Magnum Hunter Resources - Will Management Finally Deliver?
- Magnum Hunter Resources' stock price has crashed down to multi year lows along with oil and natural gas.
- Production is ramping up in their Marcellus & Utica assets - recent updates confirm positives on many key deliverables.
- Eureka Hunter Pipeline assets continue to increase transport volumes & capacity as they move closer to IPO a MLP with Morgan Stanley Infrastructure as key partner.
- Market negatives may have found the bottom this past week and represent a key entry point for significant returns.
I'm Looking For A 170% Profit On These Magnum Hunter Preferreds
- Huge gains (up to 170%) available on Magnum Hunter preferred shares.
- Magnum Hunter D series shares close below $20/share - upside to $50/share.
- Are you willing to bet the company will survive?
Why Magnum Hunter's Eureka Hunter Pipeline Is No Better Than The Company Itself
- Magnum Hunter Resources has been diving in response to sinking natural gas prices and most recently a long overdue downgrade from Sun Trust Bank.
- Despite limited exposure to oil prices and some good gas wells, the stock is a tough buy right now considering high debt metrics.
- Many investors are banking on an IPO of midstream assets, Eureka Hunter, to bring out value, but I have my concerns, and would avoid this IPO at all costs.
- MHR has a great history of growing debt and a lack of a plan to pay down the debt.
- Ask MHR longs who bought peak pricing about needing 300% to breakeven, it doesn’t feel good.
- MHR is an avoid at this point as there are much more easy to read options for making money on a natural gas price increase available.
Magnum Hunter Preferreds: A Double Digit Tax Advantaged Income Stream With Upside
- Magnum Hunter has had a knack of being in the right places at the right time.
- Management had proactively repositioned the company primarily as a natural gas producer/transporter and largely escaped the WTI sell-off.
- EBITDA is still robust and growing.
- Preferred shares represent a compelling opportunity right now, both in terms of yield and capital appreciation potential.
Markets Missing The Facts On Magnum Hunter Resources
- Company is transitioning into pure play Appalachian producer.
- Production set to increase drastically in next 60 days.
- Recent sales of Bakken acreage and scheduled MSI transaction add ~ $170 million in cash.
Magnum Hunter Resources: Will It Ever Generate Positive Free Cash Flow?
- Cash from operations dwarfed by capital expenditures.
- The funding gap is closed with equity and debt raises as well as asset sales.
- Over the long-run this strategy is completely unsustainable and the equity should be avoided.
2 Of The Most Challenged Shale Players Are Also The Most Overpriced Ones
- Shale exploration and production requires continuous drilling, due to 80%-90% three-year well decline rates.
- Continuous drilling begets continuous borrowing, since shale wells are so expensive.
- GDP and MHR have already sunk the most money into the ground vs. their peer group, relative to what they generated, since 2011.
- GDP and MHR will run out of money within the next year, and are unlikely to be able to borrow any more.
- And yet GDP and MHR have some of the highest valuations in the group.
Magnum Hunter Resources: Vulnerable In The Face Of Lower Oil Prices
- MHR resources holds acreage in Divide County, ND, where EIA data shows EUR not very competitive. Company in the process of divestment, but low oil prices may become impediment.
- MHR debt is relatively high at almost $900 million, with relatively high interest rate on long term maturities.
- In the absence of a return to much higher oil prices very soon, company can become very vulnerable.
Magnum Hunter: Divesting The Bakken Is A Critical Path Item
- Magnum Hunter is facing a formidable challenge of sourcing liquidity to fund its drilling program and acreage capture initiatives in the Utica and Marcellus.
- The company may announce the first $100+ million batch of Bakken divestitures imminently.
- Given significant funding needs, divestiture of the remaining Bakken assets in the near term will be needed.
- The outcome and timing of the divestiture initiatives will be significant factors for the stock price in the near term.
Magnum Hunter Posts A 'Monster' Well In Dry Gas Utica Play
- Magnum Hunter’s Stewart Winland 1300U “monster” well in the Utica’s dry gas window tested with 46.5 MMcf/d and very high flowing pressure on a wide choke.
- The well proves up the play further south.
- Implications for Magnum Hunter’s stock are strongly positive as the well highlights value potential of the company’s southeastern acreage.
Magnum Hunter's Eureka Pipeline: A Fantastic Asset Fairly Valued
- Magnum Hunter's Eureka Pipeline System connects the Utica and Marcelus to prime interstate connections and processing plants.
- Eureka Hunter is expected to increase throughput volumes 5 fold by YE 2018.
- MHR management is fully valuing Eureka's $17.1 M FY 2013 EBITDA with a ~50x midpoint multiple.
Magnum Hunter: Bakken/Marcellus/Utica Junior Is Betting On Natural Gas And NGLs
- MHR has had so-so results in the Bakken/Three Forks (mostly oil).
- MHR has had generally good results in the Marcellus (mostly natural gas and NGLs).
- MHR is currently seeing some potentially great results in the Utica (mostly natural gas and NGLs).
- MHR is putting most of its capital budget for 2014 into the Utica and the Marcellus.
- Natural gas prices and NGLs prices have risen in the last year. Many indicators point to further gains. This could help MHR considerably.
Yesterday, 12:58 PM
- Marathon Oil (MRO -1.3%), Cobalt International Energy (CIE -0.3%) and RSP Permian (RSPP +0.8%) are downgraded to Neutral from Buy at UBS, as the firm cuts its 2015 Brent/WTI crude forecasts to a respective $52.50/bbl and $49/bbl, and lowers 2016 Brent/WTI crude estimates to $67.50 and $62.50.
- UBS also is cautious on several energy names with large free cash flow deficits, slowing growth profiles and rich relative valuations: COP, DVN, MUR, UPL, RRC, DNR, MHR.
- The firm's top Buys are APC, CHK and EOG.
Fri, Jan. 23, 2:34 PM
- Magnum Hunter (MHR +17.2%) continues strong gains sparked by favorable comments this morning from CEO Gary Evans, who sought to assure investors that the company's borrowing base will not shrink as it has taken measures to improve the balance sheet.
- Evans says the company will stop spending on drilling or fracking until oilfield service costs come down, saying MHR is shooting for 40% discounts but that it will take time to reach the target.
- MHR has not yet announced its 2015 budget, but Evans guesses it may total ~$100M, down from its $400M plan for last year.
- Evans adds that he is not worried about falling oil prices because MHR has transformed itself from an oil company to a natural gas company, with 90% of its output coming from natural gas and natural gas liquids.
Fri, Jan. 23, 12:46 PM
Fri, Jan. 23, 11:34 AM
- Magnum Hunter Resources (MHR +22.7%) bounces off multiyear lows following positive comments during a conference call this morning, which included CEO Gary Evans saying the company is not seeing liquidity issues.
- Evans expects production to double this year even if 2015 capital spending totaled zero.
- MHR also discloses that it recently completed two new 100% owned Marcellus Shale wells.
Thu, Jan. 22, 2:25 PM
- Magnum Hunter Resources (MHR -11.6%) slumps to six-year lows after Stifel Nicolaus downgraded shares to Hold from Buy and removed its $4 price target, seeing few likely positive near-term catalysts and that natural gas price risk could outweigh any potentially positive operational or divestiture news.
- Stifel believes MHR must complete divestitures in 2015 to fund its late 2015 and 2016 Appalachian drilling program.
- Separately, MHR earlier reported a 25% Y/Y increase in its proved reserves to 83.3M boe as of Dec. 31, with the 10% discounted value of the reserves at the end of 2014 estimated at $909M, up 22%.
Thu, Jan. 22, 12:45 PM
Tue, Jan. 20, 3:58 PM
- Magnum Hunter Resources (MHR -15.5%) plunges to new 52-week lows as shares are downgraded to Neutral from Buy at Sun Trust Robinson Humphrey, which also lowered MHR's price target to $2.50 from $7.
- The firm believes MHR will lower 2015 capex to improve its liquidity situation as commodity prices weigh on potential Bakken sales and the Eureka Hunter Midstream IPO.
- MHR has been declining steadily during the past two months, falling 61% since Nov. 21.
Tue, Jan. 20, 12:45 PM
Tue, Jan. 20, 9:16 AM
Thu, Jan. 15, 9:16 AM
Wed, Jan. 14, 8:23 AM
- Magnum Hunter (NYSE:MHR) says in an SEC filing that its investor presentation providing a 2014 revenue estimate of $325M was in error, and that the company’s correct estimate for 2014 revenue is ~$400M.
- MHR +1.7% premarket after falling more than 10% yesterday, much of it because of the weak revenue number.
Tue, Jan. 13, 2:40 PM
- Magnum Hunter Resources (MHR -10.1%) reveals downside guidance for FY 2014 via investor presentation slides, seeing revenues of $325M vs. analyst consensus estimate of $406M.
- MHR says full-year production rose 65% Y/Y to ~32.5K boe/day; sees EBITDAX of $175M.
- Says 2015 capital spending will focus on high-return areas in the Appalachian Basin, but the presentation does not project spending totals beyond ~$450M in 2014 capex.
Dec. 24, 2014, 10:45 AM
- Magnum Hunter (MHR -3.5%) says a leak at a natural gas fracking well that had forced the evacuation of some eastern Ohio homes for several days has been brought under control and temporarily capped.
- The Ohio Department of Natural Resources says it will investigate what caused the well to begin leaking uncontrollably Dec. 13, and will ensure the integrity of the well before its operator, MHR subsidiary Triad Hunter, may proceed with operations.
- MHR says there is no evidence of environmental damage as a result of the blowout, and expects all wells on the Stalder Pad will be placed on production sometime in January.
Dec. 15, 2014, 2:14 PM
- Magnum Hunter Resources (MHR -7.2%) swoons to 52-week lows after reporting yesterday that a subsidiary lost control of a well in Ohio's Utica shale.
- The natural gas well, which had been drilled and completed, had been temporarily plugged and abandoned as MHR prepared to drill three other horizontal wells on the Stalder pad, but the well began to flow uncontrollably when production operations restarted.
Dec. 8, 2014, 6:45 PM
- Citigroup says it is beginning to see value in bonds of a few energy companies it considers oversold due to the “disconnect between valuations and fundamentals,” including Concho Resources (NYSE:CXO), SandRidge Energy (NYSE:SD), Magnum Hunter Resources (NYSE:MHR) and EV Energy Partners (NASDAQ:EVEP).
- Citi says on average those bonds now offer spread pickup of almost 300 bp and yield pickup of 2.9%, while the equity of those companies is down 34% since September, which is "important because equity valuations are likely to determine the extent to which strong balance sheets can acquire weaker operators on the cheap.”
Dec. 2, 2014, 8:59 AM
- Magnum Hunter Resources (NYSE:MHR) +3.1% premarket after Jim Cramer hosted CEO Gary Evans, who said he has not been bullish on oil for almost two years, and as a result, 60% of the company's production comes from natural gas on the way to surpass 90% by year-end.
- MHR owns attractive assets in Marcellus, Utica and Bakken shales with rapid production growth, but it also has one of the most debt-laden balance sheets in the industry.
- MHR shares have shed 46% YTD and hit a 52-week low of $3.70 yesterday.
MHR vs. ETF Alternatives
Magnum Hunter Resources Corporation is an exploration and production company. The Company is engaged in exploration, acquisition, development and production of crude oil, natural gas and NGLs resources in the United States and Canada.
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