Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Three Things Magnum Hunter Resources Corp (MHR) Must Do to Win Back Investors

Page 1 of 2

It’s been a tough year for investors of Magnum Hunter Resources Corp (NYSE:MHR). As I write this, shares are down about 18% on the year, though shares had been down by more than 37% after the company announced that it was ditching its auditor. While the stock has slowly recovered, the company has three major action items to accomplish if it wants to win back investors.

Magnum Hunter Resources Corp (NYSE:MHR)

1. File an annual report

It’s nearly June and the company has yet to file its annual report. Magnum Hunter Resources Corp (NYSE:MHR) has hired BDO as its new auditor and the new target is to have the report completed by the end of June. Once the report is out, investors will have a much better picture of the company.

In addition to the report, investors will want to see if there are any impairments to be made to the company’s assets, as well as if there will be any issues with its debt covenants. Once these uncertainties are cleared up, investors can really focus on the business’ performance and potential instead of these distractions.

2. Finish refocusing

Earlier this year Magnum Hunter Resources Corp (NYSE:MHR) closed the sale of the bulk of its Eagle Ford Shale assets. The deal brought in about $400 million; however, it marked a peculiar transition away from liquids and back toward natural gas. Not only did the company sell this oil-rich production but it is now earmarking half of its planned 2013 Eagle Ford capital budget to its gassy acreage in Appalachia.

Magnum Hunter Resources Corp (NYSE:MHR) isn’t finished with its transition plan as it has about $100 million-$150 million of additional non-core asset sales to complete this year. On top of that, the company needs to make a decision as to whether it will monetize its midstream assets which could be worth more than $750 million. Once investors have clarity as to what direction the company will be going, it should be a big confidence booster. Investors hate uncertainty and right now there is just too much of it at Magnum Hunter Resources Corp (NYSE:MHR).

3. Execute its plan

Once the company can get past all this uncertainty it needs to execute on its plan to grow production and eventually turn the company that can generate significant free cash flow. It has a long way to go, but clarity here could be coming soon. For example, the company just started drilling its first well into the Utica Shale. The play isn’t turning out how some producers had hoped which is adding to the company’s risk. Devon Energy Corp (NYSE:DVN), for example is bailing on the play after its first few wells didn’t turn out that well. The risk for Magnum Hunter is that its wells turn out to be duds. It doesn’t have Devon Energy Corp (NYSE:DVN)’s balance sheet strength, nor vast portfolio of opportunities to be drilling dry holes.

The other important area to watch is the Bakken. Magnum Hunter expects participate in the drilling of 30 wells this year while seeing the potential to drill more than 500 future wells. The company will need to be mindful of well costs which can range substantially. Last year, top Bakken producer Continental Resources, Inc. (NYSE:CLR) was able to drill operated wells for about $9.2 million each, however, non-operated wells that it participated in had a weighted average well cost of $11.3 million. This year the company has gotten well costs down to $8.3 million while hoping to shave another $100,000 off of its well costs before the end of the year.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!