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Drilling Deeper Into Magnum Hunter Resources Corp (MHR)’s Future

An energy investor can gain great insights by taking a deeper look into where a company’s future growth will originate. In the case of oil and gas exploration company Magnum Hunter Resources Corp (NYSE:MHR) we can find a hint about where that growth potential might result from in its recent second-quarter-operations update. Let’s break down that report and take a closer look at each of the company’s growth prospects.

Magnum Hunter Resources Corp (NYSE:MHR)

The Marcellus Shale is key to Magnum Hunter’s ability to live up to its potential. In the first quarter that potential was held back slightly by production shut-ins due to lack of infrastructure. Those issues came to an end when Markwest Energy Partners LP (NYSE:MWE)‘s  Mobley processing plant fully came on line last month.

This plant enabled Magnum Hunter Resources Corp (NYSE:MHR) and its joint-venture partner, Stone Energy Corporation (NYSE:SGY), to have natural gas processed, letting the pair capture liquids uplift. Because liquids are more profitable than dry gas, this will really help to boost margins. Infrastructure issues have had a major effect on oil and gas companies as the shale boom has grown, which is a reminder how critically important companies like MarkWest are for the industry. The following slide really puts that into perspective:

Source: Magnum Hunter Resources Investor Presentation

One other area investors need to keep an eye on this year is Magnum Hunter Resources Corp (NYSE:MHR)’s position in the Utica. The company just completed its first well and plans to fracture stimulate it later this month. We should know more about the well’s potential by late September. The Utica could provide a major new source of liquids-rich reserves and production for the company and create tremendous value for investors.

Williston Basin
The other major focus area for the company is the Bakken of North Dakota. In the second quarter, it was able to bring 19 gross wells on line while working on another 23 gross wells. Here again, something to keep an eye on is that its production has been hindered by lack of infrastructure. This time Oneok Partners LP (NYSE:OKS) provided a critical solution, as the company has been constructing a gas-gathering project. The project started to move natural gas volumes last month and over the next year it will eventually tie in more than 300 wells.

While capturing these natural gas volumes will help pad Magnum Hunter Resources Corp (NYSE:MHR)’s bottom line, the real story with the Bakken is, of course, oil. While none of its recent wells have been true gushers, it did have one well with an initial production rate of over 1,000 barrels of oil equivalent per day. Overall the company is planning to spend about $150 million in capital on the play this year, and continued strong results will really help that capital to go farther.

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