Earlier this month Magnum Hunter Resources Corp (NYSE:MHR) finally filed its long-awaited annual report. The company’s report was delayed after it fired its auditor. This document is a great tool for investors to get a really good picture of the company, which is exactly why investors should take the time to read it. To help investors know what to look for when reading the report (which you can assess here – link opens a PDF), I’m going to explain the three important numbers you’ll find in that report.
One of the most important numbers in an oil and gas company’s annual report is its proved reserves. The proved reserves are the estimated economically producible oil and gas that the company possesses. These are the most important reserves because they are the reserves that the company and its engineers are most certain are actually there.
For Magnum Hunter Resources Corp (NYSE:MHR) that number is 61.7 million barrels of oil equivalent, or Boe, as of the end of last year. It’s a number that excludes the 11.4 million Boe of reserves in the Eagle Ford that were sold to Penn Virginia Corporation (NYSE:PVA) earlier this year. Magnum Hunter Resources Corp (NYSE:MHR)’s reserves are 57% oil and natural gas liquids, and more than half of those reserves are in the company’s acreage in the Appalachian Basin. This number is important because it’s where investors can build a base value for the company, which is where the next number comes into play.
The next number to get to know is the PV-10, which is the present value of future net revenues as the reserves are produced. This gives investors a sort of baseline value for a company and in Magnum Hunter Resources Corp (NYSE:MHR)’s case its PV-10 as of the end of last year was $753.4 million:
That figure excludes the Eagle Ford sale which had a PV-10 of $227.8 million. This is where it should be noted that Magnum Hunter Resources Corp (NYSE:MHR) sold those assets for just over $400 million. So, while the PV-10 is a good baseline for value, it doesn’t account for everything, including potential upside from probable and possible reserves as well as other intangibles. That is one reason why Magnum Hunter Resources Corp (NYSE:MHR)’s total enterprise value is more than double its PV-10.