"...Magnum Hunter ( MHR) reported fourth quarter earnings. Expectations were high as its earlier production update was much better than expected. Operations saw production increase in the Bakken, Eagle Ford and Marcellus. These numbers started a run in this stock, as investors believed Magnum would beat earnings. It reported revenues of $49.1 million with a loss of 5 cents/share. Estimates were for revenues of $45.99 million and a loss of 4 cents/share. Magnum missed on the bottom line but beat on the top line. The stock was down 7% on the news. This pullback was a bit extreme but considering the stock is up $1.50/share since January 26, it may be taking a short breather. Magnum's fourth quarter net loss widened to 46 cents/share.
This company has made some significant asset purchases in a short period of time. Because of this, as with any quick expansion, Magnum is having some growing pains. Non-cash and non-recurring charges were:
- Impairment of proved of oil and gas properties of 17 cents/share.
- Unrealized loss of derivatives of 16 cents/share
- Non-cash compensation expense of 5 cents/share
- acquisition related non-cash, non-recurring expense of 3 cents/share.
I would be careful with this company as it has gas dominated production. Magnum stated it will not be developing many of its natural gas liquids dominated projects until mid-2012. This is a bit worrisome as Magnum needs to increase liquids production significantly in a very short time. In the last three months of 2011 it had an average sales price of $48.50 Boe. In summary, I believe Magnum has a bright future if it executes based on short term increases in liquids production.
seekingalpha.com  |
