A Quick Look at Magnum Hunter's First-Quarter Highlights

Most companies are gearing up to report second-quarter results, but Magnum Hunter Resources  (NYSE: MHR  )  is running a little behind this year after it was forced to let its auditor go. The good news is that less than a month after filing its annual report, the oil and gas company is presenting investors with its first-quarter numbers. Let's take a quick look.

Financial highlights
Revenue came in at $98.0 million, which is up 76% over the first quarter of last year. Meanwhile, adjusted EBITDAX for the quarter is up 63% year over year to a total of $55.4 million. Unfortunately, the company still turned in a net loss of $0.06 per share, which is slightly worse than last year's $0.02 per share loss. However, as you'll see, none of these numbers are really worth getting worked up over. 

The huge year-over-year jump in revenue was mainly driven by the company's acquisitions as well as its focus on drilling liquids-rich acreage. Magnum Hunter's focus on drilling in the Bakken as well as in the wet gas portion of the Marcellus has been a big factor in its ability to increase revenue. However, growth did come at a higher cost. Part of the reason why the company had issues with its previous auditors was due to its understaffed accounting department. The company has had to add a number of accounting personnel as well as processional services, which added to its costs and cut into profits.

Production and operational highlights
Because Magnum Hunter is an early stage exploration company, the most important metric right now is its ability to grow oil and gas production. Overall, production edged up by 9% year over year to 13,769 barrels of oil equivalent per day. However, the company lost 3,120 barrels of oil equivalent production per day in the quarter due to production shut-ins.

Magnum Hunter produced significantly more natural gas liquids than it originally anticipated and didn't have the pipeline capacity to handle the volume. If the company could have processed those volumes, its production for the first quarter would have been up by 34% year over year. The good news is that the problem was resolved in May when MarkWest's  (NYSE: MWE  )  new Mobley processing facility fully came on line.

The access to the Mobley complex is an important infrastructure asset for Magnum Hunter as it provides 320 million cubic feet equivalent per day of processing capacity, with another 200 million cubic feet equivalent per day of capacity expected to come online by the end of the year. That processing capacity, as we saw in the first quarter, is really critical to Magnum Hunter's ability to sell what it produces. As shown in the slide below, MarkWest is building critical infrastructure in the region which will help prevent future production shut-ins.

Source: MarkWest investor presentation 

Foolish bottom line
While there is a lot more to this story, the bottom line is that Magnum Hunter's revenue and production are both increasing. The predominant finding in the quarter is the company produced more natural gas liquids than anticipated and was really held back by the lack of takeaway capacity. That's a pretty good problem to have, especially when considering the issues troubling the company have now been solved. 

Magnum Hunter is still a pretty risky exploration company, which is why investors need to have both a high tolerance to risk, as well as a diversified portfolio. If you are looking to add some stability to complement your Magnum Hunter stock you might want to look at a company that The Motley Fool's analysts have uncovered. This under-the-radar company is dominating its industry to such a degree that some say it's "The Only Energy Stock You'll Ever Need." That's why you don't want to miss out on this limited-time offer to discover this under-the-radar company before the market does. Click here to access your report -- it's totally free.


Read/Post Comments (2) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 09, 2013, at 8:24 PM, Khizhim wrote:

    Hey Matt:

    No reply's necessary; I've given up on this topic, but I just wanted to enter my own comments:

    1. You've been good enough to reply to my past remarks about the sources of the images which you've included with your MF commentaries, and that's rare at TMF. At least it shows respect for readers, and I appreciate the courtesy.

    2. I asked previously if you could provide links to the sources of your images, and you did state that you'd consider the suggestion. These questions are merely rhetorical: Can I assume that you've decided against the idea of providing links to the sources of your images? Is there ANY GOOD REASON to withhold this information? I can't think of any...

    3. For the benefit of any other readers who might find your identification of the source of your image less than helpful ("Source: MarkWest investor presentation"...) here's more explicit information:

    This is taken from page 21 of a 30 page PDF of a presentation which is dated 6-19-13 and which is listed on the MarkWest Energy Partners "Presentations & Webcasts" page, at:

    http://investor.markwest.com/phoenix.zhtml?c=135034&p=ir...

    as "Bank of America/Merrill Lynch NGL Conference." The PDF itself is offered at:

    http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9M...

  • Report this Comment On July 09, 2013, at 9:45 PM, TMFmd19 wrote:

    Hi Khizhim - Believe it or not, I had been doing that on articles but I started to get lazy again. Sorry about that and thanks for the reminder!

    Matt

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2528883, ~/Articles/ArticleHandler.aspx, 9/30/2014 6:41:04 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement