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 (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.

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's (NYSE:MWE) Mobley processing plant fully came on line last month. 

This plant enabled Magnum Hunter and its joint-venture partner, Stone Energy (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:

Mhr Mwe Ngls

Source: Magnum Hunter Resources Investor Presentation 

One other area investors need to keep an eye on this year is Magnum Hunter'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 (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'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.

The final area to watch is the company's remaining acreage in Texas in what's known as the Pearsall Shale. Magnum Hunter owns about 7,000 net acres in the Pearsall, which is about half a mile below the Eagle Ford Shale. The Pearsall has different composition than the Eagle Ford; it's composed more of silica and limestone. Further, Magnum Hunter's position is in the wet gas and rich condensate part of the play, as opposed to the more oil-rich position in its recently sold Eagle Ford acres.

Magnum Hunter, along with partner Marathon Oil (NYSE:MRO), completed one well in the quarter. Initial results were decent, with initial production coming in at 584 barrels of oil equivalent per day. The bottom line here is that the play shows promise for both companies, meaning that it could provide some nice future upside to investors.

Final Foolish thoughts
Magnum Hunter has a lot of potential, but it still lacks certainty. It is positive that the future is starting to come into focus, especially as it continues to develop both the Marcellus and the Bakken. Full production of those two plays can finally be unleashed because they'll no longer be held back by infrastructure issues. This leaves investors with additional upside potential from both the Utica and the Pearsall. When put all together, the future looks promising, but the company still has a long road ahead of it. 


Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends ONEOK Partners, L.P. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.