A Deeper Look at Magnum Hunter Resources Corp’ Fourth-Quarter Results

Magnum Hunter Resources’ results continue to improve.

Feb 25, 2014 at 9:15AM
 Ohio Natural Gas

Photo credit: Flickr/Daniel X. O'Neil

Magnum Hunter Resources Corp (NYSE:MHR) recently reported its fourth-quarter and full-year results. While the company continues to lose money, the underlying business is improving. Let's take a deeper look at the company's results.

Drilling down into the numbers that matter
For the fourth-quarter Magnum Hunter Resources reported an adjusted net loss of $0.14 per share, which beat estimates by $0.06. It is also more than half of the loss the company reported in last year's fourth quarter. On top of that the company's fourth-quarter adjusted EBITDAX rose 54% over the fourth-quarter of 2012 to $37 million. This is solid growth, especially in light of all of the fact that company endured weather and pipeline related production shut-ins on the quarter. 

For the full-year Magnum Hunter Resource reported solid financial results.  Adjusted EBITDAX of $112 million was up 48% from 2012. This improved profitability was due in part to the company's focus on acquiring and drilling for liquids as well as higher realized commodity prices.

A closer look at production
Magnum Hunter Resources saw its fourth-quarter production increase by 44% over its 2012 fourth-quarter rate. Overall, production average 11,298 barrels of oil per day, or BOE/d on the quarter. However, production would have increase by 96.1% to 15,386 BOE/d if it wasn't for a combination of asset sales and production shut-ins.

One of the reasons why production was shut-in on the quarter is due to a break in a MarkWest Energy Partners LP (NYSE:MWE) natural gas liquids pipeline. That issue, combined with MarkWest Energy Partners temporary shut-down of its Mobley processing facility resulted in Magnum Hunter Resources shutting-in 925 BOE/d of production on the quarter. In addition to that the company also was forced to shut-in 1,045 BOE/d of production at its Ormet Pad location in Ohio while it waited for midstream infrastructure to be built. Because of this the company's underlying production growth is much higher than the reported number.


Photo credit: MarkWest Energy Partners LP 

This is also seen in its full-year results as Magnum Hunter Resources' production was up 26.9%. However, if it wasn't for asset sales and production shut-ins production growth would have been 91.6% higher than 2012.

Rewind and fast forward
Last year was a pivotal one for Magnum Hunter Resources according to CEO Gary Evans. The company sold its Eagle Ford Shale assets to Penn Virginia Corporation (NYSE:PVA) for $401 million. It also pocketed another $8.3 million on the sale of the Penn Virginia stock it received as part of the deal. On top of that it sold some non-core assets in North Dakota for $77.5 million. While those deals affected production, the deals provided the company with plenty of cash to use to focus its drilling program on its core acreage.

Because of this renewed focus on its core assets, Magnum Hunter Resources' investors can expect to see the company's rates of return improve in the years to come. As the company moves past exploration to development it plans on drilling wells that will produce higher estimated ultimate recoveries as well as higher production rates. According to Evans this will improve the "internal rates of return on every single dollar employed" as the company drills in its core areas.

Investor takeaway
Magnum Hunter Resources is heading in the right direction. It's selling assets to focus on its core and by doing so it should see its returns improve. While a number of risks still remain, the story here is still pretty compelling.

The one stock to buy in 2014

There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers