Why Magnum Hunter Resources' Shares Jumped

Is this meaningful or just another movement?

Travis Hoium
Travis Hoium
Apr 3, 2013 at 2:15PM
Energy, Materials, and Utilities

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Magnum Hunter Resources (OTC:MHRCQ) jumped as much as 12% in early trading after the company announced an asset sale.

So what: The company is selling 19,000 net acres in the Eagle Ford Shale play to Penn Virginia Corp. for $401 million, at least 90% of which will be in cash. The deal includes 49 producing wells, seven drilled wells, and four wells in process.  

Now what: The stock popped early, but later in the trading day the stock was only up about 4%. Management said it would use the cash to reduce debt, which grew by about $400 million over the past year. I see this as an incremental positive for Magnum, but with losses mounting and productive assets now leaving the company, I think investors should use caution buying until the company can swing a profit.

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