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Why Magnum Hunter Resources' Shares Jumped

By Travis Hoium - Apr 3, 2013 at 2:15PM

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Is this meaningful or just another movement?

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 (NYSE: MHR) 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.

Interested in more info on Magnum Hunter Resources? Add it to your watchlist by clicking here.

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