Please ensure Javascript is enabled for purposes of website accessibility

Eureka! Here's Why Magnum Hunter Resources Corp Stock Jumped 17%

By Matthew DiLallo - Jun 25, 2015 at 10:56AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Magnum Hunter Resources Corp disclosed that it intends to pursue the sale of its ownership interest in Eureka Hunter.

What: Magnum Hunter Resources Corp (NYSE: MHR) stock jumped as much as 17% in midmorning trading after disclosing that it intends to pursue the sale of its interest in midstream company Eureka Hunter. Magnum currently owns a 45.5% equity stake in Eureka Hunter. 

So what: Magnum Hunter Resources estimates that the sale of its stake could generate upward of $700 million in gross cash proceeds for the company. It's cash the company desperately needs, as its banks are requiring it to sell assets to bolster its balance sheet. The company has had trouble meeting its timeline, which is why the timeline was just recently extended for a few more weeks. While the Eureka Hunter sale will likely take longer than that to complete, the proposed sale suggests that the company is now focused on improving its balance sheet far above the minimum requirements of its banks. In fact, such a sale, if completed, would enable the company to "restructure its balance sheet and dramatically improve its current liquidity," according to a filing with the SEC.

Now what: Magnum Hunter Resources has hinted in the past that it would like to eventually sell its stake in Eureka Hunter. However, given its currently liquidity situation, it really can't wait too much longer as it needs all the cash it can get its hands on. A quick sale at the top end of its expected range would really do wonders for the company's balance sheet, which would improve its future prospects.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
319%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.