Tag Archives: Magnum Hunter Resources

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Magnum Hunter Cashes Out of the Eagle Ford

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By Matt DiLallo, The Motley Fool

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Magnum Hunter Resources took advantage of its position in the hot Eagle Ford Shale to unload most of its acreage at a premium price. In a deal with Penn Virginia , Magnum Hunter is selling approximately 19,000 net acres in the Eagle Ford Shale for $401 million. Included in the deal are 49 producing wells with another 11 wells in various stages of completion.

This is a big deal for both companies, both in terms of size and what it means for each company’s respective future. The deal represents a big chunk of capital for Penn Virginia when you consider that its market capitalization is just $200 million. To pay for the deal, the company is planning to tack on another $400 million in debt through a senior notes offering. Pro forma, the company will have over a billion dollars in debt on its balance sheet. However, these assets are mostly adjacent to its current Eagle Ford position which yields both synergy and scale. It’s really a transformational deal for the company, but given that the acres are in the oil window it appears to be worth the risk. 

For Magnum Hunter, this deal is about cashing in on a high-value asset so it can reinvest into what it believes will become higher-value assets. The company is getting a good price and locking in a solid overall return. It entered the Eagle Ford in 2009 when it spent $2.35 million to acquire a small operator, after investing another $263 million in capital to develop the play, it has already yielded $80 million in cash flow. When you add it all up, that’s a three-year internal rate of return over 80%. Given that the Eagle Ford represented its smallest acreage position, it makes sense to cash out and move on.

Initially, Magnum Hunter plans to use the funds to reduce its debt. However, the company had just $115 million of liquidity against a $300 million planned capital budget so one way or the other these funds will be plowed back into its business. That capital budget is split pretty evenly between its Williston Basin and Appalachian assets with a focus on growing its liquids rich production.

It reminds me of the blueprint that Chesapeake Energy  has famously followed. The company is constantly cashing in on its acreage to fund the development elsewhere in its portfolio. In fact, Chesapeake currently has some of its own Eagle Ford acreage up for sale and the price Magnum Hunter received bodes well for Chesapeake’s fortunes. 

The bottom line here is that this deal gives Magnum Hunter a little more financial flexibility to fund the opportunities it sees in both the Bakken and the Uitca. The company remains an interesting growth story, with production expected to leap this year from just over 14,000 barrels of oil equivalent per day to a range of 18,500-20,000 barrels of oil equivalent per day. Even better, an increasing mix …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why Magnum Hunter Resources' Shares Jumped

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By Travis Hoium, The Motley Fool

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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 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.

The article Why Magnum Hunter Resources’ Shares Jumped originally appeared on Fool.com.

Fool contributor Travis Hoium 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.

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

3 Companies Betting Big on This Emerging Shale Play

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By Arjun Sreekumar, The Motley Fool

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The great thing about America’s shale oil and gas revolution is that new shale plays keep popping up from time to time.

Currently, the two hottest shale plays are arguably North Dakota’s Bakken and Texas’ Eagle Ford. These oil-rich formations are especially attractive because the price of oil is high, providing producers with a major incentive to keep drilling.

But there’s a downside to these plays. Because they’ve already proved their mettle and boast at least a few years of very impressive production history, land lease prices and production costs are sky high. That’s why energy companies continue to search for the next big resource play, hoping to establish a substantial acreage position while the land is cheap and competitors few and far between.

A case in point is the Utica, an emerging shale play that spans several states, though the majority of drilling activity so far has been focused in Ohio. Initial assessments suggest that the Utica’s resource potential could be on par with that of the Eagle Ford.

Based on encouraging initial test well results, several energy companies have expressed enthusiasm about the Utica’s prospects. Let’s look at three major ones.

Chesapeake Energy
First up is Chesapeake Energy . After discovering the Utica in 2010, Chesapeake remains one of the most active operators in the play. As it stands, it is the largest leasehold owner, boasting approximately 1 million net acres. To date, it has drilled a total of 184 wells in the play, of which 45 are currently producing.

Chesapeake’s well results so far have been quite impressive, with several of its wells reporting daily production rates in excess of 350 bbls of oil per day. Two recent well completions in the company’s core drilling area in Carroll County, Ohio — the 8H Houyouse “15-13-5” and 8H White “17-13-5” — posted rates of 465 bbls and 390 bbls of crude oil per day, respectively.  

Though the company was initially very bullish about the play’s oil potential, it has since scaled back its expectations. It even recently announced that it no longer views the Utica as central to meeting its oil production growth target for the year, though it remains optimistic about the play’s dry gas and gas liquids potential.

Going forward, it will be focusing its drilling efforts primarily in the wet gas window of the play inside of its joint venture with Total , where it commands 450,000 net acres. Within this area, the company is projecting expected ultimate recoveries of five to 10 bcfe.  

Magnum Hunter Resources
Next up is Magnum Hunter Resources , a Houston-based energy explorer and producer. In February, the company closed on the acquisition of about 15,500 gross leasehold acres located primarily in Noble County, Ohio, through Triad Hunter, its wholly owned subsidiary. That brings Magnum Hunter Resources‘ total position in the Utica shale to a little over 61,000 net  acres.

The company has announced plans to drill at least four …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

This "Natural Gas" Company Can't Shake Its Bad Reputation

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By Tyler Crowe, The Motley Fool

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Whenever a company gets labeled as one thing, it takes a long time to distance itself from that label. Magnum Hunter Resources  is a perfect example. The company has gone through a pretty big turnaround, but can’t quite shake its reputation as a doom-and-gloom natural gas stock. Let’s take a look at what Magnum Hunter is up to and see if its most recent moves will bring this fast-growing energy company into profitability.  

Digging out of a hole
Before Magnum Hunter‘s turnaround to a predominately liquids producer, it was labeled as a natural gas company that was getting crushed by low natural gas prices. It appears, though, that the label has stuck despite the change in production. Not only has its share price dropped almost 40% this year, but more than 20% of its shares are sold short right now. Another fear is that its balance sheet is a little out of whack, with a pretty high debt load. While certainly it is a concern, it may not be as bad as many expect.  Of Magnum Hunter‘s $1.1 billion in contractual obligations (debt, lease payments, etc.), more than 60% is not due until after 2016. 

With three years of wiggle room to get its financial house in order before the big bills come due, the company has a decent amount of time to increase revenue. Between 2012 and 2011, it increased revenue by 141% and boosted production by 128% over the same period.  At the end of the fiscal year 2012, it was producing at a rate of 18,200 barrels of oil equivalent per day from all of its sources, and plans to spend another $300 million in capital expenditures to increase production capacity. Much of that will be spent in the Utica shale, where it hopes to spud its first wells in 2013.

In terms of production efficiency, the company has done a commendable job of keeping pace with competitors.  in the Bakken shale, Magnum Hunter has reduced its spud to first production time to 38 days, almost half that of major Bakken player Whiting Petroleum. If it can carry efficient operations like that into its other assets, it could be poised to do well in the near future.  The one holdup for the company right now is some midstream bottlenecks in its particular locations in these basins. Thanks to some shutdowns at refining facilities and some problems with its own pipelines, Magnum Hunter has had to hold back some production. Once these issues are cleared up, it should be able to continue with operations as normal. 

Cleaning house
Much of Magnum Hunter‘s sucess in 2013 will revolve around two things: increasing production and trimming the fat off its asset portfolio. It bought two smaller exploration and production (E&P) companies, NuLoch Resources and and NGAS Resources, within the past couple of years as well as acreage in Williston from Samson Oil & Gas. These acquisitions have been the keystone in Magnum Hunter‘s sharp pivot from a predominately natural gas company to one that is producing 65% …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Here's What This $4 Billion Winning Hedge Fund Company Has Bought and Sold

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By Selena Maranjian, The Motley Fool

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Every quarter, many money managers have to disclose what they’ve bought and sold, via “13F” filings. Their latest moves can shine a bright light on smart stock picks.

Today let’s look at GMT Capital, a private investment company founded by Thomas Claugus in 1990 that manages several hedge funds and other accounts. Its reportable stock portfolio totaled $3.8 billion in value as of Dec. 31. You don’t generally grow that large without doing some things right. Last year, Bloomberg named the company’s Bay Resource Partners hedge fund one of the richest 100. In its first 15 years, it averaged a 20% annual return, almost twice that of the S&P 500.

Interesting developments
So what does GMT Capital’s latest quarterly 13F filing tell us? Here are a few interesting details.

The biggest new holdings are American International Group and Check Point Software Technologies. Other new holdings of interest include Questcor Pharmaceuticals , which has a multiple-sclerosis drug, Acthar, that has been selling well and also has many more indications. The stock yields 3.1%, and its dividend was recently raised by 25%. Questcor has its risks, though, such as an investigation into its marketing practices, as well as competition. In its just-reported fourth quarter, revenue more than doubled, though Acthar sales for MS retreated a bit. The stock is heavily shorted.

Among holdings in which GMT Capital increased its stake was Superior Energy Services . Oil and gas drilling specialist Superior Energy has lost value, on average, over the past five years, leading some to now see it as a bargain, with its P/E ratio near 10 and forward P/E around 8. Its fourth-quarter report was mixed, with its U.S. business weak but international business growing. Management expects its international business to grow by 25% over 2013 and is more uncertain about demand in the United States.

GMT Capital reduced its stake in lots of companies, including Canada-based uranium specialist Cameco . Bulls expect the company’s business to improve as gas and coal prices eventually rise, and because of new nuclear plants being built. Southern has permission to build two, and SCANA also plans to build two. My colleague Sean Williams likes Cameco’s transparency, expects higher uranium prices, and notes that China is also expected to demand more uranium over time.

Finally, GMT Capital’s biggest closed positions included Fushi Copperweld, which was taken private, and Coeur d’Alene Mines. Other closed positions of interest include Magnum Hunter Resources and 8×8 . More than a handful of natural-gas-related companies struggled over the past year. Energy concern Magnum Hunter has been heavily shorted, in part because of significant debt and a substantial focus on low-priced natural gas in its operations. Some don’t appreciate its shift toward oil and liquids, though, and its diversification across several promising shale fields. The company recently announced a delay in the filing of its year-end report, with management apologizing …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

3 Exciting Energy Growth Plays

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By Matt DiLallo, The Motley Fool

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We are in the midst of an energy revolution like we never dreamed possible. Trapped beneath our great country are vast oil and gas resources that we’re still learning how to access. Our oil and gas production is expected to grow rapidly over the coming decade; as it does, three tiny energy companies have the potential for very big futures.

Just the Bakken, please
Weighing in at an enterprise value just shy of $4 billion, Kodiak Oil & Gas is the largest company on this list but a real runt when compared to more well-known energy companies. The company is almost solely focused on oil and gas production in the Bakken, which has helped it to grow its production at an unbelievable rate. In fact, from 2011 to 2012 it grew  production by a staggering 270% and it’s projected to double production again this year. To get there, the company is planning to spend nearly $750 million to drill 75 new wells.

With an inventory of more than 950 future wells, Kodiak still has a huge growth runway ahead. This is especially true when you consider the company currently has just 125 wells. With its shares up more than 300% over the past five years, its returns over the next five could be even better. If you want to invest in the growth of the Bakken, Kodiak is certainly worth a deeper look. 

I’ll take the Marcellus, with a side of Utica
If you thought Kodiak was small, tiny Rex Energy weighs in at an enterprise value of just over a billion dollars. Don’t let its small size fool you: This energy underdog could grow up to be a top dog someday. Its operations are mainly focused on the Marcellus Shale, with emerging growth coming from the Utica Shale. Since 2009 the company has grown its production by a compound annual rate of 50%.

Rex is planning to spend about $250 million to grow production over the next year and expects to see those funds to yield a 30%-40% boost in production. The big story here is that the growth will be in the all-important liquids department — overall liquids growth will come in at 70%, with oil and condensate growth coming in at 55% of that. If you want to stake your claim to the potential growth in the Marcellus and Utica, then Rex Energy is a name you want to get to know.

I want it all, and I want the Eagle Ford too!
The final name on my list is Magnum Hunter Resources . With an enterprise value of around $1.5 billion, it’s around the same size as Rex, however, there’s a much bigger story at Magnum Hunter. What’s intriguing here is the company has acreage in the Bakken like Kodiak, and has its own Marcellus and Utica Shale positions like Rex, but it really goes over the top with further diversification …read more
Source: FULL ARTICLE at DailyFinance