An Investor’s Guide to Magnum Hunter Resources
Source: Magnum Hunter Resources Investor Presentation
Intro to Magnum Hunter Resources
• Current management team assumed leadership of the company in 2009.
• Refocused the company’s business strategy on shale fueled growth in two major shale basins.
• Currently divesting of non-core properties to fund growth and improve liquidity.
A Look at the Leadership
• Assumed position of CEO and Chairman of the Board after taking over predecessor company in 2009.
• Renamed to Magnum Hunter Resources Corporation.
• Previously founded Magnum Hunter Resources Inc., which he sold to Cimarex Energy in 2005 for $2.2 billion.
Gary Evans, CEO
Magnum Hunter Resources Key Stats
• Recent Enterprise Value: $2.7 billion• Proved Reserves: 75.9 million BOE• PV-10 of Proved Reserves: $922 million• 2013 Average Daily Production: 14,831 BOE/d• 2014 Target Production Exit Rate: 35,000 BOE/d
The Opportunity
• 152,000 net acres in the Williston Basin
• 99,000 net acres in the Utica
• 79,000 in the Marcellus
“Shale scale”
Source: Magnum Hunter Resources Investor Presentation
Core Assets
• 152,000 net acres in Bakken/Three Forks
• 20.8 million BOE of proved reserves
• 1,437 future drilling locations
• 2-3 active drilling rigs
Williston Basin
Source: Magnum Hunter Resources Investor Presentation
Core Assets
• 99,000 net acres in Utica/Point Pleasant
• Continuing exploration and appraisal program
• Minimal proved reserves but 496.2 million BOE in contingent resources
Utica Shale
Source: Magnum Hunter Resources Investor Presentation
Core Assets
• 99,000 net acres in Marcellus
• 53.4 million BOE in proved reserves
• Current focus of 2014 capital plan
Marcellus Shale
Source: Magnum Hunter Resources Investor Presentation
Key Areas to Watch
• Utica Shale well results• Takeaway and processing capacity for NGLs• Non-core asset sales• Balance sheet• Bakken Shale returns• Eureka Hunter midstream
Biggest Risks
• Utica Shale isn’t as prolific nor as profitable as the company expects.
• Non-core asset sales don’t generate enough cash to fund drilling program.
• Long-term funding after non-core asset sales are complete.
What could go wrong?
Top 3 Reasons to Buy
• Massive upside to the Utica Shale with half of its resource potential attributable to that emerging liquids rich play.
• Strong position in the liquids rich Marcellus Shale. • Production expected to more than double in
2014 and has averaged 145% average annual growth since 2010.
Summarizing the bull case
Top 3 Reasons to Stay Away
• A lot has to go right in the Utica.• Balance sheet is complex due to Preferred
Stock and debt heavy with both Senior Notes and the Credit Facility.
• Focus on natural gas and NGLs could hurt if gas prices fall in the future.
Summarizing the bear case
Final Thoughts
• One of the most levered drillers to the Utica Shale with tremendous untapped upside.
• Strong presence in the high returning areas of the Marcellus Shale.
• Non-core divestment program should keep the company funded.
Big upside overshadows the risks
Our Top Stock for 2014
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