Magnum Hunter Resources (NYSE:MHR)

CAPS Rating: 2 out of 5

Magnum Hunter Resources Corp engages in the acquisition, development, and production of oil and natural gas primarily in West Virginia, North Dakota, Texas, and Louisiana.

Recs

5
Player Avatar TMFUltraLong (99.95) Submitted: 4/14/2010 7:09:38 PM : Underperform Start Price: $4.69 MHR Score: +4.62

Ok, here's my beef with Magnum Hunter Resources.... they haven't shown the ability to turn a profit yet despite revenues shooting up 100% per year. They went on an acquisition binge and despite non-recurring costs they still would have lost over 7 million dollars. They're trading at 26+ times 2011's figures IF they can even turn a profit, they're over 5-6 times 2011-2012's sales estimates and they have very little cash in the coffers for a company their size. I have no doubt MHR's management knows what they're doing because the metrics are ok... not great...but ok.. but what I'm saying is this isn't worth a 2000% one year gain especially after multiple years of nothing but losses. I don't see what is so special about MHR, thus the down thumb.UltraLong

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Member Avatar ValuePEG (72.45) Submitted: 4/20/2010 4:31:59 AM
Recs: 0

The low ~$.20/sh of March/April 2009 represented the culmination of a failing company PRC - Petro Resources Corporation (priced to go bankrupt and very well could have) and the bottom or near bottom of the market. On 4/24/09 the stock literally doubled in 1 day on 5x normal volume, this continued on a lower rate over the next few days. Not coincidentally on May 22 Gary Evans & Ron Ormand took over the company (I believe the shares purchased a month earlier were by him/them). They brought with them additional capital to turn the company around and redesign it into the company it is today, it is quite normal that a complete restructure/refocus of a company in this magnitude to take more than 1 year, not to mention the "acquisition binge" as you put it. So you happen to be correlating factors that just plain can't be as this is not the same company as 1 year ago today.

In a very candid conversation Gary stated that the market pricing 1+ years ago was simply crazy and he wanted to build a new company from scratch (as he had done before). As he believed that the pricing situation wouldn't exist long enough for him to do so, he decided that taking over an existing company (PRC) would give him the foothold to launch his plan. This plan was supplemented by key acquisitions of struggling companies with leaseholds in his desired investment areas, and dramatically changed with the takeover of Triad.

As far as earnings, it is very typical that when a company is taken over that it takes 6 months to 1 year or more to turn the company around, it is also typical that it takes time to properly fold in new acquisitions. IMHO Gary has done an excellent job in the 11 months he's been at the helm. Some infrastructure changes simply cannot be done overnight - prime example would be the expansion/completion of the pipeline build-out so that legacy wells that are fighting back-pressure can be run more than 1-2 hours a day.

Furthermore as far as earnings, wait till June when the 1st of the Eagle Ford wells comes online, we should see the beginning of the potential of that 30,000 newly acquired acres. By end of summer, we could possibly expect another doubling of production, definitely by end of year.

Member Avatar MoTrFinger (< 20) Submitted: 4/21/2010 3:53:15 PM
Recs: 0

I've been told this will be a $6.00 stock by Sept 2010 does it hold water?

Member Avatar naughtyguy (33.07) Submitted: 6/22/2010 11:58:04 PM
Recs: 0

I guess if you want to gain some points or make some money short term, you listen to UltraLong.
If you want to keep the pick for a long period of time, then you listen to ValuePEG.

ValuePEG apparently owns the stock in real money, so does more research and gives more detail in some of his pitches.
He then replies to Ultralong in an attempt to stop any bleeding UltraLong causes.

Looking at a previous pick, AOB, ValuePEG didn't give much of a pitch and that stock I just bought with real money at a great discount from his start price.

Interesting how he only has 18 active picks! Quite differently with UltraLong. I guess It is a lot easier to give 18 pitches than hundreds or thousands. I think I'll stay out of this stock.

Member Avatar Rule62okc (< 20) Submitted: 11/10/2010 11:08:04 PM
Recs: 0

Well then you're the only one that can't figure out the HUGE management change in May 2009!!! If you would've taken a minute or two and pulled up a chart you would've seen what the stock has done from May of '09, (about $0.30) to now, (about $5.00)! You might have even thought check the filings dating back to then and found that one of the top CEO's in the history of oil and gas just took the company over; brought in the old Magnum Hunter team and purchased Sharon Resources! Gary Evans started the original Magnum Hunter in 1985 for $1,000 and sold it 20 years later for $2.2 billion to Cimarex! Take a close look at what he has done in 18 months! Look at the assets he brought into the company. Dig into the details of the Triad acquisition and the property that was included in the deal for no cash considerate, (47,000 acres in the Marcellus for example) and then tell me what isn't special about Magnum Hunter! The Marcellus acreage is worth between 65 and75 percent of the current Market Cap! Nothing special???

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