Everything You Need to Know About Investing in Magnum Hunter Resources Corporation

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  • Sources: http://b2i.api.edgar-online.com/EFX_dll/EdgarPro.dll?FetchFilingConvPDF1?SessionID=aH9h6vL6A75Zo-9&ID=9810168
  • http://www.magnumhunterresources.com/officers.html
  • Sources: http://www.magnumhunterresources.com/Magnum-Hunter-Resources.pdf
  • Everything You Need to Know About Investing in Magnum Hunter Resources Corporation

    1. 1. An Investor’s Guide to Magnum Hunter Resources Source: Magnum Hunter Resources Investor Presentation
    2. 2. 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.
    3. 3. 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
    4. 4. 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
    5. 5. 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
    6. 6. 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
    7. 7. 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
    8. 8. 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
    9. 9. 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
    10. 10. 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?
    11. 11. 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
    12. 12. 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
    13. 13. 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
    14. 14. Our Top Stock for 2014

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