Magnum Hunter Resources (NYSE: MHR) announced operational and financial results for Q4’11 and fiscal year end 2011.
MHR reported a Q4’11 net loss of $60.9 million or a loss of $0.46 per share, compared to a net loss of $1.9 million, or a loss of $0.03 per share during Q4’10. Revenues for the quarter totaled $49.1 million, an increase of 404% from Q4’10 revenues. Adjusted EBITDA for the quarter increased 2,281% to $21.2 million compared to Q4’10. The company’s production during Q4’11 increased 547% over Q4’10 to average 9,124 BOEPD (37% oil/liquids). From Q3’11 to Q4’11, MHR increased production 73%.
For the full-year 2011, MHR reported a net loss of $90.7 million, or a loss of $0.80 per share compared to a full-year 2010 net loss of $22.3 million, or a loss of $0.25 per share. Revenues for full-year 2011 totaled $192.2 million, an increase of 295% compared to full-year 2010. Adjusted EBITDA for the year increased 1,094% to $50.4 million compared to full-year 2010. Production averaged 5,510 BOEPD (43% oil/liquids) during 2011 representing a 324% increase from 2010.
Earlier this month, the company updated its proved reserves for the period ending December 31, 2011. Total proved reserves of 44.9 MMBOE reflect an organic growth of 52.7% from the company’s pro forma proved reserves of 29.4 MMBOE as of December 31, 2010 (adjusted for the 2011 acquisition of NGAS Resources, Inc. and NuLoch Resources, Inc.) and a 235% increase over the total year end 2010 reported reserves. Magnum Hunter’s full year 2011 organic extensions and discoveries and other additions from drilling activities replaced the company’s full year 2011 estimated production by a factor of 6.7 times. When also including fiscal year 2011’s property acquisition activities as outlined above, the replacement of estimated production factor for the entire fiscal year 2011 increased by approximately 10.8 times.
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2011 Exit Rate:
MHR exited 2011 in excess of 12,500 BOEPD and is now currently producing above 13,000 BOEPD. MHR expects to exit 2012 producing in excess of 16,000 BOEPD (55% oil/liquids). We believe that based on the estimated increase in oil and liquids percentage compared to the 37% weighting for Q4’11 much of the production growth in 2012 will come from the Eagle Ford and Bakken operations. Even so, we note that though the company’s natural gas assets in the Marcellus are still contributing positive returns. The company reports in its current investor presentation that even using their low case assumptions they can generate an 11% IRR in the Marcellus at a $1.00 per MMBtu.
Expanding Liquids Reach with Recent Utica Acquisition:
On February 17, 2012, Magnum Hunter purchased leasehold mineral interests across 15,558 (12,186 net) acres located predominately in Noble County, Ohio from an undisclosed seller for a total purchase price of $24.8 million. Based on the purchase price, the transaction is valued at approximately $2,037 per acre. The Utica acreage is in close proximity to Triad Hunter’s existing acreage position in Washington and Noble Counties, Ohio, and now provides Triad Hunter approximately 18,187 gross (14,815 net) acres in these two counties, and a total of 23,214 gross (17,316 net) acres that are presently prospective for the Utica Shale.
2012 Capital Expenditure Budget:
The Company’s $200 million preliminary 2012 capital expenditure budge including $150 million for its upstream business and $50 million for its midstream business. The company intends to direct a much larger percentage of capital expenditures in 2012 to oil and liquids projects and will delay drilling and completion on the majority of its high liquid natural gas projects until later in the year when the MarkWest Mobley liquids complex becomes operational and the company can realize the full benefit from the NGL production stream.
Questions and Insights from Chairman and CEO Gary Evans at EnerCom’s The Oil & Services Conference 10:
As Oil & Gas 360 has reported in previous write-ups, MHR has been drilling longer laterals and reducing costs in the Eagle Ford in an effort to improve well economics (not as if they were not strong before). During his presentation, Gary Evans said that in the early days of drilling the Eagle Ford (14 to 15 months ago), MHR estimated EURs around 250,000 to 275,000 barrels per well. Today, they report seeing 450,000 barrels per well and expect EURs near 650,000 to 750,000 barrels per well. He believes that within two years, MHR could be drilling wells with EURs near 1 million barrels per well.