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 March 2, 2015 - 7:00 AM EST
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Magnum Hunter Resources Reports Fourth Quarter and Full Year 2014 Financial and Operating Results

New Record Daily Production of ~205.8 MMcfe/d (34,299 Boe/d); New Record Throughput on Eureka Hunter Pipeline of ~463,400 MMBtu/d

HOUSTON, TX--(Marketwired - Mar 2, 2015) - Magnum Hunter Resources Corporation (NYSE: MHR) (NYSE MKT: MHR.PRC) (NYSE MKT: MHR.PRD) (NYSE MKT: MHR.PRE) (the "Company" or "Magnum Hunter") announced today financial and operating results for the three months and twelve months ended December 31, 2014. The Company plans to file its Form 10-K for the year ended December 31, 2014 with the Securities and Exchange Commission later today, Monday, March 2, 2015. Highlights of the Company's financial and operating results include the following:

  • Oil and gas revenue increased 21.7% to $268.5 million for the year ended 2014, compared with revenue of $220.7 million for the year ended 2013
  • Adjusted EBITDAX(a) for the fourth quarter of 2014 and full year 2014 were $25.9 million and $150.5 million, respectively
  • Adjusted net loss(a) of ($0.24) and ($0.65) per diluted share is reported for the fourth quarter of 2014 and full-year 2014, respectively
  • Net gain/(loss) of $0.21 and ($1.32) per diluted share is reported for the fourth quarter of 2014 and full-year 2014, respectively
  • Reported production of 103.1 MMcfe/d (17,178 Boe/d) for the fourth quarter of 2014 and 101.3 MMcfe/d (16,879 Boe/d) for the full-year 2014
  • Current record production of ~205.8 MMcfe/d (34,299 Boe/d), a 103% increase over 2014 average daily production
  • Current production mix of 72% natural gas, 14% NGLs and 14% oil
  • Reported 83.8 MMBoe of total proved reserves at year-end 2014, up 25% from year-end 2013 (as adjusted for reported asset sales during 2014)
  • ~208,000 net acres in core plays, of which ~80,000 net acres in the Marcellus Shale and ~128,000 net acres in the Utica Shale currently under lease
  • Current record throughput on Eureka Hunter Pipeline System of approximately 463,400 MMBtu/d
  • The Company drilled and completed its first two Utica Shale dry gas wells, the Stalder #3UH (~47% working interest) and the Stewart Winland 1300U (~100% working interest), which tested at peak rates of 32.5 MMcf of natural gas per day and 46.5 MMcf of natural gas per day, respectively
  • Closed on over $210 million of non-core asset sales in fiscal year 2014
  • Raised ~$180 million of proceeds from sales of common stock at $7 per share in fiscal year 2014
  • All previously reported material weaknesses in internal controls over financial reporting have been remediated as of year-end

(a) See Non-GAAP Financial Measures and Reconciliations below

Financial and Operating Results for the Twelve Months Ended December 31, 2014

Oil and gas production increased 43.9% for the twelve months ended December 31, 2014 to 6,161 MBoe or an average of 16,879 Boe/d (58.9% natural gas), compared with 4,281 MBoe or an average of 11,728 Boe/d for the twelve months ended December 31, 2013. The increase in production was attributable primarily to the Company's expanded drilling program in its core areas of operations in the Marcellus Shale and Utica Shale.

Magnum Hunter reported an increase in oil and gas revenues of 21.7% to $268.5 million for the twelve months ended December 31, 2014, compared with $220.7 million for the twelve months ended December 31, 2013. The increase in oil and gas revenues resulted principally from increases in the Company's oil and natural gas production as a result of its expanded drilling operations in its unconventional resources plays in the Marcellus Shale and Utica Shale throughout 2014.

The Company reported a net loss of ($249.9) million attributable to common shareholders, or ($1.32) per basic and diluted common shares outstanding, for the twelve months ended December 31, 2014, compared with a net loss of ($278.9) million, or ($1.64) per basic and diluted common shares outstanding, for the twelve months ended December 31, 2013. When adjusted for non-cash expenses and non-recurring gains on asset sales, the Company's adjusted net loss attributable to common shareholders for the twelve months ended December 31, 2014 was ($0.65) per basic and diluted common shares outstanding (see Non-GAAP Financial Measures and Reconciliations below).

For the twelve months ended December 31, 2014, Magnum Hunter's Adjusted Earnings Before Interest, Income Taxes, Depreciation, Amortization and Exploration ("Adjusted EBITDAX") was $150.5 million, compared with $120.4 million for the twelve months ended December 31, 2013 (See Non-GAAP Financial Measures and Reconciliations below). The 25.0% increase in Adjusted EBITDAX was primarily due to (i) an overall production increase as a result of our expanded drilling operations in the Marcellus Shale and Utica Shale and (ii) higher average realized natural gas prices during the period. Natural gas production shut-ins, increased transportation and processing costs and higher non-recurring cash general and administrative costs (see Non-GAAP Financial Measures and Reconciliations below) per Boe, partially offset the increase. Production costs per Boe decreased in fiscal year 2014, compared with fiscal year 2013, due primarily to (i) lower recurring costs in the Appalachian Basin and Williston Basin, (ii) lower non-recurring workover expenses primarily in the Williston Basin and (iii) the sale of certain assets in the Williston Basin that historically carried a higher lifting cost. General and administrative expenses increased overall during the twelve months ended December 31, 2014 due primarily to a one-time, non-cash charge of $32.6 million resulting from a reallocation of midstream capital expenditures between the Company and its principal co-owner in Eureka Hunter Holdings. Excluding this one-time charge, general and administrative expenses decreased $6.4 million, or 7.8%, to $76.1 million for fiscal year 2014 compared with fiscal year 2013. The decrease resulted primarily from (i) lower share-based compensation and 401K plan matching expense and (ii) lower professional services fees related to accounting and auditing services. The Company anticipates that its reliance on third-party consultants will continue to substantially decrease, which, combined with reductions in corporate offices and headcount, will further reduce its recurring general and administrative expenses per Boe in fiscal year 2015.

Financial and Operating Results for the Three Months Ended December 31, 2014

Oil and gas production increased 34% for the three months ended December 31, 2014 to 1.6 million Boe or an average of 17,178 Boe per day (63% natural gas), compared with production of 1.2 million Boe or an average of 12,786 Boe per day for the three months ended December 31, 2013. The increase in production was attributable primarily to the Company's expanded drilling program in its core areas of operations. In addition, the Company's natural gas production mix increased to 63% of overall production in the fourth quarter of 2014, compared with 46% in the fourth quarter of 2013. These increases in production and natural gas mix are a result of last year's focus on capital expenditures to further develop the Company's Marcellus Shale and Utica Shale properties.

Magnum Hunter reported a decrease in oil and gas revenues of 27.7% to $46.3 million for the three months ended December 31, 2014, compared with $63.9 million for the three months ended December 31, 2013. Revenues decreased during the quarter ended December 31, 2014 due to (i) decreases in oil prices, (ii) decreased volumes due to the divestitures of certain non-core oil and gas properties located in Divide County, North Dakota during the fourth quarter and (iii) shut-ins of certain Marcellus Shale and Utica Shale wells due to pad drilling, all of which wells are now producing.

The Company reported net income of $42.8 million attributable to common shareholders, or $0.21 per basic and diluted common shares outstanding, for the three months ended December 31, 2014, compared with a net loss of ($61.2) million, or ($0.36) per basic and diluted common shares outstanding, for the three months ended December 31, 2013. When adjusted for a combination of non-cash expenses and non-recurring gains on asset sales, the Company's adjusted net loss attributable to common shareholders for the three months ended December 31, 2014 was ($0.24) per basic and diluted common shares outstanding (see Non-GAAP Financial Measures and Reconciliations below).

For the three months ended December 31, 2014, Magnum Hunter's Adjusted EBITDAX was $25.9 million, compared with $35.8 million for the three months ended December 31, 2013 (See Non-GAAP Financial Measures and Reconciliations below), a decrease of 27.6%. The decrease in Adjusted EBITDAX was due primarily to the decrease in revenues during the quarter ended December 31, 2014 referred to above. Recurring general and administrative expenses per Boe for the three months ended December 31, 2014 decreased 49% to $3.72 per Boe from $7.24 per Boe for the three months ended December 31, 2013, due primarily to (i) production increases during the period and (ii) less reliance on third-party consultants (See Non-GAAP Financial Measures and Reconciliations below). The Company anticipates that its reliance on third-party consultants will continue to substantially decrease, which, combined with reductions in corporate offices and headcount, will further reduce its recurring general and administrative expenses per Boe in fiscal year 2015.

In the fourth quarter of 2014, the Company's production was impacted by production shut-ins in the Appalachian region due primarily to the previously reported wells that were shut-in due to multi-well pad development.

2014 Significant Divestitures

During 2014, Magnum Hunter completed a number of divestitures resulting in proceeds in excess of $210 million, before purchase price adjustments. The Company successfully divested its remaining Eagle Ford Shale assets in Atascosa County, in South Texas, for $24.9 million ($15.5 million in cash and $9.4 million in stock), various properties in Alberta, Canada for $8.7 million, all of the Company's assets located in Saskatchewan, Canada for $68.8 million, certain non-core, non-operated properties in North Dakota for $23.5 million, the former Baytex operated properties in Divide County, North Dakota for $84.8 million and legacy waterfloods in West Virginia for $1.2 million.

Capital Expenditures and Liquidity

For the twelve months ended December 31, 2014, total upstream capital expenditures were $470.5 million, consisting of $80.8 million for the Williston Basin and $389.7 million for the Appalachian Basin. Leasehold acquisition expenditures for the twelve months ended December 31, 2014, were $146.2 million, with a primary emphasis in the Utica Shale and Marcellus Shale plays. Total midstream capital expenditures for such period were $221.5 million.

For the three months ended December 31, 2014, total upstream capital expenditures were $150.7 million, consisting of $13.9 million for the Williston Basin and $136.8 million for the Appalachian Basin. Leasehold acquisition expenditures for the three months ended December 31, 2014, were $46.9 million, with a primary emphasis in the Utica Shale and Marcellus Shale plays. Total midstream capital expenditures for such period were $50.2 million.

Magnum Hunter believes that its internally generated cash flows, anticipated increased borrowing availability under its senior revolving credit facility, and additional liquidity sources, including but not limited to proceeds from non-core asset sales, potential capital markets transactions and planned strategic initiatives that the Company is actively pursuing, will provide it with sufficient liquidity to fund its fiscal 2015 capital expenditure budget. As of December 31, 2014, the Company had total liquidity of approximately $63.9 million, comprised of approximately $53.2 million of cash and $10.7 million of borrowing availability under its senior revolving credit facility.

The Company's upstream capital expenditure budget for fiscal year 2015 is $100 million, but it intends to reevaluate this budget on a quarterly basis. The Company's upstream capital expenditure budget may be reduced or increased depending on realized prices for our natural gas, natural gas liquids and oil, investment opportunities, continued effective implementation of cost reduction initiatives, including reduction of oil and gas field service costs, and funding allocations. The Company has allocated approximately $70 million of its upstream capital expenditure budget to its Marcellus Shale and Utica Shale exploration and development drilling program in West Virginia and Ohio, approximately $10 million to its properties in the Williston Basin/Bakken Shale in North Dakota (substantially all of which are non-operated) and approximately $20 million for additional leasehold acreage acquisitions in the Marcellus Shale and Utica Shale plays.

The Company is working on several transactions and strategic initiatives to improve current liquidity. These transactions may include (i) entry into asset management agreements whereby a third party agrees to provide credit support to the interstate pipeline companies in replacement of the Company's firm transportation letters of credit (an "AMA"), resulting in the cancellation of the Company's firm transportation letters of credit and a corresponding increase in the borrowing capacity under its revolving credit facility, (ii) conducting sales of assets, including selling a portion of the Company's equity interest in Eureka Hunter Holdings, and/or (iii) entering into a joint venture under which the Company would sell or contribute all or a portion of its undeveloped leasehold acreage in Ohio to fund capital expenditures and provide working capital.

The Company is currently engaged in discussions with several third parties relating to a proposed AMA whereby the Company would enter into a natural gas marketing agreement with such third party during the first quarter of 2015 and, in connection therewith, the third party would substitute its credit support for the Company's outstanding firm transportation letters of credit of $39.3 million, which would then be canceled, resulting in an increase in borrowing capacity under the Company's revolving credit facility.

Magnum Hunter has also initiated discussions to sell a portion of its equity interest in Eureka Hunter Holdings by the end of the second quarter of 2015, with such portion representing less than 8% of the outstanding common units of Eureka Hunter Holdings. Based on the Company's current ownership interest in Eureka Hunter Holdings of approximately 48%, the Company anticipates that this transaction, if completed, could provide up to $75 million in additional liquidity.

The Company has also commenced marketing activities to form a joint venture with a third-party investor for the further development of the Company's undeveloped leasehold acreage in Ohio. The Company anticipates that a joint venture agreement will be reached by the second quarter of 2015 providing for a third-party investor commitment of up to a total of $500 million, which would consist of an upfront cash payment by the investor and the remainder as a capital expenditure carry, whereby the investor would fund the Company's pro rata part of the capital expenditures required to develop the acreage sold or contributed to the joint venture. The Company anticipates that the joint venture will be comprised of approximately 93,000 undeveloped net acres, all located within the State of Ohio.

Operations

During the quarter ended December 31, 2014, the Company had a 100% success rate on the 15 wells in which it had a working interest that were completed in the fourth quarter of 2014.

The table below summarizes the Company's gross drilling activities by area for the fourth quarter of 2014 and full-year 2014:

  Total Drilled
Wells
  Operated
Wells
  Completed
Wells
  Awaiting
Frac
  4Q2014   FY 2014   4Q2014   FY 2014   4Q2014   FY 2014   4Q2014   FY 2014
Marcellus Shale 4   10   4   13   6   17   0   0
Utica Shale 0   5   0   5   3   6   0   0
Williston Basin 3   38   0   1   6   18   3   3
Total 7   53   4   19   15   41   3   3

Currently, the Company is not running any drilling rigs in any of its basins where it has ownership interests in properties, as it awaits further reductions in oil and gas field service costs.

Marcellus and Utica Shale

During the fourth quarter of 2014, the Company completed the drilling of 4 gross (4 net) wells and completed 9 gross (7.5 net) wells in the Marcellus Shale and Utica Shale plays. All wells that are currently online are flowing to sales via the Eureka Hunter Pipeline System. The Company's net production in the fourth quarter of 2014 attributable to Triad Hunter, LLC's operations was approximately 73.84 MMcfe/d (75% natural gas, 18% NGLs and 7% condensate).

On the WVDNR Pad in Wetzel County, West Virginia, the Company's WVDNR #1207, #1208 and #1209 wells (~100% working interest) began flowing to sales on April 2, 2014. The wells were shut-in on May 31, 2014 to prepare the WVDNR Pad for drilling four additional down-dip laterals off the same pad site. The Company's WVDNR #1410, #1411, #1412 and #1413 wells (~100% working interest) have been drilled with an approximate true vertical depth of 7,500 feet. The WVDNR #1410 well was drilled and cased with a 4,350 foot horizontal lateral, and successfully fraced with 23 stages. The well tested at a peak rate of 12,966 Mcfe (17% NGLs and 3% condensate) per day on an adjustable choke. The WVDNR #1411 well was drilled and cased with a 4,048 foot horizontal lateral, and successfully fraced with 21 stages. The well tested at a peak rate of 10,761 Mcfe (18% NGLs and 1% condensate) per day on an adjustable choke. The WVDNR #1412 well was drilled and cased with a 4,842 foot horizontal lateral, and successfully fraced with 24 stages. The well tested at a peak rate of 12,992 Mcfe (17% NGLs and 3% condensate) per day on an adjustable choke. The WVDNR #1413 well was drilled and cased with a 5,807 foot horizontal lateral, and successfully fraced with 29 stages. The well tested at a peak rate of 13,321 Mcfe (17% NGLs and 3% condensate) per day on an adjustable choke. All wells on the WVDNR Pad in Wetzel County, West Virginia are currently flowing to sales.

On the Stewart Winland Pad in Tyler County, West Virginia, the Company's first Utica Shale well (the Stewart Winland #1300U) (100% working interest) drilled and completed in the State of West Virginia, and the most southeastern well in the entire play, was drilled to a true vertical depth of 10,825 feet with a 5,289 foot horizontal lateral, and was successfully fraced with 22 stages. The Stewart Winland #1300U tested at a peak rate of 46.5 MMcf of natural gas per day (~7,750 Boe per day) on an adjustable rate choke with 7,810 psi FCP. The Company has drilled and cased three ~100% owned Marcellus Shale wells on the Stewart Winland Pad, the Stewart Winland #1301M, #1302M and #1303M. The Stewart Winland #1301M was drilled and cased to a true vertical depth of 6,155 feet with a 5,762 foot horizontal lateral, and successfully fraced with 27 stages. The well tested at a peak rate of 17.0 MMcfe of natural gas per day (~23% condensate and ~25% NGLs) on an adjustable rate choke. The Stewart Winland #1302M was drilled and cased to a true vertical depth of 6,147 feet with a 5,676 foot horizontal lateral, and successfully fraced with 29 stages. The well tested at a peak rate of 17.1 MMcfe of natural gas per day (~19% condensate and ~26% NGLs) on an adjustable rate choke. The Stewart Winland #1303M was drilled and cased to a true vertical depth of 6,149 feet with a 5,762 foot horizontal lateral, and successfully fraced with 29 stages. The well tested at a peak rate of 16.8 MMcfe of natural gas per day (~20% condensate and ~26% NGLs) on an adjustable rate choke. All four wells (3 Marcellus Shale and 1 Utica Shale) on the Stewart Winland Pad have been flowing to sales through the Eureka Hunter Pipeline System commencing prior to year-end.

On the Stalder Pad in Monroe County, Ohio, the Company drilled and completed its first dry gas well, the Stalder #3UH (47% working interest), and placed it on production in February 2014. Initial flow tests peaked at a rate of 32.5 MMcf (approximately 5.4 MBoe) of natural gas per day on an adjustable rate choke with 4,300 psi FCP. The Stalder #3UH was drilled to a true vertical depth of 10,653 feet with a 5,050 foot horizontal lateral, and successfully fraced with 20 stages. The Stalder #6UH, #7UH and #8UH have been drilled and cased to total depth, and the Company commenced flowback operations on the wells over the last several weeks. The Stalder #6UH was drilled to a true vertical depth of 10,660 and a 5,746 foot lateral with 24 frac stages and the well is currently flowing back and still cleaning up. The Stalder #7UH was drilled to a true vertical depth of 10,660 and a 6,053 foot lateral with 25 frac stages and tested at a peak rate of 33.1 MMcfe/d. The Stalder #8UH was drilled to a true vertical depth of 10,660 and a 6,228 foot lateral with 26 frac stages and tested at a peak rate of 33.5 MMcfe/d.

Williston Basin

During 2014, the Company drilled a total of 38 gross (11.4 net) wells in the Bakken/Three Forks Sanish formations in North Dakota. In the Company's operated areas, the Company drilled 1 gross (1 net) well, and in the Company's non-operated areas, 37 gross (10.4 net) wells were drilled. At the end of the fourth quarter of 2014, 3 gross (1.4 net) Company wells were drilling or waiting on fracture stimulation in the Williston Basin of North Dakota.

Eureka Hunter

As of February 28, 2015, Eureka Hunter Pipeline was gathering approximately 463,400 MMBtu per day. The Company expects continued increases in throughput volumes as new customers bring gas to the Eureka Hunter Pipeline System due to the recent completions of new interconnects with major interstate pipelines. The midstream capital expenditure budget has been completed and is waiting on formal approval from the Eureka Hunter Holdings board. Eureka Hunter Pipeline has recently completed several key projects. Eureka Hunter Pipeline's operational focus has been centered on finishing up critical interconnections into Rockies Express Pipeline ("REX"), Texas Eastern ("TETCO") and Columbia Pipeline. Recently, Eureka Hunter Pipeline completed a new gathering pipeline that takes Utica Shale dry gas to interconnects with REX, TETCO, Dominion Transmission and Blue Racer. Eureka Hunter Pipeline's new Ormet wet and dry natural gas gathering extensions were also completed, and can now deliver dry gas to Clarington and wet gas to the Blue Racer Natrium plant.

Management Comments

Mr. Gary C. Evans, Chairman of the Board and Chief Executive Officer of Magnum Hunter, commented, "Calendar year 2014 was a transformational year at Magnum Hunter to say the least. We completed six divestitures that were predominately oil related for proceeds exceeding $210 million. We raised $180 million of new common equity at $7 per share. We replaced our previous minority equity partner in our midstream division with a new more strategic one and at the same time sold an interest to this new partner valuing our midstream division at $1 billion. We acquired ~16,456 net leasehold acres associated with the MNW transaction for ~$67.3 million and purchased ~1,700 net mineral acres related to Ormet for ~$22.7 million, all in the heart of the Marcellus Shale and Utica Shale plays in southeastern Ohio and northwestern West Virginia. We drilled some of the most prolific wells in the entire Utica Shale play proving that the southern acreage may in fact hold the best rock characteristics. We significantly reduced our financial exposure to potential borrowing base reductions caused by the recent drop in commodity prices by putting in place a second lien term loan last October that provides a five-year maturity with minimal financial covenants. Most importantly, we reported today record current production results as well as record current midstream volume throughputs that exceeded prior management estimates. For 2015, Magnum Hunter is in a very unique position of spending a limited amount of capital and reporting anticipated production growth rates exceeding 100% compared to prior year results. While our 2015 capital expenditure budget has been dramatically reduced, we remain flexible with the potential to add a large number of new completions on wells already drilled. These new production results announced today give us confidence to now increase our production guidance for calendar year 2015 to 180 - 204 MMcfe per day (30,000 - 34,000 Boe per day). Management is also continuing down the path of improving our balance sheet with several strategic initiatives that in total could exceed $200 million in liquidity enhancements over the next few months. We have our core Appalachian leasehold position that we have been acquiring over the past four years now in place. With the ultimate completion of our Ohio Utica joint venture currently in progress, we will be well positioned to begin further delineating our 208,000 net acres in the Marcellus Shale and Utica Shale plays. Having experienced four of these commodity price downturns in my 30 plus year career in this industry, we have always come out in the past a stronger company on the other side when prices improve. I expect nothing different this time around."

Non-GAAP Financial Measures

This release contains certain financial measures that are non-GAAP measures. We have provided reconciliations within this release of the non-GAAP financial measures to the most directly comparable GAAP financial measures. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, measures for financial performance prepared in accordance with GAAP that are presented in this release.

Magnum Hunter defines adjusted income (loss) as reported net income (loss) attributable to common shareholders, plus non-recurring and non-cash items which include (1) exploration expense, (2) impairment of proved oil and gas properties, (3) impairment of other operating assets, (4) non-cash stock compensation expense, (5) non-cash 401k matching expense, (6) non-recurring transaction and other expense, (7) unrealized (gain) loss on investments, (8) interest expense - fees, (9) unrealized (gain) loss on derivatives, (10) (gain) loss on sale of assets, (11) income tax expense (benefit), (12) non-recurring charge for reduction of capital account in Eureka Hunter Holdings, (13) gain on deconsolidation of Eureka Hunter Holdings, (14) loss on extinguishment of Eureka Hunter Holdings Series A Preferred Units, (15) (gain) loss from sale of discontinued operations and (16) income from discontinued operations.

Magnum Hunter defines Adjusted EBITDAX as net income (loss) from continuing operations before (1) net interest expense, (2) (gain) loss on sale of assets, (3) depletion, depreciation, amortization and accretion, (4) impairment of proved oil and gas properties, (5) impairment of other operating assets, (6) non-cash stock compensation expense, (7) non-cash 401k matching expense, (8) non-recurring transaction and other expense, (9) unrealized (gain) loss on investments, (10) interest expense -- fees, (11) unrealized (gain) loss on derivatives, (12) (gain) loss on sale of assets, (13) income tax expense (benefit), (14) non-recurring charge for reduction of capital account in Eureka Hunter Holdings, (15) gain on deconsolidation of Eureka Hunter Holdings, (16) loss on extinguishment of Eureka Hunter Holdings Series A Preferred Units, (17) (gain) loss from sale of discontinued operations and (18) income from discontinued operations. Adjusted EBITDAX is not a measure of net income or cash flows as determined by GAAP.

Magnum Hunter defines recurring cash G&A as total general and administrative expenses before (1) non-cash stock compensation, (2) acquisition and other non-recurring expense and (3) non-recurring charge for reduction of capital account in Eureka Hunter Holdings.

Management believes these non-GAAP financial measures facilitate evaluation of the Company's business on a "normalized" or recurring basis and without giving effect to certain non-cash expenses and other items, thereby providing management, investors and analysts with comparative information for evaluating the Company in relation to other oil and gas companies providing corresponding non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, measures for financial performance prepared in accordance with GAAP, and that the reconciliations to the closest corresponding GAAP measure should be reviewed carefully.

About Magnum Hunter Resources Corporation

Magnum Hunter Resources Corporation and subsidiaries are a Houston, Texas based independent exploration and production company engaged in the acquisition, development and production of crude oil, natural gas and natural gas liquids, primarily in the states of West Virginia and Ohio. The Company is presently active in two of the most prolific unconventional shale resource plays in North America, the Marcellus Shale and Utica Shale located in Northwest West Virginia and Southeast Ohio.

Availability of Information on the Company's Website

Magnum Hunter is providing a reminder that it makes available on its website (at www.magnumhunterresources.com) a variety of information for investors, analysts and the media, including the following:

  • annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports as soon as reasonably practicable after the material is electronically filed with or furnished to the Securities and Exchange Commission;
  • the most recent version of the Company's Investor Presentation slide deck;
  • announcements of conference calls, webcasts, investor conferences, speeches and other events at which Company executives may discuss the Company and its business and archives or transcripts of such events;
  • press releases regarding annual and quarterly earnings, operational developments, legal developments and other matters; and
  • corporate governance information, including the Company's corporate governance guidelines, committee charters, code of conduct and other governance-related matters.

Magnum Hunter's goal is to maintain its website as the authoritative portal through which visitors can easily access current information about the Company. Over time, the Company intends for its website to become a primary channel for public dissemination of important information about the Company. Investors, analysts, media and other interested persons are encouraged to visit the Company's website frequently.

Certain information included on the Company's website constitutes forward-looking statements and is subject to the qualifications under the heading "Forward-Looking Statements" below and in the Company's Investor Presentation slide deck.

Forward-Looking Statements

This press release includes "forward-looking statements." All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. Actual results could vary significantly from those expressed or implied in such statements and are subject to a number of risks and uncertainties. Although Magnum Hunter believes that the expectations reflected in the forward-looking statements are reasonable, Magnum Hunter can give no assurance that such expectations will prove to be correct. The forward-looking statements involve risks and uncertainties that affect operations, financial performance, and other factors as discussed in filings made by Magnum Hunter with the Securities and Exchange Commission (SEC). Among the factors that could cause results to differ materially are those risks discussed in the periodic reports filed by Magnum Hunter with the SEC, including Magnum Hunter's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, its to be filed Annual Report on Form 10-K for the fiscal year ended December 31, 2014, and its Quarterly Reports on Form 10-Q for the fiscal quarters ended after such fiscal year. You are urged to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading "Risk Factors." Forward-looking statements speak only as of the date of the document in which they are contained, and Magnum Hunter does not undertake any duty to update any forward-looking statements except as may be required by law.

MAGNUM HUNTER RESOURCES CORPORATION UNAUDITED RESULTS OF OPERATIONS
(Continuting Operations)
(in thousands, except per unit data)
  Year Ended December 31,
  2014   2013   2012
Oil and natural gas revenue and production          
Revenues (in thousands, U.S. Dollars)          
  Oil $ 131,109   $ 147,798   $ 82,225
  Natural gas   91,277     53,821     45,825
  NGL   46,115     19,080     5,678
    Total oil and natural gas sales   268,501     220,699     133,728
                 
Production                
  Oil (MBbl)   1,570     1,641     993
  Natural gas (MMcf)   21,788     13,212     14,289
  NGL (MBoe)   960     438     154
    Total (MBoe)   6,161     4,281     3,529
  Boe/d   16,879     11,728     9,643
                 
Average prices (U.S. Dollars)                
  Oil (per Bbl) $ 83.53   $ 90.04   $ 82.77
  Natural gas (per Mcf) $ 4.19   $ 4.07   $ 3.21
  NGL (per Boe) $ 48.04   $ 43.61   $ 36.79
    Total average price (per Boe) $ 43.58   $ 51.55   $ 37.89
                 
Costs and expenses (per Boe)                
  Production costs $ 7.77   $ 10.91   $ 8.54
  Severance tax and marketing $ 2.82   $ 4.27   $ 2.28
  Transportation, processing, and other related costs $ 7.03   $ 5.27   $ 3.05
  Exploration $ 19.24   $ 23.45   $ 22.78
  Impairment of proved oil and natural gas property $ 48.90   $ 11.68   $ 1.09
  General and administrative expense $ 17.64   $ 19.26   $ 17.67
  Depletion, depreciation and accretion $ 23.84   $ 25.08   $ 20.53
                 
Other segments (in thousands)                
  Midstream natural gas gathering, processing and marketing revenues $ 97,916   $ 61,178   $ 13,040
  Midstream natural gas gathering, processing and marketing revenues $ 84,764   $ 52,099   $ 8,028
  Oilfield services revenues $ 23,134   $ 18,431   $ 12,333
  Oilfield services expenses $ 15,686   $ 14,825   $ 10,037
                   
                   
MAGNUM HUNTER RESOURCES CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
   December 31,
  2014   2013
ASSETS      
CURRENT ASSETS      
  Cash and cash equivalents $ 53,180   $ 41,713
  Restricted cash   -     5,000
  Accounts receivable:          
    Oil and natural gas sales   16,319     25,099
    Joint interests and other, net of allowance for doubtful accounts of $308 and $196 at December 31, 2014 and 2013, respectively   23,888     30,582
  Derivative assets   16,586     608
  Inventory   2,268     7,158
  Investments   3,864     2,262
  Prepaid expenses and other assets   4,091     2,938
  Assets held for sale   -     5,366
    Total current assets   120,196     120,726
           
PROPERTY, PLANT AND EQUIPMENT          
  Oil and natural gas properties, successful efforts method of accounting, net   1,098,235     1,224,659
  Gas transportation, gathering and processing equipment and other, net   77,423     289,420
    Total property, plant and equipment, net   1,175,658     1,514,079
           
OTHER ASSETS          
  Deferred financing costs, net of amortization of $15,099 and $9,735 as of December 31, 2014 and 2013, respectively   22,856     20,008
  Derivative assets, long-term   -     25
  Intangible assets, net   -     6,530
  Goodwill   -     30,602
  Assets held for sale   -     162,687
  Investment in affiliates, equity method   347,191     350
  Other assets   3,928     1,644
    Total assets $ 1,669,829   $ 1,856,651
           
           
MAGNUM HUNTER RESOURCES CORPORATION  
UNAUDITED CONSOLIDATED BALANCE SHEETS  
(in thousands, except share and per share data)  
    December 31,  
    2014     2013  
LIABILITIES AND SHAREHOLDERS' EQUITY            
CURRENT LIABILITIES            
  Current portion of notes payable   $ 10,770     $ 3,804  
  Accounts payable     130,502       107,837  
  Accounts payable to related parties     90       23  
  Accrued liabilities     20,277       44,629  
  Revenue payable     5,450       6,313  
  Derivative liabilities     -       1,903  
  Liabilities associated with assets held for sale     -       12,865  
  Other liabilities     1,356       6,491  
    Total current liabilities     168,445       183,865  
                 
NONCURRENT LIABILITIES                
  Long-term debt     937,963       876,106  
  Asset retirement obligations     26,229       16,163  
  Derivative liabilities, long-term     -       76,310  
  Other long-term liabilities     5,337       2,279  
  Long-term liabilities associated with assets held for sale     -       14,523  
    Total liabilities     1,137,974       1,169,246  
                 
COMMITMENTS AND CONTINGENCIES (Note 16)                
                 
REDEEMABLE PREFERRED STOCK                
  Series C Cumulative Perpetual Preferred Stock ("Series C Preferred Stock"), cumulative dividend rate 10.25% per annum, 4,000,000 authorized, 4,000,000 issued and outstanding as of December 31, 2014 and 2013, with a liquidation preference of $25.00 per share     100,000       100,000  
  Series A Convertible Preferred Units of Eureka Hunter Holdings, LLC (the "Eureka Hunter Holdings Series A Preferred Units"), cumulative distribution rate of 8.0% per annum, 9,885,048 issued and outstanding as of December 31, 2014 and 2013, with a liquidation preference of $200,620 as of December 31, 2013     -       136,675  
      100,000       236,675  
SHAREHOLDERS' EQUITY                
  Preferred stock of Magnum Hunter Resources Corporation, 10,000,000 shares authorized, including authorized shares of Series C Preferred Stock                
  Series D Cumulative Preferred Stock ("Series D Preferred Stock"), cumulative dividend rate 8.0% per annum, 5,750,000 authorized, 4,424,889 issued and outstanding as of December 31, 2014 and 2013, with a liquidation preference of $50.00 per share     221,244       221,244  
  Series E Cumulative Convertible Preferred Stock ("Series E Preferred Stock"), cumulative dividend rate 8.0% per annum, 12,000 authorized, 3,803 issued and 3,722 outstanding as of December 31, 2014 and 2013, with a liquidation preference of $25,000 per share     95,069       95,069  
  Common stock, $0.01 par value per share, 350,000,000 shares authorized, and 201,420,701 and 172,409,023 issued, and 200,505,749 and 171,494,071 outstanding as of December 31, 2014 and 2013, respectively     2,014       1,724  
  Additional paid in capital     909,783       733,753  
  Accumulated deficit     (784,546 )     (586,365 )
  Accumulated other comprehensive loss     (7,765 )     (19,901 )
  Treasury stock, at cost:                
    Series E Preferred Stock, 81 shares as of December 31, 2014 and 2013     (2,030 )     (2,030 )
    Common stock, 914,952 shares as of December 31, 2014 and 2013     (1,914 )     (1,914 )
  Total Magnum Hunter Resources Corporation shareholders' equity     431,855       441,580  
  Non-controlling interest     -       9,150  
    Total shareholders' equity     431,855       450,730  
    Total liabilities and shareholders' equity   $ 1,669,829     $ 1,856,651  
                     
                     
MAGNUM HUNTER RESOURCES CORPORATION  
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS  
(in thousands, except share and per share data)  
                 
  Year Ended December 31,  
  2014     2013     2012  
REVENUES AND OTHER                
  Oil and natural gas sales $ 268,501     $ 220,699     $ 133,728  
  Midstream natural gas gathering, processing, and marketing   97,916       61,178       13,040  
  Oilfield services   23,134       18,431       12,333  
  Other revenue   1,918       4,230       836  
    Total revenue   391,469       304,538       159,937  
OPERATING EXPENSES                      
  Production costs   47,857       46,689       30,119  
  Severance taxes and marketing   17,344       18,282       8,043  
  Transportation, processing, and other related costs   43,292       22,549       10,775  
  Exploration   118,509       100,389       80,375  
  Impairment of proved oil and gas properties   84,764       50,011       3,839  
  Midstream natural gas gathering, processing, and marketing   15,686       52,099       8,028  
  Oilfield services   301,276       14,825       10,037  
  Depletion, depreciation, amortization and accretion   146,868       107,385       72,438  
  (Gain) loss on sale of assets, net   (2,456 )     44,641       596  
  General and administrative   108,687       82,461       62,347  
    Total operating expenses   881,827       539,331       286,597  
                       
OPERATING LOSS   (490,358 )     (234,793 )     (126,660 )
                       
OTHER INCOME (EXPENSE)                      
  Interest income   156       265       202  
  Interest expense   (86,463 )     (72,621 )     (51,846 )
  (Gain) loss on derivative contracts, net   (72,254 )     (25,274 )     22,239  
  Gain on deconsolidation of Eureka Hunter Holdings, LLC   509,563       -       -  
  Loss from equity method investment   (1,038 )     (994 )     (1,971 )
  Other income   2,561       15,897       4,014  
    Total other expense, net   352,525       (82,727 )     (27,362 )
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX   (137,833 )     (317,520 )     (154,022 )
  Income tax benefit   -       85,407       24,665  
LOSS FROM CONTINUING OPERATIONS, NET OF TAX   (137,833 )     (232,113 )     (129,357 )
  Income (loss) from discontinued operations, net of tax   4,561       (62,561 )     (9,773 )
  Gain (loss) on disposal of discontinued operations, net of tax   (13,855 )     71,510       2,409  
NET LOSS   (147,127 )     (223,164 )     (136,721 )
  Net loss attributed to non-controlling interests   3,653       988       4,013  
LOSS ATTRIBUTABLE TO MAGNUM HUNTER RESOURCES CORPORATION   (143,474 )     (222,176 )     (132,708 )
  Dividends on preferred stock   (54,707 )     (56,705 )     (34,706 )
  Loss on extinguishment of Eureka Hunter Holdings Series A Preferred Units   (51,692 )     -       -  
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (249,873 )   $ (278,881 )   $ (167,414 )
  Weighted average number of common shares outstanding, basic and diluted   189,135,500       170,088,108       155,743,418  
  Loss from continuing operations per share, basic and diluted $ (1.27 )   $ (1.69 )   $ (1.03 )
  Income (loss) from discontinued operations per share, basic and diluted   (0.05 )     0.05       (0.04 )
NET LOSS PER COMMON SHARE, BASIC AND DILUTED $ (1.32 )   $ (1.64 )   $ (1.07 )
                       
AMOUNTS ATTRIBUTABLE TO MAGNUM HUNTER RESOURCES CORPORATION                      
  Loss from continuing operations, net of tax $ (134,180 )   $ (231,125 )   $ (125,344 )
  Income (loss) from discontinued operations, net of tax   (9,294 )     8,949       (7,364 )
    Net loss $ (143,474 )   $ (222,176 )   $ (132,708 )
                           
                           
MAGNUM HUNTER RESOURCES CORPORATION  
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
  Year Ended December 31,  
  2014     2013     2012  
CASH FLOWS FROM OPERATING ACTIVITIES                
  Net loss $ (147,127 )   $ (223,164 )   $ (136,721 )
  Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                      
    Depletion, depreciation, amortization and accretion   146,868       134,867       135,896  
    Exploration   116,945       115,069       116,686  
    Impairment of proved oil and gas properties   301,276       89,041       4,096  
    Impairment of other operating assets   730       -       -  
    Share-based compensation   12,469       13,624       15,696  
    Cash paid for plugging wells   (107 )     (14 )     -  
    Loss (gain) on sale of assets   11,399       (7,318 )     (3,074 )
    Gain on deconsolidation of Eureka Hunter Holdings   (509,563 )     -       -  
    Loss from captial account adjustement of Eureka Hunter Holdings   32,569       -       -  
    Loss from equity method investment   1,038       994       1,971  
    Unrealized loss (gain) on open derivative contracts   (18,232 )     17,058       (10,945 )
    Loss on extinguished embedded derivative   91,792       -       -  
    Unrealized loss (gain) on investments   -       (8,003 )     229  
    Amortization and write-off of deferred financing costs and discount on Senior Notes included in interest expense   9,679       4,836       7,399  
    Deferred tax benefit   -       (84,527 )     (21,595 )
  Changes in operating assets and liabilities:                      
    Accounts receivable, net   8,533       22,781       (73,549 )
    Inventory   4,381       4,658       (6,198 )
    Prepaid expenses and other current assets   (3,071 )     (1,073 )     (538 )
    Accounts payable   (51,930 )     42,050       16,390  
    Revenue payable   (2,953 )     (11,589 )     8,776  
    Accrued liabilities   (23,361 )     2,421       3,492  
Net cash provided by operating activities   (18,665 )     111,711       58,011  
CASH FLOWS FROM INVESTING ACTIVITIES                      
  Capital expenditures and advances   (562,324 )     (631,511 )     (568,610 )
  Change in restricted cash   5,000       (3,500 )     -  
  Cash paid in acquisitions, net of cash received of $0; $0; and $34, respectively   -       -       (444,844 )
  Deconsolidation of the cash of Eureka Hunter Holdings   (6,380 )     -       -  
  Proceeds from partial sale of equity interest in Eureka Hunter Holdings   55,000       -       -  
  Change in deposits and other long-term assets   (2,554 )     854       89  
  Proceeds from sales of assets   193,139       506,297       4,158  
Net cash provided by (used in) investing activities   (318,119 )     (127,860 )     (1,009,207 )
CASH FLOWS FROM FINANCING ACTIVITIES                      
  Proceeds from issuing Senior Notes   -       -       596,907  
  Proceeds from borrowings on debt   629,392       373,991       546,043  
  Principal repayments of debt   (467,745 )     (380,923 )     (542,654 )
  Proceeds from sale of Eureka Hunter Holdings Series A Preferred Units   11,956       35,280       149,655  
  Proceeds from sale of Eureka Hunter Holdings Series A Common Units   8,180       -       -  
  Issue Series A-2 Units of Eureka Hunter Holdings, net of costs   40,000       -       -  
  Net proceeds from sale of common stock   178,410       -       148,241  
  Net proceeds from sale of preferred stock   -       10,072       144,635  
  Repurchase noncontrolling interest   (2,875 )     -       -  
  Proceeds from exercise of warrants and options   9,663       5,352       2,331  
  Change in other long-term liabilities   1,023       (1,222 )     186  
  Purchase of treasury shares   -       -       (1,750 )
  Payment of deferred financing costs   (14,208 )     (1,246 )     (20,313 )
  Preferred stock dividends paid   (45,601 )     (40,648 )     (26,839 )
Net cash provided by (used in) financing activities   348,195       656       996,442  
Effect of changes in exchange rate on cash   56       (417 )     (2,474 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   11,467       (15,910 )     42,772  
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   41,713       57,623       14,851  
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 53,180     $ 41,713     $ 57,623  
                       
                       
Magnum Hunter Resources Reconciliations (Unaudited)  
                         
                         
Adjusted Loss per Common Share Reconciliation   Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
($ in thousands)   2014     2013     2014     2013  
                         
Net income (loss) attributable to common shareholders - reported   $ 42,767     $ (61,208 )   $ (249,873 )   $ (278,881 )
                                 
Non-recurring and non-cash items:                                
  Exploration expense     66,115       25,132       118,509       100,389  
  Impairment of proved oil and gas properties     261,478       10,544       301,276       50,011  
  Impairment of other operating assets     64       -       730       -  
  Non-cash: stock compensation expense     5,689       1,790       11,363       13,624  
  Non-cash: 401k matching expense     408       298       2,033       1,856  
  Non-recurring transaction and other expense     8,527       8,487       26,147       29,807  
  Unrealized (gain) loss on investments     534       (229 )     1,038       814  
  Interest expense - fees     3,684       1,175       11,086       4,836  
  Unrealized (gain) loss on derivatives     (14,491 )     (6,699 )     73,560       17,058  
  (Gain) loss on sale of assets     2,156       2,527       (2,456 )     44,641  
  Income tax (benefit)     -       (38,180 )     -       (85,407 )
  Non-recurring charge for reduction of capital account in Eureka Hunter Holdings     32,569       -       32,569       -  
  Gain on deconsolidation of Eureka Hunter Holdings     (509,563 )     -       (509,563 )     -  
  Loss on extinguishment of Eureka Hunter Holdings Series A Preferred Units     51,692       -       51,692       -  
  (Gain) loss from sale of discontinued operations     (128 )     31,421       13,855       (71,510 )
  Income from discontinued operations     -       108       (4,561 )     62,561  
                                 
Total non-recurring and non-cash items   $ (91,266 )   $ 36,374     $ 127,278     $ 168,680  
                                 
Net income (loss) attributable to common shareholders - as adjusted   $ (48,499 )   $ (24,834 )   $ (122,595 )   $ (110,201 )
                                 
Net income (loss) attributable to common shareholders - as adjusted   $ (0.24 )   $ (0.15 )   $ (0.65 )   $ (0.65 )
                                 
Weighted Average Shares     199,916,880       171,085,346       189,135,500       170,088,108  
                                 
                                 
Adjusted EBITDAX Reconciliation  
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
($ in thousands)   2014     2013     2014     2013  
                         
Net income (loss) from continuing operations   $ 103,320     $ (14,382 )   $ (137,833 )   $ (232,113 )
Net Interest expense     23,960       19,221       86,307       72,356  
(Gain) loss on sale of assets     2,156       2,527       (2,456 )     44,641  
Depletion, depreciation, amortization and accretion     45,135       27,244       146,868       107,385  
Impairment of proved oil and gas properties     261,478       10,544       301,276       50,011  
Impairment of other operating assets     64       -       730       -  
Exploration expense     66,115       25,132       118,509       100,389  
Non-cash stock compensation expense     5,689       1,790       11,363       13,624  
Non-cash 401k matching expense     408       298       2,033       1,856  
Non-recurring transaction and other expense     8,527       8,487       26,147       29,807  
Unrealized (gain) loss on investments     534       (229 )     1,038       814  
Income tax (benefit)     -       (38,180 )     -       (85,407 )
Unrealized (gain) loss on derivatives     (14,491 )     (6,699 )     73,560       17,058  
Non-recurring charge for reduction of capital account in Eureka Hunter Holdings     32,569       -       32,569       -  
Gain on deconsolidation of Eureka Hunter Holdings     (509,563 )     -       (509,563 )     -  
Total Adjusted EBITDAX   $ 25,901     $ 35,753     $ 150,548     $ 120,421  
                                 
                                 
Recurring Cash G&A Reconciliation
  Three Months Ended   Twelve Months Ended
  December 31,   December 31,
($ in thousands) 2014   2013   2014   2013
               
Total G&A $ 52,660   $ 18,788   $ 108,687   $ 82,461
                       
Adjustments:                      
  Non-cash stock compensation   5,689     1,790     11,363     13,624
  Acquisition and other non-recurring expense   8,527     8,487     26,147     29,807
  Non-recurring charge for reduction of capital account in Eureka Hunter Holdings   32,569     -     32,569     -
Recurring Cash G&A $ 5,875   $ 8,511   $ 38,608   $ 39,030
                       
Recurring Cash G&A Per BOE $ 3.72   $ 7.24   $ 6.27   $ 9.12

Contact:
Cham King
AVP, Investor Relations
ir@magnumhunterresources.com


Source: Marketwired (Canada) (March 2, 2015 - 7:00 AM EST)

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