HOUSTON, TX — (Marketwire) — 08/09/12 — Magnum Hunter Resources Corporation (NYSE: MHR) (NYSE MKT: MHR.PRC) (NYSE MKT: MHR.PRD) (“Magnum Hunter” or the “Company”) announced today financial results for the second quarter of 2012 and six months ended June 30, 2012.
Magnum Hunter reported an increase in total revenues of 104% to $60.3 million for the three months ended June 30, 2012 compared to $29.5 million for the three months ended June 30, 2011. Operating margins also improved significantly as lease operating expenses per barrel of oil equivalent (“Boe”) declined approximately 30% from $14.58 per Boe to $10.14 per Boe, primarily due to the addition of new unconventional production and tighter controls on field operating expenses. Recurring cash general and administrative costs per Boe also declined approximately 66% from $15.36 to $5.29 per Boe. The Company anticipates this trend of improving operating margins to continue throughout the second half of 2012 as oil production grows in its unconventional resource plays and the Company–s overhead requirements will have minimal expansion.
The Company reported a net loss of $14.6 million or ($0.10) per basic and diluted common shares outstanding for the three months ended June 30, 2012, compared to a net loss of $18.5 million, or ($0.16) per basic and diluted common shares outstanding for the three months ended June 30, 2011. The Company–s net loss per share for the three months ended June 30, 2012, was ($0.04) per basic and diluted common shares outstanding when adjusted for non-cash and non-recurring expenses of $8.0 million (See Non-GAAP Financial Measures and Reconciliations below).
For the three months ended June 30, 2012, Magnum Hunter–s –Adjusted Earnings Before Interest, Income Taxes, Depreciation and Amortization– (“Adjusted EBITDA”) was $38.2 million or $0.25 per basic and diluted common shares outstanding. This represents a 198% increase over the Adjusted EBITDA of $12.8 million for the three months ended June 30, 2011. Second quarter 2012 Adjusted EBITDAX pro forma for a full quarter of earnings from the Williston Basin acquisition closed on May 22, 2012 would have been $41.1 million (See Non-GAAP Financial Measures and Reconciliations below).
Magnum Hunter reported an increase in total revenues of 167% to $117.5 million for the six months ended June 30, 2012 compared to $44.1 million for the six months ended June 30, 2011. Operating margins also improved substantially as lease operating expenses per barrel of oil equivalent (“Boe”) declined from $13.92 per Boe to $9.97 per Boe, primarily due to the addition of new unconventional production and tighter controls on field operating expenses. Recurring cash general and administrative costs per Boe also declined from $15.40 per Boe to $6.14 per Boe.
The Company reported a net loss of $31.7 million or ($0.22) per basic and diluted common shares outstanding for the six months ended June 30, 2012, compared to a net loss of $27.8 million, or ($0.29) per basic and diluted common shares outstanding for the six months ended June 30, 2011. The Company–s net loss per share for the six months ended June 30, 2012, was ($0.06) per basic and diluted common shares outstanding when adjusted for non-cash and non-recurring expenses of $23.5 million (See Non-GAAP Financial Measures and Reconciliations below).
For the six months ended June 30, 2012, Magnum Hunter–s –Adjusted Earnings Before Interest, Income Taxes, Depreciation and Amortization– (“Adjusted EBITDA”) was $72.5 million or $0.51 per basic and diluted common shares outstanding. This represents a 273% increase over the Adjusted EBITDA of $19.4 million for the six months ended June 30, 2011. Adjusted EBITDAX pro forma for a full quarter of earnings from the Williston Basin acquisition closed on May 22, 2012 for the first six months of 2012 would have been $75.4 million (See Non-GAAP Financial Measures and Reconciliations below).
Oil and gas production increased 162% for the three months ended June 30, 2012 to 1.18 million barrels of oil equivalent (“MMBoe”) or 12,984 barrels of oil equivalent per day (“Boepd”) (45% oil/liquids) as compared to the 450,203 barrels of oil equivalent or 4,947 Boepd reported for the three months ended June 30, 2011. The Company exited the second quarter of 2012 with a 50% oil/liquids production mix, and expects to exit 2012 in excess of 18,000 Boepd, with an approximate production mix of 60% oil and liquids.
On May 22, 2012, Magnum Hunter closed on certain Bakken/Three Forks Sanish properties located in the Williston Basin of North Dakota from Baytex Energy USA Ltd. (a subsidiary of Baytex Energy Corp. (TSX: BTE) (NYSE: BTE)) for $311 million, as adjusted for certain customary adjustments. The acquisition included 50,414 net mineral acres located primarily in Divide County, North Dakota. Additionally, during the second quarter of 2012 the Company acquired 7,272 net acres through freehold leasing and acquiring crown land in the Tableland field of the Williston Basin. The Company now has approximately 132,000 net acres in the Williston Basin.
Subsequent to the end of the second quarter, the Company recently closed on the acquisition of 1,885 net acres of leasehold located in Atascosa County, Texas for approximately $2.35 million, implying a net per acre cost of $1,246. The acreage is prospective for both the Eagle Ford and Pearsall shales and gives the Company 10 additional net drilling locations in the Pearsall Shale and 10 – 13 additional net drilling locations in the Eagle Ford Shale. The Company now has approximately 5,212 net acres prospective for the Pearsall Shale and 26,000 net acres in the Eagle Ford Shale.
Magnum Hunter–s total capital expenditures, excluding acquisitions, were $101 million for the three months ended June 30, 2012, including $87.5 million for upstream activities and $13.5 million for midstream activities. Second quarter 2012 capital expenditures included drilling capital in the amount of $16 million for wells drilled but not yet completed. These wells will be completed during the third and fourth quarters of this year. The Company–s 2012 capital expenditure budget remains at $325 million for its upstream business and $50 million for its midstream business for a total of $375 million. The Company continues to direct a larger percentage of its capital expenditures to higher margin oil and liquids projects and is delaying completion of its liquids rich natural gas Marcellus wells until later in the year when the Mobley natural gas processing facility is fully operational.
Magnum Hunter announced today that the Company–s borrowing base under its $750 million Senior Bank Facility has been increased by $47.5 million to $260 million. This 22% increase from the previous borrowing base of $212.5 million is due entirely to organic growth derived from the Company–s total proved reserves. As previously reported, Magnum Hunter–s total proved reserves as of June 30, 2012 were 67.7 million Boe, which represents a 51% increase from the proved reserve report at year end 2011.
As a result of the Company–s internally generated cash flows, our ability to issue additional Series D preferred stock and existing liquidity available under our Senior Bank Credit Facility, Magnum Hunter currently has the necessary capital to fund its remaining capital expenditure budget program. All of the capital expenditures for our midstream segment are expected to be funded through both the Eureka Hunter Credit Facility and ArcLight–s preferred equity investment. As of August 8, 2012, Magnum Hunter had total available liquidity of over $255 million, including cash and availability under the Company–s Senior Bank Facility of $130 million; and, under the Company–s market registration statement to issue and sell Series D Preferred Stock, subject to market conditions, the Company currently has the ability to issue up to an additional $125 million of Series D Preferred Stock (non-convertible). The Company has sold approximately $72 million of Series D Preferred Stock year-to-date, and expects to continue issuing Series D Preferred Stock opportunistically throughout the remainder of 2012.
Magnum Hunter added a significant number of oil hedges during the second quarter of 2012, adding 3,500 Barrels per day (Bblpd) in 2012, 1,000 Bblpd in 2013 and 4,000 Bblpd in 2014. This was done to protect the Company–s cash flow in this recently volatile commodities market. Below is an updated schedule of the Company–s commodity hedge position.
Mr. Gary C. Evans, Chairman of the Board and Chief Executive Officer of Magnum Hunter Resources, commented, “Financial results for the second quarter and first half of 2012 reflect consistent growth in production, revenues and cash flow. At the same time, maintaining cost control has been paramount and our substantial reduction in lease operating expenses and general and administrative expenses per barrel of oil equivalent produced continues to decline. This allows the cash margin expansion that we have been experiencing each quarter over the past year. Our leasehold acreage position in all five of our shale plays continues to expand, most notably in the Williston Basin and the Eagle Ford, our two oil plays. As crude oil prices have moved back well north of $90.00 per barrel, we continue to increase our commodity hedge position to safeguard future volatility and ensure cash flow down the road. With over $255 million of current and available liquidity, we are sufficiently funded to meet all of our capital needs for the foreseeable future.”
Non-GAAP Financial Measures and Reconciliations
Note: Adjusted EBITDA is a non-GAAP financial accounting measure and as such, a full reconciliation of the above exhibited Adjusted EBITDA numbers to the Company–s reported net income for the three and six months ended June 30, 2012 using standardized GAAP financial accounting methodology and as reported to and filed with the Securities and Exchange Commission can be found and is exhibited in the footnotes of this press release below. Also, a reconciliation of the recurring loss per common share to the reported loss per common share and a reconciliation to recurring cash G&A for the three and six months ended June 30, 2012 are provided in the footnotes of this press release below. 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. We believe these non-GAAP financial measures to be important measures for evaluating the relative significance of our financial information used by equity analysts and investors.
Magnum Hunter Resources Corporation is an independent exploration and production company engaged in the acquisition, development and production of crude oil, natural gas and natural gas liquids, primarily in West Virginia, Kentucky, Ohio, Texas, North Dakota and Saskatchewan, Canada. The Company is active in five of the most prolific unconventional shale resource plays in North America, namely the Marcellus Shale, Utica Shale, Eagle Ford Shale, Pearsall Shale and Williston Basin/Bakken Shale. Magnum Hunter Resources is based in Houston, Texas. For more information, visit .
The statements and information contained in this press release that are not statements of historical fact, including any estimates and assumptions contained herein, are “forward looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, referred to as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, referred to as the Exchange Act. These forward-looking statements include, among others, statements, estimates and assumptions relating to our business and growth strategies, our oil and gas reserve estimates, our ability to successfully and economically explore for and develop oil and gas resources, our exploration and development prospects, future inventories, projects and programs, expectations relating to availability and costs of drilling rigs and field services, anticipated trends in our business or industry, our future results of operations, our liquidity and ability to finance our exploration and development activities and our midstream activities, market conditions in the oil and gas industry and the impact of environmental and other governmental regulation. In addition, with respect to any pending acquisitions described herein, forward-looking statements include, but are not limited to, statements regarding the expected timing of the completion of the proposed transactions; the ability to complete the proposed transactions considering the various closing conditions; the benefits of such transactions and their impact on the Company–s business; and any statements of assumptions underlying any of the foregoing. In addition, if and when any proposed transaction is consummated, there will be risks and uncertainties related to the Company–s ability to successfully integrate the operations and employees of the Company and the acquired business. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “could,” “should,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “project,” “pursue,” “plan” or “continue” or the negative thereof or variations thereon or similar terminology.
These forward-looking statements are subject to numerous assumptions, risks, and uncertainties. Factors that may cause our actual results, performance, or achievements to be materially different from those anticipated in forward-looking statements include, among others, the following: adverse economic conditions in the United States, Canada and globally; difficult and adverse conditions in the domestic and global capital and credit markets; changes in domestic and global demand for oil and natural gas; volatility in the prices we receive for our oil and natural gas; the effects of government regulation, permitting and other legal requirements; future developments with respect to the quality of our properties, including, among other things, the existence of reserves in economic quantities; uncertainties about the estimates of our oil and natural gas reserves; our ability to increase our production and oil and natural gas income through exploration and development; our ability to successfully apply horizontal drilling techniques; the effects of increased federal and state regulation, including regulation of the environmental aspects, of hydraulic fracturing; the number of well locations to be drilled, the cost to drill and the time frame within which they will be drilled; drilling and operating risks; the availability of equipment, such as drilling rigs and transportation pipelines; changes in our drilling plans and related budgets; regulatory, environmental and land management issues, and demand for gas gathering services, relating to our midstream operations; and the adequacy of our capital resources and liquidity including, but not limited to, access to additional borrowing capacity.
These factors are in addition to the risks described in the “Risk Factors” and “Management–s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company–s 2011 annual report on Form 10-K, as amended, filed with the Securities and Exchange Commission, which we refer to as the SEC. Most of these factors are difficult to anticipate and beyond our control. Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such statements. You are cautioned not to place undue reliance on forward-looking statements contained herein, which speak only as of the date of this document. Other unknown or unpredictable factors may cause actual results to differ materially from those projected by the forward-looking statements. Unless otherwise required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We urge readers to review and consider disclosures we make in our reports that discuss factors germane to our business. See in particular our reports on Forms 10-K, 10-Q and 8-K subsequently filed from time to time with the SEC. All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements.
Gabe Scott
Vice President — Capital Markets and Corporate Development
(832) 203-4539