SOURCE: Magnum Hunter Resources

Magnum Hunter Resources

November 10, 2010 17:05 ET

Magnum Hunter Resources Reports Third Quarter 2010 Financial Results

HOUSTON, TX--(Marketwire - November 10, 2010) - Magnum Hunter Resources Corporation (NYSE Amex: MHR) (NYSE Amex: MHR-PC) ("Magnum Hunter," or the "Company") announced today financial results for the third quarter of 2010.

Financial Results for the Three Months Ended September 30, 2010

Magnum Hunter reported a net loss of $4.3 million, or ($0.06) per basic and diluted share outstanding for the third quarter of 2010, as compared to 2009's third quarter net loss of $3.1 million, or ($0.08) per basic and diluted share outstanding. Total revenues for the three months ended September 30, 2010 increased 317% to $9.6 million from $2.3 million for the three months ended September 30, 2009.

Adjusting for non-recurring and non-cash charges, Magnum Hunter's third quarter 2010 net loss was approximately $1.5 million or ($0.02) per basic and diluted common share. The Company's third quarter 2010 net loss included the following non-recurring and non-cash charges: (i) non-cash general and administrative charges associated with employee compensation for a total of $1.8 million; (ii) non-recurring general and administrative charges of $0.3 million; (iii) non-cash exploration expense of $0.3 million; and (iv) an unrealized loss on derivative contracts in the amount of $0.5 million.

Financial Results for the Nine Months Ended September 30, 2010

Magnum Hunter reported a net loss of $14.4 million, or ($0.23) per basic and diluted share outstanding for the first nine months of 2010, as compared to 2009's first nine months net loss of $7.8 million, or ($0.21) per basic and diluted share outstanding. Total revenues increased 302% to $27.3 million for the nine months ended September 30, 2010 compared to $6.8 million for the nine months ended September 30, 2009.

Adjusting for non-recurring and non-cash charges, Magnum Hunter's net loss was $1.2 million for the first nine months of 2010, or ($0.02) per basic and diluted common share. The Company's net loss for the first nine months of 2010 included the following non-recurring and non-cash charges: (i) non-cash general and administrative charges associated with employee compensation for a total of $9.0 million; (ii) other non-recurring general and administrative charges of $2.0 million primarily related to the acquisition of Triad Energy; (iii) exploration and field operating expenses of $1.0 million; and (iv) an unrealized loss on derivative contracts in the amount of $1.1 million.

Capital Expenditures and Liquidity

Magnum Hunter's liquidity position continues to improve through the expansion of our senior secured commercial bank facility; the continued sale of our 10.25% Series C Perpetual Preferred Stock (non-convertible into common) and our increasing cash flow from operations. The Company has recently received shareholder authorization to issue up to 4,000,000 Series C Perpetual Preferred Shares, up from 1,581,117 outstanding at November 9, 2010. The Company has a borrowing base of $65 million (adjusted from $75 million upon the recent closing of the Cinco Terry divestiture) with $47 million outstanding as of November 10, 2010. The Company continues to fund its expanded capital program and has liquidity of approximately $22 million as of November 10, 2010. The Company believes it has adequate resources to meet its expenditures under its capital budget for fiscal year 2010. The Company has significantly strengthened its capital structure as net debt/capitalization ratio declined to 34% as of September 30, 2010.

Management Comments

Mr. Ronald D. Ormand, Executive Vice President and Chief Financial Officer of Magnum Hunter Resources Corporation, commented, "This was an eventful quarter for our Company with significant development on multiple strategic initiatives, including: (i) the continued integration of the Triad Energy assets into our organization; (ii) the acceleration of our drilling program in the Eagle Ford Shale and Marcellus Shale areas; (iii) significant progress on the construction and financing of the Eureka Hunter Pipeline located in West Virginia; and, (iv) the divestiture of our Cinco Terry conventional natural gas property located in west Texas. We expect production from our drilling programs to commence in a meaningful way during the fourth quarter of 2010 and have substantially strengthened and simplified our capital structure in order to be in a position to capitalize on future growth opportunities. We also continue to evaluate a number of joint venture and acquisition opportunities considered "bolt on" transactions within our core areas of existing operations."

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 of exploratory leases and producing properties, secondary enhanced oil recovery projects, exploratory drilling, and production of oil and natural gas in the United States. The Company is presently active in three of the "big five" emerging shale plays in the United States.

For more information, please view our website at http://www.magnumhunterresources.com/

                   MAGNUM HUNTER RESOURCES CORPORATION
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                              (Unaudited)


                        Three Months Ended          Nine Months Ended
                          September 30,               September 30,
                        2010          2009          2010          2009
                    ------------  ------------  ------------  ------------
REVENUE:
Oil and gas sales   $  8,281,723  $  2,320,514  $ 23,920,482  $  6,566,441
Field operations
 and other             1,341,715             -     3,330,013       200,000
                    ------------  ------------  ------------  ------------
Total revenue          9,623,438     2,320,514    27,250,495     6,766,441
                    ------------  ------------  ------------  ------------

EXPENSES:
Lease operating
 expenses              2,897,910     1,288,850     8,153,941     3,806,617
Severance taxes and
 marketing               820,511             -     2,167,359             -
Exploration              250,534       278,689     1,075,643       392,365
Field operations       1,300,192             -     3,143,255             -
Impairment of oil &
 gas properties           19,991             -        19,991             -
Depreciation,
 depletion and
 accretion             2,289,425       993,380     7,138,488     3,100,242
General and
 administrative        4,633,767     2,329,401    17,903,244     4,521,076
                    ------------  ------------  ------------  ------------
Total expenses        12,212,330     4,890,320    39,601,921    11,820,300
                    ------------  ------------  ------------  ------------

LOSS FROM
 OPERATIONS           (2,588,892)   (2,569,806)  (12,351,426)   (5,053,859)

OTHER INCOME AND
 (EXPENSE):
Interest income           50,351            72        54,578           924
Interest expense      (1,096,545)     (688,469)   (3,016,429)   (1,866,655)
Gain (Loss) on
 derivative
 contracts               (61,552)      190,637     2,347,808    (1,027,467)
                    ------------  ------------  ------------  ------------

Net loss              (3,696,638)   (3,067,566)  (12,965,469)   (7,947,057)

 Net (income) loss
  attributable to
  non-controlling
  interest               (25,888)       15,344       (91,223)      129,976
                    ------------  ------------  ------------  ------------

Net loss
 attributable to
 Magnum Hunter
 Resources
 Corporation          (3,722,526)   (3,052,222)  (13,056,692)   (7,817,081)

Dividend on
 Preferred Stock        (601,131)            -    (1,309,527)            -
                    ------------  ------------  ------------  ------------

Net loss
 attributable to
 common
 shareholders       $ (4,323,657) $ (3,052,222) $(14,366,219) $ (7,817,081)
                    ============  ============  ============  ============

Loss per common
 share
Basic and diluted   $      (0.06) $      (0.08) $      (0.23) $      (0.21)
                    ============  ============  ============  ============

Weighted average
 number of common
 shares outstanding
Basic and diluted     67,996,180    37,012,912    62,010,895    36,863,881
                    ============  ============  ============  ============




                    MAGNUM HUNTER RESOURCES CORPORATION
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)


                                                    Nine Months Ended
                                                      September 30,
                                                  2010           2009
                                              -------------  -------------

Cash flows from operating activities
Net loss attributable to Magnum Hunter
 Resources Corporation                        $ (13,056,691) $  (7,947,057)
Adjustments to reconcile net loss to net cash
 provided by operating activities:
Non-controlling Interest                             91,223              -
Depletion, depreciation, and accretion            7,138,488      3,100,242
Amortization of deferred financing costs
 included in interest expense                       861,086        310,136
Dry hole cost                                             -        282,056
Share based compensation                          5,151,351      1,762,176
Unrealized (gain) loss on derivative
 contracts                                        1,181,057      3,513,709
Gain on sale of assets                              (46,784)             -
Asset impairment                                     19,991              -
Changes in operating assets and liabilities:
   Accounts receivable                            1,157,016       (216,497)
   Inventory                                         69,624              -
   Prepaid expenses                                (501,569)       (76,509)
   Accounts payable                              (1,574,837)       249,403
   Revenue payable                                  137,606        212,911
   Accrued liabilities                            3,018,315         62,746
                                              -------------  -------------
Net cash provided by operating activities         3,645,876      1,253,316
                                              -------------  -------------

Cash flows from investing activities
Capital expenditures                            (28,122,799)   (10,753,268)
Advances                                          1,432,613              -
Cash received in purchase of Sharon
 Resources, Inc.                                          -        235,023
Cash paid in acquisition of Triad, net of
 cash acquired of $3,710,000                    (59,500,299)             -
Proceeds from sale of assets                         49,670              -
Deposits                                           (979,858)             -
                                              -------------  -------------
Net cash used in investing activities           (87,120,673)   (10,518,245)
                                              -------------  -------------

Cash flows from financing activities
Proceeds from sale of common stock               24,422,951              -
Issue Series C Cumulative Perpetual Preferred
 Stock shares, net of costs                      22,878,851              -
Proceeds from exercise of warrants               13,790,459              -
Cash paid upon conversion of Series B
 Preferred Stock                                (11,250,000)             -
Loan KSOP shares                                   (542,366)             -
Options exercised                                     8,775              -
Options surrendered for cash                       (115,500)             -
Preferred stock dividend paid                    (1,335,181)             -
Proceeds from revolving credit borrowings        72,000,000      5,500,000
Principal payment on revolving credit           (35,000,000)             -
Proceeds from loan                                  580,459        217,336
Principal payment on loan                          (778,547)      (127,122)
Payment on payable on sale of partnership                 -       (113,560)
Payment of deferred financing costs              (2,630,071)             -
                                              -------------  -------------
Net cash provided by financing activities        82,029,830      5,476,654
                                              -------------  -------------

Net increase (decrease) in cash and cash
 equivalents                                     (1,444,967)    (3,788,275)
Cash and cash equivalents, beginning of
 period                                           2,281,568      6,120,402
                                              -------------  -------------

Cash and cash equivalents, end of period      $     836,601  $   2,332,127
                                              =============  =============




                        MAGNUM HUNTER RESOURCES CORPORATION
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                    (Unaudited)


                                              September 30,  December 31,
                                                  2010           2009
                                              -------------  -------------
                       ASSETS
CURRENT ASSETS:
Cash and cash equivalents                     $     836,601  $   2,281,568
Accounts receivable                               7,002,332      3,236,043
Derivative assets                                 1,433,235         94,113
Prepaids and other current assets                   573,657      1,261,534
                                              -------------  -------------
  Total current assets                            9,845,825      6,873,258
                                              -------------  -------------

PROPERTY AND EQUIPMENT (Net of Accumulated
 Depletion and Depreciation):
Oil and natural gas properties, successful
 efforts accounting
Unproved                                         48,169,404     11,887,483
Proved properties                               104,232,733     43,995,567
Equipment and other fixed assets                 15,065,160      1,655,582
                                              -------------  -------------
  Total property and equipment, net             167,467,297     57,538,632
                                              -------------  -------------

OTHERS ASSETS:
Derivative and other assets                       2,130,086      1,159,405
Deferred financing costs, net of amortization
 of $861,086 and $35,831 respectively             2,781,741      1,012,756
                                              -------------  -------------
  Total assets                                $ 182,224,949  $  66,584,051
                                              =============  =============

        LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable                              $  17,105,988  $   4,852,221
Accrued liabilities                               4,269,193        885,622
Revenue payable                                   2,408,129        342,585
Dividend payable                                          -         25,654
Current portion of notes payable                    568,562         44,157
Derivative liability                                      -         69,136
                                              -------------  -------------
  Total current liabilities                      24,351,872      6,219,375
                                              -------------  -------------

Payable on sale of partnership                      640,695        640,695
Notes payable, less current portion              52,689,323     13,000,000
Asset retirement obligation                       4,634,858      2,032,306
                                              -------------  -------------
  Total liabilities                              82,316,748     21,892,376
                                              -------------  -------------

COMMITMENTS AND CONTINGENCIES

REDEEMABLE PREFERRED STOCK:
Series C Cumulative Perpetual Preferred
 Stock, cumulative dividend rate 10.25% per
 annum, 4,000,000 authorized, 1,153,741 and
 214,950 issued & outstanding as of September
 30, 2010 and December 31, 2009, respectively,
 with liquidation preference of $25.00 per
 share                                           28,843,525      5,373,750

SHAREHOLDERS' EQUITY:
Preferred stock, 9,250,000 shares authorized,
 none issued and outstanding                              -              -
Common stock, $0.01 par value; 100,000,000
 shares authorized, 68,885,661 and 50,591,610
 shares issued and outstanding as of September
 30, 2010 and December 31, 2009, respectively       688,857        505,916
Additional paid in capital                      118,317,477     71,936,306
Accumulated deficit                             (47,501,911)   (33,135,693)
Treasury Stock, previous deposit on Triad,
 at cost, 761,652 shares                         (1,310,357)    (1,310,357)
Unearned common stock in KSOP, at cost,
 137,900 shares                                    (542,366)             -
                                              -------------  -------------
Total Magnum Hunter Resources Corporation
 shareholders' equity                            70,194,066     37,996,172
Non-controlling interest                          1,412,976      1,321,753
                                              -------------  -------------
Total Equity                                     71,064,676     39,317,925
                                              -------------  -------------
Total liabilities and shareholders' equity    $ 182,224,949  $  66,584,051
                                              =============  =============

Forward-looking Statements

This press release contains statements concerning Magnum Hunter Resources Corporation's expectations, beliefs, plans, intentions, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements and others contained in this presentation that are not historical are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the Private Securities Litigation Reform Act of 1995 (the "Litigation Reform Act"). Actual results may differ materially from those expressed or implied by these statements. You can generally identify our forward-looking statements by the words "anticipate", "believe" ,"continue", "could", "estimate", "expect", "forecast", "goal", "intend", "may", "objective", "plan", "potential", "predict", "projection", "should", "will", or other similar words. Such forward-looking statements relate to, among other things: (1) the Company's proposed exploration and drilling operations on its various properties, (2) the expected production and revenue from its various properties, (3) the Company's proposed redirection as an operator of certain properties and (4) estimates regarding the reserve potential of its various properties. These statements are qualified by important factors that could cause the Company's actual results to differ materially from those reflected by the forward-looking statements. Such factors include but are not limited to: (1) the Company's ability to finance the continued exploration, drilling and operation of its various properties, (2) positive confirmation of the reserves, production and operating expenses associated with its various properties, (3) the general risks associated with oil and gas exploration, development and operations, including those risks and factors described from time to time in the Company's reports and registration statements filed with the Securities and Exchange Commission, including but not limited to the Company's Annual Report on Form 10-K for the period ended December 31, 2009 filed on March 31, 2010, and the Company's Quarterly Reports on Form 10-Q for the quarters ending, March 31, 2010 and June 30, 2010, filed on, May 17, 2010 and August 12,2010, respectively. Magnum Hunter Resources Corporation cautions readers not to place undue reliance on any forward-looking statements. Magnum Hunter Resources Corporation does not undertake, and specifically disclaims any obligation, to update or revise such statements to reflect new circumstances or unanticipated events as they occur.

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