MAGNUM HUNTER RESOURCES
REPORTS THIRD QUARTER 2010
FINANCIAL RESULTS
FOR IMMEDIATE RELEASE - Houston – (Market Wire) – November 10, 2010 – Magnum Hunter Resources Corporation (NYSE Amex: “MHR” and “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 believe s 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 capit al 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 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, previously 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 v arious 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.
####
| | Contact: | M. Bradley Davis Senior Vice President of Capital Markets bdavis@magnumhunterresources.com (832) 203-4545 |
