Strategy to weather the current environment
By fits and turns on Friday, Magnum Hunter Resources Corp. CEO Gary Evans dismissed rumors that the company is facing an imminent liquidity crisis as commodity prices continue to tumble, reminding financial analysts during a rare conference call to discuss its business that Magnum is no longer an oil company.
Evans started the call by quoting Mark Twain, saying "rumours of our death have been greatly exaggerated." At times he sounded aggravated with the rampant speculation surrounding oil's recent downturn, but he said it's to be expected given the nature of the business. He also struck a confident tone as he reviewed the company's strategy to weather the current environment.
Oil has tumbled some 50% since June, with some industry observers saying it could soon dip below $40/bbl. Evans said he doesn't have a "crystal ball" but added that company executives believe oil will remain depressed for at least the next 12-18 months. As a result, Magnum will adjust to operate within such an environment.
But as the company's stock has fallen precipitously since June, bottoming-out at a close of $1.65/share on Thursday, Evans pleaded with analysts to remind them that Magnum is no longer an oil company. Since 2013 it has been selling off noncore assets in the oilfields of Texas, North Dakota and Canada in favor of a strategy geared toward natural gas and natural gas liquids in the Marcellus and Utica shale plays, which account for 90% of its proved reserves (see Shale Daily, Oct. 2, 2014; Aug. 11, 2014).
"As many of you know, we made a decision to exit the oil business and get into the gas business. We have sold over $700 million of oil properties over the past year and a half," Evans said. "So, as Magnum Hunter sits today, we are by no means an oil company."