Magnum Hunter Resources Corp MHR shareholders had an eventful week last week, to say the least. Shares of the independent oil and gas stock are down 77 percent over the past year and traded below $2.00 per share last week for the first time since the financial crisis. Here’s a recap of last week’s wild ride.
S&P Downgrade
Magnum Hunter’s holiday-shortened week got off to a very bad start after the S&P downgraded the company and suggested that liquidity could become an issue in 2015. S&P claimed that the company’s cash flows would be “insufficient to support its interest burden and maintenance capital spending on an ongoing basis under our price assumptions.”
The stock fell more than 15 percent on Tuesday, January 20, and dropped below $2.00 per share for the first time since 2010.
Domino Effect
Following the S&P downgrade, other analysts began piling on their own downgrades of Magnum Hunter. On January 20, SunTrust Robinson Humphrey downgraded Magnum Hunter from Buy to Neutral and lowered their price target to $2.50.
On Thursday, January 22, Stifel Nicolaus downgraded the stock from Buy to Hold and removed its $4.00 price target.
Finally, on Friday, January 23, Credit Suisse downgraded Magnum Hunter from Outperform to Neutral.
On January 22, the company announced that they would hold a conference call the following morning to discuss “macro events affecting the energy sector and company specifics.”
News of the downgrades and investor fears about the future of the company drove Magnum Hunter’s share price down an additional 5.6 percent on Wednesday and 10.8 percent on Thursday, when the stock dropped as low as $1.60 during trading.
January 23 Conference Call
The company’s conference call Friday morning did a lot to ease the minds of worried investors. CEO Gary Evans joked with shareholders that, “Rumors of our death have been greatly exaggerated.”
Evans laid out the company’s plan for 2015: cut costs, hunker down and weather the downturn in gas prices. Evans emphasized that Magnum Hunter is 90 percent natural gas at this point, after divesting the majority of its oil properties. He explained that the company is not currently in a dire position.
“There’s no gun to our head, guys. There’s no imminent problem. We’ve got [an] incredible asset base that many, many companies are envious of.”
It seems as though Evans spoke the magic words that the market wanted to hear, as Magnum Hunter’s share price climbed nearly 17 percent January 23.
After a week of big news and extreme volatility, Magnum shareholders will be watching closely this week to see if the stock has found a bottom or if the worst is yet to come. The stock traded mostly flat on Monday, closing down $0.01 on the day and was last trading around $2.11.
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