Magnum Hunter Resources Has 1 Month To Raise $65 Million

Magnum Hunter Resources Corp MHR shareholders are used to a bumpy ride, but shares of the natural gas drilling company have given investors quite a whiplash in recent weeks.

Here’s a breakdown of exactly what is going on with the volatile stock.

New 8-K Filing

After Magnum Hunter’s stock fell by more than 10 percent on Tuesday and more than 25 percent in just over a week, the company itself attempted to clarify exactly what has been going on with the stock lately.

In a new 8-K filing released on Wednesday, Magnum Hunter clarified what it suspected were “misimpressions” in the market of information disclosed in a previous 8-K filing last week about the company’s imminent need for capital.

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Although the coming cash raise is far from good news for shareholders, the latest 8-K was very clear about the requirements set forth by the company’s banks:

The Company is required to raise, by May 29, 2015, and not by any earlier date, $65 million of aggregate net cash proceeds from (i) the issuance by the Company of equity securities, (ii) permitted asset sales by the Company or any of its restricted subsidiaries or (iii) the entry into a joint venture by the Company or any of its restricted subsidiaries (including the receipt of any contemplated upfront payments therefrom).

Stock Reacts

Apparently Magnum Hunter was correct in its assumption that the market was confused about the company’s situation, as the stock has bounced back more than 11 percent following the latest filing.

Shares of the stock remain down nearly 30 percent so far in 2015 and down 73 percent in the past year.

Tough Environment For Fund Raising

The two most likely paths to $65 million for the company in the next month, equity issuance and/or asset sales, could not be coming at a worse time for Magnum Hunter. With share prices hovering near $2.00, the company will get less bang for its dilution buck by selling shares of stock now than it would have at any point since 2009.

The market for natural gas assets is also extremely weak at the moment. The energy sector has been hit hard by the global crude oil collapse, and natural gas prices, down more than 20 percent year-to-date, are near their lowest levels in a decade.