In a research report published Monday, Canaccord Genuity analyst Karl Chalabala maintained a Buy rating on Magnum Hunter Resources Corp (NYSE:MHR) with a $3.00 price target, following last week’s year-end results. Magnum shares are currently trading at $2.17, down $0.12 or 5.24 percent.
Chalabala noted, “In our view, the potential liquidity from the undeveloped Ohio Utica joint venture, the Eureka Hunter stake sale, as well as the asset management agreement for Rockies Express firm transport letter of credit, result in $275 million in liquidity for the company by mid-year, with approximately $180 million of that in cash.”
Furthermore, “Based on our analysis, running a two rig program in perpetuity at strip prices on Magnum Hunter’s 90,200 undeveloped Ohio Utica acreage (Figure 2) yields a PV-10 of approximately $1.351 billion, and would point to the interest the company has in the JV process. We consider a large majority of this acreage core, and fully anticipate a successful closing by mid-year.”
Bottom line, “While we understand investor reticence to purchase the equity given the cap structure, in our view the upcoming high-probability liquidity events will enable the company to make it through the current commodity downturn and enable a cleaner balance sheet, particularly as natural gas demand rebounds in 2016 and beyond.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Karl Chalabala has a total average return of -14.1% and a 7.1% success rate. Chalabala has a -54.3% average return when recommending MHR, and is ranked #3362 out of 3516 analysts.