Dire Straits: Magnum Hunter Tells SEC Heading for Bankruptcy

mhrHere’s one time when we wish we had been wrong. In October we warned you that Magnum Hunter Resources (MHR), a smaller but important driller in the Marcellus/Utica, was either heading for a sale or bankruptcy (see Magnum Hunter: Preparing to Sell, or Filing for Bankruptcy?). Looks like it’s the later. The company filed its required quarterly form 10-Q with the Securities and Exchange Commission earlier this week (full copy of the 10-Q below). In the filing we get this statement: “As of September 30, 2015, the Company had $6.5 million in cash and a working capital deficit of $1,037.2 million, and the Company continues to incur significant losses from continuing operations.” Eeeks. They only have $6.5M in the bank to keep the lights on and make payroll, and they owe over $1 billion. Then we get this: “…these factors raise substantial doubt about the Company’s ability to continue as a going concern.” Near the end of the report, they spell it out in black and white: “We may seek the protection of the United States Bankruptcy Court (the “Bankruptcy Court”), which may harm our business and place equity holders at significant risk of losing all of their interests in the Company.” Translation: We’re going bankrupt. In addition, earlier this week the New York Stock Exchange made good on its previous threat and has begun the process of de-listing MHR’s stock–which caused a selloff of the stock. The stock price hit 15 cents per share, so the NYSE halted trading. Never rains but it pours…

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