Magnum Hunter CEO's take on the collapse of oil

MHR CEO: Gas long-term place to be
MHR CEO: Gas long-term place to be   

After the hideous decline in oil on Friday, how worried should investors be? To answer that question, Jim Cramer turned to one company whose stock has been crushed by the outright collapse of crude.

Cramer spoke with Magnum Hunter Resources Chairman and CEO, Gary Evans, to take his pulse on the drop in crude oil.

"The blood bath is for everybody. It doesn't matter whether you're an oil company or a gas company, we are all being treated the same," Evans said.

View of three oil wells and flaring of natural gas on The Fort Berthold Indian Reservation near New Town, ND on August 13, 2014.
Linda Davidson | The Washington Post | Getty Images
View of three oil wells and flaring of natural gas on The Fort Berthold Indian Reservation near New Town, ND on August 13, 2014.

Magnum Hunter is a speculative $746 million exploration and production company that has assets in Marcellus, Utica and Bakken shales. While they have had rapid production growth, they also have one of the most debt-laden balance sheets in the industry.

This makes it one of the most highly leveraged companies in the oil patch, with a capital expenditure budget exceeding its cash flow. While they do have plans to clean up the balance sheet, they have really taken a blow with the decline in oil prices, as the stock lost 26 percent of its value in the last week and year-to-date it is down 46 percent.

"The key to the success to all of these oil and gas companies is, are you on the heart or are you on the fringe of the play? Because when you have a low commodity price environment like the one we are dealing with today, you've got to have low finding cost and be cheaper than anybody else. And you're not going to do that without good rock," added Evans.

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The CEO also added that he has not been bullish on oil for almost two years, as he recognized that oil prices were unsustainably high. As a result, 60 percent of Magnum's production comes from natural gas and he anticipates it will rise to over 90 percent by the end of December.

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