Crude oil (WTI) is down by 3.85% to $43.23 per barrel this afternoon, and Brent crude is lower by 2.82% to $48.99 per barrel, according to the CNBC.com index.
The drop in oil prices follows China's announcement this morning that it is devaluing the yuan, which would make imports more expensive for the world's second-largest petroleum consumer, according to The Wall Street Journal.
Further, the Organization of the Petroleum Exporting Countries raised its collective output to the highest level since 2012, The Journal added. OPEC said in its monthly report that in July it increased its output by 101,000 barrels a day to 31.5 million barrels a day.
OPEC noted that it does not expect extra demand for its crude oil this year, according to Reuters.
Separately, TheStreet Ratings team rates MAGNUM HUNTER RESOURCES CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate MAGNUM HUNTER RESOURCES CORP (MHR) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is very high at 2.25 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.26, which clearly demonstrates the inability to cover short-term cash needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MAGNUM HUNTER RESOURCES CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for MAGNUM HUNTER RESOURCES CORP is currently lower than what is desirable, coming in at 32.47%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -54.83% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $3.82 million or 74.28% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- MHR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 86.56%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full analysis from the report here: MHR Ratings Report