Will Magnum Hunter Resources Corp. (OTCMKTS:MHRC) Bounce?

Magnum Hunter Resources Corp. (OTCMKTS:MHRC) managed to add 37.24% to its market cap on Friday the thirteenth. Does this mean that its ill luck is at an end?

There is no simple answer to that question, but the quick version is – not necessarily, no.

Now for the longer explanation.

MHRC ended up on the OTC markets after being de-listed from the NYSE in September for failing to maintain a closing price for its common stock above $1. This happened because it is very hard for relatively small oil companies to maintain a healthy market cap during an oil crisis.

Suffice it to say that the market has hardly been kind to MHRC in recent months, and when the company’s newest 10-Q came out, it became even more obvious that this state of affairs is unlikely to change.

Why? Well, the fact of the matter is that even though MHRC is a functioning entity with sizable revenues, it was hardly profitable to begin with. Its financial reports show that even before the oil crisis hit the market hard and started knocking smaller oil companies out of the NYSE, MHRC was accumulating loss at alarming rates.

So even if the oil crisis is miraculously solved tomorrow, there’s no real guarantee that MHRC will manage to even step on the road to recovery.

As evidenced by Friday’s bounce, there is still money to be made from trading MHRC – that much is obvious. However, investors should go into such trades knowing full well the dangers associated with trading the common stock of a company that’s in a tight spot.