SISTERSVILLE - Magnum Hunter Resources Corp., parent company of local natural gas pipeline developer Eureka Hunter, agreed on a $100 million investment deal with Boston-based ArcLight Capital Partners.
Eureka Hunter is the holding company for Magnum Hunter's midstream operation, including the Eureka Hunter Pipeline located in West Virginia and Ohio.
"The capital commitment from a well-funded and experienced capital provider like ArcLight will allow Eureka Hunter to more quickly expand our footprint in West Virginia, begin to develop our gathering system in the Utica Shale in Ohio, and accelerate our ability to complete an initial public offering of Eureka Hunter without any additional required funding from Magnum Hunter," said Ronald Ormand, executive vice president and chief financial officer of Magnum Hunter.
ArcLight will also have the right to invest up to an additional $100 million of preferred units, based certain terms and conditions which includes the ultimate approval of Eureka Hunter, bringing the total potential investment to $200 million.
The initial investment of $100 million will give ArcLight an approximate 28 percent ownership interest in Eureka Hunter, establishing Eureka Hunter at an enterprise valuation of approximately $400 million. Of the initial $100 million investment, approximately $60 million will be distributed to the parent, Magnum Hunter, and the remaining $40 million will be used to fund a pending acquisition.
"This investment provides a clear valuation of our midstream business that management has been seeking for some time," said Ormand. "In addition, the initial distribution will immediately increase Magnum Hunter's liquidity by $60 million, which enhances the company's resources for our upstream capital expenditure program."