The 8k results look quite interesting with Eureka near a $20 ipo price the cash flow to MHR looks good. The delayed filing their quarterly due to accounting changes yet there assets are incredible... I do in depth research on MHR found it quite interesting to see the CEO gary evans say they want to pay down debt to make wall street happier to get value... Very intelligent CEO
OK, so back in April2012 we had ArcLight coming in for about a quarter interest. This document says MHR only has an approx. 63% equity interest, with Arc. having the remainder. MHR just contributed another $30 mil to the deal in conjunction with additional shares to MHR. So how did we get from a 75% stake in Eureka to the current 63%?
Slab, according to the March 21, 2012 press release, the initial $100 million investment gave ArcLight a 28% stake in preferred units, which have an 8% coupon. A significant portion of that coupon can be payable in additional preferred units, which I'm guessing they did. Also, the Transtex acquisition probably also diluted them done, although not as much.
FOR IMMEDIATE RELEASE – Houston – (Market Wire) – March 21, 2012 – Magnum Hunter Resources Corporation (NYSE: MHR, NYSE Amex: MHR-PrC and MHR-PrD) (“Magnum Hunter”or the “Company”) announced today a definitive agreement for the placement of $100 million of convertible preferred units (“Preferred Units”) in its subsidiary, Eureka Hunter Holdings, LLC (“Eureka Hunter”), to an affiliate of ArcLight Capital Partners, LLC (“ArcLight”). Eureka Hunter is the holding company for Magnum Hunter’s midstream operation, including the Eureka Hunter Pipeline located in West Virginia and Ohio. ArcLight, based in Boston, Massachusetts, 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% 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. Additional investments will be used to (i) develop Eureka Hunter’s gathering system network currently located in West Virginia; (ii) develop the Company’s expansion plans into the Utica Shale in Ohio; and (iii) fund other accretive midstream growth projects and/or acquisitions.
He better do something. This stock is going nowhere, and that debt pile just sits there attracting the shorts in record numbers. What is he doing with EF? The strategy of getting investors all excited about a sale and then going silent for months is just not working. Hope the BOD is watching what is going on at SD.
MHR was going to sell the eagle ford (EF) but they keep having too much success, they are shopping around but land prices in the EF have skyrocketed in the last 2 yrs thus they are trying to get a nice sells premium, but it is encouraging and progressive that they are looking at reducing leverage
Good post you are right on looks just like another SD. Huge debt losing money every quarter and management getting rewarded with fat checks and free shares while the common shareholders gets screwed time and time again. Bottom line there's no shareholder value and these f's don't care.
Sentiment: Strong Sell