September 16, 2014 / 6:36 PM / 5 years ago

UPDATE 1-Morgan Stanley takes stake in Magnum Hunter natgas pipelines

(Adds details from Morgan Stanley)

Sept 16 (Reuters) - Magnum Hunter Resources Corp said on Tuesday it will sell a stake in a natural gas gathering unit in U.S. Marcellus and Utica shale fields to the infrastructure investment unit of Morgan Stanley, giving the two co-ownership in the business valued at $1 billion.

In addition, Morgan Stanley Infrastructure will also buy about 41 percent in Eureka Hunter from a unit of ArcLight Capital Partners LLC, a U.S. private equity company, for an unspecified amount.

The U.S. shale boom has yielded multiple opportunities in natural gas for the bank. Earlier this year, Morgan Stanley’s commodities arm, which is unrelated to the infrastructure business, filed to build a compressed natural gas (CNG) export plant.

Morgan Stanley Infrastructure, the U.S. bank’s infrastructure investing arm, will pay Magnum Hunter, a U.S. oil and gas company, $65 million for a 6.5 percent stake in the Eureka Hunter gas gathering business.

After the two separate transactions, Magnum Hunter and Morgan Stanley Infrastructure together would hold an equity interest of about 98 percent in Eureka Hunter.

“We have found a new equity partner ... which will allow this tremendous asset to grow and prosper in preparation for an anticipated MLP offering sometime next year,” Gary Evans, Magnum Hunter’s chief executive officer, said in a statement, referring to a master limited partnership.

Morgan Stanley Infrastructure is part of Morgan Stanley Merchant Banking & Real Estate Investing, which is a division of Morgan Stanley Investment Management, an asset management business with $396 billion in assets, as of June 30, 2014.

Morgan Stanley Infrastructure said in another statement it will partner with Eureka Hunter management and Magnum Hunter to expand operations, grow the customer base, and secure additional build-out opportunities.

The Eureka Hunter gas gathering system uses a network of pipelines to transport dry and wet gas from wellheads to long-haul pipelines and processing plants.

The system currently has more than 100 miles of pipeline in Ohio and West Virginia with interconnections to multiple processing plants and interstate pipelines. There are also more than 50 additional miles of additional pipeline under construction, most of which is scheduled for completion in 2014.

In May, Morgan Stanley applied to the U.S. Department of Energy to build, own and operate a compression and container loading facility near Freeport, Texas, which will have capacity to ship 60 billion cubic feet a year of compressed natural gas.

Under a wholly-owned subsidiary, Wentworth Gas Marketing LLC, the bank plans to ship compressed natural gas to countries with which the U.S. has free trade agreements, including the Dominican Republic, Panama, Guatemala, El Salvador, Honduras and Costa Rica, according to the filing.

The plant would be supplied by an intrastate Texas pipeline.

Wentworth Gas Marketing and another company, Wentworth Compression LLC, are both wholly owned by Wentworth Holdings LLC, which is indirectly owned by Morgan Stanley. Wentworth is held and run by Morgan Stanley Capital Group, the Purchase, New York-based commodities arm of the bank.

A spokesman for Morgan Stanley declined to comment. (Reporting By Kanika Sikka in Bangalore and Scott DiSavino and Anna Louie Sussman in New York; Editing by Savio D’Souza, Jessica Resnick-Ault and Bernard Orr)

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