(Reuters) - Oil and natural gas producer Magnum Hunter Resources Corp MHR.N said it expected to raise $600 million-$700 million by selling its 45.53 percent stake in natural gas gathering subsidiary Eureka Hunter Holdings.
Magnum Hunter’s shares rose as much as 22 percent to $2.14 in morning trading on Thursday, after the company said a sale would help it restructure its balance sheet and shore up liquidity.
The company, which has been struggling to cope with weak prices for natural gas, had $13.7 million in cash and cash equivalents and total debt of $951 million as of March 31, according to Thomson Reuters data.
By selling “what has always been framed as the prize asset, Eureka Hunter Pipeline”, the company is left with an oil and gas business that does not “leave much of a value proposition”, analysts at BMO capital Markets said.
Magnum Hunter has until July 10 to meet a debt payment of about $65 million, and said on Wednesday that it had raised about $55.6 million so far and was continuing to pursue “liquidity enhancing transactions”.
The company can pay down $278 million of debt by selling its stake in the pipeline unit, analysts at SunTrust Robinson Humphrey wrote in a note.
In May, the company said it was looking to form a joint venture for some of its Utica shale assets in Ohio and sell undeveloped acreage in Ohio and West Virginia.
At the time, Magnum Hunter said it expected to raise about $50 million by selling part of its Eureka Hunter stake.
Morgan Stanley Infrastructure, the U.S. bank’s infrastructure investing arm, owns the majority stake in Eureka Hunter.
Eureka Hunter owns Eureka Hunter Pipeline LLC, which operates natural gas pipelines in southeastern Ohio and northern West Virginia. It also owns TransTex Hunter LLC, which provides natural gas treating and processing services.
Up to Wednesday’s close, Magnum Hunter’s shares had fallen more than 78 percent in the past 12 months.
Reporting By Manya Venkatesh in Bengaluru; Editing by Simon Jennings and Saumyadeb Chakrabarty