Pembina Pipeline Corp., a Canadian oil and gas pipeline operator (based in Calgary), just announced an agreement to buy Provident Energy Ltd. (another Calgary-based company) for C$3.2 billion to add natural gas liquids assets. The combined company will have a market cap of C$7.9 billion and a total enterprise value of C$10 billion, making it one of Canada’s largest energy infrastructure companies. Although the combined company will have far-ranging operations, part of their portfolio includes pipeline capacity to transport shale gas from the Marcellus and Utica Shales into Canada.
Pembina Pipeline Corporation and Provident Energy Ltd. are pleased to announce they have entered into an agreement for Pembina to acquire all of the issued and outstanding common shares of Provident by way of a plan of arrangement under the Business Corporations Act (Alberta) to create an integrated company that will be a leading player in the North American energy infrastructure sector. Upon the successful completion of this transaction Pembina intends to increase its monthly dividend rate from C$0.13 per share per month (or C$1.56 annualized) to C$0.135 per share per month (or C$1.62 annualized) representing a 3.8% increase and reflecting management’s confidence in the significant operational and financial strength of the combined entity going forward.
Based on the Provident Exchange Ratio and Pembina’s share price, the combined company will have a market capitalization of C$7.9 billion and total enterprise value of C$10 billion, making it one of the largest publicly traded energy infrastructure companies in Canada.
"Provident’s assets, employees, customers and growth projects are an outstanding fit for Pembina," said Bob Michaleski, President and Chief Executive Officer of Pembina. "The proposed transaction integrates our energy transportation and gas processing businesses with Provident’s suite of services including natural gas liquids (NGL) extraction, fractionation, storage, transportation and logistics, and will significantly accelerate our growth capital plans for these business segments. Our expanded footprint will provide greater access to natural gas liquids markets across North America, and will allow us to offer customers a significantly expanded spectrum of energy services."
"This is a logical transaction that leverages off Provident’s strong growth as a pure play midstream business," said Doug Haughey, President and Chief Executive Officer of Provident. "It generates substantial value for Provident shareholders and brings together two organizations with complementary strategies and assets. The result will be one of the strongest energy infrastructure players in Canada. Provident’s shareholders will participate in a larger entity that has the capability to pursue larger and more complex growth projects, has exposure to more elements of the energy infrastructure value chain, and offers greater liquidity and presence in the capital markets. Based on Pembina’s current dividend rate and the Provident Exchange Ratio, Provident’s shareholders will receive an increase in dividends per share relative to Provident’s current dividend."
Due to the continued success of producers drilling for liquids rich natural gas and the increase in field liquids extraction, the amount of NGL being produced in the Western Canadian Sedimentary Basin has increased significantly. To meet the growing need of producers in the region, Pembina expects that on closing of the proposed transaction, it will begin development of a new 65,000 bpd fractionator at Provident’s Redwater site, which is anticipated to be in-service by mid 2014 pending continued customer support and subject to required regulatory and environmental approvals.
The combined entity will be led by Bob Michaleski, President and Chief Executive Officer of Pembina, and a combination of Pembina’s and Provident’s executive teams. Due to the complementary nature of the businesses, Pembina plans to make employment offers to substantially all of Provident’s employees.*
*Prembina Pipeline Corporation (Jan 16, 2012) – Pembina Pipeline Corporation To Acquire Provident Energy Ltd., To Create Leading North American Energy Infrastructure