ALTAGAS LTD Expanded Birchcliff Partnership Announced
Partnership Details: The company has expanded its partnership with
Birchcliff Energy Ltd. The long-term contract operating agreement will allow
Birchcliff to have full operatorship of AltaGas’ 100%-owned Gordondale
deep-cut gas processing facility. Birchcliff will leverage cost optimization
opportunities between its Pouce Coupe gas plant and the Gordondale facility,
which are located ~6 miles apart and connected by pipeline. The optimization
opportunities are expected to have no net impact on AltaGas’ profitability.
Moreover, the two companies have also entered into additional long-term
tolling agreements where Birchcliff will market an undisclosed amount of
additional LPG through AltaGas’ global exports platform.
Financial And Strategic Impact: While not material, we view the agreement
as a win-win. As the sole producer at the plant, Birchcliff is highly motivated
to reduce cost to its benefit. The expanded partnership is aligned with
AltaGas’ strategy to grow tolling volumes and cash flow predictability. It is
also timely given the recent FID of the REEF project, which will expand the
company’s export capabilities. AltaGas has no plans to reduce its 100%
ownership of the Gordondale facility, which will continue to operate under the
existing long-term take-or-pay agreement between the two companies.
Partnering with producers to optimize outcomes is a healthy practice for any
midstream company. Given Birchcliff’s experience as an operator in the area,
we are not concerned with the change in operatorship.