Pembina Pipeline (TSX: PPL, Stock Forum) was on the move today when the company announced that it had entered into agreements to purchase the Vantage pipeline system along with acquiring interest in Mistral Midstream's Saskatchewan ethane extraction plant (“SEEP”) for a total consideration of US$650 million.
According to the news release, the Vantage pipeline system, a recently built high-vapour pressure pipeline, ran for 700 kilometres at 40,000 barrels per day, originating in Tioga, North Dakota and terminating near Empress, Alberta.
The company believes that Vantage will provide a long-term, fee-for-service cash flow and strategic access to the North Dakota Bakken play for future natural gas liquids (“NGL”) opportunities.
Vantage is expected to be cash flow neutral until 2016 on the basis of minimum volumes currently under contract and a full year contribution from SEEP.
The transaction outlines a deal where Pembina has agreed to acquire all the issued and outstanding shares of Vantage Pipeline Canada and Mistral and repay Vantage's bank indebtedness of approximately US$224 million. The company intends to use cash of US$395 million and US$255 million in common shares to fund the transaction.
Company President and CEO, Mike Dilger, commented on the deal, “I am very happy to announce our agreement to acquire Vantage and SEEP.”
He went on to illustrate, “We have watched the development of these assets with great interest as they represent an excellent opportunity to expand our footprint into one of the most promising hydrocarbon plays in North America and, as such, the Transaction is a low-risk, logical step-out for Pembina.”
Then he concluded, “We are excited to add this infrastructure to our leading portfolio of pipeline assets. Not only will the Transaction augment our fee-for-service cash flow stream, but we expect opportunities associated with both Vantage and SEEP to result in long-term shareholder value.”
The transaction is still subject to regulatory approval.
In other news, the company also announced that it had picked Portland, Oregon for a new west cost propane export terminal.
Currently there are 326.7m outstanding shares with a market cap of $16.4 billion.