CALGARY, Alberta, March 17, 2016 /PRNewswire/ -- Pembina
Pipeline Corporation ("Pembina" or
"the Company") (TSX: PPL; NYSE: PBA) is pleased to announce that it
has entered into agreements to acquire certain sour natural gas
processing assets (the "Acquired Assets") from Paramount Resources
("Paramount") for cash consideration of approximately $556 million, subject to customary closing
adjustments (the "Transaction").
Transaction Highlights
The Acquired Assets include Paramount's recently constructed
Kakwa sour natural gas processing complex and associated
infrastructure including gas gathering pipelines, sales gas
pipeline and future disposal wells (the "Kakwa Assets"); and
Paramount's preliminary engineering studies, licenses and surface
rights for the future construction of a sour natural gas processing
facility (the "6-18 Facility"). The Transaction will add 250
million cubic feet per day ("mmcf/d") of processing capacity in one
of Pembina's core areas. This will
increase total processing capacity under Pembina's Gas Services business to over 1.7
billion cubic feet per day ("bcf/d"), inclusive of the Musreau III
and the Resthaven expansions which are expected to be on-stream by
mid-2016, making Pembina one of
the largest third-party gas processors serving the Western Canadian
Sedimentary Basin.
Key Transaction highlights include:
- Development of a Strategic Asset Base: The combination
of the Acquired Assets with Pembina's existing Cutbank Complex will create
a strategic asset base with over 1 bcf/d of processing capacity by
mid-2016, including 405 mmcf/d of deep cut processing capacity, and
approximately 450 kilometres of gathering pipelines. The Kakwa
Assets are already physically connected to Pembina's Cutbank Complex via an existing
pipeline operated by Paramount.
- Enhances Service Offering: By acquiring sour gas
processing, Pembina is expanding
the Company's service offering and strengthening its ability to
capture future liquids rich sour gas production growth.
- Supporting Economic Geology: Situated in the liquids
rich and economic Deep Basin, the Acquired Assets serve amongst the
most economic resource plays in North
America, given their condensate focus. Paramount has
established a substantial land base of Montney and Cretaceous rights, which have the
potential to support robust throughput levels, for both the Kakwa
Assets and the proposed 6-18 Facility, for decades to come, with
attractive returns even in a low commodity price environment.
- Long-Term, Take-or-Pay Volume Commitment: In conjunction
with the Transaction, Pembina and
Paramount have entered into a 20 year midstream services agreement,
which includes a substantial take-or-pay commitment, in support of
the Kakwa Assets. Pembina retains
the right to contract spare capacity to third-parties.
- Cash Flow per Share Accretion: The Transaction is
expected to be immediately accretive to cash flow per share.
- Platform for Long-Term Growth: The Transaction includes
accretive growth potential through the expansion option for the
future 6-18 Facility. Pembina has
agreed to construct, subject to certain conditions, additional sour
natural gas processing assets. The site acquired in conjunction
with the Transaction has sufficient scale to support additional
processing facilities and in Pembina's view, the 6-18 site is capable of
supporting up to 600 mmcf/d of additional sweet or sour gas
processing capacity.
"I am very excited to announce our agreement to acquire these
assets," said Jaret Sprott,
Pembina's Vice President, Gas
Services. "The acquisition of these assets strengthens Pembina's strategic positioning in one of our
core areas, supported by some of the most economic resource plays
in North America. Pembina looks forward to expanding on its
long-term relationship with Paramount by broadening its service
offering to include sour natural gas processing services, in
addition to liquids transportation and natural gas liquids
fractionation services. The combination of Pembina's large-scale integrated value chain
and Paramount's substantial Montney and Cretaceous land position, creates
significant opportunities for future infrastructure development.
Furthermore, this transaction builds on a long-term track record of
driving significant shareholder value through acquisitions."
Description of the Acquired Assets
Kakwa Assets
The Kakwa Assets are comprised of a recently constructed natural
gas processing facility located approximately 15 kilometres from
Pembina's existing Cutbank Complex
with raw gas processing capacity of 250 mmcf/d, including a 200
mmcf/d deep cut train, a 50 mmcf/d shallow cut train and 22,500
barrels per day ("bbls/d") of condensate stabilization. The Kakwa
Assets also include an amine processing train to facilitate sour
gas processing at the facility, and is the only sour gas processing
facility west of the Smoky River within 50 kilometres.
Additionally, the Kakwa Assets include gas gathering pipelines,
sales gas transportation pipelines and future disposal wells. The
Kakwa Assets are connected to Pembina's conventional pipelines for natural
gas liquids and condensate transportation services, as well as
connected to Pembina's Cutbank
Complex, via an existing pipeline operated by Paramount. The
shallow cut and deep cut facilities were placed into service in the
first quarter of 2012 and August
2014, respectively.
6-18 Facility
Paramount has secured site licenses and undertaken preliminary
engineering work to support the construction of a new sour shallow
cut facility to be located approximately seven kilometers from
Pembina's Cutbank Complex. As part
of the Transaction, Pembina will
acquire all of Paramount's preliminary engineering studies,
licenses and surface rights for the proposed facility. Upon
Paramount's election or sufficient third-party demand, subject to
certain conditions, Pembina will
construct a sour natural gas processing facility at 6-18. If built,
commercial provisions underlying the 6-18 Facility are expected to
be similar to the Kakwa Assets and include a substantial
take-or-pay commitment.
Additional Transaction Details
Pembina has agreed to fund a
debottlenecking initiative supporting the Kakwa Assets, for
approximately $35 million. In
addition, Pembina has agreed to
optimize existing transportation agreements to match Paramount's
anticipated production growth but keeps Pembina whole on a net present value basis.
The purchase price will be funded by net proceeds from the
Company's concurrently announced bought deal common share financing
and existing capacity under the Company's $2
billion revolving credit facility. Completion of the
Transaction is subject to approval under the Competition Act
(Canada) and other customary
closing conditions. The Transaction will close following receipt of
Competition Act (Canada)
approval, which is expected to occur in the second quarter of
2016.
Dividend Increase
In connection with the Transaction, Pembina's Board of Directors has approved a
monthly common share dividend increase of $0.0075 per common share, which is an increase of
the same amount as announced in 2015. The increase from
$0.1525 per common share to
$0.16 per common share denotes a 4.9
percent increase, which is expected to start with the dividend
payable, subject to applicable laws, on May
13, 2016 to shareholders of record on April 25, 2016. While the decision to increase
the dividend by the Board of Directors at this time was a direct
result of the Transaction and the expected benefits therefrom, the
Board of Directors considers many factors in determining the
payment of dividends.
"For the fifth consecutive year, we are pleased to provide our
shareholders with an increase in our monthly common share
dividend," said Scott Burrows,
Pembina's Vice President Finance
and Chief Financial Officer. "The resilience of our business
in-spite of a challenging commodity price environment demonstrates
the strength of our integrated value chain. Incremental cash flow
from the $1.3 billion of new
fee-for-service assets placed into service in 2015, along with the
contribution from the acquired assets announced today, creates the
opportunity for Pembina to
confidently increase our dividend. Pembina remains committed to enhancing
shareholder value through the development of a large-scale,
majority fee-for-service asset base, supporting long-term dividend
growth potential."
About Pembina
Calgary-based Pembina Pipeline
Corporation is a leading transportation and midstream service
provider that has been serving North
America's energy industry for over 60 years. Pembina owns and operates an integrated system
of pipelines that transport various products derived from natural
gas and hydrocarbon liquids produced in western Canada and North
Dakota. The Company also owns and operates gas gathering and
processing facilities and an oil and natural gas liquids
infrastructure and logistics business. Pembina's integrated assets and commercial
operations along the entire hydrocarbon value chain allow it to
offer a full spectrum of midstream and marketing services to the
energy sector. Pembina is
committed to working with its community and aboriginal neighbours,
while providing value for investors in a safe, environmentally
responsible manner. This balanced approach to operating ensures the
trust Pembina builds among all of
its stakeholders is sustainable over the long-term. Pembina's common shares trade on the
Toronto and New York stock exchanges under PPL and PBA,
respectively. For more information, visit www.pembina.com.
Forward-Looking Statements & Information
This document contains certain forward-looking statements and
information (collectively, "forward-looking statements") within the
meaning of the "safe harbor" provisions of applicable securities
legislation that are based on Pembina's current expectations, estimates,
projections and assumptions in light of its experience and its
perception of historical trends. In some cases, forward-looking
statements can be identified by terminology such as "expects",
"will", "shall", "expand", "would", "plans", "develop",
"anticipates" and similar expressions suggesting future events or
future performance.
In particular, this document contains forward-looking
statements, pertaining to, without limitation, the following: the
Transaction, including the expected closing date and the
anticipated benefits of the Transaction to Pembina; financial results related to and
growth opportunities associated with the assets acquired pursuant
to the Transaction; the economics associated with the areas
surrounding the Acquired Assets; future dividends which may be
declared on Pembina's common
shares and any future dividend payment date; the planned use of
proceeds of the common share offering; the ongoing utilization and
expansions of and additions to Pembina's business and asset base, growth and
growth potential.
These forward-looking statements and information are being
made by Pembina based on certain
assumptions that Pembina has made
in respect thereof as at the date of this news release, including:
the ability of the parties to satisfy the conditions to closing of
the Transaction and the common share offering in a timely
manner; that favourable growth parameters continue to exist in
respect of current and future growth projects (including the
ability to finance such projects on favourable terms); future
levels of oil and natural gas development; potential revenue and
cash flow enhancement; future cash flows; with respect to
Pembina's dividends: prevailing
commodity prices, margins and exchange rates; and that Pembina's businesses will continue to achieve
sustainable financial results.
Although Pembina believes
the expectations and material factors and assumptions reflected in
these forward-looking statements are reasonable as of the date
hereof, there can be no assurance that these expectations, factors
and assumptions will prove to be correct.
These forward-looking statements are not guarantees of future
performance and are subject to a number of known and unknown risks
and uncertainties, including, but not limited to: non-performance
of agreements in accordance with their terms; the failure to
realize the anticipated benefits of the Transaction following
closing due to integration issues or otherwise; the impact of
competitive entities and pricing; reliance on key industry
partners, alliances and agreements; the strength and operations of
the oil and natural gas production industry and related commodity
prices; the continuation or completion of third-party projects;
regulatory environment and inability to obtain required regulatory
approvals; tax laws and treatment; fluctuations in operating
results; lower than anticipated results of operations and accretion
from Pembina's business
initiatives; reduced amounts of cash available for dividends to
shareholders; the ability of Pembina to raise sufficient capital (or to
raise capital on favourable terms) to complete future projects and
satisfy future commitments and certain other risks detailed from
time to time in Pembina's public
disclosure documents including, among other things, those detailed
under the heading "Risk Factors" in Pembina's management's discussion and analysis
and annual information form for the year ended December 31, 2015, which can be found at
www.sedar.com. In addition, the closing of the
Transaction and the common share offering may not be completed, or
may be delayed if their respective conditions to the closing of the
Transaction, including the timely receipt of all necessary
regulatory approvals, are not satisfied on the anticipated
timelines or at all. Accordingly, there is a risk that the
Transaction or the common share offering will not be completed
within the anticipated time, on the terms currently proposed or at
all.
Accordingly, readers are cautioned that events or
circumstances could cause results to differ materially from those
predicted, forecasted or projected. Such forward-looking statements
are expressly qualified by the above statements. The
forward-looking statements contained in this document speak only as
of the date of this document. Pembina does not undertake any obligation to
publicly update or revise any forward-looking statements or
information contained herein, except as required by applicable
laws.
The forward-looking statements contained in this document are
expressly qualified by this cautionary statement.
Pembina Pipeline® is a registered trademark of Pembina
Pipeline Corporation.
For further information: Investor Inquiries: Scott Burrows, Vice President, Finance and CFO,
(403) 231-3156, 1-855-880-7404, e-mail:
investor-relations@Pembina.com, www.pembina.com; Media
Inquiries: Tanis Fiss, Supervisor,
External Communications, (403) 817-7131, e‐mail:
media@Pembina.com