Pembina Gas Infrastructure to acquire key midstream assets from Veren for C$400m

Pembina Pipeline Corporation has announced a landmark deal through its joint venture, Pembina Gas Infrastructure Inc., to acquire key midstream assets from Veren Inc., worth approximately $400 million CAD. This acquisition of four oil batteries located in Alberta’s prolific Gold Creek and Karr areas is expected to significantly expand Pembina’s midstream footprint and strengthen its partnership with Veren Inc., a leading Montney and Duvernay producer in Western Canada.

Pembina Gas Infrastructure Inc., co-owned by Pembina Pipeline Corporation and KKR, is enhancing its role in Canada’s natural gas processing sector with this strategic purchase. The transaction encompasses the acquisition of four batteries with natural gas handling capacity of 320 million cubic feet per day and liquids handling capacity of 53,000 barrels per day. The natural gas from these batteries will be processed at Pembina Gas Infrastructure Inc.’s Patterson Creek Gas Plant and integrated with Pembina’s extensive Peace Pipeline system. Veren Inc. will continue to operate the newly acquired assets, reinforcing the existing partnership dynamics.

Key Deal Benefits: Enhanced Infrastructure and Strategic Alignment

The acquisition presents multiple strategic advantages for Pembina Pipeline Corporation. By acquiring these assets, Pembina Pipeline Corporation extends its integrated infrastructure network while ensuring more efficient utilization of existing facilities such as the Patterson Creek Gas Plant. The company highlights this transaction as a transformative move that integrates Veren Inc.’s upstream gathering and processing assets more deeply with Pembina’s midstream operations, which is expected to drive future growth in gas processing volumes and profitability.

Pembina’s President and CEO expressed confidence in the strategic benefits, noting that this deal aligns well with Pembina Pipeline Corporation’s vision of providing end-to-end energy solutions through collaboration with strong counterparties. Pembina’s $300 million commitment to future infrastructure development, including the construction of high-pressure gathering pipelines, marks another significant investment that ensures sustained growth and expansion in the region.

Expert Opinion: A Calculated Move to Fortify Midstream Operations

Experts believe Pembina’s acquisition of Veren Inc.’s midstream assets is a calculated move to reinforce its market position in the energy infrastructure sector. With increasing demand for gas processing facilities in Western Canada, Pembina Pipeline Corporation’s strategic focus on developing efficient, integrated infrastructure aligns with industry trends of optimizing asset utilization and reducing capital costs. By taking over Veren Inc.’s assets and making significant commitments to future infrastructure, Pembina Pipeline Corporation is setting the stage for a stronger foothold in the gas processing market.

The decision to fund the acquisition through Pembina Gas Infrastructure Inc.’s existing credit facility indicates a carefully planned capital strategy, aimed at maintaining financial flexibility. Analysts suggest that the initial $50 million annual EBITDA expected from this transaction may only be the beginning of more significant returns, given the potential for increased plant utilization and additional contracted EBITDA from further capital deployment.

What This Means for the Energy Sector

This acquisition is a part of a broader trend where energy companies are optimizing their asset portfolios through strategic mergers and acquisitions. By deepening its partnership with Veren Inc., Pembina Pipeline Corporation demonstrates its commitment to driving growth in North America’s midstream sector. The integration of Veren Inc.’s assets within Pembina’s existing infrastructure provides a seamless value chain from upstream to downstream, thereby creating a more resilient and robust operational framework.

The closing of this transaction is expected by the end of 2024, pending regulatory approvals. Pembina Pipeline Corporation’s approach to leveraging strategic acquisitions underlines its long-term commitment to enhancing shareholder value through focused capital allocation, innovative partnerships, and sustainable growth initiatives.