Two of Canada’s smaller “midstream” natural gas collection, processing, and pipeline companies have agreed to merge, creating a combined entity that will have an “enterprise value” of C$33 billion, Calgary-based Pembina Pipeline Corporation and Veresen Inc. boast in a news release.
The friendly deal will see Pembina take over Veresen for $9.7 billion in shares, cash, and assumed debt, the release said. Pembina owns a variety of pipelines and natural gas gathering and processing facilities in Western Canada. Veresen has pipelines and natural gas liquids processing and handling facilities in Oregon and Illinois as well as Canada.
The companies say they expect to increase shareholder value through expanded sales territories, “diversification across basins and products,” and a cash flow heavily weighted to fee-for-service revenues. But size was clearly also a consideration. The combined companies will have “meaningful scale able to pursue larger growth projects,” their release states.
The new entity’s $33-billion enterprise value still places it well behind Canada’s two largest midstream companies. Enbridge Inc. had 2016 revenues of US$26 billion (down from $33 billion in 2013) and carries an estimated enterprise value of US$103 billion. TransCanada Corp. posted 2014 income of C$10.2 billion and an enterprise value estimated at US$77 billion.