AltaGas Ltd. has signed a definitive agreement with Tidewater Midstream and Infrastructure Ltd. to acquire several natural gas assets from Pipestone in Montney for total consideration of $481.7 million (C$650 million), “including synergies and incremental capital that AltaGas will deploy. to complete the Phase 1 development project II from Pipestone,” the companies said in separate press releases Thursday.
The assets to be acquired include the Pipestone Natural Gas Processing Plant Phase I and Phase II Expansion Project, the adjacent Dimsdale Natural Gas Storage Facility, the inflow and outflow of Pipestone condensate trucks and the associated gathering piping systems required to operate them. assets
The acquisition is contingent on Tidewater and AltaGas making a positive final investment decision (FID) for the Pipestone Phase II project. To facilitate the achievement of an FID, AltaGas and Tidewater are forming a new joint venture (JV) to advance the final steps necessary to develop and construct the project. The terms of the Pipestone JV will allow the parties to continue collaborating on the Pipestone Phase II project even if the acquisition does not proceed, AltaGas said.
The total consideration of $481.7 million (CAD 650 million) consists of $240.9 million (CAD 325 million) in cash and the issuance of approximately 12.5 million shares of common stock AltaGas in Tidewater, which will be priced at $19.32 ($26.07 CAD), according to AltaGas. “Volume-weighted average price for 10 days to August 30, with shares to be issued and transferred to Tidewater at closing and subject to typical closing adjustments,” AltaGas said.
AltaGas said it plans to finance the transaction through a combination of short-term debt from the company’s current liquidity and the issuance of common equity from the treasury. The transaction is subject to regulatory approvals and customary closing conditions and is expected to close before the end of 2023, the company said.
AltaGas said the transaction will strengthen its midstream value chain through an expanded footprint in the Alberta Montney Formation and provide a “significant” long-term supply of liquefied petroleum gas for its global export platform, adding that the transaction “is expected to be five percent.” EPS [earnings per share] incremental in 2025 forward, while net debt to normalized EBITDA will increase by 0.1 times credit in 2025 forward.”
Tidewater said it expects to use the net proceeds of the transaction for general corporate purposes, including the repayment of its senior credit facility. Following the transaction, the company said it will continue to focus on the surface value of its remaining midstream, downstream and renewable fuel assets.
Pipestone’s Phase I facility is a modern sour cut natural gas plant with 110 million cubic feet per day (MMcfpd) of processing capacity and 20,000 barrels per day (bpd) of liquids handling capacity located in the heart of Alberta Montney, as reported. AltaGas. The facility is currently 100 percent contracted and approximately 85 percent of volumes are from long-term payment contracts with creditworthy customers. The facility includes 41.6 miles (67 kilometers) of natural gas gathering pipelines that are tied to key production regions and provide strategic outbound connections to Nova Gas Transmission Ltd. pipeline systems. and Alliance. The facility also includes Pipestone’s condensate truck inbound and outbound terminal for liquid handling and value maximization.
Pipestone Phase II is a fully permitted, shovel-ready expansion project that will provide an additional 100 MMcfpd of sour natural gas processing capacity and an additional 20,000 bpd of liquids handling capacity, according to AltaGas. After the FID, the project is expected to be fully committed under firm take-or-pay and fee-for-service agreements. Pipestone Phase II is expected to reduce operating costs and improve runtime efficiency of the broader Pipestone complex.
The Dimsdale natural gas storage facility is located east of the Pipestone I and II facilities. Its current working gas capacity of 15 billion cubic feet (Bcf) can be increased more than four times to 69 Bcf. Connected to the Alliance and NGTL pipeline systems, the storage facility provides Pipestone customers with output certainty and will be one of only three facilities capable of meeting the LNG demand balancing needs of the Montney and Canada by mid-decade and will be the only integrated processing and storage facility in the Montney, AltaGas said. The facility is located upstream of bottleneck points on the James River.
“We are excited that the Pipestone transaction will strengthen our Midstream value chain,” said AltaGas President and CEO Vern Yu. “The acquisition is consistent with AltaGas’ long-term strategy and gives us the opportunity to support the growth plans of industry-leading producers in one of Canada’s most prolific resources. -service revenue that will also bring Significant LPGs in the long term [liquefied petroleum gas] supply for AltaGas’ global export platform. The acquisition should also generate stable and growing earnings and cash flows, which will provide strong long-term value creation for our stakeholders while reducing risk and providing long-term credit accumulation.”
“We believe the transaction unlocks significant value for our shareholders while strengthening our balance sheet to better address the opportunities in our diversified portfolio of energy and energy transition infrastructure assets,” said Rob Colcleugh, interim CEO from Tidewater.
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