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Canadian Assets on Sale: Energy Transfer Sells Gas Processing Bussines to Pembina-KKR for $1.3 Billion04/19/2022
Under the agreement, Energy Transfer will sell its 51% interest in Energy Transfer Canada to the Pembina-KKR joint venture, for more than CA$1.6 billion (US$1.3 billion) including debt and preferred equity. KKR's funds already own the remaining stake.
TC’s assets include six natural gas processing plants with a combined operating capacity of 1.29 Bcf/d and an 848-mile natural gas gathering and transportation network in the Western Canadian Sedimentary Basin.
Through this agreement, Energy Transfer will be able to divest its high-quality Canadian assets at an attractive valuation, deleveraging its balance sheet and allowing it to redeploy capital within the U.S. market.
The Calgary-based company, Energy Transfer Canada, is one of Alberta's largest gas processors. As part of its portfolio of assets, the company owns six gas processing plants with a combined capacity of 1,290 MMcf/d, as well as a network of approximately 848 miles of natural gas gathering and transportation infrastructure.
As a result of the sale, Energy Transfer is slated to receive cash proceeds of approximately 340 million Canadian dollars (US$270 million), and close by the third quarter of 2022.
While this process is underway, Pembina and KKR will combine their western Canadian natural gas processing assets into a single, new joint venture entity — Newco, owned 60% by Pembina and 40% by KKR. Pembina will also be Newco's operator and manager.
This new entity will acquire Pembina's field-based natural gas processing, Veresen Midstream's portfolio (55% owned by KKR funds, 45% by Pembina), and ETC's business. And is expected to have a natural gas processing capacity of about 5 Bcf/d or about 16% of Western Canada’s total processing capacity. The worth of this joint venture will be around CA$11.4 billion (US$8.99 billion).
It is expected that all the deals will close late in the second or third quarter. According to Pembina, it plans to sell its interest in its Key Access Pipeline System as a way to finance the deal, and it is reviewing its portfolio for other noncore, nonoperating assets that might be sold in the process.
After the deal closes, Pembina plans to raise its dividend by 3.6%, as well as raise its share repurchase target to CA$350 million (US$275 million) from CA$200 million.
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Decades of free inventory from one deal: Vermilion Energy buys Leucrotta Exploration for $477 million
As part of its effort to expand its Montney Shale play, Vermilion Energy Inc. recently acquired Leucrotta Exploration Inc. for a net cash purchase price of CA$477 million. Vermilion has identified 275 high-quality, high-return, low-risk multi-zone drilling prospects. Top management believes, these prospects represent 20 or more years of low-risk, self-funding, high-deliverability shale drilling. Assuming the anticipated May closing date, Vermilion is increasing its capital budget for E&D in 2022 to $500 million and increasing guidance for production from 86,000 to 88,000 boe/d to take into account the Leucrotta acquisition.
By purchasing the gathering and processing assets of Trace Midstream, Williams' existing footprint gains expanded capacity in one of the nation's largest growth basins, bringing its Haynesville gathering capacity to over 4 Bcf/d — increasing more than 200% from 1.8 Bcf/d. The deal also includes a long-term commitment from Trace and Quantum to support Williams' Louisiana Energy Gateway project (LEG), which is aimed to deliver responsibly sourced Haynesville’s naturalgas to markets along the Texas and Louisiana GulfCoast
Oil output in the Permian Basin in Texas and New Mexico is supposed to go up 88,000 bbl/d to a record 5.219 million bbl/d in June, as the U.S. Energy Information Administration (EIA) announced in its report on May 16. Additionally, gas productivity in the Permian Basin and the Haynesville in Texas, Louisiana and Arkansas will rise to record highs of 20 Bcf/d and 15.1 Bcf/d in June, respectively. Given that this growth has been expected, recent global market changes make forecasting the output even more challenging. Learning how production will change is easier with early activity tracking, a new service recently launched by Rextag – Pad Activity Monitor. With the help of PAM, you are able to monitor well pad clearing, drilling operations, fracking crew deployment and completions with new data collected approximately every 2 days. Additionally, it cuts down activity reporting lag times by at least 98%, from 120-180 days down to just 5-8 days. In order to access reports, charts, tables, and mapping visualizations via Rextag’s Energy DataLink use a web-based application allowing users to filter, download and identify activity on a map or data table. Moreover, customers will be able to set up daily, weekly, and monthly email report notifications.
The EIA forecasts that total output in the main U.S. shale oil basins will increase 142,000 bbl/d to 8.761 million bbl/d in June, the most since March 2020. Oil productivity in the Permian Basin in Texas and New Mexico is supposed to go up 88,000 bbl/d to a record 5.219 million bbl/d in June, as the U.S. Energy Information Administration (EIA) announced in its report on May 16. In the largest shale gas basin, the productivity in Appalachia in Pennsylvania, Ohio and West Virginia will grow up to 35.7 Bcf/d in June, its highest since beating a record 36 Bcf/d in December 2021. Gas output in the Permian Basin and the Haynesville in Texas, Louisiana and Arkansas will rise to record highs of 20 Bcf/d and 15.1 Bcf/d in June, respectively. Speaking of the Permian future output, putting hands on upcoming changes in production has recently been made easier with the new Rextag's service - Pad Activity Monitor. Thanks to satellite imagery and artificial intelligence, customers are able to monitor the oil and gas wells and are provided with near real-time activity reports related to drilling operations. However, it is noticed that productivity in the largest oil and gas basins has decreased every month since setting records of new oil well production per rig of 1,544 bbl/d in December 2020 in the Permian Basin, and new gas well production per rig of 33.3 MMcf/d in March 2021 in Appalachia.
No sooner had the crude prices soared above $100/bbl than the industry professionals believed in an incredible growth of drilling activity in North America’s largest shale patch. Analysts speculate that additional output of 500,000 barrels of oil daily would become a significant part (4%) of overall U.S. daily production. That is going to flatter oil and gasoline prices. Drilling permits in the Permian Basin are persistently growing, averaging approximately 210 at the beginning of April. Moreover, the permits trend is noticed as an all-time high as a total of 904 horizontal drilling permits were awarded last month. Nowadays, learning and analysing the current situation and predicting the future development become easier with early activity tracking, a new service recently launched by Rextag. Rextag's Pad Activity monitor (PAM) allows you to see well pad clearing, drilling operations, fracking crew deployment and completions with new data collected approximately every 2 days with the help of satellite imagery and artificial intelligence. While the increase in drilling will result in higher production, U.S. shale producers will have to overcome several hurdles including labor shortages and supply constraints.