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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
Shareholder’s payout target was increased by 50% after the largest U.S. independent oil producer surpassed Wall Street’s earnings estimates on growing energy prices, said Houston-based Conoco Phillips Co. on Aug. 4. Due to Western sanctions on major producer Russia throttling energy supply amid a rebound in demand from pandemic lows, oil and gas #prices have soared. Crude has been trading more than 25% higher since the start of the year and results also benefited from high natural gas prices. Meanwhile, shares were down a fraction, to $91.03, in early trading but are up about 26% year to date. Conoco Phillips stated, that the average price obtained for a barrel of oil and gas accelerated 77% from a year earlier to $88.57. The company acknowledges that it has not hedged any of its oil and gas sales to make the most of higher market prices. The capacity of 1.69 million boe/d was in line with Wall Street estimates, however, the company expected the current quarter’s output would be between 1.71 million and 1.76 million boe/d.
California oil joint venture, Aera Energy, of Exxon Mobil Corp. and ShellPlc is being sold to German asset manager IKAV, according to the agreement of Sept. 1. Shell noted that the sale of its 51.8% membership interest in Aera Energy is for a total consideration of about $2 billion in cash with additional contingent payments based on future oil prices, subject to regulatory approval. However, the total transaction value was not disclosed. Being one of California’s largest oil and gas producers, Aera Energy accounts for nearly 25% of the state’s production. The sale by Exxon Mobil and Shell ends a 25-year-long partnership in California, meanwhile, it persists a streak of divestments of mature oil and gas properties by the two supermajors. Aera Energy LLC operates about 13,000 wells in the San Joaquin Valley in California, producing oil and associated gas. In 2021, Aera took out about 95,000 boe/d. Exxon Mobil’s interests in the Aera oil-production operation in California contained a 48.2% share of Aera Energy LLC and a 50% share of Aera Energy Services Co. held by Mobil California Exploration & Producing Co. Moreover, Exxon Mobil affiliates have signed a separate agreement for the sale of an associated loading facility and pipeline system. The sale effectively ends Shell’s upstream position in California. The company reported that the divestiture is valued to result in a post-tax impairment of $300 million to $400 million, subject to adjustments.
The completion of the merger between Centennial Resource Development Inc. and Colgate Energy Partners II LLC happened on Sept. 1, sealing the debut of Permian Resources Corp., which is considered the largest pure-play E&P company in the Delaware Basin. Permian Resources’ idea was to combine two successful E&P companies, creating a better, stronger, and more strategically compelling company. Centennial and Colgate announced an agreement to merge in May, denying rumors that Colgate, a privately held independent Midland-based company, had been seeking an IPO. The merger estimated Colgate at about $3.9 billion and consists of 269.3 million shares of Centennial stock, $525 million of cash, and the assumption of approximately $1.4 billion of Colgate’s outstanding net debt. Permian Resources, being the combined company, has a deep inventory of “high-quality” drilling locations on around 180,000 net acres the companies anticipate will provide more than $1 billion of free cash flow in 2023 at current strip prices, in accordance with the company release on Sept. 1.