CALGARY, Alberta - Pembina Pipeline (NYSE:PBA) Corporation (TSX: PPL (NYSE:PPL); NYSE: PBA), in partnership with KKR through Pembina Gas Infrastructure Inc. ("PGI"), has struck a deal to acquire oil batteries and support future infrastructure development from Veren Inc., with a net purchase price of $400 million, or $240 million net to Pembina. This transaction is expected to bolster Pembina’s strategic partnership with Veren, a key player in the Montney and Duvernay regions.
Under the terms of the agreement, PGI will take ownership of four batteries in the Gold Creek and Karr areas, boasting a natural gas handling capacity of 320 million cubic feet per day and liquids handling capacity of 53,000 barrels per day. Veren will maintain operatorship of these assets and will also take on operatorship of existing PGI-owned batteries in the area.
Furthermore, PGI commits to funding up to $300 million, with a third already pledged, for Veren’s future battery and gathering infrastructure. Veren will construct and operate the batteries, while PGI will handle the construction and operation of high-pressure gathering pipelines.
The acquisition includes a 15-year take-or-pay agreement with Veren, securing capacity at the acquired batteries and ensuring dedicated gathering and processing services for Veren's production in the specified areas. The anticipated annual adjusted EBITDA from the acquisition is estimated at approximately $50 million, with Pembina's share being about $30 million. Additional capital commitments are expected to generate incremental contracted EBITDA.
The strategic advantages of this deal include extended contracts, strengthened partnerships, and increased utilization of PGI’s Patterson Creek Gas Plant. The batteries and the gas plant are integrated into Pembina’s Peace Pipeline system, with the liquids processed at Pembina’s Redwater Facility under existing agreements.
Funding for the transaction will come from PGI’s existing credit facilities, with the closing anticipated in the fourth quarter of 2024, pending customary conditions and regulatory approvals.
This move is part of Pembina’s broader strategy to enhance its infrastructure footprint and deepen its relationships with key partners. However, the company also acknowledges various risks, including regulatory changes and market conditions, which could impact the forward-looking statements made in this context.
The disclosed financial measures in this announcement, such as adjusted EBITDA, are non-GAAP measures. These are used by management to assess Pembina's performance but may not be directly comparable to similar measures used by other companies.
This news article is based on a press release statement from Pembina Pipeline Corporation.
In other recent news, Pembina Pipeline Corporation reported a record-setting performance in the second quarter of 2024, with an adjusted EBITDA of $1.091 billion and adjusted cash flow from operating activities at $837 million. This strong performance was largely due to strategic acquisitions and asset ownership increases. Pembina has also revised its 2024 adjusted EBITDA forecast upwards, now expecting it to fall between $4.2 billion and $4.35 billion.
Furthermore, the corporation completed the acquisition of the remaining interest in Aux Sable U.S. operations and is forecasting volume growth in 2024. However, the company reported a $600 million loss on disposal of equity interest due to the consolidation of Alliance and Aux Sable. On a positive note, Pembina secured new contracts and has an optimistic outlook for its project portfolio, including potential synergies from the Alliance Aux acquisition.
These are recent developments that highlight Pembina Pipeline Corporation's robust financial performance and strategic growth initiatives. Despite cost pressures and limited M&A opportunities, the company remains focused on operational excellence with several projects in the pipeline.
InvestingPro Insights
Pembina Pipeline Corporation (NYSE: PBA) has recently made a significant move to expand its infrastructure and partnership with Veren Inc. through a substantial acquisition. In light of this strategic development, key financial metrics and analyst insights from InvestingPro provide a deeper understanding of Pembina's current market position and future outlook.
InvestingPro data shows Pembina with a robust market capitalization of $23.46 billion, reflecting its significant presence in the energy infrastructure sector. The company's P/E ratio stands at a moderate 16.79, which adjusts to a slightly lower 15.02 when considering the last twelve months as of Q2 2024. This adjustment suggests a potentially more attractive valuation for investors when factoring in the company's recent earnings.
Revenue growth remains a strong suit for Pembina, with an impressive 11.29% increase over the last twelve months as of Q2 2024. This growth signifies the company's ability to expand its operations effectively. Moreover, Pembina boasts a solid dividend yield of 5.03%, which is particularly noteworthy given that the company has maintained dividend payments for 20 consecutive years, as highlighted by one of the InvestingPro Tips. This track record emphasizes Pembina's commitment to shareholder returns, a crucial consideration for income-focused investors.
Another InvestingPro Tip indicates that analysts predict Pembina will be profitable this year, aligning with the company's positive performance over the last twelve months. This profitability, paired with the company's strategic acquisitions and partnerships, could position Pembina for continued success in the competitive energy market.
For investors seeking more detailed analysis and additional insights, InvestingPro offers numerous other tips on Pembina Pipeline Corporation, which can be found at https://www.investing.com/pro/PBA.
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