CALGARY, Alberta - Pembina Pipeline (NYSE:PBA) Corporation (TSX: PPL (NYSE:PPL); NYSE: PBA), in partnership with KKR through Pembina Gas Infrastructure Inc. (PGI), has announced a significant agreement with Whitecap Resources (OTC:SPGYF) Inc. to acquire a 50% interest in the 15-07 Kaybob Complex for $420 million. The deal also includes the development of infrastructure to support Whitecap's growth in the Lator area.
PGI will obtain a half stake in the Kaybob Complex, which boasts a natural gas processing capacity of 165 million cubic feet per day and a condensate stabilization capacity of 15,000 barrels per day. Whitecap will maintain operational control over these assets and has committed to a long-term take-or-pay agreement for PGI's capacity at the complex.
Additionally, Whitecap will dedicate all volumes it produces in the area to PGI, underpinning the deal with long-term contractual assurances. PGI has also committed to funding infrastructure development in Whitecap's Lator area, including the construction of a new battery and gathering lateral, which will be owned by PGI.
The agreement extends beyond the acquisition of the Kaybob Complex, as Whitecap has entered into long-term take-or-pay contracts with PGI at the Musreau gas plant within the Cutbank Complex and the K3 gas plant. This is expected to increase volumes at PGI's facilities and enhance its ability to capture further volumes through the Lator Lateral connection.
Pembina will also benefit from new and extended long-term integrated service agreements with Whitecap, supporting higher utilization on Pembina's Peace Pipeline and at the Redwater Complex, including the under-construction RFS IV.
The transaction, which is slated to close in the third quarter of 2024, will be initially funded through PGI's existing credit facility, subject to customary closing conditions and regulatory approvals.
The deal is seen as strategically beneficial, aligning PGI and Pembina with Whitecap, a company known for its strong growth trajectory in Western Canada. It is anticipated to enhance asset utilization and provide strong contractual protections, with benefits extending across Pembina's integrated value chain.
The information in this article is based on a press release.
In other recent news, Pembina Pipeline Corporation reported a record adjusted EBITDA of $1.044 billion for the first quarter of 2024, alongside a raised quarterly dividend. The company also revised its 2024 EBITDA guidance to between $4.05 billion and $4.3 billion, attributing this to new acquisitions and a robust marketing business.
In further developments, Pembina has received approval to initiate a buyback program to repurchase up to five percent of its common shares, a move seen as a beneficial allocation of its financial resources.
Analysts at BMO Capital Markets have raised their price target for Pembina in light of the recently sanctioned US$4 billion Cedar LNG project, reaffirming an Outperform rating for the stock.
On another front, Canada's Trans Mountain oil pipeline, owned by the Canadian Development Investment Corporation, is banking on spot shippers for profitability, with a significant portion of its capacity reserved for these customers. However, the pipeline faces challenges such as high tolls and logistical issues at the Port of Vancouver, which may impact its competitiveness.
The pipeline might not see a positive equity return until 2031 unless it can fill its uncommitted capacity, according to documents submitted in a tolling dispute. The pipeline's debt-to-EBITDA ratio is expected to remain above typical levels until 2040, as noted by Morningstar analyst.
These are among the recent developments in the energy sector.
InvestingPro Insights
Pembina Pipeline Corporation (NYSE: PBA) has recently made headlines with its strategic acquisition and partnership developments. Investors tracking PBA will find the following insights from InvestingPro particularly relevant in light of the company's latest moves.
InvestingPro Data that stands out includes Pembina's solid market capitalization of $21.38 billion, showcasing the company's substantial presence in the energy infrastructure sector. The company's Price to Earnings (P/E) Ratio, as of the last twelve months leading up to Q1 2024, is at 19.19, indicating investor expectations of future earnings growth. Additionally, Pembina's dividend yield is notable at 5.45%, which is particularly attractive for income-focused investors.
Key InvestingPro Tips highlight that Pembina has been a consistent performer when it comes to dividends, maintaining payments for 20 consecutive years. This is a testament to the company's financial stability and commitment to shareholder returns. Moreover, the company's stock is trading near its 52-week high, with a price 97.85% of the peak, which can be interpreted as a sign of investor confidence in its current strategy and future prospects.
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