Inter Pipeline (TSE:IPL) acquires Canadian NGL midstream assets

Inter Pipeline Ltd (TSE:IPL, Mkt cap 9.17B, P/E 20.04, Div/yield 0.13/5.71, EPS 1.36, Shares 337.03M) has completed its acquisition of the Canadian natural gas liquids (NGL) midstream businesses of Williams and Williams Partners for C$1.35bn in cash.

The deal includes two NGL and olefinic liquids extraction plants located near Fort McMurray, Alberta, a fractionator near Redwater, Alberta and a 420-kilometre pipeline system that connects these facilities.

According to Inter Pipeline, Williams Canada pioneered the process of extracting NGL and olefins from offgas, a byproduct of bitumen upgrading operations. The two extraction plants have the capacity to recover approximately 40,000 barrels per day of NGL and olefins from offgas. The liquids mix is then separated into marketable products at the Redwater fractionator and sold across North America.

As part of the deal, Inter Pipeline has also assumed responsibility for the potential construction of a C$1.85bn propane dehydrogenation facility located near the Redwater fractionator. This facility would convert low-cost, locally sourced propane into higher value polymer grade propylene, a petrochemical product primarily used in plastics manufacturing, the company said.

Calgary-based Inter Pipeline financed the acquisition using the net proceeds from a C$600m subscription receipt offering, C$350m of new term debt, and the balance drawn under its recently expanded C$1.5bn committed revolving credit facility.

“This accretive acquisition is a highly complementary addition to our existing NGL extraction business,” said Christian Bayle, Inter Pipeline’s president and CEO, when the deal was announced on August 8. “Consistent with our disciplined acquisition strategy, we are purchasing this unique and attractive business at a low period in the commodity cycle, and well below original cost. This positions Inter Pipeline to significantly benefit as energy prices strengthen.”

Inter Pipeline Ltd. (TSE:IPL) owns and operates energy infrastructure assets located in western Canada and Europe. Inter Pipeline operates in four segments: oil sands transportation business, conventional oil pipelines business, natural gas liquids (NGL) extraction business and the bulk liquid storage business. Its oil sands transportation business consists of the Corridor, Cold Lake and Polaris pipeline systems, which transport petroleum products and provide related blending and handling services in Alberta. Its conventional oil pipelines business involves the transportation, storage and processing of hydrocarbons, as well as midstream marketing blending and handling services. Its NGL extraction business consists of processing natural gas to extract NGLs, including ethane and a mixture of propane, butane and pentanes plus. Its bulk liquid storage business involves the storage and handling of bulk liquid products through the operation of over 10 bulk liquid storage terminals. More from Reuters »

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