Inter Pipeline Ltd (TSE:IPL) and Pembina granted royalty credits for new petrochemical plants

Two new petrochemical projects in Alberta have been granted subsidies under the provincial government’s Petrochemicals Diversification Program, which was announced in February 2016.

Inter Pipeline Pembina royalty credits

Inter Pipeline Ltd (TSE:IPL) and Pembina granted royalty credits for new petrochemical plants

Inter Pipeline Ltd (TSE:IPL, Mkt cap 10.19B, P/E 20.80, Div/yield 0.14/5.79, EPS 1.35, Shares 360.48M) said on Monday that it will receive up to C$200m in royalty credits from the Petrochemical Diversification Program. Credits were awarded in support of Inter Pipeline’s proposed construction of a C$1.85bn propane dehydrogenation (PDH) facility near Fort Saskatchewan, Alberta.

This new facility will convert low-cost, locally sourced propane into more valuable polymer grade propylene, which is primarily used to create a variety of plastics, fibers and chemicals.

“We are pleased to have been awarded meaningful incentives to assist with the advancement of this important project,” commented Christian Bayle, Inter Pipeline’s president and CEO. “The Petrochemical Diversification Program will help provide long-term economic benefits to Alberta by stimulating new investment and creating high quality employment opportunities.”

Inter Pipeline is also assessing the commercial viability of constructing an additional C$1.3bn processing facility that converts propylene into polypropylene, the company said.

Final investment decisions on both projects are expected to be made by mid-2017.

The second project awarded royalty credits under the Petrochemical Diversification Program is a joint venture between Pembina Pipeline and Petrochemical Industries Company (PIC), based in Kuwait. The partners have been approved to receive up to C$300m in credits to build an integrated PDH and polypropylene (PP) upgrading facility in Alberta’s Sturgeon County.

Royalty credits will be awarded once approved projects are completed. The credits can then be sold to oil or natural gas producers, which can use them to reduce their royalty payments.

Calgary AB based 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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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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Inter Pipeline Posts Record Oil Volume

Inter Pipeline Ltd (TSE:IPL, Mkt cap 10.95B, P/E 31.61, Div/yield 0.12/4.38, EPS 1.06, Shares 326.21M)

Impressive volume levels, particularly in the last three months of year, have enabled oil transporter Inter Pipeline Ltd. to report increased revenue of $1.56 billion in 2014, compared to $1.36 billion in 2013.

Inter Pipeline Posts Record Oil VolumeAs the Calgary Herald reports, the company has invested heavily in its three oilsands pipeline systems in the last two years, resulting in volume of more than one million barrels per day (bpd) as 2014 drew to a close.

For the year as a whole, volumes averaged 912,900 bpd on its Cold Lake, Corridor and Polaris pipeline systems, which represents a gain of 10% over 2013.

"We transported over 1.1 million barrels per day on our oilsands and conventional gathering systems (in 2014), establishing a new record for the fifth consecutive year," Christian Bayle, the firm's president and chief executive, told the newspaper.

Inter showed equally notable gains on its three conventional oil-gathering systems, which transported 205,200 bpd in 2014, a 10% climb on 2013 figures.

As well as reporting higher revenues, the firm noted an improvement in funds from operations, which rose to $564 million from $472 million.

Net income came out of the year in good shape, too, standing at $350 million. This is a significant turnaround from the $47 million loss reported in 2013.

Growth appears to be pretty consistent across the board, with Inter highlighting that all three oilsands pipelines enjoyed a prosperous 2014, including a 300% increase in northbound diluent volumes on the Polaris pipeline system.

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Inter Pipeline Sets Out Reduced Capital Spending Budget For 2015

Inter Pipeline Ltd (TSE:IPL, Mkt cap 10.69B, P/E 30.86, Div/yield 0.12/4.49, EPS 1.06, Shares 326.21M) is the latest Canadian energy company to announce drastic cuts to its capital spending budget for 2015, taking it down to C$400 million, which is less than a third of last year's budget.

Inter Pipeline Reduced Capital Spending Budget 2015As Reuters reports, the energy transportation and storage firm said focus will be firmly on completing work on the C$3 billion expansion of its Cold Lake and Polaris systems, with an additional C$110 million having been allocated to pipeline construction and pump station work.

This means that Inter Pipeline, which operates the largest pipeline gathering system in Alberta's oil sands, will implement a reduced capital program in 2015. Last year, it announced a capital spending budget of C$1.3 billion.

The drop is unlikely to come as a surprise to most, with dozens of other Canadian oil and natural gas producers and oilfield services companies having slashed capital budgets in response to tumbling benchmark crude prices, which have more than halved since June 2014.

Inter Pipeline is setting its sights on growing its oil sands transportation and conventional oil gathering businesses in 2015, spending C$195 million and C$115 million respectively on those areas. However, even those figures represent a significantly smaller outlay than in 2014.

In 2015, organic growth projects are expected to account for approximately C$340 million of total capital expenditures, the company said a statement. The remainder will be spent on sustaining capital requirements across Inter Pipeline's business segments.

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Stockwatch – Inter Pipeline To Invest $100m In Mid-Saskatchewan System Expansion

Stockwatch – Canadian energy infrastructure company Inter Pipeline Ltd (TSE:IPL, Mkt cap 10.52B, P/E – , Div/yield 0.11/3.95, EPS -0.22, Shares 322.13M) has unveiled plans to invest $100 million in the expansion of its Mid-Saskatchewan oil lines with the aim of adding 95,000 barrels per day of new capacity.

Stockwatch - Inter Pipeline plans invest $100 million expansion Mid-Saskatchewan oil lines

Stockwatch – Inter Pipeline Ltd plans to invest $100-M in the expansion of its Mid-Saskatchewan oil lines

The company, which operates regional pipeline systems in Western Canada, said it has sealed contracts with five oil producers that have agreed to ship oil on the lines for between four and ten years.

As part of the expansion project, Inter Pipeline will add 90 kilometres (56 miles) of new lines to its Saskatchewan system, including 50 kilometres of new mainline pipe and 40 kilometres of pipeline laterals, and related pumping and metering facilities. The first phase of the project is expected to become operational later this year and to be fully completed by the second quarter of 2015. Initially, the new mainlines will operate at less than 50% of capacity. This will be gradually increased as oil production rises.

Oil production in Saskatchewan has been growing at a rapid pace owing to an increase in drilling activity and the use of innovative well completion technologies in the area. Over the last two years, throughput volumes have doubled to more than 70,000 barrels per day and much of the Mid-Saskatchewan oil system has been operating at or near full capacity, Inter Pipeline said.

Inter Pipeline expects the project to fetch between $25 million and $30 million in incremental EBITDA a year.

The investment is Inter Pipeline’s most significant expansion of a conventional oil pipeline system, the company’s president and chief executive Christian Bayle commented. The expansion will help provide an efficient transportation solution for customers and flexibility to ensure growth in the future, he said.

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Market Call Tonight – Michael Sprung Interviewed by Mark Bunting on BNN

Market Call Tonight – Michael Sprung Interviewed by Mark Bunting on BNN

Michael Sprung Mark Bunting BNN Market Call Tonight

Michael Sprung Interviewed by Mark Bunting on BNN’s Market Call Tonight

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Mark Bunting:          Tonight on ‘Market Call’ we have Michael Sprung, President of Sprung Investment Management. He is taking your questions on Canadian Large Caps.

Mark Bunting:          Hello and welcome to ‘Market Call Tonight’! I am Mark Bunting. Thanks for joining us, as always, and as always, here are three ways to reach us. If you have a question for Michael Sprung, there is the email address, the toll-free number, or you can tweet us on Twitter; the handle is @marketcall. Good to see you, sir!

Michael Sprung:        Oh, it’s good to be back. Thank you!

Mark Bunting:          So some late breaking news today, we’ve been talking all about it, the Empire Company, through Sobeys, or vice versa, are buying Safeway, or at least the Safeway Stores, the U.S. Safeway, for 5.8 billion, what do you think of the strategy?

Michael Sprung:        Well, you know, it has been long rumored that who is going to buy Safeway, and so I don’t think it’s a big surprise, but I’ve got to hand it to the Empire group. I mean, they’re pretty savvy people, I think. They still will be a bit behind Loblaws in terms of their size and their reach, but not that far behind anymore.

As I understand it, I think they’ll have combined sales of around 24 billion or somewhere in that range.

Mark Bunting:          That’s right, yes.

Michael Sprung:        Is that right?

Mark Bunting:          And Loblaws in the last fiscal year had 33 billion.

Michael Sprung:        Right! So Sobeys still got a ways to go to catch up to that. But it will be interesting to see what sort of synergies, whether or not they change the banners. Because in the past we’ve seen, especially with Loblaws, we’ve seen they like to run under a multiple banner headlines; they’re even going back to using Provigo in Québec now.

Mark Bunting:          Although when Metro bought, I guess, was it Dominion?

Michael Sprung:        Yes.

Mark Bunting:          They over time changed most of those banners.

Michael Sprung:        Yes, they did. But historically Loblaws still has Zehrs and Loblaws, and then they all have their discount chains and so on, so I think there is some advantage to them perhaps having multiple banners out there.

It will be interesting to see what they do with Safeway. I think Safeway is a well-known brand, where its been particularly strong, so you wouldn’t want to necessarily give that away.

Mark Bunting:          Right, it’s a well-known name in Western Canada, and they said on the conference call, which I was on, that it’s too early to know what they’re going to do with the banners.

Michael Sprung:        Yeah.

Mark Bunting:          Let’s get to the markets here, and just quickly, have you ever owned Empire?

Michael Sprung:        I have owned it, yes, in the past; don’t own it currently.

Mark Bunting:          Okay. A lot of volatility in the markets really since kind of late May, May 22 or so when the Fed had those comments about some possible easing off with the quantitative easing, and the minute came out and so on, and we’ve seen so much volatility. How are you finding it in the markets right now?

Michael Sprung:        Well, this has been a challenging time; certainly I think it’s been somewhat frustrating. You see the U.S. market up 15% for the year and we’re basically flat here. Emerging markets have generally speaking been down so far this year.

But going into the year, I think there was some expectation that perhaps things were a little bit overvalued here. We’re getting a bit of a correction. Pace of the recovery is still somewhat uncertain.

People keep talking about the slowing economies, but nonetheless, they are more or less positive still. People are still expecting global GDP growth well over 3% this year. That’s still largely held up by China at 7.5.

But even the U.S. should outpace Canada this year and be above 2.5% or so, and Canada seems to be stuck down around 2 for the time being. But that can change quickly if the commodity cycle turns again.

And I think that recent setbacks are really presenting more opportunities for investors in this market. Particularly if you’re looking longer-term, three to five years over the next business cycle, we certainly expect that many of these commodities will come back, and now that they’re so depressed, that’s the time to be looking for where you want to place yourself for the next cycle.

Michael Sprung BNN Market Call Tonight

Michael Sprung on BNN’s Market Call Tonight

Mark Bunting:          Right! And you’ve got some ideas along those lines in your Top Picks, and we’ll get to those in about 50 minutes time or so, but after this break we’ll get to some questions from Michael Sprung on Canadian Large Caps.

Mark Bunting:          We’re starting with Jim, who is in Massey, Ontario. Good evening!

Jim:                       Good evening Mark! Michael, would you buy Yamana Gold at these prices, and do you use stop-losses? Thank you.

Michael Sprung:        I have used stop-losses in the past. I don’t generally use them. I find that if you’re monitoring your stocks day-to-day you’ve got sort of a bandwidth that you allow them to operate within, and quite often you buy a stock and it goes down and you have to step back and reassess your position.

But generally speaking, no, because when you’re trying to stick with fairly good quality companies to begin with, just because they become out of favor in the market is not necessarily a reason to just throw in the towel and take a loss, unless you’re doing it for some tax driven reason. So generally speaking, we don’t use them, have used them occasionally.

In terms of Yamana, I don’t own it currently. Certainly they do have a fairly good production profile in terms of increases coming up over the next few years. They’ve got a few projects, I think, in Brazil coming on stream in the next few years.

They’ve done pretty well. We expect to see them to be producing well over a million-and-a-half ounces a year in the not too distant future. But on a price basis I think there are some relatively better values in the gold market right now. But they’ve all been hit so hard, I mean it’s hard to differentiate.

But we’ve got things like Barrick selling at seven times earnings, and that’s pretty rare.

Now, there have been some reasons for that, but I think in the longer term they’ll sort those problems out.

But no, we don’t currently own Yamana. I think their last quarter, it was a slight miss, but you can’t watch these things quarter to quarter. Like everyone else, they’re suffering with some inflation in terms of equipment, labor, materials and so on. These mines are getting terribly expensive to develop nowadays.

But Yamana Gold I think is in a fairly good position going forward; it’s certainly one that we keep our eye on.

Mark Bunting:          All right Michael, here is an email on New Flyer Industries from Murphy; would you recommend this company, NFI?

Michael Sprung:        I would recommend it. I think that a few years ago there were some management changes and they brought in some people that were much more production and operations oriented.

Certainly, there is going to be a big build out of transportation systems somewhere along the road here. Unfortunately, municipal governments are quite strained in what they can spend in North America right now. But I think that New Flyer is in a good position to take advantage of that longer term.

So overall, I think that they’ve got a few competitors; Orion and so on, but they seem to be a little less of the factor in the market more recently. So I expect them to pick up some market share going forward over the next few years.

Mark Bunting:          We have Jennifer on the line; she is in Barrie, Ontario. Hi Jennifer!

Jennifer:                 Hi! Thanks very much for taking my call.

Mark Bunting:          You are welcome!

Jennifer:                 I want to ask about TransCanada, sort of representative of the pipelines, do you think they’ve bottomed right now, and would you buy it in Canadian or U.S. funds? And if not, do you have something else you’d recommend in that area? Thanks!

Michael Sprung:        Well, I think the Pipelines, generally speaking, are not a bad place to be looking. Certainly, with all the new development of resources, we’re going to want to move them, and I don’t believe that that’s all going to happen by rail necessarily. So I think pipeline companies are in a relatively good position.

TransCanada, I mean the big question with them has been to date the XL Pipeline, and that appears to be a little bit of a political football. And should that be down entirely, I would expect this stock could take a little bit of a hit, even from here.

Overall though, I think that if your outlook is, again, three to five years, I think it’s pulled back a little bit here, I think one could safely buy it. Depending on your circumstance and what your objectives are, I’d probably say, if you’re living in Canada, why expose yourself to currency risk, buy it in Canadian dollars.

On the other hand, if you’re balancing your portfolio and you have a need for U.S. dollar exposure, by all means. But I think for the most part I would just say, it’s a very liquid stock, it doesn’t matter what side of the border you buy it on, and I would tend to buy it in Canada.

Mark Bunting:          Which of the pipelines do you hold for clients?

Michael Sprung:        We have a small exposure to Inter Pipeline, and as you know, they’re becoming a Corp now, and I think they’re in a pretty good position. We expect to see it continuing.

Mark Bunting:          Okay, but just the one though, right?

Michael Sprung:        Just the one.

Mark Bunting:          Inter Pipeline, right?

Michael Sprung:        Yes.

Mark Bunting:          Okay Michael, we’ll take a short pause here, we’ll come right back, more questions for you on Canadian Large Caps after this.

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