Pembina Pipeline Corporation ("Pembina" or the "Company") is pleased to announce that Pembina Gas Infrastructure Inc. ("PGI"), a Western Canadian focused gas processing entity jointly owned by Pembina and KKR, has entered into agreements with Veren Inc. and certain affiliates thereof ("Veren") that include the acquisition of Veren’s Gold Creek and Karr area oil batteries and support for future infrastructure development (the "Transaction"). The net purchase price related to the acquisition of the batteries is $400 million ($240 million, net to Pembina).
"We are thrilled to enhance and further align our strategic partnership with Veren, a top-tier growth focused Montney and Duvernay producer," said Chris Rousch, PGI’s President & Chief Executive Officer. "This transaction demonstrates how our collaborative approach to infrastructure solutions creates a compelling value proposition for our customers."
Transaction Details
PGI will acquire four batteries in the Gold Creek and Karr areas, which include natural gas handling capacity of 320 million cubic feet per day and liquids handling capacity of 53,000 barrels per day. Natural gas from the batteries is processed at PGI’s Patterson Creek Gas Plant and both the batteries and the Patterson Creek Gas Plant are connected to Pembina’s Peace Pipeline system.
Veren will retain operatorship of the acquired assets, with operating costs and maintenance capital flowing through to Veren. Veren will also assume operatorship of the existing PGI-owned batteries in the area.
Additionally, PGI will fund up to $300 million, of which approximately one-third has already been committed, for Veren’s future battery and gathering infrastructure in the area (the "Veren Infrastructure"). Veren will construct and operate the batteries, and PGI will construct and operate high pressure gathering pipelines.
Veren will enter into a 15 year take-or-pay agreement for capacity at the acquired batteries, which also includes an area-of-dedication to PGI for gathering and processing services for all volumes Veren produces out of the Gold Creek and Karr areas.
Anticipated annual adjusted EBITDA associated with the acquisition of the batteries is initially expected to be approximately $50 million ($30 million, net to Pembina). Further capital deployment in support of commitments will generate incremental contracted EBITDA from corresponding fees and increased plant utilization.
Strategic Benefits
Builds on Existing Infrastructure Partnership with a Strong Investment Grade Counterparty: Strengthens the existing partnership with Veren, a leading North American producer with 20 years of premium drilling inventory and prolific assets in the Montney and the Duvernay.
Extended Contracts and Area of Dedication: The existing legacy agreements with PGI will be amalgamated under a simplified structure to include the newly purchased batteries, existing assets, and further Veren Infrastructure development, all underpinned by 15 year take-or-pay and area-of-dedication agreements. This represents significant term extensions on the legacy agreements. Further, PGI has eliminated future non-revenue generating capital obligations associated with the legacy agreements and has reduced its exposure to operating expenses.
Enhanced Alignment Between the Parties and Enhanced Patterson Creek Utilization: The Transaction allows Veren to operate upstream gathering and battery infrastructure, while PGI will continue to operate the Patterson Creek Plant. This alignment further supports increased drilling activity and corresponding volumes in Veren’s development plan, which will utilize existing unused capacity at PGI’s Patterson Creek Gas Plant.
Integration with Pembina’s Value Chain: Liquids from the batteries and the Patterson Creek Gas Plant will continue to be transported on Pembina’s Peace Pipeline system and the natural gas liquids will be processed at Pembina’s Redwater Facility under previously established agreements.
Transaction Funding
The Transaction will initially be funded using PGI’s existing credit facility.
Closing
Closing is expected to occur in the fourth quarter of 2024 and is subject to the satisfaction or waiver of customary closing conditions, including all required regulatory approvals.
