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Enbridge Selling BC, Alberta Natural Gas Midstream Operations for $3.3B

Production gathering pipelines and processing plants in Canadian natural gas hot spots changed hands Wednesday, when Enbridge Inc. sold field operations in northern British Columbia (BC) and Alberta for C$4.3 billion ($3.3 billion).

The leader of the buyer consortium, Toronto-based Brookfield Infrastructure Partners, called the deal “an exciting opportunity to invest in scale in one of North America’s leading gas gathering and processing businesses based in Western Canada.”

The asset package includes 3,350 kilometers (2,010 miles) of pipelines that supply 19 processing sites with 3.3 Bcf/d of raw liquids-rich natural gas from the Montney, Peace River Arch, Horn River and Liard geological formations.

“The business is strategically positioned for the continued development of the prolific Montney Basin,” the richest and most active area in the acquired midstream service network, said Brookfield CEO Sam Pollock.

Calgary-based Enbridge kept long-haul routes to markets from the northern gas-rich areas: the Westcoast conduits to southwestern BC and the northwestern United States, and an interest in the Alliance Pipeline to Chicago.

Enbridge acquired the Westcoast system and allied northern field services in its mid-2016 takeover of Spectra Energy for US$28 billion. The asset sale was sought to repay takeover debt and clean up the corporate profile on investment markets.

The deal raises Enbridge’s total asset sales so far this year to C$7.5 billion ($6 billion).

The sale of the Canadian gathering and processing business “significantly advances our strategic priority of moving to a pure play regulated pipeline and utility model,” said Enbridge President Al Monaco.

Canadian industry analysts described the transaction as a sign of confidence that the last big liquefied natural gas (LNG) export project still standing in BC, the Royal Dutch Shell plc-led LNG Canada terminal, will make it into construction.

However, Brookfield indicated the purchase does not rely on overseas export expectations that remain speculative, with the LNG Canada project still under owner review and TransCanada Corp. already lined up to build its proposed gas supply pipeline, Coastal GasLink.

The northern BC and Alberta natural gas services are self-sustaining and growing because a new generation of shale and tight gas production is replacing aged conventional wells. Pollock pointed out that reliability would be a feature of Brookfield’s move into the development region as “cash flows from the business are anchored by a firm contract profile with a weighted average life of 10 years.”

Enbridge and Brookfield set a mid-2019 target for closing all aspects of the transaction, allowing time for approval by Canadian federal and provincial regulatory agencies that share jurisdiction over the gas facilities.

 

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