Tulsa-based SemGroup Corp. has teamed up with KKR & Co. to buy into liquids-rich growth spots in Alberta and British Columbia (BC) shales, announcing on Thursday a takeover of the Calgary processing and pipeline firm, Meritage Midstream.
The acquisition, for C$600 million ($449 million), will be pooled with SemGroup’s current Canadian assets to create SemCAMS Midstream ULC. The combination will be 51% owned by SemGroup and 49% by KKR, the partners said.
“The transactions create a well-capitalized Canadian growth platform,” said a statement by the partners from Oklahoma and New York. “The joint venture (JV) positions SemCAMS Midstream for future growth opportunities.”
The growth strategy focuses on completing facilities currently under construction and developing additional expansion opportunities in the Montney and Duvernay shale production regions of northeastern BC and western Alberta.
The deal calls for SemGroup to receive C$615 million ($460 million) for the current Canadian assets going into SemCAMS, in addition to its majority ownership of the new combination.
KKR is contributing C$515 million ($385 million) in cash and buying C$300 million (US$224 million) in preferred shares of SemCAMS. The JV will also acquire a C$800 million ($598 million) bank credit facility, the partners said.
KKR executive Brandon Freiman described the New York City investment house as “big believers in the Montney as a growing, low-cost natural gas play that is relevant on a global scale” after 10 years of experience in Canadian resources.
“This transaction captures an attractive valuation for our SemCAMS business and accelerates our Canadian strategy in one of North America's premier energy basins,” said SemGroup CEO Carlin Conner.
Meritage currently has 195 MMcf/d of processing capacity and 157 miles of gas and liquids pipelines. A 200 mmcf/d processing expansion is under construction for completion in 3Q2019.
Counting current operations and facilities under construction, the SemCAMS combination will emerge with 1.3 Bcf/d of processing capacity, according to the partners. The JV adds it is also considering plans for a new 280 MMcf/d plant and a 100,000 b/d Montney liquids pipeline.