Pembina and KKR Partner to Acquire 50% Stake in Whitecap's Kaybob Gas Complex for $420M

Author: Benzinga Newsdesk | July 02, 2024 07:05am

Pembina Pipeline Corporation ("Pembina" or the "Company") (TSX:PPL, NYSE:PBA) is pleased to announce that Pembina Gas Infrastructure Inc. ("PGI"), a premier gas processing entity in Western Canada jointly owned by Pembina and KKR, has entered into a purchase and sale agreement with Whitecap Resources Inc. ("Whitecap") to acquire a 50 percent working interest in Whitecap's 15-07 Kaybob Complex (the "Kaybob Complex") as well as executed an agreement to support the future infrastructure development for Whitecap's Lator growth area (the "Transaction"). Gross proceeds related to the Transaction are $420 million ($252 million, net to Pembina).

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"Our ability to provide unique and value-added solutions to support Whitecap's development in both the Montney and Duvernay demonstrates our leading advantage and is why our customers choose us. These plays have significant growth potential, and we are proud to be Whitecap's infrastructure partner," said Chris Rousch, PGI's President & Chief Executive Officer. "The Transaction further demonstrates the ability for Pembina's integrated value chain to meet the growth demands of our customers."

Transaction Details

PGI will acquire a 50 percent working interest in the Kaybob Complex, which includes natural gas processing capacity of 165 million cubic feet per day and condensate stabilization capacity of 15,000 barrels per day; Whitecap will retain operatorship of the assets. In turn, Whitecap will enter into a long-term take-or-pay agreement for PGI's capacity in the Kaybob Complex and will commit to an area of dedication to PGI for all volumes Whitecap produces out of the area.
PGI has agreed to fund Whitecap's Lator area development, including a new battery and gathering lateral (the "Lator Infrastructure"), which PGI will own. In exchange, Whitecap has entered into long-term take-or-pay agreements with PGI for priority access to the Lator Infrastructure. In addition, the Lator area development includes an area of dedication to PGI for all volumes Whitecap produces out of the area.
Whitecap has entered into additional long-term take-or-pay contracts with PGI at the Musreau gas plant within the Cutbank Complex ("Musreau") and the K3 gas plant.
In addition to PGI's transaction, Pembina has signed a combination of new and extended long-term integrated transportation, fractionation, and marketing services agreements with Whitecap, including a dedication of future growth volumes from Whitecap's Kaybob and Lator developments.

Strategic Benefits

Further Aligns PGI and Pembina with a Strong Growth Company: Whitecap is a Western Canadian Montney and Duvernay producer with an exceptional track record of growth.
Enhanced Asset Utilization: The Transaction will increase volumes at PGI's Musreau and K3 facilities, utilizing existing white space.
Increased Volume Capture: The Lator Lateral will connect PGI's Musreau facility into the Lator area, enhancing PGI's potential to capture further volumes.
Strong Contractual Protections: The existing assets and further infrastructure development will be underpinned by an area-of-dedication and long-term take-or-pay agreements.
Benefits Full Pembina Value Chain: In addition to the acquired infrastructure and future development within PGI, there are added benefits across Pembina's integrated value chain. A combination of new and extended long-term transportation, fractionation, and marketing services agreements, and dedication of future growth, will support higher utilization on Pembina's Peace Pipeline and at the Redwater Complex, including RFS IV, which is currently being constructed. Further, the arrangement for Whitecap's Lator development includes deep cut processing and ethane-plus NGL transportation and fractionation, which supports Pembina's ethane supply commitments.

Transaction Funding

The Transaction will initially be funded using PGI's existing credit facility.

Closing

Closing is expected to occur in the third quarter of 2024 and is subject to the satisfaction or waiver of customary closing conditions, including all required regulatory approvals.

Posted In: PBA TSX:PPL