Canadian pipeline groups in $3.1bn deal

Pembina Pipeline has agreed a C$3.2bn (US$3.1bn) all-share deal to buy Provident Energy, with the aim of extending its reach in North American oil and natural gas pipelines and processing.

The two Calgary-based companies operate in some of North America’s fastest growing oil and gas fields, including the Marcellus shale gas field in the north-eastern US, the Bakken shale oil field straddling Montana and North Dakota in the US and Saskatchewan in Canada, and the Montney shale gas field in northeastern British Columbia.

Announcing the deal on Monday, Pembina said that the combination would allow it to bid on much bigger projects, accelerating its growth.

Bob Michaleski, chief executive, told analysts, “We have extremely complementary, but not overlapping businesses”.

Provident’s assets include gas fractionation plants, which extract propane, butane and other petrochemical feedstocks, as well as gas pipelines and storage facilities.

Mr Michaleski added in a statement, “Our expanded footprint will provide greater access to natural gas liquids markets across North America and will allow us to offer customers a significantly expanded spectrum of energy services.”

The combined company will have a market value of C$7.9bn and an enterprise value of C$10bn.

Pembina has offered Provident shareholders 0.425 of its shares for each of their shares, equal to a premium of about a quarter on Provident’s recent share price.

Pembina shares dropped almost 5 per cent to C$26.77 on Monday following the announcement. Provident shares rose 17.8 per cent to C$11.20.