|
Global energy giant surfaces in $28B deal Enbridge to buy Spectra, create North America-wide diversified infrastructure company, reduce high-carbon dependence GARY PARK For Petroleum News
Calgary-based Enbridge has struck a friendly deal to acquire Houston-based Spectra Energy to create North America’s largest energy infrastructure company, quickly relegating what would otherwise have been a setback for the Canadian firm.
The US$28 billion all-stock transaction, expected to close in the first quarter of 2017, will immediately bring under the same umbrella secured projects valued at $20 billion and another $37 billion of projects under development.
Based on the 12 months ended June 30, the new entity would have generated combined revenues in excess of $31 billion and combined earnings of $4.4 billion.
Enbridge President and Chief Executive Officer Al Monaco, designated to retain those roles, said that combining Enbridge’s position as North America’s largest carrier of crude oil with the continent’s “premier natural gas infrastructure company” will create a “true North American and global” energy leader.
Greg Ebel, Spectra’s president and CEO who will become chairman of Enbridge, said the merged company could be the most diversified energy infrastructure company in the world by establishing the “finest platform for serving customers in every region of North America.”
Sandpiper shelved The deal came only four days after Enbridge shelved what was seen as a key link in its grand plan to increase shipments out of North Dakota’s Bakken to PADD II, Eastern Canada and the Gulf Coast which had already been postponed from a 2017 startup date to 2019.
The $2.6 billion Sandpiper line covering about 600 miles to Superior, Wisconsin, was designed to carry 225,000-325,000 barrels per day.
In early August, the project had already been thrown into doubt when Enbridge Energy Partners - the partnership that operates the U.S. portion of Enbridge’s oil pipeline network - and Marathon Petroleum said they planned to terminate their transportation and joint-venture agreements for Sandpiper.
Enbridge said an EEP review had concluded that Sandpiper should be shelved “until such time as crude oil production in North Dakota recovers sufficiently to support the development of new pipeline capacity.”
Based on those projections, Enbridge said Sandpiper no longer fits into its “five-year planning horizon.”
Enbridge and Marathon have invested $800 million in the project, including money for pipeline and regulatory efforts and were facing intensified opposition from American Indian tribes and environmental groups.
The Enbridge-Spectra entity would currently have an enterprise value of $127 billion and is strongly positioned to participate in the movement of natural gas to support LNG export ventures.
Monaco said Enbridge has been exploring opportunities over the past two years to invest in natural gas and renewable energy projects to rebalance its earnings away from oil over the long-term and join the global shift to a lower-carbon economy.
The deal is valued at $40.33 per Spectra share, an 11.5 percent premium over the company’s closing price on Sept. 2. Enbridge shareholders will own 57 percent of the new company.
| 