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Pembina Purchases Provident Energy for $3.2 Billion in Stocks

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(Image: Svilen Milev)
(Image: Svilen Milev)

FINANCE

  • Pembina and Provident merger creates company worth $8 billion
  • Deal blends together Pembina’s gas processing with Provident’s extraction and storage
  • Companies combining now while production of oil sands and shale gas is increasing

Pembina Pipeline Corp will purchase Provident Energy Ltd. for CAD$3.2 billion in stock, creating a publicly traded infrastructure company worth $7.9 billion.

The merger will blend together the services each company offers: Pembina provides gas processing and energy transportation along a 7,500 kilometer network, while Provident offers logistics, fractionation, extraction, transportation and storage.

The purchase is the largest Canadian pipeline deal since 2005 and will go into effect once shareholders vote in favor of the sale.

Provident shareholders would receive 0.425 of Pembina stock for each Provident share held, or the equivalent of approximately $11.86. According to Bloomberg, the sale is average for Canadian pipeline deals with a premium of 26.6%.

Following the announcement, stocks for Pembina were $26.27 a share and stocks for Provident were $11 a share on the Toronto Stock Exchange.

The Future

Once the purchase is finalized, the companies will operate under the Pembina name and will be headed by Pembina chief executive and president Bob Michaleski as well as a combination of both company’s managers. The company has not disclosed who the managers will be.

The new company also will apply to be listed on the New York Stock Exchange.

The purchase comes at a time when the production of shale gas and oil sands has increased in not only Alberta but also British Columbia, the two provinces in which the new company operates. It also comes at a time of near record-low natural gas prices.

Michaleski said in a written 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.”

Provident CEO Doug Haughey told reporters during a conference call that he predicts the company will grow as the price of natural gas liquids outpaces dray natural gas.

Both companies are headquartered in Calgary, AB.

In December, Provident was predicted by analysts to be one of four companies that would see profit growth from Canada’s oil sands region. Provident produces a liquid called condensate, which is used to lower the viscosity of crude oil found in the oil sands.

Key Statistics - Oil and Gas in Canada (source: MarketLine)

  • In 2010, the Canadian oil and gas market’s revenue totaled $83.5 billion, with a compound annual growth rate (CAGR) of 5.5% for 2006-2010.
  • Between 2006-2010, the CAGR for market consumption volumes increased by 0.4%, reaching 1.5 million BOE.
  • The market is predicted to decelerate between 2010-2015. The CAGR is predicted to be close to 4.5%. The market is expected to be valued at nearly $104 billion by 2016.

By Melina Druga for
Melina Druga is an American writer and editor. She is the author of Enterprising Women: Practical Advice for First Time Entrepreneurs.

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