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Pembina Pipeline (PBA) to Purchase Veresen for $7.1 Billion
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Canadian energy transportation and service provider Pembina Pipeline Corp. (PBA - Free Report) recently announced that it is considering the buyout of smaller rival Veresen Inc. in a stock-and-cash deal valued at $7.1 billion, including debt. The deal, if successful, will result in the creation of one of the largest energy infrastructures in the country. The deal will provide Pembina Pipeline access to natural gas pipelines and processing infrastructure of the aquiree.
The company declared that the shareholders of Veresen can either opt for 0.4287 of a Pembina Pipeline share or $13.64 in cash. The offer made by Pembina Pipeline is at a 22.5% premium to the last closing price of the stock.
Benefits of the Deal
Pembina Pipeline's existing pipeline network interlinks Western Canada and the U.S., covering more than 6,000 miles. Addition of Veresen's natural gas gathering, processing, and pipeline assets in Western Canada to Pembina Pipeline's network will provide the company an advantageous spot in the Western Canadian Sedimentary Basin, which has the world’s third-largest crude reserve.
The merged company will be better placed with assets in various important oil and gas producing fields in Alberta, Bakken Formation and the British Columbia. By 2018, it will possess about 5.8 billion cubic feet per day of gas processing infrastructure across Western Canada along with 3 million barrels of oil equivalent per day of pipeline capacity. The company will also be able to finance Veresen's large scale growth plans like the $7.5 billion Jordan Cove liquefied natural gas project and $5.9–$7.3 billion Alliance pipeline project.
What Triggered the Deal?
The slow increase in oil prices after a two-year rut along with friendlier administration and tax policies in the U.S. are pressurizing firms with overcapacity and no major projects on the horizon beyond the few already approved ones in the pipeline industry to merge.
In 2016, Enbridge Inc.'s (ENB - Free Report) announcement of $28 billion acquisition of Spectra Energy as well as the buyout of Columbia Pipeline Group by TransCanada Corp. (TRP - Free Report) for $10 billion has created a competitive environment in the Canadian energy industry. Pembina Pipeline and Veresen's merger will help the former to counter the situation and get ahead of the smaller rivals, posing competition to energy giants Enbridge and TransCanada.
About the Company
Pembina Pipeline is an energy transportation and service provider. The company operates via four segments – Conventional Pipelines, Oil Sands & Heavy Oil, Midstream & Marketing, and Gas Services. Pembina Pipeline, formerly known as Pembina Pipeline Income Fund, is headquartered in Calgary, Canada.
Price Performance
In the last six months Pembina’s shares gained 6.04% as against the Zacks categorized Oil & Gas - Production and Pipelines industry’s increase of 7.07%. During this period the company touched the highest point at 15.25%, while the industry’s highest increase was of 11.78%.
Antero Resources is expected to witness 7.82% year-over-year earnings growth in 2017. The company posted a positive earnings surprise of 23.08% in the last quarter of 2016.
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Pembina Pipeline (PBA) to Purchase Veresen for $7.1 Billion
Canadian energy transportation and service provider Pembina Pipeline Corp. (PBA - Free Report) recently announced that it is considering the buyout of smaller rival Veresen Inc. in a stock-and-cash deal valued at $7.1 billion, including debt. The deal, if successful, will result in the creation of one of the largest energy infrastructures in the country. The deal will provide Pembina Pipeline access to natural gas pipelines and processing infrastructure of the aquiree.
The company declared that the shareholders of Veresen can either opt for 0.4287 of a Pembina Pipeline share or $13.64 in cash. The offer made by Pembina Pipeline is at a 22.5% premium to the last closing price of the stock.
Benefits of the Deal
Pembina Pipeline's existing pipeline network interlinks Western Canada and the U.S., covering more than 6,000 miles. Addition of Veresen's natural gas gathering, processing, and pipeline assets in Western Canada to Pembina Pipeline's network will provide the company an advantageous spot in the Western Canadian Sedimentary Basin, which has the world’s third-largest crude reserve.
The merged company will be better placed with assets in various important oil and gas producing fields in Alberta, Bakken Formation and the British Columbia. By 2018, it will possess about 5.8 billion cubic feet per day of gas processing infrastructure across Western Canada along with 3 million barrels of oil equivalent per day of pipeline capacity. The company will also be able to finance Veresen's large scale growth plans like the $7.5 billion Jordan Cove liquefied natural gas project and $5.9–$7.3 billion Alliance pipeline project.
What Triggered the Deal?
The slow increase in oil prices after a two-year rut along with friendlier administration and tax policies in the U.S. are pressurizing firms with overcapacity and no major projects on the horizon beyond the few already approved ones in the pipeline industry to merge.
In 2016, Enbridge Inc.'s (ENB - Free Report) announcement of $28 billion acquisition of Spectra Energy as well as the buyout of Columbia Pipeline Group by TransCanada Corp. (TRP - Free Report) for $10 billion has created a competitive environment in the Canadian energy industry. Pembina Pipeline and Veresen's merger will help the former to counter the situation and get ahead of the smaller rivals, posing competition to energy giants Enbridge and TransCanada.
About the Company
Pembina Pipeline is an energy transportation and service provider. The company operates via four segments – Conventional Pipelines, Oil Sands & Heavy Oil, Midstream & Marketing, and Gas Services. Pembina Pipeline, formerly known as Pembina Pipeline Income Fund, is headquartered in Calgary, Canada.
Price Performance
In the last six months Pembina’s shares gained 6.04% as against the Zacks categorized Oil & Gas - Production and Pipelines industry’s increase of 7.07%. During this period the company touched the highest point at 15.25%, while the industry’s highest increase was of 11.78%.
Zacks Rank and Stocks to Consider
Pembina presently carries a Zacks Rank #3 (Hold). A better-ranked stock in oil and gas sector is Antero Resources Corporation (AR - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Antero Resources is expected to witness 7.82% year-over-year earnings growth in 2017. The company posted a positive earnings surprise of 23.08% in the last quarter of 2016.
5 Trades Could Profit "Big-League" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>