May 16, 2017 • Volume 26, No. 07 CANADIANACQUIRER Serving the marketplace with news, analysis and business opportunities Pembina Pipeline takes over gas mover Veresen for $9.7B Pengrowth's $707MM in Pembina Pipeline Corp. will acquire all of the shares outstanding of Veresen disposals fuel 60% debt cut Inc. in a $9.7 billion stock and cash deal, creating one of Canada’s largest energy The $707 million that Pengrowth infrastructure companies. Pembina also assumes Veresen’s $3.8 billion debt. The Energy Corp. has grossed since late combined entity will establish a strong presence in the Western Canadian Sedimentary 2016 from four asset sales, combined Basin by merging Pembina’s oil and NGL-focused midstream assets with Veresen’s gas- with $287 million cash on weighted business. hand, has helped it cut debt “We are Increases Pembina’s EV by 45% to $33B; annual synergies of $75-100MM. by almost 60% since YE16 predominately a liquids company, to $1.15 billion. The company said in Veresen is predominantly a gas company. And I think that is the magic,” Pembina its Q1 report that the divestitures and CEO Mick Dilger said in the conference call announcing the deal, which is set to associated delevering of its balance close in late Q3 or early Q4. In retrospect, the sale of Veresen’s power business for sheet will allow it to focus on its $1.8 billion earlier this year can now been seen as preparatory for the Pembina deal, as key core assets at Lindbergh and its it strengthened its midstream identity and strategy. The combined companyʼs current producing Montney Groundbirch assets pro forma pipeline capacity is 3.0 MMboe/d and it will own 5.8 Bcf/d of gas processing in British Columbia. infrastructure in Western Canada by 2018. Continues On Pg 10 Pengrowth completed $50 million in Paramount & Trilogy shed Valhalla assets for $200 million asset sales in 2016. Paramount Resources and Trilogy Energy Corp., the latter formed in 2005 through the spin-off of Paramount assets, are both selling assets in the Valhalla area of Grand Prairie, The largest and first of the Alberta. The separate deals, with a combined value of $200 million, were announced on dispositions was the December sale of May 1. Paramount’s rationale for its $150 million sale is to continue amassing a 4% royalty interest in its operated capital to build out infrastructure to relieve Montney production. For Trilogy, Lindbergh thermal oil project for $250 proceeds from the $50 million deal will be used to repay amounts drawn million to PrairieSky Royalty. That under its credit facility and invest in the development of two other key Montney areas plus preceded two Swan Hills asset sales that its Duvernay gas and infrastructure assets. grossed a total of $365 million and are Cont'd On Pg 2 Paramount’s sold Valhalla properties Trilogy formed in April 2005 through set to close on May 31. spinout of assets of Paramount. encompass 74 net sections (94 gross) and DEALS FOR SALE had 1Q17 sales volumes of 1,400 boe/d. Barclays said in a note that the sale implied “robust” transaction metrics of $107,000 ppboe/d. Since minimal investment has been CANADA NONCORE ASSET SALE allocated to these properties, Barclays still expects strong growth through 2018 as it builds 17-Key Areas. out infrastructure to relieve Montney production. Continues On Pg 4 MANITOBA, SASKATCHEWAN, ALBERTA & BRITISH COLUMBIA. PP Varying Working Interests Available Parkland poised for more M&A after $1.5B Chevron buy Current Production: 2,442 BOED ~2,400 A month after Parkland Fuel Corp. announced the acquisition of Chevron Net Operating Income: $1,348,600/Mn BOED Canada’s refining and marketing business for $1.5 billion, CEO Bob Espey said Total Net 2P Reserves: 4,961 MBOE Canada’s largest fuel retailer is eyeing the US as a potential acquisition target after Net 2P Reserves PV10: $37,104,000 AGENT WANTS OFFERS JUNE 8 already entering 18 deals valued at over $2.4 billion in the last year and a half. PP 13061 “We do have a toehold in the US, which is a market that we’re certainly interested in,” Espey told Bloomberg News. Parkland’s current US MULTI PROVIDENCE PROPERTIES operations are mainly located in the Northern Plains states of North Dakota, Producing & NonProducing Properties Wyoming and Montana. He also said the SASKATCHEWAN, ALBERTA & BC company could expand into Canada’s Parkland entered downstream US Varying WI & Royalties for Sale PP market in 2013 through SPF Energy buy. Current Production: 585 BOED urban centers, including Calgary where it Total 2P Reserves: 2,917 MBOE currently has no retail fuel stations. Further acquisitions could occur once Parkland Total Net 2P PV10: $13,987,000 585 BOED takes the time to digest its recent buys and cut debt, which Espey said could take the ACCEPTING CASH OFFERS next 12-24 months. AGENT WANTS OFFERS JUNE 1 PP 13054 Since becoming CEO in 2011, Espey has read the market to Parkland’s advantage making inexpensive deals due to the efforts of the majors to divest their downstream PLS tracks thousands of deals businesses and assets in order to shore up their balance sheets following the collapse for sale www.plsx.ca/listings of oil prices in mid-2014. Continues On Pg 17 All Standard Disclaimers & Seller Rights Apply. CANADIANACQUIRER 2 May 16, 2017 A&D Freehold Royalties adds to Penn West adds $10MM asset sale to Q1 debt cutting drive Viking core for $34 million Embedded in its Q1 earnings release, Penn West Petroleum Ltd. announced that Freehold Royalties Ltd. spent it sold ~700 boe/d of production in a $10 million asset disposition. The closing date is $33.3 million in Q1 to acquire 32,000 expected to be at the end of May. The sale moves the company closer toward realizing its acres of royalty lands in the greater goal outlined last August to divest $100-200 million in non-core assets. Dodsland Viking play of Saskatchewan Also during the quarter, Penn West gained $70 million with estimated production in proceeds from the sale of British Columbia and Swan Hills of 185 boe/d (91% oil). royalty interests. The proceeds were used to further reduce the company’s long term debt Per its emphasis on royalties, it also sold to $384 million by the end of the quarter, down from $469 million at YE16. all of its working interest assets located in CEO David French said going forward southeast Saskatchewan for $29 million. Penn West operated 2 rigs and drilled Penn West will “selectively consolidate in Total production and operating income 11 wells in Q1 at Peace River. areas where it makes sense” and cited the associated with these assets last year was recent $11 million acquisition in Peace River that increased inventory in the area by ~40 750 boe/d and $4.3 million respectively. near-term locations as a case-in-point. French added that Penn West will continue to The sale removed $4.8 million of related build upon its basic platform through the rest of the year: Cardium waterflooding, cold decommissioning liabilities (over 300 flow heavy oil manufacturing in Peace River and Alberta Viking development. wells plus related facilities). 2P reserves at the end of 2016 were Asset sales fuel Pengrowth’s 60% debt reduction Continued From Pg 1 38.3 MMboe, up 26% from 2015. And in a deal that closed on April 11, Pengrowth received $92 million from the sale of non-producing Montney lands at Bernadet in northeast British Columbia. Total company production for 1Q17 The company cut debt by an additional $535 million through the prepayment of was 12,753 boe/d, up 7% from 1Q16 and US$300 million of its 6.35% notes and the redemption of $126.6 million of 1% sequentially, mainly due to a 13% YOY convertible debentures at maturity. rise in royalty production to 10,701 boe/d. On April 26, Pengrowth gave notice of repayment to the holders of its Royalty interests accounted for 84% of remaining 6.35% notes that it plans to prepay the US$100 million of notes on June 2. CEO total production and contributed 91% of Derek Evans said progress on cutting debt has put Pengrowth “on a path to either renegotiate operating income in Q1. The company or refinance our remaining term debt into also issued 25 new lease agreements with Pengrowth has cut debt by ~60% to 11 companies in Q1, compared to nine a new structure that should allow for the $1.15 billion since December 2016. flexibility to develop the second phase issued in 4Q16 and two in 1Q16. of our world-class Lindbergh thermal asset.” Pengrowthʼs $125 million capex this year The Viking Dodsland became a core focuses on its producing Montney and Groundbirch assets in British Columbia. area for Freehold via its 2015 acquisition of 45,000 acres with a 8.5% GORR from Penn West Petroleum as part of a Pengrowth Has Sold $522MM Assets YTD $321 million acquisition of two royalty packages, the second being 280,000 PROPERTY DISPOSITION ACTIVITY acres of combined royalties and mineral FURTHER ACTIONS TO IMPROVE BALANCESHEET title lands in the Western Canadian Sedimentary Basin. Freehold closed more than $400 million in transactions in On January6,2017 Pengrowth completedthe sale of a4.0% 2015, the busiest M&A year in its history. Lindbergh GORR GORR on allLindbergh and Muriel Lakelands togetherwith Cdn$250 million certainproprietary seismicfor $250 million The following year, Freehold nearly doubled its total land base, adding over 2.5 million royalty acres with production of 1,700 boe/d (70% gas) through a March20, 2017 Pengrowth announcedagreement to sell a Swan HillsAssets $163 million deal with Husky Energy.