Page 6 - NorthAmOil Week 25 2022

NorthAmOil PIPELINES & TRANSPORT NorthAmOil

Canada’s Parliamentary Budget Officer:

Trans Mountain pipeline no longer profitable

WESTERN THE Canadian government-owned Trans cancellation scenario was hypothetical, and that
CANADA Mountain oil pipeline is no longer profitable as the government had no plans to pull the plug on
a result of cost overruns and delays to its expan- the project.
sion project, according to a report released on The pipeline was purchased by the govern-
June 22 by the country’s Parliamentary Budget ment in 2018 from Kinder Morgan on concerns
Officer (PBO). that the company could have abandoned the
The report estimates the pipeline as having expansion project. By purchasing the pipeline,
a net present value of negative CAD600mn the Canadian government was able to guarantee
($461mn) as a result of the difference between that the expansion proceeded.
Trans Mountain’s cash flows and its purchase Ottawa has maintained that it will sell the
price of CAD4.4bn ($3.4bn). pipeline once the expansion is close to being
The cost of expanding Trans Mountain finished, consultations have taken place with
has snowballed from the previous estimate of indigenous communities and the project has
CAD12.6bn ($9.7bn) to CAD21.4bn ($16.4bn). been de-risked.
Additionally, the expansion’s in-service date The existing Trans Mountain pipeline trans-
has been postponed by a further nine months ports up to 300,000 barrels per day (bpd) of
to late 2023. Natural disasters, environmental petroleum products from near Edmonton,
protection measures and rising debt payments Alberta to Burnaby on British Columbia’s Pacific
were cited as the main reasons for the balloon- coast. The expansion project would nearly triple
ing costs. capacity to 890,000 bpd, and would carry crude
The pipeline’s value could also take a further to the coast for export to Asia.
hit if there are any additional delays or if con- Additionally, it is expected that the twinning
struction costs rise further. If the government of the 1,150-km pipeline could see crude-car-
were to scrap the expansion it would have to rying tanker traffic from the Westridge marine
suffer a CAD14.4bn ($11.1bn) write-off. How- terminal in BC increase from about three vessels
ever, a government source told Reuters that the per month to one ship per day.™

INVESTMENT

Targa to buy Lucid in $3.6bn Permian deal

PERMIAN BASIN TARGA Resources announced on June 16 that described as investment-grade producers.
it had struck a deal to buy Lucid Energy from Targa said it has liquidity including cash on
Riverstone Holdings and Goldman Sachs Asset hand, its existing $2.75bn revolving credit facility
Management for $3.55bn in cash. and committed debt financing to fund the acqui-
The transaction represents the largest mid- sition, which it expects to close in the third quar-
stream acquisition and divestiture (A&D) deal ter of this year. The company now anticipates
in the Permian Basin since 2019, according it full-year adjusted EBITDA (earnings before
to energy analytics firm Enverus. It includes interest, taxes, depreciation and amortisation)
roughly 1,050 miles (1,690 km) of natural gas to be $2.675-2.775bn, with a year-end leverage
pipelines and around 1.4bn cubic feet (39.6mn ratio of around 2.7 times.
cubic metres) of cryogenic gas-processing “The strength of Targa’s standalone finan-
capacity in service or under construction, pri- cial position has afforded us the flexibility to
marily in New Mexico’s Eddy and Lea counties. consider attractive opportunities to grow our
Indeed, Lucid is the largest gas processor in the business through acquisitions, as evidenced by
Delaware sub-basin and the largest private pro- our ability to finance the purchase of Lucid uti-
cessor in the Permian Basin as a whole, accord- lising available cash and debt with estimated pro
ing to the company’s website, forma year-end 2022 leverage around 3.5 times,
Lucid’s footprint in the Delaware Basin sup- well within our long-term leverage ratio target
ports over 20 years of drilling inventory on more range,” stated Targa’s CEO, Matt Meloy.
than 600,000 dedicated acres (2,428 square km) “The transaction with Targa will position
based on current drilling activity, Targa said. This Lucid for its next stage of growth, while creat-
is further supplemented by “significant” volumes ing enhanced opportunities for its employees,
subject to minimum volume commitments, the customers and communities,” added a River-
company added. Around 70% of volumes on stone partner and co-head of private equity,
the system are currently sourced from what it Baran Tekkora.™

P6 www. NEWSBASE .com Week 25 23•June•2022