SemGroup is partnering with industry-leading investor KKR in a joint venture to create a Canadian midstream infrastructure platform. The new JV company – SemCAMS Midstream – will acquire Meritage Midstream ULC and its midstream assets in the prolific Montney resource play.
The transactions enable SemGroup to grow its Canadian footprint while ensuring greater growth funding certainty for the new company and immediately strengthening SemGroup’s capital position.
Under the terms of the joint venture, SemGroup will contribute the shares and assets of its Canadian subsidiary, SemCAMS, valued at C$1.15 billion (US$860 million), in exchange for C$615 million (US$460 million) cash proceeds and 51% common equity ownership in SemCAMS Midstream. KKR will contribute C$515 million (US$385 million) of cash in exchange for 49% of the common equity ownership. KKR will also contribute C$300 million (US$224 million) to acquire perpetual preferred equity. In addition, the joint venture will enter into a C$800 million (US$598 million) underwritten bank credit facility.
Carlin G. Conner, Chief Executive Officer of SemGroup, said,
“This transaction captures an attractive valuation for our SemCAMS business and accelerates our Canadian strategy in one of North America's premier energy basins. The acquisition of Meritage enables SemCAMS Midstream to expand and optimize its portfolio of assets, broaden its service offerings and create a more attractive Canadian growth platform. In addition, it delivers on our commitment to strengthen our balance sheet. We are pleased to partner with KKR, an industry-leading investor with extensive experience in the energy sector.”
Brandon Freiman, Member and Head of North American Infrastructure at KKR, said,
“We have been an active investor in the Canadian energy space for the last decade and are big believers in the Montney as a growing, low-cost natural gas play that is relevant on a global scale. The combination of the highly complementary SemCAMS and Meritage businesses creates a leading midstream platform in the core of the Alberta Montney that is well-positioned to serve its growing infrastructure needs. We are thrilled to be partnering with SemGroup and the SemCAMS management team to build a nimble, well capitalized, customer-focused midstream business together in Western Canada in the coming years.”
Dave Gosse, President of SemCAMS Midstream, added,
“Combining the SemCAMS and Meritage portfolios will diversify our customer base and broaden our service offerings to include oil batteries and liquids processing, while considerably expanding our gas processing capacity. Our contiguous asset mix, geographic proximity and operational leverage will allow us to optimize our system while creating increased reliability. This acquisition complements our competitive advantages, including our unique, flexible assets that now include additional infrastructure in a top quartile producing basin. Partnering with KKR will further enhance our ability to execute on our growth strategy and our focus on being the midstream provider of choice for area producers.”