Inter Pipeline to purchase remaining 15% interest in Cold Lake Pipeline System

Inter Pipeline has signed an agreement to acquire Canadian Natural Resources' 15% interest in the Cold Lake pipeline system for $527.5m.

The deal is subject to customary closing conditions and adjustments.

After completion of the agreement, Inter Pipeline will receive 100% ownership of the Cold Lake pipeline system.

Under the agreement, Canadian Natural will receive $350m in cash and $177.5m through the issuance of 6.41 million Inter Pipeline common shares.

The transaction is expected to close by the end of this year.

Furthermore, after the Cold Lake acquisition closes, Inter Pipeline will enter into a binding long-term take-or-pay agreement with Canadian Natural to deliver diluent and bitumen blend for its Kirby North SAGD oil sands project.

The agreement will facilitate the development of a new $125m pipeline connection to the Kirby North production facility, which is expected to commence service from the 2020 first quarter.

Inter Pipeline president and CEO Christian Bayle said: “Inter Pipeline’s purchase of the remaining interest in the Cold Lake pipeline system is a highly logical and immediately accretive investment on a funds from operations basis.

“Furthermore with the Kirby North connection, Inter Pipeline secures a material oil sands transportation contract during a challenging time for the energy industry. We look forward to working with Canadian Natural to complete this important project.”

The new transportation agreement increases contracted capacity commitments of Inter Pipeline’s Cold Lake and Polaris pipeline systems by nearly 30,000 barrels a day (b/d) and 8,000b/d, respectively.

The 1,400km Cold Lake pipeline system is one of the largest transporters of Cold Lake area bitumen production. It provides long-term pipeline transportation service to various companies, including Cenovus Energy and ConocoPhillips through the FCCL Partnership.

After blending with diluent, bitumen production is transported through the Cold Lake pipeline system to major crude oil terminal hubs at Edmonton and Hardisty, Alberta.

In this year's third quarter the system delivered nearly 535,000b/d of bitumen blend.