Paramount Resources Ltd. is pleased to announce that it has entered into an agreement with a wholly-owned subsidiary of Pembina Pipeline Corporation for the sale of its Musreau Complex and related midstream assets (Midstream Transaction) for cash and other considerations in excess of CAN$600 million.
The Midstream Transaction includes the 50 million ft3/d Refrigeration Plant, the 200 ft3/d Deep Cut Plant, the 22 500 bpd Condensate Stabiliser, the Amine Facility and the gas sales pipeline connecting the Musreau Complex to the TCPL meter station, as well as the majority of Paramount's larger diameter gathering system in the Musreau area. Also included in the Midstream Transaction are the site and engineering and design work for the future 6-18 gas processing plant.
Paramount will receive CAN$556 million in cash at closing, plus a CAN$35 million capital commitment for an enhancement program the Company planned to complete in 2016 at the Musreau Complex. In addition, Pembina has agreed to optimise existing transportation arrangements to match Paramount's anticipated production growth. Paramount has also secured the right, upon the satisfaction of certain conditions, to call upon Pembina to build and provide up to 200 ft3/d of gas processing capacity at the 6-18 Plant site.
As part of the Midstream Transaction, Paramount and Pembina have also entered into a Midstream Service Agreement (MSA), which includes a 20 year arrangement that secures Paramount priority access to the sold capacity at the Musreau Complex. Paramount will have lower take-or-pay volume commitments in the initial years, ramping up to 200 MMcf/d by 2019 to align with the planned expansion and development of Paramount's Liquids-rich Montney resources. Under the terms of the MSA, the Company will pay a fixed capital fee per million ft3/d of raw gas delivered to the Musreau Complex, plus operating expenses. This capital charge will encompass costs for natural gas processing, condensate stabilisation, use of the gathering system and transportation of sales gas from the Musreau Complex to the TCPL meter station. This charge at the plant inlet is expected to be equivalent to approximately CAN$3.00/Boe of products sold from the Musreau Complex. Volumes delivered by Paramount in excess of its take-or-pay commitment will have processing priority treatment at the Musreau Complex.
A predetermined methodology has been agreed for the processing capital fee at the future 6-18 Plant as well as the associated scheduled take-or-pay gas delivery for firm processing service.
Upon closing, the proceeds from the Midstream Transaction will be used to pay down the company's bank credit facility (the Facility). As of 29 February 2016, Paramount had CAN$668.4 million drawn on the Facility. The Company intends to reduce the CAN$900 million Tranche A of the Facility by CAN$300 million to CAN$600 million and cancel the CAN$100 million Tranche B of the Facility, which has never been drawn.
"With this transaction, we have cemented a long-term partnership with Pembina, a reputable and reliable midstream operator. This is a transformational, strategic transaction for Paramount as we unlock the value of our midstream assets. We have also eliminated our future midstream funding requirement for the growth and development of our significant resources in the area, while maintaining the option to call for additional processing capacity," said Jim Riddell, Paramount's President and Chief Executive Officer.
The Midstream Transaction is expected to close in the second quarter of 2016, subject to regulatory approvals and customary closing conditions. There are no financing or other non-customary material closing conditions.
RBC Capital Markets is acting as financial advisor to Paramount on the Midstream Transaction.
Edited from source by Stephanie Roker
Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/18032016/paramount-sells-musreau-complex-and-midstream-assets/