Pembina Pipeline agrees to buy Provident Energy

Pembina Pipeline Corp., an oil and gas pipeline operator, agreed to buy fellow Canadian company Provident Energy Ltd. for $3.1 billion to add natural gas liquids assets.

Provident shareholders will receive 0.425 of Pembina stock for each share held, or about $11.86 Canadian, Calgary-based Pembina said Monday. That represents a premium of 25% based on last week’s closing share prices.

The transaction will create one of Canada’s largest publicly traded energy-infrastructure companies by adding Provident’s natural gas liquids extraction, storage and transportation services to Pembina’s 4,661-mile network. The two companies are combining amid increased production of oil sands and shale gas in Alberta and British Columbia and near-record-low prices for natural gas.

“It’s a good fit because there’s not a lot of overlap between the two companies,” said Megan Macneill, a Haywood Securities Inc. analyst in Vancouver, Canada.

Provident, based in Calgary, owns so-called midstream assets and services such as storage, transportation and logistics and extraction operations for the natural gas industry, mostly in western Canada.

“Our expanded footprint will provide greater access to natural gas liquids markets across North America and will allow us to offer customers a significantly expanded spectrum of energy services,” Pembina Chief Executive Bob Michaleski said.

Natural gas liquids are fluid fuels associated with the production of gaseous natural gas and can be refined into a variety of products.

The merged company will operate under the Pembina name and be led by a combination of Pembina’s and Provident’s current managers, Pembina said.