Houston-based Spectra Energy has agreed to buy the Express-Platte Pipeline for $1.49 billion from Borealis, the company announced Tuesday morning.
Spectra will buy the 1,717-mile pipeline system, which runs from Alberta to Illinois, for $1.25 billion cash and $240 million of debt. The pipeline carries Canadian oil to refineries in the Rockies area, and it has a capacity of 280,000 barrels a day.
“We believe we are entering the crude oil sector at a very attractive point,” said Greg Ebel, president and chief executive officer of Spectra Energy Corp. “The Express-Platte assets have a highly attractive cash flow and timing of this move could not be better. That these assets are in the ground already is a huge advantage.”
The deal will allow Spectra to add additional pipeline resources to its already significant pipeline system without the delays of construction. Express-Platte has been rated as one of the top 10 mainline crude oil pipeline operators, and is the largest pipeline to deliver Alberta crude oil to the Rockies, Ebel said. It is also one of the major pipelines connecting the Rockies to the Midwest.
The 785-mile Express Pipeline runs from Alberta to the Rockies, and the 932-mile Platte Pipeline extends from Alberta through the Bakken and Niobrara shales to the Midwest. The shared system has 44 tanks in storage capacity, providing more flexibility in transporting the Canadian crude to refineries.
Ebel said that the purchase fits in with Spectra’s strategy to further invest in crude oil midstream assets.
“This system is strategically located to supply crude oil to U.S. refining markets,” Ebel said, noting that U.S. demand for Canadian crude oil is expected to double in the next 15 years.
Ebel said that the deal also opens up opportunities for additional acquisitions in crude oil transportation.
The deal is expected to close in the first half of 2013.