SemGroup and KKR form midstream infrastructure platform, buy Meritage

SemGroup Corporation and KKR have formed a Canadian midstream infrastructure platform and have acquired a C$600m (€393.2m) oil and gas transporting business.

The joint venture, known as SemCAMS Midstream, has bought Meritage Midstream and its midstream infrastructure assets.

The acqusition will be financed with a combination of funds from the US$7.4bn (€6.42bn) KKR Global Infrastructure Investors III fund and a SemCAMS Midstream credit facility.

SemGroup said it will contribute the shares and assets of its Canadian subsidiary, SemCAMS, valued at C$1.15bn, in exchange for C$615m cash proceeds and a 51% stake in SemCAMS Midstream.

KKR will contribute C$515m of cash in exchange for the remaing 49% stake. KKR will also contribute C$300m to acquire perpetual preferred equity.

Meritage Midstream currently holds a portfolio of 195 million cubic feet per day (MMcf/d) of natural gas processing capacity, 101 miles of gas gathering pipelines, 38 miles of oil gathering pipelines and 18 miles of emulsion and gas lift pipelines.

SemCAMS Midstream will own 900 MMcf/d of natural gas processing capacity between the existing SemCAMS and Meritage facilities.

Carlin G Conner, the CEO 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 optimise 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.”

Brandon Freiman, a 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.”

 

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