Enbridge to Acquire Spectra in Bid to Diversify and Survive Low-Price Environment
Enbridge Incorporated will buy Spectra Energy Corporation in an all-stock deal valued at about $28 billion, possibly creating the largest energy-infrastructure company in North America. The companies said in a joint statement that the deal will give Enbridge and Spectra shareholders about 57% and 43% of the new company, respectively. Industrial Info is tracking more than $34 billion in active projects from the two companies.
The deal gives both companies an opportunity to work in a more diversified environment; Enbridge currently focuses on crude-oil transportation, while Spectra specializes in natural gas. Both companies have faced economic obstacles in attempting to build new pipelines amid the persistently low commodity prices that have shaken the normally secure foundations of the midstream industry. But in recent years, Canada has seen record levels of crude-oil exports to the U.S., partly because of Enbridge's cross-border pipeline system.
"During economic downturns--and more specifically, within industries--mergers and acquisitions rise to face the future," said Chris Easley, Industrial info's research manager of North American Oil & Gas. "Companies that have established themselves as oil & gas businesses, such as Enbridge and Spectra, are looking at the long term and how to survive this long stretch of low prices. It makes sense for two power players with similar interests to join forces as the industry struggles to recover."
"Pipelines are still being built in the U.S., as are terminals and storage sites," he continued. "When the industry comes back, you won’t be able to tell by the amount of rigs in the field, as we produced more in 2015 with half the rigs as 2014. You will know it’s a recovery by the amount of oil and gas produced from the field and sent to the pipelines."
For details on the market conditions that drove the pending acquisition, with information on some of Enbridge and Spectra’s proposed projects, click here for the full article at IndustrialInfo.com.