Canada's Pembina Pipeline is being cautious about further acquisitions while also recognizing there are good deals it is missing, like when Warren Buffett's Berkshire Hathaway recently scooped up Dominion Energy's US natural gas midstream infrastructure, company executives said Aug. 7.
As commodity prices and demand show signs of improvement, major energy companies are being encouraged to ease their capital spending cuts and pursue strategic tie-ups that will boost their scale and market share.
Uncertainty over how the coronavirus pandemic will evolve in the months ahead is keeping some movers on the sidelines. Pembina is interested in assets that are complementary to its existing infrastructure and development plans, which include a proposed LNG export terminal in Oregon.
"I think he made a hell of a deal and bought the railroad a decade ago at the right time and looked really smart," CEO Michael Dilger said on an investor conference call, referring to Buffett's purchase of Burlington Northern Santa Fe. "I think he's going to look smart again here."
In July, Berkshire Hathaway agreed to buy substantially all of Dominion's gas pipeline and storage assets for $4 billion in cash and the assumption of $5.7 billion in debt. Dominion also canceled its $8 billion Atlantic Coast Pipeline project that it was building with Duke Energy, and said it would focus primarily on its regulated utility businesses.
"We're trying to grow our business so that 1 plus 1 plus 1 plus 1 equals 5 and not 4 through the value chain," Dilger said. "And, so we've been disciplined. We'll continue to be disciplined to make sure that whatever we buy has synergy."
At the same time, he added, "It is tough to watch good deals come and go that maybe aren't as synergistic, but are nevertheless good deals."
The timing of Pembina's proposed Jordan Cove LNG export project and affiliated Pacific Connector feedgas pipeline remains uncertain, as sufficient commercial support must be achieved and the company still awaits certain state regulatory permits.
In its latest earnings release, Pembina said it continues to believe the project presents significant growth opportunities. Given its proposed location on the US West Coast, LNG produced there would have a shorter shipping distance to the key East Asian import market than cargoes shipped from the US Gulf Coast.
During the investor call, Pembina executives did not address Jordan Cove, specifically. But, they did say the company has more than enough cash flow to invest more money in new projects and ventures in 2021 and beyond, especially if and when the impacts from the virus ease.
"We're going to put the bat in our hands and go, no go, and we'll go from there," Dilger said on the call.
