In what is being termed as one of the biggest financial transactions in Estevan’s history, Tundra Energy Marketing Ltd. (TEML), a subsidiary of James Richardson & Sons Ltd., has purchased the southeast Saskatchewan pipeline system from an affiliate of Enbridge Income Fund Holdings Inc.
The sale includes the liquids pipelines assets in the South Prairie Region for C$1.075 billion in cash.
The deal is expected to be closed by the end of the year.
The SE Saskatchewan Pipelines System for Enbridge includes over 1,600 kilometres of crude oil and liquids gathering pipelines, about 547 kms of trunk lines, and four truck terminals.
Enbridge currently transports approximately 175,000 barrels of crude oil per day (bpd) to the company’s mainline system at Cromer, Manitoba, where the main terminal for TEML is located as well. The two companies have an interconnection there through Enbridge’s Bakken Expansion Pipeline system.
After the closing of the transaction, TEML will be handling over 250,000 bpd of crude oil production from Saskatchewan, Manitoba and North Dakota. It will have over 600,000 barrels of oil storage capacity and capability to load unit trains for customers at Cromer.
Bryan Lankester, president of TEML spoke with the Mercury on Monday, regarding the transaction, stating the newly purchased system will be, “a core asset for us. No changes in operations, pretty well status quo. In fact, in a lot of ways, the Estevan office will be a head office,” he said. “They know how to operate the lines, we’ll leverage that and it’s now a focus for our company and it will get a lot of our attention.”
Lankester said he’s been at the helm of TEML since it’s inception in 2005 in Manitoba with a marketing plan he took to a boardroom at James Richardson, that now appears to be taking another major step forward. He said TEML has an employee base of between 40 and 45 people so the 176 additional employees they now inherit from Enbridge, carries a significant impact on the rapidly growing operation.
“We look forward to working with local producers,” Lankester said.
A couple of years ago, Enbridge moved a central control team to Edmonton and Lankester said Tundra is now intending to “repatriate that service back to Estevan. There are five positions involved in that move, so we’ll be adding a few more employees there, not reducing staff.”
The TEML chief said he was well aware of Enbridge employees’ involvement in the community, saying last week’s employee fundraising Cooks That Cook event to raise money for the United Way Telethon, happened on the same day as the deal was announced. “They worked fast, they got a TV out of us right away,” he said with a chuckle, adding he hoped it helped raise some additional cash for the local cause.
“We promote community involvement here, and at James Richardson, so that kind of activity we hope will continue.”
Lankester had noted earlier that the purchase involved “some well cared for assets.”
Hartley Richardson, president and CEO of James Richardson and Sons, the parent company, said throughout their 159-year history, their primary focus has been moving commodities to North American and global markets safely and efficiently. “This transaction will further that tradition and we look forward to welcoming new employees to the JR Group of Companies.”
Graham White, a spokesman for Enbridge said the sale did not include Enbridge’s operations at Cromer. He added the deal will free up capital for redeployment and will strengthen their company’s balance sheet and support their $9 billion secured growth program in the future.
The assets involved in the sale, include the Saskatchewan gathering, Westspur and Weyburn pipeline systems. It does not include the Bakken Expansion Pipeline that enables delivery of crude oil production in North Dakota to the mainline system at Cromer.
Besides the four truck terminals and the gathering and storage system, the sale includes the Estevan office, yard facilities and equipment.
Both companies said they expect a smooth transition of operations as the deal becomes a reality close to the end of 2016.