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Pipeline operator Spectra Energy Corp. said Tuesday that is buying the 1,700-mile Express-Platte pipeline system for $1.25 billion in cash to build its oil transportation network.
Spectra is buying the pipeline system, which runs from Canada to Illinois, from pipeline company Kinder Morgan Energy Partners LP, the Ontario Teachers' Pension Plan and Borealis Infrastructure, the infrastructure investment arm of another Canadian pension fund, OMERS. The agreement also includes the assumption of $240 million in debt.
"This system is strategically located to supply crude oil to U.S. refining markets," said Spectra CEO Greg Ebel. The Express-Platte moves crude from Western Canada to refineries in the Midwest and around the Rockies, and the company said that acquiring the network will help it benefit from the rapidly expanding North American oil market.
The deal comes with an increase in U.S. oil production and follows several large North American energy deals. Monthly crude production reached its highest level since 1998 in September, according to the Energy Department. And the International Energy Association said last month that the United States could overtake Saudi Arabia as the world's biggest producer of crude oil by 2020.
Canada approved a $15.1 billion takeover of Canadian oil and gas producer Nexen by China's state-owned CNOOC last week. Miner Freeport-McMoRan Copper & Gold Inc. also said last week that it is buying oil and gas producers Plains Exploration & Production Co. and McMoRan Exploration Co. for a combined $9 billion.
Spectra expects its acquisition to immediately boost profits, adding between 3 and 5 cents per share to annual earnings. Analysts polled by FactSet had expected the Houston company to earn $1.64 per share next year.
The Express pipeline has a capacity of 280,000 barrels a day, while the Platte pipeline's capacity ranges from 145,000 to 164,000 barrels a day.
The deal is expected to close during the first half of 2013.