CNRL selling minority stake in Cold Lake pipeline for $527.5-million

Canadian Natural Resources Ltd. is selling a minority stake in an Alberta pipeline for $527.5-million in cash and stock, a rare move for the acquisitive oil sands company that comes as crude prices climb above $50 (U.S.) a barrel.

Canadian Natural said on Monday it would sell its 15-per-cent interest in the Cold Lake pipeline to Inter Pipeline Ltd. for $350-million in cash (Canadian) and $177.5-million in Inter stock. CNRL is also selling a 14.7-per-cent stake in a related partnership.

The Calgary-based company said it would retain access to the pipeline to transport crude from its planned 40,000-barrel-per-day Kirby North development, which it shelved last year as oil prices sank. CNRL revived the steam-driven project last month in a sign that optimism was starting to return to the bruised energy sector following more than two years of deep cutbacks.

Global oil prices are 50 per cent higher than at the same time last year, the result of a deal between top producers to cut production from record levels.

"While it is unusual for CNQ to sell mid-stream assets, its interest in the Cold Lake Pipeline was non-core, while egress for Kirby North has been preserved," RBC analyst Greg Pardy said in a note.

Calgary-based Inter Pipeline is acquiring the minority interest in the Cold Lake pipeline that it does not already own. The pipeline transports blended bitumen from oil sands operations around Cold Lake, Alta., to major terminals in Edmonton and Hardisty in the southeast. It transported about 535,000 barrels per day in the third quarter of this year out of a total capacity of 1.9 million barrels.

The company also said it would build a $125-million connection to the Kirby North project, which is expected to start up in 2020.

CNRL expects to record an after-tax gain of $200-million as a result of the deal, which is expected to close by year-end.