Gibson Energy Inc. has sold its U.S. environmental services businesses for $125-million, clearing the way for the energy infrastructure company to expand its Canadian oil and gas storage system.
Calgary-based Gibson found two buyers, which it did not disclose, for businesses that do everything from scrubbing oil tanks to cleaning waste water from energy projects and have 1,000 employees. Gibson put the U.S. businesses up for sale in August as part of a strategic shift that will see the company spend up to $205-million annually to build new storage and pipeline facilities in Alberta and Saskatchewan.
"While the U.S. environmental services business was performing well with visible growth opportunities, it did not complement our core assets," Gibson chief executive officer Steve Spaulding said in a press release Monday. "Proceeds of the divestitures will be reinvested in our tankage and pipeline infrastructure projects."
Along with the U.S. businesses, Gibson announced plans to sell up to four more business units over the next 18 months at an investor day presentation in January; these include its trucking operations in Canada and the United States. The company expects to raise up to $375-million from these divestitures. Last year, Gibson also sold its industrial propane business for $412-million.
Gibson plans to plow capital into its Canadian oil-storage and refining businesses, including a massive storage facility in Hardisty, Alta., that connects the oil sands to U.S.-bound pipelines and railways. The central Alberta town is currently home to Gibson tanks that can hold up to 10 million barrels of oil and the company plans to build one or two more tanks each year, each of which can hold 300,000 to 500,000 barrels of oil.
Gibson is a 65-year-old company that traces its roots to a collection of energy-related businesses owned by a private equity fund. It went public seven years ago. The company recruited Mr. Spaulding last year from a U.S. pipeline operator, Lone Star NGL LLC, with a mandate to focus the business on Canadian oil and gas infrastructure assets that generate dependable income, and steadily increase the dividends Gibson pays out to its shareholders.
As Gibson sells assets and generates cash from its remaining infrastructure operations, the company is also planning to pay down debt. Last year, Gibson's payout ratio was more than 100 per cent; in other words, the company paid out more cash in dividends and capital spending than it generated from its operations.
Money generated from asset sales, along with income generated from Gibson's remaining operations, are expected to bring the payout ratio below 100 per cent starting this year, Mr. Spaulding said at the investor presentation in January. The company's long-term goal is to have a payout ratio that ranges from 70 to 80 per cent of annual cash flow.
Shortly after Mr. Spaulding took the reins, U.K. money manager M&G Investment Management Ltd., went public in August with a letter that advocated raising money from asset sales, including the trucking divisions, and expanding Canadian operations. M&G is Gibson's single largest shareholder, with a 19 per cent stake in the company.
Investment bank BlackArch Partners of Charlotte, N.C., advised Gisbon on the sale of its U.S. environmental services businesses.