VERESEN $16.23 (Toronto symbol VSN; Shares outstanding: 279.6 million; Market cap: $4.7 billion; TSINetwork Rating: Average; Dividend yield: 6.2%; www.vereseninc.com) owns pipelines, power plants and gas-processing facilities across North America.
A major holding is 50% of the Alliance gas line, which runs 3,000 kilometres between Chicago and Fort St. John, B.C. Veresen also owns the Alberta Ethane Gathering System, 42.7% of the Aux Sable NGL plant, and the Hythe/Steeprock natural gas gathering and processing complex in the Cutbank Ridge region of Alberta and B.C.
In the quarter ended September 30, 2014, Veresen’s cash flow per share rose 4.5%, to $0.23 from $0.22.
Veresen and KKR & Co. LP (symbol KKR on New York) recently formed a joint venture called Veresen Midstream. The partners have just agreed to buy natural gas gathering and compression assets in northeastern B.C. from Encana and Japan’s Mitsubishi Corp. for $1 billion.
The partners will now undertake a $5-billion expansion for gas producers, including Encana. The expansion is backed by 30-year contracts that will significantly cut Veresen Midstream’s risk.
The company’s longer-term outlook is sound. The stock trades at 14.4 times Veresen’s forecast 2015 cash flow of $1.13 a share. It yields a high 6.2%, and the dividend appears safe.
Veresen is still a buy.
