A recent unsolicited bid for Inter Pipeline Ltd (IPL.TO) has highlighted the potential of Canada’s midstream companies to offer insulation from volatile oil prices.
Inter Pipeline, Pembina Pipeline Corp (PPL.TO) and Keyera Corp (KEY.TO) own key infrastructure such as gathering pipelines, gas-processing plants and storage tanks that are in high demand, and reported record second quarter profits.
They are sometimes overlooked, however, because of the wider energy sector’s problems of congested export channels and low prices. Inter Pipeline shares jumped 14% in two days last week after a newspaper reported the bid, leading some investors to say that their full value has gone unrecognized.
“The entire energy infrastructure space is significantly undervalued and under-appreciated,” said Rob Thummel, senior portfolio manager at Tortoise Capital, one of Inter Pipeline’s biggest shareholders. “They own and operate critical assets and generate fee-based cash flows that are essential.”