Enbridge Bets $2.6B on Tallgrass to Expand Rockies-to-Cushing Crude Network

Key Points

• Enbridge will acquire Tallgrass Energy’s crude oil transportation business for $2.6 billion, gaining a 75% operating interest in the 460,000-barrel-per-day Pony Express Pipeline, storage assets, and related Rockies-to-Cushing infrastructure.
• The deal complements Enbridge’s planned $600 million Salt Creek Midstream acquisition, which adds 420,000 barrels per day of Permian Basin gathering capacity and strengthens its wellhead-to-export value chain.
• Enbridge plans to fund the combined CAD 4.5 billion acquisitions with an equal mix of debt and equity, aiming to preserve its investment-grade balance sheet, maintain leverage targets, and continue funding its organic growth backlog.

Enbridge NYSE: ENB said it will acquire Tallgrass Energy’s crude oil transportation business for $2.6 billion, expanding its crude oil pipeline and storage footprint in the Rockies and strengthening connections to major North American producing basins and markets.

The company also discussed its previously announced $600 million acquisition of Salt Creek Midstream’s crude oil gathering assets in the Permian Basin. Enbridge President and CEO Greg Ebel said the two transactions are intended to supplement the company’s organic growth portfolio and add long-term growth options to its liquids business.

Tallgrass Assets Add Rockies-to-Cushing Connectivity

The Tallgrass transaction includes a 75% operating interest in the Pony Express Pipeline, a 460,000-barrel-per-day long-haul crude pipeline connecting Guernsey, Wyoming, with Cushing, Oklahoma. The system transports crude from the Bakken and Rockies producing regions to regional refineries and to Cushing for further transportation toward the Gulf Coast.

Enbridge said the acquisition also includes:

• A 51% ownership interest in the 240,000-barrel-per-day Powder River Gateway short-haul pipeline, which supplies volumes into Pony Express.
• Eight million barrels of crude oil storage across nine terminals.
• A connection to an additional 500,000 barrels per day of refining capacity.
• The Pony Express Pipeline 2 expansion, a 60,000-barrel-per-day project that is expected to join Enbridge’s secured growth backlog when the transaction closes.

Ebel said Pony Express provides Enbridge with a strategic link among the Bakken, Powder River and Denver-Julesburg basins and complements its existing Express-Platte pipeline system and Cushing terminal. He said the expansion reflects demand for transportation capacity along the corridor and will extend a portion of existing contracts into the next decade.

Enbridge valued the Tallgrass acquisition at approximately 10 to 11 times estimated 2027 EBITDA, according to Ebel. He said the company expects that multiple to improve over time through synergies and growth capital.

Salt Creek Extends Permian Value Chain

The previously announced Salt Creek Midstream transaction covers the Orla and Wink North gathering systems, along with a 50% interest in the Delaware Crossing system. Each system includes a terminal and serves the Delaware Basin in the Permian.

Ebel said the assets will give Enbridge direct connections to Permian producers and enable an integrated “wellhead-to-water” offering. That service chain includes gathering assets, long-haul transport on Enbridge’s Gray Oak Pipeline and export operations at the company’s Ingleside export facility.

The acquired gathering systems have total capacity of 420,000 barrels per day and are currently moving about half that volume, according to Ebel. He said the available capacity provides room for growth and could offer structural benefits as Enbridge renegotiates contracts on its existing Permian systems.

Enbridge acquired the Salt Creek assets at a 7-times enterprise value-to-EBITDA multiple, Ebel said, adding that the company expects the multiple to decline over time through synergies.

Financing Structure Preserves Growth Capacity

Chief Financial Officer Pat Murray said Enbridge plans to fund the combined CAD 4.5 billion cost of the two acquisitions through an equal mix of debt and equity. The remaining equity raise is intended to provide financial flexibility as the company pursues growth opportunities, he said.

Murray said the funding approach is designed to preserve Enbridge’s investment-grade balance sheet and its target debt-to-EBITDA range of 4.5 times to 5 times. The acquisitions are expected to be accretive in their first full year of ownership, he added.

Enbridge continues to project average annual investment capacity of CAD 10 billion to CAD 11 billion, funded through free cash flow after dividends and additional debt capacity while staying within its leverage targets, Murray said. The company has CAD 41 billion in secured organic growth projects and said it structured the acquisitions to avoid limiting funding for those projects.

“By funding these acquisitions conservatively, we’re ensuring that M&A does not crowd out future accretive projects or reduce our ability to continue executing on our organic growth program,” Murray said.

Ebel said both transactions met Enbridge’s criteria for opportunistic acquisitions, including strategic fit, alignment with basin and market fundamentals, first-year and long-term accretion, and future growth potential. He said the company continues to target 5% growth through the end of the decade while maintaining its investment capacity and balance-sheet framework.

About Enbridge (NYSE:ENB)

Enbridge Inc is a Canadian energy infrastructure company headquartered in Calgary, Alberta. Founded in 1949 as Interprovincial Pipe Line, the company has grown into one of North America's largest energy delivery businesses, operating primarily in Canada and the United States.

Enbridge's operations include crude oil and liquids pipelines, natural gas transmission and storage, and natural gas distribution and utility services. Its pipeline systems transport energy products from producing regions to refineries, export facilities, utilities and other customers.

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