Enbridge picks up more American pipelines with US$2.55B pipeline and storage deal

By Brian Zinchuk

CALGARY – Enbridge announced on Sep. 9 that, through a wholly-owned subsidiary, it has entered into a definitive agreement with wholly-owned subsidiaries of Tallgrass Energy, LP to acquire its crude oil business which includes:

• 75% of Pony Express Pipeline (Pony Express), a 1,050-mile, ~460 kbpd crude system connecting Rockies production to Cushing, OK with direct access to ~500 kbpd of refining capacity.

• 51% of Powder River Gateway system, including two crude pipelines capable of delivering a combined capacity of ~240 kbpd.

• ~8.4 million barrels of storage capacity across nine crude terminals connected into Pony Express, inclusive of a 60.3% non-operating interest in the Deeprock Crude Terminal in Cushing, OK.

• Stanchion Energy, a crude marketing business which drives incremental throughput and optimizes value of the other acquired assets.

Work on the Bakken Expansion Pipeline near Redvers in 2012. File photo

Under the agreement, Enbridge will acquire the business for cash consideration of U.S.$2.55 billion, subject to customary closing date adjustments, which represents an estimated acquisition multiple of 10-11x forward enterprise value to EBITDA.

In another announcement the same day, Enbridge announced a round of bought-deal financing for a similar dollar value. It said, “it has entered into an agreement with a syndicate of underwriters (the “Underwriters”) led by RBC Capital Markets and CIBC Capital Markets, and including Scotiabank, BMO Capital Markets, TD Securities Inc., and National Bank of Canada Capital Markets as joint bookrunners, under which the Underwriters have agreed to purchase, on a bought deal basis, 38,900,000 common shares of the Company (“Common Shares”) for aggregate gross proceeds of CDN$2.6 billion at an offering price of CDN$66.85 per Common Share.

“Enbridge intends to use the net proceeds from the Offering to partially fund announced acquisitions and to create financial flexibility to fund potential future growth opportunities. A portion of the net proceeds of the offering may be temporarily used to reduce indebtedness or invested in short-term liquid investments.”

Enbridge said it believes that U.S. crude oil production will continue to play a critical role in meeting global energy demand for decades and this transaction further positions the Company to lead this mission. Specifically, this acquisition provides Enbridge with a strategic connection between the Bakken, Powder River Basin (PRB) and Denver-Julesburg (DJ) basins through Cushing and complements Enbridge’s existing Express-Platte system. The company expects the acquired business to generate significant free cash flows, provide future growth and create opportunities for operational synergies over time across its broader liquids pipeline network.

“This acquisition strengthens Enbridge’s position as North America’s leading crude oil transporter and expands its footprint into the U.S. Rockies region,” said Colin Gruending, Executive Vice President and President of Enbridge Liquids Pipelines. “The Pony Express system is a premier crude oil corridor connecting some of North America’s most productive basins with key refining and market centers. These assets complement our broader North American footprint. As operator of Pony Express, we look forward to leveraging Enbridge’s proven operational capabilities to safely and reliably serve customers across the system.”

Pony Express is highly contracted throughout the decade with predominantly investment grade counterparties. Available takeaway capacity from the DJ/PRB remains closely aligned with expected basin production, supporting utilization and contract renewal expectations. The acquisition includes the PXP2 growth project, an incremental U.S.$0.3 billion expansion of Pony Express expected to increase capacity to approximately 515 kbpd. PXP2 is underpinned by take-or-pay contracts, is expected to enter service in late 2027, and, upon closing of the transaction, will be added to Enbridge’s $41 billion secured growth backlog.

The transaction is expected to close later in 2026, subject to receipt of customary regulatory approvals and closing conditions, including clearance from the Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.