Enbridge Inc., based in Calgary, has announced its acquisition of Tallgrass Energy LP’s crude oil business for US$2.55 billion in cash. This deal enhances Enbridge’s crude transportation, storage, and marketing operations, particularly linking the Bakken, Powder River, and Denver-Julesburg basins with Cushing, Oklahoma.
Key Details of the Transaction:
- Pony Express Pipeline: Enbridge will acquire a 75% interest in this 1,050-mile pipeline system, which has a capacity of approximately 460,000 barrels per day (b/d) and connects Rockies production to Cushing, offering access to around 500,000 b/d of refining capacity.
- Powder River Gateway System: The acquisition includes a 51% interest in this system, featuring two crude oil pipelines with a combined capacity of about 240,000 b/d.
- Storage Capacity: Enbridge will gain approximately 8.4 million barrels of storage capacity across nine terminals associated with Pony Express, including a 60.3% non-operating interest in the Deeprock Crude Terminal in Cushing.
- Stanchion Energy: The deal also comprises Stanchion Energy, a crude oil marketing business.
Strategic Significance:
Enbridge emphasized that these assets provide crucial links among key North American oil basins and complement the existing Express-Platte system. Colin Gruending, Enbridge’s EVP, stated that this acquisition reinforces the company’s role as a leading crude oil transporter in North America and enhances its presence in the US Rockies.
Future Plans:
The acquisition will facilitate the Pony Express expansion project (PXP2), a planned $300 million investment aimed at increasing the system’s capacity to 515,000 b/d, set to enter service in late 2027.
Context:
This acquisition follows Enbridge’s recent purchase of Salt Creek Midstream’s crude gathering business for $600 million, which adds significant infrastructure in the Delaware basin.
Funding:
To finance these acquisitions, Enbridge has launched a C$2.6 billion bought-deal common share offering, which will also provide flexibility for future growth.
The transaction is expected to close later this year, pending regulatory approval and customary closing conditions.
