Enbridge of Canada Acquires U.S. Tallgrass Crude Oil Pipeline Business for $2.55 Billion

en.Wedoany.com Reported - On September 9, Enbridge Inc. of Canada, through a wholly owned subsidiary, signed a definitive agreement with a wholly owned subsidiary of Tallgrass Energy to acquire Tallgrass Energy's crude oil transportation business for $2.55 billion in cash. The transaction assets include a 75% interest in the Pony Express Pipeline, a 51% interest in the Powder River Gateway system, approximately 8.4 million barrels of storage capacity across nine crude oil terminals connected to the Pony Express Pipeline, and the Stanchion Energy crude oil marketing business. The transaction price is subject to customary adjustments at closing, corresponding to an estimated forward enterprise value-to-EBITDA multiple of approximately 10–11x.

The Pony Express Pipeline is approximately 1,050 miles, or about 1,690 kilometers, in length, delivering crude oil from Guernsey, Wyoming, and multiple crude oil gathering points in Colorado to the Cushing, Oklahoma, crude oil hub. It has an average annual transportation capacity of approximately 460,000 barrels per day and can connect to approximately 500,000 barrels per day of refining capacity.

The Powder River Gateway system consists of the Iron Horse Pipeline and the Powder River Express Pipeline, which are approximately 80 miles and 70 miles in length, respectively, with a combined transportation capacity of approximately 240,000 barrels per day. It is primarily responsible for connecting crude oil from the Powder River Basin to the Pony Express Pipeline.

The terminal assets acquired in this transaction include a 60.3% non-operated interest in the Deeprock crude oil terminal located in Cushing. The nine related crude oil terminals have a combined storage capacity of approximately 8.4 million barrels and are connected to the Pony Express Pipeline transportation system.

Upon completion of the transaction, Enbridge will become the operator of the Pony Express Pipeline. The pipeline's existing transportation capacity has been locked in through long-term contracts for most of this decade, with counterparties primarily being investment-grade companies.

The transaction also includes the Pony Express Phase 2 expansion project (PXP2). The project plans to add approximately $300 million in investment to increase the Pony Express Pipeline's transportation capacity from approximately 460,000 barrels per day to approximately 515,000 barrels per day. It is currently commercially supported by take-or-pay contracts and is scheduled to be placed into service by the end of 2027.

After the transaction closes, the Pony Express Phase 2 expansion project will be incorporated into Enbridge's approximately $41 billion secured growth project backlog.

The Pony Express Pipeline and the Powder River Gateway system connect the U.S. Powder River Basin and the Denver-Julesburg Basin with the Cushing crude oil hub. Enbridge's existing Express-Platte crude oil pipeline system transports crude oil from Hardisty, Alberta, Canada, to Wood River, Illinois, United States, passing through Montana, Wyoming, Nebraska, Kansas, and Missouri.

Upon completion of this transaction, Tallgrass Energy's related crude oil pipeline and terminal assets will form a direct connection with Enbridge's existing Express-Platte crude oil transportation system, covering crude oil transportation routes between Western Canada, the U.S. Rocky Mountain region, and the Cushing crude oil hub.

The transaction is expected to close in late 2026, subject to customary regulatory approvals and satisfaction of closing conditions, including obtaining antitrust review clearance under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Enbridge plans to use a portion of the proceeds from equity financing to pay for this acquisition. The related financing proceeds will also be used for the company's acquisition of the Salt Creek Midstream crude oil gathering business announced on August 26. Enbridge expects the Tallgrass Energy crude oil transportation business transaction to increase the company's distributable cash flow per share in the first full year of ownership.