Enbridge (ENB) will buy Salt Creek Midstream’s crude oil gathering business in the Permian Basin for US$600M.
The acquired assets — the Orla and Wink North crude oil gathering businesses, as well as 50% of the Delaware Crossing system — will enhance Enbridge’s presence in the Permian Basin, and add to a Liquids Pipelines segment that delivers ~6M barrels per day.
Salt Creek will add 420K barrels per day of throughput (~7% of the network), as well as 350K barrels of storage capacity, serving >20 producers over an average remaining contract life of ~10 years.
Admittedly, a US$600M acquisition is not financially significant for Enbridge. The company’s annual growth capital budget is $10-11B (LTM was $10.9B) or 12-13x the Salt Creek Midstream acquisition price.
The Liquids Pipelines segment generates almost half of Enbridge’s adjusted EBITDA, with an LTM figure of $9.4B. If we estimate a deal multiple of 8-10x EBITDA (PAA acquired EPIC for ~10x), that would add ~0.5% to LTM EBITDA — negligible to the overall company.
Strategically, the deal provides for a direct connection for Permian Basin crude oil into Enbridge’s Ingleside Energy Center, North America’s largest crude export terminal (25% of US crude is exported from EIEC). It adds 500 miles of crude oil gathering infrastructure — the system that collects crude from individual well sites and moves it to processing facilities, storage or transportation pipelines — and expands Enbridge’s control of the energy value chain.
Separately, Enbridge will form a joint venture with KKR and Apollo for a $2.7B expansion of the Westcoast natural gas pipeline in BC. The JV will fund the Aspen Point and Sunrise expansions; in exchange KKR and Apollo will receive interest in the aggregate Westcoast system totaling 29% when Sunrise enters service in late 2028.
These projects aren’t new; both expansions were previously sanctioned, have regulatory approval, and are underpinned by long-term take-or-pay contracts. The question was on financing, with management estimating a cost of capital coming in between 4% and 8%.
Given the geopolitical backdrop, we suspect the value of owning energy infrastructure has gone up - as evidenced by the expansion in ENB’s multiple prior to some Line 5 permitting headwinds.
