Enbridge Inc. has agreed to acquire a smaller U.S. rival to add export capacity on the Gulf Coast.
The company is buying Moda Midstream Operating LLC for US$3 billion in cash from EnCap Flatrock Midstream, Enbridge said Tuesday in a statement.
Enbridge, which already handles about a quarter of all crude produced in North America, is betting on a strong outlook for exports of oil pumped from the Permian and Eagle Ford shale basins. The fracking revolution has not only revived U.S. oil production over the past decade, but it has also turned the country into one of the largest shippers of the commodity.
“Our strategy is driven by the important role that low cost, sustainable North America energy supply will play in meeting growing global demand,” Enbridge chief executive officer Al Monaco said in the statement.
The deal includes Ingleside Energy Center, near Corpus Christi, Texas. Built in 2018, it’s North America’s largest crude export terminal, which loaded 25 per cent of all U.S. Gulf Coast crude exports last year. Enbridge will also acquire a 20 per cent stake the Cactus II Pipeline, which connects the Permian with the Gulf Coast, plus the Viola pipeline and the Taft Terminal.
Enbridge said the acquisition will be initially funded with current liquidity, and that the deal -- which is expected to close in the fourth quarter -- will immediately add to earnings. The company’s shares were little changed at $40 at 7:54 a.m. in pre-market trading in New York.
Barclays plc is Enbridge’s financial adviser on the deal and Sidley is its legal counsel.
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