Enbridge is buying Salt Creek Midstream's crude oil gathering business in the Delaware Basin for $600 million, adding roughly 500 miles of pipeline in one of North America's busiest oil fields. The deal deepens Enbridge's reach into the Permian Basin and links directly to its largest crude oil export terminal, though it won't affect earnings until the deal closes and results land mostly in 2027.
Enbridge is buying Salt Creek Midstream's crude oil gathering business for $600 million, picking up roughly 500 miles of gathering infrastructure in the heart of the Delaware Basin. The purchase covers 100% of the Orla and Wink North systems and a 50% interest in the Delaware Crossing system.
What Enbridge is buying
The three gathering systems have a combined throughput capacity of 420,000 barrels per day and storage capacity of 350,000 barrels. They serve more than 20 oil and gas producers across about 320,000 net dedicated acres, backstopped by long-term commercial agreements with an average remaining term of around 10 years. Enbridge expects the assets to generate stable, long-term cash flows and a durable foundation for growth.
While $600 million is small next to Enbridge's more than CA$10 billion ($7.2 billion) in annual growth capital capacity, the deal carries strategic weight. The system feeds crude into several long-haul pipelines in the region, including Enbridge's majority-owned Gray Oak Pipeline (68.5% stake) and the Cactus II Pipeline (30% interest). That creates a direct link between oil produced in the Permian Basin and export capacity at the Enbridge Ingleside Energy Center, North America's largest crude oil export terminal.
Impact on earnings and the dividend
Enbridge expects the acquisition to be immediately accretive to its distributable cash flow per share and earnings per share once it closes. However, the deal won't affect results this year, since Enbridge doesn't expect to close it until later in 2026. Instead, it should be modestly additive to 2027's cash flow and earnings. Enbridge had already expected its compound annual growth rate to accelerate from 3% to around 5% starting next year as its cash tax rate levels out, and this acquisition adds further support to that outlook.
The bolt-on deal fits Enbridge's capital allocation strategy. Enbridge holds a dividend payout ratio of 60%-70% of cash flows and a target leverage range of 4.5x-5.0x. As a result, the company has CA$10 billion-CA$11 billion ($7.2 billion-$7.9 billion) in annual growth capital capacity. Most of that will fund its backlog of organic expansion projects, worth CA$41 billion ($25.6 billion) as of the end of Q2, but it still has room for accretive acquisitions like this one.
Room for further growth
The acquired assets also open the door to further expansion. Enbridge could pursue additional bolt-on deals or capacity expansions in the Delaware Basin or further downstream. It sees potential to invest up to another CA$1.5 billion ($1.1 billion) into the Ingleside terminal in 2027 and beyond, including further export dock expansions.
Source: The Motley Fool
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