Enbridge forms Joint Venture to expand Permian Basin gas infrastructure
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CALGARY, AB – Enbridge Inc. (TSX: NYSE:ENB) (NYSE: ENB) has announced the formation of a joint venture with WhiteWater/I Squared Capital and MPLX (NYSE:MPLX) LP to develop a network of natural gas pipelines and storage facilities. This strategic partnership aims to connect natural gas supply from the Permian Basin to the increasing demand in the LNG and U.S. Gulf Coast markets.
The joint venture, owned 50.6% by WhiteWater/I Squared, 30.4% by MPLX, and 19% by Enbridge, includes a 100% interest in the Whistler pipeline and the Rio Bravo pipeline project, a 70% interest in the ADCC pipeline, and a 50% interest in the Waha Gas Storage. These assets are primarily under long-term, take-or-pay contracts with an average duration of over 10 years, ensuring stable cash flows.
Enbridge will contribute its wholly-owned Rio Bravo pipeline project and approximately $350 million in cash to the joint venture, in addition to funding the first $150 million of the post-closing capital expenditures for the Rio Bravo pipeline project. In return, Enbridge will receive a 19% equity interest in the joint venture and retain a 25% economic interest in the Rio Bravo pipeline, subject to certain redemption rights.
Cynthia Hansen, EVP and President of Gas Transmission and Midstream at Enbridge, expressed enthusiasm for the joint venture, highlighting its integration with existing infrastructure and its potential to enhance the company’s ‘super-system’ approach to energy supply. The transaction is anticipated to optimize Enbridge’s balance sheet by increasing EBITDA and reducing the company’s share of future capital expenditures.
Pat Murray, EVP and Chief Financial Officer of Enbridge, noted the transaction’s immediate cash flow benefits and its contribution to the company’s medium-term growth outlook. The closing of the transaction is expected in the second quarter of 2024, pending regulatory approvals and customary closing conditions.
Enbridge, a North American leader in energy delivery, is committed to connecting people to reliable energy sources and advancing technologies for a sustainable future, with a goal of achieving net-zero greenhouse gas emissions by 2050.
This news report is based on a press release statement.
InvestingPro Insights
Enbridge Inc. (NYSE: ENB) has a proven track record of rewarding shareholders, as highlighted by an impressive streak of raising its dividend for 21 consecutive years. This consistency is a testament to the company’s stable financial health and commitment to returning value to its investors. Moreover, Enbridge is trading at an attractive valuation, with a P/E ratio of 17.18, which is considered low relative to its near-term earnings growth potential.
The financial stability of Enbridge is further underscored by its substantial market capitalization of $76.36 billion USD, which positions it as a prominent player in the Oil, Gas & Consumable Fuels industry. Despite recent revenue declines, the company has maintained a strong gross profit margin of over 51% in the last twelve months as of Q4 2023. Additionally, Enbridge’s commitment to shareholder returns is evident in its significant dividend yield of 7.54% as of early 2024, paired with a modest dividend growth of 2.46%.
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