Enbridge Inc. agreed to acquire Moda Midstream Operating LLC from venture capital firm EnCap Flatrock Midstream in an approximately $3.0 billion deal that was well-received by industry analysts.
In a Sept. 7 news release, Enbridge said it expects the acquisition "to be immediately and strongly accretive" to the company's financial outlook and to underpin its U.S. Gulf Coast export strategy and connectivity to reserves in the Permian and Eagle Ford basins.
Analysts with Credit Suisse Securities (Canada) Inc. struck a similar chord in a same-day note to clients: They expected the transaction to "significantly improve" Enbridge's Gulf Coast position.
"From our perspective, [Enbridge's] U.S. Gulf position lagged a number of competitors, and this transaction looks interesting on in-place assets along with the expansion potential," the analysts said. "Given the company's past efforts to build similarly situated businesses in the U.S. Gulf, we believe this purchase is strategically coherent and additive to the overall franchise — albeit on a niche basis in light of [Enbridge's] total size and scale."
CreditSights Inc. analysts also said they "have a positive view on the transaction as it adds highly contracted assets that align with [Enbridge's] strategy to increase its Gulf Coast export capacity."
Under the deal, Enbridge will acquire a 100% operating stake in the Ingleside energy center located near Corpus Christi, Texas. The center, to be renamed Enbridge Ingleside energy center, has a storage capacity of 15.6 million barrels and an export capacity of 1.5 million barrels per day, which can be expanded to 21 million barrels and 1.9 million b/d. The center is currently supported by 925,000 b/d of long-term, take-or-pay vessel loading contracts and 15.3 million barrels of long-term storage contracts.
The deal also will include Enbridge's acquisition of a 20% stake in the 670,000-b/d Cactus II pipeline, a 100% interest in the 300,000-b/d Viola pipeline, a 100% operating stake in the 350,000-barrel Taft terminal and a 50% interest in a brownfield deepwater crude and refined products terminal development opportunity in the area around St. James, La.
Additionally, as part of its goal to achieve net-zero emissions by 2050, Enbridge said it intends to reduce the Ingleside center's emissions through the development of up to 60 MW of solar power capabilities for the center. The company also said it sees the potential for additional low-carbon energy infrastructure, such as renewable fuels and carbon capture terminals, within the Ingleside center.
Moda Midstream said in a same-day news release that it will keep its ownership in the Vopak Moda Houston deepwater storage and terminaling facility in the Port of Houston.
The deal, already approved by Enbridge and Moda Midstream's boards, is scheduled to be completed in the fourth quarter. At closing, Javier del Olmo, Moda Midstream's executive vice president, COO and founder, will serve as Enbridge's vice president for U.S. Gulf Coast terminaling operations.
Bo McCall, Moda Midstream's president, CEO and founder, will be the chairman of Moda Midstream. Jonathan Ackerman, Moda Midstream's executive vice president, CFO and founder, will become president and CEO. Ian Levine, the current vice president of corporate strategy and treasurer, will be vice president of strategy and CFO.
Barclays served as the financial adviser and Sidley acted as the legal counsel to Enbridge. Credit Suisse Securities (USA) LLC served as the exclusive financial adviser and Vinson & Elkins LLP acted as the legal counsel to Moda Midstream. Shearman & Sterling served as the legal counsel to EnCap Flatrock Midstream.