Enbridge Expands U.S. Crude Footprint With $2.55B Tallgrass Deal

Enbridge Inc. ENB, a leading midstream player, is strengthening its North American liquids pipeline franchise through the $2.55 billion acquisition of Tallgrass Energy’s crude oil business. The deal gives ENB a 75% interest in the 1,050-mile Pony Express Pipeline, a roughly 460,000-barrel-per-day (BPD) system connecting Rockies production with Cushing, OK and providing direct access to about 500,000 BPD of refining capacity. The transaction significantly expands Enbridge’s presence in the U.S. Rockies, adding another major crude transportation corridor to its portfolio.

Deal Improves Network Connectivity

The acquisition also includes a 51% interest in the Powder River Gateway system, roughly 8.4 million barrels of storage across nine crude terminals connected into Pony Express and the Stanchion Energy crude marketing business.

These assets establish strategic connections among the Bakken, Powder River Basin (PRB) and Denver-Julesburg Basin through Cushing. They complement ENB’s existing Express-Platte system.

This expanded connectivity enhances the value of Enbridge’s liquids network by providing opportunities for operational synergies and incremental throughput across its broader infrastructure footprint.

Contracted Cash Flows Enhance Earnings Visibility

Another major benefit for ENB is the contracted nature of Pony Express. The pipeline is highly contracted throughout the decade, predominantly with investment-grade counterparties, strengthening the visibility of future cash flows.

Enbridge expects the acquired business to generate significant free cash flow and contribute to future growth. The transaction is expected to be accretive to distributable cash flow per share in the first full year of ownership. These characteristics fit well with ENB’s investment proposition, which relies heavily on predictable infrastructure-based cash generation.

PXP2 Adds an Embedded Growth Catalyst

The transaction brings another growth avenue through the $300 million PXP2 expansion. The project is expected to raise Pony Express capacity to approximately 515,000 BPD and enter service in late 2027.

PXP2 is backed by take-or-pay contracts and will become part of ENB’s $41 billion secured growth backlog after the acquisition closes, adding another source of visible future earnings.

Disciplined Funding Supports ENB’s Growth Outlook

Enbridge plans to partially fund this transaction and its Salt Creek Midstream acquisition through an equity offering, helping preserve financial flexibility. The midstream player continues to target debt-to-adjusted EBITDA of 4.5-5.0 times and strong investment-grade credit ratings.

The Tallgrass acquisition strengthens ENB’s business platform by expanding its footprint and improving connectivity across key crude oil markets. At the same time, the acquired assets add contracted cash flows and new growth opportunities, which enhance Enbridge’s earnings visibility and investor appeal. These advantages align with management’s medium-term target of about 5% compound annual growth in EBITDA, discounted cash flow per share and earnings per share.

ENB’s Zacks Rank & Key Picks

Enbridge currently carries a Zacks Rank #3 (Hold).

The Tallgrass acquisition is expected to strengthen ENB’s liquids pipeline network by improving access to key crude-producing regions and adding more contracted transportation capacity. Against this backdrop, investors may also consider Drilling Tools International Corporation DTI, RPC, Inc. RES and Oceaneering International, Inc. OII, each presently carrying a Zacks Rank #2 (Buy), as these companies are tied more directly to drilling, completion and offshore activity. Stronger upstream spending can support higher oil and gas production, which may ultimately increase the need for transportation, storage and other midstream infrastructure, including Enbridge. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

Drilling Tools International manufactures and rents downhole tools used in oil and natural gas drilling. DTI generated $4.1 million of adjusted free cash flow in the second quarter of 2026, marking a substantial improvement both sequentially and year over year. Although North American land activity remained soft and Middle Eastern operations faced disruptions, management indicated improving activity across several markets. A pickup in drilling activity is expected to support stronger demand for DTI’s tools and services.

RPC provides pressure pumping, downhole tools, wireline and cementing services, giving it direct exposure to upstream drilling and completion activity. RES reported second-quarter revenues of $460.9 million, up 1% sequentially, while adjusted EBITDA increased 23.3% to $66 million. Better job mix and increased activity across several service lines supported the improvement, positioning RPC to benefit if upstream spending strengthens.

Oceaneering International provides engineered services, products and robotic solutions primarily for offshore energy markets. Second-quarter 2026 revenues rose 10% to $768 million, while adjusted EBITDA increased 11% to $115 million. OII’s Manufactured Products backlog stood at $445 million as of June 30, 2026, with additional orders expected during the second half. The backlog provides useful visibility into future activity and supports OII’s outlook as offshore project spending continues.

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