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Enbridge (ENB) Increases Ownership in Gray Oak Pipeline

August 17, 2022 5:01 PM EDT

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Enbridge Inc. (Enbridge or the Company) (TSX: ENB) (NYSE: ENB) today announced it has completed a joint venture merger transaction with Phillips 66 (P66) resulting in a single joint venture holding both Enbridge's and P66's indirect ownership interests in Gray Oak Pipeline, LLC (Gray Oak) and DCP Midstream LP (DCP) and an agreement to realign their respective economic and governance interests in the underlying business operations.

Through the surviving joint venture as illustrated below, Enbridge will increase its indirect economic interest in Gray Oak to 58.5% from 22.8%, and the parties have agreed to transfer to Enbridge, from P66, the operatorship of Gray Oak, the long-haul, contracted pipeline which provides critical, low-cost connectivity from the Permian into Corpus Christi and the Houston area. The transfer of operatorship of Gray Oak is planned to occur in the second quarter of 2023. In turn, Enbridge will reduce its indirect economic interest in DCP to 13.2% from 28.3%, further reducing its commodity price exposure and strengthening the Company's low risk pipeline-utility model.

The merger is expected to be immediately accretive to Enbridge's distributable cash flow per share and result in an approximately US$400 million cash payment to the Company from the merged entity. The cash generated from the transaction will create additional financial flexibility and further the Company's capital allocation priorities.

"We're pleased to have reached this new arrangement with P66 to optimize the combined assets and drive operational and financial synergies from both assets," said Al Monaco, President and Chief Executive Officer of Enbridge. "It's another example of our continued focus on optimizing our portfolio and surfacing value for our shareholders, while further building out our already strong U.S. Gulf Coast export position. We look forward to continuing our strong partnership with P66."

Gray Oak Pipeline, in combination with Enbridge's Ingleside Energy Center (EIEC), provides an industry-leading solution to deliver low-cost, long-lived Permian Basin oil to local Gulf Coast and global export markets. The EIEC currently loads nearly 30% of North American oil exports. Through 2030, the Company anticipates that Permian oil supply will grow by an estimated two million barrels per day, enhancing Gray Oak's utilization and driving increased oil exports off the Gulf Coast. Further integration of Gray Oak and the EIEC is expected to support the development of new commercial solutions and future growth potential, unlocking additional value for Enbridge's customers.

Enbridge intends to extend its solar self-power strategy by working with the other Gray Oak owners to develop solar facilities along the Gray Oak right-of-way in support of the Company's net-zero emissions targets, and those of its customers'.

Citi acted as financial advisor to Enbridge and Vinson & Elkins acted as its legal counsel.



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