Enbridge: Permian Joint Venture Expands Opportunity Set for Reasonable Cost

Enbridge has entered into a joint venture with WhiteWater/I Squared and MPLX to form a Permian-focused joint venture. We see this as a smart move to expand Enbridge’s opportunity set in the basin for a reasonable cost, but it is too small to affect our CAD 56/USD 41 fair values estimates and narrow moat rating. Enbridge is contributing its Rio Bravo pipeline while retaining a 25% economic interest, $350 million in cash, and will fund $150 million in capital spending to complete the Rio Bravo pipeline in exchange for a 19% interest in the joint venture. In return, the joint venture will control the Whistler pipeline, the Rio Bravo pipeline, a 70% interest in the ADCC pipeline, and a 50% interest in the Waha Gas storage assets. Broadly, these assets serve as critical components to supply NextDecade’s Rio Grande LNG project and Cheniere’s Corpus Christi LNG export facility.