ONEOK to Acquire $5.9 Billion Midstream Assets

By Seher Dareen and Kanjyik Ghosh

(Reuters) – Pipeline operator ONEOK (NYSE:OKE) announced plans to purchase midstream assets valued at $5.9 billion from Global Infrastructure Partners, enhancing its presence in the Permian and Mid-Continent basins amid a wave of consolidation in the U.S. energy sector.

The U.S. pipeline and storage industry is seen as being ripe for mergers and acquisitions due to growing consolidation among oil and gas producers, coupled with challenges in approving and constructing new energy infrastructure.

Company executives stated that this acquisition will allow ONEOK to immediately compete for more volumes and solidify its role as a “one-stop shop” in the Permian region, capable of moving oil and gas and processing natural gas liquids.

ONEOK will acquire GIP’s 43% stake in EnLink Midstream (NYSE:ENLC) for $14.90 per unit, totaling around $3.3 billion in cash, reflecting a 12.8% premium to EnLink’s closing price on August 27.

Following the news, ONEOK shares rose 7.6% in morning trading on Thursday. Once the deal is finalized, ONEOK plans to pursue the remaining 57% of EnLink in a tax-free transaction.

Despite some analysts expressing surprise at the timing, citing ONEOK’s recent acquisitions of Magellan and Easton, they acknowledge the synergy potential and appreciate EnLink’s asset quality.

Additionally, ONEOK is set to acquire GIP’s equity interests in Medallion Midstream, a crude gathering and transportation system in the Permian’s Midland Basin, for $2.6 billion in cash. These assets feature fee floors, ensuring a stable return for ONEOK, who remains well-positioned for growth despite fluctuating gas prices, according to Morningstar analyst Stephen Ellis.

Headquartered in Tulsa, Oklahoma, ONEOK expects the transactions to complete early in the fourth quarter, with an immediate positive impact on earnings and free cash flow. The company anticipates synergies ranging from $250 million to $450 million over the next three years.