(Bloomberg) — Energy Transfer LP agreed to buy WTG Midstream in a $3.25 billion deal that will expand the U.S. pipeline giant’s already sprawling network in the Permian Basin.
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Energy Transfer will pay $2.45 billion in cash and approximately 50.8 million newly issued Energy Transfer common units to acquire the Midland, Texas-based company from subsidiaries of Stonepeak, Davis Estate and Diamondback Energy, a statement said Tuesday.
Pipeline operators are increasingly turning to corporate acquisitions to expand amid growing opposition to new pipeline construction in many parts of the US. WTG Midstream operates the largest private natural gas extraction and processing facility in the Permian region of West Texas and New Mexico, strengthening Energy Transfer’s presence in North America’s most productive shale region.
Read more: Midstream space is ripe for more mergers and acquisitions, says Energy Transfer
The sector dominated by corporate giants such as Energy Transfer, Enterprise Products Partners LP and Williams Cos. has been hampered in attempts at so-called organic growth by legal challenges from environmentalists and a icy federal permitting process. Energy Transfer last year bought another Permian pipeline operator, Lotus Midstream LLC.
WTG’s pipeline network spans 6,000 miles and serves some of the most active areas of the Midland Subbasin of the Permian. The company also operates eight processing plants with a combined capacity of 1.3 billion cubic meters per day.
What Bloomberg Intelligence Says
“Our analysis suggests the deal could add approximately $380-$425 million in annual Ebitda and save some costs.” – Talon Custer, BI industry analyst. Read the full report here.
WTG is also building two new processing facilities that are expected to be operational later this year and in the third quarter of 2025.
Diamondback will receive approximately $375 million in the deal, the company said in a separate statement. It will use the proceeds to reduce debt related to its upcoming acquisition of Endeavor Energy Resources LP.
Energy Transfer’s acquisition of WTG is expected to be completed in the third quarter. Shares of the suitor rose 0.2% to $15.47 at 9:31 a.m. in New York. Diamondback rose 1.1%.
(Adds details about opposition to new pipeline construction in fourth paragraph.)
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