Dealmaking in the pipeline sector has been picking up lately as some companies look to cut costs, while others seek to scale and gain access to attractive oil and gas producing regions such as the Permian basin and export facilities on the U.S. Gulf Coast.
The WTG deal, expected to close in the third quarter of 2024, will comprise $2.45 billion in cash and about 50.8 million newly issued Energy Transfer shares.
Energy Transfer will acquire WTG from affiliates of Stonepeak, the Davis Estate, and Diamondback Energy (FANG.O), opens new tab. Upon closing, Diamondback, which holds a 25% stake in WTG, stands to get about $375 million.
WTG's assets include a 6,000-mile pipeline network that serves the Midland Basin, eight processing plants with a total capacity of 1.3 billion cubic feet per day, and two new plants that are under construction.
"As Permian (natural gas liquids) production continues to surprise to the upside, we would expect significant commercial synergies in time," Raymond James analysts said in a note.
"We see the Delaware (basin) as a bit more fragmented than the Midland, though a deal of WTG's scale shows that the Midland could still see transactions at the corporate scale."
The acquisition also includes a 20% interest in the BANGL Pipeline, a roughly 425-mile natural gas pipeline connecting the Permian Basin to markets on the Texas Gulf Coast.
Energy Transfer is looking to build a deepwater port along the Texas coast and expects to receive a draft environmental impact statement for its offshore terminal this quarter.
Last year, the company also bought Crestwood Equity Partners for $7.1 billion, Lotus Midstream for $1.45 billion, while its affiliate, Dallas-based Sunoco, acquired NuStar Energy in a $7.3 billion deal.
