Energy Transfer to Buy Permian Operator WTG for $3.3 Billion

(Bloomberg) -- Energy Transfer LP agreed to buy WTG Midstream in a $3.25 billion deal that will expand the US pipeline giant’s already sprawling network in the Permian Basin.

Energy Transfer will pay $2.45 billion in cash and about 50.8 million newly issued Energy Transfer common units to acquire the Midland, Texas-based company from affiliates of Stonepeak, the Davis Estate and Diamondback Energy, according to a statement Tuesday. 

Pipeline operators are increasingly turning to corporate takeovers to expand amid growing opposition to new pipeline construction in many areas of the US. WTG Midstream runs the largest private natural gas gathering and processing business in the Permian region of West Texas and New Mexico, enhancing Energy Transfer’s presence in North America’s most prolific shale patch.

The sector dominated by corporate giants such as Energy Transfer, Enterprise Products Partners LP and Williams Cos. has been stymied in attempts at so-called organic growth by legal challenges from environmentalists and a glacial federal permitting process. Energy Transfer bought another Permian pipe operator, Lotus Midstream LLC, last year.

WTG’s pipeline network spans 6,000 miles and serves some of the most active areas of the Permian’s Midland sub-basin. The company also operates eight processing plants with a combined capacity of 1.3 billion cubic feet a day. 

What Bloomberg Intelligence Says

“Our analysis suggests the deal may add about $380-$425 million in annual Ebitda and shave some costs.” - Talon Custer, BI Industry Analyst. Read the full report here. 

WTG also is building two new processing facilities that are scheduled to start operations later this year and in the third quarter of 2025, respectively. 

Diamondback will receive about $375 million in the deal, the company said in a separate statement. It will use the proceeds to reduce debt association with the pending takeover of Endeavor Energy Resources LP.

Energy Transfer’s acquisition of WTG is expected to close during the third quarter. The suitor’s shares rose 0.2% to $15.47 at 9:31 a.m. in New York. Diamondback rose 1.1%.

(Adds detail on opposition to new-pipeline construction in fourth paragraph.)

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