North America’s largest Midstream firm Energy Transfer LP announced Tuesday it will acquire WTG Midstream Holdings LLC in a deal valued at approximately $3.25 billion, Reuters news reported on Tuesday, May 28, 2024.

According to the report, the acquisition is the latest in a string of deals within the midstream sector focused on expanding pipeline networks and processing facilities in the Permian Basin.

With the recent acceleration in consolidation in the pipeline industry, some companies seek cost-cutting measures, while others aim to expand their reach and secure access to prolific oil and gas production areas like the Permian Basin and export terminals along the U.S. Gulf Coast.

The WTG deal, expected to close in the third quarter of 2024, will involve $2.45 billion in cash and roughly 50.8 million newly issued Energy Transfer common shares. 

Energy Transfer will purchase WTG from affiliates of Stonepeak Infrastructure Partners, the Davis Estate, and Diamondback Energy Inc. (FANG). Upon completion of the deal, Diamondback, holding a 25% stake in WTG, is expected to receive approximately $375 million.

WTG's assets include a vast 6,000-mile pipeline network serving the Midland Basin, eight natural gas processing plants with a combined daily capacity of 1.3 billion cubic feet, and two additional plants under construction.

Analysts at Raymond James noted the potential for "significant commercial synergies" in the future, citing the Permian Basin's continually exceeding natural gas liquids production forecasts. 

They also observed that while the Delaware Basin is somewhat more fragmented, the WTG acquisition indicates the potential for further large-scale transactions within the Midland Basin.

The acquisition includes a 20% ownership stake in the BANGL Pipeline, a roughly 425-mile natural gas pipeline connecting the Permian Basin to markets along the Texas Gulf Coast.

Energy Transfer is currently pursuing the development of a deepwater port on the Texas coast and anticipates receiving a draft environmental impact statement for the offshore terminal later this quarter.

The company's recent acquisitions include Crestwood Equity Partners for $7.1 billion in 2023, Lotus Midstream for $1.45 billion, and its Dallas-based affiliate Sunoco's $7.3 billion acquisition of NuStar Energy.