Kinetik Holdings, a major operator of natural gas pipelines in the Delaware Basin, is exploring a potential sale following a takeover approach from Western Midstream Partners, according to people familiar with the matter.

The discussions come as energy infrastructure companies scramble to expand their footprints to meet surging demand for natural gas, driven by a boom in liquefied natural gas (LNG) exports and the massive power requirements of AI data centres.

Valued at approximately $7.2 billion, Kinetik operates roughly 4,600 miles of pipeline across the Delaware portion of the Permian Basin in western Texas and New Mexico. 

The company reportedly began plotting a sale process to gauge interest from strategic and infrastructure buyers after receiving an overture from Western Midstream in recent weeks. 

Western Midstream is backed by Occidental Petroleum, which owns about one-third of the company’s stock. 

While Kinetik shares jumped 11.1% in after-hours trading following reports of the interest, sources cautioned that discussions are in the early stages and no formal bid has been submitted.

The midstream sector — the "middleman" industry responsible for the transportation, storage, and processing of hydrocarbons — is currently seeing a historic influx of capital. 

According to energy consultancy Wood Mackenzie, firms are planning or building 8,800 miles of pipelines nationwide, with total investment in new and planned pipelines expected to reach nearly $50 billion over the next five years.

"Kinetik has been buoyed by the Delaware Basin’s status as one of the few remaining growth areas and the growing thirst for natural gas in the Gulf Coast," said Andrew Gillick, managing director at consultancy Enverus.

The potential Kinetik deal follows a wave of massive consolidations in the Permian Basin, including the recent $58 billion tie-up between Coterra Energy and Devon Energy.