ONEOK to acquire Medallion and controlling interest in EnLink for $5.9 B
- Establishes fully integrated Permian Basin platform at scale
- Expands and extends footprint in Mid-Continent, North Texas and Louisiana
- Delivers immediate accretion to EPS and FCF supporting capital allocation strategy
- Provides significant synergies through complementary asset positions
- Maintains ONEOK's strong investment-grade credit ratings
- ONEOK intends to pursue a tax-free acquisition of the EnLink publicly held interests following the closing of this transaction
ONEOK announced that it has executed a definitive agreement with Global Infrastructure Partners (GIP) under which ONEOK will acquire GIP's entire interest in EnLink Midstream (EnLink), consisting of 43% of EnLink's outstanding common units for $14.90/unit and 100% of the interests in the managing member for $300 MM, for total cash consideration of approximately $3.3 B.
ONEOK and GIP also entered into a separate definitive agreement under which ONEOK will acquire from GIP all of the equity interests in Medallion Midstream, LLC (Medallion), the largest privately held crude gathering and transportation system in the Permian's Midland Basin, for $2.6 B1 in cash representing approximately 6.3 times estimated 2025 EBITDA, including expected base case run-rate synergies.
CEO perspective. "ONEOK has a longstanding reputation as being intentional in building a premier energy infrastructure company, and today's transactions further solidify that status by adding complementary assets that allow us to continue expanding and extending our value chain," said Pierce H. Norton II, ONEOK president and chief executive officer.
"We are particularly excited to meaningfully increase our company's presence in the Permian Basin, which is expected to continue driving the majority of U.S. oil and gas growth. ONEOK has demonstrated its ability to bring assets together and capture synergies, and we are confident that these accretive transactions will enhance value for our stakeholders and will allow us to provide enhanced offerings across multiple ONEOK platforms.
"We are also looking forward to welcoming the employees of EnLink and Medallion to ONEOK," added Norton.
Strategic rationale:
- Establishes fully integrated Permian Basin platform at scale: The transactions are highly complementary to ONEOK's existing Permian natural gas liquids ("NGL") and crude infrastructure platform and include 1.7 billion cubic feet per day of Permian gas processing capacity and 1.6 million barrels per day of Permian crude gathering capacity. ONEOK expects to capitalize on its expanded and integrated platforms in the Permian Basin to drive new service offerings for producers in the region.
- Expands and extends footprint in Mid-Continent, North Texas and Louisiana: The EnLink transaction enhances ONEOK's existing integrated gas and NGL platform in Oklahoma and provides ONEOK with gas gathering and processing operations in North Texas that produce solid cash flows and are directly connected to Mont Belvieu by ONEOK's NGL pipelines. The EnLink transaction also provides ONEOK with a new position in Louisiana that includes 220,000 barrels per day of NGL fractionation capacity and approximately 4.0 billion cubic feet per day of natural gas pipeline capacity, both of which are connected to key demand centers. ONEOK expects the natural gas transmission assets to benefit from strong industrial demand growth related to data centers, liquefied natural gas, ammonia and hydrogen.
- Delivers immediate accretion to EPS and FCF supporting capital allocation strategy: The transactions are expected to be immediately accretive to earnings per share and free cash flow per share. The expected accretion will further bolster ONEOK's capital allocation strategy and ability to execute share repurchases under its previously authorized $2 billion share repurchase program.
- Provides significant synergies through complementary asset positions: In addition to meaningful commercial synergies ONEOK will attain from owning Medallion's crude gathering business in the Permian Basin, ONEOK expects additional synergies to be achieved through its control of EnLink. Key commercial and operational synergy potential from EnLink centers on integrating ONEOK's and EnLink's Mid-Continent gathering and processing systems and optimizing ONEOK's and EnLink's Gulf Coast NGL assets. Following the acquisition of Medallion, the acquisition of GIP's interests in EnLink and the proposed purchase of the publicly held interests in EnLink, ONEOK believes these, and other contemplated activities will result in annual synergies of approximately $250 million to $450 million within three years.
- Maintains ONEOK's strong investment-grade credit ratings: After giving effect to the transactions, ONEOK expects pro forma 2025 year-end net debt-to-EBITDA of approximately 3.9 times. ONEOK believes the transactions will improve its overall credit attributes and expects leverage to trend toward its previously announced target of 3.5 times during 2026 as growth projects are placed into service, assuming the completion of ONEOK's previously announced $2 billion share repurchase program by year end 2027.
Details of the transactions. $300 million of the total $3.3 billion purchase price for the EnLink interests is for GIP's 100% interest in the managing member of EnLink. GIP's common units in EnLink are being purchased for a total value of $3.0 billion, or $14.90 per unit, representing a premium of 12.8% to EnLink's closing market price as of Aug. 27, 2024. As a result of the transaction with GIP, EnLink will be a consolidated subsidiary of ONEOK for GAAP financial reporting purposes.
After the closing of the purchase of GIP's interests in EnLink, ONEOK intends to pursue the acquisition of the publicly held common units of EnLink in a tax-free transaction. The fully combined ONEOK and EnLink asset bases would be expected to enhance synergies, reduce leverage and increase accretion to ONEOK shareholders. In addition, a combination with ONEOK is expected to give EnLink unitholders access to ONEOK's stock which is part of the S&P 500, and which has significantly greater trading liquidity and an attractive dividend yield.
ONEOK has obtained financing commitments from JPMorgan Chase Bank, N.A. and Goldman Sachs Bank USA to provide up to $6.0 billion to fund the aggregate cash consideration and other expenses in connection with the EnLink and Medallion transactions. Both transactions have been unanimously approved by ONEOK's board of directors. The transactions are not cross conditional and are expected to close early in the fourth quarter of 2024. The closing of each transaction is subject to customary closing conditions, including Hart-Scott-Rodino Act clearance.
Upon closing of the EnLink transaction, ONEOK will have control of EnLink's managing member and intends to replace the board members currently designated by GIP with new board members designated by ONEOK.
ONEOK will maintain its headquarters in Tulsa, Oklahoma, and intends to retain a meaningful employee presence in the Dallas and Houston metropolitan areas.
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