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ET Joins Permian M&A Frenzy with $3.25B Deal for West Texas Gas

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Energy Transfer (ET) has made a statement acquisition, reaching a deal to acquire West Texas Gas Midstream (WTG) for $3.25B ($2.45B in cash). WTG, the largest private midstream operator remaining in the Permian Basin, will nearly triple ET’s Midland gas processing capacity from ~800 MMcf/d to 2.5 Bcf/d.

ET announced the acquisition last Tuesday (May 28). WTG operates 1.3 Bcf/d of processing plant capacity in the core of the Midland and serves strong counterparties like Exxon/Pioneer (XOM) and Diamondback/Endeavor (FANG). The ET/WTG deal follows the recent purchases of Pinnacle Midstream and Durango Midstream by Phillips 66 (PSX) and Kinetik (KNTK).

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East Daley Analytics tracks ET and WTG’s G&P assets in Energy Data Studio. We currently estimate ~23 rigs across WTG’s systems vs ~8 rigs on ET’s Midland system. XOM and Endeavor are also big drillers on ET - Midland.

The figure shows the combined G&P assets of WTG and ET – Midland in Energy Data Studio. The acquisition will add much-needed capacity for ET in the basin. We estimate the company has been fully utilizing its 800 MMcf/d of processing capacity in the Midland while offloading gas to its Delaware system via the Permian Bridge project, completed in 2021.

The bigger benefit to ET might be in capturing the NGLs processed by WTG and sending them through its Lone Star pipeline, Mont Belvieu fractionators, and Nederland export facilities. We expect WTG can access all major NGL egress pipes in the Permian, including ET’s pipelines, but its newest facilities are likely dedicated to BANGL given it owns a 20% stake in the project. However, the legacy NGLs could be up for grabs. Plant data indicates WTG produced north of 150 Mb/d as of February 2024.

WTG was the largest private G&P system left in the Permian. ET’s main competitors in the basin and the broader NGL space, Enterprise Products (EPD) and Targa Resources (TRGP), made similar transactions in 2022 for Navitas and Lucid Midstream. Since then, the companies have added (and continue to add) a combined 4.1 Bcf/d of processing capacity, 1 MMb/d of NGL egress capacity, 700 Mb/d of fractionation capacity, and 350+ Mb/d of export capacity.

The strategic rationale and future commercial opportunities for the WTG deal are clear given the EPD/Navitas and TRGP/Lucid deals, but now it’s time for ET to execute. On that front, the company has successfully integrated and expanded the Enable and Lotus Midstream acquisitions. We expect it can continue to do so with WTG. – Ajay Bakshani, CFA Tickers: EPD, ET, FANG, KNTK, PSX, TRGP, XOM.



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