ONEOK Agrees to $280 Million Acquisition of Gulf Coast NGL Pipelines
By Mary Holcomb, Digital Editor
(P&GJ) — ONEOK Inc. has agreed to acquire a system of natural gas liquids (NGL) pipelines from Easton Energy, a Houston-based midstream company, for approximately $280 million, subject to customary purchase price adjustments.
The system comprises of approximately 450 miles of NGL pipelines located in the Texas and Louisiana Gulf Coast market centers for NGLs, refined products and crude oil. These pipelines transport a wide range of liquids products through a portion of its capacity to existing customers.
“These pipelines are a critical piece of the U.S. Gulf Coast NGL and hydrocarbon value chain,” G.R. “Jerry” Cardillo, Easton’s CEO, said. “This transaction recognizes value for our customers, shareholders, and our business partners. We will now pivot our focus to our remaining business, our NGL and olefins storage business.”
ONEOK plans to connect the pipelines to ONEOK's Mont Belvieu, Texas, NGL infrastructure and ONEOK's Houston refined products and crude oil infrastructure, accelerating commercial synergies.
"This strategic acquisition provides the quickest pipeline connectivity to and within the critical supply and demand centers for our NGLs, refined products and crude oil assets in the Gulf Coast," said Pierce H. Norton II, ONEOK president and chief executive officer. "We expect that this acquisition will accelerate the ability to capture commercial synergies related to our recent Magellan acquisition and future earnings growth."
ONEOK expects to close the transaction mid-year 2024. Closing is subject to customary conditions including termination or expiration of the waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act.
In May 2023, ONEOK agreed to purchase Magellan Midstream Partners in a deal valued at approximately $18.8 billion, inclusive of debt. The acquisition, structured as a cash-and-stock transaction, saw ONEOK offering $25 in cash and 0.6670 shares of its common stock for each outstanding Magellan common unit. This move diversified ONEOK's portfolio from natural gas transportation to include Magellan's refined products and crude oil transportation business, significantly altering its revenue composition.
The acquisition aimed to create a North American midstream infrastructure giant, with a substantial portion of its earnings derived from fee-based sources. ONEOK's CEO, Pierce H. Norton II, expressed optimism about the deal, emphasizing the resultant company's robust balance sheet and financial flexibility. Despite concerns over oversupply in the natural gas market and fluctuating crude prices, the merger was expected to bolster the resilience of the combined entity through diverse commodity cycles.
Financial analysts noted the premium ONEOK paid for Magellan, yet characterized the move as bold, citing the resulting company's formidable scale and diversification. The deal, subject to regulatory approvals, was anticipated to close in the third quarter of 2023, with ONEOK expecting earnings accretion starting in 2024 and continuing through subsequent years, promising enhanced shareholder value. Leading financial advisory firms, including Goldman Sachs and Morgan Stanley, were instrumental in facilitating the transaction.
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