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Plains All American, Oryx Midstream to Merge Permian Basin Assets
08/10/2021
Plains All American Pipeline LP has decided to unite its Permian Basin assets with Oryx Midstream Holdings LLC, a privately held company. The Plains Oryx Permian Basin JV will comprise a crude pipeline with a capacity of 6.8 million bbl/d. This pipeline spans 5,500 miles, with an average remaining contract term of approximately seven years on the JV's 4.1 million committed acres.
Plains All American Pipeline LP owns the bulk of Permian Basin assets. Oryx Midstream, on the other hand, has significant holdings in the Permian Basin. Plains Oryx Permian Basin LLC will operate in the Permian Basin as a joint venture. Plains will hold 65% of the JV, and Oryx will control 35%, with the precise cash split set by a 10-year tiered modified distribution sharing agreement.
Moreover, without synergies, the JV is projected to produce $800 million in EBITDA and $625 million in free cash flow in 2021. The merger agreement's transactions are anticipated to complete in the fourth quarter of 2021.
JV's Journey In Merging Permian Basin Assets
Oryx Midstream and Plains working together is a natural evolution growth story. Plains' assets include about 5,500 pipeline kilometers and a multi-segment pipeline system capacity of 6.8 million barrels per day. Oryx has about 1,600 miles of pipeline and operational storage capacity in the Permian Basin, as well as 1.3 million acres of long-term acreage dedication and marketing agreements.
Midstream operators realize the advantages of scale and the ability to run their systems effectively. In addition, with the recent increase of takeaway capacity from the Permian Basin and a decrease in production levels as operators curtailed operations during the pandemic, the pipeline capacity is sufficient.
When the joint venture officially launches, the emphasis will be on integrating the two systems. With the JV's merged asset base, there will be more possibilities for optimization and operational leverage within the enlarged and integrated system. Plains Oryx Permian Basin JV is a beneficial deal for consumers, providing greater connection, better dependability, and increased efficiency.
This acquisition is a huge step forward in terms of enhancing the capabilities for the benefit of their customers and investors.
Plains Oryx Permian Basin will continue to develop and provide consumers with the best choices available. They are also enthusiastic about the deal and the joint venture's prospects, and what they can offer their consumers.
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From Beginnings to a $7.1 Billion Milestone: Deal-Making Histories of Energy Transfer and Crestwood - Complex Review by Rextag
Energy Transfer's unit prices have surged over 13% this year, bolstered by two significant acquisitions. The company spent nearly $1.5 billion on acquiring Lotus Midstream, a deal that will instantly boost its free and distributable cash flow. A recently inked $7.1 billion deal to acquire Crestwood Equity Partners is also set to immediately enhance the company's distributable cash flow per unit. Energy Transfer aims to unlock commercial opportunities and refinance Crestwood's debt, amplifying the deal's value proposition. These strategic acquisitions provide the company additional avenues for expanding its distribution, which already offers a strong yield of 9.2%. Energized by both organic growth and its midstream consolidation efforts, Energy Transfer aims to uplift its payout by 3% to 5% annually.
Oil and Gas: Diamondback and Endeavor's $26 Billion Merger Redefines Permian Basin
Diamondback's buyout of Endeavor happened about four months after ExxonMobil and Chevron made huge deals, with Exxon buying Pioneer Natural Resources for $59 billion and Chevron getting Hess for $53 billion. Even though 2023 was a slow year for company buyouts and mergers, with the total deals at $3.2 trillion (the lowest since 2013 and 47% less than the $6 trillion peak in 2021), the energy sector was still active. Experts think this buzz in energy deals is because these companies made a lot of money in 2022.
The U.S. has overtaken Saudi Arabia and Russia to become the world's largest oil and gas producer. In 2024, America's oil output has surpassed last year's record by 1.4%, reaching new heights. Even as oil-producing countries in the Middle East cut back, the U.S. continued to ramp up production after a downturn in 2020, establishing itself as a dominant force in the global market. In terms of numbers, U.S. oil production jumped from an average of 2.93 million barrels per day in 2023 to 13.12 million barrels per day in 2024, marking a significant 7.1% increase.
Kinetik Holdings recently announced a series of transactions in the energy sector. They struck a deal to buy Durango Permian infrastructure for $765 million. At the same time, they're selling their 16% share in the Gulf Coast Express Pipeline to ArcLight Capital Partners for $540 million. The total purchase cost includes $510 million in cash paid immediately and an additional $30 million that will be paid later, depending on whether they decide to expand further.
Recently, the Permian has seen significant acquisitions: Exxon Mobil purchased Pioneer Natural Resources for about $60 billion. Diamondback Energy's $26 billion deal to acquire Endeavor Energy Resources is currently on hold due to requests from the U.S. Federal Trade Commission. Occidental’s acquisition of CrownRock for $12 billion in the Midland.