ONEOK to acquire Brazos Midstream's Permian assets in $4.425bn all-cash deal
OKE is in focus after a $4.425bn definitive agreement to acquire Brazos Midstream's natural gas gathering and processing assets in the Permian Midland Basin, backed by a $9bn nonvoting minority equity commitment from…
Key takeaways
- ONEOK agreed to acquire Brazos Midstream's natural gas gathering and processing assets in the Permian Midland Basin in a $4.425bn all-cash deal.
- The transaction is backed by a $9bn nonvoting minority equity commitment from Apollo, with the Apollo investment set to close in the first half of September and the asset acquisition expected in the fourth quarter of 2026.
- The acquired assets include roughly 700 miles of gathering infrastructure and 1.2 billion cubic feet per day of processing capacity across seven Permian Midland Basin counties, plus about 600,000 dedicated acres under long-term fixed-fee contracts.
- ONEOK values the deal at approximately 7.5 times estimated 2027 EBITDA (including about $80 million in synergies), stepping down to roughly six times estimated 2028 EBITDA, and expects it to be immediately accretive to earnings and free cash flow per share.
- ONEOK plans to apply $5bn of the Apollo proceeds to existing debt, targeting a pro forma 2027 leverage ratio of about 3.25 times debt-to-EBITDA.
OKE is in focus after a $4.425bn definitive agreement to acquire Brazos Midstream's natural gas gathering and processing assets in the Permian Midland Basin, backed by a $9bn nonvoting minority equity commitment from Apollo. The Apollo investment is scheduled to close in the first half of September; the asset acquisition itself is expected to follow in the fourth quarter of 2026, subject to regulatory approvals.
The numbers
The acquired footprint covers roughly 700 miles of gathering infrastructure and 1.2 billion cubic feet per day of processing capacity across seven Permian Midland Basin counties. About 600,000 dedicated acres sit under long-term fixed-fee contracts with a weighted average remaining term of more than 12 years. Fourteen rigs are currently active on the acreage. ONEOK values the transaction at approximately 7.5 times estimated 2027 EBITDA, inclusive of about $80 million in full-year synergies, stepping down to approximately six times estimated 2028 EBITDA.
Common equity is untouched. The company plans to apply $5bn of the Apollo proceeds to existing debt, targeting a pro forma 2027 leverage ratio of approximately 3.25 times debt-to-EBITDA. Apollo receives a Class B interest in a new holding company, with a 7% internal rate of return capped for the first nine years. Both the acquisition and the investment were unanimously approved by ONEOK's board.
What to watch
The capacity story has a defined timetable. Once ONEOK's Cassidy II processing plant is complete, expected in the third quarter of 2027, combined Midland Basin processing capacity is expected to reach nearly 2.3bcf/d including plants under construction, which the company says would more than double its current Midland Basin footprint. The transaction also delivers a Permian Midland Basin-wide area of mutual interest with a private producer, opening growth options beyond the Brazos acreage.
ONEOK stated the deal is expected to be immediately accretive to earnings and free cash flow per share. CEO Pierce Norton II said the acquisition advances the company's wellhead-to-water integration strategy and strengthens connectivity across its natural gas and NGL value chain, positioning ONEOK for volume growth in what he described as one of the most economic and rapidly growing resource plays.
Barclays served as sole financial advisor to ONEOK on the Brazos acquisition and lead advisor on the Apollo minority equity investment, with Lazard also advising on the latter. The nearest date on the tape is the Apollo equity close, targeted for the first half of September.
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Filed via finance.yahoo.com