Energy Transfer Expands Permian Presence With $3.25B Acquisition: Details

Diamondback Energy, Inc. FANG shares are trading higher after it penned a deal with Energy Transfer LP (NYSE: ET) to sell WTG Midstream Holdings LLC.

Energy Transfer LP is acquiring WTG Midstream from affiliates of Stonepeak, the Davis Estate and Diamondback Energy in a transaction valued at approximately $3.25 billion.

The transaction’s consideration comprises $2.45 billion in cash and approximately 50.8 million newly issued Energy Transfer common units.

The buyout is expected to boost Energy Transfer’s natural gas pipeline and processing network in the Permian Basin.

The acquisition comprises eight gas processing plants (~1.3 Bcf/d), two more under construction (~0.4 Bcf/d) assets and a 20% stake in BANGL Pipeline. 

Energy Transfer is expected to benefit from well positioned assets in the Permian, which is the most active region in the U.S.

The deal is projected to close in the third quarter of 2024, subject to regulatory approval and customary closing conditions.

Synergy: The deal is anticipated to add incremental revenue from downstream NGL transportation and fractionation fees. Energy Transfer expects the WTG assets to add around $0.04 of Distributable Cash Flow (DCF) per common unit in 2025, which is expected to grow to about $0.07 per common unit in 2027. 

Diamondback Energy expects a total pre-tax consideration net of approximately $375 million, subject to customary closing conditions and adjustments. Proceeds from the transaction will be used to reduce debt associated with the pending Endeavor Energy Resources, L.P. merger.

As of March-end, Energy Transfer’s adjusted Distributable Cash Flow attributable to partners stood at $2.36 billion.

Investors can gain exposure to FANG stock via Texas Capital Funds Trust Texas Capital Texas Oil Index ETF OILT and Invesco Energy Exploration & Production ETF PXE.

Price Action: FANG shares are up 1.89% at $197.11 at the last check Tuesday.

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