Massive shift in Permian operations: Energy Transfer and Sunoco announce game-changing alliance

In a landmark collaboration, Energy Transfer LP and Sunoco LP have unveiled a joint venture that brings together their extensive crude oil and produced water gathering assets in the Permian Basin. While the deal value remains undisclosed, the ownership structure is clearly defined, with Energy Transfer holding a 67.5% majority stake and Sunoco possessing the remaining 32.5%.

This strategic alliance is poised to deliver significant financial benefits, most notably an immediate accretive effect on the distributable cash flow per limited partnership unit for both companies. A crucial element of this arrangement is the exclusion of Energy Transfer’s expansive long-haul crude pipeline network, which ensures the continuation of its operations outside the joint venture, maintaining critical transport routes for crude oil from the Permian Basin to major hubs in Nederland, Houston, and Cushing.

On the operational front, the joint venture boasts a formidable asset base, with over 5,000 miles of pipelines dedicated to the gathering of crude oil and produced water. This extensive network is complemented by substantial crude oil storage capabilities, featuring a capacity exceeding 11 million barrels. This robust infrastructure underpins the joint venture’s capacity to manage and mobilize resources efficiently across one of the most significant oil-producing regions in the United States.

These combined financial and operational strategies are designed to enhance the overall efficiency and productivity of both companies’ assets in the Permian Basin, setting a new standard for collaboration in the energy sector.

The new joint venture between Energy Transfer LP and Sunoco LP is set to transform the Permian Basin’s energy landscape.

Energy Transfer will assume the role of operator for the joint venture, contributing its Permian crude oil and produced water gathering assets and operations. Conversely, Sunoco will merge all of its Permian crude oil gathering assets and operations into the joint venture. Notably, Energy Transfer’s expansive long-haul crude pipeline network, which facilitates transportation of crude oil from the Permian Basin to key locations such as Nederland, Houston, and Cushing, will remain independent of this joint venture.

The joint venture, operational from July 1, 2024, stands as a testament to the strategic realignment within the energy sector, focusing on operational efficiency and asset optimization. This collaboration is projected to significantly enhance the logistics and operational capabilities within the Permian Basin, a region critical for U.S. energy production.

Financial and legal advisories were provided by prominent firms, with Intrepid Partners, LLC and Guggenheim Securities, LLC offering financial advice to Energy Transfer’s and Sunoco’s committees, respectively. Legal counsel was provided by Potter Anderson & Corroon LLP and Richards, Layton & Finger, P.A., among others.

Corporate Backgrounds:

– Energy Transfer LP commands one of the largest and most diversified portfolios of energy assets in the U.S., covering approximately 130,000 miles of pipeline across 44 states, including substantial natural gas and crude oil operations.

– Sunoco LP operates a vast network of fuel distribution and midstream assets across the U.S. and internationally, managing approximately 14,000 miles of pipeline and over 100 terminals.

This joint venture not only marks a strategic pivot enhancing the operational footprints of both entities but also underscores their commitment to optimizing infrastructure and ensuring efficient energy distribution across major U.S. production basins.