DT Midstream to acquire three US natural gas pipelines from ONEOK in $1.2bn deal

DT Midstream has unveiled plans to acquire three major US natural gas pipelines from ONEOK in a $1.2 billion transaction, marking a significant step in its mission to expand its natural gas infrastructure portfolio. This strategic acquisition, which is anticipated to close by early 2025, positions DT Midstream to enhance its footprint in the Midwest energy market, which is experiencing growing demand for power and natural gas.

The three pipelines—Guardian Pipeline, Midwestern Gas Transmission, and Viking Gas Transmission—are integral components of the US energy grid. Spanning a combined 2,092 kilometres, these pipelines have a transport capacity exceeding 3.7 billion cubic feet per day (Bcf/d), connecting critical supply basins to high-demand regions. These assets also benefit from stable revenue streams, backed by take-or-pay contracts with a diverse, financially strong customer base.

The Guardian Pipeline, extending 418 kilometres, plays a pivotal role in connecting DT Midstream’s Vector Pipeline and the Chicago Hub to major demand centres in Wisconsin. Midwestern Gas Transmission, a 644-kilometre pipeline capable of bi-directional flow, links natural gas supplies from the Appalachia region to Midwest markets while interfacing with the Guardian Pipeline. Viking Gas Transmission, the largest in the portfolio at 1,086 kilometres, provides a vital connection between utility customers in Minnesota, Wisconsin, and North Dakota and Canadian gas supplies at Emerson, Manitoba.

DT Midstream highlighted that the acquisition aligns with its broader strategy of acquiring and managing natural gas infrastructure in regions with strong growth potential. The $1.2 billion valuation equates to an approximately 10.5 times multiple of the projected EBITDA for the pipelines in 2025, underscoring the profitability and stability of these assets.

For ONEOK, the sale is a critical step towards financial realignment. The company reiterated its commitment to reducing its leverage ratio to 3.5 times by 2026, with the transaction proceeds contributing to greater financial flexibility. Industry analysts suggest that the divestiture will bolster ONEOK’s ability to invest in other high-priority projects while achieving its deleveraging targets.

Barclays is serving as the financial advisor for DT Midstream and has committed financing for the acquisition. Weil, Gotshal & Manges is providing legal counsel. The deal is subject to regulatory approvals, including compliance with the Hart-Scott-Rodino Antitrust Improvements Act, and other customary closing conditions.

Energy market experts note that this acquisition could have broader implications for natural gas supply chains, particularly in the Midwest. With increasing demand for clean energy alternatives, the pipelines are expected to play a central role in connecting abundant supply sources to growing population centres.

This transaction reflects a larger trend in the energy sector, where companies are realigning their portfolios to adapt to shifting energy demands and regulatory landscapes. DT Midstream’s strategic expansion underscores the growing importance of natural gas as a transitional energy source in the path toward decarbonisation.