ONEOK to expand Permian infrastructure with $5.9bn purchase of Medallion and EnLink interests

ONEOK, Inc. (NYSE: OKE) has announced a significant expansion of its energy infrastructure portfolio through two major acquisitions from Global Infrastructure Partners (GIP), valued at approximately $5.9 billion. The transactions include the acquisition of GIP’s entire stake in EnLink Midstream, LLC (NYSE: ENLC) and 100% of the equity interests in Medallion Midstream, LLC.

Under the first agreement, ONEOK will acquire GIP’s 43% interest in EnLink’s common units for $14.90 per unit, totaling around $3.3 billion. Additionally, ONEOK will purchase GIP’s 100% interest in the managing member of EnLink for $300 million. This positions ONEOK to consolidate EnLink as a subsidiary for financial reporting purposes.

In a separate transaction, ONEOK will acquire Medallion Midstream, the largest privately held crude gathering and transportation system in the Permian Basin, for $2.6 billion. This deal is valued at approximately 6.3 times the estimated 2025 EBITDA, including expected base case run-rate synergies.

CEO Pierce H. Norton II emphasized the strategic importance of these acquisitions, stating, “ONEOK has a longstanding reputation for being intentional in building a premier energy infrastructure company, and today’s transactions further solidify that status by adding complementary assets that will help us expand and extend our value chain.”

Strategic Rationale Behind the Transactions

Integrated Permian Basin Platform: The acquisitions significantly bolster ONEOK’s existing Permian infrastructure. The deal includes 1.7 billion cubic feet per day of gas processing capacity and 1.6 million barrels per day of crude gathering capacity, enhancing ONEOK’s integrated platform in the region.

Expanded Footprint: The purchase of EnLink enhances ONEOK’s gas and NGL operations in Oklahoma and provides additional assets in North Texas and Louisiana. This includes 220,000 barrels per day of NGL fractionation capacity and 4.0 billion cubic feet per day of natural gas pipeline capacity, connecting to key demand centers.

Accretion and Synergies: The transactions are expected to be immediately accretive to ONEOK’s earnings per share (EPS) and free cash flow (FCF). The integration of Medallion’s crude gathering business and EnLink’s assets is projected to generate annual synergies of approximately $250 million to $450 million within three years.

Credit Ratings and Leverage: ONEOK anticipates that the transactions will maintain its strong investment-grade credit ratings. Pro forma net debt-to-EBITDA is expected to be around 3.9 times at the end of 2025, with a projected reduction toward the target of 3.5 times by 2026.

Transaction Details

The total purchase price for GIP’s interests in EnLink includes $300 million for the managing member interest and $3.0 billion for the common units, reflecting a 12.8% premium over EnLink’s market price as of August 27, 2024. ONEOK also plans to acquire the publicly held common units of EnLink in a tax-free transaction following the closure of the initial purchase.