Western Midstream Partners to acquire Meritage Midstream for $885m

Western Midstream Partners, LP (NYSE: WES) disclosed that its operating subsidiary will acquire Meritage Midstream Services II, LLC for $885 million in an all-cash transaction. The deal is set to finalize in the fourth quarter of 2023, subject to customary closing conditions and required regulatory approvals.

Details of the Meritage Midstream Services II Assets Included

The assets purchased from Meritage Midstream Services II, a privately-held midstream firm based in Denver, Colorado, comprise around 1,500 miles of high- and low-pressure natural gas gathering pipelines and approximately 380 MMcf/d natural gas processing capacity in Wyoming’s Powder River Basin. Additionally, the Thunder Creek NGL pipeline, a FERC-regulated 120-mile pipeline with 38 MBbl/d capacity, is also part of the deal. These Meritage assets are backed by over 1.4 million dedicated acres from diverse, mostly investment-grade counterparties, boasting an average remaining contract length of about eight years.

Stakeholder Statements on the Acquisition

Michael Ure, President and CEO of Western Midstream Partners, said, “We are excited to announce the transformation of our Powder River Basin footprint with the acquisition of Meritage.” He added that the Meritage assets would significantly expand Western Midstream Partners’ existing operational scale in the Powder River Basin, allowing the company to compete for additional acreage dedications and business development opportunities.

Nick Thomas, CEO of Meritage Midstream Services II, commented, “Since 2013, Meritage has been hard at work building upon its brand as a leading midstream operator in the Powder River Basin. Today’s announcement is a testament to the many years of focused efforts, and I am extremely proud of our team’s many accomplishments.”

Financial and Operational Implications for WES

The acquisition will add a considerable amount of producer inventory to WES’s growing customer portfolio, according to Michael Ure. WES management expects to recommend a Base Distribution increase of $0.0125 per unit, or $0.05 per unit on an annualized basis, following the closing of the transaction. However, Western Midstream Partners has not updated its 2023 Adjusted EBITDA guidance range due to the uncertain timing of the deal’s closure within the fourth quarter.

In summary, the $885 million all-cash acquisition of Meritage Midstream Services II by a Western Midstream Partners subsidiary represents a significant expansion of the latter’s operations in Wyoming’s Powder River Basin. The deal is subject to standard closing conditions and is expected to be completed in the last quarter of 2023.