Pipeline operator Enterprise Products Partners said on Wednesday it will buy smaller peer Pinon Midstream for $950 million in cash to expand its natural gas infrastructure.
The oil and gas pipeline industry has seen increased consolidation since last year as U.S. production grows and as problems with permits for new pipelines have made existing operators more valuable.
Pinon, a portfolio company of Black Bay Energy Capital, operates in the Delaware Basin in New Mexico and Texas. It provides natural gas gathering and treating services in the eastern flank of the basin.
Pinon’s assets include gathering and redelivery pipelines, treating facilities for hydrogen sulfide and carbon dioxide, as well as two acid gas injection wells.
“These assets are highly complementary to our midstream energy system and provide us an excellent entry point into the eastern flank of the Delaware Basin for us to expand our natural gas processing footprint,” said A.J. Teague, co-CEO of Enterprise’s general partner.
Enterprise Products, headquartered in Houston, Texas, has been expanding its operations in the United States shale patch. It is developing two natural gas processing plants in the Delaware and Midland basins, expected to start service in 2025.
The company expects to generate distributable cash flow accretion of $0.03 per unit in 2025.
The acquisition deal is expected to close in the fourth quarter of 2024.
(Reporting by Vallari Srivastava in Bengaluru; Editing by Savio D’Souza and Shreya Biswas)