The owners of the EPIC Crude pipeline are exploring a sale, with any deal likely to value the energy infrastructure at around $3 billion including debt, people familiar with the matter said.
EPIC Crude is one of the major pipelines which brings oil from the Permian and Eagle Ford shale basins of Texas to export facilities on the U.S. Gulf coast. It entered full service in 2020 and has a capacity of more than 600,000 barrels per day.
EPIC Midstream, controlled by investment firm Ares Management, owns around 45% of the company which holds EPIC Crude. The rest is held equally by Diamondback Energy and Kinetik.
The owners are working with investment bankers on the sale and have begun sounding out potential buyers for EPIC Crude, according to four people familiar with the matter.
A pipeline company with existing Permian oil assets is the most likely buyer, said some of the sources. All the sources cautioned that a deal was not guaranteed and spoke on condition of anonymity to discuss private deliberations.
EPIC and Ares declined comment. Diamondback and Kinetik did not respond to requests for comment.
Both the chief executives of Diamondback and Kinetik hinted in calls with analysts this month they could be open to dealing their stakes, which are not core to their main businesses.
Diamondback’s Kaes Van’t Hof said a sale could form part of efforts by the company to raise $1.5 billion from divestments, and Kinetik’s Jamie Welch said it could sell “if someone shows up with the right number”.
In September last year, the pair announced they were buying 30% of the pipeline from EPIC Midstream for an undisclosed price. This bumped their total ownership to 55%.
Any deal is expected to value EPIC Crude between $2.5 billion and $3.5 billion including debt, the sources estimated.
One of the sources noted that, to achieve the top end of the valuation range, EPIC Crude would need to strike contracts with oil producers that would allow it to green-light its expansion.
EPIC Crude can be expanded to carry up to 1 million barrels per day, and is one of the last readily expandable oil pipelines of scale left in the Permian, according to its website.
As well as more than 700 miles of pipeline, running primarily from Orla, Texas, to the port of Corpus Christi, EPIC Crude has around 6.8 million barrels of storage capacity.
EPIC Midstream was formed by Ares in 2017 to develop and operate midstream infrastructure in Texas. As well as the crude pipeline, the portfolio company built a natural gas liquids system which was sold in April for $2.2 billion to Phillips 66.
(Reporting by David French in New York and Arathy Somasekhar in Houston; Editing by David Gregorio)