DALLAS - Energy Transfer LP (NYSE: NYSE:ET) has entered into a definitive agreement to acquire WTG Midstream Holdings LLC for approximately $3.25 billion. The transaction includes a mix of cash and equity, with Energy Transfer paying $2.45 billion in cash and issuing around 50.8 million of its common units to the sellers, which consist of affiliates of Stonepeak, the Davis Estate, and Diamondback (NASDAQ:FANG) Energy, Inc. The deal, subject to regulatory approvals and customary closing conditions, is slated to conclude in the third quarter of 2024.
WTG Midstream, a privately held company based in Midland, Texas, operates the largest private natural gas gathering and processing business in the Permian Basin's Midland Basin. The acquisition will add over 6,000 miles of gas gathering pipelines and eight gas processing plants with a combined capacity of approximately 1.3 billion cubic feet per day (Bcf/d) to Energy Transfer’s existing network.
Moreover, two more plants are under construction, which will contribute another 0.4 Bcf/d. The transaction also includes a 20% ownership interest in the BANGL NGL Pipeline, which connects the Permian Basin to Texas Gulf Coast markets.
The expanded infrastructure is anticipated to enhance Energy Transfer's operations and access to natural gas and natural gas liquids (NGLs) in the Permian Basin. The addition of WTG assets is expected to bring incremental revenue from downstream NGL transportation and fractionation fees, with an estimated increase in Distributable Cash Flow (DCF) by around $0.04 per common unit in 2025, growing to about $0.07 per common unit in 2027.
WTG's customer base, predominantly investment grade, supports the cash flows with an average contract life of more than eight years, indicating a stable and long-term revenue stream for Energy Transfer.
Energy Transfer's strategic network already spans 44 states, and this acquisition is poised to solidify its position in the U.S. energy infrastructure landscape. RBC Capital Markets and Vinson & Elkins LLP are advising Energy Transfer on the transaction, while Jefferies LLC and Sidley Austin LLP are advising WTG.
The information in this article is based on a press release statement.
InvestingPro Insights
As Energy Transfer LP (NYSE: ET) gears up to expand its footprint in the Permian Basin through the acquisition of WTG Midstream Holdings LLC, it's crucial to consider the company's financial health and market performance.
With a market capitalization of $52.03 billion and a price-to-earnings (P/E) ratio of 14.02, Energy Transfer presents itself as a significant player with a solid valuation in the Oil, Gas & Consumable Fuels industry. Notably, the adjusted P/E ratio for the last twelve months as of Q1 2024 stands at 13.31, reflecting a slight improvement in earnings valuation over time.
InvestingPro Tips highlight that Energy Transfer pays a significant dividend to shareholders, with a notable dividend yield of 8.23% as of mid-2024. This generous dividend yield is supported by the company's history of maintaining dividend payments for 19 consecutive years, showcasing a strong commitment to returning value to shareholders. Moreover, the stock generally trades with low price volatility, which may appeal to investors looking for stable investment options in the energy sector.
Revenue for the last twelve months as of Q1 2024 was reported at $81.22 billion, despite a -8.1% decline in revenue growth during the same period. However, quarterly revenue growth for Q1 2024 showed a positive turnaround at 13.87%. This suggests that while the company has faced some challenges, it is capable of achieving growth in its top-line figures.
For investors and analysts looking to delve deeper into Energy Transfer's potential, there are additional InvestingPro Tips available at: https://www.investing.com/pro/ET. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. Currently, there are 6 more tips listed on InvestingPro that could provide further insights into the company's performance and outlook.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.