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Enbridge agreed to acquire the Tres Palacios gas storage facility in Texas for $335 million
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Enbridge, a Canadian company operating in the midstream sector, has recently acquired the Tres Palacios natural gas storage facility in Matagorda County, Texas for $335 million. This acquisition was made through a deal with Crestwood Equity Partners LP and Brookfield Infrastructure Partners and will add approximately 35 Bcf of Gulf Coast natural gas storage to Enbridge's portfolio.
Located in Markham, Texas, Tres Palacios is a natural gas storage facility that uses salt caverns for storage. It comprises three storage caverns with a working gas capacity of approximately 35 Bcf and is currently in the process of obtaining permits for a fourth storage cavern that would add another 6.5 Bcf of capacity. According to regulatory filings, the facility has a maximum injection rate of 1 Bcf/d and a maximum withdrawal rate of 2.5 Bcf/d.
Tres Palacios possesses a gas header pipeline system that spans 62 miles and links to 11 major gas pipelines, including Enbridge's Texas Eastern Pipeline. Nonetheless, Crestwood Equity Partners LP revealed its intention to divest interests in Tres Palacios during the earnings report on February 21. The transaction is slated to be completed in the second quarter.
Expanding Through Non-Core Asset Acquisition
In an effort to streamline its portfolio, Crestwood has been expanding into oil-rich areas like the Williston, Delaware, and Powder River basins, as stated by CEO Robert Phillips in the company's Q4 earnings report. As part of this strategy, Crestwood has been divesting non-core and gas-focused assets in shale formations such as Barnett and Marcellus.
Crestwood owns a 50.1% equity interest in the Tres Palacios joint venture, with Brookfield holding the remaining 49.9%. Crestwood is set to receive approximately $168 million from the sale of its stake in Tres Palacios, which will be used to reduce its debt.
Enbridge has been capitalizing on the trend of companies divesting non-core midstream assets since the summer of 2022. One example of this is Enbridge's acquisition of Diamondback Energy Inc.'s 10% equity interest in the Gray Oak Pipeline in January. This pipeline connects crude oil from the Permian Basin and Eagle Ford Shale to various destinations along the Texas Gulf Coast.
The company has been expanding its stake in the Gray Oak Pipeline since August 2022 when it boosted its interest from 22.8% to 58.5% through a joint venture merger transaction with Phillips 66. Enbridge's stake increased further to 68.5% after it acquired the additional 10% interest from Diamondback.
In the second quarter of 2023, Enbridge will take over the operatorship of the pipeline. The company's recent acquisitions and expanded ownership of the Gray Oak Pipeline demonstrate its strategy of investing in core midstream assets to support its long-term growth.
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From Beginnings to a $7.1 Billion Milestone: Deal-Making Histories of Energy Transfer and Crestwood - Complex Review by Rextag
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Energy Transfer's unit prices have surged over 13% this year, bolstered by two significant acquisitions. The company spent nearly $1.5 billion on acquiring Lotus Midstream, a deal that will instantly boost its free and distributable cash flow. A recently inked $7.1 billion deal to acquire Crestwood Equity Partners is also set to immediately enhance the company's distributable cash flow per unit. Energy Transfer aims to unlock commercial opportunities and refinance Crestwood's debt, amplifying the deal's value proposition. These strategic acquisitions provide the company additional avenues for expanding its distribution, which already offers a strong yield of 9.2%. Energized by both organic growth and its midstream consolidation efforts, Energy Transfer aims to uplift its payout by 3% to 5% annually.
US Midstream Research 2022 Overview: TOP Providers, Their Assets and Stories
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The midstream sector plays a vital role in the oil and gas supply chain, serving as a crucial link. As the energy transition continues, this industry, like the broader sector, encounters various risks. Yet, existing analyses have predominantly concentrated on the risks faced by the upstream and downstream sectors, leaving the fate of the midstream relatively unexplored. In a nutshell, midstream operators differentiate themselves by offering services instead of products, resulting in potentially distinct revenue models compared to extraction and refining businesses. However, they are not immune to the long-term risks associated with the energy transition away from oil and gas. Over time, companies involved in transporting and storing hydrocarbons face the possibility of encountering a combination of reduced volumes, heightened costs, and declining prices.
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Rangeland Energy has agreed to sell Rangeland Midstream Canada to Kingston Midstream Alberta and remains committed to future Canadian midstream investments. Texas-based Rangeland Energy, supported by financial partner EnCap Flatrock Midstream, has inked a deal to sell its Canadian subsidiary, Rangeland Midstream Canada Ltd., to Calgary's Kingston Midstream Alberta Ltd. for cash.
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The merger between ONEOK and Magellan received approval from Magellan shareholders, securing just 55% of the total votes at Magellan’s meeting on Sept. 21. ONEOK Inc. has successfully concluded the acquisition of Magellan Midstream Partners LP on Sept. 25. The deal will bring together their respective assets and expertise, resulting in a powerful entity boasting an extensive network of approximately 25,000 miles of pipelines primarily focused on transporting liquids.
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Viper Energy's deal, comprised of cash and equity, secures an additional 2,800 net royalty acres in the Midland Basin and 1,800 in the Delaware Basin. Viper Energy Partners LP, a Diamondback Energy Inc. subsidiary, has inked a deal to acquire mineral and royalty interests in the Permian Basin. The deal, valued at around $1 billion, is with Warwick Capital Partners and GRP Energy Capital. Viper was established by Diamondback with the purpose of owning, purchasing, and capitalizing on oil and natural gas assets in North America, specifically targeting mineral and royalty interests.