Kinetik Holdings, a $7.2 billion midstream company operating roughly 4,600 miles of pipeline in the Delaware Basin of western Texas and New Mexico, is considering a potential sale. This comes after receiving takeover interest from Western Midstream Partners, according to people familiar with the matter.
Increased Industry Activity
The potential sale process coincides with a natural gas boom in the US, fueled by record production, increased liquefied natural gas exports and demand from data centers. This has led to a rise in merger and acquisition activity as companies aim to expand capacity and secure gas reserves.
Kinetik began exploring a sale to gauge interest from both strategic and infrastructure buyers after Western Midstream’s approach in recent weeks. Discussions are currently in early stages, and no formal bid has been made.
Occidental, a major US oil and gas producer, holds approximately one-third of the stock in Western Midstream, a result of its $57 billion acquisition of Anadarko in 2019. Western Midstream would likely participate in any auction if a formal sale process moves forward.
Market Response
Shares in Kinetik have increased by 22 percent since the beginning of the year, reaching a market capitalization of $7.2 billion as of Wednesday’s close. The stock experienced an 11.1 percent jump in after-hours trading following reports of the potential takeover.
Andrew Gillick of Enverus noted the Delaware Basin is “one of the few remaining growth areas” and is experiencing a “growing thirst for natural gas in the Gulf coast.” Energy companies are investing nearly $50 billion in new pipelines over the next five years, with midstream companies planning to build or construct 8,800 miles of pipeline across the country.
Recent Deals
This potential deal follows a recent surge in oil and gas mergers. Earlier this month, Coterra Energy and Devon Energy agreed to combine, creating a $58 billion shale drilling giant. SM Energy also agreed to sell natural gas assets in South Texas for $950 million in cash. Last month, Mitsubishi Corporation acquired Aethon, the largest privately held US shale gas producer, for $7.5 billion.
Frequently Asked Questions
What is a midstream company?
Midstream companies manage the transportation, storage, and processing of oil and natural gas.
Where is the Delaware Basin located?
The Delaware Basin is located in western Texas and New Mexico.
What is Western Midstream’s connection to Occidental?
Occidental owns about a third of the stock in Western Midstream as a result of its 2019 acquisition of Anadarko.
How will the increasing demand for natural gas impact the energy sector in the coming years?
