U.S. pipeline operator Kinder Morgan said on Nov. 6 it would acquire NextEra Energy Partners' gas pipelines in South Texas for $1.82 billion.
The oil and gas pipeline business has seen increased consolidation this year as U.S. production grows and persisting problems related to permits for new pipelines have made existing operators more valuable.
RELATED: NextEra Energy Aims to Sell Texas Pipeline Portfolio by Year’s End
NextEra Energy Partners' (NEP) Texas natural gas pipeline portfolio, STX Midstream, primarily consists of seven pipelines that provide natural gas to Mexico and power producers and municipalities in South Texas. The pipelines together have a transport capacity of 4.9 Bcf/d.
"Initially, we plan to fund the transaction with cash on hand and short-term borrowings," Kinder Morgan said in a statement. The deal is expected to close in first-quarter 2024.
Shares of NEP, a unit of NextEra Energy created to acquire, manage and own contracted energy projects, have lost about 44% of their value since Sept. 27 when the company trimmed its distribution growth forecast through at least 2026.
Higher interest rates have raised project costs for NEP, hurting its growth, according to analysts.
"Upon closing, the proceeds would be sufficient to pay off the outstanding project-related debt," NextEra Energy Partners' CEO John Ketchum said in a statement.
The sale price represents a 10x multiple on the estimated calendar year 2023 adjusted core profit for the Texas natural gas pipeline portfolio, NEP said.
"The valuation falls in line with recent trading multiples for midstream sector constituents and below some of the transaction marks," analysts at Guggenheim Securities said.
However, the deal provides some flexibility in credit metrics, the analysts added.
Recommended Reading
Utica’s Encino Boasts Four Pillars to Claim Top Appalachian Oil Producer
2024-11-08 - Encino’s aggressive expansion in the Utica shale has not only reshaped its business, but also set new benchmarks for operational excellence in the sector.
Exxon Plans Longest 20,000-Ft Wells on Pioneer’s Midland Asset
2024-11-04 - Exxon Mobil has already drilled some of the longest wells in the New Mexico Delaware Basin. Now, the Texas-based supermajor looks to go longer on Pioneer’s Midland Basin asset.
Analysis: Middle Three Forks Bench Holds Vast Untapped Oil Potential
2025-01-07 - Williston Basin operators have mostly landed laterals in the shallower upper Three Forks bench. But the deeper middle Three Forks contains hundreds of millions of barrels of oil yet to be recovered, North Dakota state researchers report.
As Rig Count Slips, Oil Production Keeps Growing
2024-10-22 - Despite the offshore rig market showing signs of demand slippage, oil production looks to be on the rise for the foreseeable future, Westwood analysts say.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.