Dealmakers in the midstream sector had a busy 2019, and there are indications that the trend could continue this year. Like the E&P sector, midstream companies have increasingly faced headwinds from the investment community due to perceived lop-sidedness in the risk/reward equation. This squeeze, paired with other financial factors such as limited interest from the debt markets, has resulted in depleted coffers that have partially hamstrung growth prospects. As a result, private money has moved into the sector and may fuel additional deals going forward.
According to S&P Global, midstream acquisition deal values almost doubled to $27.8 billion in the first five months of 2019 compared to the same period the previous year. The movers in the space were mostly private-equity concerns looking to secure positions in the less-volatile infrastructure plays required to move record amounts of production out of places like the Permian and Eagle Ford basins in Texas.
Blackstone Infrastructure Partners LP’s multibillion-dollar pursuit of Tallgrass Energy LP netted the company’s private portfolio a growth-oriented midstream energy company specializing in moving oil and gas from the Rocky Mountains and the upper Midwestern and Appalachian regions into major demand markets. Stonepeak Infrastructure Partners, an infrastructure-focused, private-equity firm with over $15 billion of assets under management, snapped up Oryx Midstream Services LLC for $3.6 billion. The deal covered a robust pipeline network in the Permian.