Energy Transfer has agreed to acquire rival American midstream company WTG Midstream for a price of around $3.25bn from affiliates of Stonepeak, the Davis Estate, and Diamondback Energy.

The consideration is made up of $2.45bn in cash payment and issuance of nearly 50.8 million shares of the New York Stock Exchange (NYSE) listed Energy Transfer to the sellers.

WTG Midstream operates mainly in the Midland Basin of the Permian Basin. The company is engaged in providing wellhead gathering, intra-basin transportation, processing, and other midstream services.

Through its pipeline network that spans 9,656km, WTG Midstream caters to major operators in the Martin, Howard, Reagan, Upton, and Irion counties in the Midland Basin.

WTG Midstream additionally manages eight processing plants with a combined capacity of roughly 1.3 billion cubic feet per day (Bcf/d). Currently, the company is in the process of constructing two new plants, which will add an extra capacity of around 0.4Bcf/d.

The first new plant is slated for commissioning in Q3 2024, followed by the second plant in Q3 2025.

The acquisition of WTG Midstream will also give Energy Transfer a 20% stake in BANGL Pipeline, a roughly 684km long natural gas liquids (NGL) pipeline with an initial capacity of 125,000 barrels per day which is expandable to over 300,000 barrels per day.

The pipeline links the Permian Basin to markets on the Texas Gulf Coast.

Energy Transfer said that through the deal, it gains strategically located assets in the Permian Basin. The acquisition is anticipated to yield future benefits as the basin evolves while leveraging its existing infrastructure, said Energy Transfer.

Energy Transfer stated: “WTG’s extensive system processes significant volumes from large cap investment grade producers with firm, long-term contracts and acreage dedications.

“The addition of WTG assets is expected to provide Energy Transfer with increased access to growing supplies of natural gas and NGL volumes enhancing the partnership’s Permian operations and downstream businesses.”

Subject to receipt of regulatory approval and other conditions, the deal is anticipated to close in Q3 2024.

RBC Capital Markets is advising Energy Transfer financially, with legal counsel provided by Vinson & Elkins for the transaction. Jefferies is serving as financial advisor to WTG Midstream, accompanied by legal counsel from Sidley Austin.