The energy market dislocations of the COVID era have accelerated consolidation in the midstream sector as oil and gas gatherers — and gas processors — in the Permian and other basins seek greater scale, improved reliability, and the potential to direct more hydrocarbons through their takeaway pipelines. New evidence of this trend came just last week, when Enterprise Products Partners announced it has agreed to acquire privately held Navitas Midstream Partners, a fast-growing gas gatherer and processor in the Permian’s Midland Basin, for $3.25 billion. As we discuss in today’s RBN blog, the acquisition will give Enterprise its first gas gathering and processing assets in the heart of the Midland and may boost volumes on its residue-gas and NGL pipelines there.
As we said in Part 1 of this blog series, there has been a flurry of large-scale M&A activity in the midstream sector since the start of the pandemic — and the collapse and subsequent recovery of oil and gas markets — back in 2020. There has been a common theme among these deals, namely that midstreamers were scaling back capital spending and instead focusing on improving the efficiency of existing operations by teaming with others that held adjoining, complementary assets — or that gave the acquiring firm a strong foothold in a highly desirable production area. We also discussed the plan by Crestwood Equity Partners to acquire Oasis Midstream, a combination that will give Crestwood more scale and sway in both the Bakken and the Permian’s Delaware Basin. In Part 2, we looked at the planned merger of Altus Midstream and BCP Raptor Holdco LP, the corporate parent of EagleClaw Midstream. That deal, which like the Crestwood-Oasis Midstream combination is expected to close in the first quarter of 2022, will form the largest integrated midstream company in the Delaware Basin, with an extensive network of crude, gas, and produced water gathering systems, about 2 Bcf/d of gas processing capacity, and ownership interests in four recently completed takeaway pipelines.
Today, we turn our attention to another major midstream deal, this one involving Enterprise, one of the largest U.S. midstreamers, and Navitas Midstream, which over the past seven years has built out a now-massive and flexible hub-and-spoke network of gas gathering pipelines and processing plants in what may be the absolute core of the Midland.
Before we get to the details, we should note that Permian natural gas production has more than doubled over the past four years and now tops 14 Bcf/d. In our recently posted 2022 outlook, we forecast Permian production exceeding 15 Bcf/d by the end of this year. To keep pace with that growth, the midstream sector has spent many billions of dollars on new gas gathering systems, processing plants, and gas and NGL pipelines, with virtually all of that investment backed by long-term commitments from producers and other market players. Thanks to that build-out, the Permian now has sufficient takeaway capacity, at least for another year or two — a topic we discussed recently in our Up Around the Bend series.
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