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Just the Two of Us, Part 2 - Permian Midstreamers Consolidate as Basin Production Rebounds

The Permian has been a leader in domestic oil and gas production for decades but the Shale Revolution made it a global superstar. In the past few years, thousands of miles of new crude oil, associated gas, and produced-water gathering systems have been installed in West Texas and southeastern New Mexico, as have dozens of new gas processing plants and a number of new takeaway pipelines for oil, gas, and NGLs. Lately, there has also been a lot of consolidation among Permian midstream companies, mostly with the aims of increasing scale, improving reliability, and directing more hydrocarbons through the combined companies’ gathering, processing, and takeaway assets. In today’s RBN blog, we continue our review of recent, major pipeline-company combinations in the Permian and the benefits participants expect to realize from them.

As we said in Part 1, the U.S. oil and gas industry’s upstream sector has seen more than its share of mergers and acquisitions since COVID-19 put energy markets on a wild roller coaster. And it hasn’t been just producers that are joining forces. There’s also been a flurry of large-scale M&A activity in the midstream sector, mostly involving oil and gas gatherers in the Permian and the Bakken — the nation’s two largest crude oil-focused basins. There has been a common theme among these deals, namely that midstreamers were scaling back on their capital spending and instead focusing on improving the efficiency of existing operations by teaming up with those with adjoining, complementary assets. One example is the plan by Plains All American and Oryx Midstream to contribute assets to a new, Plains-operated crude oil pipeline joint venture in the heart of the Permian’s Delaware Basin. Another is the recently announced 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 Delaware.

The Delaware Basin is also front-and-center in the planned merger of Altus Midstream and BCP Raptor Holdco LP, the corporate parent of EagleClaw Midstream — the focus of today’s blog. The combination, unveiled by the companies in late October and expected to close in the first quarter of 2022, will form the largest integrated midstream company in the Delaware, 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. Before we discuss those assets in more detail, we’ll provide a brief overview and history of EagleClaw and Altus.

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