ONEOK Expands Energy Portfolio with $5.9 Billion Acquisition of EnLink and Medallion Midstream"

ONEOK, Inc. (NYSE: OKE) has announced a transformative acquisition strategy, entering into agreements to purchase Global Infrastructure Partners’ (GIP) stakes in EnLink Midstream and Medallion Midstream for a combined $5.9 billion. This strategic move is poised to significantly enhance ONEOK’s footprint in the energy sector, particularly in the Permian Basin, and solidify its position as a leading player in energy infrastructure.

Acquisition Details

Under the definitive agreements, ONEOK will acquire GIP’s 43% interest in EnLink Midstream, LLC (NYSE: ENLC), valued at approximately $3.3 billion. This includes $14.90 per unit for EnLink’s common units and a $300 million acquisition of GIP’s stake in EnLink’s managing member. In addition, ONEOK will acquire Medallion Midstream, LLC for $2.6 billion. Medallion operates as the largest privately held crude gathering and transportation system in the Permian Basin’s Midland region.

CEO’s Perspective

Pierce H. Norton II, ONEOK’s President and CEO, expressed enthusiasm about the acquisitions, highlighting how they align with the company’s strategic goals. “ONEOK has always been intentional about building a premier energy infrastructure company,” Norton said. “These transactions further solidify that status by adding complementary assets that expand our value chain and increase our presence in the Permian Basin, which is crucial for U.S. oil and gas growth.”

Norton also emphasized the benefits of the acquisitions, including the anticipated synergies and value creation for stakeholders. “We look forward to integrating these assets and welcoming the employees of EnLink and Medallion to ONEOK,” he added.

Strategic Rationale

The acquisitions are expected to provide ONEOK with several key advantages:

• Enhanced Permian Basin Presence: The purchase of Medallion Midstream will integrate 1.6 million barrels per day of crude gathering capacity and 1.7 billion cubic feet per day of Permian gas processing capacity into ONEOK’s existing infrastructure. This move is designed to capitalize on the robust growth anticipated in the Permian Basin.
• Expanded Footprint: The acquisition of EnLink Midstream will enhance ONEOK’s existing gas and natural gas liquids (NGL) platform in Oklahoma, North Texas, and Louisiana. This includes 220,000 barrels per day of NGL fractionation capacity and approximately 4 billion cubic feet per day of natural gas pipeline capacity.
• Financial and Operational Synergies: ONEOK expects to achieve annual synergies of $250 million to $450 million within three years from integrating Medallion and EnLink. The transactions are projected to be immediately accretive to ONEOK’s earnings per share (EPS) and free cash flow (FCF), supporting the company’s capital allocation strategy and share repurchase program.
• Strengthened Credit Profile: After completing the transactions, ONEOK anticipates a pro forma 2025 year-end net debt-to-EBITDA ratio of approximately 3.9 times, with expectations to improve towards 3.5 times by 2026.

Transaction Details

The $300 million component of the EnLink acquisition covers GIP’s entire interest in the managing member of EnLink. The $3.0 billion purchase of EnLink’s common units represents a 12.8% premium over EnLink’s closing market price as of August 27, 2024. Following the completion of this transaction, EnLink will be consolidated into ONEOK’s financial statements.

ONEOK also plans to pursue the acquisition of EnLink’s publicly held common units in a tax-free transaction. This consolidation is expected to enhance synergies, reduce leverage, and increase value for ONEOK shareholders.

Financing and Advisors

ONEOK has secured financing commitments of up to $6.0 billion from JPMorgan Chase Bank, N.A. and Goldman Sachs Bank USA to fund these acquisitions. The transactions have been unanimously approved by ONEOK’s board of directors and are expected to close early in the fourth quarter of 2024, subject to customary closing conditions and regulatory approvals.

Goldman Sachs & Co. LLC is serving as the lead financial advisor to ONEOK for both transactions, with J.P. Morgan Securities, LLC and BofA Securities also advising on the Medallion transaction. Kirkland & Ellis LLP is providing legal counsel to ONEOK.

Conference Call and Further Information

ONEOK will host a conference call on Thursday, August 29, 2024, at 8:30 a.m. Eastern Daylight Time to discuss the transactions. Interested parties can access the call via telephone or webcast on ONEOK’s website. A replay of the call will be available for one year on ONEOK’s site and by phone for seven days.

About ONEOK

ONEOK, headquartered in Tulsa, Oklahoma, is a leading midstream operator in North America, offering gathering, processing, fractionation, transportation, and storage services. The company operates an extensive pipeline network that supports the transportation of natural gas, NGLs, refined products, and crude oil.

About Global Infrastructure Partners (GIP)

Global Infrastructure Partners is a major infrastructure investor with a focus on energy, transport, digital infrastructure, and water and waste management sectors. GIP manages approximately $115 billion in assets and operates globally with a strong portfolio of infrastructure assets.