DT Midstream has signed an agreement to purchase a portfolio of three interstate natural gas transmission pipelines in the US from ONEOK for $1.2bn.
The deal includes Guardian Pipeline, Midwestern Gas Transmission, and Viking Gas Transmission, which are all regulated by the US Federal Energy Regulatory Commission (FERC).
Collectively, these pipelines span approximately 2,092km and offer a combined capacity exceeding 3.7 billion cubic feet per day (Bcf/d).
The pipelines traverse seven states, primarily in the Midwest market region, which is projected to see sustained growth in power demand. The acquisition reflects a valuation multiple of approximately 10.5 times DT Midstream’s expected 2025 EBITDA.
Guardian Pipeline, a 418km interstate pipeline, connects DT Midstream’s Vector Pipeline and the Chicago Hub, serving critical demand centres in Wisconsin.
Midwestern Gas Transmission is a 644km bi-directional pipeline, which links Appalachia gas supply to the Midwest region. It also has an interconnection with Guardian Pipeline.
Viking Gas Transmission, the largest of the three at 1,086km, connects utilities in Minnesota, Wisconsin, and North Dakota with Canadian natural gas supplies at Emerson, Manitoba.
DT Midstream stated that the acquisition aligns with its focus on owning and operating natural gas infrastructure that connects prominent supply basins with key demand regions. Revenues generated by the pipelines are supported by take-or-pay contracts with a diverse base of creditworthy customers.
DT Midstream president and CEO David Slater said: “Expanding our scale through this bolt-on natural gas pipeline acquisition fully aligns with our pure play natural gas strategy. This transaction also increases the revenue contribution from our pipeline segment, supported by take-or-pay contracts with strong credit quality utility customers.”
Upon completion, ONEOK is expected to use the proceeds to enhance its financial flexibility and advance its deleveraging objectives. The company has previously announced a target leverage ratio of 3.5 times by 2026.
ONEOK president and CEO Pierce Norton II said: “This transaction will align and enhance our capital allocation priorities within our integrated operating footprint.
“DT Midstream is the ideal owner of these FERC-regulated interstate pipeline systems, with our employees sharing a similar culture of safety and reliability as they will continue to be excellent stewards of these assets providing essential natural gas transportation services.”
The transaction has received approval from DT Midstream’s board of directors and is anticipated to close by late 2024 or early 2025. The completion of the transaction is subject to regulatory approvals, including the conclusion or waiver of the waiting period required under the Hart-Scott-Rodino Act, along with other standard closing conditions.
Barclays is serving as a financial adviser to DT Midstream and has provided committed financing for the transaction. Weil, Gotshal & Manges is acting as legal counsel to DT Midstream.
