Energy Transfer has agreed to acquire Lotus Midstream Operations, a midstream operator in the Permian Basin, US, from an affiliate of EnCap Flatrock Midstream (EFM) in a cash and stock deal worth around $1.45bn.
As per the terms of the deal, the consideration has a cash component of $900m, while the remaining amount will be paid in the form of around 44.5 million newly issued shares of Energy Transfer.
The Sugar Land, Texas-based Lotus Midstream is the owner and operator of Centurion Pipeline, which is an integrated, crude midstream platform.
The crude oil gathering and transportation system connects the production from the Permian Basin to Cushing and Gulf Coast markets.
Its network comprises nearly 4,828km of crude oil gathering and transportation pipelines that stretch from southeast New Mexico across the Permian Basin in West Texas to Cushing, Oklahoma. It is said to cover key production areas of the Permian Basin with nearly 1.5 million barrels per day of capacity.
Lotus Midstream originally partnered with EnCap Flatrock Midstream in 2018. The latter is the midstream company’s financial sponsor.
In 2018, the midstream operator acquired the Centurion Pipeline and Southeast New Mexico (SENM) crude gathering systems.
Lotus Midstream’s midstream services include wellhead gathering, terminalling, intra-basin transportation, and long-haul transportation services.
The company’s Midland Terminal provides a crude oil storage capacity of two million barrels alongside additional supply and demand connectivity.
The deal also includes Lotus Midstream’s stake of 5% in the 1,046km long Wink to Webster Pipeline. The midstream asset can carry over one million barrels per day of crude oil and condensate drawn from the Permian Basin to the Gulf Coast.
Lotus Midstream CEO Mike Prince said: “We are thankful for the opportunity provided by EnCap Flatrock to have grown and developed Centurion Pipeline.
“We have had the good fortune to work alongside outstanding and dedicated people, who are responsible for Centurion’s collective success.”
For Energy Transfer, the acquisition will boost its presence in the Permian Basin, while giving increased connectivity for its businesses of crude oil transportation and storage.
Following the closing of the deal, Energy Transfer anticipates starting construction on a 48km long pipeline project that will enable the ability to the company and its customers to originate barrels from its Midland terminals for eventual delivery to Cushing.
The deal, which is subject to regulatory approval and customary conditions, is anticipated to close in Q2 2023.
