HomeFinance NewsOneok to purchase Magellan Midstream in $19bn US pipeline deal

Oneok to purchase Magellan Midstream in $19bn US pipeline deal

US pipeline big Oneok is about to purchase Magellan Midstream Companions for $18.8bn, creating one of many largest oil and fuel infrastructure corporations in North America as consolidation within the hydrocarbon enterprise beneficial properties tempo.

The deal, introduced on Sunday, will create an organization with an enterprise worth of $60bn and a sprawling 25,000-mile community of pipelines stretching from North Dakota to Texas.

Pierce Norton, Oneok chief government, described the transaction as “transformational”.

“The mix of Oneok and Magellan will create a diversified North American midstream infrastructure firm with predominately fee-based earnings, a powerful steadiness sheet and vital monetary flexibility centered on delivering important vitality services to our clients and continued sturdy returns to buyers,” he stated.

The deal comes as a cash-rich US oil and fuel sector seems to be to choose up dealmaking after a prolonged dry spell. It’ll give gas-focused Oneok a giant foothold within the crude and refined merchandise market, which the corporate stated would guarantee “steady money flows by means of numerous commodity cycles”.

The shale revolution, which turned the US into the world’s largest producer of each oil and fuel, has begun to fade as Wall Road calls for operators concentrate on shareholder returns over limitless drilling campaigns, making mergers and acquisitions one of many few methods to increase their footprint.

There have been a handful of big-ticket offers struck late final yr. Diamondback and Marathon Oil shelled out $3bn apiece to accumulate land within the Permian and Eagle Ford basins. One other roughly $5bn price of offers was performed throughout the sector in January, together with Matador Assets’ buy of personal equity-backed Permian driller Advance Power for $1.6bn.

Bankers and attorneys have forecast a “wave” of consolidation amongst drillers and pipeline operators this yr as shale corporations attempt to eke out beneficial properties in a sector that could be coming into an period of decrease development.

“To me, it signifies a return to fewer bigger corporations controlling the US oil and fuel enterprise,” stated Andrew Gillick, a managing director at consultancy Enverus. “Consolidation within the twilight of shale is smart.”

New pipeline initiatives have change into more and more troublesome to construct in recent times as they’re dragged by means of prolonged authorized challenges within the courts. Lawmakers in Washington are at the moment seeking to thrash out an overhaul of the clunky allowing course of. 

“Everybody constructed out the pipeline infrastructure for the shale revolution,” stated Raoul LeBlanc, vice-president of North American upstream at S&P International Commodity Insights.

“Now that shale is in harvest mode and it’s practically not possible to construct new pipelines, it’s not shocking to see massive mergers going down — interval. Anticipate extra.”

Magellan shareholders will obtain $25 money and 0.67 Oneok shares for every unit of inventory they maintain, representing a 22 per cent premium to the corporate’s closing value on Friday.

“We imagine the premium supplied maximises worth creation for Magellan’s unit holders and displays the important nature of Magellan’s belongings and repair choices,” stated Aaron Milford, Magellan chief government.

The deal, which has been unanimously authorised by the boards of each corporations, is anticipated to shut within the third quarter of the yr.

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