ONEOK Buys Brazos Midstream Permian Assets for $4.425B

ONEOK, Inc. is significantly expanding its Permian Basin operations through a definitive agreement to acquire Brazos Midstream's natural gas gathering and processing assets for $4.425 billion. This strategic move is set to enhance ONEOK's integrated infrastructure network, particularly in the highly productive Midland Basin region.

The substantial acquisition will be financed by a $9 billion non-voting minority equity investment from funds managed by Apollo Global Management. A key component of this transaction involves ONEOK earmarking $5 billion of these proceeds to retire existing debt. This deleveraging strategy is projected to swiftly reduce the company's pro forma leverage to approximately 3.25 times debt-to-EBITDA by 2027, a move that bypasses the need for common equity issuance and strengthens the balance sheet considerably.

This acquisition is anticipated to accelerate ONEOK's adjusted EBITDA growth trajectory, pushing it towards the higher end of its mid- to high-single-digit target range over the next five to seven years. Furthermore, the enhanced financial flexibility stemming from the deleveraging and equity infusion is expected to unlock greater capital allocation opportunities, including potential dividend increases and share repurchases, thereby boosting shareholder returns.

The acquired Brazos Midstream assets represent a premier Permian Midland Basin platform, underpinned by long-term, fee-based contracts covering approximately 600,000 dedicated acres. With a weighted average remaining contract term exceeding 12 years and support from major producers like ExxonMobil, Diamondback Energy, and Double Eagle, the system offers robust visibility into future volume expansion. The transaction implies an approximate 7.5x multiple of estimated 2027 EBITDA, factoring in synergies, and a 6.0x multiple for estimated 2028 EBITDA, reflecting anticipated growth and integration benefits.

ONEOK President and CEO Pierce H. Norton II highlighted the transaction's alignment with the company's strategy to expand its integrated energy infrastructure. He emphasized that the new assets bolster ONEOK's scale in the Permian, advance its wellhead-to-water strategy, and fortify its natural gas and NGL value chain connectivity. This integration is crucial for capturing significant volume growth in one of North America's most economically viable and rapidly expanding resource plays.

Apollo Partner Jamshid Ehsani commented on the deal, noting ONEOK's established position in midstream infrastructure. He stated that this transaction exemplifies Apollo's capacity to deploy large-scale, adaptable capital solutions tailored to support ONEOK's long-term strategic objectives. The structure of the minority equity investment, with an internal rate of return capped at 7.0% for the initial nine years, is designed to enhance economic value for ONEOK's common shareholders as distributions exceed this cap.