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Midstream Giant Kinetik Launches $1.3B M&A to Acquire Durango in the Delaware Basin
05/15/2024
Kinetik Holdings recently announced a series of transactions in the energy sector. They struck a deal to buy Durango Permian infrastructure for $765 million. At the same time, they're selling their 16% share in the Gulf Coast Express Pipeline to ArcLight Capital Partners for $540 million. The total purchase cost includes $510 million in cash paid immediately and an additional $30 million that will be paid later, depending on whether they decide to expand further.
The Durango deal and the new service contract in Eddy County will also give Kinetik complete control over the plant's products, including over 350 MMcf/d of gas and more than 60,000 barrels per day of natural gas liquids.
Jamie Welch, Kinetik’s president and CEO, said these actions represent a new investment of about $1 billion for the company. He noted, "With the Durango purchase and after finishing Kings Landing, Kinetik will manage over 2.4 billion cubic feet per day of processing capacity and about 4,600 miles of pipelines in the Delaware Basin."
The deal with Durango will boost Kinetik’s operations in the northern Delaware Basin. They're paying $315 million in cash and giving out 11.5 million shares of their Class C common stock. Some of this payment will be made later, in July 2025, to the seller, Morgan Stanley Energy Partners.
Durango’s assets are substantial. They include around 2,400 miles of gas gathering pipelines and about 220 million cubic feet per day of processing capacity in Eddy, Lea, and Chaves counties in New Mexico. Plus, this acquisition brings over 60 new customers to Kinetik.
Kinetik’s purchase of Durango includes a $75 million payment that depends on the construction costs of the Kings Landing complex, which is currently being built in Eddy County and set to be completed in April 2025. This new facility will increase Durango’s capacity to 420 MMcf/d.
Additionally, Kinetik has signed a 15-year contract to manage gathering and processing services in Eddy County, costing about $200 million for infrastructure to be built by 2026.
These deals are expected to significantly increase Kinetik’s cash flow starting in the second half of 2025, which will also lead to greater returns for shareholders.
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