LNG

Energy Transfer, the owner of pipeline and other assets in the Permian Basin and other shale basins in the Gulf Coast states as well as the Cushing crude oil delivery system and with a currently stalled LNG export project at Lake Charles, has signed a deal to acquire WTG Midstream for $3.25 billion in cash and shares.

The latest US oil and gas acquisition comes in the busiest year on record for US mergers and acquisitions numbering more than a dozen in the past 12 months and involving energy majors like ExxonMobil Corp. and Chevron Corp. as well as second-rung operators.

Energy Transfer said it was buying WTG Midstream from affiliates of US assets manager Stonepeak, the Davis Estate and Midland, Texas-based Diamondback Energy.

Transaction terms

The total consideration for the transaction will comprise $2.45Bln in cash and around 50.8 million newly issued Energy Transfer common units.

The transaction is expected to close in the third quarter of 2024, subject to regulatory approval and customary closing conditions.

Energy Transfer, based in Dallas, Texas, said that WTG provided comprehensive midstream services including wellhead gathering, intra-basin transportation and processing services.

“The company’s 6,000-mile pipeline network serves significant operators in some of the most active areas of the Midland Basin including Martin, Howard, Upton, Reagan and Irion counties,” said a statement on the deal.

WTG also operates eight processing plants with a total capacity of around 1.3 billion cubic feet per day and is constructing two new plants with an additional capacity of 0.4 Bcf per day.

The first new plant is expected to be in service in the third quarter of 2024 and the second plant the third quarter of 2025.

Huge portfolio

Energy Transfer currently owns and operates one of the largest portfolios of energy assets in the US comprising more than 125,000 miles of pipeline and associated energy infrastructure.

The company’s strategic network spans 44 states with assets in all of the major US production basins.

Energy Transfer’s acquisition also includes a 20 percent interest in BANGL Pipeline, a 425-mile Natural Gas Liquids pipeline with an initial capacity of 125,000 barrels per day, expandable up to more than 300,000 barrels per day and connecting the Permian Basin to markets on the Texas Gulf Coast.

“The company benefits from well positioned assets in the Permian which is the most active region in the US and this acquisition is expected to provide future upside as the basin continues to develop on and around Energy Transfer’s infrastructure,” explained the company.

RBC Capital Markets is serving as financial advisor to Energy Transfer, and Vinson & Elkins LLP is acting as Energy Transfer’s legal counsel on the transaction.

Jefferies LLC is serving as financial advisor to WTG and Sidley Austin LLP is acting as WTG’s legal counsel.

Energy Transfer, the US pipeline owner and shareholder with Royal Dutch Shell in the Lake Charles liquefied natural gas export project, reported solid fourth-quarter results as the LNG venture makes more progress.

The Dallas, Texas-based company said fourth-quarter net income attributable to partners amounted to $1.01 billion, primarily due to higher operating income.

It reported adjusted gross earnings of $2.81 billion, up 5 percent from the fourth quarter of 2018.

Energy Transfer said that among the quarterly highlights was the announcement in December 2019 with Shell US LNG of a comprehensive commercial tender package for engineering, procurement and construction contractors to submit final commercial bids.

“The proposed Lake Charles LNG liquefaction project being jointly developed by Energy Transfer and Shell on a 50-50 basis would modify Energy Transfer’s existing LNG import facility in Lake Charles, Louisiana to add LNG liquefaction capacity of 16.45 million tonnes per annum for export to global markets,” the company explained.

Energy Transfer also noted that in October 2019 that the Permian Express pipeline expansion went into full service.

The Lake Charles facility was the longest-serving US import terminal before the shale-gas boom and previously imported cargoes from Trinidad and Equatorial Guinea.

Under the transformation, Lake Charles will become an export facility and the successful EPC bidder is expected to be chosen after the second quarter of 2020.

The commercial tender focused on the technical scope of the project, specifically verifications of the engineering and design of the liquefaction facility.

Energy Transfer sees the Lake Charles project would capitalizes on “repurposing” the existing brownfield regas assets to achieve cost savings in the construction of the liquefaction facility.

It added that the project would also benefit from the unique strength of Energy Transfer as a leading natural gas pipeline operator with extensive connectivity to the Lake Charles facility.

Energy Transfer and Shell have signed a framework agreement designating Shell as the project leader and as construction manager and operator of Lake Charles LNG.

The Federal Energy Regulatory Commission has authorized a deadline for the Lake Charles plant to be completed by mid-December 2025.

Shell gained its stake in the Lake Charles facility from its takeover in 2015 of BG Group of the UK.

Energy Transfer began in 1995 as a small intra-state natural gas pipeline operator and is now one of the largest energy infrastructure firms in the US.

Lake Charles would be Shell's largest liquefaction foothold in North America, rivalling its LNG Canada joint venture in the province of British Columbia.