ONEOK (OKE) is acquiring EnLink Midstream (ENLC) for $3.3B. The purchase will move the needle in several ways for the company: ENLC assets will bridge a big contract cliff, establish a G&P presence in the Permian, and give OKE scale and upside in several basins.
OKE announced the EnLink acquisition last Wednesday night (August 28) as part of a total $5.9B of dealmaking, including the $2.6B purchase of Medallion Midstream. East Daley Analytics will review the Medallion deal in a future Daley Note – clients have already received our perspective in the weekly Data Insights.
In the case of EnLink, OKE will acquire GIP’s 43% limited partner stake in ENLC and 100% of the general partner (GP) interest for $3.3B. OKE intends to acquire the remaining public units of ENLC in a tax-free transaction to fully bring in the company.
EDA called out EnLink Midstream (ENLC) as a likely acquisition target in our Dirty Little Secrets annual report last December. We also recommended an OKE-ENLC tie-up several weeks ago.*
In the Financial Blueprints, we currently expect ENLC to earn $1,480MM for 2025, 5% above consensus estimates of $1,416MM. That implies a pre-synergy multiple of 8.8x (vs. 9.2x consensus) and synergies of $100-150MM. The clearest of those synergies is ENLC’s ~$120MM in annual SG&A costs and a reduction in its ~$100MM of interest and preferred distributions.
On the commercial side, the most obvious synergy is ENLC’s 150-200 Mb/d of Permian NGLs that become uncontracted in 3-4 years. East Daley highlighted these as an easy way for OKE to secure volumes on its West TX NGL pipeline. We expect ENLC already sends half these NGLs to OKE anyway, but even the remaining 75 Mb/d uplift could result in an additional ~$50MM in annual EBITDA.
ENLC also gives OKE its first G&P assets based in the Permian Basin, filling a big hole in its midstream portfolio. In Energy Data Studio, East Daley has been tracking 17-21 rigs in August between EnLink’s Delaware and Midland G&P systems.
Outside the Permian, EnLink also boosts ONEOK’s Midcon G&P position. We expect limited synergies on the NGL side as ENLC primarily ships on OKE’s pipelines already, but the additional scale in the basin could allow OKE to attract new customers and ship additional purity products on the refined products system it acquired via Magellan (MMP). ENLC’s Oklahoma assets also provide some upside if higher gas prices result in increased activity in the basin.
An underappreciated component of ENLC could be its Louisiana assets. ENLC helps position OKE to take advantage of higher Haynesville production and LNG demand growth. Both companies are expanding natural gas storage, and rates on those assets have been increasing dramatically. ENLC also runs a carbon sequestration project using its pipeline network in the Mississippi River corridor, giving OKE exposure to an emerging area for investment.
Using East Daley’s Peer Comparison Tool in Energy Data Studio, clients can easily review what the combined OKE-ENLC will look like in 2025 (excluding the privately held Medallion assets) and compare to peers, including comparisons by EBITDA and Capex. An EBITDA breakdown of OKE-ENLC is shown in the picture. – Ajay Bakshani, CFA Tickers: ENLC, MMP, OKE.
* East Daley Consulting played no role in either the OKE-ENLC or Medallion Midstream deals.
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