ONEOK (OKE) will fully merge with EnLink Midstream (ENLC) after reaching an agreement to acquire the rest of ENLC’s public units for $4.3B. The latest move doesn’t come as a surprise, and will combine two portfolios with several opportunities for synergies.
In September, OKE acquired the 100% general partner interest and a 43% limited partner stake from GIP for $3.3B. OKE will acquire the remaining public units in a tax-free transaction to fully bring in the company, taking the total price for EnLink to ~$7.6B. OKE plans to issue ~37MM shares to complete the transaction.
East Daley likes the OKE-ENLC combo, and we laid out the case for upside when OKE struck the deal with GIP. EnLink provides OKE a foothold in the Permian Basin, helps bridge some near-term contract risk, and creates scale in several basins.
On the commercial side, ENLC has 150-200 Mb/d of Permian NGLs that become uncontracted in 3-4 years. EDA highlighted these previously 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 ~$50MM in additional annual EBITDA.
ENLC gives OKE its first G&P assets in the Permian, filling a big hole in its midstream portfolio. EnLink also boosts ONEOK’s Midcon G&P position, building scale that could help OKE attract new customers and ship additional purity products on the refined products system it acquired via Magellan Midstream (MMP). ENLC’s Oklahoma assets also provide some upside if higher gas prices spur more drilling in the basin.
ENLC’s Louisiana assets are also intriguing, and could position OKE to take advantage of higher Haynesville production and LNG demand growth. Both companies are pursuing natural gas storage projects, and rates on those assets have been increasing. 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 the Peer Comparison Tool in Energy Data Studio, clients can easily review the outlook for a combined OKE-ENLC 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.
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