Diamondback Energy (FANG) and Kinetik Holdings (KNTK) have acquired a joint 30% equity stake in EPIC Crude pipeline. The seller was not disclosed, but East Daley Analytics believes Chevron (CVX) sold its 30% stake inherited via the acquisition of Noble and Noble Midstream in 4Q20. The new owners have committed more volumes to EPIC, the last Permian crude oil pipeline with upside for expansion.
FANG and KNTK announced the deal last Wednesday (September 25) for the 30% interest in EPIC Crude, an affiliate of EPIC Midstream. Each company now holds 27.5% of the pipeline, with EPIC Midstream retaining a 45% share.
EPIC Crude spans 800 miles and connects the Permian and Eagle Ford basins to Corpus Christi, the premiere destination for crude exports. EPIC has a stated capacity of 600 Mb/d, yet the pipe transported 622 Mb/d in July ’24, according to East Daley’s Crude Hub Model. EPIC is likely using drag-reducing agents to flow above its stated nameplate capacity. The pipeline is expandable up to 1 MMb/d.
Under the deal, Diamondback will convert its existing commitments on EPIC Crude to a larger 200 Mb/d minimum volume commitment (MVC) from 2025 to 2035. The 10-year MVC represents over 33% of EPIC Crude’s current capacity. The acquisition solidifies FANG’s position in the Permian Basin following its $26B acquisition of Endeavor Energy Resources, providing more capacity to accommodate additional barrels.
Separately, Kinetik reached a transportation agreement with EPIC Crude to build a new interconnect with its crude gathering system. Although KNTK’s core business is in natural gas gathering and processing, KNTK’s stake would allow it to bundle services and potentially attract new customers.
While the transaction value was not publicly disclosed, EDA anticipates the deal fetched a high multiple of ~10x EV/EBITDA, given the premier destination market, utilization rate, and that 90% of EPIC Crude’s capacity is secured under MVCs. According to the KNTK Financial Blueprint, trailing twelve month EBITDA as of 2Q24 was $281MM, implying a value of $2,810MM (including any debt at the pipeline). Thus, the 30% stake would net to a $843MM transaction value including any assumption of debt (see table for recent Permian oil asset deals). – Gage Dwan Tickers: CVX, FANG, KNTK.
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