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One of the biggest gas pipeline operators in the Delaware Basin is weighing a sale after receiving takeover interest from an Occidental Petroleum-backed midstream energy company, according to people familiar with the matter.
Kinetik Holdings, a $7.2bn midstream company with roughly 4,600 miles of pipeline across the Delaware portion of the Permian Basin — in western Texas and New Mexico — is considering a sale after an approach from Western Midstream Partners, the people said.
The potential sale process comes as the US is in the middle of a natural gas boom driven by record-high production and a big increase in demand driven by liquefied natural gas exports and the need for fuel to power data centres.
This has encouraged an increase in merger and acquisition activity across the sector as companies seek to build scale, lock in gas reserves and expand pipeline capacity.
Kinetik began plotting a sale process to test interest from both strategic and infrastructure buyers after Western Midstream made an approach in recent weeks, the people said.
However, they cautioned that discussions are at an early stage and no formal bid has been made.
Occidental, which is one of the largest US oil and gas producers, owns about a third of the stock in Western Midstream as a legacy of its $57bn acquisition of Anadarko in 2019. Western Midstream would likely be included in any auction if a formal sale process was launched, the people said.
Shares in Kinetik are up 22 per cent since the start of the year, giving it a market capitalisation of $7.2bn as of Wednesday’s close. Its stock jumped 11.1 per cent in after-hours trading after the FT reported the approach.
Kinetik was formed in 2022 through the combination of Altus Midstream and EagleClaw Midstream, with private equity group Blackstone retaining an 18 per cent stake.
Kinetik declined to comment. Western Midstream did not immediately respond to a request for comment.
Andrew Gillick, managing director and strategist at consultancy Enverus, said that Kinetic had been buoyed by the Delaware Basin’s status as “one of the few remaining growth areas” and the “growing thirst for natural gas in the Gulf coast”.
Energy companies are ploughing almost $50bn into new and planned pipelines over the next five years to cash in on natural gas demand. Midstream companies — which manage the transportation, storage and processing of oil and natural gas — are building or planning 8,800 miles of pipelines across the country, according to Wood Mackenzie, an energy consulting firm.
After a sleepy couple of years, oil and gas dealmaking roared back to life earlier this month when Coterra Energy and Devon Energy agreed to combine to create a $58bn shale drilling giant in the Permian Basin, capable of producing equivalent to 1.6mn barrels of oil a day, based on third-quarter figures.
Earlier on Wednesday, SM Energy said it had agreed to sell natural gas assets in South Texas to Caturus Energy, a company backed by investment group Kimmeridge, for $950mn in cash.
Last month, Mitsubishi Corporation bought Aethon, the largest privately held US shale gas producer for $7.5bn including debt — the biggest acquisition in the Warren Buffett-backed trading house’s history.
