ONEOK Buys Permian Basin Assets for $4.43B
The acquisition will more than double ONEOK's Midland Basin processing capacity to 2.3 Bcf/d, funded through a $9 billion nonvoting minority equity investment from Apollo
ONEOK has agreed to acquire Brazos Midstream's Permian Basin assets for $4.425 billion, a move that will significantly expand its presence in one of the largest US oil and gas producing regions. The acquisition will be funded through a $9 billion nonvoting minority equity investment from Apollo.
The acquired assets include approximately 600,000 dedicated acres under fixed-fee contracts with a weighted average remaining term of more than 12 years. The assets are supported by 14 active drilling rigs currently operated by producers including ExxonMobil, Diamondback Energy, and Double Eagle.
The acquisition is expected to more than double ONEOK's Midland Basin processing capacity to approximately 2.3 Bcf/d. Following the completion of the Cassidy II plant in the third quarter of 2027, the acquired system will comprise about 700 miles of gathering infrastructure and 1.2 billion cubic feet per day of gas processing capacity.
The deal values the assets at approximately 7.5 times estimated 2027 EBITDA, inclusive of about $80 million in full-year synergies. Apollo's minority equity investment consists of a Class B interest in a new holding company, with a 7% internal rate of return capped for the first nine years.
ONEOK plans to use $5 billion from the Apollo investment to repay existing debt, targeting a pro forma 2027 leverage ratio of approximately 3.25 times debt-to-EBITDA. The acquisition is expected to be immediately accretive to earnings and free cash flow per share.
## What it means The acquisition is a significant move for ONEOK, expanding its footprint in the Permian Basin and strengthening its integrated Permian-to-Gulf Coast strategy. The deal is expected to bring long-term, fee-based contracted growth with leading producers, and the company's planned debt reduction is expected to accelerate deleveraging and exceed its previous leverage target without issuing common equity.
The acquisition is expected to close in the fourth quarter of 2026, subject to regulatory approvals and customary conditions. With the addition of the Brazos assets, ONEOK is poised to increase its scale in the rapidly growing Permian Midland Basin, and the company's shareholders are likely to benefit from the expected increase in earnings and free cash flow per share.
## Why it matters The Permian Basin is one of the largest oil and gas producing regions in the US, and ONEOK's acquisition of Brazos Midstream's assets is a significant move in the industry. The deal highlights the ongoing consolidation in the midstream sector, as companies look to expand their presence in key regions and increase their scale. With the expected increase in processing capacity and the addition of long-term, fee-based contracts, ONEOK is well-positioned to benefit from the growing demand for natural gas and natural gas liquids in the region.
