U.S. Oil and Gas merger mania extended to the Midstream

U.S. oil and gas pipeline giant combined to a total enterprise value of $60 billion

In the U.S. shale sector, while significant attention is focused on upstream mega-deals, pipeline operators are also engaging in a flurry of mergers to enhance scale, optimize assets, and expand exposure to export markets. The next major midstream transaction could involve a leading U.S. oil and gas producer, which recently announced a substantial acquisition in the Permian Basin to bolster acreage and scale. Sources familiar with the matter revealed to Reuters this week that Occidental Petroleum, following its $12 billion deal to acquire CrownRock, is contemplating the sale of its $20 billion natural gas pipeline operator, Western Midstream Partners.

Currently, Occidental holds a 49% stake in Western Midstream, a master limited partnership, and controls its operations through the ownership of its general partner. Potential buyers for Western Midstream may include pipeline giants such as Enterprise Products Partners, Kinder Morgan, and Williams Companies, according to Reuters' sources. A potential sale of Western Midstream could enable Occidental to alleviate a portion of the $18.5 billion debt incurred from its $54 billion acquisition of Anadarko in 2019, while also contributing to the ongoing merger activity within the pipeline sector. Amidst major upstream acquisitions by industry giants like ExxonMobil, Chevron, and Occidental, pipeline operators have also been active in consolidation efforts. Notably, ONEOK's acquisition of Magellan Midstream Partners last year created a combined enterprise valued at $60 billion, boasting a robust network of liquids-oriented pipelines spanning the Gulf Coast and Mid-Continent hubs.