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Pipeline operator Enterprise Products Partners LP said it would buy Warburg Pincus-owned Navitas Midstream for $3.25 billion in cash, entering the active Midland basin to tap into increased demand for natural gas infrastructure.
The deal comes as a surge in demand and supply crunches have pushed natural gas prices to record highs. Front-month U.S. gas futures were trading around $4.09 on Monday, over 60% higher than from the start of 2021.
Woodlands, Texas-based Navitas owns a network of around 1,750 miles of natural gas pipelines in the Midland portion of the Permian basin, the region of Texas and New Mexico considered the heart of the U.S. shale industry. Navitas is expected to reach one billion cubic feet per day of cryogenic natural gas processing capacity once it completes its Leiker plant in Texas in the first quarter of 2022, during which Enterprise also plans to close the deal.
Enterprise currently owns only some downstream pipelines in the Midland basin.
The acquisition will be immediately accretive to Enterprise's distributable cash flow per unit, and it will also support additional returns to shareholders through dividends and buybacks. Based on the current outlook for commodity prices, Enterprise expects the deal to add around 18 cents to 22 cents per unit to its distributable cash flow in 2023.