Oneoc to buy Magellan Midstream in $19 billion US pipeline deal

US pipeline giant Oneoc is set to buy Magellan Midstream Partners for $18.8bn to create one of the biggest oil and gas infrastructure companies in North America as consolidation in the hydrocarbon business gains momentum.

The deal, announced Sunday, would create a company with an enterprise value of $60 billion and a massive 25,000-mile network of pipelines stretching from North Dakota to Texas.

Piers Norton, Oneok’s chief executive, described the transaction as “transformational”.

“The combination of ONEOK and Magellan will create a diversified North American midstream infrastructure with primarily fee-based earnings, a strong balance sheet and significant financial flexibility focused on delivering essential energy products and services to our customers and continuing to deliver strong returns to investors Build a company.” They said.

The deal comes as the cash-rich US oil and gas sector returns to bargains after a long drought. This will give gas-focused Oneoc a greater foothold in the crude and refined products market, which the company said will ensure “stable cash flow through various commodity cycles”.

The shale revolution, which turned the US into the world’s largest producer of both oil and gas, is now beginning to fade as Wall Street demands operators focus on shareholder returns over endless drilling campaigns, leading to Mergers and acquisitions are one of the few ways to expand their footprint. ,

A handful of big-ticket deals followed at the end of last year. Diamondback and Marathon Oil paid $3 billion to acquire land in the Permian and Eagle Ford basins. Deals worth roughly $5 billion were made across the region in January, including Matador Resources’ $1.6 billion purchase of private equity-backed Permian driller Advance Energy.

Bankers and lawyers predict a “wave” of consolidation among drillers and pipeline operators this year as shale companies seek to take advantage of a sector that is entering an era of low growth.

“To me, this marks a return to fewer large companies controlling the US oil and gas business,” said Andrew Gillick, managing director at consultancy Enverus. “Consolidation makes sense in the twilight of the shell.”

Magellan shareholders will receive $25 in cash and 0.67 Oneoc shares for each unit of stock they hold, representing a 22 percent premium over the company’s closing price on Friday.

“We believe the premium offering maximizes value creation for Magellan’s unit holders and reflects the essential nature of Magellan’s asset and service offerings,” said Aaron Milford, Magellan’s chief executive officer.

The deal, which has been unanimously approved by the boards of both companies, is expected to close in the third quarter of the year.