US midstream company Kinetik has reached an agreement to acquire Durango Permian to expand its presence in the Delaware Basin.
The transaction, valued at $765m, includes a $75m contingent consideration related to the construction of a new complex.
Durango's assets in New Mexico encompass approximately 3,862km of gas-gathering pipelines and a processing capacity of around 220 million cubic feet per day (mft³/d).
The acquisition is expected to double Kinetik's pipeline mileage and augment its processing capacity, with more than 60 new customers being added to its portfolio.
The acquisition also includes the Kings Landing project, a 200mft³/d greenfield processing complex in Eddy County, New Mexico, which is slated for completion in April 2025. This will boost Durango's processing capacity to 420mft³/d.
Kinetik, headquartered in Houston and Midland, Texas, has also secured a 15-year service agreement with an existing customer to provide gas-gathering and processing services in Eddy County, New Mexico.
The company plans to invest approximately $200m in gathering infrastructure to support this contract, which will commence at the end of the year.
To fund the Durango acquisition and the new Eddy County agreement, Kinetik will sell its 16% stake in the Gulf Coast Express Pipeline to an ArcLight Capital Partners affiliate for $540m in cash.
This divestiture aligns with Kinetik's strategy to strengthen its position as a pure-play midstream company in the Delaware Basin.
Kinetik president and CEO Jamie Welch said: “Following the Durango acquisition and the expected completion of Kings Landing, Kinetik will own and operate over 2.4 billion cubic feet per day of processing capacity, entirely in the Delaware Basin, and approximately 7,400km of pipelines across eight counties.
“These actions efficiently and accretively recycle cash proceeds from a non-operated asset into highly strategic, operated assets. Additionally, the Durango acquisition and New Eddy County agreement offer full control of plant products including more than 350 million cubic feet per day of residue gas and well over 60,000 barrels per day of natural gas liquids, providing significant additional upside value via system optimisation, modifications to existing commercial contracts, and integration with our pipeline transportation segment.”
The Durango transaction is expected to close in the second quarter of 2024, subject to customary closing conditions.
This development comes as other players in the Delaware Basin, such as Enterprise Products Partners, also invest in expanding their natural gas processing operations.
