One of the major operators of gas pipelines in the Delaware Basin is considering a sale following interest from Western Midstream Partners, a midstream energy company supported by Occidental Petroleum, according to sources familiar with the situation.
Kinetik Holdings, valued at $7.2 billion and operating about 4,600 miles of pipeline in the Delaware section of the Permian Basin across Texas and New Mexico, is exploring this potential deal. The interest from Western Midstream has prompted Kinetik to start assessing whether other strategic or infrastructure buyers might be interested, though discussions are just beginning and no formal offers have been made.
As natural gas production in the U.S. reaches record levels, there is significant demand, largely driven by liquefied natural gas exports and increasing energy needs for data centers. This growth has led to heightened merger and acquisition activity as companies strive to expand their pipeline capacities and secure gas reserves.
Occidental, a leading U.S. oil and gas producer, owns approximately a third of Western Midstream due to its $57 billion acquisition of Anadarko in 2019. If a formal sale process begins, Western Midstream would likely participate.
Kinetik’s shares have risen 22% since the beginning of the year, boosting its market value to $7.2 billion as of Wednesday’s closing. Established in 2022 through the merger of Altus Midstream and EagleClaw Midstream, Kinetik also has an 18% stake held by the private equity firm Blackstone.
Energy experts highlight that Kinetik benefits from the Delaware Basin’s status as a rapidly growing area and the rising natural gas demand along the Gulf coast. Over the next five years, energy companies are investing nearly $50 billion in new and planned pipelines to meet this demand, with midstream companies aiming to build about 8,800 miles of pipelines nationwide.
After a lull in activity, the oil and gas sector saw a resurgence in deals earlier this month when Coterra Energy and Devon Energy announced their plans to merge into a $58 billion shale drilling giant capable of producing 1.6 million barrels of oil daily.
Additionally, on Wednesday, SM Energy declared it would sell its natural gas assets in South Texas to Caturus Energy for $950 million in cash. Last month, Mitsubishi Corporation acquired Aethon, the largest privately owned shale gas producer in the U.S., for $7.5 billion, marking a significant move in the company’s history.