ONEOK to acquire Brazos Midland gas assets

ONEOK (OKE) has executed a definitive agreement to acquire Brazos Midstream’s Permian Midland Basin natural gas gathering and processing assets for total cash consideration of $4.425 billion. The transaction has received unanimous approval from ONEOK’s Board of Directors and is expected to close in the fourth quarter of 2026, subject to customary closing conditions, including Hart-Scott-Rodino Act clearance.

The Brazos Midland system consists of natural gas gathering and processing infrastructure located across seven Midland Basin counties. ONEOK stated that the acquisition aligns with its strategy to expand and extend its integrated energy infrastructure footprint in the Permian region.

To fund the acquisition, ONEOK will use proceeds from a $9 billion nonvoting minority equity investment from funds and affiliates managed by Apollo Global Management (APO). The minority equity investment is expected to close separately in the first half of September 2026.

ONEOK intends to allocate roughly $5 billion of the Apollo proceeds to reduce existing indebtedness. The company expects that the combination of the equity investment and the planned debt reduction will result in a pro forma 2027 debt-to-EBITDA ratio of about 3.25 times, reflecting a targeted leverage profile following completion of the transaction.

Brazos’ Midland Basin system is supported by roughly 600,000 dedicated acres under fixed-fee contracts. These contracts have a weighted average remaining term exceeding 12 years, providing long-duration volume commitments to the system.

Producers operating on the dedicated acreage include ExxonMobil, Diamondback Energy (FANG) and Double Eagle. The system is currently supported by 14 active drilling rigs, indicating ongoing development activity across the dedicated acreage footprint.

After completion of the Cassidy II processing plant, which is expected in the third quarter of 2027, the acquired Brazos Midland system is projected to comprise about 700 miles of gathering infrastructure. At that point, it is expected to have 1.2 billion cubic feet per day of natural gas processing capacity across seven Midland Basin counties.

Including facilities currently under construction, ONEOK said the acquisition will more than double its Midland Basin processing capacity to approximately 2.3 billion cubic feet per day. The enlarged platform is intended to support existing and future production growth in the basin.

ONEOK estimates that the purchase price implies a multiple of roughly 7.5 times projected 2027 EBITDA, inclusive of approximately $80 million of anticipated annual synergies. By 2028, the valuation is expected to equate to roughly six times projected EBITDA as synergies and volume growth are realized.

The company expects the Brazos Midland acquisition to be immediately accretive to earnings and free cash flow per share upon closing. Barclays (BARC.L) served as sole financial advisor to ONEOK on the acquisition, and Latham & Watkins LLP acted as legal advisor on both the acquisition and the minority equity investment.