EFS Midstream, a pipeline operator in the Eagle Ford Shale basin, has drawn bids from Enterprise Products Partners LP (NYSE: EPD), Energy Transfer Equity LP (NYSE: ETE) and Williams Cos. (NYSE: WMB), people with knowledge of the matter said, Bloomberg reported Jan. 15.
EFS, owned by Pioneer Natural Resources Co. (NYSE: PXD) and Reliance Industries Ltd., is expected to sell for more than $3 billion, said the people, who asked not to be identified because the process is private. Pioneer, the Dallas-based oil and gas producer, and India’s Reliance announced the sale in November.
Large oil explorers including Chevron Corp. (NYSE: CVX) and Occidental Petroleum Corp. (NYSE: OXY) have been selling pipelines and other infrastructure to fund capital-intensive drilling operations. The trend could accelerate as a plunge in oil squeezes producers’ cash flow.
Bidders have been winnowed down to only very large pipeline operators that can finance a deal despite volatile debt and equity markets, the people said. Pipeline companies typically have long-term contracts and are better able to withstand volatility in oil prices than explorers.
A spokesman for Williams declined to comment, while representatives for Pioneer, Enterprise, Energy Transfer and Reliance Industries didn’t immediately return calls seeking comment.
MLP Structure
Enterprise, Williams and Energy Transfer are three of the largest U.S. pipeline operators structured as MLPs, which get tax breaks for distributing most of their income to investors. That structure puts pressure on MLPs to keep growing to maintain dividends, which incentivizes them to make acquisitions.
Pioneer and Reliance formed EFS in 2010 to gather condensate and natural gas produced by a separate joint venture they control in the Eagle Ford. EFS has 460 miles of pipelines and 10 gathering plants, Pioneer said in November. It’s forecast to generate more than $100 million in cash flow this year.
Regency Energy Partners LP (NYSE: RGP), an MLP controlled by Energy Transfer, had been in talks to buy Talisman Energy Inc.’s (NYSE: TLM) pipeline operations in the Marcellus Shale region in November. That sale process has been halted due to Talisman’s pending sale to Spain’s Repsol SA, the people said.
Recommended Reading
TotalEnergies Entering, OMV Exiting SapuraOMV JV
2024-01-31 - TotalEnergies aims to deepen its presence in Malaysia through the $903 million deal to acquire OMV’s interest in the SapuraOMV Upstream joint venture.
Hess: Pre-emption Provision Doesn't Apply to Buyout Deal With Chevron
2024-02-27 - Hess Corp. said on Feb. 27 that a pre-emption provision does not apply to its proposed $53-billion buyout by Chevron Corp. and it remains "fully committed" to the deal.
EQT, Equitrans Midstream to Combine in $5.5B Deal: Reports
2024-03-11 - EQT Corp.'s deal would reunite the natural gas E&P with Equitrans Midstream after the two companies separated in 2018.
Analysts: Chesapeake-SWN Poised to Supply Growing Global LNG Demand
2024-01-11 - Chesapeake Energy and Southwestern Energy are combining in a $7.4 billion merger to serve more domestic customers and access growing global LNG demand.
Potential Chesapeake, Southwestern Merger May Face Tough Scrutiny
2024-01-09 - Low natural gas prices are driving producers such as Chesapeake and Southwestern to seek large ‘strategic’ deals at a time when large-scale consolidation is coming under increased scrutiny by lawmakers and regulators.