Energy Transfer Deal to Acquire WTG Midstream Continues Trend of Permian G&P Consolidation

Energy Transfer has agreed to acquire WTG Midstream for $3.25 billion in cash and stock from Stonepeak, the Davis estate, and Diamondback. The deal is 75% cash ($2.45 billion) with the remainder in stock, and it is expected to close in the third quarter of 2024. The deal follows earlier acquisitions of gathering and processing capacity in the Permian by peers (Targa/Lucid, Enterprise Products Partners/Navitas) as well as earlier efforts by Energy Transfer. We believe the deals are largely driven by the desire to control gas and natural gas liquids molecules, especially given the pipeline oversupply on the oil side of the Permian. The control over the gas and natural gas liquids molecules allows them to be directed to Energy Transfer-owned pipelines or used as feedstock for in-development pipelines or other assets (fractionation, storage), generating incremental fees. This shift is increasingly critical where gas and natural gas liquids pipelines are the biggest near-term constraint for producers and midstream firms in the Permian. For example, we see these molecules as potentially greater support for Energy Transfer's under-development Warrior pipeline.