Dallas-based pipeline giant Energy Transfer is acquiring an Oklahoma City company in an all-stock deal valued at $7.2 billion during an unprecedented Arctic storm that continues to grip the nation’s energy capital of Texas.
Energy Transfer announced the deal with Enable Midstream before Wednesday’s trading markets opened. The deal did little to move Energy Transfer’s share price, which declined slightly to $6.89. Enable shares fell 6% to close at $6.11.
The acquisition makes Energy Transfer, already one of the country’s largest pipeline companies, nearly 40% larger based on Wednesday’s closing market value.
The merger comes as Energy Transfer wages a court battle to keep its controversial Dakota Access crude pipeline open and as a new White House administration could signal tighter regulations on fossil fuel drilling and pipeline operations.
A federal appeals court recently raised doubts about the future of the 557,000 barrel-per-day Dakota Access pipeline that extends from North Dakota to Illinois when it upheld a ruling that a key easement violated federal law. American Indian tribes, environmentalists and Democratic congressional leaders are pressing President Joe Biden to shutter the pipeline.
The deal gives Energy Transfer access to Enable Midstream’s 5,900 miles of natural gas and oil pipelines and assets that stretch across Oklahoma, Arkansas, Louisiana, Texas, Missouri and Illinois.
It‘ll connect Enable’s natural gas gathering and processing systems in the Anadarko Basin in Oklahoma with Energy Transfer’s extensive network of U.S. Gulf Coast facilities. Infrastructure in the Arkoma Basin across Oklahoma and Arkansas and in the Haynesville Shale in East Texas and North Louisiana also are part of the deal.
“These complementary assets will enhance our midstream infrastructure and provide increased connectivity throughout the mid-continent and Gulf Coast,” said co-CEO Tom Long in a call with investors Wednesday.
That will enhance Energy Transfer’s ability to capitalize on growing global demand for natural gas, the company said.
The companies said the business combination would create about $100 million a year in cost savings.
Peter McNally, a Third Bridge Group energy analyst, questioned why Energy Transfer is investing so much in a natural gas company when the country is trying to move toward more renewable energy sources.
“While the financial and operational aspects of the Enable combination make sense to us, our experts have been asking how Energy Transfer will handle the transition to a low carbon energy world,” McNally said in an email.
Like most oil and gas companies, publicly traded Enable Midstream’s revenue took a hit in 2020. It reported revenue of $1.7 billion for the nine-month period through Sept. 30, compared to $2.2 billion a year earlier.
In October, OGE Energy Corp. and CenterPoint Energy Inc. said they were considering selling their stake in Enable, putting the whole company on the block. They own a combined 79% stake in Enable.
CenterPoint, the Fortune 500 energy provider based in Houston, is the majority owner of Enable. CenterPoint provides natural gas and electricity in states across the Gulf Coast and southern parts of the U.S.
CenterPoint said Wednesday that it supports the deal. It also said the sale doesn’t hinder its “efforts … to quickly restore power to the regions it serves.”
The deal is expected to close sometime in the middle of 2021.