Energy Transfer LP said on Wednesday it would buy Enable Midstream Partners to strengthen its natural gas transportation business as it faces a legal battle that could shut its Dakota Access crude pipeline.
The $2.6 billion deal comes just weeks after a U.S. appeals court dealt a blow to the 557,000 barrel-per-day Dakota pipeline, raising the chances that it will be shut pending an environmental review.
Higher prices for natural gas used in heating and electricity generation as well as a continued glut of crude oil have led U.S. shale firms to boost gas drilling and production.
U.S. gas prices touched a more than three-month high on Tuesday, as bone-chilling weather across the country disrupted pipeline flows and pushed up heating demand.
Regulators have in recent weeks also denied permits to notable natural gas pipelines, while the new Biden administration effectively killed the Keystone XL pipeline project and is soon expected to limit oil and gas drilling on federal lands.
Enable unitholders will receive 0.8595 of Energy Transfer’s units for each Enable unit. In addition, each outstanding Enable Series A preferred unit will be exchanged for 0.0265 Series G preferred units of Energy Transfer.
The transaction will also include a $10 million cash payment for Enable’s general partner and the deal was valued at about $7.2 billion, including debt.
The acquisition will also provide gas gathering and processing assets in the Arkoma basin across Oklahoma and Arkansas, as well as the Haynesville Shale in East Texas and North Louisiana, the companies said.
Energy Transfer expects the combined company to generate more than $100 million of annual run-rate cost and efficiency savings and as is expected to immediately add to free cash flow post-distributions.