Oneok, a major US pipeline company, announced its plans to acquire Magellan Midstream Partners for $18.8 billion on Sunday, May 14, establishing one of North America’s largest oil and gas infrastructure firms.
The Deal
This deal, which Oneok’s CEO, Pierce Norton, described as “transformational” in his statement, would result in the creation of a business with an enterprise value of $60 billion and a vast pipeline network spanning 25,000 miles from North Dakota to Texas.
The transaction is a relief for the US oil and gas industry as they attempt to resume dealmaking following a protracted dry spell. The business is hopeful that the agreement will offer “stable cash flows through diverse commodity cycles” by giving gas-focused Oneok a significant presence in the market for crude and refined goods.
Each share of Magellan stock will be exchanged for 0.67 Oneok shares and $25 cash, a 22 percent premium over the company’s Friday closing price.
This unanimously reached an agreement, which has been authorized by the boards of both firms and is expected to conclude in the third quarter of this year.
Struggling US Shales
The shale revolution, which transformed the United States into the world’s largest producer of both oil and gas, has begun to wane as Wall Street demands that operators prioritize shareholder returns over ongoing drilling campaigns, leaving mergers and acquisitions as one of the remaining alternatives to expand their profits.
Late last year, only a few significant transactions were completed, which included the $3 billion deal of Diamondback and Marathon Oil to acquire land in the Permian and Eagle Ford basins.
As per the Financial Times, bankers and attorneys predict a “wave” of consolidation among drillers and pipeline operators this year as shale businesses struggle to make a profit in a sector that may be entering a phase of sluggish development.
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