Kinetik Holdings Explores Sale Amid Rising Natural Gas Demand
One of the largest gas pipeline operators in the Delaware Basin is considering a sale after receiving takeover interest from Occidental Petroleum-backed Western Midstream Partners, according to people familiar with the matter.
Kinetik Holdings, a $7.2 billion midstream company with approximately 4,600 miles of pipeline across the Delaware portion of the Permian Basin – in western Texas and New Mexico – is weighing a sale following an approach from Western Midstream, the sources said.
The potential sale process comes as the U.S. Experiences a natural gas boom, fueled by record-high production and increased demand from liquefied natural gas (LNG) exports and the energy needs of data centers. This surge has spurred merger and acquisition activity across the sector as companies seek to expand their scale, secure gas reserves, and increase pipeline capacity.
Kinetik initiated a sale process to gauge interest from both strategic and infrastructure buyers after Western Midstream’s approach in recent weeks, the people said. Discussions are currently at an early stage, and no formal bid has been made.
Occidental Petroleum, a major U.S. Oil and gas producer, owns roughly a third of the stock in Western Midstream, a legacy of its $57 billion acquisition of Anadarko in 2019. Western Midstream would likely be included in any auction if a formal sale process is launched, the sources indicated.
As of Wednesday’s close, shares in Kinetik were up 22 percent since the start of the year, giving the company a market capitalization of $7.2 billion. The stock jumped 11.1 percent in after-hours trading following reports of the potential sale.
Kinetik was formed in 2022 through the combination of Altus Midstream and EagleClaw Midstream, with private equity group Blackstone retaining an 18 percent stake.
Kinetik declined to comment. Western Midstream did not immediately respond to a request for comment.
Andrew Gillick, managing director and strategist at consultancy Enverus, noted that Kinetik has benefited from the Delaware Basin’s position as “one of the few remaining growth areas” and the “growing thirst for natural gas in the Gulf Coast.”
Energy companies are investing nearly $50 billion in new and planned pipelines over the next five years to capitalize on the increasing demand for natural gas. Midstream companies – responsible for the transportation, storage, and processing of oil and natural gas – are currently building or planning 8,800 miles of pipelines across the country, according to Wood Mackenzie, an energy consulting firm.
The oil and gas dealmaking landscape has seen a resurgence this month, highlighted by the agreement between Coterra Energy and Devon Energy to combine and create a $58 billion shale drilling giant in the Permian Basin, capable of producing the equivalent of 1.6 million barrels of oil per day, based on third-quarter figures.
Earlier on Wednesday, SM Energy announced it would sell natural gas assets in South Texas to Caturus Energy, a company backed by investment group Kimmeridge, for $950 million in cash.
Last month, Mitsubishi Corporation acquired Aethon, the largest privately held U.S. Shale gas producer, for $7.5 billion including debt – the largest acquisition in the history of the Warren Buffett-backed trading house.
