Enterprise Products to buy PE-backed Navitas in $3.25bn deal

March 2022 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

March 2022 Issue

In a $3.25bn deal which boosts its natural gas pipeline network, energy services provider Enterprise Products Partners LP is to acquire producer-focused midstream company Navitas Midstream Partners, LLC from private equity firm Warburg Pincus LLC.

Under the terms of the definitive agreement, the transaction will be funded using cash on hand and borrowings under the partnership’s existing commercial paper and bank credit facilities.

The acquisition provides Enterprise’s natural gas processing and natural gas liquids (NGL) business with an entry point into the Midland Basin, one of the most economic and prolific crude oil regions in the US. The transaction coincides with a surge in demand and supply crunches which have pushed natural gas prices to record highs.

One of the largest publicly traded partnerships and a leading North American provider of midstream energy services, Enterprise Products Partners’ assets include approximately 50,000 miles of pipelines, 260 million barrels of storage capacity for NGLs, crude oil, refined products and petrochemicals, and 14 billion cubic feet of natural gas storage capacity.

“We are pleased to announce the acquisition of Navitas Midstream,” said A. J. Teague, director and co-chief executive of Enterprise. “The Navitas management team has developed a premier system in the heart of the Midland Basin. The Delaware and Midland Basins are the two most attractive regions in the US in terms of crude oil, natural gas and NGL reserves, with each having up to nine geologic horizons. We do not have a natural gas or NGL presence in the Midland Basin other than downstream pipelines.”

Drilling activity in the Midland Basin currently represents approximately 20 percent of active onshore drilling rigs in the US. The system is anchored by long-term contracts and acreage dedications with a diverse group of over 40 independent and publicly owned producers.

“We believe this acquisition will be immediately accretive to distributable cash flow per unit,” said Randy Fowler, co-chief executive and chief financial officer of Enterprise. “Based on the current outlook for commodity prices in 2023, which would be our first full year of ownership, we believe distributable cash flow accretion will be in the range of $0.18 to $0.22 per unit.”

Providing natural gas gathering, treating and processing services in the core of the Midland Basin of the Permian, Navitas Midstream’s assets include approximately 1750 miles of pipelines and over one billion cubic feet per day of cryogenic natural gas processing capacity.

“We are excited to contribute our unique Midland Basin system to Enterprise, one of the premier midstream operators,” said R. Bruce Northcutt, chief executive of Navitas. “I am proud of what the Navitas team accomplished over the past seven years and would also like to thank Warburg Pincus for their close partnership along the way.”

Jefferies LLC served as financial adviser to Navitas on the sale, while Kirkland & Ellis served as legal adviser. The transaction is expected to be completed in the first quarter of 2022, subject to customary regulatory approvals.

Mr Fowler concluded: “This investment will provide Enterprise with an attractive return on capital and support additional capital returns to our limited partners through distribution growth and buybacks of common units.”

Fraser Tennant