The joint venture will have crude oil storage capacity of more than 11 million barrels and operate more than 5,000 miles of crude oil and gathering pipelines.
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Two Dallas-based oil and gas giants that have been active in deal-making so far in 2024 have agreed to a joint venture in the Permian Basin.
Energy Transfer LP and Sunoco LP announced on July 16 that they will combine pipelines and related equipment to gather crude oil and produced water in the Permian Basin, which straddles West Texas and New Mexico. Energy Transfer (NYSE: ET) will be the operator of the joint venture and will hold a 67.5% interest, while Sunoco (NYSE: SUN) will hold a 32.5% interest.
The joint venture, which was formed July 1, will have crude oil storage capacity of more than 11 million barrels and operate more than 5,000 miles of crude oil and gathering pipelines.
Energy Transfer’s long-distance crude oil pipeline network, which transports oil from the Permian Basin to the Netherlands, Houston and Cushing, will be excluded from the joint venture.
The new joint venture is expected to be immediately accretive to distributable cash flow for both Energy Transfer and Sunoco.
The two companies have a close relationship and have been active in mergers and acquisitions this year. Energy Transfer, which was formed in 2018 through the merger of Energy Transfer Partners and Energy Transfer Equity, owns and operates more than 130,000 miles of pipelines and related energy infrastructure. The company also owns general partner interests, incentive distribution interests, and approximately 21% of Sunoco.
Energy Transfer also owns Lake Charles LNG Co., in addition to a general partner interest and 39% in Austin-based USA Compression Partners LP (NYSE: USAC).
The company is currently acquiring Midland-based WTG Midstream Holdings LLC for $3.25 billion. The deal follows its $7.1 billion acquisition of Houston-based Crestwood Equity Partners LP, which closed in November 2023.
Sunoco acquired San Antonio-based NuStar Energy Co. in May for $7.3 billion. The company also sold 204 stores across West Texas, New Mexico and Oklahoma to Irving-based 7-Eleven Co. in April for 145.787 billion yen, or about $950 million at April 15 exchange rates.
Intrepid Partners LLC acted as financial advisor and Potter Anderson & Corroon LLP acted as legal advisor to Energy Transfer in forming the joint venture. Guggenheim Securities LLC acted as financial advisor and Layton & Finger PA acted as legal advisor to Sunoco.
Vinson & Elkins LLP and Akin Gump Strauss Hauer & Feld LLP also served as legal advisors to the companies on the transaction.
