Enterprise Products to acquire Pinon Midstream for $950M in cash

Enterprise Products and Pinon Midstream, a portfolio company of Black Bay Energy Capital, announced that Enterprise’s affiliate has entered into a definitive agreement to acquire Pinon Midstream in a debt-free transaction for $950M in cash consideration. Pinon Midstream provides natural gas gathering and treating services in the core of the prolific eastern flank of the Delaware Basin in New Mexico and Texas. Pinon Midstream’s assets include approximately 50 miles of natural gas gathering and redelivery pipelines, five three-stage compressor stations, 270M cubic feet per day of existing hydrogen sulfide and carbon dioxide treating facilities with an expansion to 450 MMcf/d of capacity expected to be completed in the second half of 2025, and two of the highest capacity and deepest acid gas injection, or AGI, wells in the basin. As part of this transaction, Enterprise is evaluating locations for a third injection well that would support up to 750 MMcf/d of total treating capacity. This business is supported by fee-based contracts with long-term acreage dedications, including minimum volume commitments. Additionally, Pinon Midstream’s monitoring, reporting, and verification, or MRV, plan for permanent sequestration of carbon dioxide in its two AGI wells located at its Dark Horse Treating Facility in Lea County, New Mexico was approved by the Environmental Protection Agency in June. This milestone MRV approval satisfies a major requirement for 45Q tax credit eligibility. Enterprise estimates this area of the Delaware Basin, largely comprised of Lea County, New Mexico and Winkler County, Texas, has more than 7,500 remaining well locations and has access to at least six geologic production benches. Drilling activity in this area has generally been restricted due to the lack of sour natural gas treating and acid gas injection well capacity as well as the lengthy permitting process for acid gas injection wells which can take up to two years. This transaction is expected to be completed in the fourth quarter of 2024 subject to customary regulatory approvals. The transaction is expected to be funded using cash on hand and borrowings under Enterprise’s existing commercial paper and bank credit facilities.