Kinetik Holdings announces $1B of strategic transactions, Gulf Coast divestiture

Kinetik Holdings announced it has entered into a series of agreements under which Kinetik will (i) acquire Durango for an aggregate $765 million of cash and equity with up to $75 million of contingent consideration tied to the capital cost for the Kings Landing complex (“Kings Landing”), which is currently under construction, (ii) provide low-pressure and high-pressure natural gas gathering and processing services under a newly executed, 15-year agreement with a large existing Kinetik customer in Eddy County, New Mexico, an approximately $200 million capital investment through 2026, and (iii) divest its 16% equity interest in GCX for 100% cash for a total of $540 million. “Following on from our tremendous success with our recent Lea County, New Mexico system expansion, we are delighted to now announce this series of strategic transactions that further our expansion into New Mexico and significantly increase our footprint across the Northern Delaware Basin,” said Jamie Welch, Kinetik’s President & Chief Executive Officer. “The Durango Acquisition and New Eddy County Agreement together represent approximately $1 billion of new investment. The structure for the Durango Acquisition has approximately 60% upfront consideration with 40% of the consideration deferred until July 2025, which is after the expected Kings Landing in-service date. Following the Durango Acquisition and the expected completion of Kings Landing, Kinetik will own and operate over 2.4 billion cubic feet per day of processing capacity, entirely in the Delaware Basin, and approximately 4,600 miles of pipelines across eight counties. Proceeds from the GCX Sale and the aggregate issuance of $450 million of Kinetik Class C shares, in two installments, will be reinvested into projects at a mid-single digit EBITDA multiple. These actions efficiently and accretively recycle cash proceeds from a non-operated asset into highly strategic, operated assets. Additionally, the Durango Acquisition and New Eddy County Agreement offer full control of plant products including more than 350 million cubic feet per day of residue gas and well over 60,000 barrels per day of natural gas liquids, providing significant additional upside value via system optimization, modifications to existing commercial contracts, and integration with our Pipeline Transportation segment.” Kinetik entered into a definitive agreement to divest and directly transfer its 16% equity interest in GCX to an affiliate of ArcLight Capital Partners LLC for a total expected sale price of $540 million in cash. The purchase price is comprised of $510 million in upfront cash and an additional $30 million deferred cash payment due upon a final investment decision on a capacity expansion project. The transaction does not require HSR approval and is expected to close in the next few weeks.