Energy Transfer LP is expanding its access to Permian Basin natural gas and natural gas liquids (NGL) in a $3.25 billion deal to acquire WTG Midstream Holdings LLC from a subsidiary of independent Diamondback Energy Inc. and investment firm Stonepeak.
Private midstreamer WTG primarily operates in the Permian’s prolific Midland sub-basin. Through the deal, Energy Transfer would gain more than 6,000 miles of natural gas gathering pipelines spanning some of the most active areas of West Texas.
“The addition of WTG assets is expected to provide Energy Transfer with increased access to growing supplies of natural gas and NGL volumes enhancing the partnership’s Permian operations and downstream businesses,” Energy Transfer said.
The Dallas-based midstreamer also is acquiring eight gas processing plants with a combined capacity of about 1.3 Bcf/d. Two additional plants to add 400 MMcf/d of capacity are under construction and expected to be online later this year and in the second half of 2025.
Midland, TX-based WTG is held 25% by Diamondback subsidiary Rattler Midstream LP. Diamondback said it expected to net $375 million from the transaction, which would help to fund its $26 billion merger with Endeavor Energy Resources LP. In addition, Diamondback management during a recent quarterly earnings call underscored a need for expanding egress for the Permian as producers in the region have grappled with low natural gas prices.
Permian benchmark Waha prices have hovered below $2.000/MMBtu throughout most of the year, but dropped below $1.000 this past winter as temperatures were exceptionally mild. Prices continued to plummet with the onset of spring, hitting a year-to-date average low of negative $4.595 in early May. With early-summer heat starting to become more widespread across Texas and export demand ratcheting higher following maintenance, Waha moved back to the positive side of the ledger at an average 22.0 cents in Friday (May 24) trading.
What’s more, NGI’s Forward Look shows Waha averaging around $2.900 for this winter and at $2.590 for 2025.
To that end, NGI’s Patrick Rau, director of Strategy and Research, agreed that “The Permian is going to need another newbuild pipeline by late 2026 or early 2027.
“For that to happen, someone is going to need to reach a positive final investment decision (FID) later this year, assuming it will take two years to build that line. This move could help backstop Energy Transfer's proposed Warrior Pipeline and give it a leg up on the race to FID.”
The WTG assets also connect “two minor gas export locations to Mexico – Del Rio and Eagle Pass, TX – which will complement Energy Transfer's existing connection via its Arguelles Pipeline in South Texas,” Rau said. However, Energy Transfer “hasn’t expressed much interest in owning assets directly within Mexico, so I doubt this is any sort of precursor to any grand designs to increase their exposure to the Mexican pipeline grid.”
The WTG deal also would give Energy Transfer a 20% stake in the 425-mile BANGL pipeline, a joint venture between WhiteWater Midstream LLC, MPLX LP, WTG and Rattler. The pipeline flows NGLs from the Permian’s Delaware and Midland’s sub-basins to the fractionation market in Sweeney, TX, on the Gulf Coast. It has an expansion capacity of up to 300,000 b/d, according to WhiteWater.
