Energy Transfer announced Monday that it plans to acquire Lotus Midstream Operations from an affiliate of EnCap Flatrock Midstream in a transaction valued at approximately $1.45 billion.
The deal consists of $900 million in cash and about 44.5 million newly issued Energy Transfer common units.
Lotus Midstream owns and operates Centurion Pipeline Co., an integrated, crude midstream platform in the Permian Basin.
The parties expect to close the transaction in the second quarter if it clears regulators.
J.P. Morgan Securities and TD Securities provided financial advice to Energy Transfer and Jefferies assisted Lotus.
Falcone also worked on Energy Transfer’s purchase last year of Quantum Energy Partners-backed Woodford Express, a Mid-Continent gas gathering and processing system, for $485 million (he advised Quantum).
Other V&E team members included partner Scott Rubinsky and associate Warner Scott (corporate); partners Ryan Carney and David Peck, counsel Peter Rogers and associate Katie Dillard (tax); partners Becky Baker and Sean Becker and associate Peter Goetschel (employment/labor); partner Darren Tucker and senior associate Ryan Will and associate Alex Rant (litigation); and partner Damien Lyster, senior associate Mike Malenfant and associate Ryan Hoeffner (energy regulatory).
Rounding out the group were partner Darin Schultz, senior associate Caitlin Turner and associate Taylor Daily (finance); partner Shane Tucker and associate Kiera Kuntz (executive compensation/benefits); partner Matt Dobbins and associate Kelly Rondinelli (environmental); counsel Scot Dixon (real estate); counsel Rajesh Patel (technology transactions/IP); and partner Sarah Mitchell and associate Victoria Bahrami-Negad (insurance).
Lotus’ in-house counsel on the deal included general counsel Kathleen Shea-Ballay, who works in the greater Philadelphia area. She was previously general counsel for Sunoco Logistics Partners and in various leadership roles at Sunoco Inc.
Energy Transfer’s general counsel is Jim Wright.
Shearman & Sterling advised EnCap Flatrock with a team led by Sarah McLean, Todd Lowther, Taylor Landry and Ben Gris. Also on the team were Rebecca McCraw, Daniel Kachmar, Jonathan Cheng, Gil Shauly and John Menke.
Lotus Midstream’s Centurion provides wellhead gathering, intra-basin transportation, terminalling and long-haul transportation services. Its system, encompassing about 3,000 miles of pipeline, covers major production areas of the Permian with nearly 1.5 million barrels per day of capacity. Lotus Midstream’s Midland Terminal offers 2 million barrels of crude oil storage capacity and additional supply and demand connectivity.
The acquisition also includes a 5 percent equity interest in the Wink to Webster Pipeline, a 650-mile pipeline system transporting more than one million barrels per day of crude oil and condensate from the Permian Basin to the Gulf Coast.
Dallas-based Energy Transfer said its acquisition of Lotus’s Centurion pipeline assets will increase its footprint in the Permian Basin and provide increased connectivity for its crude oil transportation and storage businesses.
The partnership added that the assets, located across some of the most active areas of the Permian Basin, provide significant gathering volumes from key producers while also enhancing its access to key downstream markets with consistent sources of demand.
The assets provide direct access to major hubs including Cushing, Midland, Colorado City, Wink and Crane, Energy Transfer continued. The system is anchored by large cap producer customers with firm, long-term contracts and significant acreage dedications.
After closing of the deal, Energy Transfer expects to begin construction on a 30-mile pipeline project that will allow it and its customers the ability to originate barrels from its Midland terminals for ultimate delivery to the massive Cushing storage hub in Oklahoma. Energy Transfer expects to complete the project in the first quarter of 2024.
The partnership expects the transaction to be immediately accretive to free cash flow and distributable cash flow per unit and neutral to its leverage metrics. Lotus Midstream cash flows are supported by fee-based revenues from fixed-fee contracts, it said.