Enterprise Enters Midland With Navitas Acquisition

Midstream and logistics giant Enterprise Products Partners announced on Monday that it has reached a deal to acquire privately held Navitas Midstream Partners, growing its footprint in the Permian Basin.

The $3.25 billion all-cash deal will give Enterprise a toehold in the Midland subbasin of the Permian at the wellhead level, the company noted in a press release.

“We do not have a natural gas or NGL [natural gas liquid] presence in the Midland Basin other than downstream pipelines," said Enterprise co-CEO Jim Teague. "This acquisition will give us an entry point into the basin."

Acquiring Navitas gives Enterprise access to roughly 1,750 miles of pipelines in the Midland, as well as over 1 billion cubic feet per day of processing capacity once the Leiker plant comes into service — a development expected in the first half of the year.

Enterprise said that Navitas' pipeline network could support "up to 10,000 drilling locations, or over fifteen years of drilling inventory based on current rig counts."

Pending regulatory approval, the deal is expected to close in the first quarter.

Questionable Exposure

Enterprise’s main operations involve the transport and storage of hydrocarbons, and the firm is one of the key players in US exports of crude oil, NGLs and refined products.

Some experts have thus raised an eyebrow over its acquisition of Navitas, given that it adds little in terms of throughput capacity and instead expands Enterprise's exposure to the upstream.

“There is little discussion of incremental downstream volumes to [Enterprise’s] pipeline, fractionation and export business as a result of the deal, which will be a key market question to justify expanding wellhead exposure,” noted analysts with Tudor Pickering Holt. “While the relatively inexpensive portfolio cost should help mitigate initial market concern ... increasing exposure to the wellhead without a clear readthrough to NGL logistics is tough to reconcile with [Enterprise's] messaged strategy.”

Analysts with Truist Securities, on the other hand, lauded the deal’s “defensive aspects [such as] securing notable supply for [Enterprise's] integrated system.”

NGL Boom

While skyrocketing oil and natural gas production have snatched headlines in the wake of the shale revolution, US NGL supply has also surged in recent years, and has recovered more robustly from the impact of the Covid-19 pandemic as well.

NGLs such as propane and butane and liquefied petroleum gasses (LPGs) — which are the same as NGLs at the molecular level but come from downstream operations rather than upstream wellhead activity — are consistently among the largest US petroleum exports by volume.

Data from the US Energy Information Administration (EIA) show propane exports hovered around 1.3 million barrels per day for much of last year, outdoing virtually all other forms of petroleum.

The products serve as heating and cooking fuel, as well as feedstocks for petrochemical plants.