By Seher Dareen and Kanjyik Ghosh
(Reuters) -Pipeline operator ONEOK (NYSE:OKE) said it would buy midstream assets in deals worth $5.9 billion from Global Infrastructure Partners, bolstering its position in the Permian and Mid-Continent basins amid rapid consolidation in the U.S. industry.
The U.S. pipeline and storage sector is seen as ripe for deals following increased consolidation among oil and gas producers, as well as hurdles in getting new energy infrastructure approved and built.
The deal will help immediately compete for more volumes, executives said in a conference call, adding it also sets the company up as a "one-stop shop" in the Permian that can move oil and gas and process and fractionate natural gas liquids.
ONEOK will buy GIP's 43% stake in EnLink Midstream (NYSE:ENLC) for $14.90 per unit and GIP's full interest in EnLink's managing member for a total of about $3.3 billion in cash, it said late on Wednesday, a 12.8% premium to EnLink's close on Aug. 27.
The company's shares were up 7.6% in morning trade on Thursday.
Once finalised, ONEOK said it intends to pursue the acquisition of the rest of the 57% of EnLink in a tax-free transaction.
While the "timing is quite surprising" as ONEOK digests the relatively recent Magellan and Easton transactions, the synergy potential and EnLink's asset quality within a larger network of ONEOK's is modest, Raymond James analysts said.
They signaled there could potentially be additional interest in the rest of EnLink from other companies, given its solid Permian presence.
ONEOK will also buy GIP's equity interests in Medallion Midstream, a crude gathering and transportation system in the Permian's Midland Basin, for $2.6 billion in cash.
The assets have fee floors, which would ensure that the midstream firm earns a reasonable enough return, keeping ONEOK largely insulated from low gas prices while still positioned for growth, said Morningstar analyst Stephen Ellis.
Tulsa, Oklahoma-based ONEOK expects the deals to close early in the fourth quarter and immediately add to its earnings and free cash flow. It estimates synergies to be between $250 million and $450 million over the next three years.