Another big pipeline deal announced

Kinder Morgan will acquire NextEra Energy Partner’s south Texas assets, STX Midstream, for $1.815 billion.

The STX Midstream pipeline system includes a set of integrated, large diameter high-pressure natural gas pipelines that connect the Eagle Ford basin to key growing Mexico and Gulf Coast demand markets, Kinder Morgan said. STX Midstream includes a 90% interest in the NET Mexico pipeline; MGI Enterprises, a PEMEX affiliate, owns the other 10%. STX Midstream owns and operates Eagle Ford Midstream, a 158-mile residue line connecting the Eagle Ford basin to the Agua Dulce Hub in Nueces County, Texas. Eagle Ford Midstream is connected to multiple pipeline systems, including KMI’s Tennessee Gas Pipeline, Kinder Morgan Tejas Pipeline and Natural Gas Pipeline Company of America.

STX Midstream also owns a 50% interest in Dos Caminos LLC, which is operated by, and the other 50% interest owned by, Howard Energy Partners (HEP). Dos Caminos has placed in service a 62-mile pipeline that connects HEP’s existing midstream pipeline and facilities in Webb County, Texas to KMI’s new Eagle Ford pipeline, which was recently placed in service. The portfolio of assets is highly contracted, with an average contract length of over 8 years. Approximately 75% of the business is supported by take-or-pay contracts.

“This is a very attractive acquisition for KMI,” said Sital Mody, Kinder Morgan’s president of Natural Gas Pipelines. “STX Midstream nicely complements our existing assets and will enable us to capture incremental opportunities serving LNG, power generation, LDC customers and exports to Mexico.”

The oil and gas pipeline business has seen increased consolidation this year as U.S. production grows and persisting problems related to permits for new pipelines have made existing operators more valuable.

The transaction requires clearance under Hart-Scott-Rodino and is expected to close in the first quarter of 2024. A presentation including information relating to this transaction has been posted to the Investor Relations page on KMI’s website.

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