ONEOK has agreed to acquire Brazos Midstream's natural gas gathering and processing assets in the Permian Basin's Midland sub-basin for $4.425 billion in cash, expanding the midstream operator's footprint in one of the largest U.S. oil and gas producing regions. The deal comes as Permian producers generate growing volumes of associated natural gas alongside crude output, driving demand for gathering and processing capacity in the basin. According to ONEOK's press release, the acquisition will be funded as part of a separate $9 billion nonvoting minority equity investment from funds and affiliates managed by Apollo Global Management.

ONEOK plans to use roughly $5 billion of the Apollo proceeds to extinguish existing debt, while the remainder will fund the Brazos acquisition. The structure allows ONEOK to finance the transaction without issuing common equity, an approach that avoids diluting existing shareholders — a consideration that has weighed on other midstream acquirers. The company said the combination of the Apollo investment and planned debt reduction is expected to bring its pro forma 2027 debt-to-EBITDA ratio to about 3.25 times.

Brazos' Midland Basin system is supported by roughly 600,000 dedicated acres under fixed-fee contracts with a weighted average remaining term exceeding 12 years, according to ONEOK. The long-dated, fee-based contract structure is designed to insulate cash flows from commodity price swings, a feature investors typically prize in midstream assets. Producers operating on the acreage include ExxonMobil, Diamondback Energy and Double Eagle, with 14 active drilling rigs currently supporting the system.

After completion of the Cassidy II processing plant, which ONEOK expects in the third quarter of 2027, the acquired system is expected to comprise about 700 miles of gathering infrastructure and 1.2 billion cubic feet per day of gas processing capacity across seven Midland Basin counties.

ONEOK said adding the Brazos assets would more than double its Midland Basin processing capacity to approximately 2.3 Bcf/d, including facilities currently under construction. The company expects to link those volumes with its broader natural gas liquids infrastructure, including the West Texas NGL Pipeline and its Medford fractionation project — a vertical integration strategy intended to capture value across the wellhead-to-market chain, from gathering and processing through NGL transport and fractionation.

The acquisition continues a multiyear expansion that has transformed ONEOK from a primarily natural gas and NGL operator into a diversified midstream company. The company completed its $14.1 billion acquisition of Magellan Midstream Partners in 2023, adding major crude oil and refined-products infrastructure. In 2024, ONEOK paid about $2.6 billion for Medallion Midstream and $3.3 billion for Global Infrastructure Partners' controlling interest in EnLink Midstream, before acquiring EnLink's remaining publicly held interests in January 2025. The Brazos deal extends that consolidation trend into privately held Permian infrastructure, an area that has drawn sustained interest from both strategic buyers and private equity as producers drill denser wells across the basin.

ONEOK estimates the Brazos purchase price at about 7.5 times projected 2027 EBITDA, including approximately $80 million of anticipated annual synergies, falling to roughly six times projected 2028 EBITDA. The company also expects the acquisition to be immediately accretive to earnings and free cash flow per share.

The Brazos acquisition has been approved by ONEOK's board and is expected to close in the fourth quarter of 2026, subject to customary conditions including U.S. antitrust clearance. The Apollo investment is separately expected to close in the first half of September. Beyond the closing milestones, the integration of Brazos volumes with ONEOK's NGL pipeline and fractionation network and the completion of Cassidy II will indicate how fully the company realizes the projected synergies.

By Charles Kennedy for Oilprice.com.