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Houston midstream energy giant to buy another local co. for $3.25B

January 10, 2023

Enterprise Products Partners LP (NYSE: EPD), one of the largest publicly traded companies in the Houston area, will acquire another local midstream energy company for $3.25 billion in cash.

The acquisition of The Woodlands-based Navitas Midstream Partners Holdings LLC is expected to close in the first quarter, the companies said Jan. 10. Enterprise plans to use cash on hand and borrowings under its existing facilities.

The deal gives Enterprise’s natural gas processing and natural gas liquids business a presence in the Midland Basin portion of the Permian Basin in West Texas, the company said.

Navitas, a producer-focused midstream company, is a portfolio company of funds managed by New York-based global private equity firm Warburg Pincus LLC. The company provides natural gas gathering, treating and processing services in the core of the Midland Basin. Navitas is expected to complete its Leiker plant in the first quarter, bringing its assets to more than 1 billion cubic feet per day of cryogenic natural gas processing capacity plus approximately 1,750 miles of pipelines.

“The Navitas management team has developed a premier system in the heart of the Midland Basin," said A.J. "Jim" Teague, co-CEO of Enterprise’s general partner. "The Delaware and Midland Basins are the two most attractive regions in the U.S. in terms of crude oil, natural gas and NGL reserves with each having up to nine geologic horizons. We do not have a natural gas or NGL presence in the Midland Basin other than downstream pipelines. This acquisition will give us an entry point into the basin.”

In 2014, Warburg Pincus provided a line-of-equity investment of up to $500 million to the newly formed Navitas, which said it would use the startup cash to serve new shale plays that lacked the infrastructure to get to U.S. markets. CEO R. Bruce Northcutt founded Navitas with COO Bryan Neskora and Chief Commercial Officer James Wade. They were all executives at Copano Energy LLC, which Kinder Morgan Energy Partners LP (NYSE: KMP) acquired in 2013 in a $3.2 billion deal.

In November 2014, the company said it would build its first gathering and processing system project.

Now, Enterprise's acquisition of Navitas is one of the largest acquisitions of a private gas-gathering and -processing business, said John Rowan, a managing director at Warburg Pincus.

"We are incredibly proud to have supported Navitas through a transformative period of growth," said Peter Kagan, another managing director at Warburg Pincus. "Over the course of our partnership, Navitas added approximately 750 miles of new pipeline and over 1 (billion cubic feet per day) of new processing capacity in the core of the Midland Basin during a difficult time for the industry."

Meanwhile, Enterprise has several major projects announced or in the works in recent years. In December, the company started operating a new pipeline in Louisiana that can transport up to 1 billion cubic feet per day of natural gas. In October, documents published by the Texas comptroller’s office said the company is considering a $425 million addition to its massive petrochemical and manufacturing complex in Mont Belvieu, northeast of Houston. And at the 23rd World Petroleum Congress in December, Teague said the company still plans to build an offshore crude export terminal despite permitting delays.

"We are excited to contribute our unique Midland Basin system to Enterprise, one of the premier midstream operators," Northcutt said. "We have succeeded in our goal of creating a unique company that provides critical infrastructure to meet the needs of our Midland Basin producers. We would like to thank our customers for trusting Navitas to develop a system that would meet the needs of their rapid volume growth, and we know they will be in good hands with a company the scale of Enterprise."

Jefferies LLC served as financial adviser to Navitas in the Enterprise deal, and Kirkland & Ellis served as Navitas' legal adviser. Enterprise did not list its advisers, but international law firm Locke Lord said it represented Enterprise in the deal.

By Olivia Pulsinelli, Houston Business Journal