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Western Midstream (WES) Buys Meritage, Fortifies Portfolio
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Energy infrastructure provider Western Midstream Partners LP (WES - Free Report) is set to acquire Denver-based fellow company Meritage Midstream Services II LLC for $885 million in cash, with the transaction expected to close in the fourth quarter of 2023.
This strategic acquisition is set to significantly bolster WES’s position in the Powder River Basin — a key energy-producing region spanning northeastern Wyoming and southeastern Montana — by integrating Meritage Midstream’s natural gas gathering and processing facilities. With this addition, Western Midstream will see its total natural gas processing capacity increase to 440 million cubic feet per day (MMcf/d).
The To-Be-Acquired Assets
Meritage's assets, strategically positioned across Converse, Campbell and Johnson counties in Wyoming, come with robust support. They are backed by over 1.4 million dedicated acres from a diverse array of majority investment-grade counterparties, with an average remaining contract life of some eight years. Among these assets is an extensive network of 1,500 miles of high- and low-pressure natural gas gathering pipelines, along with nearly 380 MMcf/d of natural gas processing capacity. Moreover, the privately-held Meritage operates the Thunder Creek NGL pipeline, a 120-mile natural gas liquids conduit that links to the firm’s processing facilities.
Enhancing WES’ Scale and Competitiveness
The acquisition is poised to make a significant impact on WES's operational scale and competitiveness in the region, with the partnership stating that the addition of Meritage's assets would notably increase its Powder River Basin footprint and further diversify its customer portfolio in the gathering and processing segment. Additionally, with the integration of Meritage's assets, WES anticipates being better equipped to compete for undedicated acreage and business development opportunities.
Benefits for Unitholders
WES's management anticipates substantial free cash flow benefits resulting from this transaction. As a result, it plans to recommend a base distribution increase of 1.25 cents per unit, or 5 cents per unit on an annualized basis, following the closing of the deal. This move underscores Western Midstream's commitment to delivering enhanced value to its unitholders.
About Western Midstream
Western Midstream Partners has a strategic presence in multiple regions, including the Rocky Mountains, North-central Pennsylvania, Texas and New Mexico. WES is a key player in the midstream energy sector, engaging in a wide range of activities, from gathering, compressing, treating, and processing natural gas to managing condensate, natural gas liquids (NGLs), crude oil, and produced water for its customers. Additionally, WES acts as both a buyer and a seller of natural gas, NGLs, and condensate, serving as an agent for its customers under specific contractual agreements.
Zacks Rank & Stock Picks
Western Midstream Partners carries a Zacks Rank #4 (Sell) at present. Meanwhile, investors interested in the energy sector might consider the operators mentioned below. These companies currently sport a Zacks Rank #1 (Strong Buy).
Solaris Oilfield Infrastructure : It beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters at an average of 18.8%.
SOI is valued at around $469.8 million. Solaris Oilfield Infrastructure has seen its shares move up 4.6% in a year.
CVR Energy (CVI - Free Report) : It beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. Over the past 60 days, CVR Energy saw the Zacks Consensus Estimate for 2023 move up 44.2%.
CVR Energy is valued at around $3.5 billion. CVI has seen its shares gain 3.5% in a year.
Helix Energy Solutions Group (HLX - Free Report) : Over the past 60 days, Helix Energy Solutions Group saw the Zacks Consensus Estimate for 2023 move up 4.3%. The 2023 Zacks Consensus Estimate for HLX indicates 200% year-over-year earnings per share growth.
Helix Energy Solutions Group is valued at around $1.6 billion. HLX has seen its shares surge 150.4% in a year.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.
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Western Midstream (WES) Buys Meritage, Fortifies Portfolio
Energy infrastructure provider Western Midstream Partners LP (WES - Free Report) is set to acquire Denver-based fellow company Meritage Midstream Services II LLC for $885 million in cash, with the transaction expected to close in the fourth quarter of 2023.
This strategic acquisition is set to significantly bolster WES’s position in the Powder River Basin — a key energy-producing region spanning northeastern Wyoming and southeastern Montana — by integrating Meritage Midstream’s natural gas gathering and processing facilities. With this addition, Western Midstream will see its total natural gas processing capacity increase to 440 million cubic feet per day (MMcf/d).
The To-Be-Acquired Assets
Meritage's assets, strategically positioned across Converse, Campbell and Johnson counties in Wyoming, come with robust support. They are backed by over 1.4 million dedicated acres from a diverse array of majority investment-grade counterparties, with an average remaining contract life of some eight years. Among these assets is an extensive network of 1,500 miles of high- and low-pressure natural gas gathering pipelines, along with nearly 380 MMcf/d of natural gas processing capacity. Moreover, the privately-held Meritage operates the Thunder Creek NGL pipeline, a 120-mile natural gas liquids conduit that links to the firm’s processing facilities.
Enhancing WES’ Scale and Competitiveness
The acquisition is poised to make a significant impact on WES's operational scale and competitiveness in the region, with the partnership stating that the addition of Meritage's assets would notably increase its Powder River Basin footprint and further diversify its customer portfolio in the gathering and processing segment. Additionally, with the integration of Meritage's assets, WES anticipates being better equipped to compete for undedicated acreage and business development opportunities.
Benefits for Unitholders
WES's management anticipates substantial free cash flow benefits resulting from this transaction. As a result, it plans to recommend a base distribution increase of 1.25 cents per unit, or 5 cents per unit on an annualized basis, following the closing of the deal. This move underscores Western Midstream's commitment to delivering enhanced value to its unitholders.
About Western Midstream
Western Midstream Partners has a strategic presence in multiple regions, including the Rocky Mountains, North-central Pennsylvania, Texas and New Mexico. WES is a key player in the midstream energy sector, engaging in a wide range of activities, from gathering, compressing, treating, and processing natural gas to managing condensate, natural gas liquids (NGLs), crude oil, and produced water for its customers. Additionally, WES acts as both a buyer and a seller of natural gas, NGLs, and condensate, serving as an agent for its customers under specific contractual agreements.
Zacks Rank & Stock Picks
Western Midstream Partners carries a Zacks Rank #4 (Sell) at present. Meanwhile, investors interested in the energy sector might consider the operators mentioned below. These companies currently sport a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Solaris Oilfield Infrastructure : It beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters at an average of 18.8%.
SOI is valued at around $469.8 million. Solaris Oilfield Infrastructure has seen its shares move up 4.6% in a year.
CVR Energy (CVI - Free Report) : It beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. Over the past 60 days, CVR Energy saw the Zacks Consensus Estimate for 2023 move up 44.2%.
CVR Energy is valued at around $3.5 billion. CVI has seen its shares gain 3.5% in a year.
Helix Energy Solutions Group (HLX - Free Report) : Over the past 60 days, Helix Energy Solutions Group saw the Zacks Consensus Estimate for 2023 move up 4.3%. The 2023 Zacks Consensus Estimate for HLX indicates 200% year-over-year earnings per share growth.
Helix Energy Solutions Group is valued at around $1.6 billion. HLX has seen its shares surge 150.4% in a year.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.