August 31, 2026 [Storage Terminals Magazine]- ONEOK has agreed to acquire Brazos Midstream’s natural gas gathering and processing assets in the Permian Midland Basin for $4.425 billion in cash, as part of a broader transaction that will also see the company receive a $9 billion nonvoting minority equity investment from funds and affiliates managed by Apollo.

ONEOK plans to use $5 billion of the proceeds from the equity investment to reduce its existing debt.

The acquisition is expected to strengthen ONEOK’s position in the Permian Midland Basin and expand its integrated natural gas and natural gas liquids (NGL) infrastructure. The company said the assets are supported by long-term contracts and provide opportunities for further growth and operational synergies.

Pierce H. Norton II, president and CEO of ONEOK, said the transaction would expand the company’s integrated energy infrastructure and add a significant Permian Midland Basin platform.

According to ONEOK, the acquisition will advance its integrated wellhead-to-water strategy, increase connectivity across its natural gas and NGL value chain and position the company to capture further volume growth in the Permian Basin, one of North America’s largest and fastest-growing oil and gas producing regions.

The combination of the acquisition and the Apollo investment is also expected to accelerate ONEOK’s deleveraging efforts, with the company targeting pro forma 2027 leverage of approximately 3.25 times debt-to-EBITDA.

Apollo Partner Jamshid Ehsani said the transaction reflected Apollo’s ability to provide large-scale capital solutions aligned with ONEOK’s long-term strategic objectives.

Permian Midland Basin expansion

The Brazos transaction implies an acquisition multiple of approximately 7.5 times estimated 2027 EBITDA, including around $80 million in expected full-year synergies. The multiple is expected to fall to approximately 6.0 times estimated 2028 EBITDA as the acquired platform grows and additional commercial and operational synergies are realised.

The acquisition is expected to be immediately accretive to ONEOK’s earnings and free cash flow per share, supported by contracted growth across Brazos’ dedicated acreage.

The transaction will expand ONEOK’s scale in the Permian Midland Basin, add long-term fee-based contracts with major producers, enhance connectivity across its natural gas and NGL operations and create opportunities for commercial and capital efficiencies.

The acquired assets cover approximately 600,000 dedicated acres under long-term fixed-fee contracts, with a weighted average remaining contract term of more than 12 years. The system is currently supported by 14 active drilling rigs operated by major Permian producers, including ExxonMobil, Diamondback Energy and Double Eagle.

Following the expected completion of the Cassidy II processing plant in the third quarter of 2027, the Brazos Midland system is expected to comprise approximately 700 miles of gathering infrastructure and 1.2 billion cubic feet per day (Bcf/d) of processing capacity across seven core Permian Midland Basin counties.

ONEOK will also acquire a basin-wide area of mutual interest with a key private producer, providing additional opportunities to capture future production growth.

The Brazos assets are considered complementary to ONEOK’s existing Permian Midland Basin natural gas gathering and processing operations, as well as its NGL transportation and crude oil infrastructure.

The acquisition is expected to more than double ONEOK’s Midland Basin processing capacity to approximately 2.3 Bcf/d, including plants currently under construction, creating one of the largest integrated natural gas gathering and processing platforms in the Permian Midland Basin.

ONEOK expects the combined system to provide greater opportunities to capture volume growth across the energy value chain while making use of existing downstream infrastructure, including its West Texas NGL Pipeline and the Medford NGL fractionation facility, which is nearing completion.

The company also expects to generate recurring synergies by integrating commercial, operational and capital activities across the combined footprint.

$9 billion Apollo investment

Separately, ONEOK has entered into an agreement with Apollo and its affiliates for a $9 billion minority equity investment.

The investment will be made in exchange for a Class B interest in a newly formed holding company, ONEOK Holdings, L.L.C. The Class B interest will be structurally subordinate to ONEOK’s existing debt.

The investment carries a capped internal rate of return (IRR) of 7 percent for the first nine years. The target IRR will increase to 7.35 percent in year 10 and eventually to 7.85 percent in year 15.

ONEOK said value generated above the applicable capped return, including value from the Brazos acquisition, its existing portfolio and future projects, will accrue to its common shareholders.

The Class B interest is expected to receive 15 percent of quarterly cash flow from ONEOK, L.L.C.’s operations. Because distributions are expected to exceed the 7 percent capped return, the Class B capital account balance is expected to decline substantially over time.

ONEOK will also have the option to accelerate repayment of the Class B capital by allocating up to 20 percent of quarterly operating cash flow to the Class B interest, subject to certain conditions.

Beginning eight years after closing, or earlier if the Class B capital account falls to $200 million, ONEOK will have the option to acquire the remaining minority interest. The purchase price will reflect the applicable target IRR.

The Class B interest will have limited consent rights, no board representation and no liquidation preference. All distributions to the holding company will remain subject to the discretion of the operating company’s board.

ONEOK said its credit rating agencies had reviewed the transaction and considered it credit-enhancing. The company expects to receive full equity credit for the investment.

Under GAAP, the investment will be recorded on ONEOK’s balance sheet as a non-controlling interest within permanent equity.

Debt reduction and financial flexibility

In addition to funding the Brazos acquisition, ONEOK intends to use approximately $5 billion of the Apollo investment to extinguish existing debt.

The debt reduction plan includes repayments, make-whole calls and a tender offer for certain outstanding senior notes. ONEOK also plans to repay its $1.2 billion term loan at or shortly after the closing of the minority equity investment and exercise make-whole calls on certain senior note series.

The company said the measures would accelerate its deleveraging timeline and allow it to achieve its previous leverage target without issuing common equity.

The improved balance sheet is also expected to provide greater flexibility to support ONEOK’s organic growth pipeline, particularly in the Permian Basin, and potentially increase capital returns to shareholders through higher dividends and share repurchases.

ONEOK said the acquisition increases momentum toward the upper end of its target for mid- to high-single-digit adjusted EBITDA growth over the next five to seven years.

Transaction timeline

The Brazos Midland acquisition is expected to close in the fourth quarter of 2026, subject to customary closing conditions, including clearance under the Hart-Scott-Rodino Act. The transaction has been unanimously approved by ONEOK’s board of directors.

The $9 billion minority equity investment has also received unanimous board approval and is expected to close in the first half of September, subject to customary closing conditions.

Barclays is serving as ONEOK’s sole financial adviser on the Brazos acquisition and lead financial adviser on the minority equity investment, while Lazard is also advising ONEOK on the equity transaction. Latham & Watkins is serving as legal adviser to ONEOK on both transactions.

RBC Capital Markets is serving as Apollo’s sole financial adviser, with Milbank providing legal counsel. Akin Gump Strauss Hauer & Feld is serving as legal adviser to Brazos Midstream.

ONEOK’s management is scheduled to discuss the transactions during a conference call on August 31st, 2026.