Momentum Midstream backer is said to consider $5B-plus exit
TL;DR
The North American midstream energy sector is seeing increased M&A activity, with strategic buyers like Energy Transfer and ONEOK acquiring PE-backed assets. This trend is driven by favorable valuations, regulatory shifts, and rising natural gas demand, leading to more exits.
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Momentum Midstream backer is said to consider $5B-plus exit
Midstream Sector Sees Surge in Exit Activity Amid Strategic Acquisitions
The North American midstream energy sector is experiencing heightened M&A momentum, driven by strategic buyers seeking to consolidate infrastructure and capitalize on favorable market conditions. According to recent industry data, sponsor-led midstream exits in 2024 have already surpassed the total volume of 2023 by 85.8%, reaching $7.3 billion year-to-date. This trend reflects a shift in focus from upstream oil and gas producers to midstream operators, which manage pipelines and transmission systems critical to energy distribution.
Strategic acquirers, including Energy Transfer (ET) and ONEOK (OKE), have emerged as key players. For instance, ONEOK recently completed $5.9 billion in acquisitions, including EnLink Midstream and Medallion Midstream, both backed by private equity (PE) firms. These deals underscore a broader pattern: strategics are increasingly targeting PE-backed midstream assets, which offer operational readiness and established infrastructure, bypassing the permitting and regulatory hurdles of greenfield projects.
Market dynamics are also aligning to support exits. Midstream asset valuations have compressed from 7x–9x pre-2021 to 6x–8x currently, narrowing the bid-ask spread and improving transaction feasibility. Additionally, anticipated regulatory changes under a potential Trump administration—such as streamlined permitting and a reversal of Biden-era LNG export pauses—could further incentivize midstream investments.
The sector's growth is also fueled by rising demand for natural gas, particularly in power generation to support data centers and industrial reshoring. Kinder Morgan (KMI) recently expanded its Southern Natural Gas pipeline to address surging Southeastern energy needs, while industry experts project U.S. natural gas demand to grow by 25 billion cubic feet per day over five years.
With PE firms holding midstream investments beyond typical fund timelines, market participants anticipate continued exit activity. As one midstream executive noted, "Strategics are prioritizing well-positioned assets to accelerate their footprint expansion." Analysts suggest this trend will persist as infrastructure demand and regulatory clarity evolve.
(https://ionanalytics.com/insights/mergermarket/oil-and-gas-market-momentum-drives-pe-midstream-exits/): Oil and gas market momentum drives PE midstream exits, Ion Analytics, 2024.
