Kinetik to Acquire Durango, Inks 15-Year Gas Services Agreement

Midstream firm Kinetik Holdings Inc. is acquiring Durango Permian LLC, which expands its operations in Eddy and Lea Counties, New Mexico.

The Durango Acquisition increases Kinetik’s processing capacity by 420 million cubic feet per day (MMcfpd), doubles gathering pipeline mileage, and adds over 60 new customers, many of whom are private, including one of the most active producers in the Delaware Basin, the company said in a recent news release.

Kinetik stated it will acquire Durango for an aggregate $765 million of cash and equity with up to $75 million of contingent consideration tied to the capital cost for the Kings Landing, which is currently under construction.

Durango’s assets, located in Eddy, Lea and Chaves Counties, New Mexico, include approximately 2,400 miles of gas gathering pipelines and approximately 220 MMcfpd of processing capacity, according to the release.

Durango is currently constructing Kings Landing, a new 200 MMcfpd greenfield processing complex in Eddy County, which is expected to be completed in April 2025. Kinetik said it estimates an additional $78 million of net capital expenditures required to complete Kings Landing construction.

Kinetik will also provide low-pressure and high-pressure natural gas gathering and processing services under a newly executed, 15-year agreement with a large existing Kinetik customer in Eddy County, New Mexico. The infrastructure is expected to be approximately $200 million of aggregate capital through 2026, the company noted.

Further, Kinetik plans to divest its 16 percent equity interest in the Gulf Coast Express pipeline (GCX) to an affiliate of ArcLight Capital Partners LLC for a total of $540 million in cash to help fund the first two announced agreements. The purchase price is composed of $510 million in upfront cash and an additional $30 million deferred cash payment due upon a final investment decision on a capacity expansion project. The transaction is expected to close in the next few weeks.

“Following on from our tremendous success with our recent Lea County, New Mexico system expansion, we are delighted to now announce this series of strategic transactions that further our expansion into New Mexico and significantly increase our footprint across the Northern Delaware Basin,” Kinetik President and CEO Jamie Welch said.

“The Durango Acquisition and New Eddy County Agreement together represent approximately $1 billion of new investment,” Welch continued. “The structure for the Durango Acquisition has approximately 60 percent upfront consideration with 40 percent of the consideration deferred until July 2025, which is after the expected Kings Landing in-service date”.

“Following the Durango Acquisition and the expected completion of Kings Landing, Kinetik will own and operate over 2.4 billion cubic feet per day of processing capacity, entirely in the Delaware Basin, and approximately 4,600 miles of pipelines across eight counties,” he outlined.

“Additionally, the Durango Acquisition and New Eddy County Agreement offer full control of plant products including more than 350 million cubic feet per day of residue gas and well over 60,000 barrels per day of natural gas liquids, providing significant additional upside value via system optimization, modifications to existing commercial contracts, and integration with our Pipeline Transportation segment,” he concluded.

Kinetik describes itself as a fully integrated, pure-play, Permian-to-Gulf Coast midstream C-corporation operating in the Delaware Basin. Kinetik is headquartered in Houston and Midland, Texas. Kinetik provides comprehensive gathering, transportation, compression, processing and treating services for companies that produce natural gas, natural gas liquids, crude oil and water.

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