Actuals vs. estimates
| Metric | Actual | Consensus | Surprise |
|---|
Verdict
- ONEOK is acquiring Brazos Midstream's Permian Midland Basin gathering and processing assets for $4.425bn in cash, funded by a $9bn nonvoting minority equity investment from Apollo.
- The remaining $5bn of proceeds retires debt, taking pro forma 2027 leverage to approximately 3.25 times debt-to-EBITDA with no common equity issued.
- The purchase implies roughly 7.5 times estimated 2027 EBITDA including about $80m of full-year synergies, falling to about 6.0 times on 2028 EBITDA.
- Apollo's return is capped at a 7.0% IRR for the first nine years, which ONEOK says is below its cost of publicly traded equity, with value above the cap accruing to common holders.
Key metrics
| Metric | Reported | Prior year | Change |
|---|---|---|---|
| Total cash consideration for Brazos Midstream Permian Midland Basin assets | $4.425 billion | — | — |
| Apollo nonvoting minority equity investment | $9 billion | — | — |
| Debt extinguishment funded from equity investment proceeds | approximately $5 billion | — | — |
| Implied multiple on estimated 2027 EBITDA | approximately 7.5 times | — | — |
| Expected full-year synergies included in 2027 multiple | approximately $80 million | — | — |
| Midland Basin processing capacity after acquisition | approximately 2.3 Bcf/d | — | more than doubles |
Guidance changes
| Item | New guidance | Prior guidance |
|---|---|---|
| Pro forma 2027 leverage | approximately 3.25 times debt-to-EBITDA | — |
| Adjusted EBITDA growth target over the next five to seven years | high end of mid- to high-single-digit | mid- to high-single-digit |
| Earnings and free cash flow per share impact | immediately accretive | — |
| Expected close of Brazos Midland acquisition | fourth quarter of 2026 | — |
| Expected close of minority equity investment | first half of September | — |
Quality of earnings
- The $9bn Apollo investment is reported as a noncontrolling interest within permanent equity, with roughly 7.0% of the remaining capital balance deducted from net income each year before earnings attributable to ONEOK.
- The 7.5 times 2027 EBITDA multiple is stated inclusive of approximately $80m of full-year synergies that have yet to be realised.
Gotchas & watch items
- The Class B interest is expected to take 15% of quarterly cash flow from operations, and ONEOK may elect up to 20% to accelerate the paydown.
- The capped return steps up to a 7.35% IRR in year 10 and a final 7.85% in year 15 if the balance has not been retired.
- The acquisition still requires Hart-Scott-Rodino clearance and is expected to close only in the fourth quarter of 2026.
- The 1.2 Bcf/d of processing capacity depends on the Cassidy II plant completing in the third quarter of 2027.