ONEOK is acquiring Brazos Midstream's Permian Midland Basin gathering and processing assets for $4.425 billion at approximately 7.5x 2027 EBITDA, a multiple that already includes approximately $80 million of full-year synergies.
The purchase is funded by a $9 billion non-voting Class B minority equity investment from Apollo rather than common stock — the first such vehicle raised at the corporate level rather than the asset level.
Approximately $5 billion of debt is being extinguished, taking pro forma 2027 leverage to approximately 3.25x against the previous 3.5x target; Fitch has placed ONEOK on credit watch positive for a one-notch upgrade to BBB+ on closing.
Midland Basin processing capacity more than doubles to approximately 2.3 Bcf/d including plants under construction, on approximately 600,000 dedicated acres under contracts averaging more than 12 years.
Full-year 2026 financial guidance is maintained, with the next update due alongside third-quarter earnings in October.
Guidance & KPIs
Item
New guidance
Prior guidance
Full-year 2026 financial guidance
maintained at the recently increased level; update to follow with third-quarter earnings in October
—
Adjusted EBITDA growth target (next five to seven years)
high end of mid to high single-digit
mid to high single-digit
Long-term leverage
approximately 3.25x debt-to-EBITDA or lower over time
3.5x debt-to-EBITDA
Management commentary
Pierce Norton framed the two transactions as one move: acquire a Permian Midland growth platform, accelerate earnings and free cash flow per share, and strengthen the balance sheet without issuing common equity.
Walt Hulse on the structure: "The Class B interest is expected to receive quarterly distributions equal to 15% of cash flow from operations, and its return is capped at a 7% internal rate of return for the first nine years of the investment."
Hulse said all three rating agencies view the transaction as credit enhancing, with the minority investment and debt paydown expected to complete by September 20.
Sheridan Swords put current NGL receipts from Brazos at about 30,000 bbl/d, expecting an additional 120,000 to 150,000 bbl/d by 2029, with about 14 rigs currently running on the acreage.
Randy Lentz put the 2027 capital to finish Cassidy at about $130 million, with roughly $13 million of rollover bills landing in 2028.
Quality of earnings
A gain on debt extinguishment is expected because tendered notes trade below par — the face amount retired may exceed cash deployed by approximately $300 million, and that gain is excluded from the accretion figures presented.
Approximately 7% of the remaining Class B capital balance is deducted from net income to reach net income attributable to ONEOK, a charge that steps down each year as the $9 billion balance amortises.
The 7.5x 2027 multiple excludes approximately $130 million of 2027 capital still required to finish the Cassidy plant, plus roughly $13 million rolling into 2028.
Gotchas & watch items
Apollo's Class B takes 15% of cash flow from operations each quarter, which ONEOK may elect to raise to as much as 20%.
The step down from approximately 7.5x in 2027 to approximately 6x in 2028 rests on Brazos volumes growing about 20% a year from 2027.
The Brazos acquisition does not close until the fourth quarter of 2026, subject to regulatory approvals; the Apollo investment closes in the first half of September.
Current NGL receipts from Brazos are about 30,000 bbl/d; the additional 120,000 to 150,000 bbl/d is a 2029 expectation.