Permian Basin-to-Gulf Coast pipeline giant Altus Midstream Co. has agreed to merge with fellow West Texas operator BCP Raptor Holdco LP in an estimated $9 billion transaction.

Altus JV

The combination would operate 2 Bcf/day of cryogenic natural gas processing facilities in the Permian Delaware sub-basin of West Texas, with more than 850,000 acres under fee-based, long-term dedications.

The pro forma enterprise would provide residue gas, natural gas liquids (NGL), crude oil and water midstream services. Measured by processing capacity, the combination would become “the largest natural gas processor in the Delaware Basin and third largest across the entire Permian Basin.”

Houston-based Altus, 79% owned by Apache Corp., owns gathering, processing and transmission assets that include the Permian Highway Pipeline (PHP) and Gulf Coast Express (GCX). The APA Corp. unit also has firm transportation commitments to help underwrite and ensure it can reduce flaring in the Permian

“This transaction builds scale and liquidity, which will be important for Altus’ evolution as a publicly traded entity,” APA CEO John Christmann said. “We have great confidence in the new management team and look forward to remaining a key customer of Altus for many years to come.”

Privately held BCP, parent company of EagleClaw Midstream LLC, oversees EagleClaw Midstream Ventures, Caprock Midstream and Pinnacle Midstream. BCP also has a 26.7% interest in PHP.

Once the merger is completed, the  company would have stakes in four contracted Permian export pipelines. Included would be a 53% majority interest in PHP, a 16% interest in the GCX and a 33% interest in the Shin Oak NGL Pipeline. Altus also holds a 15% interest in the Epic Crude Oil Pipeline, which connects supply from the Permian and Eagle Ford Shale to Corpus Christi, TX.

Why Did Altus Choose EagleClaw?

APA CFO Steve Riney said there had been a “wide range of strategic options” before clinching the EagleClaw deal. “The combination with EagleClaw provides the right balance of high quality businesses and attractive growth opportunities.”

As part of the transaction, set to be completed by the end of March, Altus plans to issue 50 million Class C common shares to BCP’s unitholders, principally funds affiliated with Blackstone and I Squared Capital, resulting in combined ownership of 75% of the pro forma company. Subsidiary Apache Midstream LLC’s ownership would be reduced to 20%, and existing Altus public shareholders would own 5% of the combined company.

“This transaction is a transformative event for all parties and their respective stakeholders,” EagleClaw CEO Jamie Welch said. “The combination creates the largest pure-play midstream company in one of the world’s most prolific hydrocarbon basins, providing the scale, operational capabilities, and fully integrated service offerings necessary for long-term success.”

Once merged, the enterprise would be “well positioned to capitalize on accelerating activity in the Delaware Basin, with expanded processing and transportation capabilities for all three streams from the wellhead to end markets,” Welch said. 

The new management team is to be led by Welch. Apache field personnel working at Altus are to be offered employment with the pro forma enterprise.

Following completion, the board would have 11 members, including Welch, four independent directors, three Blackstone designees, two designees of I Squared, and one from Apache.

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The enterprise would maintain its headquarters in Midland, TX, with corporate leadership in Houston. The company also plans to change its name, which is set to be finalized before closing.

Apache, which develops the gassy Alpine High assets in West Texas, would continue as a customer of the combined company. Apache noted that it is “assessing the addition of drilling and completion activity in its 2022 capital budget” in light of current gas prices.