ONEOK Bets $4.4B on Brazos as Apollo Injects $9B for Permian Growth

Key Points

• ONEOK will acquire Brazos Midstream’s Permian Basin assets for $4.425 billion, adding about 600,000 dedicated acres, 700 miles of gathering infrastructure and processing capacity expected to reach 1.2 billion cubic feet per day by 2027.
• Apollo-managed funds will invest $9 billion in minority equity to fund the acquisition and repay approximately $5 billion of debt, potentially lowering ONEOK’s pro forma 2027 debt-to-EBITDA ratio to about 3.25 times.
• The deal is expected to be immediately accretive to earnings and free cash flow per share, with growth supported by synergies, increased NGL volumes and projected annual growth of roughly 20% beginning in 2027; Apollo’s investment is expected to close in September, with the Brazos acquisition targeted for the fourth quarter of 2026.

ONEOK NYSE: OKE said it has agreed to acquire Brazos Midstream’s natural gas gathering and processing assets in the Permian Basin’s Midland Basin for $4.425 billion, alongside a $9 billion minority equity investment from funds and affiliates managed by Apollo.

The company said the Apollo investment will fund the Brazos acquisition and support the repayment of approximately $5 billion of debt. ONEOK expects the combined actions to lower its pro forma 2027 debt-to-EBITDA ratio to about 3.25 times, below its prior long-term target of 3.5 times.

Chief Executive Officer Pierce Norton said the transactions are intended to add a complementary Permian growth platform, increase earnings and free cash flow per share, and strengthen the company’s balance sheet without issuing common equity.

“These transactions begin creating value day one,” Norton said, adding that the acquisition is expected to be immediately accretive to earnings and free cash flow per share.

Brazos Expands Midland Basin Position

The acquired Brazos assets include approximately 600,000 dedicated acres, contracts with a weighted average remaining term of more than 12 years, 14 active drilling rigs and a network expected to comprise about 700 miles of gathering infrastructure. Following completion of the Cassidy II plant, expected in the third quarter of 2027, Brazos is expected to have roughly 1.2 billion cubic feet per day of processing capacity.

ONEOK said the acquisition would more than double its Midland Basin processing capacity to approximately 2.3 billion cubic feet per day, including plants under construction. The company already operates more than 1 billion cubic feet per day of processing capacity and about 1,200 miles of gathering infrastructure in the Midland Basin.

Norton said the combined company will have greater operating flexibility and commercial reach, including the ability to move additional natural gas liquids through ONEOK’s West Texas NGL pipeline, fractionation assets and eventually its Gulf Coast export facility.

The transaction is expected to position ONEOK as the third-largest natural gas gathering and processing operator in the Midland Basin, according to management. The company has also secured two additional processing plants that could be deployed following final investment decisions.

Chief Commercial Officer Sheridan Swords said ONEOK currently receives about 30,000 barrels per day of NGLs from Brazos and expects volumes to increase by an additional 120,000 barrels per day, reaching as much as 150,000 barrels per day by 2029.

Management said growth is supported by the producer base, active drilling activity and new production that has already resulted in plant offloads because production is ahead of construction. Chief Financial Officer Walt Hulse said the company sees a growth profile that could increase by about 20% annually beginning in 2027 for roughly four years.

Acquisition Economics and Synergies

ONEOK said the purchase price represents an approximately 7.5-times multiple of expected 2027 EBITDA, including about $80 million of full-year synergies. The company expects the multiple to decline to about six times by 2028 as Brazos grows and additional integration benefits emerge.

Management identified capital and operational synergies from the overlap between the companies’ Midland Basin systems. Swords said the combined platform could use existing ONEOK capacity for near-term offload and growth volumes, while avoiding some capital spending that might have been required if the systems remained separate.

The company expects to spend about $130 million in 2027 to complete the Cassidy plant. Chief Operating Officer Randy Lentz said only about $13 million of additional spending is expected in 2028 for bills rolling over from the project. Hulse noted that the $130 million of Cassidy capital is not included in the cited 7.5-times acquisition multiple.

Apollo Investment Structure

Apollo-managed funds will receive a non-voting Class B interest in a newly created holding company located below ONEOK and above the operating company that holds ONEOK’s assets. ONEOK will retain the Class A interest, while existing debt will remain with the operating entity.

Hulse said the structure is designed to be subordinate to ONEOK’s existing senior notes and other debt, distinguishing it from certain prior asset-level financing arrangements in the midstream sector. He said the company discussed the arrangement with all three credit rating agencies, which viewed the transaction as credit-enhancing.

The Class B interest will receive quarterly distributions equal to 15% of cash flow from operations, with its return capped at a 7% internal rate of return during the first nine years. ONEOK can elect to increase the quarterly distribution to as much as 20% of cash flow from operations, which would accelerate the reduction of the Class B capital account.

Beginning on the eighth anniversary of closing, or earlier if the Class B capital account reaches $200 million, ONEOK may unilaterally acquire the remaining Class B interest. Hulse said distributions above the amount needed to achieve the capped return reduce the capital account, allowing a growing share of economic value to accrue to common shareholders.

Fitch placed ONEOK’s ratings on credit watch positive and said it expects to resolve the watch with a one-notch upgrade to BBB+ upon closing of the minority investment and debt repayment, according to Hulse.

ONEOK said the Apollo investment is expected to close in the first half of September, while the Brazos acquisition is expected to close in the fourth quarter of 2026, subject to regulatory approvals and customary closing conditions. The company said it is maintaining its recently increased full-year 2026 guidance and plans to provide another update with third-quarter earnings in October.

About ONEOK (NYSE:OKE)

ONEOK, Inc NYSE: OKE is a publicly traded midstream energy company headquartered in Tulsa, Oklahoma. The company owns and operates a portfolio of natural gas and natural gas liquids (NGL) pipelines, processing facilities, fractionators and storage and terminal assets. Its operations are focused on gathering, processing, transporting, fractionating and marketing NGLs and interstate natural gas, providing critical infrastructure that connects hydrocarbon production to refineries, petrochemical plants and other end markets.

ONEOK's asset base includes pipeline systems and processing plants that move and condition natural gas, along with infrastructure for the transportation, storage and fractionation of NGLs such as ethane, propane and butane.

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