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Delek (DKL) Expands in Permian Basin by Acquiring 3Bear Energy

·4 min read

Brentwood, TN-based Delek Logistics Partners, LP DKL declared that it signed a definitive agreement for the acquisition of 100% of the equity stake of privately owned 3Bear Delaware Holding, an indirect subsidiary of 3Bear Energy. The takeover, which includes 3Bear’s crude oil and gas gathering, processing and transportation businesses along with the water disposal and recycling operations in the New Mexico portion of the Delaware sub-basin, was concluded for a cash consideration worth $624.7 million.

3Bear's asset base consists of roughly 485 miles of pipelines, 88 million cubic feet per day of cryogenic natural gas processing capacity, about 120,000 barrels of oil of crude storage capacity and 200,000 barrels per day of water disposal capacity. Moreover, the assets of 3Bear are anchored by around 350,000 dedicated acres and long-term fixed fee contracts.

According to Delek Logistics, this tactical deal will considerably improve its third-party revenues and help diversify its consumer base and product mix. It will also expand its position in the Delaware Basin. The acquisition, which is projected to result in an investment multiple of around 6.25 times 2023 EBITDA, provides instant growth to the distributable cash flow and strengthens environmental, social and governance optionality via carbon capture opportunities and greenhouse gas reduction projects in progress.

Chairman, President and Chief Executive Officer of Delek Logistics, Uzi Yemin, mentioned that his organization was pleased to announce the acquisition. Yemin stated that 3Bear’s management developed strong producer relationships and a top-notch asset base in the Delaware Basin. He further said that his organization is excited to magnify operations there and provide long-term growth, which compliments DKL's current asset footprint.

He continued by mentioning that Delek is witnessing substantial growth in the existing Permian Gathering system, where average daily production increased from 83 MBbl/d in the fourth quarter of 2021 to approximately 135 MBbl/d by the end of the first quarter of 2022. “This level of growth and demand from producers provides us with confidence to move forward with this transaction,” he concluded.

The deal is subject to regulatory go-ahead and is anticipated to be complete around mid-year 2022. Delek expects to finance the transaction predominantly with the existing credit facilities and debt financing.

Delek Logistics Partners, LP owns, operates, acquires and constructs crude oil and refined products, logistics and marketing assets. The company operates crude oil transportation pipelines, refined product pipelines, crude oil gathering systems and associated crude oil storage tanks. It also provides marketing services for refined products other than jet fuel, petroleum coke and light products, operates light product terminals in Texas and Tennessee and offers terminalling services to independent third parties.

Delek Logistics currently has a Zacks Rank #2 (Buy). Some other top-ranked stocks from the energy space that warrant a look include Ranger Oil ROCC, Oasis Petroleum OAS and ConocoPhillips COP, each sporting a Zacks Rank #1 (Strong Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

Ranger Oil’s stock has rallied 174.1% in a year. The Zacks Consensus Estimate for Ranger Oil’s 2022 earnings is projected at $10.45 per share, which is an increase of 90.7% from the projected year-ago earnings of $5.48.

ROCC beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being around 27.3%.

Oasis Petroleum’s stock has gone up 135.4% in a year. Oasis Petroleum beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being around 37.6%.

The Zacks Consensus Estimate for OAS’ 2022 earnings is projected at $31.21 per share, up about 227.9% from the projected year-ago earnings of $9.52.

ConocoPhillips is valued at around $127 billion. The consensus estimate for ConocoPhillips’ 2022 earnings has been revised 12.4% upward over the past 60 days.

COP beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 12.6%. ConocoPhillips has rallied around 99% in a year.

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