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Delek Logistics (DKL) to Expand in Permian Via Acquisitions

·3 min read

Delek Logistics Partners, LP DKL recently announced that its unit DKL Delaware Gathering, LLC has signed a definitive purchase agreement for the acquisition of 100% of the equity interests of 3Bear Delaware Holding – NM, LLC for a cash consideration of $624.7 million. The deal is expected to be completed around mid-year 2022, subject to customary regulatory approvals.

3Bear has crude, gas and water gathering, processing and disposal business in the Permian Basin. 3Bear has more than 350,000 acres under its coverage and long-term fixed-fee contracts. In addition, 3Bear owns 485 miles of pipelines, 88 million cubic feet per day of cryogenic natural gas processing capacity, 120 thousand barrels (MBbl) of crude storage capacity and 200 MBbl/d of water disposal capacity.

This acquisition will further strengthen Delek Logistics’ position in the prolific Permian Basin. The ongoing increase in exploration and production activities will create demand for midstream and storage services. Through this strategic acquisition, Delek Logistics is poised to gain from the hike in demand.

Acquisitions & Mergers in Permian Basin

To control a bigger chunk of the Permian Basin assets, oil and gas companies are making acquisitions in the Permian Basin and increasing the production of hydrocarbons from this region. More acquisitions are expected to take place in the Permian Basin and production volumes will continue to increase from this region, thereby creating opportunities for midstream operators.

Occidental Petroleum's OXY acquisition of Anadarko Petroleum has expanded its operation in the Permian Basin and is accretive to free cash flow. Devon Energy’s DVN acquisition of WPX Energy has strengthened its position in the Delaware Basin. Northern Oil and Gas, Inc. NOG closed its previously announced acquisition of non-operated Permian Basin assets from Veritas Energy.

The Zacks Consensus Estimate for 2022 earnings for Occidental, Devon, and Northern Oil and Gas has moved up 105.2%, 29.3%, and 3.5%, respectively, in the past 60 days.

The long-term (three to five years) earnings growth of Occidental, Devon, and Northern Oil and Gas is currently pegged at 33.7%, 51.4% and 9.6%, respectively.

Occidental, Devon, and Northern Oil and Gas reported an average earnings surprise of 41.8%, 18.5% and 14.2%, respectively, in the last four quarters.

Price Performance

Delek Logistics Partners’ units have gained 28.2% in the past year compared with the industry’s rally of 18.6%.

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Zacks Rank

Delek Logistics currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Devon Energy Corporation (DVN) : Free Stock Analysis Report

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Delek Logistics Partners, L.P. (DKL) : Free Stock Analysis Report

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