Major Development for Diamondback Energy and Partners in Midstream
Transformative Transactions Announced for EPIC Crude
HOUSTON — Diamondback Energy, Inc. (NASDAQ: FANG), Kinetik Holdings Inc. (NYSE: KNTK), and EPIC Midstream Holdings LP are excited to share details about a groundbreaking series of transactions aimed at enhancing the growth and financial strength of EPIC Crude Holdings, LP. This affiliate of EPIC Midstream is set to benefit significantly from these strategic moves.
Key Developments in the Partnership
The partnership has resulted in the acquisition of a 30% equity interest in EPIC Crude by Diamondback and Kinetik. With this acquisition, both partners now hold 27.5% ownership in EPIC Crude, while EPIC Midstream retains its significant 45% equity interest and continues to manage its operations.
Expanded Commitments from Diamondback
In an effort to support its growth, Diamondback is transitioning its previous commitments with EPIC Crude into a more substantial volume commitment of 200,000 barrels per day (MBpd). This transition follows Diamondback’s recent merger with Endeavor Energy Resources, positioning it as the third-largest crude producer in the Permian Basin.
Kinetik's New Transportation Arrangement
Kinetik is also set to enhance its operations with a new transportation arrangement linking its crude gathering system to the EPIC Crude pipeline. Such collaborations will ensure that both companies can efficiently transport resources, helping solidify their presence in the market.
Strategic Volume Commitments and Financial Returns
These initiatives from both partners are set to commence in 2025 and will run until 2035. The combined long-term volume commitments—amounting to over 33% of EPIC Crude’s total capacity—are bolstered by minimum volume commitments (MVC), supporting the operational stability of EPIC Crude.
EPIC Crude is firmly committed to optimizing its efforts in reducing controllable costs, which will lead to improved financial returns and maximize value for all stakeholders involved. This focus on efficiency positions the company well for the future.
EPIC Crude’s Growth Trajectory
Currently, EPIC Crude is transporting more than 600 MBpd and has successfully secured MVCs or contracts covering approximately 90% of its total volumes for 2025. Additionally, it has extended the weighted average contract life, reflecting its robust and differentiated strategy that allows customers access to markets and docks in Corpus Christi as well as the Dated Brent market through the EPIC dock.
Voices from Leadership
Brian Freed, the Chief Executive Officer of EPIC Midstream, commented on the transformation: "These transactions position EPIC Crude for continued strategic and financial success. Our partners’ long-term commitments underscore the significance of this asset in facilitating crude production from the Permian Basin to the Corpus Christi market."
Kaes Van’t Hof, President and CFO of Diamondback, emphasized the importance of these developments: "This set of transactions marks a significant step toward ensuring a reliable and cost-effective means of transporting crude from our expanded portfolio for years to come."
Jamie Welch, President and CEO of Kinetik, expressed enthusiasm for the collaboration: "We are thrilled to partner with Diamondback and EPIC Midstream, as our commitments not only enhance our operational capabilities but also add significant value for our customers seeking access to premium markets."
Future Outlook for EPIC Crude
As EPIC Crude’s financial profile becomes increasingly robust, it remains optimistic about future credit rating improvements. The combination of improving leverage, an investment-grade customer base, and a strong long-term contract profile situates EPIC Crude well for sustainable growth.
Looking ahead, there are prospects for a large-scale expansion of the crude oil pipeline in the Permian Basin, with limited capital requirements primarily for additional pumps. This potential underscores EPIC Crude’s strong market positioning, with partners favoring options for about one-third of the expansion capacity.
Understanding EPIC Midstream and EPIC Crude
EPIC Midstream was established in 2017 to manage midstream infrastructure in several basins, including the Delaware and Midland regions. With a 700-mile Crude Oil Pipeline and NGL Pipeline, it connects crude oil and natural gas liquids to key markets.
EPIC Crude Holdings, LP, also formed in 2017, operates a comprehensive pipeline system extending from Texas to Corpus Christi while maintaining a high capacity of 600,000 barrels per day, expandable up to 1,000,000 barrels per day. This infrastructure supports critical operations across various Texas regions.
Frequently Asked Questions
What are the recent transactions involving Diamondback and Kinetik?
Diamondback and Kinetik have acquired a 30% equity interest in EPIC Crude, significantly increasing their ownership stakes and enhancing operational collaboration.
How will these transactions impact EPIC Crude's operations?
The transactions will allow for increased crude volume commitments and improved financial returns, fostering growth and efficiency in EPIC Crude's operations.
What future plans does EPIC Crude have for pipeline expansion?
EPIC Crude anticipates a future expansion project, which is expected to be highly economic and backed by fully underwritten contracts.
What is EPIC Crude's current transportation capacity?
EPIC Crude currently transports over 600,000 barrels per day and has contracts for approximately 90% of its total volumes for 2025.
Who are the key executives involved in these transactions?
Brian Freed from EPIC Midstream and Kaes Van’t Hof from Diamondback are among the key executives discussing the transformational changes and strategic partnerships.
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