In a significant move within the energy sector, DT Midstream, Inc. (NYSE: DTM) has reached an agreement to acquire three natural gas transmission pipelines from ONEOK, Inc. (NYSE: OKE) for a total cash consideration of $1.2 billion. This acquisition, which is expected to close in late 2024 or early 2025, will bolster DT Midstream's footprint in the Midwest, a region anticipated to experience continued growth in power demand.

The pipelines included in the deal are Guardian Pipeline, Midwestern Gas Transmission, and Viking Gas Transmission, which collectively have a capacity exceeding 3.7 billion cubic feet per day and span approximately 1,300 miles across seven states. This strategic acquisition aligns with DT Midstream's goal of connecting premier supply basins with key demand centers, enhancing its operational capabilities and financial profile.

DT Midstream plans to finance the acquisition with about $900 million in debt and $300 million in common equity. The transaction is projected to increase the company's pipeline segment to approximately 70% of its adjusted EBITDA by 2025, significantly boosting its distributable cash flow.

ONEOK's decision to sell these assets is part of its strategy to optimize its capital allocation and enhance financial flexibility. The sale is expected to contribute to ONEOK's deleveraging efforts, moving towards a target of 3.5 times leverage by 2026. The transaction has been unanimously approved by the boards of directors of both companies and is subject to customary regulatory approvals.

This acquisition comes amid a wave of consolidation in the U.S. pipeline and storage sector, driven by increasing demand for energy infrastructure and the challenges of obtaining approvals for new projects. As the energy landscape evolves, DT Midstream's acquisition of these pipelines positions it well to meet the growing energy needs of the Midwest market.