Western Midstream Partners LP said it has entered into a definitive agreement to acquire all of the outstanding shares of Aris Water Solutions Inc. in an equity-and-cash transaction valued at approximately $1.5 billion.
Under the terms of the agreement, Aris shareholders will receive 0.625 common units of Western for each Aris share, with the option to elect to receive $25 per share in cash, subject to possible proration with a maximum total cash consideration for the transaction of $415 million. The total enterprise value of the transaction is approximately $2.0 billion before transaction costs, Western said in a news release.
The merger agreement, which is subject to customary closing conditions, regulatory approvals, and Aris shareholder approval, is expected to close in the fourth quarter, according to the release.
Aris’s full-cycle water infrastructure assets include around 790 miles of produced-water pipelines, 1.8 million barrels per day MMBpd of produced-water handling capacity, 1.4 MMbpd of water recycling capacity, and 625,000 dedicated acres from “investment-grade counterparties,” the release said. The company’s produced-water and water solutions volumes are supported by an average contract tenor of approximately ten and eight years, respectively.
The Aris business complements Western’s existing produced-water business that includes about 830 miles of pipeline, a total disposal capacity of 2.035 MMbpd, and the Pathfinder pipeline project. Western’s produced-water business is also supported by long-term contracts with “significant” minimum-volume commitments, the company said.
The integration of Aris’s assets extends Western’s existing footprint far to the north into Lea and Eddy Counties, New Mexico, providing access to incremental throughput opportunities across its natural-gas, crude-oil, and produced-water businesses, the company stated.
“We are excited to announce the strategic combination with Aris, which aligns with our strategy of acquiring high-quality midstream assets that complement and expand our existing network,” Western President and CEO Oscar Brown said.
“Aris has a strong track record of growth and operational performance in the Delaware Basin. The combination of our assets creates a leading produced-water gathering, disposal, and recycling business that can meet the flow assurance needs of customers as they execute on their decades’ worth of drilling inventory,” Brown continued.
“The McNeill Ranch, previously purchased by Aris, provides upside to our acquisition case through increased produced-water disposal capacity and other surface use opportunities. Further, Aris has valuable expertise in beneficial reuse and desalination technologies, and we are excited to be able to accelerate the research and advancement of these evolving technologies with greater access to efficient capital and economies of scale,” he added.
Aris President and CEO Amanda Brock said, “Today’s transaction marks a significant milestone in Aris’s journey, and we are excited to join forces with [Western]. Since our founding in 2015, Aris has been dedicated to developing a sustainable produced-water infrastructure platform focused on gathering, disposal, and recycling activities for some of the largest operators in the Permian Basin. The combination of Aris and [Western] creates a premier midstream water-solutions provider of scale that is better positioned to deliver a variety of water services, provide critical flow assurance for natural-gas and crude-oil production activities, and generate strong returns for our shareholders through WES’s leading distribution policy and attentive focus on executing accretive growth projects”.
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