Energy Transfer LP agreed to acquire Vaquero Midstream LLC for approximately $2.63 billion, expanding its natural gas infrastructure in the Permian Basin's Southern Delaware Basin.
The transaction comprises $1.95 billion in cash and 33.3 million new Energy Transfer shares, expected to close in the fourth quarter.
Vaquero operates 300 miles of West Texas pipelines and the Caymus Processing Complex, which processes 675 million cubic feet per day of natural gas, extracting liquids like propane and leaving pipeline-ready methane.
The acquired assets connect directly to Energy Transfer's existing natural gas and liquids systems, potentially increasing volumes for transportation, fractionation, terminalling and export operations.
The deal's structural advantage lies in Vaquero's contract base: primarily fee-based agreements with an average remaining life of approximately 10 years, supported by roughly 100,000 dedicated acres. This predictable revenue stream—effectively a toll model—reduces commodity price exposure and provides the visibility that lenders and equity investors require for long-term capital plans.
Energy Transfer has outlined a $5 billion to $5.5 billion capital spending plan for 2026, largely dedicated to natural gas infrastructure. Acquisitions backed by long-term volume commitments are easier to finance than speculative expansions.
The 33.3 million new shares create dilution risk: cash flow per share falls unless acquired assets generate sufficient incremental volumes at low cost to offset the expanded equity base. Vaquero's fee-based structure mitigates this risk. Toll-like cash flows are contractually secure and easier for the market to model, making the valuation of the $1.95 billion cash outlay more defensible alongside Energy Transfer's substantial construction budget.
