ONEOK Uses Apollo Capital to Fund Brazos Deal and Cut Debt

ONEOK is using a $9 billion private-capital investment from Apollo to acquire Brazos Midstream’s Permian Midland Basin gathering and processing assets for $4.425 billion and retire about $5 billion of existing debt. The structure lets ONEOK add one of the basin’s larger gas platforms without issuing common equity.¹

The transaction, announced August 30, shows how large infrastructure buyers are combining asset consolidation with bespoke minority-equity financing. For ONEOK, the strategic goal is clear: deepen its Permian position, increase processing capacity and strengthen its wellhead-to-water natural gas liquids strategy.

The financing is the more distinctive feature. Apollo’s investment is nonvoting, structurally subordinate to ONEOK senior debt, designed to receive equity treatment and capped at a 7.0% internal rate of return for the first nine years.¹²

That gives ONEOK acquisition currency that is neither traditional corporate debt nor common equity. The company said it expects the structure to accelerate deleveraging to roughly 3.25 times debt-to-EBITDA, fund the Brazos acquisition and preserve flexibility for organic growth, dividends and share repurchases.¹

A Permian buildout without common equity issuance

The Brazos assets add a scaled Midland Basin natural gas gathering and processing footprint. After completion of the Cassidy II processing plant, expected in the third quarter of 2027, the Brazos Midland system will include about 700 miles of gathering infrastructure and 1.2 billion cubic feet per day of processing capacity across seven core Midland Basin counties.¹

For ONEOK, the deal more than doubles Midland Basin processing capacity to about 2.3 Bcf/d, including plants under construction. It also connects the acquired system with ONEOK’s existing Permian natural gas gathering and processing, NGL transportation and crude oil infrastructure.¹

The company said the platform is supported by about 600,000 dedicated acres under long-term fixed-fee contracts, with a weighted average remaining term of more than 12 years.¹

Those operating metrics matter because the deal is not just a capacity purchase. It is an integration bet. ONEOK said the assets strengthen connectivity across the natural gas and NGL value chain and support its broader Permian-to-Gulf Coast strategy, including downstream infrastructure such as the West Texas NGL Pipeline and the Medford NGL fractionation facility.¹

The company estimates the acquisition multiple at about 7.5 times 2027 EBITDA, including about $80 million of full-year synergies, and about 6.0 times 2028 EBITDA, reflecting expected growth and additional integration benefits.¹

Apollo structure replaces the usual financing tradeoff

The financing package addresses a central constraint for large midstream consolidators: how to keep buying strategic assets without overleveraging the balance sheet or diluting common shareholders.

Under the agreement, Apollo funds and affiliates will invest $9 billion for a Class B interest in a newly formed holding company, ONEOK Holdings, L.L.C.¹ The interest is nonvoting, has no board representation or liquidation preference, and is subordinate to all senior debt, ONEOK said.¹

The economics are capped. Apollo’s return is capped at a 7.0% IRR for the first nine years. The target return then steps to 7.35% in year 10 and rises to a final cap of 7.85% in year 15.¹ ONEOK said value creation above the capped return, including from the Brazos acquisition and future initiatives, accrues to common shareholders.¹

Apollo described the transaction as an example of flexible capital solutions scaled to a strategic corporate objective.² For infrastructure executives, the message is clear: private capital is competing not only as an asset buyer but also as a structured financing partner for public companies that want to keep control of growth platforms.

Debt reduction is central to the deal

ONEOK’s use of proceeds is central to the transaction’s rationale. In addition to the $4.425 billion Brazos acquisition, the company plans to extinguish about $5 billion of existing debt.¹

In a separate announcement, ONEOK launched cash tender offers for several series of senior notes as part of that repayment plan. The offers are tied to completion of Apollo’s minority equity investment.³

The company also said it plans to repay its $1.2 billion term loan and exercise make-whole calls on certain senior notes at or shortly after closing of the minority equity investment.¹

That makes the structure more than acquisition financing. It is a recapitalization attached to an operating expansion. ONEOK is taking in more private equity capital than it needs to buy Brazos, then using the excess to reduce leverage and improve credit positioning.

The approach may appeal to other infrastructure operators facing similar conditions: strong strategic incentives to consolidate assets, investor resistance to common equity dilution and limited tolerance for higher leverage.

Why the structure matters for midstream M&A

The ONEOK-Apollo structure points to a broader model for capital-intensive infrastructure consolidation. Midstream companies often need to move quickly when high-quality basin assets come to market, especially in regions such as the Permian, where processing capacity, producer dedications and downstream connectivity can compound in value.

Traditional funding routes can be blunt instruments. Common equity issuance can dilute shareholders and pressure stock prices. Incremental debt can threaten leverage targets and credit ratings. Asset-level joint ventures can complicate control.

ONEOK’s structure attempts to thread those constraints by placing a minority interest below corporate debt, limiting governance rights and capping the investor’s return.

For Apollo, the investment provides large-scale exposure to essential energy infrastructure with negotiated downside and yield characteristics. For ONEOK, it supplies flexible capital that management says is lower cost than publicly traded equity and allows future value above the return cap to remain with common shareholders.¹²

Execution risks remain

The strategy still depends on execution. ONEOK must close the Brazos acquisition, integrate the platform, realize synergies and manage the cash-flow mechanics of the Class B interest.

The acquisition is expected to close in the fourth quarter of 2026, subject to customary conditions including Hart-Scott-Rodino clearance.¹ The Apollo minority equity investment is expected to close in the first half of September 2026, also subject to customary conditions.¹

The structure also creates a new noncontrolling interest claim on cash flows. ONEOK said the Class B interest is expected to receive 15% of quarterly cash flow from operating-company operations, with distributions above the capped return reducing Apollo’s capital account over time.¹

ONEOK has an option to acquire any remaining minority interest beginning eight years after closing, or earlier if the investor capital account balance falls to $200 million before then.¹

For now, the transaction’s significance lies in its template. ONEOK is buying scale in the Permian while reducing debt and avoiding common equity issuance. If successful, the model could encourage more infrastructure acquirers to use tailored private-capital instruments to bridge the gap between strategic ambition and public-market discipline.

ONEOK Uses Apollo Capital to Fund Brazos Deal and Cut Debt

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Source Material

A Permian buildout without common equity issuance

Apollo structure replaces the usual financing tradeoff

Debt reduction is central to the deal

Why the structure matters for midstream M&A

Execution risks remain

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