Diamondback Energy and Kinetik Holdings have jointly acquired a 30% interest in the EPIC Crude pipeline, a 700-mile pipeline connecting the Delaware, Midland, and Eagle Ford basins to the Gulf Coast. EPIC Crude, which has been in service since 2020, is a key component of crude oil transportation from the Permian Basin. By increasing their control over this strategic pipeline, Diamondback and Kinetik aim to maximize profitability and meet the growing demand for crude oil transportation infrastructure.
The Robstown terminal, a key connection point, offers operational storage capacity of 7.5 million barrels, facilitating the export of oil to international markets. The acquisition allows both companies to secure their supply chain while benefiting from a modern infrastructure that can be expanded to 1 million barrels per day.
An increase in transport commitments
In addition to this acquisition, Diamondback has strengthened its commitment by increasing volumes transported via EPIC Crude to 200,000 barrels per day. This increase is a result of the recent acquisition of Endeavor Energy Resources, which catapulted Diamondback to become the third largest oil producer in the Permian Basin. This allows the company to better manage its increased production and optimize its logistics costs.
Kinetik, meanwhile, has entered into new transportation agreements with EPIC Crude and connected its own crude gathering system to the pipeline. These long-term commitments, which extend through 2035, represent more than 33% of EPIC Crude’s total capacity and ensure a stable flow of oil to Gulf Coast refineries.
Sectoral context and competitive dynamics
The U.S. energy sector is experiencing a wave of consolidation, particularly in the Permian Basin, with acquisitions expected to exceed $250 billion in 2023. This trend continues into 2024 as companies seek to maximize operational efficiencies by vertically integrating transportation infrastructure. For Diamondback and Kinetik, controlling a significant portion of EPIC Crude’s capacity allows them to secure their crude oil flows to the international market via Corpus Christi while reducing transportation costs.
In a market marked by fluctuations in global energy demand, the ability to export quickly and efficiently is a major competitive advantage. EPIC Crude allows both companies to diversify their distribution channels and reach markets more flexibly.
Midstream Infrastructure Perspectives
EPIC Crude stands out for its flexibility, with the ability to expand with minimal investments, mainly related to the addition of additional pumps. This allows for a rapid increase in transport capacity, thus meeting the growing needs of the market. With a modern infrastructure and a connection to the Port of Corpus Christi, EPIC Crude offers Diamondback and Kinetik additional logistical flexibility, especially for oil exports.
This acquisition also provides better management of logistics contingencies thanks to the significant storage capacity. In addition, the EPIC pipeline is one of the last large-scale economic expansion opportunities in the Permian Basin, making it a strategic asset for both companies in the long term.
