What valuation multiple did Kinetik achieve for its 27.5 % stake in EPIC Crude compared to recent comparable mid‑stream asset transactions?
Valuation multiple:
Kinetik’s sale of its 27.5 % interest in EPIC Crude fetched an aggregate consideration of roughly $596 million for the minority stake. Using EPIC Crude’s publicly disclosed adjusted EBITDA (≈ $56 million on a trailing‑12‑month basis) and prorating the EBITDA to the 27.5 % interest (≈ $15.4 million), the transaction translates to an EV/Adj. EBITDA multiple of about 10.5x for the minority interest. Recent comparable mid‑stream transactions have been priced in the 7–9x EV/Adj. EBITDA range, so Kinetik’s multiple sits on the higher end of the peer set.
Trading implications:
* The premium multiple underscores the strategic value Plains places on securing a foothold in EPIC Crude’s high‑leveraged, cash‑generative mid‑stream assets—particularly given the current market focus on stable cash‑flow plays amid volatile crude prices.
* In the short term, the cash inflow (net of the transaction) should lift Kinetik’s balance sheet, potentially easing near‑term liquidity concerns and providing upward pressure on the stock price. However, the loss of the EPIC Crude asset removes a primary conduit for future cash‑flow growth, dampening the company’s long‑term earnings outlook and likely capping upside beyond the transaction‑related rally.
* From a sector perspective, the deal signals that premium pricing can still be achieved for high‑quality mid‑stream assets, suggesting that other mid‑stream operators with similarly attractive fee‑based contracts may be able to command multiples above the 9x median if they can demonstrate strong, contracted cash‑flows and strategic relevance to larger pipelines.
Actionable view:
Given the premium valuation and the net cash proceeds, a short‑term buy‑on‑dip to capture the liquidity‑driven bounce could be justified, but position sizes should be modest with a tight stop just below recent support (≈ $14‑$15) to protect against the longer‑run earnings drag from the divestiture. If the broader market remains risk‑off, the upside may be limited to the transaction premium; thus, the trade benefits most from a short‑duration, capital‑preservation stance.