Sunoco to Buy NuStar for $7.3 BillionJan 25, 2024
The oil and gas business is consolidating faster and faster
NuStar stock erupted this morning after Sunoco agreed to buy the pipeline company for $7.3 billion. Let’s break down this latest wave of consolidation.
NuStar is one of the biggest pipeline and terminal operators in the world—and helps the distribution of crude oil coming out of the Permian basin in Texas. By buying NuStar—Sunoco is securing their place in America’s new export boom as oil production skyrockets.
Even though Sunoco projects this deal will generate $150 million in yearly efficiencies by 2027—the market hates this in the short term. While this is an all-stock deal, Sunoco has to secure a $1.6 billion bridge loan to refinance all of Sunoco’s debt. Sunoco is taking on a lot of risk to hopefully get access to fairly mild rewards here.
WHY IT MATTERS
As we enter into this supercharged period of American oil production, consolidation in the space is starting to become really wild. Big companies are betting big on continued American strength and production in the era of the Inflation Reduction Act. For now, Sunoco stock dropped over 6% thanks to all the risk while NuStar jumped 14% in early trading.