Olenox Industries Inc said it intends to purchase the midstream and transportation business of CPE Gathering MidCon, LLC from Vivakor, Inc in a transaction valued at roughly $36 million. The announcement was followed by a 6.2% decline in Olenox's shares on Thursday.
The companies said the purchase consideration will be satisfied through a combination of cash, a promissory note and issuance of both common and preferred stock. The acquisition is structured around a take-or-pay guarantee provided by Vivakor that establishes the business as supporting $4.56 million in annual EBITDA.
CPE Gathering operates what the parties describe as the Omega system - an on-basin midstream platform located in the STACK region of Oklahoma. The system provides crude gathering, transportation, terminaling and pipeline connectivity services. Company materials highlight the platform's role in generating fee-based cash flows and in lowering producers' operating costs.
In a statement, Olenox Chief Executive Officer Michael McLaren said: "Integrated midstream platforms like CPE Gathering generate durable, fee-based cash flows and provide critical infrastructure in established producing basins. The proposed acquisition of Vivakor’s Oklahoma midstream business would expand our presence in the STACK while positioning these assets for continued development under an integrated operating model."
Olenox indicated the transaction would complement its acquire-and-integrate strategy by broadening the addressable market for its services and by increasing predictable, fee-based revenue through integrated gathering and terminaling. The company also said the move should reduce its exposure to commodity volatility by supplementing commodity-linked revenues with fee-based cash flows.
Despite the management rationale, investors reacted negatively to the announcement, reflecting concern over the price of the deal and the possible challenges of integrating the acquired assets. That investor sentiment was cited as the proximate reason for the stock's slide following the disclosure.
Context and implications
- The acquisition targets midstream infrastructure in a key Oklahoma producing area, focusing on crude gathering and transport capabilities.
- The transaction relies on a multi-component consideration package and a Vivakor-backed EBITDA guarantee of $4.56 million per year.
- Market response was negative on announcement day, with Olenox shares falling 6.2%.