I Squared Capital's Bid for Matterhorn Pipeline: A Strategic Move in the Permian Gas Game

The energy sector’s relentless pursuit of infrastructure to capitalize on booming Permian Basin natural gas production has taken a pivotal turn. I Squared Capital, the global infrastructure investor, is reportedly in advanced negotiations to acquire a majority stake in the Matterhorn Express Pipeline, a critical artery linking the Permian Basin to Houston’s Gulf Coast export hubs. This deal, valued at over $5 billion including debt, underscores the growing strategic importance of midstream infrastructure in an era of surging U.S. LNG exports and efforts to reduce flaring.

The Deal: A Majority Stake in a Game-Changing Asset

The Matterhorn pipeline, which began operations in late 2024 after delays, has a capacity of 2.5 billion cubic feet per day (Bcf/d), making it one of the largest Permian-to-Gulf Coast projects. I Squared’s proposed acquisition targets 67.5% of the asset, currently held by WhiteWater Midstream, with minority stakes belonging to EnLink Midstream (12.5%), Devon Energy (12.5%), and MPLX (7.5%). The deal, if finalized, would position I Squared as the dominant force in a region critical to U.S. energy exports.

The pipeline’s delayed startup in late 2024—pushed from an initial Q3 2023 target—adds complexity. Construction hurdles and regulatory approvals contributed to the slip, but the asset’s strategic value remains intact. I Squared’s consortium, which includes potential partner Enbridge Inc., aims to secure the stake while navigating investor commitments and contractual terms.

Why Matterhorn Matters: Flaring, Exports, and Pricing Power

The Permian Basin has long grappled with takeaway capacity constraints, leading to periodic negative gas prices at the Waha hub. Before Matterhorn’s launch, Waha prices dipped as low as -$6.41/MMBtu in August . Post-startup, prices rebounded to $2.35/MMBtu by September 2024, stabilizing the market.

The pipeline’s role extends beyond price stabilization. By connecting Permian gas to Houston’s LNG terminals, Matterhorn supports the U.S. pivot to global energy leadership. The International Energy Agency projects U.S. LNG exports to hit 11.5 Bcf/d by 2030, requiring robust infrastructure to transport Permian gas—a key feedstock.

Risks and Challenges: Capacity, Maintenance, and Competition

While Matterhorn is a linchpin, its 2.5 Bcf/d capacity is already stretched. Permian gas production is projected to hit 25.8 Bcf/d by 2025, outpacing the pipeline’s throughput. This gap has already triggered renewed volatility: Waha prices turned negative again in March 2025, dipping to -$1.18/MMBtu, as maintenance on the Gulf Coast Express and El Paso Natural Gas pipelines reduced egress capacity by up to 1.8 Bcf/d.

Operational risks loom large. The El Paso Natural Gas (EPNG) Flagstaff compressor station, offline since 2022, remains a bottleneck, limiting westward egress by 400–700 MMcf/d. Without new projects like the Blackcomb Pipeline (2.5 Bcf/d, 2026) or Hugh Brinson Pipeline (1.5–2.2 Bcf/d, 2026), periodic bottlenecks will persist.

The Investment Case: Risks vs. Rewards

For I Squared, the Matterhorn stake offers exposure to a $50 billion LNG export market and a fixed-fee, demand-inelastic asset. The pipeline’s long-term contracts with LNG exporters and utilities provide stable cash flows, appealing to infrastructure investors seeking steady returns.

However, risks are significant. The deal hinges on:
1. Deal Finalization: No agreement is yet signed, with I Squared and WhiteWater still negotiating terms.
2. Regulatory Approval: Delays could further push out the timeline.
3. Market Volatility: Permian gas prices remain vulnerable to maintenance, production surges, and global LNG demand shifts.

Conclusion: A Strategic Win, but Not Without Hurdles

The Matterhorn Express Pipeline is a critical piece of U.S. energy infrastructure, and I Squared’s potential majority stake positions it to capitalize on the Permian’s growth. With LNG exports set to expand and Permian production expected to hit 25.8 Bcf/d by 2025, the pipeline’s role in reducing flaring and enabling exports is undeniable.

Yet, its success hinges on execution. The delayed startup, maintenance-related bottlenecks, and the need for complementary projects like Blackcomb underscore the fragility of the Permian’s takeaway capacity. Investors should weigh the asset’s long-term potential against near-term risks. For now, Matterhorn represents a high-stakes bet on the Permian’s future—and I Squared’s ambition to dominate it.

In an energy landscape where infrastructure drives opportunity, I Squared’s move is a bold play. Whether it pays off will depend on execution, regulatory clarity, and the relentless march of Permian gas production.