What makes Chevron’s (CVX, $121.90) acquisition of Anadarko (APC, $64.06) worthy?

Chevron’s primary purpose in paying $50 billion to acquire Anadarko is to boost its upstream oil and gas business, especially in the fast-growing Permian Basin. However, the deal has the bonus of bolstering the company’s midstream operations, which many investors are probably overlooking.

Although Chevron is more popular for its upstream production business and downstream retail operations, few are familiar with the company’s midstream operations of Chevron Pipeline Company. Operating about 3,000 miles of pipelines, this midstream entity is responsible for transporting more than 1.2 million barrels of oil, refined products, and chemicals each day. With a storage capacity of about 2.6 million barrels of products, these assets help Chevron’s upstream and downstream operations by moving hydrocarbons from production basins to end users.

Anadarko, with its 55% stake in Western Midstream, has highlighted these assets over the years leading the company to form a master limited partnership (MLP) more than a decade ago to drive midstream growth. Currently, Western Midstream owns interests in more than 12,700 miles of pipelines in the Rockies, Texas, New Mexico, and Pennsylvania sending more than 80% of its revenue to investors, Anadarko being the biggest among them.

If Chevron assumes Anadarko’s 55% stake in Western Midstream, the company will enjoy a steady cash flow via the MLP distribution, footprint in the fast-growing Permian Basin, like ExxonMobil support several midstream companies to build out oil and natural gas pipelines, and finally using Western Midstream as a funding vehicle.

Overall, Chevron’s future looks promising and the acquisition, if successful, will create significant value for the investors in the coming years.