Targa Agrees $3.5B Permian Deal

Targa Agrees $3.5B Permian Deal
Targa described the deal as a complementary and highly strategic acquisition of a leading gathering and processing system in the Delaware Basin.

Targa Resources Corp has announced a definitive agreement with Lucid Energy Group which will see a wholly owned subsidiary of Targa acquire Lucid Energy Delaware LLC from Riverstone Holdings LLC and Goldman Sachs Asset Management for $3.55 billion in cash.

Targa described the deal as a complementary and highly strategic acquisition of a leading gathering and processing system in the Delaware Basin that increases the company’s size and scale in the region. The company, which outlined that it sees near and longer-term synergy potential following the deal, highlighted that its Lucid Energy Delaware buy is a fully cash and debt-financed transaction.

“The strength of Targa’s standalone financial position has afforded us the flexibility to consider attractive opportunities to grow our business through acquisitions, as evidenced by our ability to finance the purchase of Lucid utilizing available cash and debt with estimated pro forma year-end 2022 leverage around 3.5 times, well within our long-term leverage ratio target range,” Matt Meloy, Targa’s Chief Executive Officer, said in a company statement.

“Lucid’s management team has developed an attractive position in the Delaware Basin and we look forward to continuing to provide value added services to the producer customers. This is an exciting acquisition that aligns with our integrated strategy as we are expanding and diversifying our Permian Basin footprint with Lucid’s complementary presence at an attractive investment multiple that we expect will further enhance the creation of shareholder value and continue to drive more volumes through Targa’s downstream businesses,” he added in the statement.

“The acquisition is expected to be immediately accretive to distributable cash flow per share. This acquisition further supports our already strong cash flow profile and ability to return an increasing amount of capital to our shareholders through common dividend increases and common share repurchases,” Meloy went on to state.

Mike Latchem, the CEO of Lucid Energy, said, “over the past several years, Lucid has firmly established itself as a leading midstream processor in the Delaware Basin, with a talented team, sophisticated operations and infrastructure, and strong customer partnerships”.

“I am immensely proud of what we have achieved, as today’s [Thursday] transaction is a testament to the commitment and expertise of our team members and our strategy of growing the business for the benefit of all stakeholders. On behalf of Lucid, I want to express our gratitude to our sponsors, Riverstone and Goldman Sachs, whose partnership was instrumental in building the platform and helping to position the company for its next chapter of success,” Latchem added.

Baran Tekkora, a partner at Riverstone and co-head of private equity, said, “we congratulate Mike Latchem and the entire Lucid team on today’s milestone”.

“The transaction with Targa will position Lucid for its next stage of growth, while creating enhanced opportunities for its employees, customers and communities. Riverstone is pleased to have executed its strategy of partnering with Goldman Sachs and Lucid’s exceptional management team, where the combination of our capital and industry expertise resulted in strong returns for all stakeholders,” Tekkora added.

Scott Lebovitz, partner and co-head of the infrastructure investing business within Goldman Sachs Asset Management, said, “we are pleased to have partnered with Lucid and Riverstone over the last several years, as the company has continued its growth as a leading gas gathering and processing platform in the Delaware Basin”.

“We believe Mike and the team have done a great job of expanding customer relationships with high quality producers in the basin while continuing their commitment to the environment, safety, and the communities they serve,” he added.

Lucid Energy is the largest gas processor in the Delaware Basin and the largest private processor in the Permian Basin, according to the company’s website, which highlights that its assets include 1,050 miles of gathering pipelines, 29 compressor stations and 1.4 billion cubic feet per day of processing capacity.

Targa Resources Corp describes itself as a leading provider of midstream services and one of the largest independent midstream infrastructure companies in North America. The company owns, operates, acquires and develops a diversified portfolio of complementary domestic midstream infrastructure assets and its operations are critical to the efficient, safe and reliable delivery of energy across the U.S. and increasingly to the world, its site notes.

Back in April, Targa announced that it had completed the acquisition of Southcross Energy Operating LLC and its subsidiaries in South Texas. In March, the company revealed that it had executed agreements to acquire Southcross Energy Operating LLC and its subsidiaries in South Texas for $200 million. In January, Targa announced that it had executed agreements to repurchase interests in its development company joint ventures from investment vehicles affiliated with Stonepeak Partners LP for approximately $925 million.

To contact the author, email andreas.exarheas@rigzone.com

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