Targa expands Permian position with $3.55-billion deal

A subsidiary of Targa Resources Corp. has agreed to acquire Lucid Energy Delaware LLC from Riverstone Holdings LLC and Goldman Sachs Asset Management for $3.55 billion in cash, Targa said in a release June 16.

In addition to building on the company’s existing gathering and processing assets across multiple shale and natural resource plays, the Lucid Energy acquisition aligns with Targa’s integrated strategy of expanding and diversifying its Permian basin footprint, said Matt Meloy, chief executive officer. Specifically, the deal extends Targa’s Permian gathering and processing position into the most active and prolific producing region of the Delaware basin, the company said.

A growing share of Permian basin drilling is focused on the northern Delaware basin, where about 90 rigs are currently operating, predominately in Lea and Eddy counties, accounting for about 55% of total Delaware basin activity, Targa said in an accompanying investor presentation.

Assets

Currently, Targa’s Permian Delaware system in West Texas and Southeastern New Mexico consists of about 6,100 miles of natural gas gathering pipelines and eight processing plants with an aggregate capacity of 1,290 MMcfd. In February 2022, the company detailed plans to construct the Midway plant, a new 275 MMcfd cryogenic natural gas processing plant, which is expected to begin operations in third-quarter 2023.

Lucid’s assets in the basin include about 1,050 miles of natural gas pipelines and about 1.4 bcfd of cryogenic natural gas processing capacity (7 cryogenic natural gas processing plants, including the 230 MMcfd Red Hills VI plant expected in service in September 2022) primarily in Eddy and Lea counties of New Mexico, and 29 compressor stations with about 180,000 compression horsepower.  

Current rig activity supports over 20 years of drilling inventory on Lucid’s 600,000 dedicated acres, which are further supplemented by volumes subject to minimum volume commitments, Targa said. Some 50% of the acquired assets’ dedicated acres are on federal land already under lease and the vast majority held by production, Targa noted in the presentation.

Subject to customary closing conditions, including regulatory approvals, the deal is expected to close in this year’s third quarter.