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Targa Resources: $3.55 Billion Cash Transaction to Acquire Lucid Energy
06/30/2022![Targa-Resources-3.55-Billion Cash-Transaction-to-Acquire-Lucid-Energy](https://images2.rextag.com/public/blog/73Blog_Targa Resources to Pay $3.55 Billion Cash to Acquire Lucid Energy.png)
On June 16 Targa Resources Corp. decided to acquire Lucid Energy Group, located in the Permian Basin, which is a part of Riverstone Holdings LLC and Goldman Sachs Asset Management.
Firstly, Targa grew due to the recent “blot-on” acquisition of Southcross Energy in the Eagle Ford for $200 million and it will become bigger thanks to the $3.55 billion cash transaction. Targa’s financial position allowed it to utilize convenient opportunities to extend its company so it bought Lucid using available cash and debt with an estimated pro forma year-end 2022 leverage around 3.5 times.
Lucid Energy Group is a leading privately held natural gas processor in the Permian Basin, supported by growth capital commitments from a joint venture formed by Riverstone Global Energy and Power Fund VI LP, whose investment funds are managed by Riverstone Holdings LLC and Goldman Sachs Asset Management.
This acquisition will allow Lucid and Tagna to reach the next stage of development together, as they found more opportunities for their employees, customers, and communities.
Before that Lucid Energy had been acquired in 2018 by the joint venture of Riverstone and Goldman Sachs from Lucid Energy Group I LLC (Cogent Midstream) for $1.6 billion cash, whereas Cogent has since been acquired by Canes Midstream LLC. Their transaction closed in the first quarter of 2018 and included committed debt financing provided by Jefferies LLC.
Its assets, well-known as the South Carlsbad Natural Gas Gathering and Processing System and the Artesia Natural Gas Gathering and Processing System, were situated in the northern Delaware Basin.
According to Targa’s estimates, the acquisition of Lucid will increase the number of natural gas pipelines by 1,050 miles and add about 1.4 Bcf/d of cryogenic natural gas processing capacity in service or under construction located mainly in Eddy and Lea counties of New Mexico. The investment-grade producers source approximately 70% of current system volumes.
Lucid created an attractive position in the Delaware Basin and is going to continue providing value-added services to the producer customers. Their assets are anchored by long-term, fixed-fee agreements and acreage dedications from a manifold set of high-quality customers reaching more than 600,000 dedicated acres.
It aligns with its integrated strategy of extending and differentiating the Permian Basin footprint with Lucid’s presence at an attractive investment multiple that is expected to enhance the development of shareholder value in the future and continue to drive additional volumes through Targa’s downstream businesses.
As the company considers, Lucid’s Delaware Basin footprint overlays some of the most economic crude oil and natural gas producing acreage in North America. Also, it is noted that current rig activity supports over 20 years of drilling inventory on Lucid’s greater than 600,000 dedicated acres, which are further supplemented by important volumes subject to minimum volume commitments.
According to the press release, a full-year standalone adjusted EBITDA is expected to be between $2.675 billion and $2.775 billion and reported year-end leverage ratio of about 2.7 times. Targa’s updated financial expectations assume NGL composite prices average $1.05 per gallon, crude oil prices average $100/bbl, and Waha natural gas prices average $6 per MMBtu for the remainder of 2022.
The Lucid acquisition will close in the third quarter and the completion of the transaction is subject to customary closing conditions, including regulatory approvals. It is expected to be accretive at once to distributable cash flow per share and further supports the already strong cash flow profile and can return an increasing amount of capital to the shareholders through common dividend increases and common share repurchases.
Each M&A agreement cardinally changes the situation on the market.
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NOG Successfully Acquires Utica Shale and Delaware Basin Operations
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/233Blog_NOG Closes Utica Shale, Delaware Basin Acquisitions.png)
Northern Oil and Gas (NOG) has successfully completed two acquisitions, investing $162.6 million in properties within the Utica Shale and the northern Delaware Basin. In November 2023, NOG ventured into the Utica Shale by acquiring interests from a private seller, including less than one producing well and slightly over one well in development, spanning several counties in Ohio. These areas, primarily operated by Ascent Resources, focus on extracting oil and gas from the Point Pleasant Formation and the Utica Shale, with the Ohio assets being a significant part of this strategy.
Triple Advantage Vital Energy's $1 Billion M&A Enhances Permian Portfolio, Cash Flow
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/190Blog_Triple Threat Vital Energy's $1B M&A.png)
Vital Energy, focused on the Permian Basin, plans quick debt reduction after securing $1.165 billion in deals, adding key Midland and Delaware basin inventory.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/297_Blog_Keystone XL Pipeline Controversy and Wildlife Disaster From Trump's Green Light to Biden's Red Light on the 15 Billion Project.jpg)
The pipeline industry in the USA faced and still faces a range of regulatory challenges, including permitting delays, environmental requirements, and public opposition to pipeline projects. In recent years, pipeline projects like the Keystone XL and Dakota Access pipelines had legal and regulatory obstacles that delayed or canceled their construction. Keystone XL Pipeline, proposed by TransCanada in 2008, aimed to transport crude oil from Canada (around Calgary and Edmonton) to refineries on the Gulf Coast (Port Arthur). The project faced opposition from environmental groups and indigenous communities, who argued that it would contribute to climate change and pose a risk to water resources. In 2015, President Obama rejected the project, citing concerns about its environmental impact. However, in 2017, President Trump revived the project, leading to further legal challenges. In June 2021, U.S. President Joe Biden officially canceled the project on his first day in office.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/282_Blog_Renewable Natural Gas How RNG Changes the Industry.jpg)
The renewable natural gas (RNG) industry in the United States is showing promising signs of growth. As of 2019, the U.S. consumed 261 billion cubic feet (BCF) of RNG, primarily utilized by independent power producers, electric utilities, and various commercial and industrial entities. However, this figure represents only a small fraction of its potential. Research indicates that the U.S. could theoretically produce up to 2,200 BCF of RNG through anaerobic digestion alone, which would equate to about 11% of daily national natural gas consumption.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/295_Blog_Renewable Efforts Lag as Global Oil and Gas Demand Continues to Rise.jpg)
Recently, the progress toward an energy transition is hitting a snag. Sales of electric vehicles are decelerating, and the growth in wind and solar power needs to be keeping pace with expectations. To make matters more challenging, electricity prices are climbing when they were expected to fall. Amidst these setbacks, the oil and gas sectors are proving resilient. According to BP's latest energy outlook, not only are these energy mainstays here to stay, but their demand is expected to remain relatively high even after reaching a peak. Interestingly, BP forecasts that oil demand will reach its zenith next year, marking a critical moment in energy consumption trends. This isn't the first time BP has projected a peak in oil demand. Back in 2019, their review anticipated a decline in demand growth, but the prediction fell flat. Instead, oil demand surged to unprecedented levels following the end of the global pandemic lockdowns, defying previous forecasts and underscoring the enduring dominance of traditional energy sources in the global market.