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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, so if you are further interested in learning more about midstream deals and players in the Permian Basin, please, contact our Houston sales office or SCHEDULE A DEMO to learn how Rextag can help you leverage energy data for your business. Tel. +1 713-203-3128 Email: treitmeier@hartenergy.com

In Matador's Favor, For $75 Million Summit Sells Its Permian Midstream Assets

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Matador Resources Co. acquires a gathering and processing system for $75 million in New Mexico’s Eddy and Lea counties from Summit Midstream Partners LP, filling up Matador’s midstream portfolio in the Permian Basin. Matador reached an agreement with a subsidiary of Summit to gain Summit’s Lane Gathering and Processing System on June 9. Nowadays, the Lane G&P System combines a 60 MMcf/d cryogenic natural gas processing plant, three compressor stations, and about 45 miles of natural gas gathering pipelines. As an investor presentation says, Matador began its initial midstream build-out in the Delaware Basin in 2015-2016. Since then the company has extended its midstream footprint in the Delaware using the San Mateo I and San Mateo II joint venture partnerships with Five Point Energy LLC

Ain't Nothing Like a $2 Billion Deal: Oasis Sells Midstream Affiliate to Crestwood

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Crestwood & Oasis Midstream merge to create a top Williston #basin player. $1.8 billion deal is expected to close during the Q1 of 2022. The transaction will result in a 21.7% ownership stake for Oasis in Crestwood common units. The remaining ownership of Oasis in Crestwood will also be of benefit to the company since it will create a diversified midstream operator with a strong balance sheet and a bullish outlook after this accretive merger.

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According to a press announcement on June 29, Baker Hughes got a contract to supply electric-powered Integrated Compressor Line (ICL) decarbonization technology and turbomachinery equipment for an upcoming natural gas transmission project by a subsidiary of Tellurian Inc. – Driftwood Pipeline LLC. Driftwood Pipeline decided that the projects of Lines 200 and 300 would be situated in Beauregard and Calcasieu Parishes in southwest Louisiana and it will be the first time when Baker Hughes installs its ICL technology for pipeline compression in North America. Joey Mahmoud, president of Tellurian Pipelines, says the company expects that the project will give upwards of 5.5 Bcf of natural gas every day, with virtually no emissions. As a part of the agreement, Tellurian makes the initial $240 million pipeline investment as part of the broader Driftwood Pipeline system, which will keep enhanced supply reliability to meet the area’s projected industrial enlargement in a purer, more sustainable way. Baker Hughes has installed over 50 ICL units across the different pipeline and offshore applications, mainly in Europe. The compressors exert a reduced environmental footprint because their hermetically sealed casing prevents emissions from obviating. It is important to mention, that they require minimal downtime as magnetic bearings are resulting in more efficient operations and low maintenance.

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On 27 June, the analysts at Kpler spread the word that the exports of crude oil from the U.S. Gulf Coast could break a record 3.3 MMbbl/d this quarter as Europe has regard to U.S. crude which can outweigh sanctioned Russian oil. Due to Washington's decision to release 180 MMbbl of oil from the nation's Strategic Petroleum Reserve, U.S. exports have increased in the last three months, as it has flooded the domestic market. Exports to Europe are anticipated averaging approximately 1.4 MMbbl/d this quarter, about 30% higher than the year-ago quarter, meanwhile, export to Asia is set to decrease to less than 1 MMbbl/d. Despite that the U.S. has lost about 1 MMbbl/d of refining capacity since 2020, it also boosted exports thanks to the government’s intervention to back crude supplies which has had consequences in growth in exports. Throughput via the Port of Corpus Christi has grown by more than 150,000 bbl/d and has become 1.86 MMbbl/d. Nevertheless, Port of Houston exports also have been increasing since the third quarter of last year, they remain below pre-pandemic levels.

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Earthstone Energy Inc., based in Texas, announced the transaction on June 28: the acquisition of Titus Oil&Gas which will raise production in the Delaware Basin by 26%. The $627 million acquisition fills the Permian Basin in Eddy and Lea counties, N.M. with 86 net locations on 7,900 net acres of leasehold, while it is not clear how much of the leasehold might be on federal acreage It is Earthstone’s seventh acquisition since 2021, a span that includes the closing of approximately $1.89 billion in acquisitions in the Permian Basin. The purchase of Titus Oil & Gas Production LLC and Titus Oil & Gas Production II LLC, privately held companies backed by NGP Energy Capital Management LLC, is estimated at $575 million in cash and it is the equivalent of $52 million in stock (3.9 million shares of its Class A common stock based on the June 24 closing price). Titus shared that its net production in June was 31,800 boe/d. The company had reserves of approximately 28.9 MMboe. Earthstone is sure its net production will increase, at the midpoint, by 20,500 boe/d (65% oil) in the fourth quarter.

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