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Targa Resources: $3.55 Billion Cash Transaction to Acquire Lucid Energy
06/30/2022
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 $6 per MMBtu for the remainder of 2022.
The Lucid acquisition will close in the third quarter and the completion of the transaction is subject to customary closing conditions, including regulatory approvals. It is expected to be accretive at once to distributable cash flow per share and further supports the already strong cash flow profile and can return an increasing amount of capital to the shareholders through common dividend increases and common share repurchases.
Each M&A agreement cardinally changes the situation on the market.
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Vital Energy Raises Production Outlook and Capital Spending with Significant Permian Basin Acquisition
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Vital Energy’s deal adds 24,000 net acres and 100 gross drilling locations in Texas, growing its Permian Basin footprint to around 198,000 net acres. Vital Energy is revising its projections for oil and gas production and capital spending upward following the successful acquisition of a substantial area in the Permian Basin. The company has gained around 24,000 net acres and 100 gross drilling locations in Texas. As a result of this deal, Vital Energy is now increasing its full-year production and capital spending guidance.
TOP 2022 vs 2023 Permian Producers Overview by Rextag
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/R242_Blog_Permian Producers Overview by Rextag.png)
The Permian Basin, America's prime oil region, faced significant challenges during the COVID-19 pandemic. The industry saw a drastic reduction in rigs and fracking crews and had to close some operations as oil prices plummeted, leading to widespread restructuring. Now, the Permian is making a strong comeback. Over the last three years, exploration and production companies (E&Ps) have increased their drilling activities. They're focusing on spending wisely and maximizing returns to their investors. The Permian's role is crucial. It was projected to contribute over 5.98 million barrels of oil per day in December, making up about 62% of the total oil production in the Lower 48 states, as per the EIA.
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Continental Resources is expanding its operations in the Midland Basin, including taking over some assets that used to belong to Occidental Petroleum. The company plans to use its expertise in exploration in this area.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/R267_Blog_EQT and Equinor Swap Marcellus Shale, Strengthen Appalachian Onshore Assets in the US.png)
Equinor and EQT Corporation have agreed that Equinor will exchange its operated assets in the Marcellus and Utica shale formations in Ohio for a stake in EQT’s non-operated interests in the Northern Marcellus formation.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/R262_Blog_Appalachian Basin Overview_ Marcellus, Utica, Trends, Predictions, 2022 vs 2024.png)
Appalachian Basin (formerly Marcellus and Utica) covers most of New York, Pennsylvania, Eastern Ohio, West Virginia, and Western Maryland in the north, reaching down to parts of Northwest Georgia and Northeast Alabama in the south. The basin is massive, covering about 185,000 square miles, roughly 1,000 miles long from northeast to southwest, and in some places, it's up to 300 miles wide. In this area, some major companies are making significant investments. EQT stands out as the largest producer in the Appalachian Basin, with other key players including Chesapeake, Range Resources, Antero, Repsol, and Gulfport also actively investing.