Targa Resources Corp., one of the largest US independent midstream infrastructure companies, has agreed to acquire Lucid Energy, a natural gas gathering and processing services company in the Delaware Basin from US asset managers for $3.55 billion in cash. The transaction is expected to close in the third quarter.
Targa is buying the Delaware Basin assets from Riverstone Holdings and Goldman Sachs Asset Management and the deal is the latest in a stream of mergers and acquisitions activity for US shale and energy assets.
In a statement, Lucid said its current assets in the Delaware Basin would support over 20 years of drilling inventory on Lucid’s more than 600,000 dedicated acres. “Our assets are anchored by long-term, fixed-fee contracts and acreage dedications from a diverse set of high-quality customers. Approximately 70 percent of current system volumes are sourced from investment-grade producers,” the company said.
Analysts said that since the joint acquisition of Lucid in 2018 by Riverstone and Goldman Sachs Lucid has “significantly grown volumes” and earnings as a highly sought-after midstream operator.
Strong financial position
Targa has sufficient available liquidity, including cash on hand. This includes its existing $2.75 billion revolving credit facility, and committed debt financing to fund the acquisition. “The strength of Targa’s standalone financial position has afforded us the flexibility to consider attractive opportunities to grow our business through acquisitions,” said Targa CEO, Matt Meloy.
Targa’s standalone 2022 financial and operational outlook has continued to improve given the strength of commodity markets and producer activity levels. The company now estimates full year standalone adjusted earnings to be between $2.675 billion and $2.775 billion.
The Targa updated financial expectations assume natural gas liquids composite prices average $1.05 per gallon, crude oil prices average $100 per barrel and Waha natural gas prices average $6.00 per million British thermal units (MMBtu) for the remainder of 2022.