iMetal

Targa Resources will purchase Lucid Energy Group, a privately held natural gas processor in the Permian Basin, from investment group Riverstone Holdings and Goldman Sachs Asset Management for $3.55 billion in cash. The deal will boost the infrastructure company’s footprint in the resource-rich Delaware Basin of New Mexico.
Lucid provides natural gas gathering, treating, and processing services in the Delaware, including approximately 1,050 miles of natural gas pipelines, 160,000 of operating horsepower compression, and 1.4 Bcf/D of cryogenic natural gas processing capacity in service or under construction located primarily in Eddy and Lea counties of New Mexico.
Lucid’s network includes a pair of gas processing units—Roadrunner, just southeast of Carlsbad; and the Red Hills complex made up of six plants with combined 1.15 Bcf/D capacity (920 MMcf/D in service with 230 MMcf/D under construction), further east in Lea County. These assets complement Targa’s 26 plants with 4.7 Bcf/D of total gross natural gas processing capacity across the entire Permian.
Lucid’s assets are anchored by long-term, fixed-fee contracts and acreage dedications from a diverse set of customers including XTO and Marathon. Approximately 70% of current system volumes are sourced from investment grade producers, according to Targa.
“The strength of Targa’s standalone financial position has afforded us the flexibility to consider attractive opportunities to grow our business through acquisitions, as evidenced by our ability to finance the purchase of Lucid utilizing available cash and debt with estimated pro forma year-end 2022 leverage around 3.5 times, well within our long-term leverage ratio target range,” said Matt Meloy, chief executive of Targa. “The acquisition is expected to be immediately accretive to distributable cash flow per share. This acquisition further supports our already strong cash flow profile and ability to return an increasing amount of capital to our shareholders through common dividend increases and common share repurchases.”