Midstream energy company Targa Resources has entered into definitive agreements for its subsidiary, Targa Resources Partners, to acquire 100% membership interests of Outrigger Delaware Operating, Outrigger Southern Delaware Operating and Outrigger Midland Operating.
Targa Resources will pay $565m as initial cash consideration for this acquisition.
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Outrigger Delaware’s gas gathering, processing and crude gathering assets are situated in the Loving, Winkler and Ward counties of Texas.
These assets have a capacity of 70 million cubic feet per day of processing capacity.
Targa intends to connect these Outrigger Delaware assets to its existing Sand Hills system, which will strengthen Targa’s premier Permian Basin footprint in the Delaware and Midland Basin area.
It also plans to analyse the potential of future connections from Outrigger Delaware to its Versado system.
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By GlobalDataOutrigger Delaware system currently has a crude gathering capacity of 40,000 barrels per day.
Targa Resources CEO Joe Bob Perkins said: “The acquisition of the Outrigger Permian assets complements our existing gas gathering and processing footprint very nicely, while expanding our reach deeper into both the Delaware and Midland Basins.
“The producer acreage that we will serve through this acquisition has decades of drilling inventory in prolific areas, with multiple stacked pay zones.
“We also are excited about the opportunities to combine Outrigger Permian’s existing crude gathering infrastructure and our expertise in crude gathering in another basin as a new platform for growth in the Permian.
“As structured, this transaction is accretive in 2017, and we believe that the earn-out structure de-risks the overall transaction profile and aligns us with the continued success of the acquired assets.”
The acquisition is subject to customary closing conditions, including regulatory approvals.
Targa Resources expects to complete the transaction by the first quarter of 2017.
Subject to certain performance-linked measures based on existing contracts and other conditions, the sellers of Outrigger Permian can receive an additional cash of up to $935m in 2018 and 2019 as potential earn-out payments calculated on realised gross margin.
The total potential consideration that could be paid to sellers is up to a maximum of $1.5bn, including the initial consideration.
BC Capital Markets was the exclusive financial advisor and Locke Lord acted as legal counsel for Targa Resources in this transaction.
