Under the agreement, Targa’s wholly owned subsidiary will acquire Lucid Energy Delaware from private equity firm Riverstone Holdings and Goldman Sachs Asset Management.
Said to be one of the largest private pipeline systems in the Permian, Lucid holds around 1,050 miles of natural gas pipelines.
It also holds cryogenic natural gas processing capacity, including 920MMcf/d in service and 230MMcf/d under construction. The assets are located primarily in the Eddy and Lea counties of New Mexico.
The firm offers natural gas gathering, treating and processing services in the Delaware Basin.
Targa CEO Matt Meloy said: “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 utilising 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.
“This is an exciting acquisition that aligns with our integrated strategy as we are expanding and diversifying our Permian Basin footprint with Lucid’s complementary presence at an attractive investment multiple that we expect will further enhance the creation of shareholder value and continue to drive more volumes through Targa’s downstream businesses.”
Meloy anticipates the acquisition of natural gas processor to be immediately accretive to distributable cash flow per share and further support the firm’s strong cash flow profile.
Subject to customary closing conditions, including regulatory approvals, the deal is scheduled for completion in the third quarter of 2022.