Targa Resources Corp. and Lucid Energy Group, a leading privately held natural gas processor in the Permian Basin, announces an agreement in which Targa will acquire Lucid Energy Delaware, from Riverstone Holdings and Goldman Sachs Asset Management, for $3.55 billion in cash.
Lucid provides natural gas gathering, treating, and processing services in the Delaware Basin, including approximately 1,050 miles of natural gas pipelines and approximately 1.4 billion cubic feet per day (“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 Delaware Basin footprint overlays some of the most economic crude oil and natural gas producing acreage in North America. Current rig activity supports over 20 years of drilling inventory on Lucid’s greater than 600,000 dedicated acres, which are further supplemented by significant volumes subject to minimum volume commitments. Lucid’s 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.
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 EBITDA 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 natural gas liquids (“NGL”) 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.
“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 Officer of Targa. “Lucid’s management team has developed an attractive position in the Delaware Basin and we look forward to continuing to provide value added services to the producer customers. 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.”
“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,” added Meloy.
“Over the past several years, Lucid has firmly established itself as a leading midstream processor in the Delaware Basin, with a talented team, sophisticated operations and infrastructure, and strong customer partnerships,” said Mike Latchem, CEO of Lucid Energy. “I am immensely proud of what we have achieved, as today’s transaction is a testament to the commitment and expertise of our team members and our strategy of growing the business for the benefit of all stakeholders. On behalf of Lucid, I want to express our gratitude to our sponsors, Riverstone and Goldman Sachs, whose partnership was instrumental in building the platform and helping to position the company for its next chapter of success.”
“We congratulate Mike Latchem and the entire Lucid team on today’s milestone,” said Baran Tekkora, a Partner at Riverstone and Co-Head of Private Equity. “The transaction with Targa will position Lucid for its next stage of growth, while creating enhanced opportunities for its employees, customers and communities. Riverstone is pleased to have executed its strategy of partnering with Goldman Sachs and Lucid’s exceptional management team, where the combination of our capital and industry expertise resulted in strong returns for all stakeholders. Since the joint acquisition of Lucid in 2018, Lucid has significantly grown volumes and EBITDA and has differentiated itself as a highly sought-after midstream operator with a best-in-class safety and environmental track record.”
“We are pleased to have partnered with Lucid and Riverstone over the last several years, as the company has continued its growth as a leading gas gathering and processing platform in the Delaware Basin,” said Scott Lebovitz, Partner and Co-Head of the Infrastructure investing business within Goldman Sachs Asset Management. “We believe Mike and the team have done a great job of expanding customer relationships with high quality producers in the basin while continuing their commitment to the environment, safety, and the communities they serve.”
