Blog Coverage Targa Resources Announced Takeover of Outrigger; Plans to Bank on the Oil-rich Permian Basin
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LONDON, UK / ACCESSWIRE / January 24, 2017 / Active Wall St. blog coverage looks at the headline from Targa Resources Corp. (NYSE: TRGP) as the Company announced on January 23, 2017, that it has executed definitive agreements through its subsidiary, Targa Resources Partners L.P. to acquire 100% of the membership interests of Outrigger Delaware Operating LLC, Outrigger Delaware Operating, LLC, and Outrigger Midland Operating, LLC. Targa will pay $565 million initially for the membership interests. Register with us now for your free membership and blog access at:
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One of Targa Resources' competitors within the Oil & Gas Pipelines space, Spectra Energy Corp. (NYSE: SE), announced on January 06, 2017, that it will issue its Q4 2016 earnings results before the market opens on Friday, February 17, 2017. AWS will be initiating a research report on Spectra Energy in the coming days.
Today, AWS is promoting its blog coverage on TRGP; touching on SE. Get all of our free blog coverage and more by clicking on the link below:
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Breaking down the agreement
Targa Resources is viewing this transaction through the subsidiary, Targa Resources Partners L.P., it acquired in February 2016. Targa is acquiring the pipeline systems from the Denver-based Outrigger Energy in the Delaware and Midland basins in Permian. Subject to performance measures, the $565 million payouts could elevate up to $1.5 billion by the end of February 2019. The potential earn-out payments are based on the realized gross margin generated from existing contracts.
This agreement is set to establish Targa's footprint into the Delaware and Midland basins and will offer strategic benefits, inclusive of:
- Increase in gross processing capacity for Targa to ~2 Bcf/d in the Permian basin by the end of 2017.
- Connect Outrigger Permian assets to existing infrastructure from Targa and facilitate eventual connection to the Sand Hills and Versado systems in Delaware (Targa systems).
- Brings several fee-based natural gas gathering and processing and crude gathering assets in the Permian Basin under Targa's infrastructure.
- Combined assets will have ~2 Bcf/day of processing capacity by the end of 2017.
The Permian Basin
The Permian Basin, being the biggest oil field in the US, has observed M&A activities accelerate continuously. Approximately $12 billion acquisition capital has been committed to land on the drilling rights in the Permian Basin of Texas and New Mexico. The Permian land rush reached new highs when RSP Permian Inc. agreed to pay $2.4 billion in cash and stock for Silver Hill Energy Partners on October 14, 2016. RSP paid approximately $45,000 per acre of drilling rights, a price which had not been observed prior to the RSP-Silver Hill agreement.
Targa Delaware Basin Assets
The agreement brings about 5,000 miles of pipeline across 3 systems (Outrigger Delaware, Sand Hills, and Versado). Additionally, it would add ~475 Mmcf/d of processing capacity across the three systems. Outrigger's existing Delaware assets include ~60 million of low-pressure gathering lines and ~30 million of high-pressure rich-gas lines (gas gathering system) and ~50 miles of pipelines with the initial capacity of 40,000 BBIs/d (crude gathering system).
Targa Midland Basin Assets
Targa's infrastructure in the Midland Basin observes 5,500 miles of pipeline across Outrigger Midland, WestTX, and SAOU systems. The net processing capacity is set to reach ~1,450 Mmcf/d by the end of 2017. Outrigger's existing assets in the area include the Tarzan Processing Facility, which is a 10 Mmcf/d cryogenic processing plant along with a crude gathering system with ~30 miles of pipeline with an initial capacity of 40,000 BBis/d.
The agreement is expected to close in Q1 2017 and is subject to customary regulatory approvals and other closing conditions.
Stock Performance
On Monday, the stock closed the trading session at $57.77, declining 3.80% from its previous closing price of $60.05. A total volume of 5.91 million shares have exchanged hands, which was higher than the 3-month average volume of 2.04 million shares. Targa Resources' stock price surged 23.44% in the last three months, 49.82% in the past six months, and 214.68% in the previous twelve months. Moreover, the stock gained 3.03% since the start of the year. The stock has a dividend yield of 6.30%. The stock currently has a market cap of $10.42 billion.
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