Targa Resources Corp. announced June 16 it snapped up Lucid Energy Delaware from Riverstone Holdings and Goldman Sachs Asset Management for $3.55 billion.
Lucid Energy Group is the largest privately held natural gas processor in the Permian Basin and Targa is one of the largest independent midstream infrastructure companies in North America.
Lucid provides natural gas gathering, treating and processing services in the Delaware Basin, including about 1,050 miles of natural gas pipelines and 1.4 billion cubic feet per day 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, Targa said. Current rig activity supports more than 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.
Targa CEO Matt Meloy said in a statement that the strength of Targa’s standalone financial position has afforded the company the flexibility to consider “attractive” opportunities to grow its business through acquisitions (the company will fund the purchase of Lucid using available cash and debt within its targeted leverage ratio).
“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 said.
The deal is scheduled to close in the third quarter. The acquisition is expected to be immediately accretive to Targa’s distributable cash flow per share.
The transaction adds a highly strategic asset base to Targa’s Permian system at a reasonable valuation, with multiple compression likely as downstream benefits are realized over time, Tudor, Pickering, Holt analyst Colton Bean said in a note.
Latham & Watkins represented Lucid Energy Group with a corporate deal team led by New York/Houston partner Charles Carpenter and Houston partner James Garrett with Houston associates Justin Thekkekara, Zainab Hashmi and Hunter Newell.
Advice was provided on tax matters by Houston partner Jim Cole with Houston associate Christine Mainguy; on benefits and compensation matters by Washington, D.C. partner Adam Kestenbaum, with Los Angeles associate Courtney Thomson; on antitrust matters by Washington, D.C. partner Michael Egge, with Washington, D.C. associates Doug Tifft and Brian Goodell; on energy regulatory matters by Washington, D.C. partner Patrick Nevins; on environmental matters by Houston partner Joel Mack and Los Angeles counsel Joshua Marnitz, with Houston associate Joseph Kmetz.
Counsel on data privacy matters was led by Houston counsel Robert Brown; on finance matters by Houston partner Catherine Ozdogan, with Houston associates Max Fin and Michael Basist; on real estate matters by New York counsel Shira Bressler; on insurance matters by San Diego associate Steven Lesan; on sanctions matters by Washington, D.C. counsel Andrew Galdes; on RWI matters by San Diego associate Hannah Cary; on intellectual property matters by Washington, D.C. counsel Kieran Dickinson; and on capital markets matters by Austin partner David Miller, with Houston associate Om Pandya.
Fried, Frank, Harris, Shriver & Jacobson also counseled the seller group including partners Mark Lukas and Erica Jaffe in New York.
Rob Pacha at Evercore and Mizuho Securities USA are Targa’s financial advisors. Pacha’s team included Tony Phan, Aaron VanDolah, Felipe Gallego, Michael Winterholler, Derek Aguirre, Clay Strack, Ben Dimnik and Daniel Hotez. Mizuho is providing the debt financing.
Vinson & Elkins is Targa’s legal counsel led by partners Chris Collins and Benji Barron and associate Charlie Fitzpatrick in Houston with help from associates Tushar Parashar, Chandler Spinks and Cole Leveque.
Also on the V&E team were partner Sarah Mitchell and associate Victoria Bahrami-Negad (insurance); partners David Wicklund and Darin Schultz and senior associate Caitlin Snelson (finance); partner Darren Tucker and senior associate Ryan Will (antitrust); partners James Meyer and Ryan Carney and senior associate Brian Russell (tax); and partner David D’Alessandro, senior associate Missy Spohn and associate Matt Green (executive compensation/benefits).
Still others included partner Tom Wilson and counsel Alex Bluebond (labor/employment); senior associate Megan Menniti and associates Zach Parker, Brian Broussard, Kene Obi and Sebastian Devora (energy transactions/projects); counsel Larry Pechacek and associate Kevin Moscon (environmental); partner Damien Lyster and associate Reagan Lutter (energy regulatory); counsel Rajesh Patel and associate Ricky Legg (tech transactions/IP); partner Thomas Zentner, senior associate Stancell Haigwood and associates Nathaniel Richards and John Frey (corporate); and partner Prentiss Cutshaw and senior associate Ken Adler (real estate).
Jefferies is Targa’s financial advisor, including Pete Bowden and Brian Bravo.
Targa said Lucid’s assets are anchored by long-term, fixed-fee contracts and acreage dedications from a diverse set of high-quality customers. Around 70 percent of current system volumes are sourced from investment grade producers.