The Permian Basin has become the backbone of the US oil and gas sector over the past few decades, providing a consistent output of natural energy resources for a litany of companies that operate in the region. Targa Resources has been operating in the Permian for an exceedingly long time and boasts projects that are essential to the US energy industry, and now, the company is set to boost its already impressive portfolio by purchasing Stakeholder Midstream and all its substantial assets in the Permian for an eye-watering $1.25 billion.
Targa Resources is set to boost its midstream capacity significantly through the acquisition
Targa Resources already boasts one of the largest and most profitable energy portfolios in the United States energy industry, and the company recently announced to the public and its shareholders that it would be purchasing Stakeholders Midstream assets in the Permian, subject to relevant regulatory approvals, of course.
Stakeholders have become a mainstay of operations in the Permian basin in recent years as the company serves as a go-to provider of essential gas and oil processing and storage operations in the Permian. Among the substantial assets that Targa has acquired as part of the deal are:
- approximately 480 miles of natural gas pipelines
- an estimated 180 million cubic feet per day (MMcf/d) of cryogenic natural gas processing and sour treating capacity
- carbon capture (CCUS) activities generating 45Q tax credits
- a small, yet essential crude oil gathering system
“From our formation, Stakeholder set out to create midstream infrastructure to service one of the nation’s leading energy-producing regions. It has been a pleasure and an honor to partner with first-class team members, customers, the community, and vendors who contributed their expertise, dedication, and creativity to the overall success of the Stakeholder platform and the broader San Andres play.” – Gaylon Gray, Co-Chief Executive Officer of Stakeholder
The substantial growth of the US gas and oil industry has been boosted by the federal government
When the latest round of sanctions against Russia and its energy companies came into effect, the price of oil and gas skyrocketed as buyers competed for a limited supply of non-Russian energy resources. The United States has become the number one gas producer in the world by capacity and has filled the gap left by Russia in the international energy market.
Targa Resources has noted that the acquisition strengthens the company’s already noticeable footprint in the Permian and paves the way for the assets purchased to generate unlevered adjusted free cash flow of around $200 million every year. With WhiteWater expressing its plans to expand the Eiger Express pipeline in the near future, the Permian Basin will continue to influence gas production in the United States for many years to come.
“This acquisition is a nice bolt-on asset that has meaningful free cash flow supported by a stable to modestly growing volume profile with minimal capital needs and executed at an attractive valuation. We believe this transaction is a continuation of our strategy of identifying opportunities to create shareholder value with balance sheet strength.” – Matt Meloy, Chief Executive Officer of Targa Resources
Targa’s plans for its Permian basin operations have shocked many in the industry
The company’s ambitious expansion plans for its Permian operations have come to light in recent months, with the acquisition of Stakeholders Midstream operations, and the all-new 500-mile ‘Speedway’ pipeline set to be constructed over the coming years. Targa is fast becoming the cornerstone of the gas and oil market in the United States and shows no signs of slowing down. The future of the global oil and gas industry will be dependent on how the US handles the wave of increased demand for natural gas over the coming years.
