Oil and gas infrastructure company Targa Resources agreed to buy natural gas processor Lucid Energy Group for $3.55 billion in cash, using the financial benefits of high commodity prices to boost its presence in the Permian Basin.
Owned by private equity firm Riverstone Holdings LLC and Goldman Sachs Asset Management, Lucid is one of the largest private pipeline systems in the Permian. The firm offers natural gas gathering, treating and processing services and has around 1,050 miles of natural gas pipelines.
Deal activity in the basin, the heart of the U.S. shale industry, has been buoyant in recent months as owners of assets, often buyout firms with longstanding investments, seek to use the market backdrop to sell to strategic players emboldened by higher commodity prices.
U.S. natural gas futures traded earlier this month at their highest level since 2008, as Russia’s invasion of Ukraine roiled global markets already squeezed by heightened post-pandemic demand.
“This is an exciting acquisition that aligns with our integrated strategy as we are expanding and diversifying our Permian basin footprint,” Targa Chief Executive Matt Meloy said in a statement.
Targa has been reshaping its operations in 2022: agreeing in February to sell its stake in Gulf Coast Express Pipeline for $857 million, after saying in January it would buy out partners in certain joint ventures for $925 million.
The Lucid deal should close in the third quarter, and immediately add to its distributable cash flow per share, Targa said.
Concurrent with the Lucid announcement, Targa said it was raising its 2022 adjusted core earnings forecast to a range of $2.675 billion to $2.775 billion, compared with its previous estimate of $2.3 billion to $2.5 billion.
Targa was advised by investment banks Evercore and Mizuho and law firm Vinson & Elkins. Lucid and backers were supported by bankers at Jefferies and lawyers from Latham & Watkins and Fried, Frank, Harris, Shriver & Jacobson.
