Targa Buys Williston
Purchase of Williston Basin crude oil pipeline and terminal system, along with gathering and processing assets in the oil-rich Bakken shale area.
Targa Resource Partners LP (NYSE: NGLS) plans to buy the Williston Basin crude oil pipeline and terminal system and its natural gas gathering and process operation from Saddle Butte Pipeline LLC for $950 million in cash.
The assets are in the heart of the oil-rich Bakken shale in McKenzie, Dunn and Montrail counties, North Dakota and include about 155 miles of crude oil pipelines.
The business has a combined crude oil storage capacity of 70,000 barrels (bbl), including the Johnsons Corner Terminal with 20,000 bbl of storage capacity (expanding to 40,000 bbl) and the Alexander Terminal with 30,000 bbl of capacity.
The business also includes about 95 miles of natural gas gathering pipelines and a 20 million cubic feet (MMcf) per day natural gas processing plant, which is undergoing an expansion to increase capacity to 40 MMcf per day. The operations are backed by producer dedications under long-term contracts that include 260,000 acres of crude oil production and more than 100,000 acres of natural gas production.
Targa expects growth capital expenditures of over $250 million will be required in 2013 to support system expansions necessary to meet producer activity.
"This acquisition of a major, strategic midstream business complements our extensive portfolio of midstream assets, extends our footprint to the very attractive Bakken Shale play, further diversifies our business with the addition of crude oil gathering, and adds significant long-term growth in fee-based revenues," said Joe Bob Perkins, chief executive of the general partner of the partnership.
“The visible, long-term growth potential of this business complements our attractive portfolio of ongoing and future organic growth projects and enhances the partnership's longer term distribution growth," he said.
Over time, the partnership expects to fund the acquisition and associated growth capital expenditures consistent with its stated financial strategy of approximately 50% debt and 50% equity. Current liquidity pro forma for the October 2012 offering of 5.25% senior notes due 2023 and redemption of the 8.25% senior notes due 2016 is over $1.1 billion.
Targa anticipates that the acquisition will contribute an additional 10% to 15% of EBITDA to its current 2013 guidance. After giving effect to the acquisition, it expects to maintain its 2013 distribution per unit guidance of 10% to 12% growth over full year 2012, and expects that the transaction will be accretive to distributable cash flow per unit starting in 2014, with increasing accretion thereafter.
Evercore Partners acted as advisor to the Partnership with respect to the transaction. Targa Resources Partners is a publicly traded midstream limited partnership based in Houston, Texas. Targa Resources Partners is managed by its general partner, Targa Resources GP LLC, which is indirectly wholly owned by Targa Resources Corp. (NYSE: TRGP).
Saddle Butte Pipeline is an independent midstream company funded by Yorktown Energy Partners LLC, a private equity and venture capital firm based in New York. Saddle Butte has as midstream assets in the Midcontinent and the U.S. Rocky Mountains.
The transaction is scheduled to close in the fourth quarter 2012.