Targa plans Delaware basin processing, pipeline capacity expansions

Targa Resources Corp. has entered into long-term, fee-based agreements with an unidentified investment-grade energy company for natural gas gathering and processing services in the Delaware basin and for downstream transportation, fractionation, and other related services.

Targa Resources Corp. has entered into long-term, fee-based agreements with an unidentified investment-grade energy company for natural gas gathering and processing services in the Delaware basin and for downstream transportation, fractionation, and other related services.

Supported by large near-term volume growth anticipated on the unidentified customer’s dedicated Delaware basin acreage, Targa plans to build about 220 miles of 12-24-in. high-pressure rich gas gathering pipelines across some of the most prolific parts of the region, as well as the new 250-MMcfd Falcon cryogenic natural gas processing plant, which is scheduled for startup in fourth-quarter 2019, the operator said.

Alongside the Falcon plant, Targa said it also will add a second 250-MMcfd gas plant named Peregrine in the Delaware basin, which will begin operations in second-quarter 2020.

Targa also will provide NGL transportation services on its new common-carrier Grand Prix NGL pipeline and fractionation services at its Mont Belvieu, Tex., complex for a majority of the NGLs from the Falcon and Peregrine plants.

Total net growth capex related to the plants and high-pressure pipeline system is $500 million, of which Targa will spend about $200 million this year.

Grand Prix line expansion

In addition to the new processing plants, Targa said it will expand the Grand Prix NGL pipeline—still under construction—into southern Oklahoma.

Scheduled to be fully completed and in service during second-quarter 2019, the pipeline expansion is underpinned by long-term commitments for both transportation and fractionation services from Targa’s existing and future processing plants in the Arkoma area in its SouthOK system and from third party commitments, including a long-term commitment for transportation and fractionation with Valiant Midstream LLC.

Once completed, capacity of Grand Prix from North Texas—where Permian and Oklahoma volumes will be connected to a 30-in. segment of the pipeline to Mont Belvieu—will be about 450,000 b/d, expandable to 950,000 b/d, Targa said.

Capacity on the 24-in. pipeline from the Permian basin to North Texas will be about 300,000 b/d, expandable to 550,000 b/d, while capacity from southern Oklahoma to North Texas will vary based on telescoping pipe size, Targa said, adding that it already has purchased most of the pipe for Grand Prix.

With about 2 bcfd of current gas processing capacity and 1.5 bcfd of processing capacity to be added across both the Midland and Delaware basins, Targa said it expects Grand Prix NGL volume deliveries to Mont Belvieu to exceed 250,000 b/d at some point during 2020 depending on upstream production levels, with volumes to increase beyond 2020 from continued production growth, increasing third-party commitments and the expiration of Targa's existing obligations to transport on other third-party NGL pipelines, further enhancing Grand Prix’s economics (OGJ Online, Feb. 9, 2018).

Targa estimated its current total growth capital spending on Grand Prix at about $1.65 billion, with net growth capital spending of $1.1 billion and $900 million net to be spent in 2018.

The operator said it expects total 2018 net growth capital expenditures for announced projects to be about $2.2 billion.

Grand Prix’s economics related to the volumes flowing on the pipeline from the Permian basin to Mont Belvieu are part of a previously announced joint-venture with Blackstone Energy Partners and the development JV with investment vehicles affiliated with Stonepeak Infrastructure Partners.

Potential asset sales

Targa also said it continues to evaluate and execute financing opportunities to fund its remaining equity capital needs for its announced 2018 projects, which may include a combination of additional asset JV arrangements, various types of public and private capital, and asset sales.

The operator has engaged Evercore Group LLC to evaluate alternatives, including the potential divestiture of its downstream petroleum logistics business, which includes terminals in Baltimore; Tacoma, Wash.; and its crude and condensate splitter and terminal in Channelview, Tex.

Targa additionally is evaluating a potential sale of its marine barge business, the company said.

These potential divestitures are predicated on third-party valuations adequately capturing Targa's forward-growth expectations for the assets. Sales proceeds could offset a large portion of the increase in net growth capital expenditures related to the newly announced projects.

Contact Robert Brelsford at rbrelsford@ogjonline.com.

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