Targa Resources’ Badlands assets help it diversify into crude oil

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Badlands assets

On December 31, 2012, Targa Resources (NGLS) acquired from Saddle Butte Pipeline LLC the ownership of its Williston Basin crude oil pipeline and terminal system and its natural gas gathering and processing operations for $975.8 million. These are collectively called “the Badlands.” The acquisition marked NGLS’s foray into the crude oil pipeline business and strongly complements Targa’s logistics and terminalling assets for refined products. The Badlands operations are located in the Bakken and Three Forks Shale plays of the Williston Basin in North Dakota, which have rich resources of oil wells.

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Targa’s Badlands assets include crude oil gathering pipelines, 40 thousand barrels of operational crude storage capacity at the Johnsons Corner Terminal, and 30 thousand barrels of operational crude storage capacity at the Alexander Terminal. The Johnson Cornerand Alexander terminals currently provide multiple delivery options. The company’s assets here also include natural gas gathering pipelines and a natural gas processing plant that was expanded in the third quarter of 2013 by 20 million cubic feet per day to a gross processing capacity of about 38 million cubic feet per day.Badland asset overview

Investment in the Badlands

In 2013, Targa invested approximately $250 million to expand its operation in oil and gas processing in these assets. Currently, NGLS has 30 thousand barrels of operational crude oil storage under construction at New Town and 25 thousand barrels of operational crude oil storage under construction at Stanley, in the Badlands. The Badlands system delivers rich natural gas to the Little Missouri processing plant with the residue natural gas delivered to the Northern Border pipeline.

Crude Oil

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The company expects a significant increase in crude oil and gas volume from the Badlands assets. Matt Meloy, the chief financial officer of NGLS, commented in the conference call of 1Q14, “Crude oil gathered increased to 75,000 barrels per day in the first quarter, a 137% increase versus the same period last year and highlights our continued progress in North Dakota. We also continue to expect 2014 average Badlands crude volumes — crude gather volumes to approximately double 2013 average volumes. For the segment, natural gas prices increased by 49%, NGL prices increased by 19%, and condensate prices increased by 4% compared to the first quarter of 2013.”

Targa Resources Partners LP (NGLS) is a master limited partnership operating in the midstream energy space. Targa Resources Corp. (TRGP) is the general partner of NGLS. Other major companies operating in this sector whose earnings investors should follow include Kinder Morgan Energy Partners LP (KMP), MarkWest Energy Partners LP (MWE), and Targa Resources Corp. (TRGP). NGLS is also part of Alerian MLP ETF (AMLP) and the Yorkville High Income Infrastructure MLP ETF (YMLI).

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