Joint venture with Blackstone Energy Partners

On October 4, Targa Resources (TRGP) announced an agreement to sell a 25% joint venture interest in its Grand Prix NGL (natural gas liquids) pipeline to funds managed by Blackstone Energy Partners. Grand Prix pipeline is expected to have an NGL transportation capacity of 300,000 barrels per day. The pipeline is planned to run from the Permian Basin to Mont Belvieu, Texas.

Targa Resources’ Joint Venture with Blackstone Energy Partners

Targa’s Grand Prix NGL pipeline project’s estimated cost is ~$1.3 billion. The project is expected to complete in the second quarter of 2019.

Targa Resources is one of the largest movers of NGLs from its processing plants across the Permian Basin. The company expects to generate sufficient returns on the pipeline solely from Targa-managed volumes. In the long term, the company expects growth in volumes both from its own gathering and processing operations as well as from third parties.

Targa Resources expects an EBITDA (earnings before interest, tax, depreciation, and amortization) multiple of 5x–7x for the project. It’s expected to generate significant fee-based cash flows over the long term.

Targa expects to realize considerable capital savings and other strategic and financial benefits through the joint venture.

Commitment from EagleClaw Midstream

Along with the joint venture for the Grand Prix project, Targa Resources and EagleClaw Midstream Ventures—a Blackstone portfolio company—formed an agreement under which EagleClaw has committed significant NGLs for transportation and fractionation associated with its natural gas volumes produced in the Delaware Basin. EagleClaw’s volumes are expected to provide substantial incremental fee-based cash flow to Targa over the long term. According to Targa, EagleClaw is the largest private natural gas gathering and processing company in the Delaware Basin.

Targa Resources also executed a letter of intent with Kinder Morgan (KMI) and DCP Midstream (DCP) for the Gulf Coast Express Pipeline project. We’ll discuss it in the next part of this series.

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