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Targa planning $2.15B in expansion projects for Delaware Basin, Oklahoma

Targa Resources Corp. is expanding its natural gas gathering and processing capacity in the Delaware Basin through the build-out of two 250-MMcf/d processing plants and 220 miles of gathering pipelines, an undertaking that would cost around $500 million.

The first cryogenic gas processing plant, called the Falcon facility, would begin operations in the fourth quarter of 2019; and the second plant, called the Peregrine facility, would start up in the second quarter of 2020. Targa would also offer transportation services on the Grand Prix NGL pipeline currently under construction, and fractionation services at the Mont Belvieu complex for most of the NGLs produced in the plants. The new high-pressure gathering pipelines would carry rich gas across the Delaware Basin's core production area.

The expansion is supported by long-term, fee-based agreements with an undisclosed energy company for gathering and processing services, as well as for downstream transportation and fractionation. The buyer also dedicated acreage within the Delaware Basin as part of the agreements.

Separately, Targa is planning an extension of its Grand Prix pipeline into southern Oklahoma, expected to cost about $1.65 billion. The project is supported by long-term contracts for transportation and fractionation services from existing and future processing plants in Targa's SouthOK system in the Arkoma area of Oklahoma, including a commitment from Valiant Midstream LLC.

The expansion involves the construction of a 30-inch diameter segment running from North Texas to the Mont Belvieu complex, and a 24-inch diameter pipeline running from the Permian Basin to North Texas. The 30-inch segment would have a capacity of 450,000 barrels per day, expandable to 950,000 bbl/d, while the 24-inch segment would have a capacity of 300,000 bbl/d, expandable to 550,000 bbl/d. Targa has not yet determined the capacity of the pipeline from southern Oklahoma to North Texas.

Targa expects to spend about $200 million on the gathering and processing expansions and $900 million on the Grand Prix expansion in 2018, raising the company's net CapEx for the year to $2.2 billion.

In addition, Targa enlisted the services of Evercore Group LLC to conduct a review of strategic alternatives that include possible divestitures of the company's downstream petroleum logistics business, which operates terminals and other assets in Maryland, Washington and Texas; as well as its marine barge business. Proceeds from the sales, if pushed through, would help fund the growth in CapEx resulting from the announced projects.