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Targa Planning $1.3B Grand Prix NGL Pipeline in Texas, Prices Public Stock Offering

Targa Resources Corp. said it plans to build a $1.3 billion natural gas liquids (NGL) pipeline to connect the Permian Basin and the company's North Texas gathering system to its fractionation and storage complex at the NGL market hub at Mont Belvieu, TX.

Meanwhile, the Houston-based company said it has priced an underwritten public offering of 17 million shares of common stock at $46.10/share. Targa also said it granted the underwriter a 30-day option to purchase up to an additional 2.55 million shares of common stock.

On Thursday, Targa said its proposed Grand Prix pipeline will have 300,000 b/d of transport capacity from the Permian Basin, with the possibility of expansion to 550,000 b/d. The company said Grand Prix would be supported by its own production volumes and other third party customers, and expects to enter the pipeline into service in 2Q2019.

CEO Joe Bob Perkins said Grand Prix "will enhance our ability to move our customers' volumes from the wellhead in the Permian Basin and North Texas to key petrochemical and export markets. Our ability to offer a highly competitive, fully integrated model, from gathering and processing [G&P] through transportation and fractionation, to current and future customers should drive continued growth for Targa in both our G&P and downstream segments."

Perkins added that Targa has been looking "to identify attractive opportunities to leverage our growing G&P volumes from one of the best hydrocarbon basins in the world into additional downstream opportunities for Targa and our customers, and Grand Prix is an excellent result of those efforts."

Targa plans to spend about $250 million of its capital expenditures (capex) budget for 2017 on the pipeline this year. The company's total capex budget for 2017 totaled approximately $1.25 billion.Grand Prix is the latest in a series of proposed NGL pipelines to serve the Permian.

Executives with Apache Corp. said earlier this month that the company plans to complete an NGL pipeline in the Permian by 2019, but the size of the pipeline had not yet been determined. One month earlier, Enterprise Products Partners LP announced plans to build its 571-mile, 24-inch diameter Shin Oak NGL pipeline, which would run from its Hobbs fractionation and storage facility in Gaines County, TX, to Mont Belvieu. Shin Oak would have an initial capacity of 250,000 b/d, but would be expandable to 600,000 b/d.

DCP Midstream LP is also in the process of expanding the capacity of its Sand Hills NGL pipeline from 280,000 b/d to 365,000 b/d. Sand Hills also connects the Permian to Mont Belvieu.

In a separate statement Thursday, Targa said its offering of the 17 million shares of common stock is expected to close on or about June 1, and is subject to customary closing conditions. The company expects to receive net proceeds of about $777.3 million from the offering, but that figure increases to $893.9 million if the underwriter exercises in full its option to purchase the additional shares.

Targa said it plans to use net proceeds from the offering for several uses, including to help pay for the Grand Prix pipeline; repay outstanding borrowings under the company's credit facilities; redeem Targa Resource Partners LP's 6 3/8% senior notes due in 2022, and for general corporate purposes. The company said the latter may include acquisitions, capex and additions to working capital, among other things.

Last January, Targa Resources Partners LP announced plans to acquire oil/natural gas gathering and processing assets in the Midland and Delaware sub-basins of the Permian for an initial cash payment of $565 million. Specifically, it acquired Outrigger Delaware Operating LLC, Outrigger Southern Delaware Operating LLC and Outrigger Midland Operating LLC.

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