Expanding in the Bakken Shale, Targa Resources Partners LP (NYSE:NGLS) has agreed to acquire 100% of Saddle Butte Pipeline LLC's ownership of its Williston Basin crude oil pipeline and terminal system and its natural gas gathering and processing operations for cash consideration of $950 million.
The business to be acquired is located in the oil-rich Bakken Shale Play in McKenzie, Dunn, and Mountrail counties, North Dakota and includes approximately 155 miles of crude oil pipelines. The business has combined crude oil operational storage capacity of 70,000 barrels, including the Johnsons Corner Terminal with 20,000 barrels of storage capacity (expanding to 40,000 barrels) and Alexander Terminal with storage capacity of 30,000 barrels. The business also includes approximately 95 miles of natural gas gathering pipelines and a 20 MMcf/d natural gas processing plant with an expansion underway to increase capacity to 40 MMcf/d. The operations are backed by producer dedications under long-term contracts that include approximately 260,000 acres of crude oil production and over 100,000 acres of natural gas production. The Partnership expects that growth capital expenditures of over $250 million will be required in 2013 to support system expansions necessary to meet producer activity.
"This acquisition of a major, strategic midstream business complements our extensive portfolio of midstream assets, extends our footprint to the very attractive Bakken Shale play, further diversifies our business with the addition of crude oil gathering, and adds significant long-term growth in fee-based revenues," said Joe Bob Perkins, CEO of the general partner of the Partnership.
Over time, the Partnership expects to fund the acquisition and associated growth capital expenditures consistent with its stated financial strategy of approximately 50% debt and 50% equity. Current liquidity pro forma for the October 2012 offering of 5.25% Senior Notes due 2023 and redemption of the 8.25% Senior Notes due 2016 is over $1.1 billion. The Partnership anticipates that the acquisition will contribute an additional 10% to 15% of EBITDA to its current 2013 guidance. After giving effect to the acquisition, the Partnership expects to maintain its 2013 distribution per unit guidance of 10% to 12% growth over full year 2012, and expects that the transaction will be accretive to distributable cash flow per unit starting in 2014, with increasing accretion thereafter.
Evercore Partners acted as advisor to the Partnership with respect to the transaction.
The transaction is expected to close during the fourth quarter of 2012.