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Welcome to the Machine - Ongoing Consolidation Streamlines the Permian’s Midstream Networks

Increasing scale. Improving efficiency. Expanding into a fast-growing production area. These are only a few of the many reasons that midstream consolidation has remained an ongoing phenomenon in U.S. oil and gas basins — nowhere more so than in the Permian. The slew of acquisitions, mergers and joint ventures announced in the past couple of years is resulting not only in more concentrated ownership of midstream assets in West Texas and southeastern New Mexico, but in large, smooth-running systems for gathering, treating and processing hydrocarbons and transporting them to market. In other words, in magnificent molecule-moving machines. With today’s RBN blog, we begin a short series on the latest round of midstream M&A activity in the U.S.’s hottest production area.

We’ve blogged often about midstream consolidation in the Permian and other basins, most recently in our four-part “Just the Two of Us” series, where we looked at Crestwood Equity Partners’ acquisition of Oasis Midstream (Permian and Bakken);  the merger of Altus Midstream and BCP Raptor Holdco LP (the corporate parent of EagleClaw Midstream) into a new entity called Kinetik Holdings (Permian); Enterprise Products Partners’ purchase of Navitas Midstream (Permian); and Targa Resources’ repurchase of ownership stakes in three “development company joint ventures” — DevCo JVs — that Targa and Stonepeak Infrastructure Partners had formed in February 2018 to help fund the development of a number of midstream assets in Texas. Before that, in We Belong Together, we discussed Plains All American and Oryx Midstream’s formation of a new, Plains-operated crude oil gathering, transportation and storage joint venture in the Permian.

Today, we return to the Permian — and Targa — to examine the midstream giant’s definitive agreement to acquire Lucid Energy Group from Riverstone Holdings and Goldman Sachs Asset Management for $3.55 billion in cash. (The deal is expected to close in the third quarter.) Publicly owned Targa is a Permian behemoth, with about 13,000 miles of gas-gathering pipelines (~7,000 miles in the Midland Basin and ~6,100 miles in the Delaware; orange lines in Figure 1) and 24 gas processing plants at 16 sites (black-outlined orange triangles) with a combined capacity of just over 4 Bcf/d: 16 plants with ~2.8 Bcf/d of capacity in the Midland and eight plants with ~1.3 Bcf/d of capacity in the Delaware. (Ten of the 16 plants in the Midland and ~4,900 miles of the gas-gathering pipelines there are owned by Targa’s WestTX joint venture with Pioneer Natural Resources, in which Targa holds a 72.8% interest.) Targa is also developing three new, 275-MMcf/d gas processing plants in the Permian (white-outlined orange triangles): the Legacy I and Legacy II facilities in the Midland (online in the fourth quarter of 2022 and second quarter of 2023, respectively) and the Midway plant in the Delaware (online in the third quarter of 2023).

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