Targa expands in US’ Permian Basin with Stakeholder acquisition

US midstream player Targa Resources (TRGP) announced on December 1 that it had struck a deal for a wholly owned subsidiary to acquire Stakeholder Midstream for $1.25bn in cash. The deal is aimed at expanding Targa’s gas-gathering, processing and treating capacity in particular.

Stakeholder is backed by a private equity commitment from EnCap Flatrock Midstream. According to Targa’s announcement, the company provides gas gathering, treating, and processing services and crude gathering and storage services in the Permian Basin. This includes around 480 miles (772 km) of gas pipelines, roughly 180mn cubic feet (5.1mn cubic metres) per day of cryogenic gas processing and sour treating capacity, as well as carbon capture, utilisation and storage (CCUS) capacity and a small crude-gathering system.

Stakeholder’s assets are anchored by long-term, fee-based contracts across roughly 170,000 dedicated acres (688 square km). Targa noted that this was underpinned by “attractive acreage with activity that has exhibited very low decline rates, supporting a durable volume profile”.

Targa added that Stakeholder’s sour gas treating and CCUS activities would complement its own treating and CCUS footprint in the Permian, which it described as “best-in-class”. Indeed, analytics firm RBN Energy said in a blog post this week that Targa was already the largest sour gas processor in the basin, having been expanding its gas-gathering and processing presence in the Permian’s Northern Delaware sub-basin through a combination of acquisitions and organic growth.

According to Targa’s website, its footprint in the Permian’s Delaware and Central Basin regions includes around 7,400 miles (11,909 km) of gas-gathering pipelines and 18 processing plants with an aggregate capacity of 3.56bn cubic feet (100.8 mcm) per day, as well as aggregate gas-treating capacity of roughly 2.6 bcf (73.6 mcm) per day and seven acid gas injection wells. The company has a slightly larger gathering and processing footprint in the Permian’s Midland sub-basin – much of it through its WestTX joint venture with ExxonMobil.

Targa expects to close the Stakeholder acquisition in the first quarter of 2026, with the transaction funded using its “strong” liquidity position, including cash on hand and an existing $3.5bn revolving credit facility. The company anticipates that Stakeholder will generate unlevered adjusted free cash flow of around $200mn per year with “minimal capital needs, very low integration costs and attractive acreage” with a stable volume profile.

“This acquisition is a nice bolt-on asset that has meaningful free cash flow supported by a stable to modestly growing volume profile with minimal capital needs and executed at an attractive valuation,” stated Targa’s CEO, Matt Meloy. “We believe this transaction is a continuation of our strategy of identifying opportunities to create shareholder value with balance sheet strength,” he continued.

“We are very familiar with the acquired assets and have strong relationships with some of the largest producers on the system,” Meloy said. “Targa’s organic growth opportunity set coupled with this accretive bolt-on transaction positions us well to enhance our already strong growth profile.”