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Targa to Sell Petroleum Terminals to Fund Pipeline Projects

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Targa Resources Corporation (TRGP - Free Report) recently inked a deal to offload its petroleum terminals and crude oil storage facilities in Baltimore and Tacoma. Houston-based Targa will divest these properties to ArcLight Capital Partners, LLC, which is headquartered in Boston, for $160 million. Subject to satisfactory closing conditions, the deal is set for culmination in the fourth quarter of 2018.

Targa intends to utilize the proceeds from the divestment to finance its pipeline projects that are underway. Pipeline constraints in the prolific Permian play have opened a window of opportunity for the midstream companies to build new projects or expand the existing ones. Record levels of oil output have prompted a race among the midstream operators to invest in oil pipelines. There has also been an enormous growth in gas production, which calls for new gas pipelines to ensure a facile flow of natural gas from the Permian region.

Notably in August, Targa had announced its intention to join hands with multiple partners including NextEra Energy, Inc. (NEE - Free Report) and MPLX LP (MPLX - Free Report) — the midstream arm of Marathon Petroleum Corporation — and some private equity investors for building a 600-mile natural gas pipeline. The Whistler pipeline, with a transportation capacity of around 2 billion cubic feet of gas per day, will transport gas from the Permian Basin to Corpus Christi and Houston regions. While the financials of the project have been kept under wraps, the pipeline is likely to become functional in late 2020.

Soaring production in the Permian region has boosted the demand for natural gas liquids (NGL) processing capacity. In this regard, Targa aims to enhance its NGL processing capacity by more than 66% over the next three years. With the capacity buildout, its EBITDA is expected to witness a double-digit CAGR over the next 4-5 years. The Zacks Rank #3 (Hold) company remains on track to achieve its full-year 2018 operational and financial outlook. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company is currently building Grand Prix pipeline to transport NGL from Permian to the Houston region. Targa holds 25% interest in Kinder Morgan, Inc.’s (KMI - Free Report) Gulf Coast Express pipeline, which will be transporting natural gas from Permian to Corpus Christi regions post its construction. The $1.7-billion pipeline is slated for completion in mid-late 2019.

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