Targa Resources Corp. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by Targa Resources Corp. on March 3, 2017, reporting events occurring on March 1, 2017. The filing details the completion of a strategic acquisition by Targa Resources Partners LP, a subsidiary of the Company.
Key Financial Metrics and Transaction Details
The Company completed the "Permian Acquisition," purchasing 100% of the membership interests in Outrigger Delaware Operating, Outrigger Southern Delaware Operating, and Outrigger Midland Operating. These entities operate gas gathering, processing, and crude gathering systems in the Permian Basin (Loving, Winkler, Ward, Howard, Martin, and Borden counties).
- Initial Purchase Price: Approximately $484 million paid in cash at closing (including adjustments), with an additional $90 million payable within 90 days.
- Potential Earn-Out: Up to $935 million in additional cash payments may be made in 2018 and 2019, subject to performance-linked measures.
- Funding Sources: Cash on hand, borrowings under the Partnership's senior secured revolving credit facility, and proceeds from common stock issued in January 2017.
The filing does not provide specific revenue, profit, cash flow, margin, or debt figures for the Company or the acquired entities as of the reporting date.
Material Changes
The primary material change is the expansion of the Company's asset base through the acquisition of Outrigger's midstream infrastructure in the Permian Basin. This transaction significantly increases the Company's footprint in gas gathering, processing, and crude gathering operations in the specified Texas counties.
Outlook, Risks, and Contingencies
Contingencies: The total consideration for the acquisition is contingent upon future performance. The potential earn-out of up to $935 million depends on meeting specific performance-linked measures in 2018 and 2019.
Risks: The transaction was funded partly through borrowings under a senior secured revolving credit facility, which may impact future liquidity and leverage ratios. The filing notes that the purchase price was determined through arm's length negotiations and that no material relationships existed between the parties prior to the transaction.
Key Facts for Investor Verification
- Verify the specific performance metrics required to trigger the up to $935 million earn-out payments.
- Review the impact of the $484 million cash outlay and $90 million deferred payment on the Company's current liquidity and debt covenants.
- Confirm the integration timeline and expected synergies of the acquired Permian Basin assets.
- Examine the terms of the senior secured revolving credit facility utilized to fund the transaction.