Targa Resources Partners LP Agrees to Acquire Remaining Assets From Targa Resources, Inc

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14, 2010

Targa Resources Partners LP (NYSE:NGLS) ("Targa Resources Partners" or the "Partnership") announced today that it has agreed to acquire Targa Resources, Inc.'s ("Targa" or the "Company") 76.8% ownership interest in Venice Energy Services Company ("VESCO"), a joint venture that is operated by Targa. The natural gas gathering and processing business is located near Venice, LA in Plaquemines Parish along the Louisiana Gulf Coast. Total value of the transaction is approximately $167.5 million, subject to certain adjustments. Consideration paid to Targa will consist entirely of cash funded through borrowings under the Partnership's senior secured revolving credit facility.

"We are pleased to announce this acquisition which will be immediately accretive to NGLS unit holders. The business addition increases the Partnership's scale and continues to position the Partnership for future growth," said Rene Joyce, Chief Executive Officer of the Partnership's general partner and of Targa. "Management's goal is to distribute to unit holders a portion of the cash flow accretion associated with this acquisition. If the closing of this acquisition occurs in the third quarter, we plan to recommend an increase to the Board of Directors in the annualized cash distribution rate of 4 cents to $2.15 per common unit for the third quarter of 2010 distribution, compared to the current rate of $2.11 per common unit."

The third quarter distribution (if approved by the board) is currently expected to be declared in October 2010 and paid in November 2010.

Highlights of the VESCO natural gas gathering and processing business to be acquired by the Partnership include:

  • Two cryogenic processing trains with a combined 750 MMcf/d of capacity;
  • Gross natural gas plant inlet and NGL production of approximately 421 MMcf/d and 22 MBbl/d for the six month period ending June 30, 2010;
  • Forecasted gross natural gas plant inlet volumes for the six month period ending December 31, 2010 should exceed those of the first six months of 2010, based on current estimates;
  • Venice Gathering System ("VGS"), a wholly owned subsidiary of VESCO, owns and operates an offshore gathering system with approximately 160 miles of pipelines which capture volumes from the Gulf of Mexico;
  • Additional gas supply interconnects (direct or indirect) with Enbridge Mississippi Canyon Gathering System, Tetco South Pass System, Tetco Main Pass System and various producer owned pipelines which provide most of current supply; and
  • Gas delivery interconnects to Tetco, Gulfsouth and Columbia Gulf.

VESCO Description, Capex Outlook and Operating Information

VESCO owns and operates a coastal straddle plant that processes volumes of natural gas from multiple offshore producing areas in the Gulf of Mexico through a series of third-party offshore gathering pipeline systems. Additionally, VESCO owns VGS' gathering system, an offshore gathering system with approximately 160 miles of pipeline, regulated as an interstate pipeline by the Federal Energy Regulatory Commission ("FERC"). VESCO processes gas in two cryogenic trains with a combined capacity of approximately 750 MMcf/d.

Almost all of the volumes are processed under hybrid contracts. In periods of favorable processing economics, hybrid contracts are similar to percent-of-liquids contracts. In periods of unfavorable processing economics, hybrid contracts are similar to fee-based contracts.

We estimate gross capital expenditures associated with VESCO for the six month period ending December 31, 2010, which consist almost entirely of maintenance capital expenditures for the period, will be approximately $1 million.

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