Targa, Sanchez Energy form Eagle Ford gas JV

Targa Resources Partners LP and Sanchez Energy Corp. have agreed to form joint ventures that will construct a 200-MMcfd cryogenic natural gas processing plant in La Salle County, Tex., and 45 miles of high-pressure gathering pipelines that will connect Sanchez Energy’s Catarina gathering system to the plant.

Targa expects to contribute $125 million to the JVs while Sanchez Energy expects to contribute $115 million. Each company is slated to receive 50% ownership interest in the plant and the associated pipelines.

The La Salle County plant, whose capacity will be expandable to 260 MMcfd, will accommodate growing production from Sanchez Energy’s Eagle Ford shale acreage position in Dimmit, La Salle, and Webb counties in Texas and from other third-party producers.

Targa will manage construction and operations of the plant and gathering lines. The plant is expected to begin operations in early 2017. Targa will hold all the transportation capacity on the pipeline, and the gathering JV will receive fees for transportation.

Sanchez Energy has firm capacity for 125 MMcfd of plant processing and pipeline capacity for the first 5 years and has dedicated the Catarina acreage and all production developed during the 15-year term. The company has the option to deliver additional volumes and commit additional acreage to the new plant as production increases.

“The modern plant design is expected to deliver better liquids yields and lower processing fees, resulting in lower operating costs, higher net-backs, and greater price realization on our natural gas liquids revenue stream,” explained Tony Sanchez III, chief executive officer of Sanchez Energy. “The joint ventures are expected to also improve our access to end markets, including the developing Mexico and global LNG markets, and provide opportunities to increase revenue through utilization of the new midstream system to transport and process third party volumes.”

Sanchez Energy in late September agreed to sell certain pipeline, gathering, and compression assets on the western part of its Catarina asset to affiliate Sanchez Production Partners LP for $345 million (OGJ Online, Sept. 28, 2015). Sanchez Energy said proceeds from that sale would enable the company to pursue asset acquisitions, the acceleration of cost-efficient drilling and completion, and the strategic leasing of additional acreage in its core operational areas.

Targa earlier this year completed its $7.7-billion acquisitions of Atlas Pipeline Partners LP and Atlas Energy LP, which included Eagle Ford assets.

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