As part of the agreement, Sanchez Energy will invest $115m to acquire 50% ownership stake in the plant and high pressure gathering pipeline.
Planned to be developed in La Salle County, Texas, the processing plant will have initial processing capacity of 200 million cubic feet per day (MMcf/d) and will serve Sanchez’ Catarina field in the Eagle Ford.
The plant, which will have a peak capacity of up to 260 MMcf/d, is designed to accommodate the growing production from Sanchez Energy’s premier Eagle Ford Shale acreage.
The pipeline will connect Sanchez Energy existing Catarina gathering system to the plant.
Sanchez Energy CEO Tony Sanchez III said: "These South Texas midstream joint ventures are a key part of our strategy aimed at capturing opportunities across the hydrocarbon value chain.
"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."
"Importantly, these South Texas midstream assets are expected to provide stable cash flows which a master limited partnership may find attractive and financeable at favorable rates.
Planned to be commissioned by early 2017, the natural gas processing plant and gathering pipelines will be designed, built and operated by Targa with an investment of $125m.
"As the project develops, we intend to explore potential alternative financing or other options for the joint ventures to maintain our liquidity, while also exploring whether there are any mutually beneficial funding strategies with Sanchez Production Partners LP that might be attractive to us," Sanchez III added.
Sanchez Energy expects the new midstream joint ventures to provide significant operational and commercial benefits while improving yields and net-back prices.
