Targa Resources Corp.
CEO : Mr. Matthew J. Meloy
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2023 Q2 | -43.8% YoY | 43.6% | -12.2% | 2023-08-03 |
Matt Meloy says,
Record volumes and consistent performance
- Second quarter results were consistent with expectations, driven by the strength of the business.
- Record volumes in the Permian region, leading to record NGL transportation and fractionation volumes downstream.
- Adjusted EBITDA expected to ramp over the rest of the year, with a full-year estimate of $3.5 billion to $3.7 billion.
New plant announcements
- Official announcement of new plants in Permian Midland and Permian Delaware to support infrastructure needs of producer customers.
- Continued growth CapEx spending estimated at between $2 billion and $2.2 billion for 2023.
- Projects remain on track and on budget.
Permian operations and activity
- Average reported inlet volumes across Midland and Delaware basins reached a record 5.1 billion cubic feet per day.
- Legacy II Plant in Permian Midland fully operational, with next Midland plant (Greenwood) on track to begin operations in late Q4 2023.
- Midway plant in Permian Delaware commenced operations and is expected to increase processing capacity.
Logistics and Transportation segment
- Record NGL pipeline transportation volumes and fractionation volumes during the second quarter.
- Expected restart of GCF and commencement of Train 9 fractionator in Mont Belvieu in 2024.
- Train 10 fractionator expected to be operational in 2025.
Long-term outlook and strategic priorities
- Focus on growing EBITDA, growing the dividend, and reducing share count while maintaining leverage within target range.
- Positive outlook for Targa, with a unique value proposition for shareholders and potential shareholders.
Scott Pryor says,
Demand and Spot Opportunities
- In the second quarter, the company experienced less spot opportunities due to a decrease in arbitrage opportunities in the marketplace.
- Headwinds in freight economics have tightened things up and impacted overall demand.
Third Quarter Outlook
- The company expects to extend existing contracts and add new contracts to their portfolio in the third quarter.
- The expansion project coming online in the third quarter is expected to provide additional benefits.
- Despite downtime for mandatory inspections, third quarter volumes are expected to be similar or better than the second quarter.
Fourth Quarter Outlook
- With the expansion project online and a ramp-up in demand, the company anticipates a positive outlook for the fourth quarter.
- Seasonal demand typically seen in the fourth quarter and first quarter further supports the positive outlook.
- Volumes through the company’s systems are expected to continue ramping up.
Q & A sessions,
Capital Spending on Daytona Project
- Most of the spending on the Daytona project will occur next year.
- The spending includes two fractionators, Train 9 and Train 10, as well as investments in GCS this year.
- This higher-than-normal spending on fractionation and NGL pipeline will taper off once Train 9 and Train 10 are online by the end of 2024.
Return of Capital and Dividend Growth
- Targa’s focus is on investing in its core business to generate good returns.
- The company plans to invest in both the G&P side and the downstream side to ensure volume to customers and drive EBITDA growth.
- This strategy will enable Targa to continue returning capital to shareholders through dividends and share repurchases.
- Targa repurchased a significant amount of shares in the second quarter.
Return on Invested Capital (ROIC)
- Targa has achieved a 26% ROIC on its investments in its core business.
- The company expects the returns on its future projects to be well in excess of its cost of capital.
- Organic growth is typically described as a 5 to 7 times multiple, but Targa aims to achieve a lower-end multiple of 4 to 5 times.
- The overall multiple may be influenced by commodity prices during the investment period, but Targa is becoming less commodity price sensitive.
Impact of Ethane Market and Pricing
- Targa benefited from the volatile ethane market in July, as it was able to utilize its storage position to take advantage of price spikes.
- The market has since balanced out, with prices returning to more moderate levels.
Propane Market and Inventory
- Propane pricing is currently down compared to recent levels, partly due to higher inventories.
- Global demand for propane is increasing, particularly in China with its PDH plant.
- The industry has adequate inventory levels, and the addition of more vessels for LPGs indicates market demand for increased propane exports.
No bad stock 