Targa(US:TRGP)2021-05-06 20:51Financial Data and Key Metrics Changes - Targa Resources reported a quarterly adjusted EBITDA of $516 million, an increase of 18% over the fourth quarter [22] - The company reduced its debt balance by $383 million quarter-over-quarter, resulting in a consolidated reported debt-to-EBITDA ratio of approximately 4.3 times at the end of the first quarter, down from 4.7 times at year-end 2020 [24][7] - The full year 2021 adjusted EBITDA estimate was increased to between $1.8 billion to $1.9 billion, representing a 13% increase compared to 2020 based on the midpoint of the new guidance range [18][27] Business Line Data and Key Metrics Changes - In the Permian region, average total 2021 inlet volumes are expected to increase between 5% and 10% over the previous year, with current volumes averaging about 2.7 billion cubic feet per day [10] - The Gathering and Processing segment benefited from higher commodity prices, with margins improving due to fee floor arrangements [14][23] - LPG export volumes at Galena Park averaged 8.5 million barrels per month in the first quarter, down 23% sequentially, but the outlook for the second quarter remains strong [16][17] Market Data and Key Metrics Changes - The severe weather from the February winter storm caused a 50% reduction in gathering and processing volumes, but overall system volumes rebounded to pre-storm levels later in the first quarter [8][9] - The Grand Prix pipeline is performing well, with current deliveries into Mont Belvieu at approximately 380,000 barrels per day, and expected full-year average deliveries to increase over 25% from 2020 [14][15] Company Strategy and Development Direction - The company is prioritizing free cash flow towards debt reduction and aims to achieve a long-term consolidated leverage ratio target of three to four times [30][20] - Targa is evaluating the timing for a new Midland plant, estimated to cost about $150 million, which could be needed as early as the second half of 2022 [11] - The company is also focusing on sustainability and ESG initiatives, including the formation of a Sustainability committee at the Board level [32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in the integrated NGL business and the ability to capture growth volumes from the Permian without significant incremental CapEx [20] - The company expects second quarter adjusted EBITDA to be lower than the first quarter but anticipates significant momentum heading into 2022 [28] - Management noted that the overall capital allocation priority is on leverage reduction and simplifying the corporate structure [40][45] Other Important Information - A reporting change was made to include certain fuel and power costs in product purchases and fuel to better reflect their relationship to revenue-generating activities [25] - The company remains significantly hedged for 2021 and continues to add hedges across most commodities [26] Q&A Session Summary Question: Capital allocation philosophy and potential CapEx pressure - Management emphasized that the overriding priority is on leverage reduction, with potential CapEx pressure mainly on the Permian Midland side due to increasing volumes [40][41] Question: Thoughts on carbon capture initiatives - Management is evaluating opportunities in carbon capture and renewable projects, indicating that they are in the early stages of assessing these initiatives [47][48] Question: Guidance and fee floors performance - Management clarified that the guidance increase reflects strong operating performance and benefits from the winter storm, with expectations for continued strong performance [52][54] Question: Impact of propane inventories on pricing - Management acknowledged low propane inventories and strong pricing, indicating that higher NGL prices are generally beneficial for Targa [68][70] Question: M&A activity and non-core asset sales - Management stated that while they are open to smaller acquisitions, their focus remains on organic growth and reducing leverage, with no current processes for non-core asset sales [98][102]