Targa(TRGP) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Targa Resources reported record adjusted EBITDA of $1.07 billion for Q3 2024, a 9% increase from Q2 2024, driven by higher Permian volumes and optimization in the marketing business [22][23] - The adjusted operating margin for the Gathering and Processing segment reached a record$ 788 million, supported by strong volume growth and fee-based contracts [22] - The Logistics and Transportation segment also set a record with an adjusted operating margin of $717 million, backed by record NGL transportation and fractionation throughput [23] Business Line Data and Key Metrics Changes - In the Permian, natural gas inlet volumes averaged a record 6 billion cubic feet per day in Q3 2024, a 5% increase from Q2 2024 and an 18% increase year-over-year [14][15] - NGL pipeline transportation volumes averaged a record 829,000 barrels per day, and fractionation volumes averaged 954,000 barrels per day, both reflecting a 6% sequential increase [17] - The LPG export business at Galena Park averaged 12.4 million barrels per month, despite a temporary reduction in loading capability due to inspections [19] Market Data and Key Metrics Changes - The company anticipates robust NGL supply growth due to the expected increase in Permian G&P business and corresponding plant additions [18] - Global demand for U.S.-sourced LPGs remains strong, with plans to expand loading capacity by an additional 650,000 barrels per month by the second half of 2025 [19] Company Strategy and Development Direction - Targa is focusing on maintaining a strong investment-grade balance sheet while investing in high-return integrated projects and returning capital to shareholders [20][21] - The company is moving forward with two new Permian plants in response to anticipated growth, enhancing its sour gas treating position in the Delaware Basin [10][11] - Targa aims to capture and sequester CO2 in the Permian, accruing 45Q tax credits, which will enhance its sustainability efforts [11][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's short-, medium-, and long-term outlook, particularly regarding the Permian position and the expected growth in volumes [10][12] - The company expects to exceed the high end of its previously provided adjusted EBITDA range for 2024, projecting more than$ 500 million year-over-year growth [7][23] - Management noted that the current operational success and market conditions position Targa well for continued growth and shareholder returns [9][20] Other Important Information - Targa has repurchased nearly $650 million of common shares year-to-date, with plans to return 40% to 50% of adjusted cash flow from operations to shareholders [20] - The company has achieved upgrades from all three rating agencies in 2024, reflecting its improved credit profile and outlook [27] Q&A Session Summary Question: Can you provide more color on 2025 CapEx and capital allocation plans? - Management indicated excitement about the overall performance and expects continued growth in capital spending, particularly in Gathering and Processing [30][31] Question: How do you expect downstream throughput to trend? - Management anticipates continued strength in volumes moving into Q4, benefiting from increased refrigeration capacity [33][34] Question: Can you share insights on producer activity and Targa's position in New Mexico? - Management noted strong growth in gas volumes and a favorable position in the Delaware Basin due to the Lucid acquisition [39][40] Question: What is the outlook for future gas egress needs in the basin? - Management expressed optimism about the need for additional gas pipelines and Targa's involvement in upcoming projects [41][42] Question: What is the long-term trend for growth CapEx? - Management confirmed that while a typical year might see$ 1.7 billion in growth capital, higher growth rates could necessitate increased spending [45][46] Question: How are share buybacks being approached? - Management stated that share repurchases will continue to be opportunistic, reflecting strong conviction in the company's future [49][50] Question: What are the plans for NGL pipeline spending? - Management indicated that NGL pipeline spending may be accelerated due to increased transportation volumes and operational leverage [52][54]