雅虎香港財經 Targa Resources Corp. (NYSE:TRGP) Q1 2024 Earnings Call Transcript
Targa Resources Corp. (NYSE:TRGP) Q1 2024 Earnings Call Transcript May 2, 2024
Targa Resources Corp. misses on earnings expectations. Reported EPS is $1.24 EPS, expectations were $1.38. Targa Resources Corp. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by. Welcome to the Targa Resources First Quarter 2024 Earnings Webcast and Presentation. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Sanjay Lad, Vice President of Finance and Investor Relations. Please go ahead, sir.
Sanjay Lad: Thanks, Jonathan. Good morning, and welcome to the First Quarter 2024 Earnings Call for Targa Resources Corp. The first quarter earnings release, along with the first quarter earnings supplement presentation for Targa that accompany our call, are available on our website at targaresources.com in the Investors section. In addition, an updated investor presentation has also been posted to our website. Statements made during this call that might include Targa's expectations or predictions should be considered forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our latest SEC filings.
Our speakers for the call today will be Matt Meloy, Chief Executive Officer; and Jen Kneale, Chief Financial Officer. Additionally, the following senior management team members will be available for Q&A; Pat McDonie, President, Gathering and Processing; Scott Pryor, President, Logistics and Transportation; and Bobby Muraro, Chief Commercial Officer. I will now turn the call over to Matt.
Matt Meloy: Thanks, Sanjay, and good morning. We are proud of our first quarter results as we continue to execute across the organization to deliver another quarter of record adjusted EBITDA, Permian volumes, and LPG export volumes, along with a 50% increase to our common dividend per share and $124 million of common share repurchases. For the quarter, we really benefited from strong back half of the quarter Permian volume growth. January was impacted by operational upsets associated with harsh weather. From there, volumes significantly increased throughout the quarter, which helped drive record results and sets us up well looking forward. We are adding a substantial amount of compression across the rest of the year and our expectation is for continued Permian volume growth, recognizing that prior to Matterhorn initiating service and adding incremental natural gas takeaway capacity, gas markets will remain tight.
As we saw in March and April, if there are upsets associated with pipeline maintenance that create further constraints, it may affect volumes and significantly impact Waha gas prices. Short term constraints aside, given our outlook for increasing Permian volumes and resulting NGL supply growth, we announced this morning that we are moving forward with two major growth capital projects. Our next Permian Midland plant, Pembrook II, and our next fractionator in Mont Belvieu, and Train 11 to support the infrastructure needs of our customers. We mentioned in February that we are ordering long lead items for both projects and have since received Board approval to move forward with no change to our estimates for 2024 and 2025 net growth capital spend.
I am pleased to announce that we are also moving forward with a small capital project at our Galena Park facility that will increase our LPG export capacity by approximately 650,000 barrels per month within the second half of 2025. This project is an excellent example of our organization balancing between capital-efficient while ensuring our ability to support increasing volumes through our systems and also does not change our estimates for growth capital spending. Despite the current weakness in Waha natural gas and NGL prices, we continue to estimate full year 2024 adjusted EBITDA between $3.7 billion and $3.9 billion, which we believe is reflective of the importance of our fees and fee floors in our G&P business, which are supporting our continued investment in infrastructure despite a lower commodity price environment.
Looking ahead, our premier Permian supply aggregation position, coupled with our integrated NGL system positions us nicely to continue to generate high return organic opportunities and be able to continue to return incremental capital to our shareholders. Let's now discuss our operations in more detail. Starting in the Permian, activity continues to remain strong across our dedicated acreage. In Permian Midland, construction continues on our new Greenwood II plant and remains on track to begin operations in the fourth quarter of this year. Greenwood II is expected to be highly utilized when it comes online, which is necessitating moving forward with Pembrook II, which is expected to begin operations in the fourth quarter of 2025. As you may have seen publicly, we had a fire at our Greenwood I plant in Permian Midland on April 16th.
There were no injuries and we appreciate the work by our Targa team and first responders who were able to extinguish the fire safely and quickly. With 19 plants and a broad footprint across the Permian Midland, we are leveraging our operational flexibility to move gas around to handle all existing volumes and planned production growth to continue to be able to provide reliable service to our producer customers while the plant is down. We expect the plant back online before the end of the second quarter and do not expect the plant downtime to significantly impact our Midland volumes for the second quarter. We estimate about $10 million of repairs related to the incident. In Permian Delaware, activity and volumes across our footprint are also running strong.
Our Roadrunner II plant is expected to commence operations in June and is also expected to begin service highly utilized. Our next Delaware plant Bull Moose remains on track to come online in the second quarter of 2025. We continue to expect increasing Permian volumes as we move through the rest of the year as we benefit from new compression and plants coming online. For the second quarter, Waha gas prices are averaging around negative $1.30 as residue gas pipeline downtime for maintenance and operational upsets have resulted in additional tightness in the Permian Basin. We have done a good job of managing our Permian gas takeaway positions to ensure surety of flow from our producers as the market awaits some relief when the Matterhorn pipeline comes on later this year.
Shifting to our Logistics & Transportation segment. Construction continues on our Daytona NGL pipeline expansion, and we remain on track to begin operations in the fourth quarter of this year. The outlook for NGL supply growth continuing means our Daytona expansion will be much needed to handle incremental barrels. We are currently starting up our new fractionator in Mont Belvieu, Train 9, and expect it to be highly utilized. We expect to restart our Gulf Coast fractionator joint venture during the second quarter, which we also expect our portion of the capacity to be highly utilized at startup. Construction continues on our Train 10 fractionator, which is also expected to be much-needed when it comes online. Given our outlook for increasing NGL production growth to Mont Belvieu supports us efficiently moving forward with Train 11, a new 150,000 barrel per day fractionator.
Train 11 is expected to begin operations in the third quarter of 2026, and the capital associated with Train 11 was already included in our expectations for spending that we provided publicly for both 2024 and 2025. In our LPG export business at Galena Park, our loadings were a record 13.3 million barrels per month during the first quarter as we continue to benefit from strong market conditions and the Houston Ship Channel allowance of nighttime transits for larger vessels. Before I turn the call over to Jen to discuss our first quarter results in more detail, I would like to extend a thank you to the Targa team for their continued focus on safety and execution, while continuing to provide best-in-class service and reliability to our customers.
Our employees continue to rise to the challenges of our business and we are appreciative of their efforts.
Jen Kneale: Thanks, Matt. Good morning, everyone. Targa's reported quarterly adjusted EBITDA for the first quarter was a record $966 million, a 1% increase over the fourth quarter. For the first quarter, our natural gas inlet volumes in the Permian averaged a record 5.4 billion cubic feet per day, a 2% increase when compared to the fourth quarter. March Permian volumes were stronger than estimated when we hosted our February earnings call and significantly higher than January, which translated into additional volumes downstream. For the full quarter, our NGL pipeline transportation volumes averaged 718,000 barrels per day. Our fractionation volumes averaged 797,000 barrels per day, including the impacts of scheduled maintenance at our Mont Belvieu complex.
Our LPG export loadings were a record 13.3 million barrels per month and we benefited from optimization opportunities in our marketing business. As we look across the rest of 2024, second quarter EBITDA may be weaker than Q1 given seasonality in our business, the impacts on the quarter of the fire at our Greenwood plant, and the tight Permian residue gas market with EBITDA increasing through the back half of the year. The combination of our fee and fee floor contracts in our Gathering & Processing segment and our hedges mean we are largely insulated from current commodity prices that are significantly lower than our guidance prices. As Matt said, we continue to estimate full year 2024 adjusted EBITDA between $3.7 billion and $3.9 billion and expect to exit 2024 with a lot of momentum heading into 2025, given our new infrastructure that comes online this year.
This morning, we included a new performance metric in our disclosures, adjusted cash flow from operations, which is adjusted EBITDA, less interest expense and cash taxes. This is the metric that we first started discussing last November around our return of capital framework looking forward, and we thought it made sense for us to also include it in our disclosures. Including the new growth projects announced this morning, there is no change to our estimate for 2024 growth capital spending of between $2.3 billion and $2.5 billion. We also continue to estimate approximately $1.4 billion of net growth capital expenditures in 2025, which will result in meaningful free cash flow generation. Our current year estimate for net maintenance capital spending remains $225 million.
At quarter end, we had $2.6 billion of available liquidity and our consolidated net leverage ratio was 3.6 times, well within our long term leverage ratio target range of 3 times to 4 times. Shifting to capital allocation, our priorities remain the same, which are to maintain a strong investment grade balance sheet to continue to invest in high returning integrated projects and to return an increasing amount of capital to our shareholders across cycles and we are delivering on those priorities. We are continuing to model the ability over time to return 40% to 50% of adjusted cash flow from operations to equity holders and believe that this is a useful framework for thinking about Targa's return of capital proposition over time. Consistent with previously announced expectations, our Board approved the declaration of a 50% increase to the 2024 annual common dividend to $3 per share, and we expect to be able to grow the annual common dividend meaningfully thereafter.
We also repurchased $124 million of common shares during the first quarter at a weighted average price of approximately $104 per share. We believe that we continue to offer a unique value proposition for our shareholders and potential shareholders, growing EBITDA, a growing common dividend per share, reducing share count, and excellent short, medium and long term outlooks. Our talented team continues to execute on our strategic priorities and safely operate our assets to deliver the energy that enhances our everyday lives, and we are so thankful for the efforts of all of our employees. And with that, I will turn the call back over to Sanjay.
Sanjay Lad: Thanks, Jen. For the Q&A session, we kindly ask that you limit to one question to one follow-up and reenter the lineup if you have additional questions. Jonathan, would you please open the line for Q&A?
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