Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Targa Resources Corp (TRGP, Financial) reported record adjusted EBITDA of $1.07 billion for the third quarter, a 9% increase over the second quarter.
- The company expects to exceed the high end of its previously provided adjusted EBITDA range for 2024, indicating strong financial performance.
- Targa Resources Corp (TRGP) has significantly strengthened its balance sheet, achieving investment-grade credit ratings from all three major agencies.
- The company announced plans to increase its 2025 annual common dividend by 33% to $4 per share, reflecting confidence in future cash flows.
- Targa Resources Corp (TRGP) is advancing with new Permian plants due to higher anticipated growth, ensuring alignment with producer needs and continued volume growth.
Negative Points
- Despite strong performance, Targa Resources Corp (TRGP) faces potential challenges with increased capital expenditure, which could exceed $2.7 billion in 2024.
- The company is experiencing a more robust growth environment, which may require accelerated infrastructure spending, impacting free cash flow.
- Targa Resources Corp (TRGP) has not provided a firm number for 2025 capital spending, indicating uncertainty in future financial planning.
- The company acknowledges potential impacts from lower margin contracts rolling over, which could affect fourth-quarter volumes.
- Targa Resources Corp (TRGP) faces competition in the LPG export market, with significant capacity expansions from other players potentially impacting market share.
Q & A Highlights
Q: Can you provide more color on the 2025 CapEx and how long you expect the accelerated growth to endure?
A: Matthew Meloy, CEO: We are excited about our performance, which translates into higher EBITDA growth and volumes. We have seen an acceleration in gathering and processing, resulting in more field-level capital for this year, likely continuing into next year. We plan to give more details on our spending and plant timing in February.
Q: How do you expect downstream throughput across your dock to trend?
A: Douglas Pryor, President of Logistics and Transportation: We had a significant increase in the third quarter and expect this to continue into the fourth quarter. We benefit from demand for propane and butane and are utilizing our docks efficiently. We anticipate continued strength in global demand for US-sourced LPGs.
Q: Can you share more about your conversations with producer customers and how your New Mexico position differentiates you?
A: Matthew Meloy, CEO: We see more growth on the gas side, with wells being more productive. Our acquisition of Lucid assets in 2022 enhanced our Delaware footprint, positioning us well to capture strong activity in New Mexico.
Q: How do you view future gas egress needs in the basin, and what could Targa's involvement be?
A: Robert Muraro, Chief Commercial Officer: We are excited about our partnership with Blackcomb and support more egress out of the basin. We expect a faster cadence for gas pipe needs due to increased gas production and are working on future requirements.
Q: How do you view the long-term trend in growth CapEx, and is the $1.7 billion run rate still valid?
A: Jennifer Kneale, CFO: The $1.7 billion framework holds for high single-digit growth environments. However, we are experiencing more robust growth, resulting in accelerated spending for core infrastructure and plant capital to handle increasing growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
