Targa Resources Forecasts Rising Profits on 2024 Exports
Driven by rising demand for LPG and NGL exports, Targa Resources (TRGP) expects an 8% increase in profits from 2023 to 2024 with EBITDA ranging between $3.7 billion and $3.9 billion.
“While our volume ramp materialized later than we forecasted for 2023, we are pleased that we ended the year with December actuals in line with our original guidance expectations for the Permian, providing us with strong momentum in 2024,” said Matt Meloy, Targa CEO, during the company’s Feb. 15 fourth-quarter earnings call. “We expect another year of record financial and operational metrics.”
For the final quarter of 2023, Targa reported revenue at $4.24 billion, which slipped year-over-year from the 2022 fourth-quarter result of $4.55 billion—but still beat market expectations by $390 million. Results were driven by surging shipments of NGL and LPG in the quarter.
NGL pipeline volumes increased by 44% over the same period in 2022 to 722,000 bbl/d. LPG exports hit a record at the end of 2023, averaging 13.3 MMbbl per month.
Targa’s export business through the Houston Ship Channel saw an appreciable increase at the end of the year thanks to the port authority testing an allowance of nighttime transits for larger vessels, Meloy said.
“We think that probably provided us about a 5% to 10% benefit,” said Scott Pryor, Targa president of logistics and transportation.
Pryor took time to thank the Houston port authority and the ship pilots organization that made the change possible, saying nighttime passages will benefit not just Targa but the local and Texas economy as well.
For all of 2023, Targa reported that about $800 million in capital had been returned to shareholders through quarterly dividends and share repurchases. The company intends to increase returns in 2024.
“We announced in November an expectation of a 50% year-over-year increase to our annualized 2024 common dividend per share,” Meloy said. Shareholders should expect a payment in May.
The company’s optimism is driven by the production value of its assets. Targa has the largest Permian Basin gathering and processing footprint in the industry and an integrated NGL system that puts the company in a good position, the CEO said. The projected revenues should allow the company to invest around $1.7 billion annually over the next few years while bringing in about $300 million in annual EBITDA growth.
During the earnings call, executives also gave an update on plans for the Apex project, a natural gas pipeline that would stretch southeast across Texas connecting Midland and Jefferson counties. The line, with a projected completion in 2026, would support projects in the Sabine River area.
Targa received a permit from the Texas Railroad Commission to build the line in March 2023, but has yet to decide if the project will go forward.
“We've said it before and we'll say it again, our number one priority is that gas continues to flow out of the basin so that NGLs can come out of our plants and go down Grand Prix and go across our docks,” said Targa CCO Bobby Muraro, who added that several other pipeline proposals could serve for the company’s needs.
“Every month that passes, I get more encouraged by the work we're doing to make sure that a pipe gets built and comes online ’26-ish,” Muraro said.
