Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record adjusted EBITDA, Permian volumes, and LPG export volumes achieved in the first quarter.
- Announced major growth capital projects including Pembrook II and Train 11 to support increasing Permian volumes and infrastructure needs.
- 50% increase in common dividend per share and $124 million of common share repurchases, reflecting strong financial performance and shareholder returns.
- Continued strong activity in Permian operations with new plants and compression expected to support volume growth throughout the year.
- Record LPG export loadings of 13.3 million barrels per month during the first quarter, benefiting from strong market conditions and operational expansions.
Negative Points
- January operations were impacted by operational upsets due to harsh weather, affecting volumes.
- Current weakness in Waha natural gas and NGL prices, although mitigated by fee floors in G&P business.
- Fire at Greenwood I plant in Permian Midland, expected repair costs around $10 million, although no significant impact on Midland volumes anticipated for Q2.
- Tight Permian residue gas market and pipeline maintenance could pose challenges to volume handling and impact Waha gas prices.
- Second quarter EBITDA may be weaker than Q1 due to seasonality, the impacts of the Greenwood plant fire, and ongoing operational constraints.
Q & A Highlights
Q: What are the impacts of Panama Canal issues on LPG volumes, and how do you see the global market affecting your operations?
A: (D. Scott Pryor - President of Logistics & Transportation) The Panama Canal issues have not significantly impacted operations, and shipping has moderated. The company has adapted by using alternative routes like the Cape of Good Hope. The expansion project and nighttime transits have also bolstered operations, with expectations of continued strong demand, especially from new PDH plants in China.
Q: Can you quantify the benefit of nighttime transits on your operations?
A: (D. Scott Pryor - President of Logistics & Transportation) Nighttime transits have improved operating rates by more than 10%, allowing higher utilization of refrigeration units and contributing positively to overall operations.
Q: Given the strong inlet volumes in Q1, how do you view the growth trajectory for the rest of 2024 amidst Waha egress issues?
A: (Matthew J. Meloy - CEO & Director) The company anticipates continued growth across both Midland and Delaware, supported by robust producer activity and new infrastructure developments, despite potential intermittent constraints from residue pipeline downtimes.
Q: How does the recent announcement of new projects align with your strategic focus and capital expenditure forecasts?
A: (Matthew J. Meloy - CEO & Director) The focus remains on organic growth within core businesses, with new projects like Train 11 and Pembrook II already factored into multiyear plans. The strategy includes continuous assessment of infrastructure needs to support gathering and processing growth.
Q: How are you managing the balance between maintaining a strong balance sheet and pursuing high-return projects?
A: (Jennifer R. Kneale - CFO) Targa prioritizes maintaining a strong balance sheet while investing in integrated projects that offer high returns. The company is also focused on returning capital to shareholders, with plans to continue utilizing share repurchases as a strategic tool.
Q: Can you discuss the operational impacts and financial implications of the Greenwood plant fire?
A: (Jennifer R. Kneale - CFO) The fire resulted in approximately $10 million in repairs, impacting both capital and operating expenses. Despite this, the company expects minimal impact on overall volume growth and financial performance for Q2, supported by strong operational execution and new asset integrations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
