Targa Resources, Inc. (TRGP)

TRGP 
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Targa Resources Corp (TRGP)

Q2 2013 Results - Earnings Call Transcript

August 1, 2013 10:00 AM ET

Executives

Jennifer Kneale - Director - Finance

Joe Bob Perkins - Chief Executive Officer

Matt Meloy - SVP, CFO and Treasurer

Analysts

Edward Rowe - Raymond James

Presentation

Operator

Good day, ladies and gentlemen. And welcome to the Targa Resources second quarter 2013 earnings webcast and presentation. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will be given at that time. (Operator instructions)

As a reminder, this call maybe recorded. I'd now introduce your host for today's conference Jennifer (inaudible) Director of Finance, you may begin, sir.

Jennifer Kneale

Thank you, operator. I'd like to welcome everyone to our second quarter 2013 investor call for both Targa Resources Corp. and Targa Resources Partners LP. Before we get started, I would like to mention that Targa Resources Corp., TRC, or the Company and Targa Resources Partners LP, Targa Resources Partners or the Partnership have published their joint earnings release which is available on our website www.taragaresources.com. We will also be posting an updated investor presentation to the website later today.

Speaking on the call today will be Joe Bob Perkins, Chief Executive Officer, and Matt Meloy, Chief Financial Officer. Other management team members are available for the Q&A. Joe Bob and Matt are going to be comparing the second quarter 2013 results to prior period results, as well as providing additional color on our results, business performance, and other matters of interest.

I would like to remind you that any statements made during this call that might include the company's or the Partnership's expectations or predictions should be considered forward-looking statements and are covered by the Safe Harbor provisions of the Securities Acts of 1933 and 1934.

Please note that actual results could differ materially from those projected in any forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings, including the Partnership's annual report on Form 10-K for the year ended December 31, 2012, and quarterly reports on Form 10-Q.

With that, I will turn it over to Joe Bob Perkins.

Joe Bob Perkins

Thanks, Jen. Welcome and thanks to everyone for participating. For today's call, I'll start off with a high level review of performance highlights. We'll then turn it over to Matt to review the Partnership's consolidated financial results, it's segment results and other financial matters for the partnership. Matt will also review key financial matters related to Targa Resources Corp.

Following, Matt's comments, I'll provide some concluding remarks and then we'll take your questions. Our reported second quarter adjusted EBITDA was $127 million as compared to $123 million last year. This was 3% increase compared to second quarter last year driven by volume increases across all our Field Gathering & Processing system and by increased margin in our Logistics and Marketing division.

Our overall results show the benefits of diversity and increasing fee based margin contributions. Fee based margins were greater than 50% for the second straight quarter. For the Field Gathering & Processing segment, the combination of volume increases and higher natural gas and condensate prices more than offset the NGL prices that were 20% lower in the second quarter of 2013 versus the second quarter of 2012.

The logistics asset segment produced quarterly operating margin of $52 million, up 14% compared to last year, primarily driven by higher fractionation revenue of CBF, and increased LPG, export and storage activity and our integrated Galena Park and Mont Belvieu facilities.

The strong results for the Logistics Assets segment were just achieved despite a planned partial turnaround at CBF that resulted in lower fractionation throughput. In addition to the work done during the turnaround to comply with OSHA requirements, we're completing some additional work that will increase operational efficiency at CBF.

We're pleased to announce that CBF Train 4 is operational, we are also pleased to announce that we have finally broken ground on our $200 million a day Longhorn plant to North Texas. We received our greenhouse gas permit in mid-June, but it was subject to an additional 30-day public notice period related some necessary changes to the permit requested by Targa. That period was over in mid-July and we were able to break ground.

As you may recall, we ordered the plant some time ago and we have done all that we can to be able to construct as quickly as possible. We now believe that the plant will commence startup activities just shortly after the first of the year.

In the Permian Basin, our 30 million a day expansion at SAOU is completed in the first quarter and we are already close to full. The new 200 million a day High Plains plant at SAOU announced in the fourth quarter of 2012 is still on track to be finished in mid 2014.

The producers need for this plant is even greater than when we announced it. The producer activity in this portion of the Permian Basin is very high and the activity around all our other Permian Basin systems continues to increase.

This is the second quarter that we are including results from Targa Badlands, our Bakken Shale crude oil and gas gathering operation. We saw the quarter over first quarter increase in crude gathered and continued to make progress on multiple fronts of this growth project.

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