Targa (TRGP)(NGLS) Issues Q3 Update; Comments on Operations
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Financial Fact:
Income before income taxes: -5.1M
Today's EPS Names:
PLCE, COE, JVA, More
Financial Fact:
Income before income taxes: -5.1M
Today's EPS Names:
PLCE, COE, JVA, More
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Targa Resources Partners LP (NYSE: NGLS) and Targa Resources Corp. (NYSE: TRGP) reports the following regarding operating and financial outlook for 2012 and 2013 as well as 2013 growth capital expenditures including new growth project updates.
Targa Resources Partners LP Financial Update
Based on preliminary results for the third quarter of 2012, the Partnership expects net income attributable to Targa Resources Partners LP of approximately $23 million, Adjusted EBITDA of approximately $113 million and distribution coverage of approximately 1.0x. The anticipated decline in Adjusted EBITDA from the second quarter of 2012 results primarily from the impact of Hurricane Isaac, which reduced Adjusted EBITDA by approximately $8 million in the Coastal Gathering and Processing segment, and from lower commodity prices, partially offset by increased plant inlet volumes in the Field Gathering and Processing segment. The reduction in net income compared to the second quarter is due to these same factors and an approximately $14 million non-cash charge of the Partnership's approximately 28% interest in the Yscloskey plant. The Yscloskey plant contributed just 0.25% to the Partnership's operating margin during the first six months of 2012. Following Hurricane Isaac, the Yscloskey joint venture owners elected not to restart the plant.
For the full year 2012, assuming current commodity prices, the Partnership expects Adjusted EBITDA to be at or slightly below the low end guidance of $515 million including the impact from Hurricane Isaac and lower average NGL prices, which are approximately 25% lower than what was assumed when the Partnership and Company issued guidance at this time last year.
The Partnership estimates that Adjusted EBITDA for 2013 will be approximately $540 million to $570 million. This estimate assumes commodity prices in 2013 of $3.50 per MMBtu for natural gas, $90 per barrel for crude oil and average prices for the Partnership's NGLs of $0.87 per gallon, including $0.35 per gallon for ethane. Under these assumptions, a $0.10 per gallon change in the price of ethane would correspondingly change 2013 Adjusted EBITDA by approximately 3%. The Partnership expects distribution coverage to be in the range of 1.0x in the first half of 2013 and to increase in the second half as announced growth projects are placed in service. For 2014, Adjusted EBITDA is expected to increase by 25% or more compared to 2013 as the announced growth projects that are placed in service during 2013 contribute for the full year in 2014.
Based on the estimated range of Adjusted EBITDA for 2013 and assuming generally stable broader market conditions, the Partnership expects to be in a position to increase distributions per common unit by 10% to 12% in 2013 compared to 2012, subject to approval of the board of directors of the Partnership's general partner.
These initial estimates for the third quarter and full year 2012, and for 2013 and 2014, are preliminary estimates and, accordingly, remain subject to changes that could be significant. See the section of this release entitled "Non-GAAP Financial Measure" for a discussion of Adjusted EBITDA and a reconciliation of this measure to its most directly comparable financial measure calculated and presented in accordance with U.S. generally accepted accounting principles ("GAAP").
Growth Projects Update
The Partnership has recently approved two new projects with estimated incremental growth capital of approximately $450 million:
A new 200 MMcf/d cryogenic processing plant at SAOU to meet increasing production and continued producer activity on the eastern side of the Permian Basin. The new processing plant is expected to be operational in mid-2014. Total capital expenditures related to the new processing plant are expected to be $225 million.
Expansion of our LPG Export Project to increase export capability to approximately 5+ million barrels per month. Total capital expenditures for the project are now expected to be $480 million compared to the $250 million that was originally announced. The original export project scope adds the capability to load four VLGC (very large gas carrier) cargoes of international grade propane per month starting in the third quarter of 2013. The expanded project scope will increase that capability by an additional two to four VLGCs starting in the third quarter of 2014, while retaining and increasing our capability to load HD5 propane and butanes for small and mid-sized vessels.
With these new projects, the Partnership estimates that over $1.6 billion in growth capital investments will be placed in service in 2012 through 2014, with approximately two-thirds of the total for projects that will provide primarily fee-based margin.
Targa Resources Corp. Financial Update
Given the Partnership's expected distribution growth of 10% to 12% in 2013, TRC expects to be in a position to increase dividends by 25% to 30%+ in 2013 compared to 2012, subject to the approval of the board of directors of TRC. For 2013, the estimated financial performance of the Partnership is expected to result in cash taxes for TRC equal to approximately 23% of its estimated pre-tax distributable cash flow. TRC's estimated dividend increases, effective tax rate and the estimated Adjusted EBITDA of the Partnership are based on preliminary estimates and, accordingly, remain subject to changes that could be significant.
Targa Resources Partners LP Financial Update
Based on preliminary results for the third quarter of 2012, the Partnership expects net income attributable to Targa Resources Partners LP of approximately $23 million, Adjusted EBITDA of approximately $113 million and distribution coverage of approximately 1.0x. The anticipated decline in Adjusted EBITDA from the second quarter of 2012 results primarily from the impact of Hurricane Isaac, which reduced Adjusted EBITDA by approximately $8 million in the Coastal Gathering and Processing segment, and from lower commodity prices, partially offset by increased plant inlet volumes in the Field Gathering and Processing segment. The reduction in net income compared to the second quarter is due to these same factors and an approximately $14 million non-cash charge of the Partnership's approximately 28% interest in the Yscloskey plant. The Yscloskey plant contributed just 0.25% to the Partnership's operating margin during the first six months of 2012. Following Hurricane Isaac, the Yscloskey joint venture owners elected not to restart the plant.
For the full year 2012, assuming current commodity prices, the Partnership expects Adjusted EBITDA to be at or slightly below the low end guidance of $515 million including the impact from Hurricane Isaac and lower average NGL prices, which are approximately 25% lower than what was assumed when the Partnership and Company issued guidance at this time last year.
The Partnership estimates that Adjusted EBITDA for 2013 will be approximately $540 million to $570 million. This estimate assumes commodity prices in 2013 of $3.50 per MMBtu for natural gas, $90 per barrel for crude oil and average prices for the Partnership's NGLs of $0.87 per gallon, including $0.35 per gallon for ethane. Under these assumptions, a $0.10 per gallon change in the price of ethane would correspondingly change 2013 Adjusted EBITDA by approximately 3%. The Partnership expects distribution coverage to be in the range of 1.0x in the first half of 2013 and to increase in the second half as announced growth projects are placed in service. For 2014, Adjusted EBITDA is expected to increase by 25% or more compared to 2013 as the announced growth projects that are placed in service during 2013 contribute for the full year in 2014.
Based on the estimated range of Adjusted EBITDA for 2013 and assuming generally stable broader market conditions, the Partnership expects to be in a position to increase distributions per common unit by 10% to 12% in 2013 compared to 2012, subject to approval of the board of directors of the Partnership's general partner.
These initial estimates for the third quarter and full year 2012, and for 2013 and 2014, are preliminary estimates and, accordingly, remain subject to changes that could be significant. See the section of this release entitled "Non-GAAP Financial Measure" for a discussion of Adjusted EBITDA and a reconciliation of this measure to its most directly comparable financial measure calculated and presented in accordance with U.S. generally accepted accounting principles ("GAAP").
Growth Projects Update
The Partnership has recently approved two new projects with estimated incremental growth capital of approximately $450 million:
A new 200 MMcf/d cryogenic processing plant at SAOU to meet increasing production and continued producer activity on the eastern side of the Permian Basin. The new processing plant is expected to be operational in mid-2014. Total capital expenditures related to the new processing plant are expected to be $225 million.
Expansion of our LPG Export Project to increase export capability to approximately 5+ million barrels per month. Total capital expenditures for the project are now expected to be $480 million compared to the $250 million that was originally announced. The original export project scope adds the capability to load four VLGC (very large gas carrier) cargoes of international grade propane per month starting in the third quarter of 2013. The expanded project scope will increase that capability by an additional two to four VLGCs starting in the third quarter of 2014, while retaining and increasing our capability to load HD5 propane and butanes for small and mid-sized vessels.
With these new projects, the Partnership estimates that over $1.6 billion in growth capital investments will be placed in service in 2012 through 2014, with approximately two-thirds of the total for projects that will provide primarily fee-based margin.
Targa Resources Corp. Financial Update
Given the Partnership's expected distribution growth of 10% to 12% in 2013, TRC expects to be in a position to increase dividends by 25% to 30%+ in 2013 compared to 2012, subject to the approval of the board of directors of TRC. For 2013, the estimated financial performance of the Partnership is expected to result in cash taxes for TRC equal to approximately 23% of its estimated pre-tax distributable cash flow. TRC's estimated dividend increases, effective tax rate and the estimated Adjusted EBITDA of the Partnership are based on preliminary estimates and, accordingly, remain subject to changes that could be significant.
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