Targa(US:TRGP)2022-02-25 04:02Financial Data and Key Metrics Changes - Targa Resources reported record adjusted EBITDA of $2.05 billion for 2021, a 25% increase over 2020, with Q4 adjusted EBITDA at $571 million, up 13% sequentially [9][26] - The company achieved approximately $1.13 billion in adjusted free cash flow, leading to a year-end leverage ratio of 3.2 times [27][28] - Targa reduced debt by about $1.2 billion year-over-year [9] Business Line Data and Key Metrics Changes - Gathering and Processing volumes in the Permian reached record levels, with average inlet volumes increasing 12% over 2020 [13] - Logistics and Transportation segment saw NGL transportation volumes increase to a record 433,000 barrels per day in Q4 [19] - Fractionation volumes at Mont Belvieu averaged 612,000 barrels per day, impacted by an unplanned outage [20] Market Data and Key Metrics Changes - The company expects full-year 2022 adjusted EBITDA to be between $2.3 billion and $2.5 billion, reflecting a significant increase over 2021 [11][31] - The outlook for LPG export business remains robust, with a 19% sequential increase in volumes loaded during Q4 [22] Company Strategy and Development Direction - Targa is focused on simplifying its capital structure and enhancing shareholder returns through increased dividends and share repurchases [12][30] - The company plans to invest in organic growth opportunities, including new processing plants in the Permian [32] - Targa aims to maintain a strong balance sheet while exploring bolt-on acquisitions to enhance its footprint [75][84] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational and financial execution, highlighting strong activity levels in the Permian and expectations for continued volume growth [7][24] - The company anticipates higher commodity prices and continued growth across operations as key drivers for EBITDA growth in 2022 [31] Other Important Information - Targa repurchased approximately $40 million of common shares in Q4 and has $369 million remaining under its share repurchase program [29] - The company has a strong liquidity position with over $3.2 billion available at year-end [29] Q&A Session Summary Question: Capital allocation and preferred shares repurchase - Management indicated that proceeds from the GCX sale would likely be used to accelerate the repurchase of preferred shares in Q2, while maintaining flexibility for common share repurchases [38] Question: Growth CapEx allocation - Approximately $150 million of capital is allocated for the Midway plant, with significant spending on Legacy I and II plants as well [40] Question: Grand Prix utilization and expansion - Management noted strong operating leverage and plans to add pumps to the Grand Prix pipeline as production grows [44] Question: LPG export expansion rationale - The expansion project is low-cost and aims to meet growing international demand for cleaner feedstocks [46] Question: Natural gas egress from the Permian - Management acknowledged the need for additional infrastructure and expressed interest in participating in future pipeline projects [54] Question: 2022 EBITDA guidance drivers - Key drivers include commodity prices, Permian volumes, and strong export markets, with potential upside from managing costs effectively [58] Question: Contracting environment and customer preferences - Management noted that most growth is under long-term contracts, with a mix of fee-based and POP contracts in the Permian [66] Question: Hedging strategy and position - Targa is well-hedged, with over 75% of its volumes hedged for 2022, and plans to maintain similar hedging strategies for future years [68] Question: M&A opportunities and valuation trends - Management remains open to bolt-on acquisitions but maintains a high hurdle for any potential deals [88]