Targa Resources Expects Permian Basin Production Volumes to Continue Rising

Targa Resources executives revealed on Thursday that they anticipate production volumes from the Permian Basin in Texas to keep increasing, despite a decline in the third quarter.

Temporary Factors Impacted Third-Quarter Volumes

During a call with analysts to discuss the Q3 financial results, Targa Chief Executive Matt Meloy attributed the 5% decrease in Permian Basin NGL (natural gas liquids) volumes and the 0.1% dip in gas inlet volumes to various temporary factors. These factors included the previously announced transition of 200 MMcf/d of natural gas to a third-party plant, delays in adding new compression infrastructure, and severe heat that hindered overall operations.

Delaware Basin Experienced Significant Production Drop

The third-quarter production drop primarily occurred in the Delaware portion of the Permian Basin. NGL production in the Delaware Basin plummeted by 12.3% from the second quarter to 322,500 b/d (barrels per day), and natural gas inlet volumes decreased by 2.9% to 2,485.4 MMcf/d (million cubic feet per day). However, there was some offsetting growth in Permian Midland volumes, with a 2.5% increase for natural gas and NGLs.

Long-Term Outlook Remains Positive

Despite the mid-year dip, company officials expressed confidence in the future growth of Permian Basin volumes. They stated that this decline was not indicative of a broader shift in producer activities. Meloy asserted, "The underlying outlook is that we're very confident Permian volumes are going to continue to grow, not just for Q4 but as you look out to 2024, 2025, and beyond."

Strong Year-to-Year Growth Recorded

The total Q3 Permian Basin NGL volumes reached 695,600 b/d, marking a 28% increase compared to the same period in 2022. Additionally, natural gas volumes reached 5,052.3 MMcf/d, representing a 28% year-on-year increase.

Third-Quarter NGL Production Figures

Across all Targa operating regions, the total NGL production in the third quarter amounted to 836,300 b/d. Although this was a 4% decrease from the second quarter, it still reflected a significant 23% year-on-year growth.

Overall Natural Gas Inlet Volumes

The overall natural gas inlet volumes for the third quarter stood at 6,923.4 MMcf/d, which remained nearly unchanged from the previous quarter. However, it marked a substantial 17% increase compared to the same period last year.

Targa Reports Positive Momentum in the Market

Targa, a leading energy company, recently made significant strides in enhancing its operations. The company successfully brought online the Greenwood processing plant in the Permian Midland, with a capacity of 275 MMcf/d. In addition, Targa completed a 1 million bbl/month expansion at its Galena Park LPG export terminal in Texas. These actions highlight the positive momentum observed in the broader market.

Increased Cargo Loadings at LPG Export Facility

Despite the required downtime for the company's dock expansion, Targa experienced a 15% rise in cargo loadings at its LPG export facility in the third quarter compared to the previous quarter. This improvement can be attributed to enhanced market conditions. Targa achieved export volumes of 349,300 b/d out of Galena Park during the quarter, representing a 27% year-to-year increase.

Optimizing Export Capacity

To further optimize export capacity, Targa is currently exploring additional opportunities through smaller, debottlenecking projects. By closely monitoring volume growth within its systems, the company will strategically time these projects.

Strong Financial Performance

Targa's third-quarter net income, attributable to the company, reached $220 million, marking a 14% increase from Q3 2022. Furthermore, adjusted earnings before interest, taxes, depreciation, and amortization rose by 9% to $840.2 million.

Reporting by Jessica Marron; Editing by Jeff Barber