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2Q23 Data Points Two Ways for Targa

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The Daley Note: July 14, 2023

Data for 2Q23 is trickling in as earnings season fast approaches for the energy sector. Targa Resources (TRGP) is one company where East Daley Analytics is weighing conflicting signals for the quarter.

We are currently publishing updated Financial Blueprints ahead of earnings calls. So far, we’ve release updated outlooks for Crestwood Equity (CEQP), EnLink Midstream (ENLC), Kinetik (KNTK), Magellan Midstream (MMP), Plains All American (PAA) and Summit Midstream (SMLP).

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TRGP’s updated Blueprint will be available next week. Overall, we’ve seen relatively flat gathering and processing volumes reported in Texas plant data through April for the Midland sub-basin. On the low end, volumes for Targa’s Midland G&P system are down 5% in April vs the 1Q23 average. Nevertheless, with two months of incomplete data and the Legacy II plant coming online in late 1Q23/early 2Q23, we expect volumes increased for TRGP through the quarter.

The bears might argue the Dos Picos plant, new to the neighborhood, is taking some Midland volumes from Targa. Pioneer Natural Resources (PXD), the anchor shipper on TRGP – Midland, recently bought DoublePoint, which had volume commitments with the Dos Picos plant on the Pinnacle Midstream system. Data in in Energy Data Studio shows volumes to Dos Picos are on the rise, and some of Pinnacle’s gain may come at Targa’s expense (see graph). Pinnacle just announced another 220 MMcf/d processing plant scheduled to come online in 4Q24.

However, EDA still believes Midland growth ramped up for Targa in May and June. Backing our view, Vital Energy (VTLE) reported this week its 2Q23 production was 89.5 Mboe/d, up ~4% from 85.8 Mboe/d reported in 1Q23 (adjusted for the Driftwood acquisition). Most of Vital's production is in the Midland and, according to G&P system allocations in Energy Data Studio, the lion’s share of its rich gas is processed by Targa.

Vital Energy is the second-largest producer on TRGP’s Midland system. The positive data point suggests Targa’s growth Q-o-Q will end up closer to the 1-2% growth we are seeing in the Midland sub-basin, despite muted volumes so far in state-reported plant data.   – Rob Wilson, CFA



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