The Daley Note: October 6, 2023
Targa Resources (TRGP) is in the midst of a huge expansion of natural gas processing that will keep the Permian Basin’s leading G&P system operator in the pole position.
From YE22 through 2025, Targa plans to build over 2 Bcf/d of gas processing capacity. The expansions account for 38% of new capacity planned in the Permian over this period, according to East Daley estimates. Combined with the Daytona NGL Pipeline, the projects will help TRGP gain market for the company’s downstream NGL business.
Targa’s project queue grew once it acquired the Lucid system in the Delaware sub-basin. TRGP in recent quarters has started the 275 MMcf/d Legacy I and II plants in the Midland and the 275 MMcf/d Midway plant in the Delaware. The Greenwood (4Q23 in-service date) and Wildcat II (1Q24 in-service date) plants are under construction. Targa is also relocating a 230 MMcf/d plant from the Eagle Ford to the Delaware, to be installed as Roadrunner II. The Greenwood II and Bull Moose II projects are also in the works (see table).
Supply growth has filled Targa’s plants in operation, making the construction binge necessary. East Daley estimates TRGP’s total Permian gas processing facilities were running at 97% utilization at YE22, the highest of any midstream operator (see figure). Enterprise Products (EPD), at 96% utilization, was the only company facing similar constraints in the basin, according to EDA’s Permian Supply and Demand Forecast.
By leveraging its expanded G&P footprint, East Daley expects TRGP to feed all of its NGL volumes directly to its Grand Prix NGL pipeline and divert flows from other pipelines. Though Grand Prix is also running near full capacity of 550 Mb/d, we model volumes to grow once the 400 Mb/d Daytona project is online, expected in 1Q25. Slowing growth post-2025 keeps volume flat through our forecast in the TRGP Financial Blueprint.
As plant dedications roll off in 2025-30, the competition for NGL barrels grows fiercer in the Permian. Thew new processing and NGL infrastructure create a risk to legacy players as Targa can funnel NGLs into Grand Prix and Daytona. EPD, Energy Transfer (ET), ONEOK (OKE), and Phillips 66 (PSX; via DCP Midstream ownership) are most at risk if Targa can execute. – Christina Adjiman Tickers: EPD, ET, OKE, PSX, TRGP.
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