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Raising Targa Outlook on Solid Midland Data

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The Daley Note: February 13, 2023

East Daley has raised our 4Q22 earnings forecast for Targa Resources (TRGP) following new data showing strong results on several company assets in the Midland Basin.

We revised our 4Q22 Adj. EBITDA estimate higher by $34 million in our TRGP Financial Blueprint, from $795 million to $829 million. Following the updates, our full-year 2022 EBITDA estimate is $2.885 billion vs $2.850 billion previously. We also revised up our 2023 Adj. EBITDA forecast to $3.5 billion from $3.4 billion previously. 

We shared our outlook for Targa on Feb. 3 in The Daley Note, based on asset-level Financial Blueprints available for TRGP and other midstream companies we cover. Since then, new Texas state data show a significant jump in plant volumes reported on TRGP’s West Texas and North Texas G&P systems.

Targa WestTexas MidlandThe figure shows historical and forecasted performance for the TRGP - West Texas G&P system, which  services producers in the Midland sub-basin of the Permian. The processing plant data for the West Texas system increased by 309 MMcf/d from 3Q22 to 4Q22 (actual data is through November 2022). The asset data as depicted is available in East Daley's Energy Data Studio in the G&P System Analysis use case. 

The latest data suggests TRGP's new Legacy processing plant filled up much quicker than we had expected (see light green line in figure).

While smaller in order of magnitude, Targa’s North Texas system (not shown) also saw volumes increase by 46 MMcf/d. The system has  benefited from increased rig activity recently.

Targa is one of several midstream companies to see an uptick in volumes on systems in the Midland Basin. Users of Energy Data Studio can screen for other Midland assets through the G&P System Analysis use case.

Targa plans to report earnings before the market opens on Wednesday, Feb. 22. The updated TRGP Financial Blueprint is available to clients on East Daley’s portal- Rob Wilson Tickers: TRGP.

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