Targa sees steady LPG exports in 2015

Targa Resources Partners expects LPG export volumes to remain steady through 2015 despite market volatility, chief executive Joe Bob Perkins said today.

Targa's second quarter LPG exports rose 3pc from year-ago levels to 164,300 b/d, or roughly 4.9mn bl per month.

"We are seeing continued demand for short and long-term contracts, and we continue to add contracts for the second half of 2015 and beyond," Perkins told analysts on the company's earnings call. "We expect LPG export levels to be at or above second quarter volumes for the remainder of the year."

Limited VLGC availability impacted customers during the quarter, but Perkins declined to predict when lower freight costs may hit the international market.

Overall Targa's results were impacted by lower commodity prices, despite a surge in gathered volumes during the quarter, largely stemming from the inclusion of Targa Pipeline Partners (TPL) volumes earlier this year.

"We generally feel a bit more optimistic about volumes than we did at the first of the year," Perkins said. "We project 3-5pc volume growth from the fourth quarter versus 2015, which puts Targa in a better 2016 spot than we were expecting."

Targa Resources Partners LP reported second quarter profits fell 56pc from last year to $53.3mn despite higher throughput in crude and natural gas gathering and NGL exports and production.

Targa gathered 106,200 b/d of crude, up 27pc from last year, and 3.5bn ft3/d of natural gas, up 67pc from the same period in 2014. Natural gas gathering was negatively impacted by flooding in north Texas during the quarter, Perkins said. NGL production stood at 290,600 b/d, up 86pc from last year. NGL sales rose 31pc to 496,500 b/d. Condensate sales more than doubled to 11,600 b/d from year-ago levels.

Targa has hedged roughly 70pc of remaining natural gas sales in 2015, 60pc of remaining condensate, and 30pc of NGL volumes this year, according to chief financial officer Matt Meloy.

Crude and NGL production growth is likely to continue despite lower prices, executives said on today's call.

"Going forward in a price environment is today our volume feeling is better than it was at the beginning of the year," Perkins said.

Targa is building a fifth NGL fractionator near its Mont Belvieu, Texas storage facility that is expected to come online in mid-2016, Perkins said, adding it is preparing permit applications for a sixth fractionation train. He said ethane rejection is ongoing.

Targa continues to discuss a new terminal or condensate splitter as part of a joint venture with Noble. "We would expect a splitter or terminal or both projects would be operational in 2017," Perkins said.

Several of Targa's crude gathering customers plan to accelerate drilling activity at $60/bl or better, Perkins said.

"They're drilling with a more limited budget, in the best spots, and the technology has improved, so the best spots are more productive than they have been in the past," Perkins said.

als/dcb

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