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Targa Resources starts up Permian-to-Mont Belvieu NGL pipeline

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Targa Resources starts up Permian-to-Mont Belvieu NGL pipeline

Targa Resources Corp. placed into service an NGL pipeline that will eventually provide 300,000 barrels per day in liquids transportation capacity, one of the company's projects aimed at addressing takeaway constraints in the Permian Basin.

The Grand Prix pipeline project, which Targa is developing with Blackstone Group Inc. and Stonepeak Infrastructure Partners LP, has started flowing 150,000 bbl/d to 170,000 bbl/d to Mont Belvieu, Texas. CEO and Director Joe Bob Perkins called the pipeline "the largest and clearly most strategic single project in Targa's history" during the company's second-quarter earnings conference call Aug. 8.

Executives expected the volumes to grow to about 200,000 bbl/d in September and further increase through the rest of the year due to more short-term, third-party transportation contracts and additional gathering and processing facilities that will begin service.

Targa President Matthew Meloy was confident about reaching the volume target. The company's previous guidance aimed for 250,000 bbl/d at some point in 2020. "We are unofficially changing that ... [to 200,000 bbl/d] or so in September. I'd say we feel really good about hitting that," Meloy told analysts.

Grand Prix came online after about a two-month delay and roughly 10% over budget as a result of a long permitting time and weather-related construction delays. But even with the cost overrun, Targa's projected returns beat its previous estimates.

"[O]ur estimated returns are significantly higher than when we announced the project as we have continued to add significant long-term acreage contracts and [other] contracts, further strengthening the volume outlook for Grand Prix going forward," Meloy said.

Targa in 2017 announced plans to build Grand Prix, which initially would have run from the Permian and Targa's North Texas system to the company's fractionation and storage complex at the NGL market hub in Mont Belvieu. The company later proposed an extension of the pipeline in southern Oklahoma. Targa owns 55% and operates the project. Blackstone owns 25%, and development joint ventures own the remaining 20%.

Earlier on Aug. 8, Targa reported second-quarter adjusted EBITDA of $306.5 million, down from $315.2 million in the prior-year period but beating the S&P Global Market Intelligence consensus adjusted EBITDA estimate of $285.5 million. Distributable cash flow stood at $192.0 million, a drop from $225.1 million in the year-ago quarter.