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Targa Resources Partners LP (



Q4 2011 Earnings Call

February 23, 2012 11:30 am ET


Joe Brass - Director, Finance

Joe Bob Perkins - CEO

Matt Meloy - CFO & Treasurer


Darren Horowitz - Raymond James

Stephen Maresca - Morgan Stanley

Catheleen King - Bank of America

Michael Blum - Wells Fargo

John Edwards - Morgan Keegan

Craig Shere - Tuohy Brothers

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Good day, ladies and gentlemen, and welcome to the Targa Resources Fourth Quarter 2011 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (OperatorInstructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to Joe Brass. You may begin.

Joe Brass

Thank you, operator. My name is Joe Brass, I’d like to welcome everyone to our fourth quarter and full-year 2011 investor call for both Targa Resources Corp. and Targa Resources Partners LP.

Before we get started, I’d like to mention that Targa Resources Corp., TRC or the Company; and Targa Resources Partners LP, Targa Resources Partners or the Partnership have published their joint earnings release which is available on our website We will also be posting an updated investor presentation to the website after the call.

Speaking on the call today will be Joe Bob Perkins, Chief Executive Officer; and Matt Meloy, Chief Financial Officer and Treasurer. Joe Bob and Matt are going to be comparing the fourth quarter and full-year 2011 results to prior period results, as well as providing additional color on our results, business performance and other matters of interest.

Before we begin, I would like to remind you that any statements made during this call that might include the Company’s or the Partnership’s expectations or predictions should be considered forward-looking statements and are covered by Safe Harbor provision of the Securities Acts of 1933 and 1934. Please note that actual results may differ materially from those projected in any forward-looking statements.

For a discussion of factors that could cause the actual results to differ, please refer to our SEC filings including the Partnership’s and the Company’s annual reports on Form 10-K for the year ended December 31, 2010 and other quarterly reports on Form 10-Q.

One quick reminder before we get started into the results. With the closing of multiple acquisitions from TRC over the previous years and in accordance to accounting treatment for entities under common control, the results of operations of the Partnership include the historical results of these businesses for all periods reported.

With that, I will turn it over to Joe Bob Perkins.

Joe Bob Perkins

Thanks Joe. Welcome and thanks to everyone for participating in our fourth quarter and full-year 2011 conference call. As is our practice besides Matt and myself, there are several other members of the team who will be available to assist in the Q&A session. That group today’s includes Rene Joyce, Jim Whalen, Jeff McParland, Paul Chung and Bob Sparger. So, I will be getting a lot of support and you are surrounded.

For today’s agenda, I will start off with a high-level review of performance, key accomplishments and business highlights. We will then turn it over to Matt to review the Partnership’s consolidated financial results, the segment results and other financial matters. Matt will also review key financial matters related to Targa Resources Corp. Following Matt’s comments, I will provide additional updates on our ongoing activities, and we will take your questions at the end.

We are pleased to report strong operating and financial results of the fourth quarter and full-year 2011 with solid performance in both our Gathering and Processing, and Logistics and Marketing divisions. The Partnership's integrated mainstream platform continues to benefit from industry fundamentals. Strong ongoing trends, which we have discussed before, driving growth in liquids, rich and natural gas volumes and increased NGL supplies.

As indicated in our earnings release, we recorded record adjusted EBITDA of $146 million for the fourth quarter and $491 million for the year. This resulted in quarterly and annual distributable cash flow of approximately $107 million and $337 million respectively. The 2011 adjusted EBITDA of approximately $491 million reflects annual growth of about 25% over 2010. The Partnership's fourth quarter declared distribution of $0.6025 per quarter or $2.41 per unit per year was a healthy coverage of 1.6 times.

This distribution represents a 10% increase compared to the fourth quarter of 2010 and that 10% increase is just for the quarter comparison. With this latest distribution increase, the Partnership is well-known track to achieve our guidance of 10% to 15% distribution growth for full-year 2012 over full-year 2011.

In 2011, the Partnership demonstrated strong distribution growth while at the same time maintaining an average annual distribution coverage of 1.4 times, slightly higher than the 2010 reported coverage of 1.3 times. As you will recall, due to increased scale and diversity, our long-term target would be coverage of more like 1.2 times.

Moving to business highlights for our Gathering and Processing division, the Field G&P segment recorded a 2011 operating margin increase of approximately 22%, compared to full-year 2010. This increase was benefited from active drilling and completion activity resulting in increased volumes at SAOU, North Texas and Permian. Inlet volumes in gross NGL production for the segment both increased more than 4% over 2010. And this 4% increase is a net of a year-over-year Versado volume decrease, which we expect to reverse in 2012.

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