Targa Resources Partners LP Q2 2010 Earnings Call Transcript

Targa Resources Partners LP Q2 2010 Earnings Call Transcript
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Targa Resources Partners LP (NGLS)

Q2 2010 Earnings Call

August 05, 2010 10:00 am ET

Executives

Anthony Riley - IR

Rene Joyce - CEO

Jeff McParland - EVP, CFO

Analysts

Darren Horowitz - Raymond James

Adam Rothenberg - BLP

Presentation

Operator

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Good day ladies and gentlemen and welcome to the Targa Resources Partners second quarter 2010 earnings conference call. At this time all participant lines are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) as a reminder this conference is being recorded. I would now like to turn the conference over to Mr. Anthony Riley. Please go ahead.

Anthony Riley

Thank you operator. Good morning everyone. I am Anthony Riley and I would like to welcome to Targa Resources Partners LP second quarter 2010 investor call.

Before we get started, I would like to mention that the partnership has published an earnings release, which is available on our website at targaresources.com. Speaking on the call today will be Rene Joyce, Chief Executive Officer; and Jeff McParland, Executive Vice President and Chief Financial Officer. Rene and Jeff are going to be comparing the second quarter results prior period results as well as providing additional color on our results, current 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 partnership’s expectations or predictions should be considered forward-looking statements and are covered by the Safe Harbor provision Securities Act of 1933 and 1934. Please note that actual results could differ materially from those projected in any forward-looking statements. For a discussion of factors that could cause actual results to differ please refer to our SEC filings in our annual parent on Form 10-K for the year ended December 31, 2009 and our quarterly report on Form 10-Q for the quarter ended March 31, 2010.

One quick reminder before starting into the results with the closing of the acquisition of the Downstream Business in 2009 and the Permian and the Straddle systems in 2010 in accordance with the accounting treatments for entities under common control the results of operations of the partnership include the historical results of the downstream business and the Permian and Straddle systems.

I would also like to point out that the partnership has changed its segment reporting starting with today's quarterly result. Jeff will review more details of the change for reporting segments a bit later in the call. But I will briefly summarize the new segment structure before Rene discusses our results. To start the gathering and processing division now includes two segments. The field gathering and processing segment included the North Texas SAOU and the recently acquired Permian system. The second segment, Coastal gathering and processing contains the LOU system and the recently acquired Straddle system both from Louisiana.

The NGL Logistics and Marketing division for downstream business now have two segments. The logistics assets segment and the marketing and distribution segments.

With that, I will turn it over to Rene Joyce, our Chief Executive Officer.

Rene Joyce

Thanks Anthony. Good morning and thanks to everyone for participating in Targa Resources Partners second quarter conference call. Besides Jeff and myself, there are several members of the management that will be available to assist in Q&A session.

By way of agenda, I will start off with a review of our key accomplishments and business highlights followed by segment performance overview for the quarter. I will then turn it over to Jeff to review our consolidated financial results, detailed segment performance and other financial matters. Following Jeff’s comments, I will provide some updates on some ongoing activities at the partnership and finally, we will take your questions.

The partnership reported strong second quarter operating and financial results combined plant inlet volumes for the two gathering and processing segments increased almost 10% compared to last year's second quarter while fractionation volumes in the logistic segments were essentially flat compared to last year. In the marketing and distribution segment operating margin was down slightly. Our solid operating performance resulted in the distributable cash flow of over $55 million which corresponds to the strong distribution coverage of approximately 1.4 times for the quarter.

We recently announced a 2% increase in our distribution for the second quarter which will be paid on August 13. We are pleased to be talking about distribution growth again supported by the strong underlying strength of our business.

We also recently executed a new five-year 1.1 billion senior secured revolving credit facility which boosts our liquidity, with our February 2012 maturities in July 2015 and speaks of the strength of our business. Jeff will give you some more color on the new agreement in a bit. And finally just last week we announced a new growth project with Marathon Corporation to install new benzene treating equipment as an addition to our LSNG unit at our Mont Belvieu complex. This project along with our expansion of the Cedar Bayou Fractionator enhances the growing fee based services in our downstream business.

Turning to the segment level I will first summarize the quarter's performance in our gathering and processing segments. Second quarter plant natural gas inlet for the field gathering and processing segment was 402 million cubic feet per day, an increase of approximately 3% compared to the same period in ’09. This increase was primarily, the increase was driven by 5%, 9% increases at the San Angelo unit and Permian system, somewhat offset by a 3% decrease at North Texas.

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