Targa Resources Partners' CEO Discusses Q3 2011 Results - Earnings Call Transcript

Targa Resources Partners LP ( NGLS)

Q3 2011 Earnings Call

November 7, 2011 9:00 pm ET

Executives

Joe Brass – Director, Finance

Rene R. Joyce – Chief Executive Officer

Matthew J. Meloy – Chief Financial Officer, Senior Vice President and Treasurer

Michael A. Heim – Executive Vice President and Chief Operating Officer

Analysts

Bradley Olsen – Tudor, Pickering, Holt & Co.

Darren Horowitz – Raymond James

Louis Shammy – Zimmer Lucas

T.J. Schultz – RBC Capital Markets

Yves Siegel – Credit Suisse

Michael Blum – Wells Fargo Securities, LLC

James Jampel – HITE Hedge

Helen Ryoo – Barclays Capital

Presentation

Operator

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

I would now like to turn the conference over to your host for today, Mr. Joe Brass, Director of Finance. Sir, you may begin.

Joe Brass

Thank you, operator. I’m Joe Brass, and I’d like to welcome everyone to our third quarter 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 www.targaresources.com. We will also be posting an updated investor presentation to the website after the call.

Speaking on the call today will be Rene Joyce, Chief Executive Officer and Matt Meloy, Chief Financial Officer and Treasurer. Rene and Matt are going to be comparing the third quarter 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 the Safe Harbor provision of the Securities Acts 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 the actual results to differ, please refer to our SEC filings including the Partnership’s annual report on Form 10-K for the year ended December 31, 2010 and other quarterly reports on Form 10-Q, as well as the company’s registration statement on Form S-1 as amended.

A quick reminder before we get started into the results. With the closing of multiple acquisitions from TRC over the previous years and in accordance with 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 Rene Joyce.

Rene R. Joyce

Thanks Joe. Welcome and thanks to everyone for participating in our third quarter conference call. Besides Matt and myself, there are several other members of the management team who will be available to assist in the Q&A session.

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

You may recall that Targa had a press release on October 19, which provided an update on selected projects and provided some explanation of our financial outlook given modern moving pieces in our businesses. Today’s earnings release, the third quarter 10-Qs and our current outlook for the business are consistent with the press release.

The Partnership’s businesses continue to benefit from favorable industry dynamics that are driving growth in natural gas supply and in NGL volumes across our diverse asset base. Year-over-year operating margin strengthened in both our Natural Gas Gathering and Processing division and our Logistics and Marketing division.

Turning to third quarter, the Partnership experienced an unusual set of operational issues both ours and third-parties, impacting financial performance. These issues many of which were attributed to a much harder than normal summer in our operations areas have been resulted are not expected to occur to the extent, but to this extent in the future. The Partnerships fundamentals remain strong and we expect an EBITDA in the fourth quarter at least as strong as our previously announced guidance.

We reported third quarter adjusted EBITDA of $107 million, which resulted in distributable cash flow of $65.4 million; distribution coverage was 1.1 times based on our third quarter declared distribution of $58.25 or $2.33 on an annual basis. The partnerships distribution represents an 8% increase compared to the third quarter 2010.

Our Field Gathering and Processing segment increased inlet volumes year-over-year at our San Angelo Operating Unit in North Texas driven by very attractive drilling and production activity.

Favorable pricing increased VESCO and Louisiana operating unit inlet volumes and improved GPM at both business units led to a strong year-over-year performance in our Coastal Gathering and Processing segment. The resulting increase in NGL production both from our G&P division and from other gas processes also experienced increased NGLs improved operating activity through our integrated downstream assets and continues to create incremental demand for NGL infrastructure.

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