NGL production hit yet another record in Oct ’24 thanks to the early start of Targa Resources’ (TRGP) Daytona NGL Pipeline. New data confirms the project has addressed a bottleneck in the Permian Basin and gives TRGP good momentum heading into 4Q24 earnings.
The new October high for NGL production follows record production in March, April, May and September of 2024. Much of the growth in 1H24 came from the biggest component of the NGL barrel (ethane), and East Daley Analytics has covered the topic several times in our monthly Ethane Supply & Demand product.
This time, the growth is also coming from the “heavies” – propane, butane and natural gasoline. In fact, 93% of the PADD 3 NGL production growth from 2Q24 to 3Q24 is from c3+ products. What’s enabled growth in the NGL “heavies” is the early in-service of TRGP’s Daytona pipeline from the Permian to Mont Belvieu east of Houston (refer to the map).
The map shows Targa’s access to Energy Transfer’s (ET) Sendero plant, which is where Daytona receives much of its NGL volumes in New Mexico. This has driven most of the growth on Targa’s Grand Prix, as shown in the throughput by state figure (refer to the orange-shaded bar graph).
Some of Grand Prix’s growth has come from the DJ Basin via Grand Prix’s Oklahoma lateral, but most has come from New Mexico. The jump in throughput corroborates management’s comment that the pipeline was needed to alleviate constraints, especially in the Permian.
Daytona is the first of several pipeline expansions that should keep NGL production growing in 2025. ONEOK (OKE), Enterprise Products (EPD), Energy Transfer (ET), MPLX and EPIC also plan new projects, with big implications for NGL shipping dynamics from the Permian Basin.
With a full quarter of Daytona throughput, Targa’s new Train 10 fractionator (as well as the restart of Gulf Coast Fractionators) and extremely tight LPG exports markets creating upside on spot exports, EDA expects Targa will book record earnings in 4Q24. EDA’s Targa model was updated for clients in mid-Jan’25 ahead of earnings, reach out for more information. – Rob Wilson, CFA Tickers: EPD, ET, MPLX, OKE, PSX, TRGP.
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