Q4 2019 Earnings Call
Welcome to the Targa resources Corp. fourth quarter 2019 earnings conference call.
At this time, all participants' lines are in listen only mode.
The speakers presentation, there will be a question answer session.
That's good question during the session you need to press star one when your telephone.
Please be advised to today's conference maybe recorded.
If you will require any further assistance please press star zero.
No it during the conference or what your Speaker today Sunday Night Senior director of Investor Relations. Thank you. Please go ahead Sir.
Thank you, Chris Good morning, and welcome to the fourth quarter and full year 2019 earnings call for Targa Resources Corp.
Fourth quarter earnings release for Targa Resources Corp, along with the fourth quarter earnings supplement presentation are available on the Investor section of our web site at Targa resources Dot Com. In addition in an updated investor presentation has also been posted to our website.
A reminder, that statements made during this call that might include Targa resources expectations or predictions should be considered forward looking statements within the meaning of section 20, when he said the Securities Exchange Act of 1934.
Actual results could differ materially from those projected in forward looking statement.
For a discussion of factors that could cause actual results to differ please refer to our latest FCC filings.
Our speakers for the call. This morning, we'll be Joe Bob Perkins, Chief Executive Officer about Malloy, President and Gen, Neil Chief Financial Officer.
We will also had the falling senior management team members available for Q1 day.
Mcdonie, President gathering and processing, Scott prior President logistics, and transportation and Bobby MRO Chief Commercial officer.
And with that I'll now turn the call over to Joe Bob.
Thanks, Andrew Good morning, and thank you to everyone for joining.
It continues to be an exciting time at Targa wouldn't record quarterly and full year adjusted EBITDA.
As we benefit from numerous major projects that commenced operations in 2019.
Those projects have successfully transformed targa into a leading integrated midstream company completed projects in the cash flows from these projects possession target very well over the long term.
I want to say, thanks to the exceptional targeting.
Our continued focus and best in class execution.
Executing on projects on customer service on our company's long term strategic priorities and most importantly.
Exactly and effectively operating our infrastructure facilities everyday.
If we wrap up a strong 2019 and look forward to 2020, I'm very enthusiastic about the Targa leadership for the future when Matt already performing in the C. O C officially start when a couple of weeks complemented by Gen and the CFO role and the entire executive team target is in very fine.
With that I'll now turn the call over to Mike.
Thanks, Joe Bob and good morning to everyone.
Before I get into our results for the year I would like to take a minute to say a few words about the founding executive team of target.
The original founder started out as a management team with no assets.
In through their leadership.
Good work dedication integrity and willingness to train and develop others created one of the Premier integrated Midstream company.
The individually and collectively they target what it is today and our strong results in 2019 are a direct result of their leadership vision.
Over the past 15 plus years.
So with that on behalf of the current executive team and all target employees, we would like to personally. Thank you Joe Bob.
And when they join.
The late ROI Johnson.
Jim Whalen.
My car.
Paul Chong.
And Jeff Macfarlane.
So with that now turning to our results 2019 was a pivotal year for target as we began to benefit from a cash flow ramp associated with our significant investment cycle.
Even with NGL and natural gas prices at historic lows throughout much of 2019, we posted record full year adjusted EBITDA result of 1.44 billion.
We outperformed our expectations in 2019, driven by our Permian and Grand Prix volumes, and we benefited from additional optimization opportunities and our NGL and natural gas businesses.
We expect to carry forward this positive momentum throughout 2020.
With strong volume growth in the Permian driving NGL down Grand Prix to our Mont Belvieu and Galena Park facilities.
Let's first discuss our gathering and processing business.
Overall, targas GMP volumes in 2019 exceeded our initial estimates.
Permian volumes increased 32% and total field volumes increased 15%.
In the Permian our systems remain highly utilized in fourth quarter volumes in the Permian Midland sequentially increased 6% as we benefited from a full quarter contribution from our new Pembroke point.
Our next Permian Midland plant Gateway will be much needed when it comes online in the fourth quarter of 2020.
We're assessing the timing of when in 2021, we will need the next Permian Midland plant.
In the Permian, Delaware volumes in the fourth quarter.
Sequentially increased 18% as our new Falcon plant, which was completed in late September was ramping throughout the fourth quarter.
Our next Permian plant paragraph remains on schedule to begin operations in the second quarter of 20 Twond.
We also benefited in the fourth quarter for much needed incremental residue gas take away.
From the Permian after the Gulf Coast Express pipeline commenced full operations in late September.
Looking forward, we expect strong volume growth across our Permian, Midland and Delaware systems and 20 Twond.
Our growth is largely underpinned by the majors in large independents, who are forecasting continued volume growth.
Also continued to have success, and adding fee floors and or additional fee based margin to our Permian GMP contract, a strategic priority, which will continue in 2020 and beyond.
Moving to the Badlands are gathered gas volumes sequentially increased 29% in the fourth quarter as our new little Missouri for plants continue to ramp.
Incremental NGL takeaway capacity for the based on online at December or Badlands volumes are expected to continue to increase looking forward.
But the completion of Grand Prix our fee based margin is rapidly increasing and our business mix has shifted more towards downstream.
Driven by estimates of increasing fee based margin from both our GMP and downstream business as we estimate that our fee based margin will increase to about 80% and 20 twond.
Our Grand Prix pipeline continues to perform very well if deliveries into Mont Belvieu increased averaged 266000 barrels per day during the fourth quarter as we benefited from our new Falcon point and some shorter term NGL transportation volumes.
We anticipate Grand Prix volumes into Mont Belvieu to increase it averaged 275 to 300000 barrels per day in 20 Twond.
Turning to our fractionation business overall business fundamentals in Mont Belvieu continue to remain robust.
Targets fractionation volumes in 2019 increased 22% over the previous year and our fractionation complex continues to operate at a high utilization rate.
Train seven is on track to be complete.
Late March 2020, and is anticipated to be highly utilized that start up.
Construction continues on train eight which we continue to expect to be online.
Third quarter 20 Twond.
Our LPG export business, our recently completed Debottlenecking projects have enhanced our flexibility and increased our loading capability to where we can load up to 10 million barrels per month.
And we benefited from sequentially higher LPG export loadings during the fourth quarter.
Our next phase of export expansion at our Galena Park facility remains on track.
Increase our effective capacity to up to 15 million barrels per month in the third quarter of this year, depending on product sized vessel mix and other factors.
Our export facilities remain well contracted as our commercial team continues active and productive dialogue with our customers. We expect LPG export volumes to increase in 2020 over the previous year [noise].
Our total net growth Capex for 2019 was 2.28 billion.
Less than our guidance of 2.4 billion.
Consistent with our November earnings call, we continue to expect to spend between 1.2 and 1.3 billion on net growth capital in 2020.
We remain focused on maintaining capital discipline across the organization and we'll continue to prioritize future investments around our core strategy.
With that I'll now turn the call over to Jim to discuss Targas results were present, our 2020 outlook.
Thanks, Matt Partners reported quarterly adjusted EBITDA for the fourth quarter was $465 million for dividend coverage of approximately 1.4 times.
Our performance during the fourth quarter was driven by meaningful contributions from recently completed growth projects, particularly Graham Creek and favorable market conditions in both our logistics and transportation and gathering and processing segment.
We also benefited from approximately $35 million of items that I would characterize as onetime in nature.
He is one time fourth quarter benefits included adjustments to certain operating in general and administrative expense estimates and partner related reimbursement.
Ill provide some more color on fourth quarter 2019 versus first quarter 2020, when I describe our guidance shortly.
Our full year 2019 reported adjusted EBITDA was $1.435 billion exceeding the high end of our financial guidance range.
Full year significant commodity price headwinds were more than offset by the outperformance of our existing assets and assets placed in service during the year.
Turning to a couple of housekeeping items that you may have noticed in our earnings release. This morning realized hedge gains losses associated with our GMP equity volume hedges are now included in GMP segment gross margin, which we believe better aligns with how we evaluate the performance of our GMP segment.
We also renamed our logistics and marketing segment to logistics and transportation to better align with the segments asset level performance given the recent completion of Grand Prix and the change in naming convention did not impact previously reported results for the segment.
Turning to hedging for full year 2020, we have hedged approximately 80% of natural gas approximately 75% of condensate and approximately 60% of NGL.
Our increasing fee based margin complemented by our hedging program provides us with cash flow stability.
Additional unrelated hedge disclosures, including 2021 percentages by commodity can be found in our earnings supplement presentation.
During the fourth quarter, we successfully issued $1 billion, a 5.5% senior notes due in March 2030, net proceeds from the senior notes offering were used to pay off borrowings under our TRP revolver.
We had approximately $2.7 billion available liquidity as of December 31st.
On a debt compliance basis CRP is leverage ratio at the ended the fourth quarter was approximately 4.3 times versus a compliance covenant of five and a half time.
Our consolidated reported debt to EBITDA ratio was approximately 5.5 times.
We expected our leverage profile will improve through time as we benefit from increasing margin contributions from assets recently placed in service, we're expected to be placed in service and lower growth capital spending. We're also continuing to assess selected asset sale to potentially accelerate the improvement of our leverage ratio.
We closed on the sale of our Permian, Delaware crude gathering assets in January for approximately $134 million and are continuing to work through the evaluation of the potential sale of our Permian Midland crude gathering assets.
Building off of our performance in 2019, let's turn to our expectations for 2020, which assume NGL composite barrel prices to average 45 cents per gallon crude oil prices to averaged $52 per barrel Henry hub natural gas prices to averaged $2 per M. B to you and one on natural gas prices to averaged 50 cents.
Per M B to you for the year.
Beginning with our operational expectations and the gathering and processing segment, we estimate total Permian natural gas inlet volumes for 2020 increased approximately 20% on average over 2019 Permian Inlet volume.
In 2020, we expect continued growth in badlands crude and gas gathered volumes and modest declines in our central region.
Overall, we estimate total field GMP natural gas inlet volumes for 2020 increased approximately 10% on average over 2019 total field GMP inlet volume.
Moving toward downstream segment, and beginning with Grand Prix as Matt mentioned, we anticipate throughput in the Mt. Belvieu to average between 275 and 300000 barrels per day in 2020.
We also expect or fractionation volumes to increase year over year, largely driven by continued growth in Permian GNP volumes and the addition of trained seven and eight which will also support the expectation of increasing year over year LPG export volumes.
Shifting to our financial expectations, we estimate for your 2020, adjusted EBITDA to be between $1.6 billion to $5 billion and $1.75 billion, representing an 18% increase over 2019 based on the midpoint of our range.
For your dividend coverage is estimated to be around 1.2 times, assuming a flat three dollar and 64 cents annual dividend.
We would also like to provide some additional color on expectations for the first quarter of two of 2020 versus the first quarter, sorry versus the fourth quarter 2019, particularly given the $35 million a onetime benefits in the fourth quarter.
We're now halfway through the first quarter and given the combination of the onetime items in the fourth quarter with headwinds associated with lower commodity prices lower hedge gains and higher expected operating expenses in DNA. We expect that first quarter 2020, adjusted EBITDA will be lower than fourth quarter 2019 adjusted EBITDA.
First quarter 2020, operating expenses NGL <unk> will be higher than the fourth quarter largely from additional assets placed in service piratical, Lauren and higher insurance and benefits costs.
Overall and 2020 operating expenses are estimated to increase over 2019, given all the new assets in service and those coming online. During this year well per unit operating expenses are expected to improve as we benefit from full year operation and increased operating leverage from our expansion projects.
Next completed in 2019.
As Matt also mentioned, our net growth Capex for 2020 remains unchanged with a range of $1.2 billion to $1.3 billion.
This estimate includes the assumptions that we will be funding pioneers capital and Westtx for 2020 under the joint ventures, Nonconsent provisions and Oscar also that there will be some spending during the year for another plant in Permian Midland even as we continue to evaluate timing of the project.
Given our increasing asset base or estimate for net maintenance Capex for 2020 is approximately $150 million.
For additional details related to our estimated 2020 outlook. Please review our earnings slides, which are posted on the investor page of our website with that I'll now turn it back Matt for a few closing remarks. Thanks John.
The thing we remain excited about target as long term outlook, while there may be some uncertainty and global commodity markets related to the Corona virus and other macro factors there as strength and what we can see for targets core business in 2020.
With that operator, please open the line for but.
Thank you deserve a murder to ask a question do we need to press star one when you're talking.
To withdraw your question. Please press the pound key.
Please stand by <unk>.
Your first question comes from a lot of Tristan Richardson with Suntrust.
Hey, Good morning can you hear me.
Yes, we can and good morning.
<unk>.
Real quick on the the supply side. It seems like it's a theme you guys have talked about quantifying.
Could you quantify that general opportunity to reduce exposure to commodity exposure, whether it'd be from you know revenue floors or escalators.
Outright contract renegotiations, just is there a way to frame up the potential there.
Well I think we had that included in our 80% you know all in fee based margin for 2020, you know really the opportunity for us to continue to increase our fee based percentage is going to be on the one hand, just increasing fee based margin on the downstream side, but also going into those.
Commodity sensitive contracts, where there are no meaningful fees.
For those and where we're spending dollars on additional infrastructure, we're going to need some fee based protection for us to continue to to spend capital you know what gas prices between zero and a dollar a wall hall in low NGL prices, where I need some fee base protection for that asthma.
And we've had good success with our producers who are who understand that want us to continue to move their volumes.
So we want to continue to be able to hook goes up and move those two our plants and so we're a line from that perspective, and we've had a lot of good progress I'd say on 2019, and we're continuing that progress in 2020.
Helpful. And then just follow up on that the downstream side can you talk about the marketing.
Margin opportunity in the downstream business enhanced now the Grand Prix is online and he is that opportunity reflected in the 2020 outlook.
Or should you spread opportunities remain resilient that could represent upside.
So I would say, yes, partially as a result, the Grand Prix being online we have a lot more ngls coming into our system, we have more fractionation capacity coming on where as we add fractionation, we're adding storage and related infrastructure, which allows us to take you don't take advantage of market you know a contango.
And other things for marketing opportunities. So I'd say the overall volumes increase we have more of those opportunities. We put in I'd say conservative estimates of those opportunities into our guidance. So there is not zero in there, but it's a relatively modest expectation of some of those opportunities, which is generally consistent trends Tristan with how we try to forecast those elements of the.
Business with conservatism and then helped outperformance we moved through the air if the opportunities present themselves and 2019 was a year, where we did have significant opportunities. We highlighted 10 million of downstream opportunities in the second quarter that we quantified as onetime in nature and had additional opportunities as other assets came online through the year. So.
We expect some this year, it's just difficult to quantify at this point.
Very helpful. Thank you guys very much.
Okay. Thank you.
Thank you.
And our next question comes from the line of door.
Well, yes. Your line is open.
Hi, Good morning, guys, maybe just a follow up or to clarify trust. Since first question just with respect to fee based seems like you've gotten there ahead of schedule.
You know, adding the assets that our fee based I think is what you said is the answer but is it I think the collars or the <unk> trying to adjust contracts and so forth part of whats getting there and is there more opportunity.
The incremental fee based from here.
Just from those types of renegotiation.
Sure. Yes, we have had I'd say, a really good movement in terms of adding fee based floors and fee based components to existing contracts and as we're contracting for new volumes coming in the Permian, what's really both its new contracts and and existing and we.
See the ability to be able to do more of that so we're in various stages with our producers and discussing with them. How we can meet their needs and the fee based protection that we're going to you don't need to be able to continue to to meet their needs.
Okay, and just to clarify you know you talked about adding Diaz. So the assumption would be that if you've chosen to death.
Yes.
Right.
That's right if we bought in the Devcos then we will have additional fee based margin as well.
Perfect I'm, just switching a little bit I was wondering if we talk about the LPG export facility you had a very strong quarter. There obviously, the new capacity was online.
But it was exceptionally strong and just wondering if some of that was related to some of the propane arbs that were out there.
Worse, it's more a function of the fact that you added butane capacity in your now better able to optimize requirements.
And if so does that mean when you add more refrigeration.
You know in this third quarter later this year that we can actually see further optimizations from there as well to of customer demand.
Scenario. This is Scott we did have a nice quarter. When you look at third quarter over fourth quarter, we had about a 12% increase in our volumes across our dog from those quarters. Additionally, we saw a 17% increase as we said in her script from 2018% to 2019 as we continue to bring projects online that really helped us de bottleneck the facility.
Much of that was butane related and the improvements we saw from third quarter fourth quarter was prom predominantly around the butane molecule. So we've benefited from those debottlenecking projects as a result of that.
We view ourselves is pretty much highly contracted.
As we roll through this year of 2020, we're we're going to benefit from increased volumes flowing through our systems all the way from our upstream.
[music] Grand Prix do our downstream assets as a whole, which will dictate opportunities, but more barrels across our dog.
That's the reason why we're adding the additional capacity in the third quarter of this year with the increased refrigeration capacity that we're bringing online. So we still view ourselves is highly contracted with that said.
With the assets that we put in place with the projects that we put in place. It helps us really mitigate times, where we've seen even in the first quarter, we've had some issues with fog delays.
And so fog delays kind of take away from that opportunity. If you will have to maybe participate in a spot market because we want to make sure that were performing on the contracts that we have across our dog today. So.
We have added new contracts on term related business that will kind of come in towards the latter half of this year with the expansion project and we've had great success in renewing all of our contracts across the dog. So we have we're highly contracted and we feel very comfortable with the fees that we've done it with the term.
Related business.
We're definitely going to benefit with increased volumes, though flowing through our systems that will find their way all the way the dog, which again provides flow assurance all the way back to the wellhead for the producers that are on our systems.
Okay. So that's what makes perfect sense sounds like it's it's ratable then I'm just one final question if I may given the amount of spare frac capacity that's out there in the market is.
He is the only way for you to capitalize on using I guess effectively an asset light strategy on a go forward basis and potentially delay the need for Frac nine where you can utilize.
Some other fracs based and so forth in in sort of seen opportunity for capex to step down and be delayed a little bit while you optimize other people's spare capacity.
Yeah. So as you know they said in the call train seven will be high highly utilized than we have have train eight coming on and when that comes on it will give us some excess capacity in our in our system as we await for future growth and as our volume commitments and mdcs from our customers kick in.
I would say you know.
There is an opportunity with others also having fractionation, calling on we don't necessarily need to be just in time with a frac train nine so it will give us a little bit of opportunity to be you know before we go hadn't greenlight and say we need to add train nine I'd say another thing that we're benefiting from and you saw this in Q4 as our fracs are running even better than anticipated.
We called train 600000 barrel a day Frac. If you look at what we the fractionation volumes for Q4. It looked like it was over nameplate, that's because we're able to Ron train sets at higher than 100. So we're also creating a little more capacity, which could push out train nine as well, so I'd say through our own optimization of our appetite.
And looking elsewhere, we feel pretty good about being able to move train nine a little bit further out.
Alright, perfect that makes perfect sense, thanks, very much for the color guys and once again congratulations on all you.
Sure.
Okay. Thank you.
Thank you and our next question comes from a line of Jeremy tonnage with JP Morgan Your line is open.
Hi, Good morning, I, just wanted to start with the guidance here and it's encouraging to see the level of growth that you talk about both on a the GMP side and also Grand Prix I was wondering if you could kind of a provide a bit more color as far as what type of cadence you see to that growth over the year any thoughts on kind of like what that type of <unk>.
Ray could look like just trying not you know as we model for the route get a sense for how things are playing out there.
Jeremy This is Jen we tried to provide you with a little bit of color certainly related to first quarter relative to fourth quarter, particularly as a result of those $35 million of onetime benefits that we tried to discuss in a little bit of detailing our commentary in the press release and also in our scripted comments, we're not going to get into.
Providing quarter by quarter guidance related to EBITDA or really any of the other metrics that we've put out there. This morning, I think what 2019 was a great year for a company excellent execution really across all fronts, particularly when you think about new assets that came online and how well they performed we've got additional asset.
It's coming online in 2020 hope that those perform as well as those that came online in 2019 did and we'll just have to see how the year plays out we have had some headwinds already thus far in 2020 with commodity prices, what sort of the typical seasonality in freeze offs that we generally have early in January.
Right and you know you never really can't quantify all the pluses and minuses that will occur during a year and that's generally one of the reasons that we like to provide annual guidance versus quarterly guidance.
That's helpful. And then maybe just clarifying on the Q1 being lower than Q4 was that versus the kind of the 430 number that exclude some of those onetime items or is that versus the 465, just trying to quantify the impacts there.
If you go back and have a chance to read the script, we tried to provide a little bit more color in there. So it's really it's versus the us for 65. So yes includes the onetime items. So we're trying to direct you certainly to remove those when you think about Q1 relative to Q4 and also provided a little bit of detail that opex and DNA.
We'll be higher in Q1, then it was in the fourth quarter as well consistent with the expectation that 2020, opex in DNA will be higher as well than 2019.
That's helpful. Thanks, and just the last one if I could it seems like a you've got done a really good job recently have kind of a divest divesting some noncore assets to help accelerate de leveraging there and just wondering I know you're not going to tell us what assets, you're selling but just wondering anymore you could share on the thought process. If I look around the portfolio when I see owner.
Shipped in something like Gtx and I see it it's nice to have the capacity on the pipe, but I don't know if necessary we need to own the pipe anymore now that Phil just wondering you know what were the types of opportunities you guys see to kind of raise more some funds there.
The only asset process asset sale process that we currently have underway is the one related to the Permian Midland crude to Brazil crude business. Jeremy. So we'll continue to assess other opportunities all across the portfolio, but there's nothing else active at this time, but clearly we've demonstrated a willingness if assets are not what we consider.
Core to the this sort of Permian aggregation of supplier GMP aggregation of supply it transport to Frac to volumes available for exports then we will consider.
Whether there's a third party that would be more likely owner of the asset than we are.
That's all for me Thanks for taking my question.
Okay. Thank you.
Thank you and our next question comes from a lot of Michael Blum with Wells Fargo. Your line is an open.
Great. Good morning, everybody I will just two questions one on Grand Prix can you just maybe explain the outperformance you're seeing on volumes versus your sort of prior expectations was that just conservatism or.
It's something changing either with your own plans or third party volumes, that's causing those numbers to keep moving higher.
Hey, Michael I I'd say, it's a number of factors I'd say to start it was probably a little conservative when we initially gave it was a while ago. We gave that estimate of 250000 barrels at some point and in 2020 and then we just left that they're not wanting to update that wanted to actually get an operating before we revised our guidance and wanted to show.
Performing so I'd say part of it was conservatism, but I will say, we saw a really strong volume growth across our Permian system. You know, we outperformed all our volume guidance in 2019 that provided more ngls on our system I'd say third parties. We've had good success, attracting others down the pipe as as well has been.
Benefit versus our original expectations, when we gave that original guidance.
We're also going through all of our plants.
And I and optimizing so we're surrounded engineering team dr. airplanes, and trying to squeeze more NGL increased recoveries and you're seeing that in our numbers as well. So we're trying to enhance recoveries.
On these plants that were putting in as well so it's a number of factors.
Okay, Great and then second question is so you're obviously, our EBITDA is trending very nicely or do you still get your latest thoughts on devco and the timing of when you're mailing and start.
Some of that back in.
Sure. Michael This is Jen I think consistent with our third quarter commentary around the Devcos nothing has really changed fourth quarter performance was stronger than we expected ultimately we'd like to see how 2020 performance shakes out.
Before we likely start buying back pieces of the Devco. Our focus right now is on improving our leverage metrics and so there's really no change to the underlying assumption that we really said when we entered the devco arrangements, which was for modeling purposes. If you want to assume that we take the entire structure out in 2022, given we've got for.
Years as of the fourth quarter of 2019 to do so that's a fine assumption if you want to assume with increasing EBITDA that we may de risk the overall structure and take out by taking out a piece earlier, given we can take out a piece or pieces and 100 million dollar and commence that's a fine assumption as well. So I think either of those are consist.
With how we're looking at it internally right now, which again is consistent with how we've been looking at it really since we entered into the transaction.
Great. Thanks <unk>.
Thanks, Mike.
Thank you.
And our next question comes from the line Spyrou donors with credit Suisse. Your line is open.
Hey, Good morning, everyone. First question just follow up on the 2020 EBITDA guidance one of US just trying to reconcile the strength in that guidance seems like getting to the high and low ends of the range is going to take maybe a lot more than just the commodity movements. So just curious if you just walk us through some of the other major variables that flux set up and down.
I think that for us the guidances or range is really reflective of our best estimates right now for the year given the visibility that we have into the year 2019 was very strong for US. We believe that there will continue to be opportunities for assets to hopefully outperform in 2000 2020, but there's also uncertainty.
Related to prices the Corona virus producer activity levels, particularly in the back half of the year and so that's why there's a wider range on the absolute dollars than we have generally presented in years past.
Understood and then that kind of segways into the next question just around hedging and sort of getting ahead of some of that risk. So there's two part question here first one just clarification on that and call. It dollar Seventyish hedged price you've got in there is that just Henry hub or you sort of put in a while component to that and then second are you hedging today in the small.
Right now or your models, telling you to kind of wait for a stronger entry point.
On the hedges that's reflective of the aggregate hedges that we've entered into that includes all our basis hedges.
And I think that you'll see us continue to hedge one given the opportunity clearly we added a fair bit of hedges really from our fourth quarter disclosures on through the early part of the year given the point of view that we have internally related to prices on the NGL side, we remain less hedged them, we ideally would like to be at this point and.
That's really just are result of ethane prices, which is the largest part of our and your NGL barrel and sort of where ethane prices have been for some time, but to the extent that we get any strength that we can hedge into we'll do that as well as just continuing with our programmatic hedge program that we work through with the hedge Committee hardboard.
Very helpful. Thanks.
Thanks, Jeremy Thanks.
Thank you.
And our next question comes from the line of Colton Bean, What's Tudor Pickering Holt Your line is no.
Well. Thanks, So just a follow up on Scott's commentary around the LPG exports looks like the disclosure there implied a slight shift and C. C. Four mix, 75% propane now at least on a trailing basis, there any potential to push more volumes into butane weighted markets like India to increased utilization of that you Tim routing capabilities over the course of the year.
Gold Tonight, I would say that.
The lift or is that we have kind of dictate what their desired mixes are clearly with a lot of the waterborne traders volumes are moving to where the demand pool is that a lot of that growth. Obviously is in the east and the Asian marketplaces, and we've talked about in the past with the developing countries a lot of that as both approach.
Oh painted butane mix, we did benefit from third quarter to fourth quarter with larger percentages of butane moving across our dock and that certainly we are gearing ourselves up so that we have that capability going forward and.
That's the reason why we kind of give a broad range relative to what our capabilities are.
That it is dependent upon how much is propane versus butane and the size of vessels. So I think you'll continue to Paul perhaps see increased volume percentage of butanes going across our dog and hence the reasons why we put our de Bono debottlenecking projects in place.
Got it.
And then Matt I think you touched on some of the moving pieces on both trained on the timing in the next Permian plant beyond Gateway.
As we look at that I'm trying to reconcile versus that prior 1.8 billion of capital for 2020 in 2021 any other considerations beyond bluestone.
Yeah, I mean, just to bring that 1.8 to current you know that was given.
You know over over a year ago, we added the blues time, which was 200 and then and our call last summer, we mentioned that our processing plants. There were three amend their and they were about $30 million higher relative to the original expectation so that would bring it to kind of that that to one number I think as you look forward to 2021, how much capex.
That's going to be it's really going to be dependent upon our underlying volumes out in the Permian.
How much how much success, we're having out there you know we've indicated likely another Midland plant here.
Timing is still uncertain.
Think with peregrine coming on at Falcon, just coming on were probably have a little more timing and a little more runway on the Delaware side, when we had a plant, but it's going to depend on how volumes ramp this year, but as you look to 2021 is likely going to be processing plant, maybe potential fractionation spending entre nine depending on that timing.
Our export ER Doc going in here, we should should be okay. There for a while I was going to be regular probably a normal course capex for 420 21.
Got it appreciate that.
Okay. Thank you. Thank you my last question comes from a lot of Sunil Sibal Seaport Global Securities. Your line is an open.
Yeah, Hi, good morning, guys. A couple of questions from me a starting out for the kind of.
Thank you mean indicated Oh 19 came out like 120 million below which you had guided to.
And Twentytwenty Capex guidance is maintained so I was curious you know that Oh, some kinda scope of project or are you finding you know.
Cost Oh, probably coming off load on the project.
Yeah, I would say, it's really as our as we continue to focus on capital discipline and you know scrutinize every project and just push our organization to focus capital in along the core business that we talked about gathering and processing, where its tied into grand Prix into fractionation and export. So I think it just as we.
Increased the level of scrutiny.
Looking at our projects being very careful and diligent forward Greenlighting anything new we were able to come in under for 2019 and.
That didn't rollover frankly into changing our 2020 estimates so I think it's just continued.
Capital discipline operating cost you know you kind of everything we're pushing through it as an organization, we're starting to see some of those positive positive result.
Okay.
And then just wonder to reconcile with your guidance on on the kind of <unk> NGL volumes. It seems like from yet what you did in the fourth quarter.
Full year Twentytwenty, you're expecting in Florida, Marta as you know.
So uptake however, you know on the on the Frac site, you also comment or Doug do you expect to for the new fraud, the stock certainly for us.
I was kind of curious you know how do we reconcile those two and also you know if you could talk anything about your assumptions on a 10.
Rejection going into 2020, if there are you in any significant assumptions made there.
Sure I guess I'll start with thank you for fractionation trained seven being fall. So we have.
Been running over nameplate, we have inventory right. So we're going to be working off existing yeah. We have <unk>, we have a lot of storage capacity, but we're going be working off inventory when seven comes on and as volumes continue to ramp.
So I think as you look at the Grand Prix volumes.
You know there can be underpinned will have peregrine coming on but as I said, we'll have some capacity in the Delaware. So it's we have some excess capacity now so we see kind of modest increases you know oh, there with with the peregrine coming on and then we have the gateway coming on is not coming onto a really the fourth quarter. So as those we expect that to be highly.
Utilized that start up that's going to be coming on in the fourth quarter.
Ben is going to be our third party volumes on Grand Prix. We do expect some growth. There. We have that you know baked into our forecast and then I'd say, the other offset which I didn't mention before we did benefit a in late 2019 from some shorter term transportation only agreements are shorter term TNF agreements.
Last year.
We have a I'd say conservative assumption related to kind of non contracted volumes in 2020 are they're gonna be opportunities to move barrels for some of our customers get our midstream more producers on a shorter term basis I think there will be some of those opportunities we didn't factor those opportunities into our 2020 numbers.
Okay got it and then one housekeeping for me.
Thank you guys touched upon the 35 million Tailwinds that you got on Opex and other items in Q4.
Oh, well those kind of focused in on a constant <unk> any particular business unit or in any particular geography.
To me on this is Jen we talked about the fact that that was really made up of a combination of.
Opex estimates DNA estimates and then also some partner reimbursements and so it was a combination of factors really across the board generally we've talked on the third quarter, which was also consistent with the fourth quarter that our estimates for AD valorem taxes came in lower and actuals them, what we had assumed.
We also benefited from lower benefits costs through the year than we expected and we did less hiring for the year than we expected or estimated so really it's it's more corporate level, then specific to any individual business unit.
Okay got it that's all I had thanks for all the coloring congrats phenomenally good corridor.
Okay. Thank you next meal.
Thank you. This concludes today's question and answer session I wouldn't like to turn the call back to the senior director of Investor Relations Sanjay Lad for any further remarks.
Great. Thanks to everyone that was on the call. This morning, and we appreciate your interest in Targa resources, we will be available for any follow up questions over the course of the day, Thanks and have a great day.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
[music].