Targa Resources beats quarterly core profit estimates on boost in gas volumes

By Pooja Menon

Feb 19 (Reuters) - Pipeline operator Targa Resources TRGP.N beat fourth-quarter estimates for adjusted core profit on Thursday, driven by higher demand and transport volumes of natural gas and natural gas liquids across its systems.

U.S. natural gas futures NGc1 rose more than 11% sequentially in the quarter, snapping a streak of declines that started in the second quarter.

Midstream companies are benefiting from strong oil and gas production in the Permian Basin, rising natgas demand driven by LNG exports and soaring power generation tied to AI operations and data centers.

Targa projected capital expenditure to be about $4.5 billion in 2026 and announced plans to build a new 275 million cubic feet per day natgas processing plant, Yeti II, in the Permian Delaware, which is expected to start operations in the fourth quarter of 2027.

On a conference call, executives said larger downstream capital projects, including Speedway NGL pipeline, and LPG export expansion are set to come online in the second half of 2027.

The company expects target reaching run rate adjusted core profit of over $6 billion following the completion of Speedway, they said.

"While we view the fourth quarter and guidance beat positively, share price reaction could be muted given the recent outperformance and increasing expectations going into the print," said RBC Capital Markets analysts.

Targa shares fell 1.3% in afternoon trading.

Total quarterly natural gas sales were up 6.2% to 2.96 billion British thermal units per day from the previous year, while NGL pipeline transportation volumes rose about 20.3% to 1,048.7 thousand barrels per day.

Targa forecast 2026 adjusted core earnings to be between $5.4 billion and $5.6 billion, with the midpoint in line with analysts' estimate of $5.5 billion according to data compiled by LSEG.

The Houston, Texas-based company posted an adjusted core profit of $1.34 billion for the quarter ended December 31, compared with the estimate of $1.27 billion.