Pipeline operator Targa forecasts core profit above estimates on boost in gas volumes

Targa Resources forecast full-year adjusted core profit above analysts' expectations on Thursday, helped by higher volumes of natural gas and liquids transported through its pipelines.The U.S. Energy Information Administration (EIA) reported a record rise in oil production in October, as demand surged to its highest levels since the pandemic. Meanwhile, a 24% rise in natural gas prices in the fourth quarter boosted margins for pipeline operators and lifted transportation demand.U.S. oil and gas transportation companies gained in 2024, fueled by hopes of growing electric generation associated with artificial intelligence operations, cryptocurrency mining and data centers, with Targa rising nearly 104% last year.Total quarterly natgas sales rose nearly 2% at 2.78 billion British thermal units per day (BBtu/d) in the fourth quarter, while NGL pipeline transportation volumes rose 20.7% to 871,500 barrels per day (Bbl/d).Targa expects 2025 growth capital expenditures to be between $2.6 billion and $2.8 billion."While the higher spend may push a turn to positive free cash flow into 2026, we are not surprised by the higher capex guide given new projects and Targa previously noted spend is trending higher to meet producer demands," said RBC Capital Markets analyst Elvira Scotto.Shares of the company were down over 5%."Stock may take a breather given its YTD outperformance vs large cap peers ... (but) view any pullback as an attractive entry point," Scotto added.Targa's adjusted core profit was $1.12 billion in the reported quarter, beating analysts' estimate of $1.10 billion, according to data compiled by LSEG.Targa forecast continued growth across its Permian footprint, which is expected to drive record production at the basin, NGL pipeline transportation and LPG export volumes in 2025. The Houston-based company expects 2025 adjusted core profit to be between $4.65 billion and $4.85 billion, compared with analysts' estimated profit of $4.63 billion.