Targa Resources confident another Permian natural gas pipeline will be built in 2026

Targa Resources is working on "multiple options" for a new exit pipeline out of the Permian Basin and is confident that one will be built by 2026 when Waha prices are expected to come under renewed pressure, Chief Commercial Officer Robert Muraro told investors May 2.

Targa has approval from the Texas Railroad Commission for the 42-inch diameter Apex intrastate pipeline, which would run 536 miles from Midland to Jefferson County, but it is also considering participating in other proposed projects.

"We are working on multiple fronts... all that have very good traction," Muraro said May 2. "I fully expect that a pipe will go FID by the end of this year." An FID could come sooner than year-end "If we make good progress on one of the options, or the industry does."

The recent spell of negative prices at Waha in West Texas is concentrating minds among producers and pipeline operators, Muraro said.

Relief for Waha will come when the Matterhorn pipeline begins service. MPLX reiterated April 30 it is expected online in the third quarter.

Targa expects more pressure on Waha in 2026. "Every couple of years, we see Waha get crushed," Muraro said. He is confident a new pipeline can be built in time for 2026. A 24-month timeframe between FID and start of service is the "guideline that I think the whole industry uses for the construction of that pipe."

Rising Permian production

Targa remains bullish on Permian production growth in 2024, despite a slowdown in April amid deeply negative Waha prices.

The company was "pleasantly surprised with how volumes responded post the harsh weather in January," CEO Matthew Meloy said.

Permian production recovered to an average 18.5 Bcf/d during February, from 17.9 Bcf/d in January when freezing weather disrupted production, data from S&P Global Commodity Insights showed. It eased to 18.4 Bcf/d in March and fell further to 18.1 Bcf/d in April, but was still higher year over year -- it averaged 17.9 Bcf/d in April 2023.

"We're still optimistic we're going to have continued growth from now through the end of year, even despite those issues," Meloy said in reference to negative prices at Waha.

"Activity level across our entire producer base is pretty robust," said Patrick McDonie, president of gathering and processing. The company is seeing increasing activity levels "across the Delaware, the Central and the Midland Basin."

Processing buildout

Targa reported gas processing volumes of 5.4 Bcf/d in the Permian, up from 5.3 Bcf/d in the fourth quarter 2023 and 4.8 Bcf/d in the first quarter of 2021.

The company announced May 2 it would build a new 275 MMcf/d processing plant, Pembrook 2, in the Permian Midland "in response to increasing production." The plant is expected to begin operations in the fourth quarter of 2025.

Work is continuing on the 275 MMcf/d Greenwood 2 plant in the Midland Basin, which is on track to begin operations in the fourth quarter. "Greenwood 2 is expected to be highly utilized when it comes online which is necessitating moving forward with Pembrook 2," Meloy said. "We're already looking at when we'll need the next plant after Pembrook 2."

The company's Greenwood 1 plant is offline because of a fire April 16. It expects the plant to be back online before the end of the second quarter, Meloy said.

In the Delaware Basin, the company is building the 230 MMcf/d Roadrunner II processing plant, expected online in June, and the 275 MMcf/d Bull Moose plant, expected online in the second quarter of 2025, Meloy said.