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Why rising propane and butane exports affect some US energy MLPs

Part 3
Why rising propane and butane exports affect some US energy MLPs (Part 3 of 5)

Targa Resources will increase its liquefied petroleum gas exports

Targa Resources and LPG

Targa Resources (NGLS), a major MLP player in the midstream market, has been active in increasing infrastructure and facilitating exports. In September 2013, it commissioned Phase I of its international export expansion project, which includes facilities at Mont Belvieu and Houston, Texas.

2014.03.03 - Targa Galena ParkEnlarge Graph

Phase I of this project expanded the company’s export capability to approximately 3.5 to 4 MMBbl per month of propane or butane. Included in Phase I expansion is the capability to export international grade low ethane propane. The company also added capabilities to load VLGC vessels in addition to the small and medium-sized export vessels that it loads for export. Construction is underway to further expand propane and butane international export capacity by approximately 2 MMBbl per month, with an expected completion of Phase II in 3Q14. Expected total cost international export project to be approximately $480 million.

2014.03.03 - Targa LPG ExportsEnlarge Graph

Already, Targa’s LPG export capabilities have provided an uplift to earnings. The company noted that strong 4Q13 results were partially due to LPG export volumes that more than doubled as a result of the September 2013 completion of its expansion of export facilities.

Note that Targa Resources is a component of ETFs such as the Alerian MLP ETF (AMLP), the Alerian Energy Infrastructure ETF (ENFR), and the Global X MLP ETF (MLPA). Plus, note that an alternate way to get exposure to Targa is through investing in its parent company and general partner, Targa Resources Corp. (TRGP), which exerts managerial control over Targa as well as owns significant amounts of NGLS stock and its general partner interest (and associated incentive distribution rights). Essentially, TRGP is more levered to the performance of NGLS’s assets. However, note that it’s a C-Corp, not an MLP.

Continue to the next part of this series to read about the other major player in the LPG export space, Enterprise Products (EPD).

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