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Targa Resources Corp (NYSE:TRGP)
Q4 2019 Earnings Call
Feb 20, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Targa Resources Corp. Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Sanjay Lad, Senior Director of Investor Relations. Thank you, and please go ahead, sir.

Sanjay Lad -- Senior Director, Finance and Investor Relations

Thank you, Chris. Good morning, and welcome to the fourth quarter and full year 2019 earnings call for Targa Resources Corp. The fourth quarter earnings release for Targa Resources Corp, along with the fourth quarter earnings supplement presentation, are available on the Investors section of our website at targaresources.com. In addition, 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 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our latest SEC filings. Our speakers for the call this morning will be Joe Bob Perkins, Chief Executive Officer; Matt Meloy, President; and Jen Kneale, Chief Financial Officer. We will also have the following senior management team members available for Q&A: Pat McDonie, President, Gathering and Processing; Scott Pryor, President, Logistics and Transportation; and Bobby Muraro, Chief Commercial Officer.

And with that, I'll now turn the call over to Joe Bob.

Joe Bob Perkins -- Chief Executive Officer

Thanks, Sanjay. Good morning, and thank you to everyone for joining. It continues to be an exciting time at Targa, with 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 and the cash flows from these projects position Targa very well over the long term. I want to say thank you to the exceptional Targa team for their continued focus and best-in-class execution, executing on projects, on customer service, on our company's long-term strategic priorities and, most importantly, safely and effectively operating our infrastructure facilities everyday. As we wrap up a strong 2019 and look forward to 2020, I am very enthusiastic about the Targa leadership for the future. With Matt already performing in the CEO seat, officially so in a couple of weeks, complemented by Jen in the CFO role and the entire executive team, Targa is in very fine hands.

With that, I'll now turn the call over to Matt.

Matthew J. Meloy -- President

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 Targa. The original founder started out as a management team with no assets, and through their leadership, hard work, dedication, integrity and willingness to train and develop others, created one of the premier integrated midstream companies. They individually and collectively made Targa 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 Targa employees, we would like to personally thank you: Joe Bob; and Rene Joyce; the late Roy Johnson; Jim Whalen; Mike Heim; Paul Chung; and Jeff McParland. So with that, now turning to our results. 2019 was a pivotal year for Targa as we began to benefit from the 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 results 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 in our NGL and natural gas businesses. We expect to carry forward this positive momentum throughout 2020, with strong volume growth in the Permian, driving NGLs down Grand Prix to our Mont Belvieu and Galena Park facilities. Let's first discuss our gathering and processing business. Overall, Targa's G&P volumes in 2019 exceeded our initial estimates.

Our Permian volumes increased 32%, and total field volumes increased 15%. In the Permian, our systems remain highly utilized in fourth quarter volumes, and the Permian Midland sequentially increased 6% as we benefited from a full quarter contribution from our new Pembrook Plant. Our next Permian Midland plant, Gateway, will be much needed when it comes online in the fourth quarter of 2020. We are 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, Peregrine, remains on schedule to begin operations in the second quarter of 2020. We also benefited in the fourth quarter for much needed incremental residue gas takeaway 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 in 2020. Our growth is largely underpinned by the majors and the large independents who are forecasting continued volume growth. We also continue to have success in adding fee floors and/or additional fee-based margin to our Permian G&P contracts, a strategic priority, which will continue in 2020 and beyond. Moving to the Badlands. Our gathered gas volumes sequentially increased 29% in the fourth quarter as our new Little Missouri four plant continued to ramp, with incremental NGL takeaway capacity from the basin online in December, our Badlands volumes are expected to continue to increase looking forward. With the completion of Grand Prix, our fee-based margin is rapidly increasing, and our business mix has shifted more toward downstream.

Driven by estimates of increasing fee-based margin from both our GMP and downstream businesses, we estimate that our fee-based margin will increase to about 80% in 2020. Our Grand Prix pipeline continues to perform very well as deliveries into Mont Belvieu increased to average 266,000 barrels per day during the fourth quarter as we benefit from our new Falcon Plant and some shorter-term NGL transportation volumes. We anticipate Grand Prix volumes into Mont Belvieu to increase and average 275,000 to 300,000 barrels per day in 2020. Turning to our fractionation business. Overall business fundamentals in Mont Belvieu continue to remain robust. Targa's 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 in late March 2020 and is anticipated to be highly utilized at start-up. Construction continues on Train 8, which we continue to expect to be online late third quarter 2020.

In our LPG export business, our recently completed debottlenecking projects, have enhanced our flexibility and increased our loading capabilities 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 and will increase our effective capacity to up to 15 million barrels per month in the third quarter of this year, depending on product size, 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. 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 billion 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 will now turn the call over to Jen to discuss Targa's results for the fourth quarter and present our 2020 outlook.

Jennifer R. Kneale -- Chief Commercial Officer

Thanks, Matt. Targa's reported quarterly adjusted EBITDA for the fourth quarter was $465 million, with dividend coverage of approximately 1.4 times. Our performance during the fourth quarter was driven by meaningful contributions from recently completed growth projects, particularly Grand Prix and favorable market conditions in both our logistics and transportation and gathering and processing segments. We also benefited from approximately $35 million of items that I would characterize as one-time in nature. These onetime fourth quarter benefits included adjustments to certain operating and general and administrative expense estimates and partner-related reimbursements. We will 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. For the 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 G&P equity volume hedges, are now included in G&P's segment gross margin, which we believe better aligns with how we evaluate the performance of our G&P segment. We also renamed our logistics and marketing segment to logistics and transportation to better align with the segment's 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 NGLs. Our increasing fee-based margin, complemented by our hedging program, provides us with cash flow stability. Additional related hedge disclosures, including 2021 percentages by commodity, can be found in our earnings supplement presentation. During the fourth quarter, we successfully issued $1 billion of 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 of available liquidity as of December 31.

On a debt compliance basis, TRP's leverage ratio at the end of the fourth quarter was approximately 4.3 times versus a compliance covenant of 5.5 times. Our consolidated reported debt-to-EBITDA ratio was approximately 5.5 times. We expect that our leverage profile will improve through time as we benefit from increasing margin contributions from assets recently placed in service or expected to be placed in service and lower growth capital spending. We are also continuing to assess selected asset sales to potentially accelerate the improvement of our leverage ratios. 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 $0.45 per gallon; crude oil prices to average $52 per barrel; Henry Hub natural gas prices to average $2 per MMBtu; and Waha natural gas prices to average $0.50 per MMBtu for the year. Beginning with our operational expectations in the gathering and processing segment, we estimate total Permian natural gas inlet volumes for 2020 to increase approximately 20%, on average, over 2019 Permian inlet volumes. 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 G&P natural gas inlet volumes for 2020 to increase approximately 10%, on average, over 2019 total field G&P inlet volumes. Moving to our downstream segment and beginning with Grand Prix. As Matt mentioned, we anticipate throughput into Mont Belvieu to average between 275,000 and 300,000 barrels per day in 2020. We also expect our fractionation volumes to increase year-over-year, largely driven by continued growth in Permian G&P volumes and the addition of Train seven and 8, which will also support the expectation of increasing year-over-year LPG export volumes. Shifting to our financial expectations. We estimate full year 2020 adjusted EBITDA to be between $1.625 billion and $1.75 billion, representing an 18% increase over 2019 based on the midpoint of our range. Full year dividend coverage is estimated to be around 1.2 times, assuming a flat $3.64 annual dividend. We would also like to provide some additional color on expectations for the first quarter of 2020 versus the first quarter sorry, versus the fourth quarter of 2019, particularly given the $35 million of onetime benefits in the fourth quarter.

We are 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 and G&A, we expect that first quarter 2020 adjusted EBITDA will be lower than fourth quarter 2019 adjusted EBITDA. First quarter 2020 operating expenses and G&A will be higher than the fourth quarter, largely from additional assets placed in service, higher ad valorem and higher insurance and benefits costs. Overall, in 2020, operating expenses are estimated to increase over 2019 given all the new assets in service and those coming online during this year while per unit operating expenses are expected to improve as we benefit from full year operations and increased operating leverage from our expansion projects 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 Pioneer's capital in West Tex for 2020 under the joint venture's nonconsent provisions and 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, our estimate for net maintenance capex for 2020 is approximately $150 million. For additional details related to our estimated 2020 outlook, please review our earnings supplement slides, which are posted on the Investor page of our website.

With that, I will now turn it back to Matt for a few closing remarks.

Matthew J. Meloy -- President

Thanks, Jen. In closing, we remain excited about Targa's long-term outlook. While there may be some uncertainty in global commodity markets related to the coronavirus and other macro factors, there is strength in what we can see for Targa's core business in 2020. And with that, operator, please open the line for questions.

Questions and Answers:

Operator

[Operator Instructions] The first question comes from the line of Tristan Richardson with SunTrust.

Tristan James Richardson -- SunTrust Robinson Humphrey -- Analyst

Good morning. Can you hear me?

Matthew J. Meloy -- President

Yes, we can.

Tristan James Richardson -- SunTrust Robinson Humphrey -- Analyst

Good morning. Thank you. Just real quick on the supply side, it seems like it's a theme you guys have talked about quantifying that could you quantify the general opportunity to reduce commodity exposure, whether it be from revenue floors or escalators or just outright contract renegotiations? Is there a way to frame up the potential there?

Matthew J. Meloy -- President

Well, I think you we had that included in our 80% all in fee-based margin for 2020. 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 spend capital at gas prices between 0 and $1 at Waha and low NGL prices, we're going to need some fee-based protection for that investment. And we've had good success with our producers who understand that and want us to continue to move their volumes. So we want to continue to be able to hook those up and move it to our plants. And so we're aligned from that perspective. And we've had a lot of good progress, I'd say, in 2019, and we're continuing that progress in 2020.

Tristan James Richardson -- SunTrust Robinson Humphrey -- Analyst

Helpful. And then just a follow-up on the downstream side. Can you talk about is the marketing margin opportunity in the downstream business enhanced now that Grand Prix is online? And is that opportunity reflected in the 2020 outlook? Or should if spread opportunities remain resilient, that could represent upside?

Matthew J. Meloy -- President

So I would say, partially as a result of 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 advantage of market, contango and other things for marketing opportunities. So I'd say as 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's not 0 in there, but it's a relatively modest expectation of some of those opportunities.

Jennifer R. Kneale -- Chief Commercial Officer

Which is generally consistent, Tristan, with how we try to forecast those elements of the business with conservatism and then helped to outperform as we move through the year 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.

Tristan James Richardson -- SunTrust Robinson Humphrey -- Analyst

Very helpful. Thank you guys very much.

Jennifer R. Kneale -- Chief Commercial Officer

Okay. Thank you.

Operator

And our next question comes from the line of Shneur Gershuni with UBS.

Shneur Z. Gershuni -- UBS Investment Bank -- Analyst

Good Morning guys Maybe just to follow-up or to clarify Tristan's first question, just with respect to fee-based. It seems like you've gotten there ahead of schedule. Adding the assets that are fee-based, I think, is what you said is the answer. But is adding the collars or just trying to adjust contracts and so forth part of what's getting there? Is there more opportunity to add incremental fee-based from here just from those types of renegotiation?

Matthew J. Meloy -- President

Sure. Yes, we have had, I'd say, 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. So it's really both, it's new contracts and existing, and we see the ability to be able to do more of that. So we're in various states with our producers and discussing with them how we can meet their needs and the fee-based protection that we're going to need to be able to continue to meet their needs.

Shneur Z. Gershuni -- UBS Investment Bank -- Analyst

Okay. And just to clarify. You talked about adding the assets, so is the assumption would be that if you took in the depth, your fee-based margin is going to higher today?

Jennifer R. Kneale -- Chief Commercial Officer

That's right. If we bought in the DevCos, then we would have additional fee-based margin as well.

Shneur Z. Gershuni -- UBS Investment Bank -- Analyst

Great. Just switching a little bit. I was wondering if we can 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. Or is this more a function of the fact that you added butane capacity and you're now better able to optimize requirement? And if so, does that mean we've had more refrigeration in the third quarter later this year that we can actually see further optimizations from there as well, too, of customer demand?

D. Scott Pryor -- President of Logistics and Marketing

Shneur, 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 dock from those quarters. Additionally, we saw a 17% increase, as we said in our script from 2018 to 2019, as we continue to bring projects online that really helped us debottleneck the facility. But that was butane-related, and the improvements we saw from third quarter to fourth quarter was predominantly around the butane molecule. So we benefited from the debottlenecking projects as a result of that. We view ourselves as pretty much highly contracted. As we roll through this year of 2020, we're going to benefit from increased volumes flowing through our systems all the way from our upstream through Grand Prix through our downstream assets as a whole, which will dictate opportunities to put more barrels across our dock.

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 as 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 FOB delays. And so FOB delays kind of take away from that opportunity, if you will, to maybe participate in a spot market because we want to make sure that we're performing on the contracts that we have across our dock today. So we have added new contracts on term-related business that will kind of come in toward the latter half of this year with the expansion project. And we've had great success in renewing all of our contracts across the dock. So we have we're highly contracted, and we feel very comfortable with the fees that we've done with the term-related business. And we're definitely going to benefit with increased volumes, though, flowing through our systems that will find their way all the way to the dock, which again provides flow assurance all the way back to the wellhead for the producers that are on our systems.

Shneur Z. Gershuni -- UBS Investment Bank -- Analyst

Okay. So that makes perfect sense. It sounds like it's ratable then. Just one final question, if I may. Given the amount of spare frac capacity that's out there in the market, is there a 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 and sort of see an opportunity for capex to step down and be delayed a little bit while you optimize other people's spare capacity?

Matthew J. Meloy -- President

Yes. So as we said in the call, Train seven will be highly utilized, and we have Train eight coming on. And when that comes on, it will give us some excess capacity in our system as we wait for future growth and as our volume commitments and MVCs from our customers kick in. I would say there is an opportunity with others also having fractionation coming on. We don't necessarily need to be just-in-time with frac Train 9, so it will give us a little bit of opportunity to be before we go ahead and green light and say, we need to add Train 9. I'd say another thing that we're benefiting from, and you saw this in Q4, is our fracs are running even better than anticipated. We call it Train 6, 100,000 barrel a day frac. If you look at what we the fractionation volumes for Q4, it looks like it was over nameplate. That's because we're able to run Train six at higher than 100,000. 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 assets and potentially looking elsewhere, we feel pretty good about being able to move Train nine a little bit further out.

Shneur Z. Gershuni -- UBS Investment Bank -- Analyst

Alright, perfect that make Sense Once again, congratulations on all you've been through, all of you, and Joe Bob.

Matthew J. Meloy -- President

Okay, thank you

Operator

And our next question comes from the line of Jeremy Tonet with JPMorgan.

Jeremy Bryan Tonet -- JP Morgan Chase & Co, -- Analyst

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 the G&P side and also Grand Prix. I was wondering if you could kind of 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 exit rate could look like? Just trying to, as we model further out, get a sense for how things are playing out there.

Jennifer R. Kneale -- Chief Commercial Officer

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 detail with 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, really, any of the other metrics that we've put out there this morning. I think, look, 2019 was a great year for our 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 assets coming online in 2020. I 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, with sort of the typical seasonality and freeze-offs that we generally have early in January. And you never really can 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.

Jeremy Bryan Tonet -- JP Morgan Chase & Co, -- Analyst

That's helpful. And then maybe just clarifying on Q1 being lower than Q4. Was that versus the kind of the $430 million number that excludes some of those one-time items? Or is that versus the $465 million? Just trying to quantify the impact there.

Jennifer R. Kneale -- Chief Commercial Officer

If you go back and have a chance to reread the script, we tried to provide a little bit more color in there. So it's really it's versus the $465 million. 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 G&A will be higher in Q1 than it was in the fourth quarter as well, consistent with the expectation that 2020 opex and G&A will be higher as well than 2019.

Jeremy Bryan Tonet -- JP Morgan Chase & Co, -- Analyst

That's helpful. And just a last one, if I could. It seems like you've done a really good job recently of kind of divesting some non-core assets to help accelerate deleveraging there. And just wondering, I know you're not going to tell us what assets you're selling, but just wondering, any more could share on the thought process? If I look around the portfolio and I see ownership in something like GCX and I see it's nice to have the capacity on the pipe, but I don't know if you necessarily need to own the pipe anymore now that that's built. Just wondering, what are the types of opportunities you guys see to kind of raise some more some funds there?

Jennifer R. Kneale -- Chief Commercial Officer

The only asset process, asset sale process that we currently have under way is the one related to the Permian Midland 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 sort of Permian aggregation of supplier, G&P aggregation of supply to transport to frac, to volumes available for exports, then we will consider whether there's a third-party that would be a more likely owner of the asset than we are.

Jeremy Bryan Tonet -- JP Morgan Chase & Co, -- Analyst

That's all for me. Thanks for taking my question. Okay, thank you.

Operator

And our next question comes from the line of Michael Blum with Wells Fargo.

Michael Jacob Blum -- Wells Fargo Securities -- Analyst

Great. Good morning, everybody. I just have 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 is something changing, either with your own plans or third-party volumes that's causing those numbers to keep moving higher?

Matthew J. Meloy -- President

Michael, I'd say it's a number of factors. I'd say to start, it was probably a little conservative when we initially gave. And it was a while ago we gave that estimate of 250,000 barrels at some point in 2020. And then we just left that there, not wanting to update that, wanted to actually get it operating before we revise our guidance and wanted to show it performing. So I'd say part of it was conservatism, but I'll also say we saw really strong volume growth across our Permian system. We outperformed our volume guidance in 2019. That provided more NGLs on our system. I'd say third parties, we've had good success in attracting others down the pipe as well has been a benefit versus our original expectations when we gave that original guidance. And we're also going through all of our plants and optimizing. So we're sending engineering teams out to our plants and trying to squeeze more NGLs, increase recoveries, and you're seeing that in our numbers as well. So we're trying to enhance recoveries on these plants that we're putting in as well. So it's a number of factors.

Michael Jacob Blum -- Wells Fargo Securities -- Analyst

Okay, great. And then second question is, so your obviously, your EBITDA is trending very nicely. Can you just give your latest thoughts on DevCo and the timing of when you may start buying some of that back in?

Jennifer R. Kneale -- Chief Commercial Officer

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 into 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 four 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 in $100 million increments, that's a fine assumption as well. So I think either of those are consistent 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.

Michael Jacob Blum -- Wells Fargo Securities -- Analyst

So thanks for.

Jennifer R. Kneale -- Chief Commercial Officer

Thank you.

Operator

And our next question comes from the line of Spiro Dounis with Credit Suisse.

Spiro Michael Dounis -- Credit Suisse AG -- Analyst

Hey, morning, everyone.First question, just a follow-up on the 2020 EBITDA guidance. A lot of us just trying to reconcile the strength in that guide, and it 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 could just walk us through some of the other major variables that flex that up and down.

Jennifer R. Kneale -- Chief Commercial Officer

I think that for us, the guidance 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 our assets to hopefully outperform in 2020, but there's also uncertainty related to prices, the coronavirus, 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.

Spiro Michael Dounis -- Credit Suisse AG -- Analyst

Understood. And then that kind of segues into the next question, just around hedging and sort of getting ahead of some of that risk. So just a 2-part question here. First one, just a clarification on that, call it, $1.70-ish hedge price you've got in there. Is that just Henry hub or you sort of put in Waha component to that? And then second, are you hedging today in this market right now or your model is telling you to kind of wait for a shorter entry point?

Jennifer R. Kneale -- Chief Commercial Officer

On the hedges, that's reflective of the aggregate hedges that we've entered into, so that includes all our basis hedges. And I think that you'll see us continue to hedge when 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 than we ideally would like to be at this point, and that's really just a result of ethane prices, which is the largest part of our 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 of our Board.

Operator

And our next question comes from the line of Colton Bean with Tudor, Pickering, Holt.

Colton Westbrooke Bean -- Tudor, Pickering, Holt & Co. -- Analyst

So just to follow-up on Scott's commentary around the LPG exports. It looks like the disclosure there implied a slight shift in C3, C4 mix. I think it's 75% propane now, at least on a trailing basis. Is there any potential to push more volumes into butane-weighted market like India to increase the utilization of that butane-loading capabilities over the course of the year?

D. Scott Pryor -- President of Logistics and Marketing

Colton, I would say that the lifters 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 at. A lot of that growth, obviously, is in the east, in the Asian marketplaces. And we've talked about it in the past, with the developing countries, a lot of that is both the propane and 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 perhaps see increased volume percentage of butanes going across our dock. And hence, the reasons why we put our debottlenecking projects in place.

Colton Westbrooke Bean -- Tudor, Pickering, Holt & Co. -- Analyst

Got it. And then, Matt, I think you touched on some of the moving pieces on both Train nine and the timing of the next Permian plant beyond Gateway. As we look at that and try to reconcile versus that prior $1.8 billion of capital for 2020 and 2021, any other considerations being loosed in?

Matthew J. Meloy -- President

Yes. I mean, just to bring that $1.8 billion to current, yes, that was given over a year ago when we added the Bluestem, which was $200,000. And then, in our call last summer, we mentioned that our processing plants, there were three of them in there, and they were about $30 million higher relative to the original expectations, so that would bring it to kind of that $2.1 billion number. And 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 success we're having out there. We've indicated likely another Midland plant here. Timing is still uncertain. I think with Peregrine coming on and Falcon just coming on, we'll probably have a little more timing and a little more runway on the Delaware side when we add a plant, but it's just going to depend on how volumes ramp this year. But as you look to 2021, it's likely going to be processing plants, maybe potential fractionation spending on Train 9, depending on that timing. With our export dock going in here, we should be OK there for a while. So it's going to be regular kind of normal course capex for 2021.

Colton Westbrooke Bean -- Tudor, Pickering, Holt & Co. -- Analyst

That, appreciate

Matthew J. Meloy -- President

Thank you.

Operator

And our last question comes from the line of Sunil Sibal with Seaport Global Security.

Sunil K. Sibal -- Seaport Global Securities LLC -- Analyst

Yeah, hi, Good morning, guys. A couple of questions from me. Starting out with the capex, I think you indicated that 2019 came out like $120 million below what you had guided to, and 2020 capex guidance is maintained. So I was curious, is it some change in scope of projects? Or you're finding cost to be coming out lower on all the projects?

Matthew J. Meloy -- President

Yes. I would say it's really as our as we continue to focus on capital discipline and scrutinize every project and just push our organization to focus capital in and along the core business that we talked about, gathering and processing, where it's tied into Grand Prix, into fractionation and export. So I think just as we increase the level of scrutiny, looking at our projects, being very careful and diligent before we're green lighting anything new, we were able to come in under for 2019, and that didn't roll over, frankly, into changing our 2020 estimates. So I think it's just continued capital discipline, operating costs, G&A, kind of everything we're pushing through as an organization, we're starting to see some of those positive, positive results.

Sunil K. Sibal -- Seaport Global Securities LLC -- Analyst

Okay. And then just wanted to reconcile with your guidance on the Grand Prix NGL volumes. It seems like from what you did in the fourth quarter, for full year 2020, you're expecting a modest 10-percent-or-so uptake. However, on the frac side, you also commented that you expect the frac, the new frac, to start fairly full. I was kind of curious, how do we reconcile those 2? And also, if you could talk anything about your assumptions on ethane rejection going into 2020, if there are any significant assumptions made there.

Matthew J. Meloy -- President

Sure. Well, I guess, I'll start with the for fractionation Train seven being full, so we have been running over nameplate. We have inventory, right? So we're going to be working off existing we have a lot of storage capacity, but we're going to 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, they're going to be underpinned. We'll 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 there with the Peregrine coming on. And then we have the gateway coming on, it's not coming until really the fourth quarter. So as those we expect that to be highly utilized at start-up, but that's going to be coming on in the fourth quarter. Then it's going to be our third-party volumes on Grand Prix. We do expect some growth there. We have that baked into our forecast. And then I'd say the other offset, which I didn't mention before, we did benefit in late 2019 from some shorter-term transportation-only agreements or shorter-term T&F agreements last year. We have, I'd say, conservative assumption related to kind of non-contracted volumes in 2020. Are there going to be opportunities to move barrels for some of our customers, either midstream or producers on a shorter-term basis? I think there will be some of those opportunities, but we didn't factor those opportunities into our 2020 numbers.

Sunil K. Sibal -- Seaport Global Securities LLC -- Analyst

Okay, got it. And then one housekeeping for me. So I think you guys touched upon the $35 million tailwinds that you got on opex and other items in Q4. Were those kind of focused in or concentrated at any particular business unit or in any particular geography?

Jennifer R. Kneale -- Chief Commercial Officer

Sunil, this is Jen. We talked about the fact that, that was really made up of a combination of opex estimates, G&A 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 in actual than 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 more corporate level than specific to any individual business unit.

Sunil K. Sibal -- Seaport Global Securities LLC -- Analyst

Congrats on a really good quarter.

Operator

This concludes today's question-and-answer session. I would like to turn the call back to the Senior Director of Investor Relations, Sanjay Lad, for any further remarks.

Sanjay Lad -- Senior Director, Finance and Investor Relations

Great. Well, 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.

Operator

[Operator Closing Remarks]

Duration: 44 minutes

Call participants:

Sanjay Lad -- Senior Director, Finance and Investor Relations

Joe Bob Perkins -- Chief Executive Officer

Matthew J. Meloy -- President

Jennifer R. Kneale -- Chief Commercial Officer

D. Scott Pryor -- President of Logistics and Marketing

Tristan James Richardson -- SunTrust Robinson Humphrey -- Analyst

Shneur Z. Gershuni -- UBS Investment Bank -- Analyst

Jeremy Bryan Tonet -- JP Morgan Chase & Co, -- Analyst

Michael Jacob Blum -- Wells Fargo Securities -- Analyst

Spiro Michael Dounis -- Credit Suisse AG -- Analyst

Colton Westbrooke Bean -- Tudor, Pickering, Holt & Co. -- Analyst

Sunil K. Sibal -- Seaport Global Securities LLC -- Analyst

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