Targa Resources Cuts One-Third Of Budget Amid Record Low Oil Prices
Houston natural gas pipeline operator Targa Resources is cutting nearly one-third of its budget for new projects amid record low commodity prices.
In a Wednesday afternoon statement, Targa reported that the company is cutting $400 million from its 2020 capital expenditure budget. Specializing in natural gas gathering pipelines that move natural gas from oil wells to processing plants and larger pipelines, the company plans to spend between $1.2 billion and $1.3 billion on new projects this year.
The new figures mark a 32 percent drop from the company’s previously announced budget. Targa also reduced its first quarter dividend from 91 cents per share down to 10 cent per share, a move that is expected sting stockholders but save the company an estimated $755 million that will be used to pay down debt.
“In this uncertain environment, where we are dealing with the combination of significantly lower commodity prices and lower expected activity levels given recent producer actions, compounded by the evolving impacts of the coronavirus pandemic, we believe that the prudent decision for Targa is to move swiftly in utilizing levers available to us to strengthen our balance sheet,” Targa Resources CEO Matthew Meloy said in a statement.
West Texas Intermediate crude oil closed trading at $20.37 per barrel on Wednesday afternoon, a price not seen since Feb. 2002. Natural gas on Louisiana’s Henry Hub is trading at a four-year low of $1.63 per million British thermal units.
Founded in 2003 and headquartered in Houston, Targa has nearly 2,700 employees across the United States. With more than 28,900 miles of natural gas gathering pipelines in shale plays across the United States, the company posted a $334 million loss on $8.7 billion of revenue in 2019.