Oil and natural gas prices have been falling for almost a year now, and the decline in prices has seriously hurt the top and bottom lines of many oil and gas producers.Unfortunately for these producers, the prices have continued to decline, and future expectations have drastically fallen as well.One of these producers is Targa Resources (TRGP – Snapshot Report), and they are the Zacks Bear of the Day.
This Zacks Rank #5 (Strong Sell) owns general and limited partner interests in Targa Resources Partners LP, engaged in providing midstream natural gas and natural gas liquid services in the United States. The Company operates its business through two business segments: Natural Gas Gathering and Processing and NGL Logistics and Marketing. The Natural Gas Gathering and Processing segment includes assets used in the gathering of natural gas produced from oil and gas wells and processing this raw natural gas into merchantable natural gas by extracting natural gas liquids and removing impurities.NGL Logistics and Marketing segment is engaged in gathering and storing; fractionating, storing, and transporting of finished NGLs.
In their most recent earnings report, the company saw year over year net income attributable to Targa Resource Partners fall by -62.2%, and EBITDA decline by -97.4% over the same time period.As for Targa Resources, the arm saw net income fall -58.6% from the year ago quarter, and net income per diluted common share fell -68.5%.
As you can see in the graph below, the price and future expectations have significantly declined from 2015.
Declining Estimates
Due to weakening natural gas prices, and the companies poor Q3 performance, expectations over the past 30 days have declined for Q4 15, Q1 16, FY 15, and FY 16; Q4 15 fell from $0.45 to $0.43, Q1 16 dropped from $0.32 to -$0.06, FY 15 slipped down from $1.04 to $0.96, and FY 16 plummeted from $1.62 to $0.10.
Bottom Line
According to the Henry Hub Natural Gas Spot Price estimates, market prices declined significantly in 2015, and are not expected to reach 2014 levels in the near term; in 2014 the average spot price was $4.37 (dollars per million Btu), which fell to $2.62 in 2015.Going forward, the spot price is estimated to only improve $0.02 to $2.64 in 2016, but then jump up to $3.22 in 2017.
