• Comparable EBITDA: Increased by 6% compared to the third quarter of last year.
• Net Capital Expenditures: Expected to be between $7.4 billion and $7.7 billion, a reduction from the initial outlook of $8 billion to $8.5 billion.
• Asset Sales: Completed asset sales totaling $1.6 billion in 2024.
• Debt to EBITDA Target: On track to achieve a target of 4.75 times by year-end 2024.
• Comparable Earnings: $1.1 billion, a 4% increase from the third quarter of 2023.
• 2024 EBITDA Outlook: Expected to be at the upper end of the $11.2 billion to $11.5 billion range.
• Dividend: Fourth quarter dividend declared at $82.25 per common share.

• Warning! GuruFocus has detected 9 Warning Signs with TRP.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• TC Energy Corp (NYSE:TRP) reported a 6% increase in comparable EBITDA for the third quarter compared to the same period last year, positioning the company well for the rest of 2024.
• The company successfully completed the spinoff of its Liquids Pipelines business into South Bow, marking a strategic milestone.
• TC Energy Corp (NYSE:TRP) has placed $1.2 billion of projects in service year-to-date and expects to place approximately $7 billion of assets into service in 2024.
• The company has reduced its 2024 net capital expenditures outlook to between $7.4 billion and $7.7 billion, an 8% reduction from the initial outlook, enhancing financial strength and flexibility.
• The Southeast Gateway project is progressing well, with an updated estimated capital cost 11% lower than the initial estimate, contributing to overall capital program reduction.

Negative Points

• TC Energy Corp (NYSE:TRP) expects its 2024 earnings per common share to be lower than in 2023, primarily due to non-controlling interest adjustments from asset divestitures.
• The liquid segment experienced a decrease in performance due to lower margins for marketing activities, despite higher volumes on the US Gulf Coast system.
• The company faces ongoing discussions and uncertainties regarding indigenous economic participation in the NGTL system.
• There is a need to manage customer concentration risk and overall exposure in Mexico, which may require bringing in partners or reducing exposure.
• Despite strong project execution, the company remains cautious about increasing its capital program size until it builds more cushion below the 4.75 debt to EBITDA metric.

Q & A Highlights

Q: Can you break down the demand you're seeing from coal to gas switching versus higher demand from power plants versus behind the meter generation? Which category represents the largest piece of the demand? A: Stanley Chapman, Executive Vice President and Chief Operating Officer, Natural Gas Pipelines, explained that the largest demand driver is LNG exports, expected to triple by 2035. Power generation demand is also increasing due to coal retirements and data centers. TC Energy sees about 13 BCF a day of growth opportunities across various stages of execution, development, or origination.

Q: Do you view yourself as CapEx constrained where you need to high-grade projects? How do you think about the long-term CapEx trajectory given all these opportunities? A: Francois Poirier, President and CEO, stated that TC Energy is entering an organic deleveraging phase and is confident in allocating $6 billion to $7 billion of capital through the end of the decade. The company is focused on building cushion below the 4.75 debt-to-EBITDA target before considering increasing the capital program size.

Q: Can you provide more color on the cost optimization and capital expenditure front? A: Stanley Chapman noted that the reduction in capital guidance from $8 billion to $8.5 billion to $7.4 billion to $7.7 billion is due to focus initiatives and efficient project execution. About $270 million in savings are tied to focus initiatives, with additional savings from procurement and construction efficiencies.

Q: What drove the project cost reduction for Southeast Gateway, and is there a chance for an earlier commercial service start? A: Stanley Chapman explained that cost savings were achieved through efficient procurement and construction, releasing additional contingency. The project is on track for Q1 2025 in-service, with ongoing discussions with CFE about potential accelerated completion and payment.

Q: How are you balancing the opportunity set in Mexico versus managing total business exposure in the region? A: Francois Poirier mentioned that while there are growth opportunities in Mexico, TC Energy plans to reduce exposure by bringing in partners or other means. The goal is to manage customer concentration risk and Mexico exposure, aiming to reduce it from 15% of consolidated EBITDA.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.