* Shares close at $24.70, 12.3 pct above IPO price
* Shares trading on NYSE under symbol "TRGP"
* Oil, natgas price disparity good for midstream cos
* Targa, Kinder Morgan going public as corporations
* Corps can be more attractive than LPs as investments
(Updates with closing price)
By Clare Baldwin and Anna Driver
NEW YORK/HOUSTON, Dec 7 Shares of natural gas
company Targa Resources Corp (TRGP.N) closed 12.3 percent above
their initial public offering price on Tuesday as investors bet
on natural gas and a more familiar corporate structure.
The shares opened at $24.10 and rose as high as $25.20
before retreating slightly to close at $24.70 in their stock
market debut. The IPO price was $22.
Targa is controlled by private equity firm Warburg Pincus.
It is going public as a corporation but owns general and
limited partner interests, including incentive distribution
rights, in Targa Resources Partners NGLS.N which has access
to natural gas reserves in the Permian Basin, Fort Worth Basin
and onshore regions of the Louisiana Gulf Coast and the Gulf of
Targa Resources Partners provides midstream natural gas and
natural gas liquid services in the United States.
More and more U.S. exploration companies are drilling in
areas where gas has a higher liquids content, in a bid to take
advantage of the price disparity between oil and natural gas.
The liquids, which include ethane and propane, can be stripped
from the gas and sold for more than "dry gas."
Gas gathering, storage and processing companies, or
midstream companies like Targa, could be well-positioned to
benefit from higher natural gas liquids production.
Targa's structure as a corporation rather than a limited
partnership makes it easier for some institutions and retail
investors to buy in, said Morningstar midstream energy analyst
Jason Stevens. Limited partnerships have tax advantages but
operate under a different tax structure -- requiring different
back-office support -- and are not always liquid enough for all
investors, Stevens said.
Carlyle-backed [CYL.UL] pipeline company Kinder Morgan is
also planning to go public as a corporation. The company in
November filed to raise up to $1.5 billion in an IPO.
"The underlying assets are supporting stable cash flows.
Those cash flows go into paying a pretty healthy distribution
at the MLP level. Targa will pay a dividend based off of those
cash flows," Stevens said.
Targa plans to pay an annual dividend of $1.03. It said in
its prospectus that it expects to increase that dividend if its
business ventures are successful.
Targa raised 31 percent more than expected in its IPO as it
increased both the number of shares sold and the price.
Investors in the company sold 16.4 million shares for $22
each, raising about $360.3 million. They had been expected to
sell 13.8 million shares for $19 to $21 each.
Underwriters on the IPO were led by Barclays Capital,
Morgan Stanley, Bank of America Merrill Lynch and Deutsche Bank
Securities. The shares trade on the New York Stock Exchange
under the symbol "TRGP."
(Reporting by Clare Baldwin in New York and Anna Driver in
Houston; Editing by John Wallace, Matthew Lewis and Richard