Targa Resources Q2 2025 Earnings Report

Targa Resources EPS Results

• Actual EPS: $2.87
• Consensus EPS: $1.95
• Beat/Miss: Beat by +$0.92
• One Year Ago EPS: N/A

Targa Resources Revenue Results

• Actual Revenue: $4.26 billion
• Expected Revenue: $4.82 billion
• Beat/Miss: Missed by -$561.04 million
• YoY Revenue Growth: N/A

Targa Resources Announcement Details

• Quarter: Q2 2025
• Date: 8/7/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 11:00AM ET

Targa Resources (NYSE:TRGP) Corp., together with its subsidiary, Targa Resources Partners LP, owns, operates, acquires, and develops a portfolio of complementary domestic midstream infrastructure assets in North America. It operates in two segments, Gathering and Processing, and Logistics and Transportation. The company is involved in gathering, compressing, treating, processing, transporting, and selling natural gas; storing, fractionating, treating, transporting, and selling natural gas liquids (NGL) and NGL products, including services to liquefied petroleum gas exporters; and gathering, storing, terminaling, purchasing, and selling crude oil. It is also involved in the purchase and resale of NGL products; and sale of propane, as well as provision of related logistics services to multi-state retailers, independent retailers, and other end-users. In addition, the company offers NGL balancing services; and transportation services to refineries and petrochemical companies in the Gulf Coast area, as well as purchases, markets, and resells natural gas. As of December 31, 2023, it leased and managed approximately 605 railcars; 137 tractors; and 6 vacuum trucks and 2 pressurized NGL barges. Targa Resources Corp. was incorporated in 2005 and is headquartered in Houston, Texas.

Targa Resources Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record Q2 volumes in the Permian (6.3 Bcf/d, +11% YoY) and NGL transportation/fractionation (961k & 969k bbl/d) with continued ramp into July and August bolster growth outlook for 2025 and 2026.
• Positive Sentiment: Multiple growth projects ahead of schedule including Pembroke II, Bull Moose II, Bull Run pipeline extension, and Mont Belvieu expansions (Train 11 & LPG capacity) to enhance processing and export capabilities.
• Neutral Sentiment: Q2 adjusted EBITDA rose 18% YoY to $1.163 billion; full-year 2025 EBITDA guidance maintained at $4.65–4.85 billion, with $3.5 billion liquidity and 3.6× leverage comfortably within targets.
• Positive Sentiment: Capital allocation remains balanced with $324 million of share repurchases in Q2, a new $1 billion buyback authorization, and a continued target to return 40–50% of cash flow via dividends and opportunistic repurchases.
• Neutral Sentiment: Leadership update: Scott Pryor will retire in March 2026 and Ben Branstetter will succeed him as President of Logistics & Transportation after eight years in various Targa roles.

Presentation

[Operator]

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Targa Resources Corporation Second Quarter twenty twenty five Earnings Webcast and Presentation. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. At this time, I would like to turn the conference

[Operator]

Tristan Richardson, Vice President of Investor Relations. Sir, please begin.

[Tristan Richardson, VP - Investor Relations at Targa Resources]

Thank you, Howard. Good morning, and welcome to the second quarter twenty twenty five earnings call for Targa Resources Corp. The second quarter earnings release, along with a supplement presentation that accompany our call, are available on our website at targaresources.com. Additionally, an updated investor presentation has also been posted to our website. Statements made during this call that might include Targa's expectations or predictions should be considered forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934.

[Tristan Richardson, VP - Investor Relations at Targa Resources]

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 today will be Matt Molloy, Chief Executive Officer Jen Neal, President and Will Byers, Chief Financial Officer. Additionally, members of Targa's senior management will be available for Q and A, including Pat McDonnie, President, Gathering and Processing Scott Pryor, President, Logistics and Transportation Bobby Mararo, Chief Commercial Officer and Ben Branstetter, Senior Vice President, Downstream. I'll now turn the call over to Matt.

[Matthew Meloy, CEO & Director at Targa Resources]

Thanks, Tristan, and good morning. I would like to begin by announcing that after thirty five years with Targa and its predecessor companies, Scott Pryor, our President of Logistics and Transportation, has shared with us his intent to retire effective 03/01/2026. Scott has been a critical part of the Targa team and his leadership, work ethic, dedication, integrity, and focus on serving our customers has made it a pleasure to work alongside Scott. On behalf of our board, the leadership team, all of Targa's employees and our customers, I'd like to thank you, Scott. Following Scott's retirement, Ben Brandstetter will succeed Scott as President of Logistics and Transportation.

[Matthew Meloy, CEO & Director at Targa Resources]

Ben has been with Targa for the past eight years in various leadership roles across corporate development and our downstream group. Scott and Ben have worked closely together for years and will work together over the next many months in transition and we look forward contribution to Targa in his new role. Turning to the second quarter, we reported strong results with record Permian volumes, record NGL transportation volumes and continued execution across our footprint, setting us up well for the balance of the year and providing a lot of momentum looking ahead. We saw a strong ramp in volumes in the second quarter as gas on our Permian system increased by about a processing plant worth of volumes during the quarter, up about two seventy million cubic feet per day, and we are seeing that strength continue. In July, our volumes were up another two fifty million cubic feet per day, meaning we added a plant worth of gas in the second quarter and another plant worth of gas in July.

[Matthew Meloy, CEO & Director at Targa Resources]

And we are seeing that strength continue so far in August. There has been movement in the broader Permian rig count this year, which has been a focus for investors. Over the last four months, while the Permian rig count has softened, the number of rigs on our system is largely unchanged. While there is a lot of noise and volatility in the macro environment, ongoing discussions with our producers point to continued strong growth on our system for the remainder of 2025 and into 2026 and beyond. Given the strong ramp in volumes we're seeing and our expectations for the remainder of the year, our outlook for 2026 volume growth is as strong now as it was at the beginning of the year with the potential for it to be stronger by the time we exit this year.

[Matthew Meloy, CEO & Director at Targa Resources]

We have also added some new material to our investor presentation, which lend support for our continued growth outlook. We have highlighted some factors that demonstrate Targa's differentiated growth profile. Over the past five years, Permian gas production has grown at a higher rate than crude production due to the general increase in gas to oil ratios across the basin over time. While year over year growth in crude production from the Permian has averaged 8% per year over the past five years, Associated gas growth has averaged 13% per year. And Targa's volume growth has outperformed crude and gas production over that timeframe.

[Matthew Meloy, CEO & Director at Targa Resources]

Our year over year volume growth has averaged 17%, 4% higher than associated gas and 9% higher than crude per year. Looking forward, third party forecasts call for 7% growth in Permian associated gas over the next five years. With this strong outlook coupled with Targa's footprint across the best rock in the basin and world class producers, are well positioned for meaningful growth over the long term. There are a lot of tailwinds for Targa. We move a lot of natural gas to end markets and the demand for natural gas is expected to continue to increase.

[Matthew Meloy, CEO & Director at Targa Resources]

We transport and fractionate a lot of natural gas liquids to domestic and international end markets and the demand for NGLs is expected to continue to increase. Our customers across our value chain are very good at what they do and we think will continue to create meaningful growth opportunities for our company. Our conviction is demonstrated by $324,000,000 of common share repurchases during the second quarter across a volatile quarter. Our focus continues to be on increasing adjusted EBITDA and increasing common dividend per share and declining share count, while maintaining our strong investment grade balance sheet. We believe that our premier Permian asset footprint, integrated wellhead to water system and strong financial position will allow us to continue to invest in integrated growth opportunities, generate attractive returns and return increasing capital to our shareholders over the long term.

[Matthew Meloy, CEO & Director at Targa Resources]

Before I turn the call over to Jen to discuss operations in more detail, I would like to thank the Targa team for their continued focus on safety and execution while continuing to provide best in class service and reliability to our customers.

[Jennifer Kneale, President at Targa Resources]

Thanks, Matt. Good morning, everyone. Let's talk about our operational results in more detail. Starting in the Permian, our natural gas inlet volumes averaged a record 6,300,000,000 cubic feet per day in the second quarter, an increase of 11% versus a year ago and a strong rebound from the first quarter, which was impacted by severe weather events. In the Permian Midland, our new Pembroke II plant is currently in startup, ahead of schedule and much needed as our Midland system continues to run at very high utilization.

[Jennifer Kneale, President at Targa Resources]

Our East Pembroke and East Driver plants remain on track to begin operations in the second quarter and 2026. In Permian Delaware, our Bull Moose II plant is ahead of schedule and is now expected to begin operations in the 2025. Our Falcon II plant remains on track to begin operations in the 2026. We expect our processing infrastructure currently under construction will be much needed at startup. Lastly, in the Delaware, we recently completed our seventh AGI well, further increasing our leading gas treating capabilities across the basin.

[Jennifer Kneale, President at Targa Resources]

Looking out further, we are ordering long lead items for additional Permian plants as we prepare for growth in 2027 and beyond. As production continues to grow, Targa is increasingly moving more and more natural gas for our customers across the Midland And Delaware Basins. To further enhance connectivity and reliability, we are announcing an extension of our Bull Run natural gas pipeline system in the Delaware Basin. The 43 mile, 42 inches intrastate natural gas pipeline extension of Bull Run will enhance gas takeaway by increasing connectivity between our Permian Delaware system and the Waha hub. The extension will add further flow assurance for our customers across the Delaware and increase access to important residue markets.

[Jennifer Kneale, President at Targa Resources]

It is scheduled to be in service in the 2027. On the Blackcomb and Traverse natural gas pipelines, where we have a 17.5% equity interest, Blackcomb remains on track and is fully subscribed. And the planned capacity of Traverse was recently upsized to 2,500,000,000 cubic feet per day from 1,750,000,000 cubic feet per day based on strong customer demand. Shifting to our Logistics and Transportation segment, Targa's NGL pipeline transportation volumes averaged a record 961,000 barrels per day and fractionation volumes averaged 969,000 barrels per day during the second quarter. Our fractionation volumes were meaningfully impacted by our planned turnaround at our fractionation complex in Mont Belvieu, which reduced our capacity for two thirds of the second quarter.

[Jennifer Kneale, President at Targa Resources]

With a turnaround complete in early June and increasing GMP supply, our fractionation volumes are now more than 1,000,000 barrels per day. Given the anticipated growth in our Permian GMP business and corresponding announced plant additions, our outlook for NGL supply growth on our system remains strong. Looking at our downstream projects currently underway, Delaware Express, our intra basin NGL pipeline expansion is ahead of schedule and is now expected to be complete in the 2026. Our next fractionator in Mont Belvieu, Train 11, is also ahead of schedule and is expected to be complete in the 2026. Train 12 remains on track for the 2027.

[Jennifer Kneale, President at Targa Resources]

Turning to our LPG export business at Galena Park, our loadings averaged 12,800,000 barrels per month during the second quarter. Despite shifting trade policy and a lot of macro headlines, our docks remained effectively full and we are seeing continued strength in cargo loadings. Our LPG export debottleneck expansion is expected to be in service in the fourth quarter, and we remain on track with our larger LPG export expansion, which will increase our loading capacity to approximately 19,000,000 barrels per month and is scheduled to be online in the 2027. To build on Matt's earlier comments, even with commodity price volatility and headlines around global trade, our results highlight our resilient business model. We are well positioned operationally and believe that our leading customer service driven wellhead to water strategy puts us in excellent position to continue to execute for our shareholders.

[Jennifer Kneale, President at Targa Resources]

I will now turn the call over to Will to discuss our second quarter results, outlook and capital allocation. Will?

[William Byers, CFO at Targa Resources]

Thanks, Jen. Turga's reported adjusted EBITDA for the second quarter was 1,163,000,000 an 18% increase from a year ago. The increase was attributable primarily to higher Permian volumes generating higher margin across our G and P and L and T segments and contribution from 100% ownership of our Badlands assets. Adjusted EBITDA was roughly flat for the first quarter. Record Permian and NGL transportation volumes were offset by lower marketing margin, sequentially weaker commodity prices, and the impact of our planned turnaround at our fractionation complex in Mont Belvieu.

[William Byers, CFO at Targa Resources]

2025 is progressing on track with a strong first half and our continued expectation of increasing Permian volumes for the remainder of the year. We continue to estimate full year 2025 adjust EBITDA to be in a range of $4,650,000,000 to $4,850,000,000 In June, we successfully completed a 1,500,000,000 debt offering comprised of $750,000,000 of 4.9% notes due 2030 and $750,000,000 of 5.65% notes due 02/1936. We used the net proceeds from the debt issuance to reduce borrowings on our commercial paper program, and in July to retire 705,000,000 of 6.5% notes due 2027. In July, we also extended the maturity of our accounts receivable securitization facility to 08/31/2026. At the end of the second quarter, we had $3,500,000,000 of available liquidity and our pro form a consolidated leverage ratio was 3.6 times, comfortably within our long term leverage ratio target range of three to four times.

[William Byers, CFO at Targa Resources]

With projects tracking ahead of schedule, our announced bull run extension in the Permian Delaware, and spending on long lead items for additional Permian gas processing expansions, we now expect net growth capital spending for 2025 to be approximately $3,000,000,000 and we continue to estimate 2025 net maintenance capital spending of $250,000,000 With the recently enacted tax legislation and its return of 100% bonus depreciation, we expect we will no longer be subject to the corporate alternative minimum tax or CAMT in 2026 and will defer becoming a material cash taxpayer beyond 2027. As we continue to assess the benefit to Targa, we could see deferral of cash taxes further out depending on a variety of factors in the out years. Shifting to capital allocation, our focus is more of the same from target, maintain our strong investment grade balance sheet, continue to invest in high returning integrated projects, and return an increasing amount of capital to our shareholders. During the second quarter, we repurchased $324,000,000 in common shares at an average price of $165.86 per share, continuing our track record of executing opportunistic share repurchases as part of our all of the above capital allocation strategy. This week, our board of directors also authorized a new $1,000,000,000 common share repurchase program.

[William Byers, CFO at Targa Resources]

This brings total available share repurchase capacity to approximately $1,600,000,000 as of 06/30/2025. This authorization adds to our flexibility and is purely a continuation of our existing program. We remain steadfast in our strategy of continuing to target returning 40% to 50% of adjusted cash flow from operations to equity holders over time through a growing combination of dividends and opportunistic share repurchases. We are in excellent financial shape with a strong and flexible balance sheet, and we are well positioned to continue to create value for our shareholders. And with that, I will turn the call back to Tristan.

[Tristan Richardson, VP - Investor Relations at Targa Resources]

Thanks Will. For Q and A, we ask that you limit to one question and one follow-up and reenter the queue if you have additional questions. Operator?

[Operator]

Our first question or comment comes from the line of Spiro Dounis from Citi. Your line is open, sir.

[Spiro Dounis, Director at Citigroup]

Thanks, operator. Good morning, everybody. First question, Matt, I wanted to go back to your comments in the prepared remarks just around your ability to historically outperform the basin. The tone of this call is seemingly starkly different than a lot of your peers this season. And so I just want to get maybe your latest thoughts on your ability to keep outperforming here, why you think you'd be able to consistently do that, and if you're willing to maybe put a number on what you think that outperformance might look like going forward.

[Matthew Meloy, CEO & Director at Targa Resources]

Yes. Hey Spiro, good morning. We have really seen over the years the volumes on our Permian system continue to grow. It feels like we have not only the largest footprint, but footprint that's really over some of the best rock in both the Midland and the Delaware Basin. So I think it's a combination of having the largest footprint where we can offer redundancy and reliability to our customers, which is highly attractive to them.

[Matthew Meloy, CEO & Director at Targa Resources]

And just being over some of the best rock in the area. So I think it's a combination of all of those things. And we have, I would say our producer set are some of the largest, most active producers that haven't really varied their drilling plans as maybe much as some others have. So I think it's a combination of all of those things and it just gives us continued confidence, not only in the back half of this year, but as we look out in 2026 and beyond, the same factors that have allowed us to outperform the basin over the last several years, those attributes are still in place as we look forward.

[Spiro Dounis, Director at Citigroup]

Great, that's great to hear. Second question, just maybe moving to NGL margins. It's another common theme this quarter that seems to be in focus again. I think there's a lot of concern about overbuild, maybe narrower export ARBs. And so there seems to be kind of a pointing down of the margin environment going forward.

[Spiro Dounis, Director at Citigroup]

Just curious if you could just update us maybe over the medium term, how you see the outlook and if there's any risk to margins queue from here?

[D. Scott Pryor, President - Logistics & Transportation at Targa Resources]

Hey, Spiro, this is Scott and good morning. As it relates to the export side of the business, first, we would point to the fact that we have growing, supply originating from our gas processing footprint with long term customers and great producers behind our plants. As a result of that, obviously we've added a tremendous amount of infrastructure, on our midstream platform with pipelines, expanding fractionation footprint and of course we've got expansions going on in the fourth quarter of this year at our export dock with our debottleneck and then our larger expansion project in the 2027. I would also say that we all agree, I think that we have a growing global demand, for LPGs whether it be on petrochemicals, PDHs, domestic and industrial supply needs across the globe, which is indicative of the fact that we, again, the market is going to continue to grow. We have always been highly contracted at our dock and with us being highly contracted, we have not always participated heavily in the spot market.

[D. Scott Pryor, President - Logistics & Transportation at Targa Resources]

So when people talk about things like the market is maturing, we have really had long term contracts that have matured for a number of years now. We don't see anything, any change in that. There are currently today four exporters along the Texas Gulf Coast. Three of those are supplying product from Mount Bellevue, one further south. And when we talk about further expansions or when we talk about, a new additive to the marketplace, I don't see the competitive dynamics really changing because the competitive dynamics have already been there.

[D. Scott Pryor, President - Logistics & Transportation at Targa Resources]

So with that said, I think it really boils down to who has the source of supply. And I really, really feel strongly about Targa's position as it relates to that, again, back to our GMP footprint, the long term contracts that we have, And of course, we put the infrastructure in place to ensure that we can move it across our docks.

[Spiro Dounis, Director at Citigroup]

Great. Thanks for that color, Scott, and congrats on the retirement. I'll leave it there. Thanks, everyone.

[D. Scott Pryor, President - Logistics & Transportation at Targa Resources]

Thanks, Spiro.

[Tristan Richardson, VP - Investor Relations at Targa Resources]

Okay. Thank you.

[Operator]

Thank you. Our next question or comment comes from the line of Keith Stanley from Wolfe Research. Mr. Stanley, your line is open.

[Keith Stanley, Director at Wolfe Research, LLC]

Hi. Good morning. Curious how you're thinking about competition in the Northern Delaware. You were kind of a first mover through Lucid and gas treating and AGI wells, but it seems like it's becoming a bigger and bigger focus for a lot of your peers.

[Patrick McDonie, President - Gathering & Processing at Targa Resources]

Yeah. I don't disagree. Obviously, you've seen enterprise and now MPLX come in and buy treating companies to address the sour gas situation in the Delaware Basin. As we've said before, obviously, we're the largest treater of sour gas in the Delaware Basin. We have the most capability.

[Patrick McDonie, President - Gathering & Processing at Targa Resources]

We have 2.3 Bcf a day of treating capacity, seven AGI wells with eyes on expanding that as our sour gas volumes grow. Frankly, Targa has been treating sour gas almost since its inception, right, with one of the first acquisitions that was done as Targa. And certainly a lot of our employees have been dealing with SourGas for forty years. It is a core competency and I think when we started looking at the Delaware Basin back in the 2016, 'seventeen, 'eighteen timeframe, we pretty quickly recognized that there were really economic benches that had sour gas production, that producers were reluctant to develop because there wasn't solutions to handle that gas. So I would say as much as seven, eight, nine years ago, we put a strategy in place.

[Patrick McDonie, President - Gathering & Processing at Targa Resources]

One, we bought out Rigor Right and they had some sour gas infrastructure. We leveraged off of that. As we looked at Lucid, that was part of the overall equation. I mean, it's really a recognition of how much sour gas capability over the long, long term is out there. And what I would say is that the competition is fine.

[Patrick McDonie, President - Gathering & Processing at Targa Resources]

We compete on all basis in the midstream business, obviously. We've got a ton of acreage under contract that continues to get developed. We continue to add, as we said, in our commercial success acreage that covers sour gas production. And as the Avalon Bone Springs gets developed, in the future, we're very, very well positioned. And certainly the Wolfcamp in certain regions of the basin that we have under contract also has CO2 or H2S, one or the other or both.

[Patrick McDonie, President - Gathering & Processing at Targa Resources]

And Targa is very, very well positioned to handle additional growth. And like I said, we've got a ton of it under contract already.

[Matthew Meloy, CEO & Director at Targa Resources]

Yes, and just to add to that, we've been competing in that business for years. And one of the things that gives us, I would say competitive advantage is our Red Hills complex over a Bcf a day can handle sour. It's connected to our Bull Moose Wildcat complex, which can also handle sour. So we have the scale and redundancy to offer better run times for our customers. It's running sour, there's more operational issues that you're to have than running sweet.

[Matthew Meloy, CEO & Director at Targa Resources]

And so we offer, I think a unique set of services to our customers.

[Keith Stanley, Director at Wolfe Research, LLC]

Thanks for that detailed response. Second question, so once again, a very growthy tone in your business. As you accelerated some CapEx into 2025, should we think 2026 CapEx is going to be even lower year over year or maybe not given the growth you're seeing? And it seems like NGL pipeline capacity is filling up pretty quick as well.

[Jennifer Kneale, President at Targa Resources]

Keith, this is Jen. I'd say that from where we sit today, the assets that we have in progress right now, we expect them to come online and be highly utilized. And hats off to our engineering and operations teams for figuring out if there are certain projects that they could get on a week, a month or in some cases a quarter sooner because again they will be very much needed. Look, it's August right now. I think that from our perspective doesn't make sense to front run producer budgeting cycles this fall.

[Jennifer Kneale, President at Targa Resources]

We'll get a lot more information from producers around 2026 that will inform our 2026 capital budget that we'll come out with in February. But certainly, we believe that where we are spending capital is very much along our core competencies, very much consistent with the rates of return and track record that we've been able to demonstrate previously. And I think you're trying to see us continue to be capital efficient where it makes sense, such that when projects come online, there are volumes essentially available to base load them such that the returns are better than we made an investment decision. So I think all of that means that we'll continue to work through our growth capital plan for 2026. We believe there's a lot of growth on our system, and we believe that we can execute on that growth and continue to generate attractive returns, which at the end of the day is what will create shareholder value.

[Tristan Richardson, VP - Investor Relations at Targa Resources]

Thank you. Thank you.

[Operator]

Thank you. Our next question or comment comes from the line of Jeremy Tonet from JPMorgan Securities LLC. Mr. Tonet, your line is open.

[Jeremy Tonet, MD & Research Analyst at J.P. Morgan]

Hi. Good morning.

[Matthew Meloy, CEO & Director at Targa Resources]

Hey. Good morning,

[Jeremy Tonet, MD & Research Analyst at J.P. Morgan]

Matt, I think you talked about going into the end of the year into 2025, heading into 2026, potentially even in a stronger position. Just wondering if you could share more data points you're seeing that provide the confidence there.

[Matthew Meloy, CEO & Director at Targa Resources]

Yeah, sure. We really saw, I'd say volumes for the first half of this year were more or less kind of in line with our expectations at the beginning of the year. Maybe first quarter was a little bit softer with some operational issues. And what we really saw, I would say hello?

[Jeremy Tonet, MD & Research Analyst at J.P. Morgan]

Yes, I'm here.

[Matthew Meloy, CEO & Director at Targa Resources]

Okay, all right, we just heard a beep. Okay. And then what we saw, I'd say later in the second quarter, we really saw volume start to ramp. And then I gave the color on the call, we've seen in July volumes up another processing plant worth of gas just in the month of July relative to the second quarter. And while I didn't give a number, August is up a fair amount from even the July numbers.

[Matthew Meloy, CEO & Director at Targa Resources]

So that's giving us confidence that the well connects that we have on our schedule, the volumes coming on are starting to really flow through our system. With Pembroke II coming on, that should provide some relief as well. Midland is pretty much full right now. So we really need that Pembroke II plant to come on and that should give us further volumes over the back half of the year. So we're only just in early August, but we would expect just for the momentum we have kind of early in the first part of the second half of this year, that continues.

[Matthew Meloy, CEO & Director at Targa Resources]

It just puts us in a really strong position as we exit, and that's what we're trying to articulate.

[Jeremy Tonet, MD & Research Analyst at J.P. Morgan]

Got it. That's very helpful. That's it for me. Thank you.

[Matthew Meloy, CEO & Director at Targa Resources]

Okay, thanks Jeremy.

[Operator]

Thank you. Our next question or comment comes from the line of Jackie Colladis from Goldman Sachs. Your line is open.

[Jackie Koletas, Equity Research Analyst at Goldman Sachs (India) Securities Pvt Ltd.]

Hi, good morning. Thank you so much for the time. I was wondering if you could just provide a little bit more detail on the associated CapEx expectations or potential returns on the Bull Run extension and what the commercial structure, if any, looks like there.

[Jennifer Kneale, President at Targa Resources]

Jackie, this is Jen. I'd say that from our perspective, Bull Run and the extension is just a natural extension of capabilities that we are already very good at in terms of putting pipe in the ground and moving molecules and trying to provide our producers with better solutions. So, our perspective, this extension is taking essentially gas from our Bull Moose and Wildcat complex up in the Delaware, bringing volumes down to Waha on a 42 inches pipeline. So it's really supported by the volumes that we already have flowing in our existing assets there and then the expected growth that we would expect from the Delaware going forward. So not that dissimilar to other parts of our business where we're able to aggregate volumes on the gathering and processing side and then enhance our capabilities for our producers, provide better redundancy, better outlets, to our producers by essentially enhancing our capabilities as we move through time. So this is just a natural extension of that.

[Jackie Koletas, Equity Research Analyst at Goldman Sachs (India) Securities Pvt Ltd.]

Got it. That makes sense. And then just second, buybacks in the quarter were fairly strong, and you authorized new repurchase program as well. How do you anticipate to balance future buybacks with other uses of capital over time? And just talking about like the cadence of potential buybacks going forward.

[Jennifer Kneale, President at Targa Resources]

This is Jen again. I think we very consistently try to demonstrate that our share repurchase program is opportunistic, and that is the standard that our Board of Directors holds us to as we allocate capital to that repurchase program. You clearly saw us be very active in the second quarter. We thought that there was an opportunity where global macro concerns were disconnecting a little bit from what we perceive to be the fundamentals of the Targa business and the intrinsic value of Targa. And as we look at our short, medium, and long term outlooks, really weren't seeing anything change that was, reflected by some of the downward activity that we were seeing in our share price, and that's why you saw a step in.

[Jennifer Kneale, President at Targa Resources]

I think we'll continue to be the all of the above approach that we've demonstrated so far, which means that your ability to predict our activity quarter by quarter is going to continue to be very difficult. We're continuing to allocate capital to very attractive organic growth capital projects, but we have a very strong balance sheet and that provides us with a lot of flexibility as well to continue to execute in returning more capital to our shareholders. So it just puts us in a really good position to be able to pull different levers as we believe we see the opportunities present themselves.

[Jackie Koletas, Equity Research Analyst at Goldman Sachs (India) Securities Pvt Ltd.]

Thank you so much for your time. Appreciate the color.

[Tristan Richardson, VP - Investor Relations at Targa Resources]

Thank you. Okay. Thank you.

[Operator]

Thank you. Our next question or comment comes from the line of Manav Gupta from UBS. Mister Gupta, your line is open.

[Manav Gupta, Executive Director at UBS Group]

Good morning. I just wanted to go back. Earlier in the year, you did take 100% ownership of Badlands. I just want to understand, has that transaction met your expectations and your goals? And have those assets been performing in line with your expectations?

[Manav Gupta, Executive Director at UBS Group]

And how does owning 100% change your view of the asset versus not owning the same percentage as you did before? So if you could talk about that.

[Matthew Meloy, CEO & Director at Targa Resources]

Yeah, sure. Yeah, so the Badlands transaction that we announced earlier this year was really taking out Blackstone, which we really view they had a preferred interest, so it was refinancing their preferred interest and had some cash flow savings because we could just put it on balance sheet. So it's been performing, yes, as expected. Overall volumes up there continue to be relatively flat. There's some signs that production could be increasing here over the next one to two years or so, but it's been relatively flat and it's been performing, I'd say in line with our expectations.

[Matthew Meloy, CEO & Director at Targa Resources]

I'd say with the enhanced competition, as you look out going forward for NGLs, I'd say, yeah, those assets do pose more strategic value and there's some more opportunities there to do something on NGL side of the business. And so we're just evaluating all those opportunities and we'll think thoughtfully about what makes the best sense for Targa.

[Manav Gupta, Executive Director at UBS Group]

Perfect. Thank you. And you obviously have a very strong lineup of organic growth projects, but we are also seeing, you know, multiple transactions getting executed in the Permian. I think two were announced in the last Monday or so. And in terms of you have the balance sheet, trying to understand what could be a good criteria for any bolt on M and A that you could undertake just to further increase your presence and that could add to your existing footprint?

[Matthew Meloy, CEO & Director at Targa Resources]

Yes. And we continue to look at acquisitions. We haven't anything of really significant size and kind of the asset market for a while, kind of going back to lucid in 2022. But we continue to look. I'd say we have a really strong footprint on the GMP side of the business.

[Matthew Meloy, CEO & Director at Targa Resources]

We have really strong NGL presence. So we have all the strategic needs of our core business met. And so now what we're really looking for are there nice bolt ons that could supplement our base strategy. So our focus has been on organic growth. We have a lot of growth opportunities just executing the number of plants that we have in our downstream business that continues to be our focus.

[Matthew Meloy, CEO & Director at Targa Resources]

But if there's something that bolts on really nicely to our G and P footprint, we'll continue to look at it. As I said before, the bar continues to be high for us because we have all the strategic needs met, but if there are some nice synergies or opportunities, we'll continue to be thoughtful and look at those.

[Manav Gupta, Executive Director at UBS Group]

Thank you so much.

[Tristan Richardson, VP - Investor Relations at Targa Resources]

Okay, thank you.

[Operator]

Thank you. Our next question or comment comes from the line of Michael Blum from Wells Fargo. Mr. Blum, your line is open.

[Michael Blum, Managing Director at Wells Fargo Securities]

Thanks. Hey, everybody. Good morning. So I wanted to ask on the the LPG export docks. You mentioned that it was effectively full for the quarter, but as I look at the chart, I mean, the volumes were down sequentially the last two quarters.

[Michael Blum, Managing Director at Wells Fargo Securities]

I think you're below your total existing capacity. So just wondering if you can just kind of square that and especially in light of the fact that I think you're very highly, highly contracted. And then maybe I'll just throw in my second question here at the same time. Appreciate your competitive position, but as I'm sure you know, there's new entrants coming to the market. Just wondering how you're thinking about that as get this growing competition from the Permian on pipe all the way to the export dock.

[Michael Blum, Managing Director at Wells Fargo Securities]

So just wanted to get your thoughts on how you're going to approach that. Thanks.

[D. Scott Pryor, President - Logistics & Transportation at Targa Resources]

Hey, Michael. This is Scott again. I'll start on the export side. And then perhaps given the fact that we've got Ben here with us today and who he's been working the transportation fractionation side of our business, he can talk a little bit about NGL pipes out of the basin as well. But I'd really refer back to my earlier comments and that is our strategy around the export dock really starts with our availability of supply that is originating from our gas processing plants.

[D. Scott Pryor, President - Logistics & Transportation at Targa Resources]

Again, term contracts that will feed into our overall system, whether it be pipe, frac, etcetera, all the way down to our export dock. Again, adding another potential entrant or participant in the export business along the Texas Gulf Coast really does not change our overall strategy. We will be competitive, but I think again, given the fact that we have been highly contracted, for term business, and business quite frankly with a lot of those contracts has volumes that ramp up over time that will complement our expansion on the back half of this year and then the expansion we've gotten in the 2027 at those, what I would call mature rates. I feel very comfortable with our overall position as it relates to that. When you look out there, the market again has been competitive for a while and we've done very, very well in that sector, on the export side of our business.

[D. Scott Pryor, President - Logistics & Transportation at Targa Resources]

And, we again, I think it goes back to the availability of supply that will stay on our system and move across our overall docks, and feeding a growing global demand. And then I'll turn it over to Ben just to talk a little bit about, NGL pipes out of the basin.

[Benjamin Branstetter, SVP - Downstream Commercial at Targa Resources]

Thanks, Scott. I think you said it well across our entire downstream footprint. We are really expanding it on the back of millions of dedicated acres across various basins. So we have line of sight to volumes on. And on top of that, we continue to have commercial success as our customers see the great offering we have across our integrated system and wide footprint with a lot of redundancy.

[Benjamin Branstetter, SVP - Downstream Commercial at Targa Resources]

So that's really how we're looking at all the expansions on the downstream side as being underpinned with.

[D. Scott Pryor, President - Logistics & Transportation at Targa Resources]

Thank you.

[Tristan Richardson, VP - Investor Relations at Targa Resources]

Okay. Thanks, Michael.

[Operator]

Thank you. Our next question or comment comes from the line of Jean Ann Salisbury from Bank of America. Your line is open.

[Jean Ann Salisbury, Managing Director at Bank of America]

Permian gas egress has been tight year to date, which you can see in the depressed Waha pricing. But there's a lot of pipeline capacity coming on next year that most people, including us, think will unlock the basin for the rest of the decade. Is that how you see it as well? And when those pipelines come on next year, would you expect to see a sustained move for you off your fee floors?

[Robert Muraro, Chief Commercial Officer at Targa Resources]

This is Bobby. Yeah, no, we've been excited to see all the egress pipes get announced. A little bit of the bull run bolt on because we get to get that gas to the hub where our producers can think about which direction do they want to go in, what pipe do they want to go on and have a lot of optionality as opposed to like a pipe or two pipes out of our plant. As we think about egress and how it relates to the basin, again, kind of same, same comment, we're excited to see it happen. Our residue strategy hasn't changed.

[Robert Muraro, Chief Commercial Officer at Targa Resources]

If we can put gas on a pipe and make it happen, if we can build a pipe, we can participate in the pipe, we want to see egress happen. And with it happening at the rate it's going up, I think it's, we're going be well supplied with egress for a little bit here, when all these pipes come online. Relative to the floors, I'm not going to speculate on where price is gonna go, but stronger Waha pricing ultimately is good for those few floors. I would love to be above those few floors because we've essentially been below them for most of recent history. And that would be just an incremental tailwind to our business out there.

[Jean Ann Salisbury, Managing Director at Bank of America]

Great, thank you. And now that Grand Prix is filling up, can you talk about the pros and cons of using more third party NGL transport from here? I mean, I guess the pros like obviously you don't have to spend a lot of CapEx, but should we expect a cent or 2 per gallon of extra cost on your incremental downstream volumes from here if you're using third party transport?

[Jennifer Kneale, President at Targa Resources]

This is Jen. I'll start and then I'll throw it to Ben. I think that from our perspective, what utilizing third party transport allows us to do is one, provide a little bit of diversification in just ensuring that not all of our volumes are flowing on our pipe. But two, it's really to be capital efficient. And I think that's an indication really of how well we're all working across the space.

[Jennifer Kneale, President at Targa Resources]

I think that an overbuild situation doesn't really benefit anybody. So you're seeing us work very well with our peers to figure out how to continue to move our molecules and a lot of the growth that we have, but do it in a manner that's efficient across the space. I think that the way that we evaluate it is one, just making sure that volumes will continue to move. We're adding processing plants and a lot of incremental processing plants are going to drive a lot of additional NGL volumes into our system and ensuring that we are continuing to provide our customers with the best possible service is what is paramount to us. So that's really evaluating what are the alternatives out there, what are those alternatives cost, and therefore, with all of that put together, what makes the most sense for Targa over both the short, medium, and really the long term. Ben?

[Benjamin Branstetter, SVP - Downstream Commercial at Targa Resources]

I think that is all right, Jen. I just remind everyone, we have multiple flexible medium term offloads that as our volumes are growing, we can move into those and time any future expansion in the most optimized way for bringing it online and for the capital spend. And then when that expansion comes online, we'll have volumes to put out at driving good returns.

[Jackie Koletas, Equity Research Analyst at Goldman Sachs (India) Securities Pvt Ltd.]

Great. Thank you. Thank you.

[Operator]

Thank you. Our next question or comment comes from the line of Sunil Sibal from Seaport Global. Your line is open.

[Sunil Sibal, Managing Director at Seaport Global Securities]

Hi. Good morning. First of all, congratulations to Scott on his retirement and also to Ben on his new role. So seems like, you know, from your comments that you probably are getting ready for the next set of processing capacity additions. I was curious, how should we think about capital costs for those processing plants?

[Sunil Sibal, Managing Director at Seaport Global Securities]

Are you seeing any meaningful change considering the inflationary environment, especially on the material side? And how does if it does impact any of your returns? Thanks.

[Jennifer Kneale, President at Targa Resources]

Good morning, Sunil. This is Jen. First of all, I'd say that our engineering team does a phenomenal job of assessing all of the options really available to us, in terms of utilizing the target standard plant design and then figuring out whether a system is sweet or sour, what additional information we'll need, and then identifying the right third parties for us to work with that can really keep our costs as low as possible. So definitely a big, congratulations to our engineering team for the success on the plants that they are bringing online, the plants in progress, and then of course they're already thinking about the plants in the future. I think you're right that from our perspective costs have risen, but we've also done a really good job of managing those rising costs.

[Jennifer Kneale, President at Targa Resources]

You're seeing us co locate plants. So instead of just having one plant at a site, you're seeing a lot of sort of, vintage two plants at sites like the Bullmoose two plant, Pembroke two plants. That allows us to benefit from some of the shared services across facilities, which helps us manage our costs. And again, I think that's part of the benefit of having such a large and flexible system in place like we have. But we have seen costs rise, so depending on whether a plant is sweet or sour, costs are probably averaging more between, call it, $225,000,000 to $275,000,000 But again, our team is doing a really good job of managing plant design, supply chain, making sure that we are ahead of any potential constraints and issues that could create rising costs to just make sure that we are continuing to build best in class facilities at best in class costs.

[Sunil Sibal, Managing Director at Seaport Global Securities]

Thank you.

[Tristan Richardson, VP - Investor Relations at Targa Resources]

Okay. Thank you.

[Operator]

Thank you. Our next question or comment comes from the line of Jason Gabelman from TD Cowen. Mr. Gabelman, your line is open.

[Jason Gabelman, MD - Energy Equity Research at TD Cowen]

Yeah. Hey. Good morning. Thanks for taking my question. I wanted to try asking again about something that's already been asked, which is the direction of of kind of fixed fees within the Permian Basin.

[Jason Gabelman, MD - Energy Equity Research at TD Cowen]

And it sounds like there's a lot of cross currents. You you noted pretty full system in the Midland Basin, but also costs rising and more competition in the Delaware AGI side. So just wondering when you put that all together, what the direction of travel is on the fees that you're able to secure from competitor or from customers? Is it up, down, flat? Any color would help.

[Matthew Meloy, CEO & Director at Targa Resources]

Yes, sure, Jason. I'll start and Jen, you or Pat want to jump in. As Pat mentioned earlier, we've faced competition all along. It's changed. It used to be, you go back years, there was a lot of private equity coming into the space and there was a lot of competition on the GMP side.

[Matthew Meloy, CEO & Director at Targa Resources]

We've been competing with the recent acquisitions, you go back over the years, we were competing with the predecessor and now we're competing with the acquirer. So there's been a lot of competition on GMP. Our base business, we have long term contracts. Typically GMP contracts are ten years. We have a lot of fifteen year contracts.

[Matthew Meloy, CEO & Director at Targa Resources]

So we have long term contract protection. And we have multiple plans, reliability, redundancy, the largest system which affords us a really good opportunity to compete with others as they're comparing the Targa offering versus the next best competition. So there's always been competition. I think we compete pretty well all the way from GMP and all the way through downstream.

[Jennifer Kneale, President at Targa Resources]

This is Jen. I'd just add that I think from our perspective, we've got the best commercial team in the business, which means that we are creative and entrepreneurial and willing to work with our customers. And so to the extent that there's an opportunity, for example, to think more about the longer term game than the shorter term game, if there's a chance to go and acquire more acreage, but it means that we blend down into a lower fee. We'll of course play whatever game best supports our producers and creates the most value over the long term for our shareholders as well. So I think we just do a really good job of working well with our producers and broader customers to figure out what are their needs, how are those needs changing and evolving, and then how can we best structure our contracts to meet those needs.

[Jason Gabelman, MD - Energy Equity Research at TD Cowen]

Yeah, that's great. Thanks. And my follow-up is just on the EBITDA guide and the $200,000,000 range is unchanged. There's only a few months left in the year here. So wondering, as you look at the balance of the year, the risks to kind of coming in at the high end or the low end of that range.

[Jennifer Kneale, President at Targa Resources]

I'd say that it still feels like there's a lot of the year left to go. It feels more like we're halfway through the year here with a bunch left to go. I think from our perspective, as Matt's comments indicated, we feel really, really good about where we are for 2020 A big part of what we came out in February and said was that our guide and the range was really predicated on us continuing to see volume growth, particularly in the back half on the GMP systems and bringing that incremental volumes through the rest of our integrated system. And clearly, with all the data points that we've provided today, those volumes are materializing and I think we've got a lot of conviction based on where we know producers are with well completions and continued activity back half of this year. Starting to feel really good about the volume outlook for Target, not only back half of this year, but then the implications for 2026.

[Jennifer Kneale, President at Targa Resources]

I think there are some potential tailwinds that ultimately we'll have to see how those present rest of the year. Related to commodity prices, we saw weaker commodity prices in the second quarter. We've seen lower gas prices on the Waha side thus far here in the third quarter. So commodity prices, we don't have a ton of exposure. But in the first quarter, we benefited from about $10,000,000 of margin above feed levels.

[Jennifer Kneale, President at Targa Resources]

In the second quarter, we really had no margin above feed floor levels. So to the extent we get any tailwinds there, certainly that would be additive in the back half of this year. And then we also don't tend to forecast our marketing business on both the natural gas and the NGL side. So to the extent we see some tailwinds there, that would be additive back half of the year as well. And fourth quarter is where we typically see more strength in marketing opportunities than, the second and third quarter.

[Jason Gabelman, MD - Energy Equity Research at TD Cowen]

That's great. Thanks for that color.

[Tristan Richardson, VP - Investor Relations at Targa Resources]

Okay. Thank you. Okay. Thank you.

[Operator]

Thank you. I'm sure no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.

[Tristan Richardson, VP - Investor Relations at Targa Resources]

Thanks, everyone, for joining the call this morning, and we appreciate your interest in Target Resources.

[Operator]

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.

Participants

Executives

• Tristan Richardson, VP - Investor Relations
• William Byers, CFO
• D. Scott Pryor, President - Logistics & Transportation
• Patrick McDonie, President - Gathering & Processing
• Benjamin Branstetter, SVP - Downstream Commercial

Analysts

• Matthew Meloy, CEO & Director at Targa Resources
• Jennifer Kneale, President at Targa Resources
• Spiro Dounis, Director at Citigroup
• Keith Stanley, Director at Wolfe Research, LLC
• Jeremy Tonet, MD & Research Analyst at J.P. Morgan
• Jackie Koletas, Equity Research Analyst at Goldman Sachs (India) Securities Pvt Ltd.
• Manav Gupta, Executive Director at UBS Group
• Michael Blum, Managing Director at Wells Fargo Securities
• Jean Ann Salisbury, Managing Director at Bank of America
• Robert Muraro, Chief Commercial Officer at Targa Resources
• Sunil Sibal, Managing Director at Seaport Global Securities
• Jason Gabelman, MD - Energy Equity Research at TD Cowen