Targa Resources Q2 Earnings Call Highlights

Key Points

• Record quarterly performance: Targa reported second-quarter adjusted EBITDA of $1.603 billion, up 38% year over year and 14% sequentially, driven by record Permian volumes, marketing gains and downstream activity.
• Guidance raised within prior range: The company expects full-year adjusted EBITDA toward the upper end of its $5.7 billion–$5.9 billion forecast, supported by continued Permian growth as previously shut-in volumes return to its systems.
• Expansion and shareholder returns: Targa expects about $4.5 billion in 2026 growth capital spending, with multiple processing and export projects advancing, while it raised its dividend 25% year over year and repurchased approximately $80 million of stock.

Targa Resources NYSE: TRGP reported record second-quarter operating volumes and adjusted EBITDA, supported by growth in the Permian Basin, higher marketing optimization opportunities and record activity across its downstream operations.

Chief Executive Officer Matt Meloy said adjusted EBITDA rose 38% from a year earlier, while Permian volumes increased by more than 900 million cubic feet per day from the prior-year period and 450 million cubic feet per day from the first quarter. The company said its results were achieved despite first-quarter weather disruptions, natural-gas takeaway constraints, negative Permian gas pricing and broader market volatility.

For the full year, Targa now expects adjusted EBITDA to be toward the upper end of its prior $5.7 billion to $5.9 billion guidance range. Meloy said that would suggest adjusted EBITDA growth of close to $1 billion over 2025, alongside dividend growth and share repurchases.

Permian Growth and Returning Volumes

President Jen Kneale said second-quarter Permian volumes reached a record 7.2 billion cubic feet per day, up approximately 7% sequentially and 14% from a year earlier. During the quarter, Targa had roughly 200 million to 400 million cubic feet per day of gas shut in behind its Permian systems on a given day because of weak Waha pricing.

However, the company said the quarter-over-quarter volume increase despite those shut-ins demonstrated continued producer activity. With the Hugh Brinson Phase I project and GCX expansion now operating, most price-related producer shut-ins returned to Targa’s systems in July, according to Kneale.

Kneale said July delivered another strong month of volume growth and that activity is running somewhat ahead of the company’s expectations at the start of the year. The company expects continued growth during the second half of 2026 and said the momentum supports its outlook for 2027 and beyond.

Management also said a stronger macro backdrop, including higher crude oil prices and improved natural-gas egress from the Permian, is supporting producer activity. The company noted that a small amount of price-related shut-in volume remained to return in early August, while routine shut-ins can also occur for operational reasons such as frac protection.

Marketing Gains and Downstream Records

Chief Financial Officer Will Byers said second-quarter adjusted EBITDA was $1.603 billion, up 14% from the first quarter. The gain reflected higher marketing optimization opportunities and record volumes in Permian gathering and processing, NGL transportation, fractionation and LPG exports.

Targa’s marketing businesses exceeded the company’s expectations by about $250 million in the first half, with much of the outperformance occurring during the second quarter. Kneale said constrained Permian gas egress created opportunities for the marketing business, while stronger Waha prices and narrower basis spreads have since reduced some of those opportunities.

Meloy said the company is taking a conservative view of marketing margins for the second half because it does not assume material optimization gains in its guidance. While underlying volumes remain strong, management expects lower marketing opportunities to moderate results compared with the second quarter.

Downstream operations also set records during the quarter. Targa reported NGL transportation volumes of 1.1 million barrels per day, fractionation volumes of 1.2 million barrels per day and LPG export loadings averaging 14.8 million barrels per month. Management said demand for U.S. hydrocarbons, including butane, helped the company maximize dock utilization and export volumes.

Ben Branstetter, president of Logistics and Transportation, said Targa remains highly contracted through the startup of its LPG Export Expansion, or LEP 4, and for years afterward. The company said some demand created by the current export environment has been incorporated into longer-term contracts.

Growth Projects and Capital Plans

Targa said its East Driver gas-processing plant in the Permian Midland began service late in the second quarter ahead of schedule. Five additional processing plants in the Permian Delaware — Copperhead I and II, Yeti I and II, and Roadrunner III — remain on schedule to begin operations as previously announced.

The company is evaluating the timing of its next Midland processing plant and expects a continued cadence of multiple plant additions annually, depending on basin growth, commercial contracts and new customer wins. Pat McDonie, president of Gathering and Processing, said extended equipment lead times have not affected Targa’s ability to execute projects, with the company generally planning around an 18- to 24-month timeline from development to startup.

On the downstream side, Targa’s Train 11 fractionator entered service early in the second quarter and was quickly highly utilized. Trains 12 and 13 remain on track. The Delaware Express Pipeline also entered service during the quarter, adding NGL transportation capacity in the Delaware Basin.

The Speedway NGL pipeline expansion, connecting Targa’s Permian operations to Mont Belvieu, remains scheduled for the third quarter of 2027. Initial capacity is expected to be 500,000 barrels per day, with potential expansion to 1 million barrels per day through additional pumping capacity. Targa’s LPG export expansion, expected to raise capacity to roughly 19 million barrels per month, is also scheduled for the third quarter of 2027.

Byers said Targa continues to expect approximately $4.5 billion of net growth capital spending and $250 million of net maintenance capital spending in 2026. The company ended the second quarter with $3.2 billion of available liquidity and a pro forma consolidated leverage ratio of about 3.4 times, within its long-term target range of 3 times to 4 times.

Targa declared a second-quarter common dividend of $1.25 per share, a 25% increase from the year-earlier dividend. It also repurchased about $80 million of common stock during the quarter at an average price of $259.93 per share.

About Targa Resources (NYSE:TRGP)

Targa Resources Corporation NYSE: TRGP is a U.S.-focused midstream energy company that provides gathering, processing, transportation, storage and marketing services for natural gas, natural gas liquids (NGLs), and condensate. Its operations span the midstream value chain, including gas gathering systems that collect production from wells, processing plants that separate and recover NGLs and other hydrocarbons, fractionation and purification facilities that prepare NGLs for market, and pipeline and terminal assets that move and store products for producers, refiners and other customers.

The company operates a network of pipelines, processing plants, fractionators and storage facilities that serve producers and consumers across major U.S.

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