What Targa Resources (TRGP) Said on Its Q3 Earnings Call

Key Points

• Targa expects 2026 adjusted EBITDA of at least $6 billion, up more than 21% from 2025, with record Permian volumes and long-term ExxonMobil agreements underpinning further growth.
• Permian natural gas volumes reached a record 7.5 billion cubic feet per day in Q3, while NGL transportation and fractionation also hit records. Several processing and fractionation projects are ahead of schedule or progressing toward planned startup dates.
• 2026 growth capital spending is expected to be about $5 billion, with free cash flow anticipated to rise meaningfully in 2028. Management plans to recommend a 20% dividend increase in 2027, to $6 per share annually.

Targa Resources NYSE: TRGP expects 2026 adjusted earnings before interest, taxes, depreciation and amortization to reach at least $6 billion, as record Permian Basin volumes and a long-term agreement with ExxonMobil support plans for further infrastructure expansion.

Chief Executive Officer Matt Meloy said on the company’s third-quarter earnings call that the outlook represents an increase of more than $1 billion, or more than 21%, from 2025. He expects Permian volume growth in 2027 to resemble this year’s pace and said customer activity and recent contract wins support multiple years of double-digit percentage growth.

Third-quarter adjusted EBITDA was $1.5 billion, down 6% from the second quarter. Chief Financial Officer Ben Branstetter said record volumes across Permian gathering and processing, natural gas liquids transportation and fractionation were offset by fewer marketing and optimization opportunities and lower liquefied petroleum gas exports.

Permian growth drives investment

President Jen Kneale said Targa’s Permian natural gas volumes reached a record 7.5 billion cubic feet per day in the third quarter, up about 5% from the prior quarter and 14% from a year earlier. She said volumes that had been curtailed by some producers in the second quarter returned during the third quarter as additional pipeline capacity improved Waha natural gas prices.

Meloy said the company’s August agreements with ExxonMobil are additive to its existing growth outlook. The 20-year, fee-based agreements cover gathering and processing and downstream services and are supported by acreage dedications in the Delaware and Midland basins.

Asked about the deal’s economics, Meloy said Exxon drove a hard bargain in a competitive process, but Targa believes the agreement will generate attractive returns on its capital investment.

Kneale said Targa’s Copperhead processing plant in the Delaware Basin was in startup ahead of schedule. Its Yeti and Yeti II plants are expected to start in the second and third quarters of 2027, respectively, also ahead of schedule. Three additional Delaware plants—Wrangler, Ranger and Ranger II—are planned for the second quarter of 2028.

The company is also ordering long-lead equipment for two more Delaware plants and one Midland plant, which Kneale said will likely be needed in 2028 or early 2029. During the question-and-answer session, she said additional development of the Woodford and Barnett zones could provide upside, but Targa has not factored much of it into its forward outlook because visibility remains limited.

Downstream projects advance

Growth in Permian production contributed to record third-quarter NGL transportation volumes of 1.17 million barrels per day and fractionation volumes of 1.26 million barrels per day, Kneale said. LPG export loadings averaged 13.7 million barrels per month, up 10% from a year earlier but below the second-quarter record.

Targa’s Train 12 fractionator recently began operating ahead of schedule, while Train 13 remains on track for the first quarter of 2028. The company also announced plans for a 14th fractionation train at Mont Belvieu, expected to start in the first quarter of 2029. Once complete, the project would bring Targa’s operated fractionation capacity at the site to approximately 1.8 million barrels per day.

The Speedway NGL transportation expansion and a major LPG export expansion remain on track for the third quarter of 2027. The export project is expected to increase capacity to about 19 million barrels per month. Kneale said the company has ordered additional pumps for Speedway to increase its capacity as volumes grow.

Spending and shareholder returns

Branstetter said Targa’s 2026 growth capital spending outlook remains approximately $5 billion, including projects announced on the call, while estimated net maintenance capital spending is $250 million. Capital spending is likely to remain elevated in 2027, he said, but the company expects a meaningful increase in free cash flow in 2028 as major projects enter service.

Targa ended the third quarter with $2.9 billion of available liquidity and a pro forma consolidated leverage ratio of approximately 3.4 times, within its long-term target of three to four times.

The company declared a third-quarter dividend of $1.25 per share in October, up 25% from a year earlier. Management also intends to recommend that the board increase the annual dividend by 20% in 2027 to $6 per share. Through the first nine months of 2026, Targa repurchased approximately $187 million of common stock at an average price of about $261 per share, Branstetter said.

About Targa Resources (NYSE:TRGP)

Targa Resources Corp. is a midstream energy company that gathers, processes, transports and stores natural gas and natural gas liquids (NGLs), and provides services for crude oil. Its infrastructure connects oil and gas producers with pipelines, processing facilities, fractionators, storage sites and domestic and international markets.

The company's services include natural gas gathering, compression and processing; NGL transportation and fractionation; and crude oil gathering and terminaling.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.