Targa Resources Corp. Q2 FY2025 earnings call

• Scott Pryor, President of Logistics and Transportation, intends to retire effective March 1, 2026, with Ben Branstetter succeeding him. - Second quarter saw strong results with record Permian volumes and NGL transportation volumes. Permian gas volumes on Targa's system increased significantly during the quarter and continued to grow in subsequent months. - In the Permian Midland, the Pembrook 2 plant is in start-up ahead of schedule. In the Permian Delaware, the Bull run 2 plant is ahead of schedule. An extension of the Bull run natural gas pipeline system in the Delaware Basin was announced. - NGL pipeline transportation and fractionation volumes were strong, with fractionation volumes recovering post-turnaround. Downstream projects such as the Delaware Express intrabasin NGL pipeline expansion and fractionator trains in Mont Belvieu are ahead of schedule. LPG export loadings averaged 12.8 million barrels per month during the second quarter despite trade policy challenges.

In the Permian, natural gas inlet volumes averaged a record 6.3 billion cubic feet per day in the second quarter, an increase of 11% compared to the previous year. 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. Adjusted EBITDA for the second quarter was $1.163 billion, which was an 18% increase from the same period last year. The Permian gas on Targa's system saw an increase of about a processing plant worth of volumes during the quarter, with further growth in July and August. Targa's fractionation volumes were impacted by a planned turnaround but recovered to over 1 million barrels per day after the turnaround.

• 2025 adjusted EBITDA is expected to be in the range of $4.65 billion to $4.85 billion. - Completed a $1.5 billion debt offering, using the proceeds to reduce borrowings. The Board authorized a new $1 billion common share repurchase program, bringing total available share repurchase capacity to approximately $1.6 billion as of June 30, 2025. - Net growth capital spending for 2025 is expected to be approximately $3 billion, with net maintenance capital spending of $250 million.

• Macro environment volatility which can impact business performance. - Competition in the midstream business that may affect market share and margins. - Potential impact of commodity price fluctuations on margins and overall financial results.

Q: Spiro Dounis asked about Targa's ability to outperform the basin historically and potential outperformance numbers.

A: Matthew J. Meloy stated it's due to having the largest footprint over the best rock in both Midland and Delaware Basins, reliable producers with consistent drilling plans.

Q: Spiro Dounis inquired about NGL margins and the outlook.

A: D. Scott Pryor said it's based on growing supply from gas processing, global demand for LPGs, and Targa's highly contracted export dock.

Q: Keith Stanley asked about 2026 CapEx expectations.

A: Jen Kneale said they'll work through the 2026 capital budget based on producer information, focusing on capital efficiency.

Q: Jeremy Tonet asked for data points providing confidence.

A: Matthew J. Meloy mentioned volumes ramping in the second half and the Pembrook 2 plant providing relief.

Q: Jacqueline Koletas asked about potential returns on the Bull run extension.

A: Jen Kneale said it's a natural extension of existing capabilities.

Q: Jacqueline Koletas questioned the balance of buybacks with other capital uses.

A: Jen Kneale said the repurchase program is opportunistic and flexible based on opportunities.

Q: Manav Gupta asked about the Badlands transaction.

A: Matthew J. Meloy said the transaction is performing as expected with strategic value.

Q: Michael Blum asked about LPG export and competition.

A: D. Scott Pryor said the strategy is based on supply from gas processing and Targa is well-positioned despite competition.

Q: Jean Ann Salisbury asked about Permian gas egress and fees.

A: Bobby Muraro was excited about egress pipes, and Jen Kneale said they evaluate third-party transport for capital efficiency.

Q: Sunil Sibal asked about processing capacity capital costs.

A: Jen Kneale said costs average between $225 million to $275 million with the engineering team managing costs.

Q: Jason Gabelman asked about fee direction and EBITDA guide risks.

A: Matthew J. Meloy said they compete with long-term contracts, and Jen Kneale said the EBITDA guide remains on track with volume growth and potential commodity tailwinds.