Targa Resources Corp. Q4 FY2025 earnings call

• Matt Meloy thanked Scott Pryor for 35 years of service and welcomed Ben Branstetter to the executive team. • 2025 was an exceptional year with record volumes and financial performance, including Permian volume growth, NGL transport and frac volume increases, and record LPG export volumes. • Announced 2 new projects: Yet II Delaware processing plant and 13th fractionator in Mont Belvieu, and ordered long lead items for 2 additional plants in Permian planned for early 2028. • Jennifer Kneale discussed Permian volumes, winter storm impacts, volume outlook, commercial success, and upcoming plant placements. • Will Byers talked about fourth quarter adjusted EBITDA, full year 2025 adjusted EBITDA, growth capital spending, share repurchases, leverage ratio, and 2026 adjusted EBITDA guidance.

In 2025, Targa had record financial performance with adjusted EBITDA of $4.96 billion, over $800 million higher year-over-year. Permian volumes grew 11% with over 600 million cubic feet per day increase. NGL transport volumes up almost 170,000 barrels per day, frac volumes up over 120,000 barrels per day, and record LPG export volumes. Fourth quarter Permian volumes averaged a record 6.65 billion cubic feet per day, up 10% from last year. NGL transportation volumes in fourth quarter averaged a record 1.05 million barrels per day, fractionation volumes averaged a record 1.14 million barrels per day, and LPG export volumes averaged 13.5 million barrels per month.

• Estimate full year 2026 adjusted EBITDA to be between $5.4 billion and $5.6 billion, an 11% increase over 2025. • Expect approximately $4.5 billion of growth capital spending in 2026. • Cash flows are greater than 90% fee-based and have hedged the majority of non-fee margin for next 3 years. • Expect to end 2026 with leverage ratio comfortably within long-term target range. • Do not expect Targa to pay meaningful cash taxes for next 5 years due to return of bonus depreciation.

Q: Jeremy Tonet asked about Targa's resiliency and growth outlook in 2026 and beyond, and what drives the $2.5 billion CapEx.

A: Matt Meloy said 2026 looks strong with low double-digit growth due to existing customers drilling and commercial success, and Jennifer Kneale added it's based on existing contracts and positioning to service them.

Q: Theresa Chen asked about 2027+ inlet growth assumption, commodity price assumptions, and durability of commercial success.

A: Matt Meloy said multiyear forecast is from producer revisions, more positive on 2027 and beyond, and Jennifer Kneale said it's based on executed contracts.

Q: John Mackay asked about margins and Waha view.

A: Jennifer Kneale said they'll execute consistently with track record, and Bobby Muraro said Waha will be bumpy with pipes coming online.

Q: Keith Stanley asked about marketing assumptions for 2026 and Delaware plant growth.

A: Jennifer Kneale said conservative on marketing gains, and Matt Meloy said growth from producer revisions.

Q: Manav Gupta asked about upstream technologies and bolt-on deals.

A: Jennifer Kneale said combination of factors, and Bobby Muraro said bolt-ons from strong producer relationships.

Q: Michael Blum asked about deeper zone development and Waha price exposure.

A: Matt Meloy said early activity in deeper zones, and Matt Meloy said they hedge and have transportation positions.

Q: Jean Ann Salisbury asked about ethane recovery risk.

A: Matt Meloy said Permian generally in recovery.

Q: AJ O'Donnell asked about CapEx bridge and rich gas production.

A: Jennifer Kneale said bridge includes new plants, fracs, and field spending, and Matt Meloy said rich gas production should grow higher.

Q: Ameet Thakkar asked about export volumes and commercial commitments.

A: Ben Branstetter said well contracted and many conversations on long-term supply.

Q: Brandon Bingham asked about EBITDA guidance and commodity price sensitivity.

A: Jennifer Kneale said volume growth and marketing gains could drive higher, and Jennifer Kneale said well hedged on equity volumes.

Q: Jason Gabelman asked about Downstream growth and Speedway CapEx.

A: Matt Meloy said balanced on frac and transport, and Jennifer Kneale said total project cost $1.6 billion with more spending in 2026.

Q: Sunil Sibal asked about acreage dedications and inventory.

A: Jennifer Kneale said decades of drilling inventory on dedicated acreage