Targa Resources Corp. Price & Performance (TRGP)

Additionally, the following senior management team members will be available for Q and A. Pat McDonough, President, Gathering and Processing Scott Prior, Logistics and Transportation, and Bobby Muraro, Chief Commercial Officer.

I'll now turn the call over to Matt.

Thanks, Tristan, and good morning, everyone. 2024 was a great year and we are continuing to build on our momentum.

Our 2024 results demonstrate our differentiated positioning with record volumes from the Permian significantly outperforming initial expectations, driving record NGL transportation fractionation and export volumes that also exceeded expectations.

As we look forward to 2025 and beyond, we believe that we are uniquely positioned to continue to deliver significant growth for our shareholders. We have a demonstrated track record of adding infrastructure that is highly utilized and 2024 was no different.

With our additional two Permian processing plants, two additional NGL fractionators and our day We announced three new projects this morning. Our Delaware Express project, a 100 mile 30 inches diameter intra Delaware Basin pipeline expansion of Grand Prix that will provide us with additional NGL capacity in the Delaware Train 12, our next 150,000 barrels per day NGL frac capacity to 19,000,000 barrels a month. Our newly announced projects are needed to accommodate incremental NGL volumes from our five Permian processing plants currently under construction These critical projects are core to Targa's strengths positioning us to continue to demonstrate attractive returns on invested capital. We have recently accelerated projects and gross spending relative to our thoughts on when we would need additional downstream infrastructure This was driven by more organic growth than previously estimated plus the execution of multiple new commercial deals. In 2024, our Permian GMP volumes grew by 14% year over year. With an incremental seven zero nine million cubic feet per day moving through our system. Expected meaningful volume increases but we were surprised to the upside as our growth far exceeded the high single digit growth we were talking about last February.

Our volume outperformance was really driven by a combination of the advantages of our Permian systems and dedicated acreage being on the best rock in the Midland and Delaware Basins, lower declines on existing volumes, increased producer activity and performance in certain areas relative to initial expectations higher gas to oil ratios and Commercial six While we expect to continue to benefit from similar trends in 2025, we currently estimate that our Permian G and P volume growth will be more second half weighted. This growth along with several large commercial wins that began adding volumes late in 2025 and into 2026 positions us to drive even stronger volume growth in 2026.

These trends and the volume growth we expect to see on our system will drive further increases in year over year adjusted EBITDA and the generation of meaningful adjusted free cash 2024, our record adjusted EBITDA of $4,100,000,000 was 17% higher than 2023. We estimate another year of record financial and operational results in 2025 with over $600,000,000 in EBITDA growth expected this year.

We are also in position to deliver significant growth in 2026 and beyond with four new Permian GMP plants coming online in 2026 driving significant NGL volume growth through our downstream assets. The strength of our results positions us to continue to return an increasing amount of capital to our shareholders over a 50% increase to our common dividend for 2024 versus 2023, and a record $755,000,000 of common share repurchase Looking forward, we announced in November, we expect to recommend a 33% year over year increase to our annualized 2025 common dividend per share. Our focus isn't changing.

Our balance sheet is strong, providing us with and to continue to return capital to our shareholders. Including opportunistic common share repurchases. Before I turn the call over to Jen, I would like to recognize and thank our employees for their continued focus on safety and execution while providing best in class service and reliability to our customers.

Every group within Targa played a huge role in our execution across the year We provided our shareholders with the ninth highest total return in the 500, which which is a tremendous accomplishment that we want to build on. Lastly, I am pleased to announce that Jen Neal is moving into the President role effective 03/01/2025, after leading our finance and administrative functions for the last seven years and as as part of Jen's continuing development, she is going to shift her focus to now lead our commercial engineering and operations functions across Targa, Over to you, Jim.

Thanks, Matt. Good morning, everyone. Building on Matt's remarks, there is a lot of activity on our acreage in the Permian.

Starting in the Delaware, our new Bull Moose plant is now online and highly utilized.

We also completed the addition of our 800,000,000 cubic feet per day of front end sour gas treating and the 30 inches rich gas pipeline that connects Targa's two largest treating and processing facilities in the Delaware Basin. These projects bring Targa's Delaware treating capacity to approximately 2,300,000,000 cubic feet per day and create significant system fungibility. We are continuing to make progress on our next two plants that are under construction and our Falcon two plant online in the second quarter of twenty twenty six. With two plants coming online within a quarter in 2026, we expect to be in great position to handle customer volume growth in the Delaware. Moving to the Midland Basin, our Greenwood II plant came online in late October and was fully utilized at Targa. We currently have three additional plants under construction with our Pembroke II plant expected online in the fourth quarter of twenty twenty five, our East Pembroke plant online in the second quarter of twenty twenty six and our East Driver plant online in the third quarter of twenty twenty six. Across both the Midland and the Delaware, we are evaluating when we will need to move forward with our next Permian plants to accommodate continued growth on our systems.

Turning to our Logistics and Transportation segment. Targa's NGL pipeline transportation volumes averaged a record 872,000 barrels per day and fractionation volumes averaged a record 1,100,000 barrels per day during the fourth quarter as we benefited from our day our Train 10 fractionator coming into service in late October. Our 30 inches 100 mile Inter Delaware Basin expansion of Grand Prix that we announced this morning is needed to accommodate growing Delaware Basin volumes. By moving forward with a 30 inches diameter pipeline, we we have the flexibility to consider repurposing part of our existing Grand Prix NGL lines to large diameter gathering lines or residue service to further enhance flow assurance and takeaway options for our producers. Our outlook of increasing long haul NGL transportation volumes has continued to strengthen and Daytona coming online plus the third party medium term transportation deals that we mentioned previously provide us with flexibility looking forward.

Given the anticipated growth in our Permian GMP business, our outlook for NGL supply growth remains robust and our downstream system expansions will be much needed to handle growth from our systems. [indiscernible] next fractionator in Mont Belvieu, Train 11, remains on track for the third quarter of twenty twenty six is expected to be much needed at startup. Our newly announced Train 12 is also expected to be much needed, which Targa estimated in the first quarter of twenty twenty seven. In our LPG export business at Galena Park, our loadings averaged a record 14,000,000 barrels per month during the fourth quarter. We remain on track to complete our 650,000 barrel per month expansion in the fourth quarter of twenty twenty five. Given our fractionation expansions that will result in incremental propane and butanes in the Targa system, plus the continued strength in global demand for U. S. Sourced LPGs, we we expect our LPG export expansion project announced this morning to be much needed when it comes online in the third quarter of twenty seven. The addition of a new pipeline between Mont Belvieu and Glencoe Targa and another refrigeration unit will significantly increase our loading rates and enhance our facility flexibility.

During the fourth quarter, we purchased BP's 12% interest in Cedar Bayou fractionators for net cash consideration of approximately $111,000,000 and we now own 100% of CBF. This transaction allows us to provide our partner with liquidity while simplifying our operational structure at an attractive return. We also announced this morning a definitive agreement to repurchase all of the out which holds our North Dakota assets for approximately $1,800,000,000 we executed the Badlands transaction in February 2019, we were in the midst of building our largest project ever, Grand Prix, and multiple plants and fracs to help commercialize Grand Prix. We maximize proceeds without any TRGP dilution with the structure which was critical to us at the time given our large capital lift and strength of conviction in our outlook. We have now taken out the last piece of creative financing that we utilized back then to keep investing without dilution. Rationale for taking out Blackstone now is simple. The preferred had a low double digit cost. Essentially $180,000,000 of fixed annual charges. With the strength of our balance sheet, we can refinance it with much lower cost debt, providing more than $80,000,000 annual cash savings and have minimal impact to our leverage ratio.

We'll now own 100% of the Badlands again which is a strong fee based free cash flow asset Characteristics that made it attractive for joint venture investment in 2019 make it attractive for us to fully [indiscernible] With an effective date of January 1, we will benefit from owning 100% of Badlands for all of 2025, resulting in approximately $180,000,000 of incremental EBITDA. As Matt mentioned, we have accelerated significant spending into 2025 that we were not forecasting at this time last year because of the outperformance of volume growth in 2024 and our expectations for continued growth Through the end of twenty twenty four, our ROIC over the past five years was 21% which is strong given we had the second largest project in Targa's history Daytona and several other major projects come online and only partially contribute 2024.

We provided an illustrative framework last February that detailed to support high single digit growth in Permian volumes. We this framework holds, we clearly benefited from a lot more volume growth than that in 2024. And given our additional commercial success, our like to see more volume growth going forward.

This growth accelerated several downstream projects which added capital to 2025.

The framework should continue to be helpful in a lower growth environment but our capital spend over the next few years is likely to be higher. If four plants come online in 2026, we will need additional processing in 2027 and beyond and that volume growth has accelerated downstream spend. Importantly, these projects are all core to Targa and leverage our existing footprint and we believe will continue to result in attractive rates of return driving increasing EBITDA and free cash flow over time. As a result of our strong returns and attractive growth, we continue to return meaningful increases in capital to our investors. We opportunistically repurchased $755,000,000 of common shares at a weighted average price of $127.2 during 2024, a substantial increase over the $347,000,000 of share repurchases In 2024, we returned 42% of our adjusted cash flow from operations to shareholders. This was higher than we expected at the beginning of last year, but the strength of our results positioned us to return capital to shareholders more quickly. Consistent with the multiyear framework we've previously discussed, we continue to model returning more than 40% of cash flow from operations to shareholders on a multiyear basis looking forward.

We will continue to focus on an all of the above approach to creating value for our shareholders. Maintaining our strong balance sheet positions us to both continue to invest in attractive organic growth opportunities while increasing our return of capital to shareholders. Our compelling value proposition continues to be supported by growing EBITDA meaningful increases to common dividends per share, reducing share count and an excellent outlook. 2024 was a big year for our company and I'm so appreciative of the efforts of our employees. We have a lot of momentum and are excited about the future. I will now turn the call over to Will to discuss our fourth quarter results and our 2025 outlook.

Well, Thanks, Jen.

Targa's reported quarterly adjusted EBITDA for the fourth quarter was $1,122,000,000 a 5% increase over the third quarter. The sequential increase was attributable to higher Permian volumes which resulted in higher system volumes through our integrated NGL business.

Full year 2024 adjusted EBITDA was a record $4,100,000,000 a 17% increase over 2023 and was supported by record financial and operational metrics across the company despite weak natural gas and NGL prices. We also benefited from stronger than expected natural gas and NGL marketing opportunities across 2024 with approximately $100,000,000 of optimization opportunities that were not included our original guidance.

During 2024, we spent approximately $3,000,000,000 on growth capital projects growth capital spending came in ahead of our previous estimates as a result of the acceleration of spending attributable to our Permian commercial success, and various growth projects that shifted spending into 2024. Our net maintenance capital was $232,000,000 At the end of the year, our net consolidated leverage ratio was approximately 3.4 times below the midpoint of our long term leverage ratio target range of three to four times.

With our strong balance sheet we have stable mid BBB investment grade ratings with each of the three rating agencies. Turning to 2025, we are very excited about our outlook and expectations.

We estimate full year 2025 adjusted Volume growth in the Permian Basin will drive operating margin across our businesses The Logistics and Transportation segment is well positioned to benefit from full year contributions of our Daytona NGL pipeline and Trains nine and ten. Our outlook assumes commodity prices of $1.55 for MMB2 [indiscernible] for Waha Natural Gas dollars 0.65 per gallon for our weighted average NGL barrel, and $70 per barrel for WTI crude. Our cash flows are greater than 90% fee based and we have hedged about 90% of the remaining 10% non fee margin through 2026. The increasing fee based margin across our businesses will continue to provide us with cash flow stability and the fee floors and our GMP business support our ability to invest across lower commodity price environments while positioning us to benefit from higher commodity prices. Relative to our full year 2025 financial guidance, a 30% move higher in commodity prices, would increase full year adjusted EBITDA by around $130,000,000 while a 30% decrease would reduce adjusted EBITDA by around $80,000,000 This momentum will position us well going into 2026. Estimate $2,600,000,000 to $2,800,000,000 of growth capital spending 2025 and our capital budget includes spending on the three new downstream projects announced today in addition to the five Permian plants and Train 11 currently underway spending associated with the recent commercial success that Matt highlighted, modest spending associated with long lead time items for our next potential Permian system expansions and we are continuing to evaluate when we will need to move forward with spending on incremental long haul NGL transportation.

As Jen mentioned, our third party medium term NGL transportation agreements provide us with flexibility and base load volumes for our next NGL pipeline expansion when needed. Our estimate for net maintenance capital spending is $250,000,000 Similar to year end 2024, we expect to end 2025 with our leverage ratio comfortably within our long term target range of three to four times providing continued flexibility going forward. In February, we closed on a new five year $3,500,000,000 revolving credit facility maturing February 2030. The upsized revolver enhances our liquidity position, and flexibility to continue to execute on our strategic priorities. In 2027, any favorable tax policy changes by the new administration such as reinstating bonus depreciation or eliminating AMT would reduce our cash taxes relative to our expectations. I would like to join Matt and Jen in thanking our 30 employees who have made our success possible the team effort every day as we continue to execute on our growth program. And with that, I will turn the call back over to Tristan. Thanks, Will. For the Q and A session, we ask that you limit to one question and one follow-up. And reenter the queue if you have additional questions.

Latif, please open the line for Q and A. Thank you. Again to ask Our first question comes from the line of Jeremy Tonet of JPMorgan. Your question please, Jeremy. Hi, good morning. Jen, congratulations there. First off, and just wanted to go, I guess, into, I guess, the forward outlook at this point with the guidance you provided. I believe there's commentary that I activity would accelerate over the back half of the year. And if I think about the CapEx pull forward here, it seems like things are going better than previously expected, growing faster. I'm just wondering any high level thoughts you could share, I guess, on how the trajectory of EBITDA could grow across the year, the back half higher and really how we should think about 2026 at this point given the trajectory later in the year as well as some of these growth projects being pulled forward here? Thanks.

Yes, sure Jeremy. I'll start. The growth outlook I'd say for us is really strong relative to where we are sitting last year at this time. I'd say the multiyear growth outlook has improved really for every year. As we look at this year specifically, we're we're pointing to more back half growth. Last year, we saw really strong volumes the first part of the year and that continued through the rest of the year. This year, as we look at our producer forecast, it is more back half weighted and the commercial success on the deals we talked about in 2024 really start contributing kind of second part of 2025 and into 2026.

This year is also for Q1 is impacted by weather. We've had just round after round of freezing weather that's impacted our Permian volumes. And then impacted our NGL volumes downstream. So we have had some weather headwinds here in the first quarter But our outlook for this year is really strong and we just kind of look through the bottoms up build of our producer forecasts. 2026 looks like it's potentially even a stronger year than 2025. And Jeremy, I'd just add, when you think about four plants coming online in 2026, we're not trying to look too far beyond this year. We're really excited about this year. Four plants coming online next year as well. We've just got a tremendously strong outlook of multi years of growth here that we're really [indiscernible] Got it.

So 2026 looking better than 2025 at this point and long term growth outlook today looking better than it did in the past. So got it there. And then I believe there was some comments on optimization that occurred in 2024 and is not I guess, in the EBITDA guide for 2025 and obviously you're not baking the business around this. But is there any reason to think that some optimization does not materialize again in '25? Just wondering how we should think about that?

I would say that we're already we're always pretty conservative when we guide to full year EBITDA. And when we think about marketing opportunities and our footprint across both the natural gas and the natural gas liquids side, Each year opportunities present themselves, but it's not part of what we forecast a meaningful way. We let those present. That's one of the reasons that in 2024 you saw us increase our guidance range in August, then you saw us in November, say we thought we'd be at the high end of the range. And then you've, of course, seen us today beat all of that with where we ended up for 2024. So similarly, as we think about this year, I'd expect opportunities to present themselves, but it's not something that we bake in to our overall planning process until they're accounted for essentially.

Got it. So optimization is still very much possible upside to the [indiscernible] I think that's it for me. Thank you very much. Thanks, Jeremy. Thank you. Our next question comes from Keith Stanley of Wolfe Research. Please go ahead, Keith.

Hi. Thank you. Good morning.

Wanted to start on the Badlands buy in and just clarify, did Blackstone have an option to put the preferred interest back to you at a certain point Or is the timing just you have excess balance sheet capacity? And I think Jen you noted $80,000,000 a year of cash savings from doing this. And so you're just opportunistic on it. I'd say that what we announced today was us being opportunistic and saying that from our perspective with the strength of our balance sheet, with the cash savings from refinancing a higher cost low double digit preferred being able to put it on our balance sheet at a much much lower cost of debt, made all the sense in the world to us and we quantified for the savings for you of around $80,000,000 on the call. As with any structure like that, yes, there are eventual options for a partner like Black Stone to get out, but by no means were we anywhere where we had to make a decision. For us, it just was really on the backs of a really strong twenty twenty four year end leverage ratio of 3.4 times, We're taking on a tiny bit of leverage here and generating $80,000,000 cash savings and now go back to owning 100% of a stable fee based asset that's throwing off a lot of free cash flow.

Great.

Thanks for that.

Second, I just wanted to ask on buybacks given some of the growth commentary including 26 potentially even being stronger than than 25. So when you think about buybacks and just capital allocation generally, the stock has rerated a lot You're getting great returns on organic growth You could probably get pretty good returns on M and A as well. So how are you thinking about prioritizing capital allocation at this point including buybacks just given kind of the overwhelming growth potential? [indiscernible] For us, it continues to be an all of the above approach. I think that we clearly have a lot of really attractive organic growth capital investment opportunities that we can invest in and you're seeing us do that. For our producers and customers and that will of course, be a core area of focus for us moving forward. While we're doing that, you also saw us execute on record repurchases 2024. Meaningfully increased the dividend in 2024. And now of course, we have the expectation of a 3% increase to the common dividend in 2025. What we really like about our repurchase program is it's opportunistic. So to the extent we see a disconnect between our belief of the value of Targa and what the market is presenting itself or is presenting to us, we've got the financial flexibility with the strength of our balance sheet to step in.

You saw us in twenty twenty four execute a lot of repurchases in the second quarter. We knew how strong our 2024 was going to be We were relying on volume growth showing up. It was showing up in spades even more than we expected. So you saw step in because that was supporting a strengthening short, medium and long term outlook of growth. Similarly, we executed on a lot of great commercial opportunities. That's supporting an outlook of significant growth in 2026 and beyond. We've got a ton of conviction in what we have going on here and are really proud of our employee execution across engineering, operations, commercial, [indiscernible] And that means that as we look out over the short, medium and long term, our forecast is strengthening. And that's on the backs of really strong organic opportunities. And we've got the flex flexibility financially to execute opportunistically on repurchases when we think that it makes sense.

Thanks a lot. All right. Thanks, Keith.

Thanks. Our next question comes from Jackie Galetis of Goldman Sachs. Please go ahead, Jackie.

Hi. Thank you so much for the time. First, just wanted to start, you pointed to commercial success, really driving some of the capital spending higher. Where are you seeing the success across your footprint? Is it mostly on the sour gas opportunities, Or is this more across like the entire GMP segment as a whole?

Yes, sure, Jackie. I'll touch on that and then Pat, if if you want to jump in. I mean, I'd say we've really seen good commercial in both the Midland and the Delaware. We actually included in our investor presentation a slide which highlighted what we characterize as three larger deals. All three of those were in the Delaware side of the basin. It just shows that there's still a lot of activity and a lot of acreage positions available. I mean, we have millions of acres already dedicated. That's going to provide us nice growth. But we continue to execute and have some wins with with our producer customers on I'd call it kind of step out acreage development.

And we've seen that on both sweet and sour. So I think the fungibility of our system being able to have a significant amount of treating for both CO2 and H2S and the fungibility to continue to operate when plants are in maintenance just provides an overall very good level of service for our customers and it's really paying off for us. I think the only thing I would add is, as Matt alluded to in the investor presentation, Really the example we gave there was just illustrative.

I mean there is a long list of new transactions that we did in 2024 and I've already completed in 2025 that is adding to the overall acreage position contract and our growth going forward. And That's why when you listen to our prepared comments, etcetera, we say back half loaded 2526%. We've got a lot of line of sight on the stuff we've had under contract plus this new added acreage and drilling commitments that our producers are bringing to us. So we really are excited about the short and long term outlook for our growth in the Permian Basin.

Got it. Appreciate that. And then, just moving on to what the faster than expected Permian growth kind of implies looking at those long lead items for potential Permian expansions and evaluating incremental additional long haul What What does the cadence kind of of those additional plants beyond '26 might look like? And at what point do do you kind of expect to move forward with additional infrastructure? From here.

Sure. Yes, good question. And frankly, internally, we're trying to estimate and do the best we can for having the right amount of capacity and not too much and not too little What you see is four plants coming on in 2026. That's higher than normal if you look in 2025, we have two plants coming on. So you're kind of a three plant average for those two.

We currently evaluating twenty seven and twenty eight.

We have multiple sites already picked out for new processing plants in the Delaware and Midland and we're determining best location and best timing for those. So I think as Jen mentioned, we gave framework which pointed to $1,700,000,000 of CapEx for call it, two plants a year. I think what we're seeing is here in the short medium term, it feels like we're higher than that. And that's why you've seen CapEx move higher and it's accelerated some downstream spending. All of which is core to us. It's kind of right down our fairway of what we do, gather and process, and then handle the NGL volumes downstream. So So we'll continue to kind of figure out what the right cadence for plants is. It's two for 2025, we have four for 2026 and I'd say we're evaluating 2028 we see significant growth really in all of those years.

Okay. I'll leave it there. Thank you.

Okay. Thank you. Thank you. Our next question comes from Manav Gupta of UBS. Please go ahead, Manav.

Good morning. My question here relates to you are obviously involved with the Permian gas Egress pipeline.

I'm just trying to understand the scope over there. Obviously, look like a very strong demand outlook driven by LNG, coal to gas switching and data centers. So just trying to understand this entire conversations that you're having with the people about possibly investing more with Permian gas egress out there.

Hi, this is Bobby. Yes, as we announced our partnership with Whitewater and Blackcomb, excited to get that done, excited to get that pipeline online in 2026.

We continue to talk to anyone and everyone about egress. Obviously, there's another pipe that got announced coming out of the Permian.

That will help with egress of natural gas as well as supplying new demand from LNG and data centers. That team is out there figuring out what the next pipe is, where the next demand is, data centers, LNG, those conversations are ongoing constantly. And we're in that mix every day. [indiscernible] we're figuring out when that next pipe is needed, where that next demand center is And as we evaluate some of that intra Permian basin pipe we've got where we can deliver gas that can get burned at data centers or power plants in the Permian. So we're working on those things every day and all day and figuring that out. But we're excited to see Blackcomb come online in 2026 because it will be much needed when it does.

Perfect. Obviously, you have a very strong organic growth pipeline. Just trying to understand the appetite for some bolt on deals also And the reason I'm asking is one of your midstreamrefining peers is seeing some activist pressure to start divesting some of their midstream assets. And I'm just trying to understand if there is what would be the appetite for small bolt on deals that you could do? Yes, sure. In terms of gas takeaway, we invest 17.5% in Blackcomb. And as we look at being part of solution for additional takeaway in the Permian, I think there will be other opportunities afforded to us to invest in other pipes. And as Bobby mentioned, we're looking at multiple opportunities. When is the next one going to be needed?

And what would be an opportunity for us to make a commitment to a high then have some investment opportunities. So yes, I'd say we will continue to look to invest in long haul takeaway. We're also evaluating, we mentioned as we're putting in the Delaware Express 30 inches NGL line, We have some Grand Prix pipeline in the Delaware and we're evaluating whether we want to make those [indiscernible] gathering lines or potentially making that residue lines as well to continue to aggregate natural gas residue from plants to aggregate for additional long haul pipe takeaway. So we do have additional opportunities on the residue gas side.

And as we continue to grow, we'll continue to look to see if additional investments there makes sense. And on the broader topic of M and A, I don't really think our posture has changed a whole lot. I mean, we have a lot of organic growth opportunities that we see. That is our primary focus. That is what we're going to be spending most of our time on. We've looked at some of these bolt on transactions. I'd say we have a high bar and nothing has either transacted with other parties or they've held. So we've continued to focus on our organic growth. I think the bar for us continues to be high and we'll just kind of continue continue on that path.

Thank you.

Thank you.

Our next question [indiscernible] Maybe the first question is just on the outlook. Was wondering if you could spend a bit of time just talking about the expected returns on the projects that have been announced. Should we still be thinking about these around that 5.5x built build multiple that you've guided before or have the returns in any way changed Good morning, A. J. This is Jen. I'd say that everything that we provided in the framework before really holds, which is we've got a demonstrated track record of being able to do better than that 5.5 times multiple and our expectation is that we ought to be able to [indiscernible] saw in 2024 the strength of our results with really weak commodity prices. To the extent we do ever see commodity prices move higher on the natural gas and NGL side, we've got that asymmetric SKU to the upside, which would provide incremental returns that you really haven't seen play out here recently despite us putting up really attractive rates of return on what we've invested in. So I think continuing to use the 5.5 or a little bit better is a reasonable starting point as you're modeling out our business.

Of course, we're working every day to figure out how to utilize those assets to drive those returns higher. Think what's been great for us is everything that we brought online has essentially been full at Targa up. Other than Daytona, which is an asset that we expect to ramp over time. But even the ramp there has been faster than expected and that's why we've had to do some of those medium term NGL transportation agreements. So part of how we get better returns is that when assets come online, we've been able to commercialize the volume growth more quickly than when we made the FID decision and the strength of our commercial team is certainly helping us to do that and we'd expect that to continue going forward as well.

Okay, great. Maybe just one more then on Q4 results and kind of talking about how these assets ramped into service pretty quickly. But just noticing that there was a pretty big step up in frac volumes versus NGL production. Just wondering if you could provide some comments on there. Was there any third party step up involved in that increase? Hey, A. J, this is Scott. Yes, we saw a really nice quarter in the fourth quarter. When you look at our volumes overall, when you look at fourth quarter of 'twenty three, to fourth quarter twenty twenty four are buying grew by 29% over that timeframe. A lot of that was because we brought on frac train nine during the third quarter and then a course Frac Train 10 that came online in the fourth quarter. So that allowed us basically to utilize frac volumes that we had been offloading at times to other third parties.

As well as our volume growth that we saw from all of our processing plants and then being able to work off inventory that we had stored. So all of that is really part of the benefit that we saw of the 1,100,000 barrels that we saw during the fourth quarter. Needless to say, when you think about the number of plants that we've announced on the Delaware side, on the plants that we've announced on the Midland side, And each of those plants contributes 35,000 to 40,000 barrels a day of volume. Much of which will be directed to our pipelines and much of which will be coming to our fractionators That gives us line of sight and the reasons why Train 11 was announced previously and today Train 12. So when you think about when those are coming online in the third quarter of 'twenty six, then of course, Frac Train 12 now in the first quarter of twenty twenty seven. All that lines up very well with the plant cadence that we've already announced today.

Okay. Thanks for the color. I'll turn it back Okay. Thank you. Thank you. Our next question comes from Michael Blum of Wells Fargo. Please go ahead, Michael. Thanks. Good morning, everyone.

I had two questions on volumes. I'll just stack them here together. The first is on the fourth quarter. Your Permian volumes sequentially were up only a little bit only modestly. Q3 to Q4 and that's spite of the fact that you've been bringing on plant you brought on plants in the second half of the year. So just wanted we should be aware of there? I thought maybe the volumes will be a bit higher. And then for the full year, you said you grew volumes overall 14%. In 2024. What does guidance assume in 2025 for volume growth? Thanks.

Related to the fourth quarter the trajectory of growth that we've been on was pretty staggering when you think about moving across the year and volumes moving up two seventy seven million cubic feet today Q2 to Q1 and three eleven million cubic feet today Q3 to Q2. And then the 83,000,000 cubic feet a day of growth Q4 relative to Q3, we tried to call it out in our press release quarter over quarter commentary. That we did have a low margin contract that rolled over at the very beginning of the fourth quarter. So that's what was going to create some of that noise quarter to quarter. But we certainly wanted to make sure that we highlighted for you. I'd say that when we think about our growth '25 relative to '26, we had the Bull Moose plant just come online. We've got another plant that comes online. Later this year. We've talked about a back half ramp. We're certainly above that low that sort of high single digit framework that we said underpinned the growth in the $1,700,000,000 case that we published last February. I'd say expect higher growth than that. 2024 was a really strong year.

We're really pointing to 2026 and the four plants as our next strong year, but we're going to continue to have really attractive Permian across 2024 or sorry, excuse me, 2025 as well. But again, just trying to remind everybody, we're going to see a lot of that growth materialize back half because as Matt said, that's when a lot of those commercial agreement arrangements really start to ramp up in the back half 'twenty five and then provide significant incremental growth in 2026. Which is what is underpinning the four plants in 2026.

Thank you. Okay. Thanks, Michael.

Thank you. Our next question comes from Neil Dingmann of Truist Securities.

Please go ahead, Neil. Good morning. Thanks for the time.

My first question, it's been asked just want to ask maybe differently on the Babylon Steel I understand the lower cost of capital and financial ability there.

Just wondering maybe how this fits into the overall integrated NGL strategy and if again, of course, for the right price, would you all consider selling this asset?

Yes. What's interesting about the badlands is, our our strategy is obviously invest in gathering and processing and move the NGLs into our down footprint.

We actually get those NGLs into our fractionator. We don't have transport all the way up to the badlands, but it is tied into our fraction and then those volumes are available for export. So we do get some synergies from the NGL downstream business on the badlands. With us refinancing at the lower cost debt, any option that we would have to do anything up there, whether it's with a partner or something strategic, those are frankly a little bit easier. With us owning 100% of it. So it doesn't change any of the dynamics about what's the best way for Targa to look at all of its assets, right? So, now if anything, it kind of improves that position. Sure. Love the flexibility. And then second question, maybe just on your North Texas Mountain Valley NGL pipeline, I'm just really wondering, what's the timing in when would you all need new capital there, maybe along with how you are using offloads to bridge that need?

Yes. Well, first off, obviously, we announced the Delaware Express line. That is just to give a little bit more on that. That line is a 30 inches line [indiscernible] basically allow us to move incremental growth that we're seeing on the Delaware Basin side In the fourth quarter, we had about 390,000 barrels of NGL production on the Delaware, much of that was in moving on Grand Prix. But when you think about the number of plants that we're adding on the Delaware side, with Boom is one course Falcon two, all of which will be online in the second quarter of twenty twenty six. That volume will find its way and be necessary to move on our Delaware Express Daytona and Grand Prix.

Our capacity all the way into Bellevue with our South Leg is about 1,100,000 barrels per day. We moved 872,000 barrels a day on Grand Prix during the fourth quarter. So we still have some operating leverage there. And then certainly, the third party offload deals that we've done allows us to ramp into our cadence of plan and gives us a lot of flexibility on when we would need to announce further long haul pipe. It's certainly something that we're looking at.

Trying to stay in front of and again with our success that we're seeing on our upstream plant adds it's something that obviously we've alluded to in our notes. That we're studying that hard.

I'm sure you Allstate Okay. Thank you.

Thank you.

Our next question comes from Theresa Chen of Barclays. Please go ahead, Teresa.

Thank you for taking my questions. Looking more to the medium term, as you see visibly the strong back half acceleration in 2025 tying into the four plants coming up next year. I'm curious if you can quantify in any way how strong is strong growth in 2026 from a volumetric perspective as you look at your inlet volumes.

Then beyond that, clearly, you're in curious of accelerated and above average growth in CapEx and including the downstream infrastructure that needs to come online? But based on what you see today, when do we kind of revert back to normal, if ever? Would love to get your thoughts there.

Yes, sure. Part of Giving multiyear volume guidance is difficult. I mean, As you saw in 2024, we thought we had a good estimate and we far exceeded that. Producers ended up being more active, wells came on better, GORs increased, they didn't decline as much. So we saw good outperformance in 'twenty four. Part of what goes into 2026 is also just how strong things do ramp in the back half of 2025 and what our exit is for 2025. So that's why we're not giving '26. When you just look at it on an annual basis, we see higher year over year in 2026. We still see strong growth in 2025.

I'd say not as strong as we saw in 2024. It's definitely south of that.

Still see pretty strong growth in 2025. But just the indicators we're getting is from the commercial success we've had and just the drilling plans we currently have from producers, it's looking like that back half of 2025 is setting up very nicely. For 2026.

And then yes, when you get into kind of more normal capital cadence, we have some again some chunkier downstream projects that we've announced here this morning with with the export terminal and additional frac. We have trained nine and ten just came on. We have eleven and twelve. We have a looping out in the for the Delaware Express, Once a lot of those get in service, you could expect to see again after this next build cycle on the downstream side perhaps lower CapEx cadence at that point. But we're still sorting through what that looks like and what it's all going to be dependent on what what the volume growth is on the GMP side.

Understood. And turning to the export component of your infrastructure value chain, completely understanding that these supply push purity products need to move and you will collect the fees on the growing volumes. But also curious to hear your view on the ebbs and flows of demand from your international customers?

Theresa, this is Scott. First off, when you look at just the tremendous growth that we've seen with LPG volumes coming out of The U. S. And just less than ten years, the LPG market has grown two, two point five to three times in that timeframe. And then when you look at the market share that The U. S. Has today, it's grown from 29% to 46% just in that timeframe as well and that's again on a growing volume We would expect that trend to continue. There is still a vast majority of volumes that can find their way predominantly to the Asian market place and to growing market centers that are out there for LPG That's both on the propane and on the butane side. There's a number of countries obviously that are still in need of mobile fuel fuel that is clean burning and efficient and that's something that the LPG molecule provides in a very effective manner. So we would just see that trend continue. And so us, when we look at our export expansion project, it's an expansion that includes a pipeline It includes a refrigeration unit. And all of that is at an cost of just less than 400,000,000 So that is a very attractive project for us.

It provides the ability for us to continue to compete and make sure that the volumes stay on our system can be exported to the marketplace.

Thank you very much.

Okay. Thank you.

Our next question excuse me. Our next question comes from Brandon Bingham of Scotiabank. Please go ahead, Brandon.

Hi. Thanks for taking the questions here.

I just wanted to quickly go back on the strong Permian activity for this year and then sort of the near medium term outlook I wanted to just more specifically focus in and ask if there's been any discussions with customers or if there's any contemplations within the [indiscernible] in the basin? And if that's something that could potentially be tailwinds to your outlook this year or outer years? Yes, this is Pat.

It's capital loaded questions.

Just to be frank. But certainly, when you think about the Permian, the primary And we are definitely seeing Some parties on both the Delaware and Midland side now look at the Woodford Barnett, which is a little bit deeper horizon And I would say that we're in the initial stages of that getting test probably a little bit ahead in the Delaware. Relative to Delaware versus the Midland. And then certainly in both, both sides of the basin. There's multiple horizons for different reasons, either the quality of the rock relative to the other benches or a sour component in the Delaware that have waited to be developed and frankly, there's good economics with all of those, the expectation is they will get developed over time. [indiscernible] I guess the short answer is yes, we are seeing a little bit of interest in the deeper horizons and we'll see how that plays out.

Got it. Thank you. And then if we could just quickly go back to shareholder returns. I know it was previously asked about buybacks, but just kind of thinking through that and how you see it shaping up this year with the stock above where you executed the buybacks in 4Q?

Just how all that fits in with the 40% to 50% payout target and if you might consider any other alternative levers like a special dividend or something, understanding you don't want to get the base dividend too high. Taking it through the cycle sort of approach there. But just how you guys are thinking through that?

That with where the stock currently sits today? Brandon, this is Jen.

I'd say that it's really consistent with how we've been thinking about it going all the way back to when we put our share repurchase program in place in the third quarter of twenty twenty. A strong balance sheet, we've got a lot of flexibility.

Really since then, we have been buying each quarter at higher price [indiscernible] quarters where maybe we saw a little bit of dislocation and that's where you really saw a step in. We've got a really strong short, medium and long term outlook. And we continue to have conviction that we can provide our shareholders with an increasing return of capital from utilizing that opportunistic share repurchase program. But we really like the fact that we get to report it after we've executed on it. And so I don't think you're going to hear us come out and say this is how you should think about it quarter to quarter or this is what we're forecasting for this year or next year. I think there's a 40% to 50% framework holds and that's a combination of dividends and thoughts on opportunistic repurchases that we have running through our models.

And that of course is a multiyear framework. We got above 40% in 2024. I think we've got expectations that we'll continue to return a meaningful increase capital to shareholders as we move forward through time. And it will be a combination [indiscernible] and we value balance sheet strength and we value the ability to continue to invest in high returning organic growth capital projects And then we value the fact that we can return capital to our shareholders as well. And I think that all of the above approach has really worked well for us. And so we really don't see a need to change it as we look forward. Awesome. Yes, I agree. Thank you so much.

Okay. Thank you. Thank you.

Thank you. Our next question comes from Harry Mathyr of Barclays. Your line is open, Harry. Hi, good morning.

Talk about the balance sheet a little bit. So I mean the narrative about leverage has been very consistent from you for the past few years. Three point zero to four point zero, but You also previously messaged a preference to be in the lower half of that range. So with CapEx now expected to be higher in the next few years, I'm just wondering how we should think about the prospects for Targa being in the lower half of that range on leverage in the near to medium term?

Good morning, Harry. This is Jen. I think that's still definitely our preference. But I think that consistent with what we've also said before, we don't see a need to force our way there.

We ended 2024 at 3.4 times.

The Badlands repurchase takes us a little bit higher. But then as we look out over the next several years, what we really like is the trajectory of our leverage fairly quickly coming down into that lower end of the three to 3.5 times. But at the end of the day, we're very comfortable managing this business where we currently are from a leverage ratio perspective.

But I do think that just as a natural movement through the current growth capital cycle, as these projects come online, we benefit from meaningful increases year over year EBITDA contributions. Our leverage ratio will Okay, thanks. And then with you consolidating badlands and optimizing cost of capital, just wondering generally any thoughts on more comprehensively addressing some of your higher cost debt given you do have some callable notes with coupons that are still off market versus where your bonds trade today?

I think we're always looking at how best we can essentially save money across our entire organization and finance team is held to that same level of accountability, which says, if there are opportunities to take out higher cost debt, then certainly we'll evaluate it. Right now, we've got more than $1,000,000,000 drawn on our revolver. We've got, of course, the Badlands repurchase. So probably more focused short term on helping to manage that liquidity position, but we're always looking at those higher coupon callable notes and trying to assess what the right time may be to bring them in and refinance either utilizing our new revolver or potentially terming out. That will continue to be a consistent evaluation by our finance team.

Okay. Thanks, Barry.

Thank you.

Our final question comes from Sunil Sabal of Seaport Global, Yes. Hi, good morning, everybody, and thanks for the time.

I wanted to start off on the capital program. It seems like inflation in The U. S. Continues to be sticky and if tariffs come into play, cost to build anything in U. S. Is probably going up. I was curious how that environment you you manage your returns on new investments. Are you able to pass on all this potential costs to customers or any risk management aspects of your capital program? Yes, sure. Hey, Sunil.

Yes, we've actually seen steel prices move up here. Just kind of the talk of tariffs we have seen that happen. No, it impacts our capital costs, whether it's like processing plant or NGL pipes we're putting in place as steel prices move up, it does impact our overall CapEx budget. But as you look at [indiscernible] steel cost as a percent of an overall processing plant or or an NGL pipe. It's It's I'd say it's a modest contribution. So then you have a percent increase on a modest contribution of the overall CapEx. I'd say it's a manageable a manageable headwind on any of these projects. We'll still get good returns We've actually worked with some of the on some of our projects working in supplying U. S. Steel. So we aren't subject to the tariff. So our procurement group is managing it. It will be a bit of a headwind, but I think it's a manageable one. [indiscernible] And then on the NGL export side of things, seems like the competitive landscape is heating up a bit. You obviously announced this significant expansion today. I was curious if you could talk about the competitive landscape there. [indiscernible] I remember correctly, I believe you were most Has that changed recently?

Yes, sure. I'll start and then Scott you can add on.

The NGL or the LPG X market is competitive. So there's multiple players. So with another facility being built, it's competitive now, it'll be competitive when another one gets built. So we've been able to manage and do quite well with our we have a really good team. We move our volumes from our system across our dock and we expect to continue to do that. Scott, anything to Yes. And I would just add that again, from our comments earlier, this is a very attractive brownfield project for us. Again, it's less than $400,000,000 to add a pipeline from Now Bellevue down to Galena Park, along with a new refrigeration unit. Gives us a lot of operating leverage going forward, complement our overall business all the way back to the wellhead. When we look at contracting for this, we always stay very well contracted. We do a tremendous job with our export team of renewing existing contracts, adding new contracts, both long term and short term in certain situations And as it relates to this project, 20 online in the third quarter of twenty twenty seven, because it fits very well with the cadence of plants pipelines and fractionation that we need to move the LPGs across our dock.

So we'll continue to contract heavily. And take advantage of that marketplace. I also like the fact that we've got a number of contracts. The volume actually ramps up over time this new expansion project. So we feel very comfortable with our project the market share that we have today. Again, The U. S. Is continuing to dominate the overall export market in general and it will continue to Okay. Thanks for the color.

Okay. Thank you. Thank you. I would now like to turn the conference back to Tristan Richardson for Thanks, operator. Thanks, everyone, for joining the call this morning. We appreciate your interest Targa Resources.

This concludes today's conference call. Thank you for participating. You may now disconnect. [indiscernible]