Targa Resources Corp. Q4 FY2024 earnings call

• Matt Meloy highlighted 2024 as a great year with record NGL transportation, fractionation, and export volumes, and announced new projects like Delaware Express, Train 12, and LPG export expansion. He discussed Permian volume growth drivers and expectations for 2025 and beyond.
• Jen Kneale detailed Permian plant progress (Greenwood 2 plant online, plants under construction), logistics and transportation segment performance (record volumes, Daytona NGL pipeline), LPG export expansion plans, and the acquisition of Badlands LLC, noting $80 million annual cash savings from refinancing.
• Will Byers reported Q4 adjusted EBITDA of $1.122 billion, 5% higher than Q3, and provided 2025 guidance with adjusted EBITDA expected between $4.65B - $4.85B, and growth capital spending estimated at $2.6B - $2.8B.

In 2024, Targa Resources' record adjusted EBITDA was $4.1 billion, 17% higher than 2023. The Permian GMP segment saw volume growth with 14% year-over-year increase in 2024. Logistics and Transportation segment had record NGL pipeline transportation and fractionation volumes in Q4 2024, averaging 1.1 million barrels per day. LPG export segment had loadings averaging a record 14 million barrels per month in Q4 2024. Revenue contribution: Permian GMP was a significant contributor to overall EBITDA, with logistics and transportation and LPG export also playing key roles.

• 2025 adjusted EBITDA is expected to be between $4.65 billion and $4.85 billion, a 15% increase over 2024.
• Growth capital spending for 2025 is estimated at $2.6 billion to $2.8 billion, including new downstream projects announced.
• 2026 and beyond: Four new Permian GMP plants coming online in 2026, positioning for stronger volume growth and increased adjusted EBITDA and free cash flow.

• Commodity price fluctuations: A 30% move higher in commodity prices would increase 2025 adjusted EBITDA by around $130 million, while a 30% decrease would reduce it by around $80 million.
• Steel price increases and potential tariffs: Impacting capital costs for projects, though manageable.
• Competitive landscape in NGL export market: Multiple players, but Targa's expansion projects aim to maintain competitiveness.

Q: Jeremy Tonet asked about the forward outlook, back-half growth, and optimization.

A: Matt Meloy said growth outlook is strong with more back-half growth in 2025, and Jen Kneale added 2026 looks stronger than 2025. Jen also noted optimization is possible upside but not baked into planning.

Q: Keith Stanley asked about the Badlands buy-in and capital allocation.

A: Jen Kneale explained the Badlands buy-in provides $80 million annual cash savings and they have an all-of-the-above capital allocation approach with opportunistic buybacks.

Q: Manav Gupta asked about Permian gas egress pipeline and bolt-on deals.

A: Bobby Muraro discussed Permian gas egress pipeline plans, and Matt Meloy said they continue to look at long-haul takeaway opportunities but focus on organic growth.

Q: AJ O'Donnell asked about project returns and Q4 results.

A: Jen Kneale said using a 5.5 times multiple is reasonable, and Scott Pryor discussed Q4 volume growth from frac and NGL production.

Q: Michael Bloom asked about Q4 Permian volumes and 2025 volume growth guidance.

A: Jen Kneale noted Q4 Permian volume growth had noise from a low-margin contract, and 2025 growth is expected to be higher than the high single-digit framework.

Q: Neal Dingmann asked about the Badlands deal and asset sale.

A: Matt Meloy said Badlands fits into the integrated NGL strategy and ownership provides flexibility.

Q: Theresa Chen asked about medium-term growth and export demand.

A: Matt Meloy discussed medium-term growth and Scott Pryor noted LPG demand from international markets is expected to continue growing.

Q: Brandon Bingham asked about deeper benches in the Permian and shareholder return.

A: Pat McDonie discussed deeper bench interest, and Jen Kneale said they have an all-of-the-above approach with flexibility in share repurchases.

Q: Harry Mateer asked about leverage and debt optimization.

A: Jen Kneale said they prefer lower leverage but are comfortable with current levels, and they evaluate higher-cost debt refinancing.

Q: Sunil Sibal asked about capital program risks and NGL export competition.

A: Matt Meloy discussed steel price impact on capital costs, and Scott Pryor noted their NGL export expansion is a competitive brownfield project with operating leverage.