Q2 2021 Targa Resources Corp Earnings Call

August 5, 2021

[music].

Good day, and thank you for standing by and well go to the Targa Resources Corp, second quarter 2021 earnings conference call.

At this time all participants on the on listen only mode. After speak of presentation. There will be a question answer session to ask the question during the session you'll need the press star 1 on your telephone.

Please be advised that today's conference maybe recorded if you require any further assistance. Please press star zero on anything on the conference over to your speaker today Mrs.

Sanjay Lad, Vice President Finance and Investor Relations. Please go ahead.

Thank you Victor good morning, and welcome to the second quarter 2021, the earnings call for Targa Resources Corp. The SEC.

The quarter earnings release, along with the second quarter earnings supplement presentation for Targa resources that accompany our call are available on our website at Targa resources Dot com in the investors section.

In addition, an updated investor presentation has also been healthy for our website.

Statements made during this call that might include Targa resources expectations or predictions should be considered forward looking statements within the meaning of section 21 E of the.

Securities Exchange Act of 230.

Actual results could differ materially from those projected in forward looking statements.

Discussion of factors that could cause actual results to differ please refer to our latest SEC filings.

Our speakers for the call today will be Matt Meloy, Chief Executive Officer, and Jen Kneale, Chief Financial Officer. Additionally.

Additionally, the following the senior management team members, who will be available for Q&A.

Mcdonald President gathering of processing, Scott fire, President of logistics, and transportation and Bob <unk> Chief Commercial officer.

With that I'll now turn the call over to Matt.

Thanks, Sanjay and good morning, everyone.

We're excited to announce another great quarter at Targa as our overall business continued to perform well led by our position on the Permian based on and our integrated NGL business.

As we continue to execute on our key strategic priorities. We are very pleased with our positioning.

Taking into consideration on our first half performance on the strength of our business outlook for the second half of this year, coupled with stronger commodity price fundamentals. We are increasing our estimated 2021 EBITDA to be between 1.9 and $2 billion 2021, EBITDA is now estimated to be 19%.

Hired last year based on the midpoint of our new guidance range or.

Our prioritization of free cash flow for debt reductions, we reduced our debt balance by 780 million for the first half of the year and our consolidated leverage was 3.8 times at the end of the second quarter within our target range of 3 to 4 times and well ahead of schedule due to our strong.

Our performance this provides us greater flexibility in both the and bolsters targets financial position.

We now expect the end the year at about 3.5 times leverage with the strong balance sheet and well position to repurchase the depth of low interest in the first quarter of next year.

We are also very proud of efforts of our target of employees over of difficult last year and a half of our employees have continued.

To perform exceptionally well for our customers and have done with the continued focus on safety and we're very thankful for their efforts.

Let's now turn to our operational performance of business outlook.

<unk> in the Permian second quarter system volumes rebounded quickly following the major winter storm during the first quarter of system Inlet volumes increased 15% sequentially. We now expect our 2021 Permian inlet volume to increase for the high end of the previously disclosed 5% growth over 2020.

Our Permian Midland system ran above nameplate capacity for much of the second quarter and we're pleased to announce our new 200 million cubic feet per day <unk> plant is mechanically complete and expected to begin full operation in early September.

Special Thanks to our operations of engineering teams for safely, bringing online on well over a month ahead of schedule and under Bob.

Yes.

We expect time to commence operations highly utilized and given our outlook for continued production growth we announced this morning, our plans to move forward with the construction of our new 250 million cubic feet per day legacy plant, which is expected to begin operations during the fourth quarter of 2022.

Even with the addition of legacy there is no change to our 2021 net growth capital spending estimate of between $350 million of $450 million.

Our current year spend on legacy is estimated to be about $70 million.

In Permian, Delaware completions on activity levels have continued to ramp and we currently have adequate processing capacity to accommodate our anticipated near to medium term growth.

The stronger outlook across our Permian basin footprint, coupled with our new plant announcement, we'll continue to drive incremental volume through our downstream businesses.

Moving on to the Badlands, we saw sequential increases to our gas and crude volume during the second quarter.

<unk> are completing wells and we continue to have positive producer dialogue.

Turning to our central region gas inlet volumes during the second quarter also rebounded from the winter storm and increased 8% sequentially.

For the system continues to largely be in decline. We are currently seeing a modest uptick in completions on activity, which could mitigate some of the decline.

Shifting to our logistics and transportation segment overall system volumes during the second quarter meaningfully rebounded from the effects of prior quarters major winter storm.

Our Grand Prix pipeline continues to perform very well with total deliveries into Mont Belvieu increased from 14% sequentially.

During the second quarter, we transported a record 392000 barrels per day, and we expect volumes to ramp through the balance of the year. We also achieved record fractionation volumes at our Mont Belvieu complex, averaging about 644000 barrels per day during the second quarter, representing an 18% sequential increase.

<unk>.

In our LPG export services business at Galena Park second quarter volume sequentially increased 20%, averaging $10.3 million barrels per month.

While we remain highly contracted the current higher NGL prices are causing reduced short term demand for spot opportunities. However, overall of the long term fundamentals remain strong for LPG exports in the current.

The strength in propane prices, it's still a net positive for targa.

Looking ahead with our leverage already in the target range and on track to be even lower by year end, we expect to be in a position to return incremental capital to our shareholders in 2022 after repurchase of the desk co joint venture interest.

We have the ability to return capital to shareholders in a number of different ways for additional dividend share repurchases repayment of preferred equity <unk> continuing to reduce debt. We are currently evaluating along with our board the best way to deliver value to shareholders shareholders, while maintaining our long term financial.

<unk> ability, we will prioritize the strong balance sheet that keeps targa and strong financial position across downside scenarios, we expect to articulate more details in February with our 2022 outlook and capital plan for the year.

Target continues to benefit from the strength of our business on our talented employees and we remain very well positioned for the long term.

With that I will now turn the call over to Jim.

Thanks, Matt targeted adjusted EBITDA for the second quarter was $460 million as second quarter volumes across our integrated Permian gathering and processing and logistics and transportation system meaningfully rebounded from the effects of the winter storms experienced during the first quarter.

Second quarter EBITDA was sequentially lower predominantly due to the storm related benefit from seasonal opportunities in our marketing businesses realized during the first quarter and from higher Opex from additional volumes moving for our systems and higher G&A.

For the first half of 2020.

Thank you the first half of 2021 targeting the generated free cash flow of $593 million.

Versus the $171 million of at the same from time period in 2020.

And significantly hedged for 2021 and continue to add hedges for this year on beyond while still benefiting from higher prices across our unhedged equity volume exposure and prices above the floors, you can find our usual hedge disclosures in our quarterly earnings supplement presentation.

As Matt mentioned, we are increasing our full year estimated 2021 of adjusted EBITDA to be between $1.9 billion to $2 billion.

Our updated financial estimates assume full year 2021, <unk> crude oil prices averaged $65 per barrel NGL prices average 70 cents per gallon and Henry hub in Oaxaca natural gas prices averaged $3 from 2010 and $3.10.

And then the Btu.

The biggest drivers of our continued performance relative to previous expectations for 2021, our commodity prices, particularly as we benefit from price at the Buskey for US also higher volume and continued cost management relative to expectations.

Inclusive of expected spending the tier for the newly announced legacy plant or 2021 net gross capex estimate remains unchanged of between $350 million of $450 million and we now estimate net net net maintenance capex to be lower at approximately $120 million.

Our continued strong performance means we expect to end 2021 with consolidated leverage around 3.5 times on this puts us in excellent position to repurchase of our desktop interest from the first quarter of 2022, while still maintaining consolidated leverage within our target of 3 to 4 times.

Looking forward, we believe that existing in the lower half of our target consolidated leverage ratio range provides for more flexibility, which is why we are continuing to prioritize free cash flow for debt reduction, particularly in advance of our desktop repurchase.

As we look forward our balance sheet is well positioned we have an excellent liquidity position with no near term debt maturities.

Also in early June Fitch issued their inaugural ratings for Targa and assigned us with the double B plus rating. We really appreciate the amount of work that the Siemens assets to provide that initial rating.

We are now rated by the 3 leading agencies and are continuing our dialogue with each related to our trajectory towards investment grade, which remains the priority for targa.

Shifting to our focus around sustainability and ESG, we continue to advance our efforts on internal initiatives in this area and we plan to publish our next sustainability report in the fall.

In closing on behalf of all management, we say thank you for our talented targa team for all of the day deal.

With that I will turn the call back over to Sanjay.

Thanks, Jen we kindly ask that you limit to 1 question on 1 follow up for the Q&A lineup of if you have additional questions Vic.

Victor will you. Please open the lines for Q&A.

Of course.

And you ask the question.

On H Press Star 1 on your telephone to withdraw your question just the press the pound key.

Once again Thats 2 questions 1 more for questions.

First question comes from the line.

Shunyi from <unk>.

You may begin.

Hi, good morning, everyone.

Maybe just start off a little bit just wanted to chat about your guidance.

Obviously, it was taken up today and you sort of cited the fact that you expect to be at the higher end of the volume range or volume growth range.

Just kind of curious if theres been a lot of discussion around increased activity specifically in the Delaware.

Curious if that's around your assets and that's what's driving the guidance increase or is there a potential of that if this activity in the Delaware continues to increase that we could actually see even higher exit rate for <unk>.

Our GAAP.

When you close out the year, just kind of curious what was baked in.

Sure Hey, good morning Shneur.

The are seeing stronger volume points at a high end of our range I would say it's in <unk>.

The Midland day on the Delaware, we are saying.

Hey.

Higher activity.

It's really of the dynamic we talked about last call I'd say, it's still for the most part there which is the larger producers are really staying within what the.

What they told us.

The smaller and some of the private guys. We are seeing ramp up more of it you've seen a steady increase in the rig count, but not a huge spike up so I think we're just saying.

Just continued strong activity across the board for our producers.

Is there anything else you'd want to add to that of I'd, just say that we are seeing activity in both basins obviously.

Legacy plan announcement, we're seeing continued strong growth on the Midland side of the basin, we have seen more activity in the Delaware.

But.

Delineated just as Matt described the big guys staying kind of on the programs and more of the little Guy activity. So.

Both sides of the growth.

Cool.

We appreciate the color there.

Maybe to follow up in terms of.

The whole simplification of approach I mean, you've been pretty consistent in saying that this is really of 'twenty..2 event I think in your prepared remarks today, you talked about KEPCO probably happening in <unk>.

You have to give notice the you'll let us know that ahead of time.

If I remember correctly your prep steps down in March.

As well too which is another component to that but.

At the same time Youre kind of in this interesting position today, where you can actually write that youre going to be at 3.5 times leverage by the end of this year does that increase your flexibility to be a little bit more opportunistic around buybacks.

Or right now of routines parked to take out the Dev co and maybe work on the profit.

Later in the next year.

Yes, I'll start.

Jonathan you want to add and we did we are targeting 3.5 through year end and that does assume that we are prioritizing our free cash flow to go towards debt reduction and that is our base case plan is to get there and that just puts us in good position to be able to take.

Take out the depth of <unk> in the first part of next year, we do have.

Of share buyback authorized but what you've seen us do this year for the first part is prioritized that free cash flow towards debt reduction Thats my expectation that we'll continue to do that while still having the ability.

To do share repurchases and then we're taking a hard look at that with our board and we'll kind of lay out what the 2022 capital plan is.

In February for our free cash flow.

All I'd add Shneur is that I think.

On the flexibility of our outperformance of the flexibility as a result of our outperformance this year positions us really nicely to be able to take out of the debit has been the first quarter and still have our leverage within that long term target range, which is great and then as we think about the press we've got a lot of optionality that it steps down on 105 in mid March but thats.

Something that we also look at taking out ratably over a number of quarters in order to maintain that balance sheet flexibility that we've worked so hard to get.

Great. So it sounds like a lot of flexibility here on the outperformance in guidance increase sort of.

Physicians you'd have a lot of options is that kind of the takeaway guys.

Yes, that's right.

Perfect. Thank you very much really appreciate the color today.

Okay. Thank you.

Our next question will come from the line of John Mckinney.

And the sacks, you may begin.

Hey, everyone. Good morning, Thanks for the time.

Maybe for the first 1 I'll just circle back on the <unk> first question on Permian volumes. Some thinking if we look at where you guys sit right now.

You're kind of at the top end of the range or close further gross guidance. Even if you are kind of flat for the next couple of quarters.

Just curious.

The to balance that against your comments of activity overall picking up.

On whether or not that just some conservatism or you see anything else going on.

Yes sure.

We typically see especially on the Midland side, a lot of growth as we get into the second quarter and into the third quarter. So some of it of seasonal we see a lot of activity, we see that continuing and some of that.

Feels like the activities more ratable, but the volume and to grow more on the second and third quarter and we are seeing that this year I think which is part of that so while we do expect some growth.

End of continue for the back half of the year into the 2022. It may not be at the same rate that we kind of experienced the last few months Pat anything no I agree we're lumpy in the second third quarters, but we do expect growth through the end of the year, probably not as lumpy as what we've seen over the last 6 months.

Okay. That's fair thank you.

And then just on Capex. So first half was lower than we expected.

It looks like the hind plants coming in sooner than expected.

You guys reduced the maintenance.

The guidance, but not the gross guidance I'm, just curious on kind of.

What else is kind of filling out that second half of the year.

The spending and.

Is that because of more activity, we're seeing more well connect from that can kind of give us a read on 'twenty, 2 or anything else going on in there.

Thanks for the biggest piece John is the announcement of the legacy plants as Matt mentioned in his scripted remarks that essentially $70 million of spending into the scanner that we otherwise for probably likely on it spend.

And so when you think about where we are year many of us.

Call it around $150 million and then we now have that additional $70 million for the remainder of our expected spending is for additional gathering lines on compression to support the continued growth of our gathering and processing footprint and then from small downstream projects that are consistent with what we've been forecasting previously.

Okay. Thanks for the I guess just to clarify that the.

So the legacy plant that is still the same 1 you guys for I guess.

<unk> of last quarter, and I was just kind of formally in the budget is that the right way to think about it.

Sure Ryan it for them.

On the board approved now on the spending on it okay alright, thanks for the time I appreciate it.

Okay. Thank you.

Our next question on comes from the line.

Michael Blum from Wells Fargo, you may begin.

Thanks, Good morning, everyone.

I wanted to just clarify.

Just looking at sequentially that the marketing margins were down is that just due to the.

Since of youri opportunities or is there something else going on.

The NGL marketing that.

On to make sure I understood that.

It's really 2 pieces, Michael and we talked a little bit about this on our first quarter earnings call that within the first quarter on the marketing side, we benefited from the winter Storm and then there are also some benefits from contango opportunities that we entered into.

The sort of early in the <unk>.

Second quarter on late in the first quarter of 2020.

Got it.

And then I wanted to ask you about LPG exports.

Mentioned.

Perhaps on fewer spot opportunities, but in light of just how high propane prices are.

Do you think in the second half of the year Youre going to see actual cargo cancellations. It just seems like something that kind of give.

Yes, Michael this is Scott.

The first point of the fact that our export performance was strong in the second quarter on.

A nice recovery from what we saw on the first quarter, which was impacted by by the February Winter storm.

Certainly as you pointed to of late and really throughout this year the increased price on both propane and butane.

Here in the U S vs global pricing.

Has impacted some opportunities for spot. So I think when you look at it the international market.

Is choosing at times to look for other.

The other places as opposed to U S Gulf coast for export and at times quite frankly.

Target may choose to not participate at certain pricing levels. So as the result of that I think the spot opportunities may be impacted.

As Matt pointed out though.

The prices here on propane in the U S helped us in other areas of our integrated platform. So we benefit from that.

We have not experienced any cancellations to this point, but again the fundamentals with inventories here in the U S about 20 million barrels behind this time last year.

<unk> supports propane prices, which could have an impact on spot opportunities. We are well contracted and should we see cancellations. Obviously, we collect the cancellation fee as a result of that.

Understood. Thank you.

Okay. Thanks, Michael.

Yes.

Our next question will come from the line of.

Jeremy Tonet from Jpmorgan you may begin.

Hi, good morning.

Hey, good morning, just wanted to start off on the credit side here and we.

We get to some more numbers you guys being around 3.5 times levered at the end of the year de levering rapidly into next year 2 billion being of quite notable size and scale.

I'm just kind of curious why the agencies I guess haven't been moving a bit quicker towards IAG here I mean, it seems like you check all the boxes those metrics that leverages is actually better than all of the other C Corp peers. So am I missing something here or is there something else for the agencies.

I think.

Perspective, we're in a consistent dialogue with the agencies and we certainly I think share your view on Jeremy I think part of what they're looking for is just continuing on sustainable performance and delivering on what we said we were going to day unrelated to our deleveraging related to our continued discipline.

Around capex spending and the like so.

I believe that we already have incredibly strong metrics I'm really proud of the organization for getting us in the position of our end, where we could end this year with leverage of around 3.5 times certainly agree with you and I hope that the rating agencies. Similarly.

We will continue to assess our strong performance, thus far this year and really over the last.

18 months, and we will start to take positive credit action. All we can do is continue to stay in front of them and I think that we have an excellent dialogue with all 3 agencies and appreciate the amount of time that they've been willing to spend with us over the last 18 months.

So I do feel like it's just a matter of time.

Got it yes, just wanted to make sure. They knew you had the lowest leverage of all C Corp peers, because that kind of stood out to us, but maybe moving on here too.

Carbon capture it seems from the map that we can tell some of your processing plants from the Permian or kind of a stone's throw away from some Sidoti plant. So I'm just kind of wondering.

Is that something you see in the near future. If theres all of this kind of of ESG Green PE money out there or is there any reason not to invite them into a JV, where they put up the capital you guys put in the assets and kind of get something going together there that's positive ESG doesn't cost a lot for.

Targa.

Yes, Jeremy we are but.

So we're looking at carbon capture of our processing plants on evaluating what that project could look like.

We are.

As we go through it I agree with you I don't know that theres going to be a shortage of capital is going to be the issue just kind of getting through some of the operating operational where we're going to sequester it and permitting and some other things that we're that we're working hard on.

<unk>.

And you also said in the near term I think this is also it is going to take a while right for us to figure if we have a viable project here.

Or not I'd say, we're making good progress on.

As we kind of learn more on becoming increasingly optimistic that there's potential to do something here, but it's still going to take it's going to take some time.

Got it so hopefully if all of the Railroad Commission gets primacy there that things can kind of move a bit quicker, but great to hear things that go in that direction. So I'll leave it there. Thank you.

Okay. Thanks, Jamie.

Okay.

Our next question on comes from line of Tristan Richardson from tour of Securities You May begin.

Hey, good morning, guys appreciate all the comments.

A follow up to earlier question on on capital in 2022.

Obviously, you guys make very clear priorities in 'twenty, 2 or on leverage in <unk>.

Cash flow consolidation and cost of capital management, but just thinking.

We've got a very short list of identified projects I'm really only half of the legacy plant spend in 2022.

Even on the back of increased completion activity should.

Should we think capital could come in further next year than than even kind of where you've talked about sort of the guidance today for 2021.

Just on the Gen I think ultimately it will depend on activity levels.

Certainly continuing to see good growth around our system, particularly on the Midland side and also the Delaware side on the Permian. So we certainly expect continued spending on gathering lines compression et cetera, plus we'll have the remaining spending on the legacy plants and then we will be having to likely think about the right timing for the next plant in the middle.

Non basin, just depending on how forecast low so I think right now we're not in position to give 2022 patents.

But I think that my expectation with the would be that it would be more similar to this year versus with the mature.

The drop off on a year over year.

That's helpful and then just.

Secondly, on just curious thoughts on sort of hedging philosophy in 2022, I mean, I think this time of year ago of the world is very different than you guys were very.

The intention on taking out equity links just taking it out of the question for 2021, but Stan somewhat more normal world thoughts on.

Equity links, particularly against the past several years of.

Of the big shift to a much more fee based model.

Yes.

As far as our hedging goes I mean, we are going to want US day, we call. It programmatic hedging in our target, 75% year, 150% year, 2 and then 25% year 3.

I would say of continuing to execute kind of along that programmatic amount and be somewhere around the ranges, but you are right with our leverage lower and with more fee based we would have some opportunity.

On.

Even go inside of that but I think right now where we are is kind of sticking with that 75 to $5.25 of approach that's worked for us and something we're likely to kind of hover around for a while.

Great. Thank.

Thank you.

Okay. Thank you.

Our next question comes from Ryan of spill Dennis from Credit Suisse. You may begin.

Hey, good morning team.

2 quick follow ups from me first 1 on capital return.

And then kind of tying it back to the Jeremy's question around investment grade. It sounds like you guys are on a path. There. It's all about execution just curious on your discussions with the with the agencies.

Provide any sort of guide rails for you as you sort of formulate that plan to return capital and then also kind of imagine you've been.

Any feedback from investors as you go through this process. So curious what so far has kind of resonated with you as you formulate that plan.

I think clearly our existing investors potential investors and the rating agencies on some of the important constituents of where we have to take their points of view and a consideration as we work with the board.

Any of this fall.

The imposition to articulate what our go forward strategy on capital allocation will be the again as Matt said, we expect to articulate in February of steering them on.

And so I'd say that it's an evolving dialogue.

Say that we're getting a lot of advice and im saying this advice in the day that 1 would expect just depending on what type of investor we are talking to or certainly the rating agencies want to see on more credit positive decision, making versus the alternative. So those are all very important voices and we.

Certainly listening on that and in providing onboard with that feedback and that's an important part of the evolving conversation of Targa.

Great. Thanks for that Jen the second question just on on asset sales.

Obviously, not in a position where you need to do anything but I know of 1 point you had contemplated selling some non core assets last year. It seems like the M&A market has dramatically improved valuations seem to be coming back assets are changing hands.

Curious where that stands and if there is any interest there.

I think we'll continue to CSP opportunistic so to the extent that we think theres, an asset or assets that make sense for somebody else to own.

On the lower cost of capital of for other reasons and that's something that we'll consider but as you said in your opening part of the question. The great part of the says we've got a lot of flexibility and we don't need to do anything so that means the bar on the thresholds for us willing to sell assets is higher than it certainly was before when we needed to sell assets in order to be able to.

Finance our growth capital.

Got it that's all I had thanks for the time frame.

Okay. Thank you.

Our next question comes from the line of Keith Stanley from <unk>.

The research you may begin.

Hi, Good morning, I wanted to clarify 1 thing on return on capital for next year.

The options of buybacks dividends and buying in the preferred equity. So I guess, how do you compare buying in the press versus the other alternatives.

You talked a little bit about maybe buying it and gradually as it is it fair to say you have a more patient tone on the pace of taking out the prefs than than perhaps in past quarters.

I think from our perspective, the TMC for Pratt is a material amount of capital.

We deploy in order to be able to redeem that so as we look at it in this higher cost of asset 95%, but we also have a lot of flexibility in terms of <unk>.

Amount of time that we have that we want to of redeem it so.

You are hearing from us that our base case assumption right now is that there really isn't a driving reason to have the take it out in the first quarter in mid March when it steps down the 1 on file we can maintain and even enhance our balance sheet flexibility by being a little bit more deliberate with the trc profit taking it out.

More slowly over time and so that's the base case assumption that we're running key of course that can evolve as we move through this year and into next year as we have more flexibility with the increasing free cash flow without the kind of assumption that we're running.

Got it thanks.

Second question, you've talked about increased activity on the Permian I feel like we've heard some mixed things this earning season on that and the 1 thing Im wondering just last year of associated gas production meaningfully outpace oil.

Are you seeing any changes in that dynamic or do you think gas NGL production growth from here.

<unk> to outpace the oil production growth from the Permian.

We see it continuing.

As you described it exactly right and.

Obviously, the Delaware is a little more oily.

Then the Midland side of the basin is dependent upon where overall volume growth could affect it a little bit but absolutely more gassy.

Thank you.

Okay. Thank you.

Our next question comes from the line of all of our Moscow from Mizuho you may begin.

Hi, everyone. Thanks for taking my question 1 of them was already asked but just curious 1 of your G&P peers from the Bakken seems to be benefiting from rising gasoline.

Rising gas oil ratios in the past.

That's fair and in the Permian, We're just curious to hear whether longer term you expect to see a similar sort of GFR trajectory in the Permian is that based on the chairs or when the Permian is a bit of of different animal in terms of the underlying geology, just curious to hear your thoughts.

Yeah, I mean, I think we are benefiting similarly to others of you see higher DLR go up you have seen that.

Out in the Permian and you see on our gas performance day, even a little bit better than our crude here from you look at this quarter. So.

I think the higher <unk> as a tailwind for us across multiple systems.

Okay. Thanks, that's all for me.

Okay. Thank you.

Sure.

And once again Thats star 1 for questions. Our next question comes from Ryan <unk> of the ball.

From Seaport Global you may begin.

Yes, hi, good morning, everybody.

Couple of questions for me the has been a fair bit of the industry discussion on.

I can recovery of just curious if you could talk about some items that youre seeing on your systems and also kind of remind us with regard to the commercial construct with the <unk>.

Customers.

Those of the seasons on that from the company made at the Targa level of is it primarily at the customers.

Basically considering that it seems like you do have some.

Frac capacity and also the ability to expand.

Kind of free.

Sure Yeah on ethane recovery I would say it varies across our systems for whether producers of elections or we make the election. So it varies by contract by system, but for the most part of our assets are in recovery.

And kind of have been in recovery. So that's how the most of our assets are operating you did see if you look.

You saw an uptick in south, Texas, where it wasn't rejection announcing the recovery piece on NGL uplift there, but for the most part of the other systems, we're really already.

Already in recovery.

Okay.

Then.

The question was related to the.

Mark jumps in the.

The logistics segments. So clearly there was.

Of the downtick there I was just curious on.

On the transportation of instead of its sites are you seeing any day.

On the movements in the rates of those that part of the business is fairly steady in most of the.

Most of the dynamics of the changes on the on the marketing side of things.

Yes, so most of our volumes that are going downstream business, whether it's transportation or fractionation are under long term contract. So theres not a whole lot of movement.

Terms of rates, there for where the volumes that are going through.

Through our assets I think when you look at the unit margin you spoke of the reported numbers Jim talked about was we had some marketing gains in the first quarter. So we had some outperformance due to.

The winter storm of marketing gains, which kind of skewed the unit margins higher but the overall run rate business is performing well on our generally under long term contract.

Okay got it thank you.

Okay. Thank you.

Once again that start of warrant for questions 1 more for questions.

And I'm not showing any further questions in the queue at this moment.

Yes.

Well thank for everyone for being on the call of this morning, and we appreciate your interest in Targa resources. The IR team will be available for any follow up questions. You may have thank you and have a great day.

This concludes today's conference call. Thank you for participating you may now disconnect.

[music].

Good day, and thank you for some of them by well go to the Targa Resources Corp, Second quarter 2021 earnings Conference call. At this time, all participants on the on listen only mode.

The presentation, there will be a question answer session.

I ask the question during the session you on each press star 1 on your telephone.

Please be advised of todays conference maybe recorded if you require any further assistance. Please press star zero on that I'd say on the conference over to your speaker today Mr.

Sanjay Lad, Vice President Finance and Investor Relations. Please go ahead.

Thank you Victor good morning, and welcome to the second quarter 2021 earnings call for Targa Resources Corp. The second quarter earnings release, along with the second quarter earnings supplement presentation for Targa resources at the company. Our call are available on our website of Targa resources Dot com in the Investor.

Action.

In addition, an updated investor presentation has also been posted to our website.

Statements made during this call that might include Targa resources expectations or predictions should be considered forward looking statements within the meaning of section 20 <unk> of the Securities Exchange Act of 230.

Actual results could differ materially from those projected in forward looking statements.

The discussion of factors that could cause actual results to differ please refer to our latest SEC filings.

Our speakers for the call today will be Matt Meloy, Chief Executive Officer, and Jen Kneale, Chief Financial Officer. Additionally.

Additionally, the following the senior management team members, who will be available for Q&A.

Mcdonald President of gathering and processing, Scott fire, President of logistics, and transportation and Bobby Morrow, Chief commercial officer, and with that I'll now turn the call over to Matt.

Thanks, Sanjay and good morning, everyone.

We're excited to announce another great quarter at Targa as our overall business continued to perform well led by our position on the Permian based on and our integrated NGL business.

As we continue to execute on our key strategic priorities, we are very pleased with our position.

Taken into consideration on our first half performance on the strength of our business outlook for the second half of this year, coupled with stronger commodity price fundamentals. We are increasing our estimated 2021 EBITDA to be between 1.9 and $2 billion 2021, EBITDA is now estimated to be 19%.

Hired last year based on the midpoint of our new guidance range or.

Our prioritization of free cash flow for debt reductions mean, we reduced our debt balance by $780 million in the first half of the year and our consolidated leverage was 3.8 times at the end of the second quarter within our target range of 3 to 4 times and well ahead of schedule due to our <unk>.

Our performance this provides us greater flexibility and bolstered and bolstered targets financial position.

We now expect the end the year at about 3.5 times leverage with the strong balance sheet and well position to repurchase the depth of low interest in the first quarter of next year.

We are also very proud of efforts of our target of employees over of difficult last year and a half of our employees have continued.

To perform exceptionally well for our customers and have done so with the continued focus on safety and we're very thankful for their efforts.

Let's now turn to our operational performance and business outlook.

<unk> in the Permian second quarter system volumes rebounded quickly following the major winter storms during the first quarter at system Inlet volumes increased 15% sequentially. We now expect our 2021 Permian inlet volumes to increase at the high end of the previously disclosed 5% growth over 2020.

The Permian Midland system ran above nameplate capacity for much of the second quarter and we're pleased to announce our new 200 million cubic feet per day <unk> plant is mechanically complete and expected to begin full operations in early September.

A special thanks to our operations engineering teams for safely, bringing online on well over a month ahead of schedule and under Bob.

Yes.

Even with the addition of legacy there is no change to our 2021 net growth capital spending estimate of between $350 million of $450 million on.

Our current year spend on legacy is estimated to be about $70 million.

The Permian Delaware completions on activity levels have continued to ramp and we currently have adequate processing capacity to accommodate our anticipated near to medium term growth the.

The stronger outlook across our Permian basin footprint, coupled with our new plant announcement, we will continue to drive incremental volume through our downstream businesses.

Moving on to the Badlands, we saw sequential increases to our gas and crude volume during the second quarter producers are completing wells, where we continue to have positive producer dialogue.

Turning to our central region gas inlet volumes during the second quarter also rebounded from the winter storm and increased 8% sequentially.

While the system continues to largely be on decline. We're currently seeing a modest uptick in completions on activity, which could mitigate some of the decline.

Shifting to our logistics and transportation segment overall system volumes during the second quarter meaningfully rebounded from the effects of prior quarters major winter storms.

Our Grand Prix pipeline continues to perform very well with total deliveries into Mont Belvieu increase of 14% sequentially.

<unk>.

In our LPG export services business at Galena Park second quarter volume sequentially increased 20%, averaging $10.3 million barrels per month.

Strength in propane prices, it's still a net positive for targa.

Looking ahead with our leverage already in the target range and on track to be even lower by year end, we expect to be in a position to return on incremental capital to our shareholders in 2022 after repurchase of the depth of co joint venture interest.

The ability we will prioritize the strong balance sheet that keeps targa and strong financial position across downside scenarios, we expect to articulate more details in February with our 2022 outlook and capital plan for the year.

Target continues to benefit from the strength of our business on our talented employees and we remain very well positioned for the long term.

With that I will now turn the call over to Jim.

Thanks, Matt target adjusted EBITDA for the second quarter was $460 million a.

The second quarter volumes across our integrated Permian gathering and processing and logistics and transportation system meaningfully rebounded from the effects of the winter storm experienced during the first quarter.

Second quarter EBITDA was sequentially lower predominantly due to the storm related benefits from seasonal opportunities in our marketing businesses realized during the first quarter and from higher Opex from additional volumes moving for our systems and higher G&A.

For the first half of 2020, sorry for the first half of 2021 targeting the generated free cash flow of $593 million.

The $171 million over the same compliance day in 2020.

The significantly hedged for 2021 and continue to add hedges for this year on beyond while still benefiting from higher prices across our unhedged equity volume exposure and prices above the colors, you can find our usual hedge disclosures in our quarterly earnings supplement presentation.

As Matt mentioned, we are increasing our full year estimated 2021, adjusted EBITDA to be between $1.9 billion to $2 billion. Our updated financial estimates assume full year 2021, <unk> crude oil prices averaged $65 per barrel NGL prices averaged 70 cents per gallon.

And Henry hub, and Wahaha natural gas prices averaged $3 from <unk> and $3.10 per and then the btu the.

The biggest drivers of our continued performance relative to previous expectations for 2021, our commodity prices, particularly as we benefit from price it's about the floors.

The higher volumes and continued cost management relative to expectations.

Inclusive of expected spending this year for the newly announced legacy plan. Our 2021 net gross Capex estimate remains unchanged at between $350 million and $450 million and we now estimate net net net maintenance capex to be lower at approximately $120 million or continued.

Strong performance means we expect the end 2021 with consolidated leverage around 3.5 times on this puts us in excellent position to repurchase of our desktop interest from the first quarter of 2022, while still maintaining consolidated leverage within our target of 3 to 4 times.

As we look for our balance sheet is well positioned we have an excellent liquidity position with no near term debt maturities.

Also in early June Fitch issued their inaugural ratings for Targa and assigned us with the double B plus rating at <unk>.

Really appreciate the amount of work with Siemens assets to provide that initial rating.

We are now rated by the 3 leading agencies and are continuing our dialogue with each related to our trajectory towards investment grade, which remains a priority for targa.

Shifting to our focus around sustainability and ESG, we continue to advance our efforts on internal initiatives in this area and the planned to publish our next sustainability report in the fall.

In closing on behalf of all management, we say thank you for our talented targa team for all of the day deal and with that I will turn the call back over to Sanjay.

Thanks, Jen and currently at the limit to 1 question on 1 follow up for the Q&A line up if you have additional questions. Victor will you. Please open the lines for Q&A.

Of course as a reminder to ask the question UNH Press Star 1 on your telephone.

To withdraw your question just the press the pound key once again thats balance.

Questions 1 more for questions.

Our first question comes from the Lion share.

The Shunyi from you.

You may begin.

Hi, good morning, everyone.

Maybe just start off a little bit just wanted to chat about your guidance.

Obviously, it was taken up today and you sort of cited the fact that you expect to be at the higher end of the volume range or volume growth range.

Kind of curious if theres been a lot of discussion around increased activity specifically in the Delaware I'm curious if that's around your assets and that's what's driving the guidance increase or is there a potential of that if this activity in the Delaware continues to increase that we could actually see even higher exit rate for targa.

When when you close out the year, just kind of curious what was baked in.

Sure Hey, good morning Shneur.

Yes.

The stronger volume, we pointed at the high end of our range I would say it's on.

Both of the Midland day on the Delaware, we are saying.

Hey.

Higher activity.

It's really the dynamic we talked about last call I'd say, it's still for the most part there which is the larger producers are really standing within what they told us.

But the smaller on some of the private guys. We are seeing ramp up more you've seen a steady increase in the rig count, but not a huge spike up so I think we're just saying.

Just continued strong activity across the board for our producers pad.

Pat is there anything else you'd want to add to that of I'd, just say that we're seeing activity in both basins obviously.

Legacy plan announcement, we're seeing continued strong growth on the Midland side of the basin, we have seen more activity in the Delaware.

But.

Delineated just as Matt described the big guys staying kind of on the programs and more of a little guy activity. So.

Both sides of growing.

Cool.

Definitely appreciate the color there.

And then maybe to follow up.

The.

The whole simplification of approach I mean, <unk> been pretty consistent in saying that this is really of 'twenty..2 event I think in your prepared remarks today, you talked about KEPCO probably happening in <unk>.

You have to give notice the you'll let us know that ahead of time.

If I remember correctly your prep steps down in March.

<unk>, which is another component to that but.

At the same time, you are kind of in this interesting position today, where you can actually write that youre going to be at 3.5 times leverage by the end of this year does that increase your flexibility to be a little bit more opportunistic around buybacks or.

Right now every team's parked to take out the depth of co and maybe work on the profit.

Later in the next year.

Yeah, I'll start John and then if you're 1 of you want to add on.

We did we are targeting 3.5 through year end and that does assume that we are prioritizing our free cash flow to go towards debt reduction that is our base case plan is to get there on that just puts us in good position to be able to take.

Take out the Dev co in the.

The first part of next year, we do have.

To do share repurchases and then we're taking a hard look at that with our board and we'll kind of lay out what the 2022 capital plan is.

In February for our free cash flow.

All I'd add Shneur is that I think.

On the flexibility of our outperformance of the flexibility as a result of our outperformance this year positions us really nicely to be able to take out the debit as in the first quarter and still have on leverage within that long term target range, which is great and then as we think about the press we've got a lot of optionality of their it steps down on 105 in mid March but thats.

Something that we also look at taking out ratably over a number of quarters in order to maintain that balance sheet flexibility that we've worked so hard to get.

Great. So it sounds like a lot of flexibility here on the outperformance and gadgets increase sort of.

Physicians you'd have a lot of opportunities is that kind of the takeaway guys.

That's right, yes, thats right.

Perfect. Thank you very much really appreciate the color today.

Okay. Thank you.

Our next question will come from the line of John Mackay from <unk>.

Goldman Sachs you may begin.

Hey, everyone. Good morning, Thanks for the time.

Maybe for the first 1 I'll just circle back on the <unk> first question on Permian volumes. Some thinking if we look at where you guys sit right now.

You're kind of at the top end of the range or close further gross guidance. Even if you are kind of flat for the next couple of quarters.

Just curious.

Balance that against your comments of activity overall picking up.

Whether or not that just some conservatism or you see anything else going on.

Yes sure.

We typically see especially on the Midland side, a lot of growth as we get into the second quarter and end of the third quarter. So some of it of seasonal we see a lot of activity, we see that continuing in some of the.

Feels like the activity is more ratable, but the volume and to grow more on the second and third quarter and we are seeing that this year I think which is part of that so while we do expect some growth obviously.

Obviously kind of continue for the back half of the year on into 2022 of it may not be at the same rate that we kind of experienced the last few months path of anything.

No I agree we're lumpy on the second and third quarters, but.

We do expect growth through the end of the year, probably not as lumpy as what we've seen over the last 6 months.

Okay. That's fair thank you.

And then just on Capex. So first half was lower than we expected.

It looks like the hind plants coming in sooner than expected.

You guys reduced the maintenance.

The guidance, but not the gross guidance. So I'm just curious on kind of what else is kind of filling out that the second half of the year.

Spending in.

At <unk>.

Because of more activity, we're seeing more well connect from that can kind of give us a read on 'twenty, 2 or anything else going on in there.

Thanks for the biggest piece John is the announcement of the legacy plant. So as Matt mentioned in his scripted remarks that manage essentially $70 million of spending into the scenario that we otherwise for probably likely on it spend and so when you think about where we are year of any of its been call. It around $150 million and then we now have that.

On the $70 million for the remainder of our expected spending is for additional gathering lines on compression to support the continued growth of our gathering and processing footprint and then some small downstream projects that are consistent with what we've been forecasting credit discipline.

Okay. Thanks for the I guess just to clarify that.

So the legacy of plant that is still the same 1 you guys were I guess evaluating of last quarter and I was just kind of formally in the <unk>.

Budget is that the right way to think about it.

Correct right.

Informing the board approved now in the spending on it okay alright, thanks for the time I appreciate it.

Okay. Thank you.

Our next question on comes from the line.

Michael Blum from Wells Fargo, you may begin.

Thanks, Good morning, everyone.

I wanted to just clarify.

Just looking at sequentially. The marketing margins were down is that just due to the.

Absence of youri opportunities or is there something else going on.

With the NGL marketing that.

Want to make sure I understood that.

Sort of early in the.

The second quarter on late in the first quarter of 2020.

Got it.

And then I wanted to ask about LPG exports.

You mentioned.

Perhaps on fewer spot opportunities, but in.

In light of just how high propane prices or do you think in the second half of the year Youre going to see actual cargo cancellations. It just seems like something's got to give.

Yes, Michael this is Scott.

First point of the fact that our export performance was strong in the second quarter of now.

This recovery from what we saw on the first quarter, which was impacted by the February winter storm.

Certainly as you pointed to of late and really throughout this year the increased price on both propane and butane here.

Here in the U S vs global pricing.

Has impacted some opportunities for spot. So I think when you look at it the.

International market.

Is choosing at times to look at other places as opposed to the U S Gulf coast for export and at times quite frankly.

Targa may choose to not participate at certain pricing levels. So as a result of that I think spot opportunities may be impacted.

As Matt pointed out the higher prices here on propane in the U S helped us in other areas of our integrated platform. So we benefit from that.

We have not experienced any cancellations to this point, but again the fundamentals with inventories here in the U S about 20 million barrels behind this time last year.

That supports propane prices, which could have an impact on spot opportunities. We are well contracted and should we see cancellations. Obviously, we collect the cancellation fee as a result of that.

Understood. Thank you.

Okay. Thanks, Michael.

Okay.

Our next question will come from the line of.

Jeremy Tonet from Jpmorgan you may begin.

Hi, good morning.

Hey, good morning, just wanted to start off on the credit side here and we.

We get to some more numbers you guys being around 3.5 times levered at the end of the year de levering rapidly into next year 2 billion being of quite notable size and scale.

I'm just kind of curious why the agencies I guess haven't been moving a bit quicker towards IAG here I mean, it seems like you check all the boxes those metrics that leverage is actually better than all of the other C Corp peers. So am I missing something here or is there something else for the agencies.

I think.

Perspective, we're in a consistent dialogue with the agencies and we certainly I think share your view on Jeremy I think part of what they're looking for is just continuing on sustainable performance and delivering on what we said we were going to data related to our deleveraging related to our continued discipline.

Around capex spending and the like.

I believe that we already have incredibly strong metrics I'm really proud of the organization for getting us in the position that we're in where we could end the sia with leverage of around 3.5 times certainly agree with you and I hope that the rating agencies. Similarly.

We will continue to assess our strong performance, thus far this year and really over the last.

18 months, and we will start to take positive credit actions. All we can do is continue to stay in front of them and I think that we have an excellent dialogue with all 3 agencies and appreciate the amount of time, it's been willing to spend with us over the last 18 months.

So I do feel like it's just a matter of time.

Got it yes, just wanted to make sure. They knew you were at the lowest leverage of all C Corp peers, because that kind of stood out to us, but maybe moving on here too.

Carbon capture it seems from the maps that we can tell some of your processing plants from the Permian or kind of a stone's throw away from some Sidoti <unk>. So I'm just kind of wondering.

Is that something you see in the near future. If theres all of this kind of ESG Green PE money out there is there any reason not to invite them into a JV, where they put up the capital you guys put in the assets and kind of get something going together there that's positive ESG doesn't cost a lot for.

For Targa.

Yes, Jeremy we are.

So we're looking at carbon capture off of our processing plants in the evaluating what that project could look like we are.

Or as we go through it I agree with you I don't know that theres going to be a shortage of capital is going to be the issue just kind of getting through some of the operating operational where we're going to sequester, Ed and permitting and some other things that we're that we're working hard on.

No.

And you also said in the near term I think this is also it is going to take a while for us to figure if we have a viable project here.

Or not I'd say, we're making good progress on.

As we kind of learn more on becoming increasingly optimistic that there's a potential to do something here, but it's still going to take it's going to take some time.

Got it so hopefully if all of the railroad Commission gets privacy, there that things can kind of move a bit quicker, but great to hear things that go in that direction. So I'll leave it there. Thank you.

Okay. Thanks very much.

Our next question comes from the line of Tristan Richardson from tour of Securities You May begin.

Hey, good morning, guys appreciate all the comments, but just the.

A follow up to earlier question on capital in 2022.

Obviously, you guys made very clear priorities in 'twenty, 2 or on leverage in.

<unk> consolidation.

The capital management.

Thinking.

<unk> got a very short list of identified projects from really only half of the legacy plants spend in 2022.

Even on the back of increased completion activity should we think capital could come in further next year than than even kind of where you've talked about for the guidance today for 2021.

So some of the Gen I think ultimately it will depend on activity levels.

We're certainly continuing to see good growth around our systems, particularly on the Midland side and also the Delaware side on the Permian. So we certainly expect continued spending on gathering lines compression et cetera on plus we'll have the remaining spending on the legacy plans and then we will be having to likely think about the right timing for the next plant.

Inland basin, just depending on how forecast low so I think right now we're not in position to gain of 2022 patents.

I think that my expectation with the would be that it would be more similar to the Sierra versus we see on material drop off year over year.

That's helpful and then just.

Secondly, on just curious thoughts on sort of hedging philosophy in 2022, I mean, I think this time of year ago of the world is very different than you guys for Berry.

Intention on taking out equity links just taking it out of the question for 2021, but.

Somewhat more normal world thoughts on.

Equity links, particularly against the past several years of of deals being shipped to a much more fee based model.

Yes.

As far as our hedging goes I mean, we are going to want US day, we call it programmatic hedging our target 75% year, 150% year 2 in the 25% year 3.

I'd say of continuing to execute kind of along that programmatic amount of would be somewhere around those ranges, but youre right with our leverage lower and with more fee based we would have some opportunity.

Even go inside of that but I think right now where we are is kind of sticking with that $75.525 of approach that's worked for us and something we're likely to kind of hover around for a while.

Alright. Thank.

Thank you.

Okay. Thank you.

Our next question comes from Ryan of spin.

Net from credit Suisse, you may begin.

Hey, good morning team.

2 quick follow ups from me first 1 on capital return.

And kind of tying it back to Jeremy's question around investment grade. It sounds like you guys are on the path. There. It's all about execution just curious on your discussions with the with the agencies.

Provide any sort of guide rails for you as you sort of formulate that plan to return capital and then also kind of imagine you've been getting.

Feedback from investors as you go through this process. So curious what so far has kind of resonated with you as you formulate that plan.

Through this fall really for you then the imposition to articulate what are the elsewhere on strategy on capital allocation will be at the end as Matt said, we expect to articulate in February of steering them on so I'd say that it's an evolving dialogue.

I would say that we're getting a lot of advice and I'm, saying of that advice and day..1 would expect just depending on what type of investor we're talking to or certainly the rating agencies want to see on more credit positive decision, making versus the alternatives.

They are all very important voices and we are certainly listening on that and then providing onboard with the feedback and that's an important part of the evolving conversation of Targa.

Great. Thanks for that John the.

Second question just on asset sales on.

Obviously, not in a position where you need to do anything, but I know of 1 point.

You had contemplated selling some non core assets last year. It seems like the M&A market has dramatically improved valuations seem to be coming back assets are changing hands, just curious where that stands and if there is any interest there.

I think we'll continue to seize the opportunity so to the extent that we think theres, an asset or assets that make sense for somebody else to own the have a lower cost of capital of for other reasons and that's something that we'll consider but as you said in your opening part of the question. The great part of this is we've got a lot of flexibility and we don't need to do anything to that.

That means the bar on the thresholds for us willing to sell assets is higher than it certainly was before when we needed to sell assets in order to be able to finance our growth capital.

Got it that's all I had.

Thanks for the time frame.

Okay. Thank you.

Our next question comes from the line of Keith Stanley from Wolfe Research you may begin.

Hi, Good morning, I wanted to clarify 1 thing on return on capital for next year, you've listed options of buybacks dividends and buying in the preferred equity. So I guess, how do you compare buying in the press versus the other alternatives.

You talked a little bit about maybe buying it and gradually as it is it fair to say you have a more patient tone on the pace of taking out the prefs than than perhaps in past quarters.

Yes.

I think from our perspective, the TMC for crash is a material amount of capital.

Clearly in order to be able to redeem that so as.

As we look at it as higher cost of asset 9.5%, but we also have a lot of flexibility in terms of.

The amount of time that we have that we launched 2 of redeem it so.

I think you are hearing from us that our base case assumption right now is that there really isn't a driving reason to have the take it out in the first quarter in mid March when it steps down the 1 on file we can maintain and even enhance our balance sheet flexibility by being a little bit the more deliberate with the trc profit and taking it out.

The more slowly over time and so that's the base case assumption that we're running Keith of course that can evolve as we move through this year and into next year as we have more flexibility with increasing free cash flow. So that's the current assumption that we're running.

Got it thanks.

The second question.

You've talked about increased activity on the Permian I feel like we've heard some mixed things this earning season on that and the 1 thing I am wondering just last year, you had associated gas production meaningfully outpace oil.

Are you seeing any changes in that dynamic or do you think gas NGL production growth from here.

Continues to outpace the oil production growth from the Permian.

We see it continuing.

As you described it exactly right and obviously, the Delaware is a little more oily.

And on the Midland side of the basin is dependent upon where overall volume growth could affect it a little bit but absolutely more gassy.

Thank you.

Okay. Thank you.

Our next question comes from the line of Robert Moskow from Mizuho you may begin.

Hi, everyone. Thanks for taking my question 1 of them was already asked but just curious 1 of your G&P peers from the Bakken since the benefiting from rising gasoline.

The rising gas oil ratios in the past.

That's fair and then the Permian, we're just curious to hear whether longer term you expect to see a similar sort of trajectory in the Permian is that based on the chairs or when the Permian is a bit of of different animal in terms of the underlying geology, just curious to hear your thoughts.

Yes, I think we are benefiting similarly to others that you'll see higher <unk> go up you have seen that help us out in the Permian and you see on our gas performance day, even a little bit better than our crude here from you look at this quarter. So.

I think the <unk> is a tailwind for us across multiple systems.

Okay. Thanks, that's all for me.

Okay. Thank you.

And once again Thats for 1 for questions. Our next question will come from the scenarios for the ball from Seaport Global you may begin.

Yes, hi, good morning, everybody.

Couple of questions for me the has been a fair bit of the industry discussion on ethane recovery.

Curious if you could talk about some trends that youre seeing on your systems and also kind of remind us with regard to the commercial.

Commercial construct with the <unk>.

Most of those.

Both of the seasons on that end of the company made the targa level of is it primarily the customers.

And the especially considering that it seems like you do have some.

Frac capacity and also the ability to expand.

Free.

Sure Yeah on ethane recovery I would say.

It varies across our systems for whether producers of elections or we make the election. So it varies by contract by the system.

But for the most part of our assets are in recovery.

And kind of have been in recovery. So that's how the most of our assets are operating you did see if you look.

You saw an uptick in south, Texas, where it wasn't projection of announcing the recovery piece on NGL uplift there, but for the most part of the other systems, we're really already.

Already in recovery.

Okay.

The second question was related to the.

Mark Johnson.

Logistics segment, so clearly there was.

For the downtick there I was just curious on.

On the transportation and services side are you seeing any.

And the momentum the rates of those that part of the business is fairly steady in most of the.

Most of the dynamics of the changes on on the on the marketing side of things.

Yes, so most of our volumes that are going downstream business, whether it's transportation or fractionation are under long term contract. So theres not a whole lot of movement.

Terms of rates, there for where the volumes that are going through.

Through our assets I think when you look at the unit margin you spoke of the reported numbers Jim talked about was we had some marketing gains in the first quarter. So we have the outperformance due to the.

The winter storm of marketing gains, which kind of skewed the unit margins higher but the overall run rate business is performing well and are generally under long term contract.

Okay got it thank you.

Okay. Thank you.

Once again Thats star 1 for questions 1 more for questions.

And im not showing any further questions in the queue at this moment.

Well thank for everyone for being on the call. This morning, and we appreciate your interest in Targa resources. The IR team will be available for any follow up questions. You may have thank you and have a great day.

This concludes today's conference call. Thank you for participating you may now disconnect.

Q2 2021 Targa Resources Corp Earnings Call

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