Targa Resources Corp. Q1 2023 Earnings Call
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Good day and thank you first planning by welcome to the Targa Resources Corp, first quarter 2023 earnings call. At this time, all participants are in a listen only mode.
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Now I'd like to had a conference over to your speaker to teach Sanjay Lad, Vice President of Finance and Investor Relations. Please go ahead.
Thanks, Bella good morning, and welcome to the first quarter 2023 earnings call for Targa Resources Corp, first quarter earnings release, along with our first 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 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 21 E.
Of the Securities Exchange Act of 1934 actual results could differ materially from those projected in forward looking statements for.
For a 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, the following senior management team members, who will be available for Q&A.
Pat Mcdonald, President gathering and processing, Scott Pryor, President logistics, and transportation and Bobby Morocco, Chief commercial officer, and with that I'll now turn the call over to Matt. Thanks, Sanjay and good morning to everyone. This year is off to a strong start at Targa and we are very proud of our execution across.
The company in the first quarter in Q1, we had quarterly EBITDA that was up 50% over prior year with a lower common share count record volumes in the Permian record NGL transportation and fractionation volumes and strong LPG export volumes.
We also finished construction and are in the process of bringing our legacy to plant fully online.
And we are also returning an increasing amount of capital to our shareholders. We increased our quarterly cash dividend by 43% and executed on $52 million of common share repurchases during the first quarter.
With our strong first quarter complete and given the strength of the business fundamentals underpinning our assets, we remain comfortable with our full year 2023, adjusted EBITDA estimate despite natural gas and NGL prices being about 30% and 10% lower than the price assumptions underpinning.
Our 2023 EBITDA guidance range.
Natural gas volumes across our Permian systems are growing.
Our current aggregate volumes are over 5 billion cubic feet per day of reported enlist and are expected to ramp as we move through the year driving incremental volumes through our integrated downstream assets, we have four plants under construction in the Permian and our ordering long lead times for an additional two plants.
Given our increasing Permian volumes, and resulting NGL supply growth, we announced this morning that we are moving forward with a new 120000 barrel per day fractionator trained 10 at our Mont Belvieu complex, which is expected to be online in the first quarter of 2025.
With the addition of trained 10 and additional spending on long lead items for our next Permian plants. We now estimate full year 2023, gross capex spending to be between 2 billion and $2 2 billion.
Investing in organic growth projects across our integrated footprint provides target with attractive returns and puts us in a strong position to continue to return incremental capital to our shareholders.
Let's now discuss our operations in more detail.
Starting in the Permian high activity levels continue across our dedicated acreage our systems across the Midland and Delaware basins averaged a record $4 8 billion cubic feet per day of reported inlet volumes during the quarter.
In Permian Midland our system has essentially been running above nameplate capacity absent the impacts of first quarter winter weather and is currently operating up over 100 million cubic feet per day versus Q1 average inlet.
Our new legacy to plant partially came online in late March limited by electricity capacity to the site and is expected to be able to be fully available later this quarter and kudos to our engineering and operations team for safely, bringing the plant online ahead of schedule and on budget.
Our next Midland plant Greenwood remains on track to begin operations in late fourth quarter of 2023 and is expected to be highly utilized when it comes online.
In Permian, Delaware inlet volumes across our system increased 5% sequentially activity and volumes across our northern Delaware footprint are running strong and we have bolstered our connectivity across our Delaware assets to handle the near term growth. Our midway plant is close to completion and is expected to begin operations later in the second quarter.
Our wildcat too and Roadrunner two plants remain on track to begin operations in the first and second quarters of 2024, respectively.
We continue to expect volume growth across both our Permian Midland and Delaware positions for the remainder of the year and well beyond.
Beyond those projects already announced and in progress we are evaluating when we will need additional gas processing capacity in the Permian and we are ordering long lead items for our next Midland and Delaware plant.
To that end some of you may have seen a filing with the Texas Railroad Commission around the proposed gas pipeline, we call apex. This filing allowance per preliminary survey work to be completed on proposed routes.
Given how rapid we are growing with over 1 billion cubic feet of incremental residue gas from just the plants. We currently have under construction. We continue to work to ensure sufficient residue takeaway from the basin. As we have said previously we remain in position to support as needed residue pipes to get Permian gas to market, whether we are leading.
Those efforts or or participating with third parties. The next pipe as needed in both our producers and markets on the Gulf Coast are keenly aware of that need.
We are also continuing to add intra basin connectivity and redundancy in both the Midland and Delaware to move residue gas from Targa plants to enhance flow assurance to get volumes from targa assets to market.
In our central region, and the Badlands volumes were sequentially flat during the quarter overall volumes remained steady as we are currently not seeing any material change in activity despite lower commodity prices.
Shifting to our logistics and transportation segment targets NGL transportation volumes were a record 537000 barrels per day and fractionation volumes were a record 759000 barrels per day during the first quarter with the ramp in supply volumes from our Permian systems and third parties are Grand Prix deliver.
Ares into Mont Belvieu are currently averaging around 600000 barrels per day with fractionation volumes currently running near capacity of around 800000 barrels per day.
Gcs will provide some much needed help when it is fully restarted in the first quarter of 2024, and we expect our train nine fractionator to open up highly utilized when it commences operations during the second quarter of 2024.
Our newly announced trained 10 with an in service date of the first quarter of 2025 is expected to be much needed given the expected continued growth in our G&P business.
Turning to our LPG export business at our Galena Park facilities, we loaded an average of $11 2 million barrels per month during the first quarter as we benefited from increased demand from stronger global market conditions are low cost expansion project to increase our propane loading capabilities with an incremental 1 million barrels per month of capacity.
Remains on track for mid 2023.
We are well contracted across our export facility and continue to expect that 2023 will be a record year for LPG export volumes.
We remain excited about the long term outlook at Targa looking ahead, we continue to execute on our strategic priorities will drive increasing EBITDA, a higher common dividend and reduced common share count while maintaining leverage within our target range.
We announced this morning that our board has approved a new $1 billion common share repurchase program, which provides us with flexibility going forward to continue to be opportunistic on repurchases.
Before I turn the call over to John to discuss our first quarter results in more detail I would like to extend a thank you to the target team for their continued focus on safety and execution, while continuing to provide best in class services to our customers.
Thanks, Matt Good morning, everyone targets reported quarterly adjusted EBITDA for the first quarter was $941 million, increasing 12% sequentially as we benefited from increased optimization opportunities in our marketing and LPG export businesses contribution from our recent acquisition of the remaining 20.
5% interest in our Grand Prix NGL pipeline earlier, this year and higher overall system volumes, despite lower commodity prices.
As we think about the shape of quarterly adjusted EBITDA across 2023, given the benefits of optimization opportunities in Q1 and seasonality in some of our businesses. We currently expect second quarter adjusted EBITDA to be the lowest of the year ramping from there as our system volumes continue to grow.
As Matt mentioned for the first quarter, we declared a cash dividend of <unk> 50 per common share or $2 per share on an annualized basis, representing a 43% increase over the first quarter of 2022 consistent with previous messaging, we expect to maintain the same quarterly dividend for the remainder of the year.
We also repurchased $52 million of common shares in the first quarter at a weighted average price of $71 82.
As of quarter end, we had approximately $92 million remaining under our $500 million program and now also have a new $1 billion share repurchase program authorized in in place.
Our full year 2023, adjusted EBITDA estimate continues to be between $3 5 billion to $3 7 billion.
And we expect year end leverage around the midpoint of our long term target leverage ratio range of three to four times.
At the end of the first quarter, our pro forma leverage ratio was approximately three five times.
We are well hedged across all commodities for the balance of 2023 and continue to add hedges for 2024 and beyond.
Coupled with our fee for contracts, we have significantly derisked, our earnings and cash flow outlook, while preserving the upside when commodity prices increase.
With our plans to move forward with the construction of Frac train 10 in Mont Belvieu and acquiring long lead items for our next Permian gas plant. We now estimate 2023 gross capital spending between 2 billion and $2 2 billion.
There is no change to our current year estimate for net maintenance capital spending of $175 million.
At quarter end, we had about $2 6 billion of available liquidity.
Which provides us with a lot of flexibility looking forward.
Maintaining a strong investment grade balance sheet across cycles continues to be a priority at target. We believe that our strong balance sheet and continued investment in high return projects positions us to continue to prudently return, an increasing amount of capital to our shareholders across cycles, Lastly, I'd like to Echo, Matt and extend to think.
To our employees for their continued focus on safety, while executing on our strategic priorities.
And with that I will turn the call back over to Sanjay.
Thanks, Ken for the Q&A session. We kindly ask that you limit to one question and one follow up and re enter the lineup. If you have additional questions.
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Our first question comes from the line of Michael Blum with Wells Fargo. Your line is now open.
Thank you and good morning, everyone.
I wanted to ask you about fracturing 10.
Maybe just walk us through the thought process there it seems like Theres a lot of frac capacity being added to the market right now.
And some people are starting to talk about pressure on rates. So how much of train nine is contracted and how much of a train 10.
Would be contracted or would you need to be contracted to move forward.
Hey, Michael This is Scott our Frac train 10 will have a similar cost to our train nine facility.
And as we stated in our remarks train nine is expected to come online in the second quarter of 2024.
Given the number of current plants that we have under construction in.
In the Permian and our comments around ordering long lead items for additional plants, we will obviously need to keep up with fractionation capacity for the expected production stemming from our own plants.
There have been times over the course of the last few quarters that in order to manage our inventories the influx of volumes that.
Our coming onto our system. There are times that we have been offloading volumes, both on transportation as well as fractionation. So our belief is is that we have a strong need for frac train nine as it comes online and again Frac train 10 is trying to stay ahead of the cadence of the number of plants that we are building on the upstream side.
Along with the overall growth that we're seeing from the industry.
And just to add to that Michael This is Matt here.
We see the underlying growth in our G&P business and we're pointing that two frac train nine Frac train 10, and a restart of gcs. So I would suspect others as they are bringing in additional fractionation. They have volumes that they see from their customers and their contracts.
We need to make sure we have sufficient fractionation capacity for our underlying GNP business. So we can provide an integrated NGL service to our G&P customers.
Got it thanks and then.
I just wanted to ask about the increase in growth Capex.
It seems like Youre kind of moving towards that.
$2 billion, a year plus or.
This level is that.
That a fair way to think about the run rate going forward and if not what do you think that does kind of long term shakeout.
Yes, Michael.
Michael It is a little bit tough to do run rate as it does get lumpy during certain years. When you have large long haul NGL pipes. For example that can be in and give you more runway I would also say when we made the acquisition of the North Delaware assets.
Number of last year.
There was not sufficient processing capacity. So we do have a little bit of catch up here with five plants being kind of brought online in ordering long lead time for two that likely a little bit heavy if you were to do a multiyear model that said I think we're going to continue to have strong G&P growth, we're going to be needing to continue to add plant. So it really.
Comes down a little bit of the Lumpiness of some of the larger projects and the timing of our processing plants, but.
With our underlying acreage position and strong producer contracts, we have in the Permian.
As long as they keep drilling, which we see for years to come we're going to continue to invest in gathering and processing plants, expanding NGL transportation fractionation and export, but there could be some lumpiness from year to year.
Thanks, Matt.
Okay. Thanks, Michael.
One moment for your next question.
Okay.
Okay.
And your next question comes from the line of Brian <unk> with UBS. Your line is now open.
Hi, good morning, everyone.
Maybe just touch on the return of capital outlook, just given the Lumpiness in Capex over the next two years and we saw some buybacks in the quarter with likely some dividend increases for the next few years. So just given the rising capex, Andy but outlooks for the next few years from these growth projects. It was kind of curious if you could discuss how targets balance sheet capacity moves over the next few years.
Given that free cash flow after dividends is pretty flattish until 'twenty five.
This is Jen Brian I think we have a very strong balance sheet right now sitting at the end of the quarter around the midpoint of our long term leverage ratio target range, despite making a $1 billion.
<unk> in the first quarter, and we think that our capital spending really helps to create significant long term shareholder value and position us to be able to return an increasing amount of capital to our shareholders as Matt described in his answer to Michael There is some lumpiness associated with our growth capital spending, particularly around.
Our large projects like Daytona.
And that means that there is some periods, where we may have less free cash flow than other periods, but we believe that this sets us up.
We continue to execute on really where we already are which is a roadmap that says we will continue to maintain a really strong balance sheet, we've got increasing year over year EBITDA growth really as far as we can see under a variety of scenarios and then also are able to return increasing amounts of capital to.
Our threat to our shareholders through a significantly increasing dividend and also opportunistic share repurchases I think that's the roadmap that we've shown over the last couple of years and I think that's the roadmap that will continue to follow going forward.
Great appreciate that and.
And as a follow up it just seems like Targa is using.
Going after a little bit more third party contracts historically it just seems like target was very much historic historically focused on its internal equity volumes for both the <unk> side curious if you could just opine further on some of these new third party opportunities that Youre seeing is it specifically on the long haul side or GMP as well.
And whether this is a business strategy shift to win new business or is there, perhaps just more industry cooperation to maximize asset utilization.
Not sure exactly which piece on third party or you're referring to but let me just kind of answer it generally.
In cargo, we try and.
Really service, our existing customers in our gathering and processing business, but we have been for years trying to get more acreage positions more underlying volumes in our G&P business to continue to grow that business and then move those NGL downstream. So we've been very active in managing our existing contracts and going after new customers.
New areas in our GNP business and I'd say, the same goes for transportation and fractionation and export because we have a lot of those volumes from GMP moving into our system.
Most of those volumes have been moving more towards GMP based on our downstream side versus just third parties that are unaffiliated with GMP.
That's been a trend that's been continuing I don't know that thats really been changing but that said our downstream commercial team is still focused on trying to get new business, whether it's for grand per year for our fractionator.
To provide that level of service for customers, whether they're our G&P customers or just downstream customers. So we're continuing that effort.
That's really changed for us.
Great I'll leave it there I appreciate all the color. Thanks.
Okay. Thank you. Thank you.
Your next question comes from the line of Jeremy Tonet with Jpmorgan. Your line is now open.
Hi, good morning.
Hey, good morning, Jeremy.
Just wanted to come back to I guess, Capex and how you guys think about hurdle rates and accretion clearly in this market, there's greater scrutiny on on all Capex and just wondering even with the lower commodity prices I guess, if you could give us a feeling for what type of accretion you see here, where your hurdle rates stand right now that would be very.
Helpful. Thanks.
Jeremy This is Jen we put in ROIC slide in our excuse me our February materials, partially just two very explicitly highlight just how well we believe we've been able to invest over the last several years, particularly in projects and opportunities that we consider core and the spending that we've announced.
This morning, with our Frac train Pan and also additional spending around another Permian gas plant is core just like the spending that we're already doing for additional gas plants fractionation NGL transportation is core to us. So I wouldn't say that our hurdle rate has really shifted continues to be call. It five to seven times I think that.
We have been able to execute better than that partially because our assets are so well utilized when they come online. It feels like we're almost behind every time any last that comes online. So is base loaded very quickly, which creates incremental more incremental returns that accrue to us more quickly than maybe before when we grew.
Into our capacity, maybe a little bit more slowly.
So I would say that we continue to look at each and every opportunity and tried to really scrub our capital spend plan. We are in a cycle right now where we are spending a little bit more on partially that is a result of the lumpiness of some of our bigger projects, but ultimately it's really across our core value chain and we believe it's going to generate significant <unk>.
<unk> returns for Targa and for our shareholders to the extent that we get into an environment, where we see producer activity slowdown I think we've demonstrated a track record where we have rationalized spending before when you think about our 2020 spending of $600 million in 2021 spending just a little bit over $400 million.
We clearly have executed previously where if activity levels are lower we rationalize our spend currently we just have a lot of expectations given the strength of the producers underlying our G&P systems for significant oil volume growth and thats going to necessitate additional volumes.
Ross, both our GMP and logistics and transportation footprint.
Got it that's very helpful. Thanks, and then just wanted to dive in a little bit more on reaffirming the guidance here, even with the big move in commodity prices. Just wondering if you could provide a little bit more color on some of the offset there just wondering how you're tracking versus the 10% Permian growth.
Outlined there are better than that and then also just LPG export trends seem pretty robust as well. So I'm wondering if you could just help us think through some of those tailwind.
We now have one quarter under our belt. So it's always easier to affirm guidance when part of it is already accounted for and I think Q1 was a really strong quarter for us across the board record volumes in a number of different areas and our employees also did an excellent job of optimizing our assets and generating additional opportunities from our footprint.
So as we look out at the rest of the year prices are lower but I think we continue to see and expect excellent volume growth again really across all of our assets and that's really what is underpinning our reaffirmation of our guidance despite lower prices.
Got it that's helpful I'll leave it there thanks.
Okay. Thanks, Jeremy.
Your next question comes from the line of Tristan Richardson on with Scotiabank. Your line is now open.
Hey, Good morning, guys, just maybe a question good morning, Jason.
Appreciate it Matt maybe just a question on the residue side, you talked a little bit about apex. Obviously this is very early days here and really just emphasize that the longer term need for residue.
At a high level, but maybe kind of curious what this.
This could look like in terms of potential.
End market destinations.
Maybe just a little bit more detail on what the preliminary plans for this looked like maybe timing capital et cetera.
Thinking about is this is this a project that you guys are full speed ahead on or really just exploring potential options.
Yes.
Thanks, Chris and good question.
What really under lines or underlies our overall strategy for residue is to make sure that there's takeaway and so we want to support whether it's with apex pipeline or others, we want to make sure that theres takeaway, we have a lot of volumes in the Permian a lot of plants coming online so for us to be able to charge a processing fee and the liquids.
Down Grand Prix and into our Frac, we need to make sure. We're processing those volumes, we need to make sure that theres residue takeaway. So we are working and we're doing some preliminary work on apex. We're also talking to other other customers, but I'm going to turn it over to Bobby just to talk a little bit more about that project and what were thinking there yes. So.
This is Bob.
And then what we wanted to say is we want to see all of the resident move out of the Permian basin. So whether it's on a pipeline like apex or a third party pipeline or one that were.
Part of we'll just be excited to see pipelines go and then as we think about.
What apex could look like if it did go.
We ultimately have no shortage of.
Residue supply.
So put to our pipe between us and our customers.
And I think everybody knows what's going on with the market down there in that general vicinity of the state with LNG and other demand coming off so as we think about that the potential for that project to come together at some point in the future kind of goes to.
What happens with other pipes.
What we ended up doing.
Other pipes versus FX, and then what the market.
What the market does down there and how it develops.
Taking these things all up is a fairly complicated process and we just want to make sure that.
There are options out there that we can execute on that make sure. The residue flows whether it's the pipe in 'twenty six that'll be needed or a pipe that's needed in 2008 as all those facilities down there and the Sabine River.
Oradour come online and have to have a very strong demand for gas.
Appreciate it Bob.
Maybe just a follow up.
I think we all know the scale and the quality of your customers both in the Midland and the Delaware, but maybe curious to the extent you are seeing any discussion of change in development plans are responding to price signals in the market, even if it's at the margin and on very small customers, but just any comments on maybe the long tail there.
Yes. This is Pat.
Really we haven't had any change in activity activity levels remain high rigs are running on acreage all around our system on our system. We havent. The big guys. Obviously, we're disciplined I tell you guys, what they're going to continue to execute on their plans.
I'm, a little more back loaded this year than in previous year.
The rigs are running into the wells are drilled the little guys.
Frankly, we haven't seen any change in activity there yet either they continue to be very active and we're bringing on a lot of incremental volumes for the medium and smaller guys. So to date.
We have not seen a change in activity levels are high.
I appreciate it thank you guys very much.
Alright, thank you.
Your next question comes from the line of Duress Chen with Barclays. Your line is now open.
Hi, Thank you for taking my question.
In terms of the timeline that Houston match with one may be able to.
Move over some of the Y grade volumes coming off of the legacy lucid processing plants onto your own system.
Now that you've had these assets under your belt for some time can you give us a centers and when do you expect.
Ramp up higher in the cadence.
Yes sure Matt.
For Frac train, whether it's 910 or DCF, we really see that from our underlying G&P business and continued volume growth in just execution from our producer customers. We do have some contracts that roll off from time to time those are.
Most of those are <unk>, where it would be more transportation and fractionation. So between now and 2025, we do have some of those but the lion's share of the need for Frac train 10 is just from underlying continued.
Activity from our producers in our in our G&P business.
Got it.
And then in terms of capital allocation and the buybacks specifically.
I understand that.
Have a programmatic approach to this and it's more on an opportunistic basis, but just given the volatility and the dislocation in the market. We saw during the first quarter was there a reason why you didn't want to utilize its toolkit. This tool in your toolkit and more.
Theresa. This is Jen you saw us partially utilize the tool by buying a little bit more than $50 million in the first quarter. We also made $1 billion acquisition of our remaining interest in Grand Prix during in the quarter. So part of what we're just trying to balance each and every quarter and then annually is just our spending requirements whether that be a result.
Acquisition activity like in the case of Q1 with the Grand Prix acquisition or other capital spending with the opportunities that we see in the market and we were able to step in we believe when we were given the opportunity in Q1.
Manner that we're very comfortable with.
Thank you.
Thank you okay. Thank you.
Your next question comes from the line of Keith Stanley with Wolfe Research. Your line is now open.
Hi, Good morning wanted to start on the NGL and gas marketing for the quarter.
I mean, it looks just based on the percentage of margin like a like.
Record quarter for the company. So can you talk a little more to the types of activities.
Did you fully anticipate the strength you saw this quarter as of the last call or did you see more opportunities in March and then just overall expectations for the rest of the year should we assume you got to kind of go back to normal on marketing or are you continuing to see opportunities to do better.
Yeah, sure Hey, Keith.
I would say when we gave our guidance part of that was already factored in the guidance was given in February we already had some of those seasonal opportunities I'd say and saw the strong LPG export market.
We really had good performance across the traditional kind of NGL marketing gas marketing and LPG exports part of which was known when we gave the guidance.
So that was factored into some extent as we go forward I would say, we do see kind of more normalized level as we go throughout the year. That's why John kind of pointed to a weaker Q2. So I think Q2 is going to be a little bit weaker we don't see those kind of outsized opportunities that we saw in Q1.
But kind of more normalized as we as we move throughout the year.
Great. Thanks, and then.
I guess just on the Frac capacity. So I think you said in your prepared remarks, you were already at 800000, a day recently, which I think is your capacity.
And then you reactivate gcs early next year so.
Can you still grow frac volumes within your system over the balance of the year or are you at a point, where you need to start off loading a little more already into the second half of the year.
Yes, we do have the ability to grow more so we said were around 800, we can do low eight hundreds of Y grade at Belvieu. We also have our lake Charles Frac, which we can push some more volumes over there and we do have ability to push volumes to other fracs.
In any given month work on loading and offloading back and forth between different players in Bellevue for different reasons. So now we feel good about being able to handle all of our volumes between now and when <unk> comes on the first part of next year and then we'll get even more relief when train nine.
It comes on but that that gives us comfort that we're going to have volumes for our gcs startup and answering nine when it comes along.
Thanks.
Okay. Thank you.
Your next question comes from the line of Paul.
Been with TPG.
Your line is now open.
Good morning, Matt I thought I heard you referenced securing long lead items on two additional plants. So first wanted to verify the portal versus singular there and then any comments on the planning horizon and how you see potential constraints shaping up across your Midland and Delaware footprint.
Sure. Yes, you did hear that correctly last call, we talked about long lead items for one plant in our.
Securing long lead items for two plans, so I would expect us to be green lighting, one or both of those plants relatively short shortly so we're kind of signaling that.
Yes in terms of constraints, we have had really strong performance, we kind of gave those updates here, where we are currently running we have enough capacity to handle our volumes from processing and.
Transport and Frac, but that is why we're adding more and more capacity along kind of that whole value chain is as we see continued growth through the rest of this year, we think it really sets us up for a strong 2024 as our volumes really ramp through the back half of the year and we'll have more capacity coming on in 2024.
Gathering and processing I'd say it's.
Gathering and processing I'd say it's.
Getting pretty tight on the processing side in both the Delaware and the Midland the good thing about our plants and just the way our engineering teams have design needs. We have stretch above nameplate. So we're putting in 275 million a day plants. So even when we're at capacity we can stretch up on these plants and go to call. It 300 or so on most of these plants so that gives.
US good flexibility and we've got.
Gross capacity of almost six Bcf a day out there so they can move that.
10%. It gives you a pretty good flex on the processing side.
Then on the NGL side, we've been adding pumps on Grand Prix, that's giving us some running room, but that's why we're adding Daytona is we see pretty good line of sight to needing that when that comes on and then we've talked about.
Frac expansion I'd say the other piece that we're looking at we have an expansion coming on in the export business. This summer 1 million barrels a month of propane loading that is our next one we're taking a hard look at and trying to determine for us what the right next project is for US. So we're still kind of working through that with engineering operations and just timing of our own.
They're all volumes when we may need further export expansion.
And just in terms of planning horizon I think the latest data plant. We've got right now is roadrunner too in kind of mid 24. So should we think about these as being biased at the back half of 'twenty four maybe early 'twenty five.
Yes, yes, that's probably a reasonable yes great.
Great and then.
Back on the.
Power supply issues you saw at legacy too I guess, one can you expand on that and then two do you see any additional timing risk to ERCOT interconnection as you move toward completion on your other plants.
Yes, so we have legacy one there already so we're able to using the existing infrastructure. We have some extra capacity, which is why were running legacy one of kind of in that it has the ability to be about 100 million a day. If you load up legacy one we can load legacy two to about $100 million or so.
A day that should be we should have all the electricity work done the infrastructure done later this quarter, we will have full access to the full $275 million that is one of our timing constraints as we're putting in future plants that tends to be one of the longer lead items to get put in place is the infrastructure.
Sure these plants that we're putting in.
The last 12, or so plants, we put in of all been electrics and.
It just takes time to get all of that situated as it's a very large electric load.
Great. Thank you.
Okay. Thank you.
Your next question comes from the line of Sean <unk> with Seaport Global Your line is now open.
Yes, hi, good morning, everybody and thanks for all the color.
So when I look at processing.
Permian seems like one to one two bcf per day total processing.
Going to end up going for <unk> no.
Out of that how much visibility you have on the residue gas takeaway just as a ballpark.
Yes, so for the plants.
That we're putting in we are connecting to various residue outlets to make sure. We have transport intra basin to wall hard that we can then get to market from there. So we will have connectivity within the Permian basin.
For those plants and then it really just goes to the broader basin is their takeaway out of the basin and what does that look like we have some compression expansions coming on we have a long haul pipe coming on mid next year, which should provide some relief. So it feels like when the long haul pipe comes on next year, we will have some runway, but that's why as Bob talked about we are beginning.
We've begun work in discussions on APAC and what this next pipeline is after Matterhorn.
Got it.
And my second question was.
But longer term.
Where do you see the balance sheet in terms of credit ratings.
Over the medium to long term I think we've got competitors.
Look that is showing up.
So mid Triple B.
The card process with your team also.
So Neal this is Jim I think that ideally, we'd like to be at least a mid triple B company and right now we're sitting one notch lower than that.
We have a very strong balance sheet right now so we're really comfortable with where our leverage ratio is today and the trajectory of that leverage ratio.
So ultimately we believe that will continue to execute as we have historically, which is execute across all dimensions of our business plan and then the ratings will be a result of that execution, but I would expect as we continue to manage through this year and into next year and our leverage ratio continues to improve we will be looking to.
Inquire about a potential upgrade with the agencies.
Got it thanks for that.
Okay. Thank you.
Hi, This is Jake <unk> on for Neil. Thank you for the question and squeezing me in here I know we've touched on this a couple of times, but I just wanted to go back to the EBITDA guide for the year.
And marketing specifically, so I know you guys said.
Marketing was I guess, a little bit stronger than expected to some extent and that is going to be normalized for the rest of the year and so.
Given the fact that you also said that.
Volume growth is looking strong for the remainder of the year as well just trying to figure out is there does this mean there is upside to the maintained EBITDA guide.
Given that <unk> strength in marketing.
And.
I say that because I see a bullet in the slide deck that site.
Higher marketing and optimization, which I don't think with their prior so I'm just trying to get a sense of I guess what implications are there. Thank you.
I think as we think about balance of the year Theres always the potential for additional upside in terms of higher commodity prices if volumes exceeded our expectation if we see more optimization opportunities or if we've got commercial success beyond what we've already got baked into our forecast and that materializes. This year so well.
I'll have to see other rest of the year plays out, but certainly you are hopefully hearing our excitement not only that we have a really strong Q1 under our belt, but also that our outlook is as strong as it is.
But we'll have to see what happens with prices and ultimately when volume volumes materialized and if we see more volumes then we expect our volumes ramp a little bit more slowly than we expected.
Got it perfect. Thank you very much.
Thanks, guys. Thank you.
And I see no further questions at this time I will now turn the call back over to Sanjay Lad.
Thanks to everyone that was 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 thanks and have a great day.
This concludes today's conference call. Thank you for your participation you may now disconnect have a good day.
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