Q4 2023 Targa Resources Corp Earnings Call

February 15, 2024

His presentation, there will be a question and answer session.

Can I ask a question during the session you will need to press star one one on your telephone.

We'll then hear an automated message advising your hand is raised to withdraw your question. Please press star one again please.

Please be advised that today's conference is being recorded.

I would now like to hand, the conference over to your Speaker today, Sanjay Lad, Vice President of Finance and Investor Relations. Please go ahead.

Thanks, Shannon good morning, and welcome to the fourth quarter of 2023 earnings call for Targa Resources Corp, fourth quarter earnings release, along with our fourth quarter earnings supplement presentation for Targa 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 posted to our website.

Statements made during this call that might include Targa is expectations or predictions should be considered forward looking statements within the meaning of section 21 E of the Securities Exchange Act of $19 34.

Okay.

Yeah.

Okay.

Good day, and thank you for standing by.

Welcome to the Targa Resources Corp, fourth quarter 2023 earnings webcast and presentation at.

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

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

At this time all participants are in a listen only mode.

After the Speakers' presentation, there will be a question and answer session.

I'll ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised.

Our speakers for the call today will be <unk>.

Malloy, Chief Executive Officer, and Jen Kneale, Chief Financial Officer. Additionally, we will have the following senior management team members available for Q&A, Pat Mcdonald, President gathering and processing, Scott Pryor, President logistics, and transportation and Bobby <unk>, Chief commercial officer and wood.

To withdraw your question. Please press star one again.

Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Sanjay Lad, Vice President of Finance and Investor Relations. Please go ahead.

Sanjay Lad: Thanks, Shannon good morning, and welcome to the fourth quarter of 2023 earnings call for Targa Resources Corp, fourth quarter earnings release, along with our fourth quarter earnings supplement presentation for Targa that accompany our call are available on our website at Targa resources Dot com in the investors section. In addition, an updated.

I'll now turn the call over to Matt. Thanks, Sanjay and good morning, 2023 was another record year for Targa and I would like to recognize and thank our employees for their focus dedication and execution throughout the year.

Some of our highlights for 2023 include record safety performance record gathering and processing volumes in the Permian record volumes across our logistics and transportation assets record adjusted EBITDA of 353, Billion% to 22% increase over 2022, while also reducing our share count.

Sanjay Lad: Investor presentation has also been posted to our website.

Sanjay Lad: Statements made during this call that might include Targa is expectations or predictions should be considered forward looking statements within the meaning of section 21 E of the Securities Exchange Act of $19 34.

Major projects came online on time on budget and have been highly utilized since startup.

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

Ended the year with 90% of our G&P volumes fee based or with fee floor.

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

Positive outlook to our current investment grade ratings with each of the three agencies and the completion of two successful notes offerings and higher year over year return of capital to our shareholders through both an increased common dividend and record common share repurchases.

Sanjay Lad: Our speakers for the call today will be Matt.

Sanjay Lad: Matt Meloy, Chief Executive Officer, and Jen Kneale, Chief Financial Officer.

Sanjay Lad: Additionally, we will have the following senior management team members available for Q&A Pat.

Sanjay Lad: Donnie President gathering and processing.

Our performance was particularly strong given wahaha natural gas and NGL prices were about 64% and 34% lower year over year, and we benefited from margin from fee floors in our gathering and processing business across 10 of 12 months, demonstrating our business is more insulated to downside to downward commodity price.

Sanjay Lad: Scott Pryor, President logistics, and transportation and Bobby Mara Chief Commercial officer, and with that I'll now turn the call over to Matt.

Matthew J. Meloy: Thanks, Sanjay and good morning.

Matthew J. Meloy: 23, it was another record year for Targa, and I would like to recognize and thank our employees for their focus dedication and execution throughout the year.

Ms than ever before.

Matthew J. Meloy: Some of our highlights for 2023 include record safety performance record gathering and processing volumes in the Permian record volumes across our logistics and transportation assets record adjusted EBITDA of $3 five 3, billion% to 22% increase over 2022, while also reducing our share count.

We also exited 2023 with a lot of volume momentum in the Permian.

Our December reported inlet averaged $5 5 billion cubic feet per day of 450 million cubic feet per day improvement from our third quarter average, while our volume ramp materialize later than we forecasted for 2023. We are pleased that we ended the year with December actuals in line with our original.

Matthew J. Meloy: Major projects came online on time on budget and had been highly utilized since startup.

Guidance expectations for the Permian, providing us with strong momentum in 2024, we expect another year of record financial and operational metrics with full year adjusted EBITDA estimated to be between $3 7 billion and $3 9 billion for 2020 for the.

Matthew J. Meloy: Ended the year with 90% of our G&P volumes fee based or with fee floor.

Matthew J. Meloy: Positive outlook to our current investment grade ratings with each of the three agencies and the completion of two successful notes offerings and higher year over year return of capital to our shareholders through both an increased common dividend and record common share repurchases.

The significant year over year increase in adjusted EBITDA is primarily driven by higher expected Permian gathering and processing volumes and higher expected NGL transport fractionation and export volumes.

Consensus growth expectations for Permian associated gas in 2024 is about 9% and given our track record of outperforming the basin. We are installing over 400 million cubic feet per day of compression in the first half of 2024, which will drive increasing volumes through our downstream assets.

Matthew J. Meloy: Prices than ever before.

Matthew J. Meloy: We also exited 2023 with a lot of volume momentum in the Permian. Our December reported inlet averaged $5 5 billion cubic feet per day of 450 million cubic feet per day improvement from our third quarter average, while our volume ramp materialize later than we forecasted for 2023, we are.

We currently estimate between two three and $2 5 billion of growth capital spending in 2024, as we bring it online to Permian plants, three fractionator and an NGL pipeline. While also spending on projects that will come online beyond 2024, including additional Permian plants and fractionation trains.

Matthew J. Meloy: Pleased that we ended the year with December actuals in line with our original guidance expectations for the Permian, providing us with strong momentum in 2024, we expect another year of record financial and operational metrics with full year adjusted EBITDA estimated to be between $3 7 billion and $3 nine.

Beyond these projects already announced and under construction. We're also ordering long lead time items for our next Permian plants and Frac train 11 to ensure we keep pace with the significant activity we continue to see.

Backed by the strength of our outlook and increasing stability of our cash flows we announced in November an expectation of a 50% year over year increase to our annualized 2024 common dividend per share the increased dividend will be recommended to our board in April for the first quarter of 2024 with payments of shareholders in May.

Matthew J. Meloy: Billion for 2020 for the.

Matthew J. Meloy: The significant year over year increase in adjusted EBITDA is primarily driven by higher expected Permian gathering and processing volumes and higher expected NGL transport fractionation and export volumes.

Matthew J. Meloy: Consensus growth expectations for Permian associated gas in 2024 is about 9% and given our track record of outperforming the basin. We are installing over 400 million cubic feet per day of compression in the first half of 2024, which will drive increasing volumes through our downstream assets.

We also repurchased a record $374 million of common shares in 2023 and continue to be in position to execute on our opportunistic share repurchase program in 2024.

Beyond 2024, we really like our positioning driven by our view of cost advantaged basins like the Permian continuing to be a key supplier of hydrocarbons for decades to come as.

Matthew J. Meloy: We currently estimate between two three and $2 5 billion of growth capital spending in 2024, as we bring it online to Permian plants, three fractionator and an NGL pipeline. While also spending on projects that will come online beyond 2024, including additional Permian plants and fractionation trains.

As we look to 2025, we estimate about $1 4 billion of growth capital spending burdened by the next major projects that are not currently board approved but would be necessary to support continued volume growth, including train 11, and additional Permian G&P plants with increasing EBITDA in 2025 relative to 2020.

Matthew J. Meloy: Beyond these projects already announced and under construction. We're also ordering long lead time items for our next Permian plants and Frac train 11 to ensure we keep pace with the significant activity we continue to see.

Four and lower estimated growth capital spending we expect to generate significant free cash flow in 2025.

Matthew J. Meloy: Backed by the strength of our outlook and increasing stability of our cash flows we announced in November an expectation of a 50% year over year increase to our annualized 2024 common dividend per share the increased dividend will be recommended to our board in April for the first quarter of 2024 with payments of shareholders in May.

Also we included in our presentation slides. This morning, an illustrative buildup of multiyear average spending that would approximate about one 7 billion per year. This assumes high single digit gas volume growth in the Permian requiring us to continue to add infrastructure across our value chain.

$1 7 billion of capital spending at a five five times multiple would drive over $300 million of EBITDA growth year over year, and increasing free cash flow supporting our ability to continue to return an increasing amount of capital to our shareholders.

We also repurchased a record $374 million of common shares in 2023 and continue to be in position to execute on our opportunistic share repurchase program in 2024.

Matthew J. Meloy: Beyond 2024, we really like our positioning driven by our view of cost advantaged basins like the Permian continuing to be a key supplier of hydrocarbons for decades to come as.

We also included our estimated cap are estimated spending to maintain volumes currently on our system, which we think is helpful in demonstrating the resiliency of our business.

Matthew J. Meloy: As we look to 2025, we estimate about $1 4 billion of growth capital spending burdened by the next major projects that are not currently board approved but would be necessary to support continued volume growth, including train 11, and additional Permian G&P plans with increasing EBITDA in 2025 relative to 2020.

Growth capital spending to maintain existing volumes is estimated at around $300 million annually, which is informed by how quickly we were able to rationalize spending in 2020 in 2021, when we still had strong volume growth across our assets.

In a scenario of $300 million of annual growth capital spend we would be in position to utilize significant free cash flow to continue to return capital to shareholders, while maintaining a very strong balance sheet.

Matthew J. Meloy: Four and lower estimated growth capital spending we expect to generate significant free cash flow in 2025.

Matthew J. Meloy: Also we included in our presentation slides. This morning, an illustrative buildup of multi year average spending that would approximate about one 7 billion per year. This assumes high single digit gas volume growth in the Permian requiring us to continue to add infrastructure across our value chain.

As we look forward our excitement is are our excitement and our outlook is driven by a few things first we have the largest Permian gathering and processing footprint in the industry with several million dedicated acres across Midland and Delaware basins.

That coupled with an integrated NGL system positions us nicely to generate high return organic opportunities to invest around $1 7 billion annually over a multi year average delivering over $300 million of annual EBITDA growth driving significant free cash flow and positions targeted to <unk>.

Matthew J. Meloy: $1 7 billion of capital spending at a five five times multiple would drive over $300 million of EBITDA growth year over year, and increasing free cash flow supporting our ability to continue to return an increasing amount of capital to our shareholders.

Matthew J. Meloy: We also included our estimated cap are estimated spending to maintain volumes currently on our system, which we think is helpful in demonstrating the resiliency of our business.

Continue to meaningfully increase the amount of capital returned to shareholders and deliver significant value to our shareholders over the long term.

Matthew J. Meloy: Growth capital spending to maintain existing volumes is estimated at around $300 million annually, which is informed by how quickly we're able to rationalize spending in 2020 in 2021, when we still had strong volume growth across our assets.

Let's now discuss our operations in more detail starting in the Permian activity continues to remain strong across our dedicated acreage fourth quarter inlet volumes averaged a record $5 3 billion cubic feet per day, an 11% increase when compared to the fourth quarter of 2022.

Matthew J. Meloy: In a scenario of $300 million of annual growth capital spend we would be in position to utilize significant free cash flow to continue to return capital to shareholders, while maintaining a very strong balance sheet.

We brought online significant compression across our Midland Delaware systems during the fourth quarter, driving a 5% sequential increase in volumes.

In Permian Midland, our new 275 million a day Greenwood plant, which commenced operations during the fourth quarter is already highly utilized our next Midland plant Greenwood two remains on track to begin operations in the fourth quarter of 2024 and is expected to be much needed when it comes online.

In the Permian, Delaware activity and volumes across our footprint are also running strong we brought online our new 275 million a day Wildcat to plant in late fourth quarter and it is already highly utilized.

Matthew J. Meloy: <unk> high return organic opportunities to invest around $1 7 billion annually over a multi year average delivering over $300 million of annual EBITDA growth driving significant free cash flow and position target to continue to meaningfully increase the amount of capital returned to shareholders.

Our roadrunner too and bold moves plants remain on track to begin operations in the second quarters of 2024 and 2025, respectively.

As mentioned earlier, we are ordering long lead time items for our next Permian plants to support continued production growth across our footprint.

Matthew J. Meloy: And deliver significant value to our shareholders over the long term.

Matthew J. Meloy: Let's now discuss our operations in more detail starting in the Permian activity continues to remain strong across our dedicated acreage fourth quarter inlet volumes averaged a record $5 3 billion cubic feet per day, an 11% increase when compared to the fourth quarter of 2022.

Shifting to our logistics and transportation segment targets NGL pipeline transportation volumes were a record 722000 barrels per day and fractionation volumes were a record 845000 barrels per day during the fourth quarter of.

Matthew J. Meloy: We brought online significant compression across our Midland Delaware systems during the fourth quarter, driving a 5% sequential increase in volumes.

Our Grand Prix NGL pipeline deliveries into Mont Belvieu increased 9% sequentially as we benefited from increased supply from our Permian G&P systems and higher third party volumes.

Matthew J. Meloy: In Permian Midland, our new 275 million a day Greenwood plant, which commenced operations during the fourth quarter is already highly utilized our next Midland plant Greenwood two remains on track to begin operations in the fourth quarter of 2024 and is expected to be much needed when it comes online.

The outlook for NGL supply growth from our G&P footprint and third parties remains robust and our Daytona NGL pipeline expansion will be much needed to handle growth from our system. We have obtained all required permits and have commenced construction on Daytona. We now expect the pipeline to begin operation.

Matthew J. Meloy: In the Permian, Delaware activity and volumes across our footprint are also running strong we brought online our new 275 million a day Wildcat to plant in late fourth quarter and it's already highly utilized.

Ahead of schedule in early fourth quarter of this year, assuming favorable weather conditions are.

Our fractionation complex in Mont Belvieu continues to operate near capacity and we expect our train nine fractionator to be highly utilized when it commences operations during the second quarter of 2024.

Matthew J. Meloy: Our roadrunner too and bold moves plants remain on track to begin operations in the second quarters of 2024 and 2025, respectively.

Matthew J. Meloy: As mentioned earlier, we are ordering long lead time items for our next Permian plants to support continued production growth across our footprint.

The restart of Gcs will also provide much needed capacity when it is fully online during the second quarter of 2024 are trained 10 fractionator is also expected to be much needed given the anticipated growth in our G&P business and corresponding plant additions and remains on track for the first quarter of 2025 as mentioned earlier we are.

Matthew J. Meloy: Shifting to our logistics and transportation segment targets NGL pipeline transportation volumes were a record 722000 barrels per day and fractionation volumes were a record 845000 barrels per day during the fourth quarter our.

<unk> also ordering long lead items for train 11 support continued production growth across our footprint.

Matthew J. Meloy: Our Grand Prix NGL pipeline deliveries into Mont Belvieu increased 9% sequentially as we benefited from increased supply from our Permian G&P systems and higher third party volumes.

In our LPG LPG export business at Galena Park, our loadings were a record $13 3 million barrels per month during the fourth quarter as we benefited from our recently completed expansion strong market conditions and the Houston ship channel allowance of nighttime transits for larger vessels, providing strong momentum for 2024.

Matthew J. Meloy: The outlook for NGL supply growth from our G&P footprint and third parties remains robust and our Daytona NGL pipeline expansion will be much needed to handle growth from our system.

Matthew J. Meloy: We have obtained all required permits and have commenced construction on Daytona. We now expect the pipeline to begin operations ahead of schedule in early fourth quarter of this year, assuming favorable weather conditions.

Before I turn the call over to Jen to discuss fourth quarter results in more detail as well as our expectations for 2024 I would like to extend a second thank you to the target team for their continued focus on safety and execution, while continuing to provide best in class service and reliability to our customers.

Matthew J. Meloy: Our fractionation complex in Mont Belvieu continues to operate near capacity and we expect our train nine fractionator to be highly utilized when it commences operations during the second quarter of 2024.

Thanks, Matt Good morning, everyone targets reported quarterly adjusted EBITDA for the fourth quarter was $960 million of.

Matthew J. Meloy: The restart of DCF will also provide much needed capacity when it is fully online during the second quarter of 2024 are trained 10 fractionator is also expected to be much needed given the anticipated growth in our GNP business and corresponding plant additions and remains on track for the first quarter of 2025 as mentioned earlier we are.

A 14% increase over the third quarter. The sequential increase was attributable to higher Permian volumes, which resulted in higher system volumes across our integrated NGL business full year 2023, adjusted EBITDA was a record $3 five 3 billion.

Supported by record financial and operational metrics across the company.

Matthew J. Meloy: <unk> also ordering long lead items for train 11 to support continued production growth across our footprint.

Spent approximately $2 $2 billion on growth capital projects and $223 million and net maintenance capital during 2023 largely in line with our previous estimates.

Matthew J. Meloy: In our LPG LPG export business at Galena Park, our loadings were a record $13 3 million barrels per month during the fourth quarter as we benefited from our recently completed expansion strong market conditions and the Houston ship channel allowance of nighttime transits for larger vessels, providing strong momentum for 2024.

November we successfully completed a $1 billion offering of six 5% coupon senior notes due 2029, and a $1 billion offering of six 5% coupon senior notes due 2034. This allowed us to reduce our term loan borrowings by $1 billion and enhance our liquidity position.

Matthew J. Meloy: Before I turn the call over to Jen to discuss fourth quarter results in more detail as well as our expectations for 2024 I would like to extend a second thank you to the target team for their continued focus on safety and execution, while continuing to provide best in class service and reliability to our customers.

At the end of the fourth quarter, we had $2 7 billion of available liquidity and our net consolidated leverage ratio was approximately three six times well within our long term leverage ratio target range of three to four times.

Jennifer Kneale: Thanks, Matt Good morning, everyone targets reported quarterly adjusted EBITDA for the fourth quarter was $960 million, a 14% increase over the third quarter. The sequential increase was attributable to higher Permian volumes, which resulted in higher system volumes across our integrated NGL business full year 2023.

Also this morning in an announcement that was made public while we're on this call S&P has upgraded us to triple B reflective of the progress we have made to date and our outlook for the future.

Turning to our expectations for 2024, we are really excited about that short and longer term outlook. We estimate full year 2024, adjusted EBITDA to be between $3 7 billion and $3 9 billion.

Speaker Change: <unk> adjusted EBITDA was a record $3 five 3 billion.

Speaker Change: Supported by record financial and operational metrics across the company.

An 8% increase over 2023 based on the midpoint of our range assuming commodity prices of $1 80 per and then Btu for wall Horn natural gas 65 per gallon for a weighted average NGL barrel and $75 per WTS crude oil barrel.

Speaker Change: Approximately $2 $2 billion on growth capital projects and $223 million and net maintenance capital during 2023 largely in line with our previous estimates.

Speaker Change: Remember, we successfully completed a $1 billion offering of six 5% coupon senior notes due 2029, and a $1 billion offering of six 5% coupon senior notes due 2034. This allowed us to reduce our term loan borrowings by $1 billion and enhance our liquidity position.

We expect first quarter 2024, adjusted EBITDA to be lower than fourth quarter 2023 as volumes across our systems were impacted by a very cold winter weather and operating expenses are increasing in anticipation of system expansion.

Speaker Change: At the end of the fourth quarter, we had $2 7 billion of available liquidity and our net consolidated leverage ratio was approximately three six times well within our long term leverage ratio target range of three to four times.

System expansion across both our segments.

We expect quarterly adjusted EBITDA to increase sequentially as we move through the year and benefit from increasing volumes across our system.

We estimate $2 3 billion to $2 5 billion of growth capital spending for 2024, including the vast majority of spending on Greenway II boom is Daytona and train 10, our estimate for net maintenance capital spending is about $225 million reflective of our spending in 2023 and the increased assets that are.

Speaker Change: Also this morning in an announcement that was made public while we're on this call S&P has upgraded us to triple B reflective of the progress we have made to date and our outlook for the future.

Speaker Change: Turning to our expectations for 2024, we are really excited about that short and longer term outlook. We estimate full year 2024, adjusted EBITDA to be between $3 7 billion and $3 9 billion.

<unk> teams are managing.

We expect to end 2024, with our leverage ratio comfortably within our long term leverage ratio target range of three to four times, providing continued flexibility going forward.

Speaker Change: An 8% increase over 2023 based on the midpoint of our range assuming commodity prices of $1 80 per and then Btu for Wahoo natural gas <unk> 65 per gallon for a weighted average NGL barrel and $75 per WTS crude oil barrel we.

We are well hedged across all commodities for the balance of 2024 and continue to add hedges for 2025 and beyond the combination of hedges and fee based margin across our businesses will continue to provide us with cash flow stability our fee floors in our G&P business support our ability to invest across lower commodity price environments while.

Speaker Change: We expect first quarter 2024, adjusted EBITDA to be lower than fourth quarter 2023 as volumes across our systems were impacted by a very cold winter weather and operating expenses are increasing in anticipation of system expansions.

Positioning us to benefit from higher commodity prices.

Relative to our full year 2024 financial guidance of 30% moves higher in commodity prices would increase full year adjusted EBITDA by around $165 million, while a 30% decrease with reduced adjusted EBITDA by around $75 million.

Speaker Change: System expansion across both our segments.

Speaker Change: We expect quarterly adjusted EBITDA to increase sequentially as we move through the year and benefit from increasing volumes across our system.

Speaker Change: We estimate $2 3 billion to $2 5 billion of growth capital spending for 2024, including the vast majority of spending on Greenway II boom is Daytona and train 10, our estimate for net maintenance capital spending is about $225 million reflective of our spending in 2023 and the increased assets that are.

As Matt described earlier, we also provided you with our current view of 2025 growth capital spending and illustrative multiyear buildup across a couple of scenarios.

We hope they are helpful. Our goal in providing them was to highlight some key points.

We believe that there will continue to be strong growth in Permian volumes on our system going forward, which is going to drive incremental volumes through our downstream assets requiring continued investments, which will continue to be at attractive returns, particularly given our efforts around adding fees and fee floors.

Speaker Change: <unk> teams are managing.

Speaker Change: We expect to end 2024, with our leverage ratio comfortably within our long term leverage ratio target range of three to four times, providing continued flexibility going forward.

Speaker Change: We are well hedged across all commodities for the balance of 2024 and continue to add hedges for 2025 and beyond the combination of hedges and fee based margin across our businesses will continue to provide us with cash flow stability our.

Downstream projects are larger and spending is lumpier as those projects come online and we benefit from the operating leverage associated with increased available capacity, our gross capital spending moderates as evidenced by our current expectation of $1 4 billion of capital spend in 2025.

Speaker Change: <unk> in our G&P business support our ability to invest across lower commodity price environment, while positioning us to benefit from higher commodity prices realm.

Across multiple years, we would expect growth capital spend in an environment of continued volume growth to approximate around $1 7 billion.

Speaker Change: Relative to our full year 2024 financial guidance of 30% moves higher in commodity prices would increase full year adjusted EBITDA by around $165 million, while a 30% decrease with reduced adjusted EBITDA by around $75 million.

We are bullish Permian growth going forward, but are often asked the question how much capital would it take to maintain volumes and our answer is approximately $300 million.

This is not a scenario that we anticipate it is merely intended to be instructive and hopefully helpful. In demonstrating the strength of the target value proposition across the downside scenario when the strength of our free cash flow generation and balance sheet with leave us very well positioned.

Speaker Change: As Matt described earlier, we also provided you with our current view of 2025 growth capital spending and illustrative multiyear buildup across a couple of scenarios.

Speaker Change: They're helpful. Our goal in providing them with the highlight some key points.

Shifting to capital allocation, our priorities remain the same which are to maintain a strong investment grade balance sheet to continue to invest in high returning integrated projects and to return an increasing amount of capital to our shareholders across cycles.

Speaker Change: We believe that there will continue to be strong growth in Permian volumes on our system going forward, which is going to drive incremental volumes through our downstream assets requiring continued investment which will continue to be at attractive returns, particularly given our efforts around adding fees and fee for us.

As Matt described underpinned by the strength of our business outlook for 2024 and beyond we plan to recommend to our board a 50% increase in the 2024 annual common dividend $3 per share and we expect to be able to grow our dividend meaningfully thereafter.

Speaker Change: Downstream projects are larger and spending is lumpier as those projects come online and we benefit from the operating leverage associated with increased available capacity, our gross capital spending moderates as evidenced by our current expectation of $1 4 billion of capital spend in 2025.

We also expect to remain in position to continue to execute opportunistically under our common share repurchase program in 2023, we repurchased a targa record $374 million of common shares at a weighted average price of $76 72.

Speaker Change: Across multiple years, we would expect growth capital spend in an environment of continued volume growth to approximate around $1 7 billion.

Speaker Change: We are bullish Permian growth going forward, but are often asked the question how much capital would it take to maintain volumes and our answer is approximately $300 million.

With $41 million repurchased during the fourth quarter, we had about $770 million remaining under our $1 billion share repurchase program at the end of the fourth quarter.

Speaker Change: This is not a scenario that we anticipate it is merely intended to be instructive and hopefully helpful. In demonstrating the strength of the target value proposition across the downside scenario when the strength of our free cash flow generation and balance sheet would leave us very well positioned.

Our base scenarios, we are continuing to model the ability over time to returned 40% to 50% of cash flow from operations to equity holders, providing a framework for thinking through our return of capital proposition looking forward.

As it relates to taxes based on our estimate for earnings and spending and current tax policy. There is no change to our assumptions that we may be subject to the federal minimum tax in 2026, and a full cash taxpayer in 2027.

Speaker Change: Shifting to capital allocation, our priorities remain the same which are to maintain a strong investment grade balance sheet to continue to invest in high returning integrated projects and to return an increasing amount of capital to our shareholders across cycles.

We believe that we continue to offer a unique value proposition for our shareholders and potential shareholders growing EBITDA growing common dividend per share reducing share count and an excellent short medium and long term asset.

Speaker Change: As Matt described underpinned by the strength of our business outlook for 2024 and beyond we plan to recommend to our board a 50% increase in the 2024 annual common dividend $3 per share and we expect to be able to grow our dividend meaningfully thereafter.

Outlook excuse me.

Our talented team continues to execute on our strategic priorities and safely operate our assets to deliver the energy that enhances our everyday lives and we are very thankful for the efforts of all of our employees.

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 to enter the Q&A lineup. If you have additional questions. Shannon would you. Please open the line for Q&A.

Speaker Change: With $41 million repurchased during the fourth quarter, we had about $770 million remaining under our $1 billion share repurchase program at the end of the fourth quarter.

Thank you.

As a reminder to ask a question. Please press star one one of your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Speaker Change: Across our base scenarios, we are continuing to model the ability over time to return, 40% to 50% of cash flow from operations to equity holders, providing a framework for thinking through our return of capital proposition looking forward.

Our first question comes from the line of Jeremy Tonet with J P. Morgan Securities LLC. Your line is now open.

Speaker Change: It relates to taxes based on our estimate for earnings and spending and current tax policy. There is no change to our assumptions that we may be subject to the federal minimum tax in 2026, and a full cash taxpayer in 2027.

Hi, good morning.

Hey, good morning, Jeremy.

Just wanted to start off I guess.

With the news about 2025, Capex stepping down so significantly versus 2020 for creating a lot of flexibility there as it relates to return of capital I'm. Just wondering if you might be able provide a little bit more detail as far as thoughts on capital allocation at that point.

Speaker Change: We believe that we continue to offer a unique value proposition for our shareholders and potential shareholders growing EBITDA growing common dividend per share reducing share count and the excellent short medium and long term asset.

Waiting dividend growth relative to buybacks, just kind of any other any incremental color would be helpful. There with that extra $1 billion step down in capex.

Speaker Change: Excuse me.

Speaker Change: Talented team continues to execute on our strategic priorities and safely operate our assets to deliver the energy that enhances our everyday lives and we are very thankful for the efforts of all of our employees.

Good morning, Jeremy This is Jen I think that we're really excited about 2025 and the possibilities for Targa and our shareholders. There's really no change to how we are thinking about return of capital I think part of the excitement that we have around this year next year and really many years to come is that we believe we offer a really unique value.

Speaker Change: And with that I will turn the call back over to Sanjay.

Sanjay Lad: Thanks, Ken for the Q&A session, we kindly ask that you limit to one question and one follow up and as we enter the Q&A lineup. If you have additional questions. Shannon would you. Please open the line for Q&A.

Sanjay Lad: Thank you as a reminder to ask a question. Please press star one one of your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

<unk>, where we will be in position from a significantly increasing amount of free cash flow to meaningfully increase our common dividends per share and continue to execute under our opportunistic share repurchase program.

Sanjay Lad: Our first question comes from the line of Jeremy Tonet with Jpmorgan Securities LLC. Your line is now open.

We published the framework in November that said that we would expect to be in position to return, 40% to 50% of cash flow from operations to our shareholders and that's what we're modeling and as we get into 2025 and beyond that means that there is a lot of incremental capital that can flow to our shareholders and again, that's really what is underpinning what we see.

Jeremy Bryan Tonet: Hi, good morning.

Jeremy Bryan Tonet: Hey, good morning, Jeremy.

Jeremy Bryan Tonet: Okay.

Jeremy Bryan Tonet: Just wanted to start off I guess.

Jeremy Bryan Tonet: With the news about 2025, Capex stepping down so significantly versus 2020 for creating a lot of flexibility there as it relates to return of capital. Just wondering if you might be able provide a little bit more detail as far as thoughts on capital allocation at that point in waiting dividend growth relative to buybacks just.

It should be a very exciting target story for both our company and our shareholders.

Got it thank you for that and.

And maybe just pivoting towards LPG exports, a good step up there and just wondering if you could comment a bit more if the lifting of daylight hour restriction I think it is planned and we expect the port authority to drop the trial moniker.

Jeremy Bryan Tonet: Kind of any other any incremental color would be helpful. There with that extra $1 billion step down in capex.

Jeremy Bryan Tonet: Good morning, Jeremy This is Jen.

Jennifer Kneale: I think that we're really excited about 2025 and the possibilities for Targa and our shareholders. There's really no change to how we are thinking about return of capital I think part of the excitement that we have around this year next year and really many years to come is that we believe we offer a really unique value proposition, where we will be in position from a cigar.

Not too far down the road here and just wondering how you think that impacts target capacity.

The daylight hour restriction is fully removed then.

Hey, Jeremy This is Scott first off you're right fourth quarter was a really nice quarter for us with over 13 million barrels per month, which was a combination of both propane and butane across the dock.

Jennifer Kneale: Difficultly, increasing amount of free cash flow to meaningfully increase our common dividends per share and continue to execute under our opportunistic share repurchase program.

Certainly a couple of benefits there that we that we took to our advantage. One was obviously the export expansion project that we had that increased.

Jennifer Kneale: We published the framework in November that said that we would expect to be in position to return, 40% to 50% of cash flow from operations to our shareholders and that's what we're modeling and as we get into 2025 and beyond that means that there is a lot of incremental capital that can flow to our shareholders and again, that's really what is underpinning what we see.

Our refrigeration capacity increased our ability to load vessels faster and.

We were able to operate through the really the entire fourth quarter. So we got the step up with that.

The nighttime transits that were lifted or provided another benefit so the Houston ship channel along with the Houston pilots.

Jennifer Kneale: It should be a very exciting target story for both our company and our shareholders.

Collaborated together to provide that to the industry as a whole.

Speaker Change: Got it thank you for that and maybe just pivoting towards LPG exports a good step up there and just wondering if you could comment a bit more if the lifting of daylight hour restriction I think it is planned and we expect the port authority to drop the trial moniker.

Targa benefited from that as a result of that.

I'd say that nominally speaking, we think that that probably provided us about a 5% to 10% benefit it's.

It's difficult to really pin that down because it was a variety of factors that play into that and on top of that we were able to benefit from spot activity as a result of those increase lifting.

Speaker Change: Not too far down the road here and just wondering how you think that impacts target capacity.

Wood.

I would like to add that I give a huge thank you to the Houston pilots and the Houston ship channel that provide that change in nighttime transits that they have done very safely effectively and efficiently.

Speaker Change: The daylight hour restriction is fully removed then.

Speaker Change: Hey, Jeremy This is Scott first off you're right fourth quarter was a really nice quarter for us with over 13 million barrels per month, which was a combination of both propane and butane across the dock.

Not only benefits target, but it really benefits a wide variety of industries, along the Houston ship channel that helped drive, Texas economy, as well as the U S economy, so going forward into 2024 Youre right. Currently today. It is kind of labeled as a trial period, but I think based upon the success that they've had the safe operating environment that <unk> been able.

Scott Pryor: Certainly a couple of benefits there that we took in to our advantage one was obviously the ex the <unk>.

Scott Pryor: Export expansion project that we had that increased our refrigeration capacity increased our ability to load vessels faster and.

Conduct conduct themselves under we view this really as a as a long term change and we will continue to benefit from it we hope to find other ways to optimize around that as we learn more about the night time transits and the vessels that are available to move through that process.

Scott Pryor: And we were able to operate through the really the entire fourth quarter. So we got to step up with.

Scott Pryor: The nighttime transits that were lifted or provided another benefit so the Houston ship channel along with the Houston pilots.

Scott Pryor: Collaborated together to provide that to the industry as a whole.

Got it okay. So it sounds like there could be upside down the road.

Scott Pryor: <unk> benefited from that as a result of that I would say that nominally speaking, we think that that probably provided us about a 5% to 10% benefit.

Versus the five to 10.

Well, what I would say is I think that in the fourth quarter. It was not the nighttime transits were not a part of the entire fourth quarter. It really got instituted in November and I think that we will hopefully find some better ways to optimize around it again as we learn more about the program. So.

It's difficult to really pin that down because it was a variety of factors that play into that and on top of that we were able to benefit from spot activity as a result of those increase lifting.

Scott Pryor: Wood.

Scott Pryor: I would like to add that I give a huge thank you to the Houston pilots and the Houston ship channel that provide that change in nighttime transits that they have done very safely effectively and efficiently.

It benefited us now and we will continue to see how that fares for us going forward.

It's still early Jeremy So I think we're thinking 5% to 10% is a good.

Scott Pryor: Not only benefits target, but it really benefits a wide variety of industries, along the Houston ship channel that helped drive, Texas economy, as well as the U S economy, so going forward into 2024, you're right. Currently today. It is kind of labeled as a trial period, but I think based upon the success that they've had the safe operating environment that <unk> been able.

Kind of a good range of upside right now, but it's still pretty early.

Got it that's helpful. Thank you.

Okay. Thank you.

Thank you. Our next question comes from the line of spire Adonis with Citi. Your line is now open.

Thanks, operator.

To go back to the Permian production quickly Jay you had mentioned maybe a slower start to the year and I think thats pretty consistent with what producers are saying I'm just curious, though as we think about the year as a whole you give us a sense of what Permian production growth is underwriting the guidance and to the extent that it's back half loaded what that implies about 225.

Scott Pryor: To conduct conduct themselves under.

Scott Pryor: We view this really as a as a long term change and we will continue to benefit from it we hope to find other ways to optimize around that as we learn more about the nighttime transits and the vessels that are available to move through that process.

Got it okay. So it sounds like there could be upside down the road.

I think that we're continuing to see a lot of very robust growth on our Permian assets. A couple of important points that I think were mentioned in the scripted comments were one that by the time that we got to the end of 2023, we actually outpaced our initial expectations for the year, while that growth materially.

Scott Pryor: Versus the 5% to 10.

Scott Pryor: Well, what I would say is I think.

As a little bit more slowly than we expected it did materialize and ended up exceeding expectations at year end. What I was trying to highlight was we did experienced some extreme winter weather here, thus far to start the year and that will impact our Q1 results.

But our operations teams are doing an excellent job of getting.

Seasonally our assets back up and running.

As we think about the balance of this year and beyond I think you've seen our track record that we outperform the expectations for growth out of the Permian basin on the gas side and there's nothing that we're seeing that would change that trend in any meaningful way, we didn't give a statistic this year for Permian growth relative to what we've provided previously in the past.

One just because we think that individual operational statistics are less meaningful than some of the high level corporate information that we give and I think that our performance in 2023 highlighted that a little bit right. Our volumes ended up becoming in a little bit lower than our initial guidance for the full year average, but again, we exited higher than we initially anticipated.

Supported so everything is just really setting up well for continued execution across both the Midland and the Delaware Basin and we have a very strong outlook for robust continued growth for as long as we can say.

Got it thanks for that.

Second question maybe.

Maybe go into 2025, I know youre, not providing 25 EBITDA today, but some of the materials did did maybe gives us a tool to help think about that you guys are pointing to significant growth.

You've also talked about in the slides $300 million of annual EBITDA growth with $7 billion of spending so I.

I guess, if I look back at 2384 spending over $2 billion in each of these years. It would seem like as we think about the lease of 25.

Over $300 million of EBIT growth would seem like an easy hurdle, but I don't want to get too ahead of myself.

Yes.

Yes, I think what I'd say is we feel really good about our position coming out of 24 going into 25, I think 25 is going to set up very well I think we see significant EBITDA growth and 25% and frankly beyond 'twenty five.

We guided to three to $2 five of Capex. This year, we were about $2 two last year. So.

The kind of five five times investment multiple is multiyear average if not you'll spend a set amount in one year. So it result in EBITDA in that year. It's a multi year average that we think we can do call. It five to six times EBITDA on our Capex. So when you kind of look at what we spent the last couple of years I think it just sets up for a very strong 2020.

Five we decided not to give EBITDA guidance for 25, but just kind of point you to our historical spending and just the overall volume trajectory that we're seeing across our footprint is just going to set up very nice for us in 'twenty five.

Fair enough. Thanks for that Matt I appreciate the time today is okay.

Okay. Thank you.

Thank you. Our next question comes from the line of Brian Reynolds with UBS. Your line is now open.

Hi, good morning, everyone.

Maybe to follow up on some of the kind of long term EBITDA growth outlook I think you outlined kind of a build multiple around five five times.

I think a quarter or two ago, you kind of outlined the past three years that some of these projects came in at much lower multiples. So kind of it's kind of just trying to understand maybe the difference. There. If you can maybe theres theres some doses of conservatism in the build or whether whether the commodity has anything to play with that and whether we could maybe see some upside to the EBITDA build multiple.

But multiple is a multi year average it's not your spend a set amount in one year. So it results in EBITDA in that year. It is a multi year average that we think we can do call. It five to six times EBITDA on our Capex. So when you kind of look at what we spent the last couple of years I think it just sets up for a very strong 2025, we decided not to give you.

Sure. Good question I mean, really historically go back years, we kind of said five to seven times build multiple is kind of what we targeted we've been able to do better than that I think that was just kind of.

Some some cushion in that five to seven.

If you look back at the last five years, we've really been kind of closer to a four times build multiple.

EBITDA guidance for 25, but just kind of point you to our historical spending and just the overall volume trajectory that we're seeing across our footprint. It's just going to set up very nice for us in 'twenty five.

We've had really good volume growth across our system in the Permian Grand Prix filled up much quicker even than our expectations were just drove the returns even higher so I think we've really had some strong performance, but I would say theres really nothing fundamentally different in what we're investing in this year and next year go forward than what we invested in in the <unk>.

Okay fair enough. Thanks for that Matt I appreciate the time today.

Okay. Thank you.

Thank you. Our next question comes from the line of Brian Reynolds with UBS. Your line is now open.

Hi, good morning, everyone.

<unk>, where we did have a lower investment multiple I'd say, perhaps theres a little bit of conservatism.

Maybe to follow up on some of the kind of long term EBITDA growth outlook I think you outlined kind of a build multiple around five five times.

Into that number.

But it's not there's not a large delta from commodity prices, one way or the other I would say we have more commodity price upside given the fee floors that Jan and we've talked about.

I think a quarter or two ago, you kind of outlined the past three years that some of these projects came in at much lower multiples. So kind of kind of just trying to understand maybe the difference. There. If you can maybe there is there is some doses of conservatism in the build or whether whether the commodity has anything to play with that and whether we could maybe see some upside to the EBITDA build multiple.

Which could drive that lower if we get some commodity price tailwind.

I would just add that I think Brian the conservatism is further highlighted by how highly utilized we think our projects will be that are in progress right now when they come online which has been really the same playbook that we've benefited from over the last many years. It feels like we're just in time on a number of our assets, which is great for the finance person in the room because.

Some some cushion in that 5% to seven.

It means that they are very highly utilized at start up and provide significant incremental cash flow very quickly. It makes it a little bit tougher for our operations and engineering teams of course as they try to plan.

Look back at the last five years, we've really been kind of closer to a four times build multiple.

We've had really good volume growth across our system in the Permian Grand Prix filled up much quicker even than our expectations with just drove the returns even higher so I think we've really had some strong performance, but I'd say, there's really nothing fundamentally different in what we're investing in this year and next year go forward than what we invested in in the past.

But I think that thats part of the conservatism as well that.

Really is reflective in the five five times versus the realized multiples that you've seen across our footprint.

Great. Thanks, and maybe as a follow up to Spiro's question, Don just Permian growth previously you kind of gave more of a firm number around 10% and then the illustrative guide you kind of talk high single digits.

<unk>, where we did have a lower investment multiple I'd say, perhaps theres, a little bit of conservatism put into that number.

Maybe just talk about that as kind of your base expectation at this point and then kind of as a follow up has has any of the M&A any updated view on some acquisitions in the Midland impacting your thought process. There and then just on the operational hiccups are we past that and as it relates to <unk>.

But it's not there's not a large delta from commodity prices, one way or the other I would say we have more commodity price upside given the fee floors that Jen and we've talked about.

Which could drive that lower if we get some commodity price tailwind.

<unk> gas quality issues, how does your system able to manage that summer gas.

Potentially grow at a higher clip than the rest of the basin.

Okay I'll start and then Pat can probably touch on a little bit of this too I think when you look at our Permian growth for the year were really.

Good about where we're starting the year December was our highest month.

And it really does set us up for really good production growth, just where we exited 2023 going into 'twenty four so even with relatively modest growth from here, we're going to see a really strong year over year and that's why we said consensus is about 9% we've typically beat that.

But I think that thats part of the conservatism as well that.

As reflected in the five five times versus the realized multiples that you've seen across our footprint.

But even if we get anywhere around high single digits or a little bit better I think it sets us up very well not only for 'twenty for about.

Great. Thanks, and maybe as a follow up to Spiro's question, Don just Permian Inlet growth previously you kind of gave more preferred firm number around 10% and then the illustrative guide you kind of talk high single digits.

About 25, and then I'll, let Pat speak a little bit kind of the M&A landscape from from our E&P customers.

Yes, theres been a lot of M&A activity over the last three years to four years. So it's not something we're familiar with and frankly.

Maybe just talk about that as kind of your base expectation at this point and then kind of as a follow up has any of the M&A any updated view on some acquisitions in the Midland impacting your thought process. There and then just on the operational hiccups are we past that and as it relates to <unk>.

Not see a material difference with these new announcements as we've seen in the past frankly, we've seen pretty consistent growth across the combined company's relative to our position with the individual companies.

<unk> gas quality issues, how does your system able to manage that summer guests in.

Potentially grow at a higher clip than the rest of the basin.

New ones that are coming out we have meaningful positions with all of the parties. We have long term contracts with all of the parties, we have great relationships with.

Okay I'll start and then Pat can probably touch on a little bit of this too I think when you look at our Permian growth for the year were really.

With all of those producers.

Feel good about where we're starting the year December was our highest month.

<unk>.

If you look at what's been publicly announced.

By those parties you wouldn't expect a significant impact.

To what their expected growth levels are going to be frankly at least on one of the major the bigger mergers.

There is.

Good.

You could allow that theres going to be.

But even if we get anywhere around high single digits or a little bit better I think it sets us up very well not only for 'twenty four.

Spectation of incremental growth on our assets on the Midland side of the basin. So.

About 25% and then I'll, let Pat speak a little bit kind of the M&A landscape from our E&P customers.

There is a lot of activity a lot going on but we have benefited from it because we've got great assets. We're reliable we've got good contracts and we've got good relationships, yes, and just to add to that to your other part of your question was around gas quality and trading.

Yes, theres been a lot of M&A activity over the last three years to four years. So it's not something we're familiar with and frankly.

We don't see a material difference with these new announcements as we've seen in the past frankly, we've seen pretty consistent growth across the combined company's relative to our position with the individual companies.

A lot of account we are spending a lot of capital and we spent last year and this year for additional treating facilities, primarily in the Delaware Basin.

We're putting in some additional.

Treaters to handle both Cotwo and <unk> and we're drilling multiple wells to handle that the acid gas injection wells and pipelines and connectivity to handle that so I think that really positions us nicely as the Delaware continues to grow and gas quality becomes.

Sanjay Lad: The new ones that are coming out we have meaningful positions with all of the parties. We have long term contracts with all of the parties, we have great relationships.

Sanjay Lad: With all of those producers.

Sanjay Lad: <unk>.

Another issue that the producers are going to have to deal with will be in really good position.

Sanjay Lad: If you look at what's been publicly announced.

Sanjay Lad: By those parties you wouldn't expect.

To handle that and most of that capital will be and are the large the lion's share of it will be and kind of by the end of this year.

Sanjay Lad: <unk> impact.

Sanjay Lad: What their expected growth levels are going to be frankly.

And then I think the very last question and your questions.

Sanjay Lad: On one of the major the bigger mergers.

Around where their volumes have rebounded as a result of the impacts of winter storm and I'm really proud I think we're really proud of the efforts of our operations teams to get volumes back online.

Sanjay Lad: There is.

Sanjay Lad: Sure.

Sanjay Lad: You could allow that theres going to be.

Sanjay Lad: An expectation of incremental growth on our assets on the Midland side of the basin. So.

Sanjay Lad: There is a lot of activity a lot going on but we benefited from it because we've got great assets. We're reliable we've got good contracts and we've got good relationships, yes, and just to add to that to your other part of your question was around gas quality and trading.

So we're close to back to levels that we are seeing before we experienced the extreme weather.

Great. Thanks, I appreciate all the color. This morning. Thanks, Okay.

Okay. Thank you.

Thank you. Our next question comes from the line of Tristan Richardson with Scotiabank. Your line is now open.

Sanjay Lad: A lot of account we are spending a lot of capital we spent last year and this year for additional treating facilities, primarily in the Delaware Basin.

Hi, Good morning, Matt and Jen pardon My voice this morning.

We appreciate the Capex sensitivity you guys laid out and really curious about the flexibility you have in that 25 outlook certainly.

Sanjay Lad: We're putting in some additional.

Sanjay Lad: Treaters to handle both Cotwo and <unk> and we're drilling multiple wells to handle that the acid gas injection wells and pipelines and connectivity to handle that so I think that really positions us nicely as the Delaware continues to grow and gas quality becomes.

You talked about that high.

The high single digit embedded in that assumption, but can you talk about timing that spend.

In the event producers deviate from that assumption, whether that is deferring a train 11.

Another issue that the producers are going to have to deal with will be in really good position.

Timing your plants towards the end of 'twenty five and then also maybe just about.

To handle that and most of that capital will be and are the large the lion's share of it will be and kind of by the end of this year.

Does greenwood to and pull news coming on and towards the second half of 'twenty four is that adequate capacity to sort of support that sort of high single digit inlet for 25.

Matthew J. Meloy: And then I think the very last question and your questions.

Matthew J. Meloy: Around where their volumes have rebounded as a result of the impacts of winter storm and I'm really proud I think we're all really proud of the efforts of our operations teams to get volumes back online.

And the illustrative.

Yes, so as we think about 'twenty, four and then going into 'twenty five.

We're ordering some long lead time have some spending for train 11, which will both be in 'twenty four and 'twenty five and then we also mentioned there's additional plants.

Matthew J. Meloy: So we're close to back to levels that we are seeing before we experienced the extreme weather.

Call. It two plants, maybe one in the Delaware one in the Midland.

Speaker Change: Great. Thanks, I appreciate all the color. This morning. Thanks, Okay.

Of additional ordering long lead time and kind of our base assumption that we're going to need to start spending capital on is going to hit our 'twenty four and 'twenty five budgets. So that's kind of what we have in our budget right now.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you. Our next question comes from the line of Tristan Richardson with Scotiabank. Your line is now open.

Tristan Richardson: Hi, Good morning, Matt and Jen pardon My voice this morning.

Matthew J. Meloy: Really appreciate the Capex sensitivity you guys laid out and really curious about the flexibility you have in that 25 outlook certainly.

Or if there's even more production growth in the Permian could that move that plant timing up a little bit it could move it up it could move it up a little bit if it's.

Matthew J. Meloy: You talked about that high.

Matthew J. Meloy: The high single digit embedded in that assumption, but can you talk about timing that spend.

Perhaps on the lower end of the growth ranges could we push those out and we could push that out a little bit.

Matthew J. Meloy: In the event producers deviate from that assumption, whether that is deferring a train 11.

Really the big sensitivities to our Capex does it really tends to be more on the downstream side.

Matthew J. Meloy: Timing your plants towards the end of 'twenty five and then also maybe just about.

Arena need when's, the next fractionator, what about Daytona coming on should give us some good runway from an NGL perspective, but whenever you need more transportation and then export those are the larger projects that can be a bit lumpier. So I think 25.

Matthew J. Meloy: Does greenwood to and pull news coming on and towards the second half of 'twenty four is that adequate capacity to sort of support that sort of high single digit and went for 25.

Matthew J. Meloy: In the illustrative.

A lot of that up and down really could just be around our GNP business and some of the plant timing and related field capital.

Speaker Change: Yes, so as we think about 'twenty, four and then going into 'twenty five.

Speaker Change: We're ordering some long lead time have some spending for train 11, which will both be in 'twenty four and 'twenty five and then we also mentioned there's additional plants.

Super helpful. Appreciate it Matt and then just a quick follow up Tom.

Talking about the 90% fee based now and it seems like a substantial move from 'twenty. Three clearly this is a multi year priority for you guys and it has been a game of inches.

Speaker Change: Call. It two clients, maybe one in the Delaware one in the Midland.

Speaker Change: Of additional ordering long lead time and kind of our base assumption that we're going to need to start spending capital on is going to hit our 24 and 25 budgets. So that's kind of what we have in our budget right now.

Are you seeing a big change in 'twenty, four really a function of mix and where which of your producers are growing or did you see some substantial kind of re cuts are re contracting occur throughout 'twenty three.

Speaker Change: Or if there's even more production growth in the Permian could that move that plant timing up a little bit it could move it up could move it up a little bit if it's.

Yes, we have been making steady progress on getting more fee based components, primarily fee floors, but also just.

Fee based GMP business over the last several years, our commercial team really did a fantastic job in 2023.

Matthew J. Meloy: Perhaps on the lower end of the growth ranges could we push those out and we could push that out a little bit.

Matthew J. Meloy: Really the big sensitivities to our Capex does it really tends to be more on the downstream side.

Change in just the number of contracts that we were able to get redone. So it was a step change late in 'twenty, three which significantly changed our overall downside risk profile and that is done. So now we're estimating 90% you see that on our commodity price sensitivity.

Matthew J. Meloy: Are we going to need when's. The next fractionator, what about Daytona is coming on should give us some good runway from an NGL perspective, but whenever you need more transportation and then export those are the larger projects that can be a bit lumpier. So I think 25.

We still have some length. So there is some downside.

Matthew J. Meloy: A lot of that up and down really could just be around our GNP business and some of the plant timing and related field capital.

If prices move down, but relative to our overall size of 30% downside $60 million to $70 million.

Speaker Change: Super helpful. Appreciate it Matt and then just a quick follow up Tom.

Speaker Change: Talking about the 90% fee based now and it seems like a substantial move from 'twenty. Three clearly this is a multiyear priority for you guys and it has been a game of inches.

That's not much sensitivity that is fundamentally different than where we were really 12, 24, and certainly 36 months ago.

I appreciate it thanks very much Matt.

Tom: Are you seeing a big change in 24, really a function of mix and where which of your producers are growing or did you see some substantial kind of re cuts are re contracting occur throughout 'twenty three.

Thank you.

Thank you. Our next question comes from the line of Theresa Chen with Barclays. Your line is now open.

Good morning.

I have a question on <unk>.

Matthew J. Meloy: Yes.

Matthew J. Meloy: Been making steady progress on getting more fee based components, primarily fee floors, but also just.

Following up on Justin's question.

Related to the seafloor within your G&P segment.

Matthew J. Meloy: Fee based GMP business over the last several years, our commercial team really did a fantastic job in 2023, and I would say there was a step change in just the number of contracts that we were able to get redone. So it was a step change late in 2003, which significantly changed.

Just thinking about the 90% at this point.

As you have put in additional fee floors within your PLP contracts over time is the mix of fee based versus <unk> with the floor within that 90% changing I E.

Is the incremental.

Matthew J. Meloy: Overall downside risk profile and that is done so now we're estimating 90% you see that on our commodity price sensitivity.

Fee based contract really putting in fee floors for PLP or have you exchanged some previous legacy.

Fee based contract with <unk> with the floors.

Matthew J. Meloy: We still have some length. So there is some downside.

We negotiate and just really trying to understand the rationale behind why your customers, what's allowing you to put in.

Matthew J. Meloy: If prices move down, but relative to our overall size of 30% downside $60 million to $70 million.

<unk> overtime.

This is jen it's actually a mixture of what you talked about but for different reasons is seeing the percent of our G&P business that is fee based increase largely as a result of acquisition. When we bought leases primarily underpinning the lucid contracts that we acquired were largely fee based contracts and so we saw a big step.

Matthew J. Meloy: That's not much sensitivity that is fundamentally different than where we were really 12, 24, and certainly 36 months ago.

Speaker Change: I appreciate it thanks very much Matt.

Speaker Change: Thank you.

Thank you. Our next question comes from the line of Theresa Chen with Barclays. Your line is now open.

<unk> and the increase of fees generated from our G&P business associated with that acquisition.

Theresa Chen: Good morning.

Theresa Chen: I have a question on.

Theresa Chen: Following up on Justin's question.

Matthew J. Meloy: Related to the seafloor within your G&P segment.

But what our commercial team has been really successful at doing and I would also like to take my hats off to all of them because it's been just a huge effort that I think has very meaningful implications for our company as they have gone in and worked with producers to really demonstrate that in order to incentivize targeted to be willing to spend capital and <unk>.

Matthew J. Meloy: Just thinking about the 90% at this point.

Matthew J. Meloy: As you have put in additional fee floors within your PLP contracts over time.

Matthew J. Meloy: The mix of fee based versus GOP with seafloor within that 90% changing I E.

It goes back to 2020. This is an effort that we have been building on building momentum on over the last many many years.

Matthew J. Meloy: Is the incremental.

Matthew J. Meloy: Fee based contract really putting in field force for PLP or have you exchanged some previous legacy.

But going back to those conversations in order for targa to be willing to continue to invest capital, which you've seen us consistently do over the last many years, we need to make sure that we will get an adequate rate of return and the downside commodity price environment. It simply just the math and our producers have been very supportive of that construct so we've gone into.

Matthew J. Meloy: <unk> based contracts with <unk> with the floor.

We negotiate and just really trying to understand the rationale behind why your customers would allow you to put in.

Matthew J. Meloy: For us overtime.

Matthew J. Meloy: This is jen it's actually a mixture of what you talked about but for different reasons is seeing the percent of our G&P business that is fee based increased largely as a result of acquisition. When we bought leases primarily underpinning the lucid contracts that we acquired were largely fee based contracts and so we saw a big <unk>.

Sting PLP contracts and we've been able to restructure those to put the <unk> in place that again have incentivize us to continue to spend capital even as commodity prices are lower while not giving up the upside to the extent commodity prices rise and so it's really been a mix of we've acquired a lot of fee based assets on the <unk>.

<unk> change in the increase of fees generated from our G&P business associated with that acquisition.

A&P side, and then we've gone in and we have either restructured existing contracts or as new contracts have been put in place by our commercial team they've been put in place with that fee for structure, while also generating returns across our integrated system and the commercial teams that really just done a very good job supporting our producers with what our producers' needs.

Matthew J. Meloy: Really demonstrate that in order to incentivize targeted to be willing to spend capital and this goes back to 2020. This is an effort that we have been building on building momentum on over the last many many years.

But under a contract that also works for us to continue to invest capital.

That's helpful. Thank you.

And then when we think about the long term illustrative capex, so going from one four back to them.

Matthew J. Meloy: But going back to those conversations in order for target to be willing to continue to invest capital, which you've seen us consistently do over the last many years, we need to make sure that we will get an adequate rate of return and the downside commodity price environment. It simply just the math and our producers have been very supportive of that construct so we've gone into.

One seven on a multiyear basis and thinking through the next lumpy projects in the downstream segment. In addition to additional.

Fractionation and export capacity.

Eventual looping of the 30 inch segment of Grand Prix can you talk about at this juncture with the growth that you have ahead of you and Daytona coming online by year end and filling up thereafter, what the cadence of build and spend would be for that.

<unk> PLP contracts and we've been able to restructure those to put the fee for is in place that again have incentivize us to continue to spend capital even as commodity prices are lower while not giving up the upside to the extent commodity prices rise and so it's really been a mix of we've acquired a lot of fee based assets on that.

<unk> <unk> and <unk>.

How do we get from one four to one seven or beyond integral to come yes.

Matthew J. Meloy: ANP side, and then we've gone in and we have either restructured existing contracts or as new contracts have been put in place by our commercial team they've been put in place with that fee for structure, while also generating returns across our integrated system and the commercial teams that really just on a very good job supporting our producers with what our producers.

Sure Good question so I.

I would say.

The primary delta from the one four to $1 seven as downstream downstream spending.

No.

Having multiple multiple fractionation facilities are and that is really more of this year, but really the delta between one four and one seven is primarily downstream one of the larger projects that.

Matthew J. Meloy: But under a construct that also works for us to continue to invest capital.

We don't have any meaningful spending on next year is transportation.

Speaker Change: That's helpful. Thank you.

Speaker Change: And then when we think about the long term illustrative capex, so going from one four back to the.

Other NGL pipe, we have Daytona coming on this year, that's going to provide us. Some good runway. So then how much runway that provides really depends on what the overall growth rate in the Permian and our capture of those NGL barrels to move on onto Daytona. So that is something we're thinking about these pipes take a couple of years.

Speaker Change: One seven on a multiyear basis and thinking through the next lumpy projects in the downstream segment. In addition to additional.

Matthew J. Meloy: Fractionation and export capacity.

To get build and probably even a little bit longer than that so we have to look out two three years and say when do we need to think about looping that 30 inch segment.

Matthew J. Meloy: Eventual looping of the 30 inch segment of Grand Prix can you talk about at this juncture with the growth that you have ahead of you and Daytona coming online by year end and filling up thereafter, what the cadence of build and spend would be for that.

There is also available transport out there from some of our competitors. So we can move I think it will move the lion's share of our volumes on our own by there can be transportation agreements that can be had with some of our competitors as well so really for us all options are on the table, whether it's US building, a 30 inch down the road or utilizing some excess capacity.

Matthew J. Meloy: <unk> <unk> and.

Matthew J. Meloy: How do we get from one four to one seven or beyond into gear to come yes.

Speaker Change: Sure Good question so I.

Speaker Change: I would say.

The primary delta from the one four to $1 seven as downstream downstream spending.

From some other NGL box.

Yes, Matt I would just add the fact that our Westlake we've shown that we can actually operate at above 600000 barrel a day nameplate that we have kind of put out there so that volume along the west leg along with volumes that are coming in from the north are all feeding through the 30 inch pipeline we've got.

Matthew J. Meloy: No.

Matthew J. Meloy: Having multiple multiple fractionation facilities are and that's really more of this year, but really the delta between one four and one seven is primarily downstream one of the larger projects that.

Matthew J. Meloy: We don't have any meaningful spending on next year is transportation.

Still a lot of operating leverage with the 30 inch pipeline and certainly Daytona provides us a lot of operating leverage going forward for periods of time.

Matthew J. Meloy: Other NGL pipe, we have Daytona coming on this year, that's going to provide us. Some good runway. So then how much runway that provides really depends on what the overall growth rate in the Permian and our capture of those NGL barrels to move on onto Daytona. So that is something we're thinking about these pipes take a couple of years.

Thank you.

Okay. Thank you.

Our next question comes from the line of Neel Mitra with Bank of America. Your line is now open.

Matthew J. Meloy: Bill can probably even a little bit longer than that so we have to look out two three years and say when do we need to think about looping that 30 inch segment. There is also available transport out there from some of our competitors. So we can move I think it will move the lion's share of our volumes on our own pipe there can be transportation agreements that can be had.

Hi, good morning, Thanks for all the detail on the Capex spend I wanted to follow up on the last question.

And the $550 million related mostly to downstream.

I mean, you're spending.

Half for our Frac each year that leaves about $300 million each year for an average transportation and export. So first of all is there any.

Matthew J. Meloy: With some of our competitors as well so really for US all options are on the table, whether it's US building a 30 inch down the road or utilizing some excess capacity from some other NGL box.

The ability to meaningfully expand Galena park at this time.

Speaker Change: And Matt I would just add the fact that our Westlake we've shown that we can actually operate at above the 600000 barrel a day nameplate that we have kind of put out there so that volume.

Are there land constraints and then second.

With the NGL pipe build oversupply do you see your need for expanding pipe.

Speaker Change: Along the west leg, along with volumes that are coming in from the north are all feeding through the 30 inch pipeline we've got.

Elongated just because.

You are able to hold your pricing power when others are competing for barrels.

Jennifer Kneale: Still a lot of operating leverage with the 30 inch pipeline and certainly Daytona provides us a lot of operating leverage going forward for periods of time.

Hi, Neil this is Scott.

I'll start it off and just say that when I first think about the pipe recognize.

Jennifer Kneale: Thank you.

Recognize that today, we utilize third party pipes for volumes that are coming into our Bellevue facility today.

Okay. Thank you.

Jennifer Kneale: Our next question comes from the line of Neel Mitra with Bank of America. Your line is now open.

And when we think about the growth that we have on the GMP side and the Daytona pipeline, we are not out there.

Neel Mitra: Hi, good morning, Thanks for all the detail on the Capex spend I wanted to follow up on the last question and the $550 million related mostly to downstream, assuming you're spending about half for our frac each year that leaves about $300 million each year for <unk>.

Adding four fees relative to fill up our existing capacity and our expected capacity, we would have on Daytona. So all of that kind of folds hand in hand, with the growth that Pat and his team on the GMP side have relative to transportation.

Matt alluded to the fact that if there is capacity on the industry pipes, we again, because we utilize that today, we can always look for opportunities to utilize that to bridges to whenever we might need to do a loop around our existing system as it relates to Galena Park.

Speaker Change: On average.

Speaker Change: <unk> and exports so first of all.

Speaker Change: Is there any.

Speaker Change: Ability to meaningfully expand Galena park at this time.

Speaker Change: Are there land constraints and then second.

We have a really good idea of what the next expansion project looks like.

Speaker Change: With the NGL pipe build oversupply.

Speaker Change: See you or need for expanding pipe.

And it's a variety of factors from adding for duration to adding pipe to adding potential docks and things of that nature. So we're keeping obviously a close eye on what that timing needs to be relative to our growth.

Speaker Change: Along gated just because.

Speaker Change: You are able to hold your pricing power.

Speaker Change: Others are competing for barrels.

Speaker Change: Hi, Neil this is Scott.

Again, driven by our G&P business.

Scott Pryor: I'll start it off and just say that when I first think about the pipe recognize that today, we utilize third party pipes for volumes that are coming into our Bellevue facility today and.

And we will continue to evaluate that so.

I will say again the expansion that we had in the fourth quarter that we're benefiting from today the night time transits.

Scott Pryor: And when we think about the growth that we have on the GMP side and the Daytona pipeline, we are not out there fighting for fees relative to fill up our existing capacity and our expected capacity. We would have on Daytona. So all of that kind of folds hand in hand, with the growth that Pat and his team on the G&P side.

Both of those really are hand in hand expansion projects on their own without having to spend a lot of capital. So we will continue to look for ways to debottleneck, where possible to get incremental capacity as well. So I think we've got a lot of opportunity and some runway with the existing assets that we have but we do have space available to expand at Galena.

Speaker Change: Relative to transportation.

Mark.

Speaker Change: Matt alluded to the fact that if there is capacity on the industry pipes, we again, because we utilize that today, we can always look for opportunities to utilize that to bridges to whenever we might need to do a loop around our existing system as it relates to Galena Park.

Perfect and if I can just follow up quickly one of your peers.

<unk> for the oil outlook in the Permian.

Almost all of the growth would come out of the Delaware versus the Midland I know that you want.

Necessarily representative of the overall basin, but could you just perhaps breakout what youre seeing with producer activity between the two basins in the Permian.

Speaker Change: We have a really good idea of what the next expansion project looks like.

Speaker Change: And it's a variety of factors for matting for duration to adding pipe, adding potential docks and things of that nature. So we're keeping obviously a close eye on what that timing needs to be relative to our growth.

Yes.

We see growth in the Delaware, but we see significant growth in the Midland as well so we see growth across both of our footprints at really active producers.

Again, driven by our G&P business.

So on our footprint, we see growth in the Midland and we see growth in the Delaware.

And we will continue to evaluate that so.

Speaker Change: I will say again the expansion that we had in the fourth quarter that we're benefiting from today the nighttime transits.

Okay. Thank you.

Yes.

Thank you.

Speaker Change: Both of those really are hand in hand expansion projects on their own without having to spend a lot of capital. So we will continue to look for ways to debottleneck, where possible to get incremental capacity as well. So I think we've got a lot of opportunity and some runway with the existing assets that we have but we do have space available to expand at Galena.

Our next question comes from the line of Keith Stanley with Wolfe Research. Your line is now open.

Hi, good morning.

One follow up on Daytona just sticking to next year 2025.

Do you expect volumes in Daytona is simply tied to targeted G&P volumes or are there material third party volumes that you're expecting to to pick up when the pipeline comes into service.

Speaker Change: Mark.

Speaker Change: Perfect and if I can just follow up quickly one of your peers.

Hey, Kate this is Scott I would say, it's predominantly driven by our G&P footprint as to what will be feeding into Daytona.

Speaker Change: <unk> for the outlook in the Permian.

Speaker Change: Almost all of the growth would come out of the Delaware versus the Midland I know that.

So it is a combination, but I would say the largest proportionate share of that is going to be related to our G&P and the additive of the plants that we've already announced and any potential plants going forward.

Speaker Change: You won't necessarily representative of the overall basin, but could you just perhaps breakout what youre seeing with producer activity between the two basins in the Permian.

Got it thanks, and then Gen. One other clarifying the cash taxes.

Speaker Change: Yes.

Speaker Change: We see growth in the Delaware, but we see significant growth in the Midland as well so we see growth across both of our footprints at really active producers.

So expectation I think you said full 15% cash tax rate in 2006 and then.

Statutory 2020, 21% tax rate in 2027.

Speaker Change: So on our footprint, we see growth in the Midland and we see growth in the Delaware.

And then Relatedly, how would the house passed legislation, which brings back bonus depreciation potentially impact that outlook.

Speaker Change: Okay. Thank you.

Speaker Change: Yes.

Thank you.

Speaker Change: Our next question comes from the line of Keith Stanley with Wolfe Research. Your line is now open.

We are pretty borderline right now, whether we would be subject to the A&P in 2026 or 2027, it's actually pretty close so that we're trying to give you a conservative look right now that based on our latest forecast we may be subject to the A&P and then in that scenario in 2027 will have worked our way through our net operating losses and we.

Keith Stanley: Hi, good morning.

Keith Stanley: One follow up on Daytona just sticking to the next year or 2025.

Keith Stanley: Do you expect volumes in Daytona is simply tied to targeted G&P volumes are there material third party volumes that you're expecting to to pick up when the pipeline comes into service.

Be fully subject to the statutory tax rate to the extent the existing build its moving its way through gets passed and we do see a return of accelerated bonus depreciation that would be a big help to us and that may delay things.

Speaker Change: Hey, Keith This is Scott I would say, it's predominantly driven by our G&P footprint as to what will be feeding into Daytona. So it is a combination, but I would say the largest proportionate share of that is going to be related to our G&P and the additive of the plants that we've already announced and any potential plants going forward.

Call it a year or so based on current forecasts ultimately we'd have to see what the final policy is that gets passed but that would be our early read right now.

Speaker Change: Got it thanks, and then Gen. One other clarifying the cash taxes.

Thank you.

Alright. Thank you. Thank you.

Speaker Change: So expectation I think you said full 15% cash tax rate in 2006, and then Sachin.

Our next question comes from the line of John Mackay with Goldman Sachs. Your line is now open.

Hey, Thanks for the time I wanted to go back to the.

Speaker Change: Statutory 2020, 21% tax rate in 2027, and then Relatedly, how would the house passed legislation, which brings back bonus depreciation potentially impact that outlook.

Potential export expansions.

Maybe this is one for Scott I appreciated the color, but I guess when you guys are looking high level top down from a strategy standpoint, if we think about the quantity of Ngls coming off your Permian processing footprint and how much of that on a percentage basis moves its way onto the export side.

We are pretty borderline right now, whether we would be subject to the A&P in 2026 or 2027, it's actually pretty close so that we're trying to give you a conservative right now that based on our latest forecast we may be subject to the A&P and then in that scenario in 2027 will have worked their way through our net operating loss.

Do you want to be able to hold that percentage going forward are you comfortable with that percentage dropping due an increase just any kind of directional strategy that would be what would be interesting.

Speaker Change: And we'd be fully subject to the statutory tax rate to the extent the existing bill Thats moving its way through gets passed and we do see a return of accelerated bonus depreciation that would be a big help to us and that may delay things.

Yes sure.

Yes.

We think about really from GNP, all the way through our dock, we want to make sure we have the capacity to handle the volumes coming from our G&P footprint and so thats kind of how we think about staging transportation and fractionation and that goes for export as well we want to make sure we have.

Speaker Change: Call it a year or so based on current forecasts ultimately we'd have to see what the final policy is that gets passed but that would be our early read right now.

Good market for our propane propane and butane as Scott mentioned, that's really what we export.

Speaker Change: Thank you.

Speaker Change: Alright. Thank you. Thank you.

Speaker Change: Our next question comes from the line of John Mackay with Goldman Sachs. Your line is now open.

So with the expansion that just came on in the night time allowance of kind of call. It 5% to 10% I think that gives us some cushion as we go forward and as we see really how much capacity that nighttime opens up for us that gives us some good cushion before we're going to need another export.

John Edwards: Hey, Thanks for the time I wanted to go back to the.

John Edwards: Potential export expansions.

John Edwards: Maybe this is one for Scott I appreciate the color, but I guess when you guys are looking high level top down from a strategy standpoint, if we think about the quantity of Ngls coming off your Permian processing footprint and how much of that on a percentage basis moves its way onto the export side.

Project, but we are but we are already looking in scoping and so the timing is kind of to be determined by Rio need refrigeration, we need a pipeline and we're looking at dock.

But those projects are not the really large scale, I'd say greenfield or brownfield I kind of view those as more debottlenecking you have one pinch point you've spent a couple of hundred million dollars and you get some excess capacity then you do the next and then you do the next so those are the things, where we're kind of looking at over the longer term, but yes, we want to make sure we can.

Scott Pryor: Do you want to be able to hold that percentage going forward are you comfortable with that percentage dropping due an increase so just any kind of directional strategy that would be it would be interesting.

Speaker Change: Yes sure.

Speaker Change: Yes, as we think about really from GNP all the way through our dock, we want to make sure we have the capacity to handle the volumes coming from our G&P footprint and so thats kind of how we think about staging transportation and fractionation and that goes for export as well we want to make sure we have.

Can handle the volumes coming across our our system.

All right that's clear thank you maybe just.

One last quick one you mentioned you had caught up on the compression side, obviously, we've been hearing about tightness in the compression market across the board one of your peers talked about it as being a potential relative to already and on growth even going forward from here in the Permian, maybe just your high level thoughts and whether that actually is a bit of a constrain it.

Speaker Change: Good market for our propane propane and butane as Scott mentioned Thats really what we export.

Speaker Change: So with the expansion that just came on in the night time allowance of kind of call. It 5% to 10% I think that gives us some cushion as we go forward and as we see really how much capacity that nighttime opens up for us that gives us some good cushion before we're going to need another export.

Point or it's gotten better versus.

Third quarter.

Yes, I mean, we.

Have the issues, we talked about last year with really just kind of being behind on our getting our compression all said and getting that all done last year. We had a lot of compression come on late last year and then you saw our volumes in Q4 really move up we have another talked about 400 million a day of compression. So we order that it's about a year right now for our compressors that we tried to do.

Sanjay Lad: Project, but we are but we are already looking in scoping and so the timing is kind of to be determined, but I really need refrigeration to any of the pipeline are we looking at a dock.

Sanjay Lad: But those projects are not really.

Jeremy Bryan Tonet: Really large scale, I'd say greenfield or brownfield I kind of view those as more Debottlenecking you have one pinch point you spend a couple of hundred million dollars.

Get ahead of it as we saw we were getting behind last year. We've just.

Approved another.

The other day to order some more inventory to try and get ahead of it and stay for 2025. So part of that does depend on volume growth and you see a lot of volume exceeds our forecast you can end up having some pinch points, but we're trying to be smart and look at the forecast and stay ahead of it.

Jeremy Bryan Tonet: Get some excess capacity then you do the next and then you do the next so those are the things, where we're kind of looking at over the longer term, but we want to make sure we can handle the volumes coming across our our system.

Speaker Change: All right. That's clear. Thank you maybe just one last quick one you mentioned you had caught up on the compression side, obviously, we've been hearing about tightness in the compression market across the board one of your peers talked about this being a potential relative to already and on growth even going forward from here in the Permian, maybe just your high level thoughts.

I think the only thing I'd add Matt is lead times have not come down the lead times are still long so that problems do exist.

Got out in front of them.

If I could just ask one follow up on the Caterpillar announced a capacity expansion on their large engine line I guess week or two ago.

Any initial read on whether that should bring that down for me.

Jennifer Kneale: And whether that actually is a bit of a constrained at this point or it's gotten better versus.

Year to something a little better.

I have not heard any change in lead times.

Jennifer Kneale: Third quarter.

Speaker Change: Yes, I mean, we.

Okay Fair enough alright. Thank you I appreciate the time.

<unk>.

Okay. Thank you.

Our next question comes from the line of Michael Blum with Wells Fargo. Your line is now open.

Thanks, Thanks for squeezing me in.

Just wanted to ask it.

Any update on apex, Permian gas pipeline and im assuming the $1 $7 billion run rate does not contemplate that.

Jennifer Kneale: It's about a year right now for compressors that we tried to get ahead of it as we saw we were getting behind last year. We've just approved another <unk>.

Jennifer Kneale: The other day to order some more inventory to try and get ahead of it and stay for 2025. So part of that does depend on volume growth and you see a lot of volume exceeds our forecast you can end up having some pinch points, but we're trying to be smart and look at the forecast and stay ahead of it.

Dot projects.

This is Bobby.

We continue to work on.

All of the options to get gas out of the basin, which includes apex.

<unk> said it before I'll say it again, our number one priority as a gas continues to flow out of the basin.

Speaker Change: And I think the only thing I'd add Matt is lead times have not come down the lead times are still long so that problems do exist, we've just gotten out in front of them.

So that Ngls can come out of our plants and go down Grand Prix and go across our docks.

Speaker Change: If I could just ask one follow up on the Caterpillar announced a capacity expansion on their large engine line I guess week or two ago any initial read on whether that should bring that down from a year to something a little better.

Last call I think I talked about the fact that <unk>.

Several other projects that.

Fit the parameters that we would want to.

Back have raised their heads and we're working hard on those along with apex and everything else. So.

Speaker Change: I have not heard any change in lead times.

Every month that passes I get more encouraged by.

Speaker Change: Okay Fair enough alright. Thank you I appreciate the time.

Speaker Change: Okay. Thank you.

The work, we're doing to make sure that our pipe gets built and it comes online 26 ish.

Speaker Change: Our next question comes from the line of Michael Blum with Wells Fargo. Your line is now open.

I'm confident that something will get done this year, whether thats, an apex or one of the multiple options now we're looking at.

Thanks, Thanks for squeezing me in.

Speaker Change: Just wanted to ask if the.

Michael Blum: Any update on apex, Permian gas pipeline and I'm, assuming the $1 $7 billion run rate does not contemplate that.

Two to increase egress out of the basin.

So yes.

And then Michael on the on the Capex part that is not included in the one four.

Scott Pryor: Dot projects.

Bobby Mara: This is Bobby.

And any project that goes we'll evaluate does it make sense for us to be a partner so for a partner that would increase that capex. There is also some of these pipes will be project finance for the majority of the capital. So any amount of equity we were to put into it would be relatively small so it may or may not be project finance, but.

Bobby Mara: We continue to work on.

Scott Pryor: All of the options to get gas out of the basin, which includes apex.

Speaker Change: <unk> said it before I'll say it again, our number one priority as a gas continues to flow out of the basin.

Speaker Change: So that Ngls can come out of our plants and go down Grand Prix and go across our docks.

That is not included in the.

And art and our outlook and I would just add one last point that in the $1 7 million, we have been spending some capital in the last couple of years on what I call intra basin Permian residue just to ensure we've got really good redundancy on the residue side between our plants. So to the extent that we're contemplating any of that in the future that will be included in that one.

Scott Pryor: Last call I think I talked about the fact that <unk>.

Scott Pryor: Several other projects that.

Scott Pryor: Fit the parameters that we would want to.

Scott Pryor: Back have raised their heads and we're working hard on those along with apex and everything else. So.

Scott Pryor: I am every month that passes I get more encouraged by.

$7 billion multiyear outlook, but no major projects.

Scott Pryor: The work, we're doing to make sure that our pipe gets built and it comes online 26 ish.

Okay got it that helps and then just.

Scott Pryor: I am confident that something will get done this year, whether thats, an apex or one of the multiple options now we're looking at.

On Frac 11 that I guess youre, starting to spend a little bit on this year.

What's the timing of when that would be in service.

<unk>.

Scott Pryor: Two to increase egress out of the basin.

Hey, Michael This is Scott we have not defined what the timing would be for that in service date.

Scott Pryor: So yes.

Scott Pryor: And then Michael on the on the Capex part that is not included in the one four.

Ordering long lead us lead items gives us some flexibility on what that data needs to be out into the future. We're just finding that.

Speaker Change: And any project that goes we'll evaluate does it make sense for us to be a partner so for a partner that would increase that capex. There is also some of these pipes that will be project finance for the majority of the capital. So any amount of equity we were to put into it would be relatively small so it may or may not be project finance, but.

Supply chain planning supply chain issues are creating some issues with certain equipment and so as a result of that we can take some small capital dollars to ensure that we can hold whatever date, we put out there in the future. So we don't have a defined date at this point, but it's certainly something we want to keep on our radar and keeping it.

Scott Pryor: That is not included in the.

Scott Pryor: And our outlook and I'd just add one last point that in the $1 7 million, we have been spending some capital in the last couple of years on what I call intra basin Permian residue just to ensure we've got really good redundancy on the residue side between our plants. So to the extent that we're contemplating any of that in the future that would be included in that one <unk>.

Thank you.

Thank you okay. Thanks, Michael.

This concludes the question and answer session I would now like to hand, the call back over to Sanjay Lad for closing remarks.

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.

Scott Pryor: <unk> million dollars multiyear outlook, but now major projects.

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

Speaker Change: Okay got it that helps and then just on.

Speaker Change: On Frac 11 that I guess youre, starting to spend a little bit on this year.

Speaker Change: What's the timing of when that would be in service.

Speaker Change: <unk>.

Speaker Change: Hey, Michael This is Scott we have not defined what the timing would be for that in service date.

Scott Pryor: Ordering long lead us lead items gives us some flexibility on what that data needs to be out into the future. We're just finding that.

Scott Pryor: Supply chain planning supply chain issues are creating some issues with certain equipment and so as a result of that we can take some small capital dollars to ensure that we can hold whatever date, we put out there in the future. So we don't have a defined date at this point, but it's certainly something we want to keep on our radar and keep it.

Speaker Change: Thank you.

Speaker Change: Thank you okay. Thanks, Michael.

Speaker Change: This concludes the question and answer session I would now like to hand, the call back over to Sanjay Lad for closing remarks.

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.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.

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Speaker Change: Good day, and thank you for standing by.

Speaker Change: Welcome to the Targa Resources Corp, fourth quarter 2023 earnings webcast and presentation at.

Speaker Change: At this time all participants are in a listen only mode.

Speaker Change: After the Speakers' presentation, there will be a question and answer session.

Speaker Change: To ask a question. During this session you will need to press star one on your telephone you will then hear an automated message advising your hand is raised.

Speaker Change: Your question. Please press star one again please.

Speaker Change: Please be advised that today's conference is being recorded.

I would now like to hand, the conference over to your Speaker today, Sanjay Lad, Vice President of Finance and Investor Relations. Please go ahead.

Sanjay Lad: Updated investor presentation has also been posted to our website.

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

Sanjay Lad: Of the Securities Exchange Act of $19 34, actual results could differ materially from those projected in forward looking statements.

Sanjay Lad: For a discussion of factors that could cause actual results to differ please refer to our latest SEC filings.

Sanjay Lad: Our speakers for the call today will be Matt.

Matthew J. Meloy: Malloy, Chief Executive Officer, and Jen Kneale, Chief Financial Officer. Additionally, we will have the following senior management team members available for Q&A, Pat Mcdonald, President gathering and processing Scott.

Matthew J. Meloy: Scott Pryor, President 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.

Matthew J. Meloy: 23 was another record year for Targa, and I would like to recognize and thank our employees for their focus dedication and execution throughout the year.

Matthew J. Meloy: Some of our highlights for 2023 include record safety performance record gathering and processing volumes in the Permian.

Volumes across our logistics and transportation assets record adjusted EBITDA of $3 five 3, billion% to 22% increase over 2022, while also reducing our share count.

Matthew J. Meloy: Major projects came online on time on budget and had been highly utilized since startup.

Matthew J. Meloy: Ended the year with 90% of our G&P volumes fee based or with the floor.

Matthew J. Meloy: Our performance was particularly strong given wahaha natural gas and NGL prices were about 64%, 34% lower year over year, and we benefited from margin from fee floors in our gathering and processing business across 10 of 12 months, demonstrating our business is more insulated to downside to downward commodity.

Matthew J. Meloy: Prices than ever before.

Matthew J. Meloy: Billion for 2020 for.

Matthew J. Meloy: We currently estimate between two three and $2 5 billion of growth capital spending in 2024, as we bring online two Permian plants, three fractionator and an NGL pipeline. While also spending on projects that will come online beyond 2024, including additional Permian clients and fractionation trains.

Matthew J. Meloy: We also repurchased a record $374 million of common shares in 2023 and continue to be in position to execute on our opportunistic share repurchase program in 2024.

Matthew J. Meloy: Beyond 2024, we really like our positioning driven by our view of cost advantaged basins like the Permian continuing to be a key supplier of hydrocarbons for decades to come as.

Matthew J. Meloy: Four and lower estimated growth capital spending we expect to generate significant free cash flow in 2025.

Matthew J. Meloy: We also included our estimated cap are estimated spending to maintain volumes currently on our system, which we think is helpful in demonstrating the resiliency of our business.

Matthew J. Meloy: As we look forward our excitement is are our excitement and our outlook is driven by a few things first we have the largest Permian gathering and processing footprint in the industry with several million dedicated acres across Midland and Delaware basins that coupled with an integrated NGL system positions us nicely to <unk>.

Matthew J. Meloy: And deliver significant value to our shareholders over the long term.

We brought online significant compression across our Midland Delaware systems during the fourth quarter, driving a 5% sequential increase in volumes.

Q4 2023 Targa Resources Corp Earnings Call

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