Q2 2025 Targa Resources Corp Earnings Call
Over to Mr. Tristan Richardson, Vice President of Investor Relations, to begin.
Thank you, Howard. Good morning and welcome to the second quarter 2025 earnings call for Target resources. Corp.
The second quarter earnings release along with a supplement presentation that a company. Our call are available on our website at Target resources.com. Additionally, an updated investor presentation has also been posted to our website
Statements made during this call, that might include targets, expectations or predictions should be considered forward-looking statements within the meaning of 20 section. 21e of the Securities, Exchange Act of 1934.
Actual results could differ materially from those projected and forward-looking statements.
For discussion of factors that could cause actual results to differ, please refer to our latest SEC filings.
Our speakers for the call today will be Matt Meloy, Chief Executive Officer; Jen Kneale, President; and William Byers, Chief Financial Officer.
Additionally members of Target, Senior Management will be available for Q&A including Pat mcdonie president Gathering and processing Scott prior president Logistics and transportation.
Bobby muraro Chief commercial officer.
And Ben brain Center.
Senior vice president, Downstream.
I'll now turn the call over to Matt.
Thanks, Tristan and good morning. I would like to begin by announcing that after 35 years with Target and its predecessor. Companies Scott Pryor, our president of logistics and transportation has shared with us. His intent to retire effective, March 1st 2026,
Scott has been a critical part of the target team and his leadership. Work, ethic dedication, integrity and focus on serving. Our customers has made it a pleasure to work alongside Scott on behalf of our board. The leadership team, all of Target's employees and our customers. I'd like to thank you Scott.
Following Scott's retirement, Ben Branstetter will succeed Scott as President of Logistics and Transportation. Ben has been with Targa for the past 8 years in various leadership roles across Corporate Development and our Downstream group.
Scott and Ben have worked closely together for years and will work together over the next many months in transition. And we look forward to Ben's continued contribution to Target in his new role.
Turning to the second quarter, we reported strong results with record, permi and volumes record, NGL Transportation volumes, and continued execution across our footprint. Setting us up, well, for the balance of the year and providing a lot of momentum looking ahead.
We saw a strong ramp in volumes in the second quarter as gas on our puran system. Increased by about a Processing Plant worth the volumes. During the quarter up about 270 million, cubic feet per day, and we are seeing that strength continued
In July, our volumes were up another 250 million cubic feet per day, meaning we added a plant's worth of gas in the second quarter and another plant's worth of gas in July. We are seeing that strength continue so far in August.
There has been movement in the broader puran rig count this year, which has been a focus for investors over the last 4 months. While the puran rig count has softened the number of rigs on our system is largely unchanged.
While there is a lot of noise and volatility in the macro environment, ongoing discussions with our producers point to continued, strong growth on our system for the remainder of 2025 and into 2026 and Beyond.
Given the strong ramp and volumes, we're seeing, and our expectations. For the remainder of the Year, our outlook for 2026 volume growth is as strong. Now, as it was at the beginning of the year, with a potential, for it to be stronger by the time we exit this year.
We have also added some new material to our investor presentation, which lends support for our continued growth Outlook. We have highlighted some factors that demonstrate targets differentiated growth profile.
Over the past 5 years Permian gas production has grown at a higher rate than crude production due to the general increase in gas to oil ratios across the Basin over time.
While year-over-year growth Inc, in crude production from the puran has averaged 8% per year over the past 5 years Associated. Gas growth has averaged 13% per year.
And Target's, volume growth has outperformed crude, and gas production over that time frame. Our year-over-year volume growth has averaged 17% 4% higher than Associated gas and 9% higher than crude per year.
Looking forward, third-party forecast call for 7th and permeated in perion, Associated gas over the next 5 years.
With this strong Outlook coupled with Target's footprint across the best rock in the base. And, and world-class producers, we are well positioned for Meaningful growth over the long term.
Wins for Target. We move a lot of natural gas to end markets, and the demand for natural gas is expected to continue to increase. We transport and fractionate a lot of natural gas liquids to domestic and international markets, and the demand for NGLs is expected to continue to increase.
Our customers across our value chain are very good at what they do and we think will continue to create meaningful growth opportunities for our company.
Our conviction is demonstrated by 324 million of common share repurchases. During the second quarter across a volatile quarter,
our Focus continues to be on increasing adjusted IBA and increasing common dividend per share and declining. Share count while maintaining our strong investment grade balance sheet,
we believe that our Premier permanent asset footprint, integrated Wellhead to water system and strong financial position will allow us to continue to invest in integrated growth opportunities, generate attractive returns and return. Increasing Capital to our shareholders over the long term.
Before I turn the call over to Jen to discuss operations in more detail. I would like to thank the target team for their continued. Focus on safety and execution, while continuing to provide best-in-class service and reliability to our customers.
Thanks, Matt. Good morning, everyone. Let's talk about our operational results in more detail.
Starting in the puran, our natural gas, Inlet volumes averaged, a record 6.3 billion cubic feet per day. In the second quarter, an increase of 11% versus a year ago and a strong rebound from the first quarter, which was impacted by severe weather events.
In the Puran Midland, our new Pembroke 2 plant is currently in startup ahead of schedule and is much needed as our Midland system continues to run at very high utilization.
Our East Pembroke and East driver plants. Remain on track to begin operations in the second quarter, and third quarter of 2026.
In perm and Delaware, our bullmoose 2 plant is ahead of schedule and is now expected to begin operations in the fourth quarter of 2025 our Falcon 2, plant remains on track to begin operations in the second quarter of 2026.
We expect our processing infrastructure currently under construction will be much needed at startup.
Lastly, in the Delaware, we've recently completed our seventh AGI wealth further, increasing our leading gas, treating capabilities across the basin.
Looking out further. We are ordering long, lead items, for additional puran plants, as we prepare for growth in 2027 and Beyond.
As production continues to grow Target is increasingly moving more and more natural gas for our customers across the Midland and Delaware bases.
To further enhance connectivity. And reliability. We are announcing an extension of our Bull Run natural, gas pipeline system in the Delaware basin.
The 43 me 42 in intrastate natural, gas, pipeline, extension of Bull, Run will enhance gas, takeaway by increasing connectivity between our puran, Delaware system and the waha Hub.
The extension will add further flow Assurance for our customers, across the Delaware and increase access to important residue markets.
It is scheduled to be in service in the first quarter of 2027.
On the blackcomb and Traverse natural gas pipelines, where we have a 17, and 12% Equity interest, blackcomb remains on track and is fully subscribed. And the plan capacity of Traverse was recently upsized to 2.5 billion, cubic feet per day from 1.75 billion, cubic feet per day. Based on strong, customer demand
Shifting to our Logistics and transportation segment targets NGL pipeline Transportation volumes. Averaged a record 961,000 barrels per day and fractionation volumes average 969,000 barrels per day during the second quarter.
Our fractionation volumes were meaningfully impacted by our planned turnaround at our fractionation complex in Mont Belleview, which reduced our capacity for two-thirds of the second quarter, with the turnaround complete in early June and increasing GMP supply. Our fraction volumes are now more than 1 million barrels per day.
Given the anticipated growth in our puran GMP business and corresponding announced plan editions. Our outlook for NGL Supply growth on our system remains strong.
Looking at our Downstream projects currently underway Delaware. Express our interbasin NGL pipeline expansion is ahead of schedule and is now expected to be complete in the second quarter of 2026.
Our next fractionator in mont Bellevue, train 11 is also ahead of schedule and is expected to be complete in the second quarter of 2026.
Train 12 remains on track for the first quarter of 2027.
Per month during the second quarter despite shifting trade policy and a lot of macro headlines are docs remained, effectively full and we are seeing continued strength in cargo loadings.
Our LPG, export debottlenecking capacity to approximately 19 million barrels per month and is scheduled to be online in the third quarter of 2027.
To build on Matt's earlier, comments. Even with commodity price volatility and headlines around global trade. Our results highlight, our resilient business model,
We are well positioned operationally and believe that our leading customer service driven Wellhead to water strategy, puts us in excellent position to continue to execute for our shareholders.
I will now turn the call over to Will to discuss our second quarter results, outlook, and capital allocation.
Thanks Jen Target is reported adjusted. EBA for the second quarter was 1.163 billion and 18% increase from a year ago.
The increase was attributable primarily to higher permanent volumes generating higher margin for Cross or gmpp and LMT segments and contribution from 100% ownership of our Badlands assets.
Adjusted. I was roughly flat for the first quarter.
For record, purring and NGL. Transportation volumes were offset by lower marketing, margin sequentially weaker, commodity prices, and the impact of our planned turnaround at our fractionation complex in Mont Belleview,
2025 is progressing on track with a strong first half and our continued expectation of increasing permanent volumes for the remainder of the year.
We continue to estimate full year 2025. Adjust the Eva dot to be in a range of 4.65 billion to 4.85 billion.
In June, we successfully completed a 1.5 billion.
Debt offering comprised of 750 million of 4.9% notes due to 2030 and 750 million of 5.65% notes to 2036.
We use the net proceeds from the debt issuance to reduce borrowings on our commercial paper program and then July to retire 705 million of 6.5% notes due 2027.
In July, we also extended the maturity of our accounts receivable securitization facility to August 31st 2026.
At the end of the second quarter, we had 3.5 billion dollars of available liquidity and our pro-forma Consolidated. Leverage ratio was 3.6 times.
Comfortably within our long-term leverage ratio target range of 3 to 4 times.
With projects, tracking ahead of schedule are announced bull. Run extension in the Permian Delaware and spending on Long lead items for additional puran. Gas processing expansions we now expect net growth Capital spending for 2025 to be a proximately 3 billion.
And we continue to estimate 2025 net maintenance Capital spending of 250 million.
With the recently enacted tax legislation in its return of 100% bonus depreciation. We expect, we will no longer be subject to the corporate Alternative Minimum Tax or CMT in 2026.
And will defer becoming a material cash. Taxpayer Beyond 2027.
As we continue to assess the benefits to Target, we could see deferral of cash taxes, further out depending on a variety of factors in the out years.
Shifting to capital allocation, our focus is more of the same. From Target, we will maintain our strong investment-grade balance sheet, continue to invest in higher returning, integrated projects, and return an increasing amount of capital to our shareholders.
During the second quarter, we repurchased $324 million in common shares at an average price of $165.86 per share.
Continuing our track record of executing opportunistic share repurchases as part of our all-of-the-above capital allocation strategy.
This week, our board of directors. Also, authorized a new 1 billion, common share of purchase program. This brings total available share repurchase capacity to approximately 1.6 billion dollars at the June 3020 2025.
This authorization adds to our flexibility and is purely a continuation of our existing program.
It remains steadfast in our strategy of continuing to Target returning, 40 to 50% of adjusted cash flow from operations to equity holders over time through a growing combination of dividends and opportunistic. Share repurchases.
We are in excellent financial shape.
Are well positioned to continue to create value for our shareholders.
And with that I will turn the call back to Tristan. Thanks will for Q&A. We ask that you limit to 1 question and 1 follow-up and re-enter the queue. If you have additional questions, operator.
Our first question to comment comes from the line of Spyro. Denise from City, your line is open, sir.
Thanks, operator morning, everybody. Uh, first question, Matt, why don't you go back to your your comments, uh, in the prepared remarks just around your ability to historically outperformed, the Basin. Um, you know, the tone of this call is seemingly starkly different than than a lot of your peers this season. And so I just want to get, you know, maybe your latest thoughts on your ability to keep our performing here, why you think you'd be able to consistently do that and if you're willing to maybe put a number on, what you think that outperformance might look like going forward.
Yeah, hey Spyro. Good morning. Um, you know, we have really seen over the years, you know, the volumes on our permanent system, continue to grow, you know, it feels like we have not only the largest footprint but uh, footprint that's really over some of the best rock and both the Midland and the Delaware Basin. So I think it's a combination of having the largest footprint where we can offer a redundancy and reliability to our customers, which is highly attractive to them. Um, and just being over, some of the best rock, uh, in in the area. So I think it's a combination of all of those things and we have, I would say our producer said or some of the largest most active producers.
That um, you know, haven't really varied their drilling plans as maybe much as some others have. So uh you know, I think it's a combination of all of those things and it just gives us continued confidence. Not only in the back half of this year but as we look out in 26 and Beyond the same factors that have allowed us to outperform the Basin over the last several years. Those uh you know attributes are still in place as we look forward.
Great, that's great to hear. Um, the second question is maybe moving to NGL margins. Some other common themes this quarter that seem to be in focus again, you know, I think there's a lot of concern about overbuild, maybe narrower export arbs. So, there seems to be kind of a pointing down of the margin environment going forward.
Just curious. If you could just update us, you know, maybe over the medium term, how you see the Outlook? And if there's any risk to margins, you from here,
Hey Sparrow. This is Scott and good morning. Um.
As it relates to the export side of the business first. Uh, we would point to the fact that we have uh growing uh Supply originating from our gas processing footprint with long-term customers and great producers behind our plans.
As a result of that, obviously, we've added a tremendous amount of infrastructure on our midstream platform with pipelines, expanding our fractionation footprint. Of course, we've got expansions going on in the fourth quarter of this year and our export dock with our debottlenecking. Then there's our larger expansion project, which is scheduled for the third quarter of 2027.
I would also say that we all agree. Uh, I think that the we have a growing Global demand, uh, for lpgs whether it be on petrochemicals pdhs, uh, domestic and Industrial Supply needs across the globe, uh, which is indicative of the fact that we, again, the market is going to continue to grow. We have always been highly contracted at our dock. Um, and with us being highly contracted, we have not always participated heavily in the in the spot market. So when people talk about things like the market is is maturing. We have really had long-term contracts that have matured for a number of years now. Uh, we don't see anything any change in that there are currently today. For exporters along the Texas Gulf Coast. Uh, 3 of those are supplying product from Mount Belleview 1 further south. Uh, and when we talk about further, expansions, or when we talk about, uh, a new additive to the marketplace, uh, I don't see the competitive Dynamics, really changing.
Because the competitive dynamics have already been there.
um, so with that said, I think it really boils down to who has the source of supply and I really, really feel strongly about Target's position as it relates to that again, going back to our GMP footprint, the long-term contracts that we have, and
Of course, we put the infrastructure in place to ensure that we can move it across our docks.
Great. Thanks for that, Call Scott, and congrats on the retirement. I'll leave it there. Thanks, everyone. Thanks, Carol. Okay, thank you. Thank you. Our next question or comment comes from the line of Keith Stanley from Wolfe Research. Mr. Stanley, your line is open. Hi. Good morning.
Uh Curious how you're thinking about competition in the northern Delaware. You know you were kind of a first mover through lucid and gas treating and AGI well Wells but it's like it's becoming a bigger and bigger Focus for a lot of your peers.
Actually, you've seen Enterprise and now MP Alex come in and buy treating companies. Um,
To address the situation in the Delaware Basin. Um as we've said before obviously we're the largest uh treater of of the sour gas in the Delaware Basin. We have the most capability we have 2.3 BCF a day of treating capacity.
7, AGI Wells with eyes on expanding that as our saragas volume's grow. Um, frankly
Target has been treating sour gas almost since its inception, right? With one of the first acquisitions that was done as Target. And certainly, a lot of our employees have been dealing with our gas for 40 years. It is a core competency, and I think when we started looking at the Delaware Basin back in the 2016-2018 time frame.
We pretty quickly recognized that. Um, there were really economic conventions that had sour gas production.
That producers were reluctant to develop because there wasn't solutions to handle that gas.
So, I would say as much as 789 years ago, we put a strategy in place.
1 we bought out rigger, right? And they had some Sour gas infrastructure.
We leveraged off of that as we looked at Lucid, which was part of the overall equation.
I mean, it's really a recognition of how much sour gas capability over the long. Long term is out there.
And what I would say is that, um, the competition is fine. We compete on all basis uh, in the Midstream business obviously.
Um, we've got a ton of acreage.
Under contract, that continues to get developed.
We continue to add as we said in our commercial success.
Acreage that covers sour gas production and as the Avalon bone Springs gets developed uh in the future. We're very, very well positioned and certainly the wolf camp in certain regions of the Basin that we have under contract. Also has CO2 or H2S, what are the other or both?
And Target is very very well positioned to to handle additional growth. And like I said, we've got a ton of it under contract already. Yeah. And just to add to that, um, you know, we've been competing, um, you know, in that business for years and 1 of the things that gives us, I would say competitive Advantage is, you know, our Red Hills complex over a BCF, a day. Can handle sour, it's connected to our Bull, Moose Wildcat complex, which can also handle sour. So we have the scale and redundancy to offer better, run times for our customers, um, and it's
Running sour. There's more operational issues that you're going to have them running sweet. And so we offer, you know, I think a unique set of services to our customers.
Uh, thanks for that uh, detailed response.
Second question. So, uh, again, once again a very growth tone, uh, in your business, you know, as you accelerated some capex into 2025,
Should we think 2026 capex is going to be even lower year-over-year? Or maybe not given the growth you're seeing and seems like NGL pipeline capacities, filling up pretty quick as well.
Yes, this is Jen, I'd say the from where we sit today, the assets that we have in progress right now, we expect them to come online and be highly utilized and hats off to our engineering and operations teams for figuring out if there are certain projects that they could get on a week, a month or in some cases a quarter sooner because again, they will be very much needed. Um,
Older value.
Thank you.
Thank you.
Thank you. Our next question to comment. It comes from the line of Jeremy tonette from JP Morgan Securities. LLC, Mr. Tony, your line is open.
Hi, good morning. Hey, good morning Jeremy. Uh Matt I think you talked about um going into the end of the year into 25 heading into 26 you know, potentially even in a stronger position. Just wondering if you could share more data points, you're seeing that uh, provide the confidence there.
Yeah, sure. You know we really saw I'd say volumes for the first half of this year. We're more or less kind of in line with our expectations at the beginning of the year. Maybe first quarter was a little bit softer with some operational issues. And what we really saw I would say
Yep. Hello
Yes I'm here. Okay, all right. We just heard a beep. Okay um and then what we saw um I'd say later in the second quarter we really saw volume start to ramp and then I gave the color on the call we've seen in July volumes up, you know another Processing Plant worth of gas just in the month of July relative to the second quarter. Um and while I didn't give a number August is up, you know, a fair amount from even the July uh numbers. So that's giving us confidence that the, you know, well connects that we have on our schedule. The volume's coming on are starting to really flow through our system and then with Pembroke 2 coming on. That should provide some relief as well. Uh, Midland's pretty much full
Right now, so we really need that. Penthe, 2 plant to, to come on and that, that should give us further, uh, you know, volumes over the back half of the year. So, you know, we're only, you know, just in early August. Um, but we would expect just for the momentum, we have kind of early in the, you know, first part of the second half of this year, if that continues, it just puts us in a really strong position as we exit. And that's what we're trying to articulate.
Got it. That's uh, very helpful. That's it. For me. Thank you. Okay, thanks Jeremy.
Thank you. Our next question comes from the line of Jackie Coladas from Goldman Sachs. Your line is open.
Hi. Good morning. Thank you so much for the time. Um, I was wondering if you could just provide uh a little bit more detail on the associated, you know, capex expectations or potential Returns on the bull run extension and what the commercial structure. If any looks like there,
Yeah. Okay, this is Jen. I'd say that from our perspective Bull Run and the extension is just a natural extension of capabilities that we are already very good at in terms of putting pipe in the ground and moving molecules and trying to provide our producers with better Solutions. So, from our perspective, this extension is taking, uh, essentially gas from our bull moose and Wildcat, uh, complex up in, uh, up in the Delaware bringing volumes down to, uh, down to waha on a 42 inch pipeline. So, it's really supported by the volumes that we are.
We are flowing in our existing assets there, and then the expected growth that we would anticipate from the Delaware going forward. So, not that dissimilar to other parts of our business where we're able to aggregate volumes on the gathering and processing side, and then enhance our capabilities for our producers, providing better redundancy and better outlets to our producers by essentially enhancing our capabilities as we move through time. So, this is just a natural extension of that.
Got it, that makes sense. Uh, and then just second, you know, buybacks in the quarter were fairly strong, and you authorized, you know, um,
uh, a new repurchase program as well. Um, you know, how do you anticipate to balance future BuyBacks with other uses of capital over time? Um, and just, you know, talking about like the Cadence, uh, of of potential BuyBacks going forward.
This is Jen again. I think we very consistently try to demonstrate that our share repurchase program is opportunistic, and that is the standard that our Board of Directors holds us to as we allocate capital to that repurchase program. You clearly saw us be very active in the second quarter. We thought that there was an opportunity where global macro concerns were disconnecting a little bit from what we perceive to be the fundamentals of the Target business and the intrinsic value of Target. As we look at our short, medium, and long-term outlooks, we really weren't seeing anything change.
Provides us with a lot of flexibility as well to continue to execute in returning, more Capital to our shareholders. So it just puts us in a really good position to be able to pull different levers as we believe we see the opportunities present themselves.
Thank you so much for your time. Appreciate the color.
Thank you. Okay, thank you.
Thank you. Our next question comes from the line of Manav Gupta from UBS. Mr. Gupta, your line is open.
Good morning. I just wanted to go back earlier in the year, you did take 100% ownership of Badlands. I just wanted to understand has that transaction made your expectations and your goals and have those assets. Been performing in line with your expectations and how does owning 100% change your view of the asset versus not owning the same percentage as you as you did before. So if you could talk about that. Yeah sure. Yeah. So the the Badlands transaction, you know that we announced earlier this year was really a taking out black Zone which we all really view. They had a preferred interest that was refinancing their preferred interest and had some cash flow savings because we could just put it on balance sheet so um it's been performing. Yeah. As expected um overall volumes up there have continued to be relatively flat there's you know some signs that you know production could be increasing here over the next uh you know 1 to 2 years or so. But it's been relatively flat and it's been performing I'd say in line with our expectations. Um, you know, I'd say with the
Um, enhanced competition. Uh, you know, as you look out, uh, going forward for ngls, I'd say, yeah, those assets do, um, pose more strategic value and there's some more opportunities there, uh, to do something on, on, on the NGL side of the business. And so we're just evaluating all those opportunities and we'll think thoughtfully about what makes the best sense for uh, Target.
Perfect. Thank you. And you obviously have a very strong line of of organic growth projects. But we are also seeing, you know, multiple transactions getting executed in the permanent I think 2 are announced in last Monday or so. And and in terms of you have the balance sheet trying to understand what could be a good criteria for any bolt-on m&a that you could undertake, uh, just to further, increase your presence. And that could add to your existing footprint.
Yeah, and we continue to look um at at Acquisitions. You know, we haven't uh, you know, had had anything of really significant size and kind of the asset Market um, you know, for a while, you know, kind of going going back to lucid and in 2022. But we continue to look um I'd say we have um, uh it, you know, really strong footprint on the GMP side of the business. We have a really strong NGL presence. So we have all the Strategic needs of our Core Business met. And so now what we're really looking for are there nice bolt-ons that could supplement our base strategies so our Focus has been on organic growth. We have a lot of growth opportunities just executing the number of plants that we have.
Uh and our Downstream business that continues to be our Focus but if there's something that bolts on really nicely to our GMP footprint. Um we'll continue to look at it. Um I'd say you know as I said before the bar continues to be high for us because we have all the Strategic needs met but if there's some nice synergies or opportunities we'll continue to be thoughtful and and look at those
Thank you so much.
Okay, thank you.
Thank you. Our next question or comment comes from the line of Michael Bloom from Wells Fargo. Mr. Bloom, your line is open.
Thanks uh Hey everybody. Good morning. Um so
I wanted to ask on the the LPG export uh docs you mentioned that it was effectively full for the quarter but you know as I look at the chart I mean the volumes were down.
Sequentially, the last two quarters, and I think you're below your total existing capacity. So, just one of you can kind of square that, especially in the fact that I think you're very, you know, you're highly, highly contracted. And then maybe I'll just throw in my second question here at the same time. Um, appreciate your competitive position, but as I'm sure you know, there are new entrants coming to the market. I'm just wondering how you're thinking about that as you get... there's growing competition from the Permian on pipe all the way to the export dock. So, just wanted to get your thoughts on how you're going to approach that. Thanks. Hey, Michael, this is Scott again. I'll start on the export side and then perhaps, given the fact that we've got Ben here with us today, and who, uh, he's been working in the transportation for...
Adding another potential entrant, uh, uh, or participant in the export business, along the Texas Gulf Coast really does not change our overall strategy. Uh, we we will be competitive, uh, but I think again, given the fact that we have been highly contracted, uh, uh, for term business, uh, and business, quite frankly, with a lot of those contracts has volumes that ramp up over time, that will complement our expansion on the back half of this year and then the expansion. We've got in the third quarter of 2027 at those, what I would call mature rates. I feel very comfortable with our overall position as it relates to that, um, you know, when we, when you look out there, uh, the market again has been competitive for a while, and we've done very, very well in that sector. Uh, on the export side of our business and, um, we again, I think it goes back to the availability of Supply uh, that will stay on our system and move across our overall docks, uh, and feeding a, a growing Global demand. And then I'll turn it over to Ben just to
Talk a little bit about, uh, NGO pipes out of the basin.
Thanks Scott. I just, I think you said it well across our entire Downstream footprint. We are really expanding it on the back of millions of dedicated Acres across various basins. So we have line of sight to volumes on. And on top of that, we continue to have commercial success. As our customers, see, the great offering we have across our integrated system and, and wide footprint with a lot of redundancy. So that's really how we're looking at all the expansions on the on the downstream.
inside this being underpinned, with
Thank you.
The premium guests egress has been tight year to date, which you can see in the depressed waha pricing, but there's a lot of pipeline capacity coming on next year. Uh, that, you know, most people including us, think will unlock the Basin for the rest of the decade. Is that how you see it as well? And when those pipelines, come on next year, would you expect to see a sustained move, uh, for you off your, your fee floors?
Um, this is Bobby. Yeah, no we we've been excited to see all the egress pipes gets in. Get announced. It's a little bit of the Bull Run bolt on because we get to get that gas to the hub where our producers can think about, which direction, do they want to go and what pipe do they want to go on and have a lot of optionality as opposed to like a pipe or 2 pipes out of our plant? Um, as we think about
Um, egress and how it relates to the Basin again kind of the same same comment, we're excited to see it happen. We our residue strategy hasn't changed if we can put gas on a pipe to make it happen, if we can build a pipe, if we can participate in the pipe, we want to see egress happen, um, and with it happy at the rate it's going. I think it's it's um, we're going to be well, supplied with egress for a little bit here. When all these pipes come online, um relative to the floors, you know, I'm not going to speculate on where price prices going to go.
But um stronger waha pricing, ultimately is good for those people orders. I would love to be a above those 3 floors because we've essentially been been below them for for most of recent history. Um, and that would be just an incremental Tailwind to our business out there.
Great. Thank you. Um, and now that Grand Prix is filling up. Um, can you talk about the pros and cons of using more third-party NGL transport from here? I mean, I guess the pro is like, obviously you don't have to spend a lot of capex, but should we expect a center to per gallon of extra cost on your incremental Downstream volumes from here? If you're using third-party transport?
This is Jen. I'll start and then I'll throw it to been. I think the from our perspective, what utilizing third-party transport allows us to do is 1 provide a little bit of diversification and just ensuring that not all of our volumes are flowing on our pipe but 2, it's really to be Capital efficient and I think that's an indication indication really of how well we're all working across the space. I think that an overbuild situation doesn't really benefit anybody so you're seeing us work. Very well with our peers, to figure out how to continue to move our molecules in a lot of the growth that we have but do it in a manner that's efficient across the space.
Um, I think that the way that we evaluated is 1 just making sure that volumes will continue to move. We're adding a lot of processing plants and a lot of incremental processing, plants are going to drive a lot of additional NGL volumes into our system. And ensuring that we are continuing to provide our customers with the best possible service is, what is Paramount to us. So that's really evaluating. What are the Alternatives out there? What are those Alternatives cost? And therefore with all of that put together? What makes the most sense for Target over both the short medium and really the long term,
Been.
Multiple flexible medium-term offloads that as our our volumes are growing we can we can move into those and and time any future expansion and the most optimized way for bringing it online. And for the capital spend, and then when that expansion comes online, we'll have volumes to put out at driving driving. Good returns.
Great. Thank you.
Thank you.
Thank you.
Our next question to comment comes from the line of Sunil Sabal from Seaport Global. Your line is open.
Hi. Good morning. Uh first of all, congratulations to Scott on his retirement and uh also to ban on his new role
Uh, so it seems like, you know, from comments that you probably are getting ready for the next set of, uh,
Uh, processing capacity additions. I was curious. You know, how should we think about Capital costs? You know, for those processing brands, are you seeing any many meaningful change? Considering the inflationary environment, especially on the material side?
And uh, how does if it does impact any of your returns? Thanks?
Good morning to Neil, this is Jen. First of all, I'd say that our engineering team does a phenomenal job of assessing all of the options really available to us, both in terms of utilizing the target standard plant design and then figuring out whether a system is sweet or sour, what additional information we'll need, and then identifying the right third party.
For us to work with that can really keep our costs as low as possible. So definitely a big, uh, congratulations to our engineering team for the success, on the plants that they are, bringing online the plants in progress. And then, of course, they're already thinking about the plants in the future. I think you're right that from our perspective costs have risen, but we've also done a really good job of managing those Rising costs. You're seeing us collocate plants. So instead of just having 1 plant at a site, you're seeing a lot of sort of uh vintage 2 plants at sites like the bull moose 2 plant, Pembroke, 2 plants that allows us to benefit from some of the share Services across facilities which help which helps us manage our costs. And again, I think that's part of the benefit of having such a large and flexible system in place. Like we have, but we have seen costs rise so depending on whether a plant is sweet, or sour costs are probably averaging more between call it 225 million to 275 million. But again, our team is doing a really good.
Good job managing plant design, supply chain, and making sure that we are ahead of any potential constraints and issues that could create rising costs. This is to ensure that we are continuing to build best-in-class facilities at best-in-class costs.
Thank you.
Okay. Thank you. Thank you. Our next question, comment comes from the line of Jason gableman. From TD Cowen, Mr. Gableman, your line is open.
Yeah, hey morning. Thanks for taking my question. Um, I wanted to try asking again about something that's already been asked, which is the direction of, of, kind of fixed fees, uh, within the puran Basin, and it sounds like there's a lot of cross-currents you you noted. Uh, pretty full system in the Midland Basin, uh, but also costs rising and more competition in the Delaware AGI side. So, just wondering when you put that all together, um, what the direction of travel is on the fees that you're able to secure from competitor or from customers, is it, is it up down flat? Any any color would help?
Yeah sure Jason I'll start and if January or Pat want to want to jump in, you know, as Pat mentioned earlier, you know we've faced competition all along. It's changed. Uh it used to be you go back years. There was a lot of private Equity coming into the space and there was a lot of competition on the GMP side. We've been competing with the recent acquisitions you go back over the years, we were competing with the predecessor and now we're competing with the, you know, with the acquirer. So there's been a lot of competition on gmpp um our base business, we have long-term contracts, typically GMP,
Contracts are ten years. We have a lot of 15 year contracts. Um, so we have long-term contract protection, um, and we have, uh, you know, multiple clients reliability redundancy, the largest system with which affords US, um, you know, a really good opportunity to compete with others as they're comparing the target offering, um, you know, versus, you know, the next best competition. So there's always been competition. Um, you know, I think we compete, uh, pretty well, you know, all the way from GMP and all the way through Downstream.
I just add that, I think.
Business means that we are creative and entrepreneurial and willing to work with our customers. To the extent that there's an opportunity, for example, to think more about the longer-term game than the shorter-term game, if there's a chance to go and acquire more acreage, but it means that we blend down into a lower fee, we'll of course play whatever game best supports our producers and creates the most value over the long term for our shareholders as well. So, I think we just do a really good job of working well with our producers and broader customers to figure out what their needs are, how those needs are changing and evolving, and then how we can best structure our contracts to meet those needs.
Yeah, that's great. Thanks. My follow-up is just on the IBA.com guide, and the $200 million range is unchanged. But there are only a few months left in the year here, so I'm wondering, as you look at the balance of the year, the risks to kind of coming in at the high end or the low end of that range.
I'd say that it still feels like there's a lot of the year left to go. It feels more like we're halfway through the year here, with a bunch left to go. But I think from our perspective, as Matt's comments indicated, we feel really, really good about where we are for 2025. A big part of what we came out and said in February was that our guidance and the range were really predicated on us continuing to see volume growth, particularly in the back half on the GMP systems, and bringing that incremental.
Volumes through the rest of our integrated system. And clearly, with all the data points that we've provided today, those volumes are materializing, and I think we've got a lot of conviction based on where we know producers are with completions and continued activity in the back half of this year. If you'll start, I'm starting to feel really good about the volume outlook for Targa, not only in the back half of this year, but then the implications for 2026. I think there is some potential tailwind that ultimately will have to see how those present the rest of the year related to commodity prices. We saw weaker commodity prices in the second quarter; we've seen lower gas prices thus far here in the third quarter. So commodity prices, we don't have a ton of exposure, but in the first quarter, we benefited from about $10 million of margin above people were levels. In the second quarter, we really had no margin above people were levels. So to the extent we get any tailwind there, certainly that would be additive in the back half of this year. And then we also don't tend to forecast our marketing business on both the natural gas.
And the NGL side. So to the extent, we see some Tailwinds there, that would be additive back half of the year as well. And fourth quarter is where we typically see more strength in marketing opportunities than, uh, the second and third quarter.
That's great. Thanks for that, caller. Okay, thank you. Okay, thank you.
Thank you. I'm sure there are no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.
Thanks to everyone for joining the call this morning. We appreciate your interest in Targa Resources.
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.