Q3 2025 Targa Resources Corp Earnings Call

Speaker #1: Thank you for standing by . My name is Tina and I will be your conference operator today . At this time , I would like to welcome everyone to the Targa Resources Corp.

Speaker #1: third Quarter 2025 earnings webcast and presentation . All lines have been placed on mute to prevent any background noise . After the speakers remarks , there will be a question .

Speaker #1: Simply press star one on your telephone keypad . To withdraw your question , press star one again . Thank you . It is now my pleasure to turn the call over to Tristan Richardson Investor Relations and Fundamentals .

Speaker #1: Please go ahead .

Speaker #2: Thanks , Tina . Good morning and welcome to the third Quarter 2020 Earnings Call for Targa Resources Corp. . The third quarter earnings release and a supplement presentation that accompany our call are available on our website at Targa Resources Corp.

Speaker #2: . 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 section 21 of the Securities Exchange Act of 1934 .

Speaker #2: 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 .

Speaker #2: Our speakers for the call today will be Matt Malloy , Chief Executive Officer . Jen Neale , president , and Will Byers , chief Financial Officer .

Speaker #2: Additionally , members of the senior management will be available for Q&A , including Pat McDonough , president , gathering and Processing . Scott Prior , president , Logistics and Transportation .

Speaker #2: Bobby Muraro , chief Commercial Officer . And Ben Branstetter , senior vice president , downstream . I'll now turn the call over to Matt .

Speaker #3: Thanks , Tristan , and good morning . We had another outstanding quarter with record adjusted EBITDA driven by record volumes across our footprint .

Speaker #3: With three quarters completed , we now expect our full year 2025 adjusted EBITDA will be around the top end of our previously provided guidance range .

Speaker #3: Our Permian volumes grew more than 340,000,000 cubic feet per day , and nearly 700,000,000 cubic feet per day . Compared to this time last year .

Speaker #3: Our Permian growth is driving additional NGL volumes through our integrated system . As NGL volumes increased , about 180,000 barrels per day compared to this time last year .

Speaker #3: Incrementally , the customer success we achieved in 2024 has started to show up in our volumes some this year , but really adding to our longer term confidence of continued Permian volume growth .

Speaker #3: Our customer success has continued as our commercial team has added to our leading Permian GMP position , with acreage dedications from new and existing customers in and around our footprint , further bolstering our long term growth outlook .

Speaker #3: To accommodate this continued volume growth from our customers in September , we announced several new growth projects , including our Speedway NGL transportation expansion , the Yeti Gas processing plant in Texas , and the in the Permian Delaware and Buffalo Run , an expansion of our Permian natural gas pipeline system .

Speaker #3: And today we announced our next gas processing plant , Copperhead , in New Mexico in the Permian Delaware . Also , our previously announced Forza natural gas pipeline in the Delaware had a successful open season and we are moving ahead with that project .

Speaker #3: We continue to expect meaningful long term growth in Permian gas and NGL volumes across our footprint . Our conviction is supported by multiple factors , including the bottom up forecast from our existing producer customers , our continued commercial success , and the continued industry trend of rising gas to oil ratios .

Speaker #3: We have a lot of projects in progress , which means growth capital is elevated in 2025 and 2026 , and these attractive investments .

Speaker #3: will drive significant increases in adjusted EBITDA . Our chunkier downstream projects are set to come online in 2027 . Both the Speedway NGL line and our larger LPG export expansion have sufficient capacity to handle our growing volumes for many years .

Speaker #3: Once these projects are online , we expect our downstream capital spending will be significantly lower for years to come . Driving a substantial increase in free cash flow in this expected increase in free cash flow will be durable , meaning even if we are in a stronger growth environment , driving elevated spending on the GMP side , our downstream spending should still be modest .

Speaker #3: So in late 2027 , our downstream NGL capital is expected to be significantly lower than today's and our adjusted EBITDA is expected to be much higher than today's .

Speaker #3: This results in a strong and growing free cash flow profile for years . This is what our team is working towards every day .

Speaker #3: Execute our large capital projects in the near term while continuing to invest in high return projects leading to targets next transformation . A large investment grade integrated NGL infrastructure company that provides industry leading growth and generates significant free cash flow year after year .

Speaker #3: This is a value proposition we are excited to be a part of . This is our focus and as we look out over the medium and long term , we expect to be in a unique position to grow adjusted EBITDA , grow common dividends per share .

Speaker #3: Reduce share count , generate significant and growing free cash flow , and do this all with a strong investment grade balance sheet . Before I turn the call over to Jen to go over our operations in more detail , I would like to thank the team for their continued commitment to safety and execution , and for consistently delivering reliable , high quality service to our customers .

Speaker #4: Thanks , Matt . Let's talk about our operational results in more detail . Starting in the Permian , our natural gas inlet volumes averaged a record six point 6,000,000,000 cubic feet per day in the third quarter , representing an increase of 11% versus a year ago .

Speaker #4: And strong sequential growth in October . Our Permian volumes were impacted by some producers shut ins from low commodity prices and storms , but these volumes are now largely back online , which we have taken into account in the updated color that we expect to be around the top end of our guidance range for adjusted EBITDA .

Speaker #4: The second half ramp that we were forecasting at the beginning of the year has materialized , and we see at least 10% growth in Permian volumes for 2025 .

Speaker #4: And based on the visibility that we have today , we see 2026 as another year of strong , low double digit growth in the Permian Midland , our Pembroke two plant came online during the third quarter and is running at high utilization .

Speaker #4: And Permian Delaware . Our Bull Moose two plant commenced operations recently in October . We expect our processing infrastructure currently under construction , will be much needed at start up , and our projects are on track with previously provided timelines largely driven by requests from our customers .

Speaker #4: We are continuing to build out our intra-basin residue capabilities in the Permian, which will help us manage tightness in natural gas egress from the basin until the next wave of takeaway comes online in 2026.

Speaker #4: The Bull Run Extension in the Delaware is expected to begin operations in the first quarter of 2027 , and Buffalo run our Midland residue expansion is expected to be completed in stages and fully complete in early 2028 .

Comfortably within our long-term leverage ratio target range of 3 to 4 times.

As we provided in September, we estimate net growth, Capital spending for 2025 to be approximately 3.3 billion and we continue to estimate 2025 net maintenance Capital spending of 250 million.

We announced today, we intend to recommend, to Target's board of directors to increase our annual common dividend to $5 per common. Share

This incremental $1 per share equates to a 25% increase to the 2025 level.

If approved, it would be effective for the first quarter of 2026 and payable in May 2026.

We remain active in our opportunistic cap. Share repurchase program.

as part of our all of the above Capital, allocation strategy,

During the third quarter, we repurchased $156 million in common shares, bringing year-to-date repurchases to $642 million, including purchases made subsequent to the end of the third quarter.

We are an excellent Financial shape with a strong and flexible balance sheet and we 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 the Q&A. We ask that you limit it to 1 question and 1 follow-up and then reenter the queue. If you have additional questions, Tina.

Hi, good morning.

Hey, good morning. Jeremy

Hey, uh, thanks for the updates. Here was just curious with, um, you guys trending towards the top end of the guide here, just wondering how things have unfolded versus original expectations. Is this more Wells coming onto the system, or is this better productivity per well or what factors uh would you say are are driving this upside versus original expectations. Good morning, good morning Jeremy. This is Jen for 2025. When we gave our guidance back in February, our biggest caution was that it was predicated on a big back, half volume ramp based on the best available available information that we had from our producers at the time. I think those volumes have largely materialized consistent to better than our expectations, then we initially forecasted. And that's what's driving record. Parian, NGL transportation and fractionation volumes and providing us with meaningful Tailwind. I think we've also seen a fair bit of volatility across the year, which is provided us with some incremental natural gas and NGL marketing opportunities.

We don't typically forecast those, when we give guidance. So the fact that we're outperforming a little bit relative to the, the fact that we really didn't have anything material in our guidance is also a little bit of a Tailwind this year. But I'd say, the producers, largely performing on track to a little bit better than expectations. We have not seen a material change or shift in activity levels on our systems and I think that's really supporting the strength of performance that we've

Really across this year. But in particular you saw a big ramp Q3 relative to Q2 you saw a big red Q2 relative to q1 and then as we look forward to 2026, it just really puts us in a good position ending this year as well.

Got it, that's helpful. Thank you for that. And, uh, appreciate the commentary with regards to 2026 with a low, double digit growth there. Um, not to get too far ahead of ourselves here but some of your key producers have put out kind of long dated uh, you know, looks into what the growth would look like in the Parian. And so just wondering you know what since uh you know that provides for you as far as kind of a more of a a medium-term look as far as how you think things could uh unfold for growth.

Yeah. Hey, Jeremy, this is Matt. Um, you know, I I think we have, you know, the best-in-class footprint in the puran across both the Midland and the Delaware with really active, high quality producers. And so when we look out, not only in 2026, but in 2027 and Beyond, we get, you know, Bottoms Up forecast from our producers. And I think that really underpins the confidence, we have about continuing to grow even with, you know, kind of a flat to even modestly, declining rig count, you know, our producers are giving us, you know they're well, scheduled and it gives us a lot of confidence as we uh, you know, get into 26 and looking at our locations and longer term. Growth plans. Um, you know, it really kind of underpins uh, underpins our our multi-year Outlook

Got it. That's uh very helpful. I'll leave it there. Thank you. Okay thanks Jeremy.

Our next question comes from the line of Spyro down with City, please. Go ahead.

Thanks, operator. Good morning, team. Uh, thank you. I have a question. I wanted to add more, Matt. I want to start with operational leverage. Um, maybe back to your comments just around that free cash flow inflection that's coming. Uh, I guess on my math, you know, I think I've got another one to two more processing plant announcements before you need another frac speedway. Of course, there’s plenty of road headroom here, we think. Uh, but in terms of the rest of the system, are there any other expansions to kind of have on our radar? You keep adding these processing plants, or does it feel like we're finally heading to that period where you could benefit from some of the white space on the system?

Yeah, good, good question. And that is, as we kind of look out over the next couple of years, we do see that we're calling, you know, really a transformation as we get into the back half of 27. Once Speedway comes on. Once our larger scale LPG export comes on the downstream spending should be relatively modest and really, at that point only include, um, rateable fracks, and that'll be dependent upon how our GMP is growing between now and 27. And as we're looking out into 2829, so as you're thinking about multi-year model you know, we've announced trains 11 and 12 those are progressing well we're evaluating trained 13 and when we'll need to announce that and when that 1 is going to come on. But uh for the downstream spending I think once Speedway and our export comes on it's really going to be rateable fracks uh through our

System. And so when you look out in the back half of 27 with significantly higher ebida, even if you know, we're in a strong growth environment on the GMP side. Just the fact that we have significantly higher ebit doll and lower Downstream spending, it's going to put us in a really good position to have a free cash flow profile uh for years to come.

More so just wondering can you walk us through maybe what that opportunity set looks like and and how big that could be? And if we should expect the same kind of 5x, 6X, return profile, that we see across the rest of the business.

Sparrow, this is Bobby. Um, the way we work on these things is in coordination with our producers on everything. And when you look at what um, drives that asset, uh, that infrastructure investment for us. It's coordinated with our producers on where we can add reliability, where we can add redundancy to our plants and then where we can make a really good fee. Um, and pushing gas through those pipes. At the end of the day, is that Basin has grown. And you've seen gas, takeaway be more problematic from an individual pipe. That is under, um, that is getting worked on at some point in time and it affects a plant, we end up being able to move, gas around the Basin and put it into other available capacity, which both our producers. And the producers we market for the producers that market their own gas. In the ones we Market gas for. Um, look for that optionality in the portfolio. And so ultimately, we've been building these little steps for a little while we just announced the kind of complete picture recently. Um and it's all been underwritten by volumes that are flowing on our system.

That both we market and our, our big customers that market, their own gas market. So, um, and when I think about what the investment multiple is, it's it's really a high quality return relative to everything we do. So it, it smells a lot like, um, all of our other reports that we put out on roic. So um, I think it fits in really well with um just deploying capital and spots where we have flowing volumes and customers that want it. And it's similar returns to the rest of our business.

Great caller, Bobby. Thanks for that. I'll leave it there. Thanks everyone.

Our next question is from the line of Teresa Chen with barklay, please go ahead.

Morning, thank you for taking my questions. Um, you know, we um, have experienced as challenging environment for some time at this point. Uh, Mark by bearish sentiment on liquid prices and broader macro uncertainty, you've delivered a strong results and even guided tours, the upper end of your, um, annual guidance range, which underscores the solid, um, momentum that you're seeing. But at the same time, your recent project announcements have drawn scrutiny with some questioning why you didn't leverage or why you didn't choose to lever, third-party NGL and infrastructure for longer versus investing. Now, to increase capacity across your own system. Could you explain the rationale behind this decision and provide additional context? Supporting your strategy?

Good morning, Teresa. This is Jen. I think that we really do try to be very much Capital efficient across the portfolio. And what we've tried to do is essentially drop breadcrumbs as we've gone through the last couple of years. And as we've added processing, editions continued to have commercial success. That's been in addition to the foundational millions of Acres already dedicated to us, it was going to drive a lot of incremental growth on our system. Drop breadcrumbs that Grand Prix was feeling quickly and we are trying very much to be Capital efficient around it. We've talked about the fact that we've done third-party offload deals, and that's part of what you'll see in 2026. We'll have some more offload fees then we've had before. But part of what we're doing, there is not that dissimilar to what we did with Grand Prix, which was we de-risked the investment by, at the time that the project will come online with Speedway. We will have already flowing volumes that we can move on to our pipeline at the end of the day, we are in the business of providing the best-in-class Operational Support.

For our producer customers. And we think we do that really well from the Wellhead, all the way to the water. And an important part of that is being able to operate our assets, being able to leverage our integrated footprint be able to provide our producers, with flexibility and fungibility and redundancy. And at the end of the day, be able to completely de-risk, our Enterprise and best position Target to create value for our shareholders. And that's part of what we believe we're doing here. We've got 5 plants that are in progress, that's going to be a lot of

Of incremental ngos that we will need to move on our system. And what we will do is we will utilize third-party transportation for a period of time that we're comfortable with. And then again we will base load our next investment with those already flowing volumes and then we'll have operating leverage to accommodate the growth from there. And we just believe that that combination puts us in the best position again to both deliver for our customers and also to deliver for our shareholders,

Excellent, thank you. The follow-up question on the intro basis and residue strategy has clearly become a key area of investment. Where do you anticipate the next bottlenecks to be within the Parian?

And it kind of goes to plant specific, which is what that header system is for, at times of interruptions on Long, Haul pipes. Um, but when I think about Takeaway on residue in particular and you may be asking about more than the residue but, um, it's obviously extremely tight right now with where basis is gone. Every time there's, um, a bobble and, and a long haul pipe, but we're excited about the end of 26 with 2 pipes, coming online and material capacity. But we've been growing fast and um I think those pipes will be not only needed but well utilized when they come online.

so,

thank you.

Okay, thank you.

Our next question comes from the line of Keith Stanley with wolf research. Please go ahead.

Hi, good morning. So you're pointing to around the top end of the guidance range for the year, which at the exact top end would imply EBITDA does down in Q4 versus Q3. Are there any headwinds to be aware of? You cited some of the October shutdowns. Just how to think about Q4 growth relative to Q3.

Good morning, Keith. This is Jen. I'd say that I think we tend to be a conservative bunch, so we'll start with that. And I'd say that we feel really good about setting another year of records, but, in 2025, I think a little bit of the conservatism is born out of the fact that we've got two months to go in the year. We did see some shut-ins from lower commodity prices in October, which we haven't really seen before.

Continued maintenance on a number of natural gas pipes, out of the Permian expected for November. And so a little bit, it's going to be what are the implications of that? Now, what's great is we've got a little bit of a natural offset where to the extent, we've got weakness in waha pricing, we're able to leverage, our extensive footprint to benefit on the marketing side, but it's a little bit of just some conservatism as we go through the next couple of months, which may be choppy. But I think the key point is we are really well positioned and it's probably likelier that we're above the top end of the range than below the top end of the range. But with that, conservatism, just felt comfortable saying that we thought we'd be around the top end.

Got it. Thanks for that color. Uh uh, other questions just on the Frac volume. So a Q3 was obviously up. I think it was 17% quarter over quarter.

Is should we think of that as a good run rate from here? Or did you have a lot of unforged inventory? Um, from the maintenance work earlier in the year that boosted Q3?

Uh, sure, yeah. This is been um, you're right. We did have a, a turnaround in the first and second quarters that really impacted us to essentially a Frac um down in terms of available for our capacity and with the fracks fully back online and in the third quarter and the turnaround going well we were essentially full and I'd just say we're very much looking forward to train 11 and trained 12 coming online um and those will come on.

Highly utilized.

Thank you.

All right. Thank you. Thanks, Keith.

Your next question comes from the line of Michael Blum with Wells. Fargo. Please go ahead.

Uh, thanks. Good morning, everyone.

Can, can you?

Can you discuss the decision to increase the dividend by 25% next year versus leaning more heavily into buybacks? I imagine you're not too thrilled with the recent stock price performance given the strong underlying performance of the business. So, I just want to get your thoughts on your weighing between dividends and buybacks.

Yeah, hey, hey Michael. Um, you know, we've kind of talked about doing all the above approach. And when we just look out at our forecast over multiple years, we have a lot of room to meaningfully increase the dividend. Um so it is a little bit more art than science. You know, we talked to our board and say, what is a good balanced approach to increasing the dividend and also, being able to have a strong balance sheet to be opportunistic with share repurchases? You've seen us, you know, pretty active so far this year on share repurchases. I think that's going to continue to be, you know, the framework going forward is we plan to be opportunistic with our share repurchases. It'll bounce around from quarter to quarter and year to year to year, but I think that'll be part of our return to Capital so I, you know, I really think we can do both. I think the the dividend uh growth that we're providing is still something we can look out over.

Multiple years and continue to grow it even from here. Um and I think that's just supported by our underlying you know uh fundamentals in our business of growing IBA and you know free cash flow generation going forward.

Can you give us an update on and market demand and specifically where you might be seeing areas of strength or weakness across different regions, thanks?

Hey, Michael, this is Scott. I, I would say that you know, typically throughout the year at times. The second and third quarter volumes dip, a little bit relative, to what we see in the fourth quarter, in the first quarter of each year, uh, fundamentally nothing has changed on the export front, we continue to be highly contracted the demand is growing really across the globe. There is also some seasonality as it relates to the kind of the product mixed relative to propane and butane but we continue to add contracts. We got some, we will get some benefit in the fourth quarter with the small to the bottom of the banking project that is now online. That gives us a lot of flexibility and provide some reliability to uh to our export facility. But really when you look at our, at our at our export project, that we've got coming online in the third quarter of 2027, that's related to expected Global demand, that is going to continue to grow across uh various regions. Um we're going to uh see increased production from our Upstream with the number of plants that we've got

Coming online, obviously Grand Prix, and and Speedway pipeline uh providing products to our fractionation footprint, which is growing. And then the product itself will just be priced to move across our export document. We provide, uh, you know, a lot of operating leverage that we will have going forward. So uh, again, the fundamentals have not changed, uh, the demand is

Grow and we'll be a broad participant across, uh, various regions across the globe.

Thank you.

All right. Thanks Michael.

On your next question, comes from the line of manav Gupta with UBS. Please go ahead.

Good morning. I wanted to ask you about the Parian, sour gas opportunity. You guys were the first mover. You are the biggest processor of per gas, but you know, as your returns have been very good, some others are trying to now change and I'm not trying to understand the competitive advantage over there and and the growth and opportunity that you see in in the demo that's that region of Eddie and Lee in terms of permanent sour gas what are you seeing out there if you could talk a little bit about that?

Yeah, I think, you know, what we said on the last call is that we implemented our SAR gas strategy many years ago. We saw the need; we saw the economic benefit.

of, you know, a few of the benches in Delaware specifically that had sour gas, mainly H2S and CO2 that.

Again, we were economic ventures that weren't getting developed because of the lack of sour gas infrastructure. So, a long time ago, we started investing in the sour gas treating facilities. We began tying up acreage as sour gas began to get developed. So, we were really a front runner.

In front of a lot of other people and we're able to get a lot of acreage, uh, tied up. We continue to see the development now of those benches. So our sour gas production continues to grow, certainly other people have stepped in to that realm because, uh, they've been frankly unable to participate in the growth in those benches without that capability. So I'd say we were first mover we're well positioned. We've tied up a lot of acreage and we're seeing the benefit of that strategy unfold and continue to unfold over coming years. Yeah, and I just add on to that too. I mean, we have a system um, that has fungibility and redundancy really unlike any systems around. I mean, uh, our red Health System, uh, can handle sour gas, our bull moves, Wildcat complex, and handle, sour gas. And we have a 30-inch, uh, wet gas line between those that can move volumes in between and we have multiple AGI welds that several different facilities across Targo. So, uh, we offer a

service to our producer customers, uh, that that's really unmatched.

Thank you so much for that. I just have a quick follow-up on the first project. I think you mentioned you had a successful open season. Our understanding is that it’s a lower CAPEX project, so the returns would be very attractive. Could you talk a little bit about this particular project? Thank you.

How we invest across the rest of our portfolio. But what we like about this strategy is, it's largely taking existing volumes plus some of the growth we have from some of our new plants that are in progress and underway and really leverage, all of that additional volume. To again provide more flexibility to our producer customers. And at the end of the day, it's really that best-in-class service that we think is what differentiates us relative to others.

Thank you so much.

All right, thank you.

Next question comes from the line of AJ. O'Donnell with tph, please go ahead.

Hey uh morning everyone. Um, I wanted to go back to uh maybe a follow on to something that's Spyro asked earlier in the call. Just about lumpy or Downstream projects and just overall capex.

um, you know, looking at the speedway project, um, just curious on

You know, giving your volumes have been trending, you know, above estimates and continue to perform pretty well. Uh, at what point in time. Do you think you would anticipate needing to, you know, expand the pipe to the full million per day, uh, design capacity. And you know, if it was sanctioned

Is that something that you would pursue the capacity all at once, or could it be a phased approach?

No good. Good question. That, that would be a good uh capex project uh for us to undertake for sure. A great capex project because you know the most of the capital goes into getting that initial capacity to move from 500,000 barrels up to a million. It's really just putting on pump stations. And so as we see volume growth, um, it would be a fraction, uh, of the capital, um, you know, compared to the initial capacity. So we'd be able to highly economically, just layer on some pump stations to go from 500,000 to a million. And I think we'll just do that kind of rate over time as opposed to announce, we're going to go from 500 to a million. It's likely, we'll stage them in over time. Uh, as volumes ramp very much like we did with Grand Prix. Yeah, very much like Grand Prix, right?

Okay, I appreciate that. And then maybe if I could just shift to the to the mid-con, um,

You know, I think we've seen some commentary from producers and 1 of your peers, specifically talk about activity, moving to.

Uh, gassier areas of the Basin. Um, just curious what you guys have seen on your system and how if at all, that's impacted your thoughts on your central region, uh, uh, platform.

Uh, this is Pat. What I would say is that we have seen some levels of activity, that, you know, we hadn't seen over the last 2, to 3 years. I wouldn't say there's a huge surge in activity. Certainly, some of our key, producers are starting to poke around and do a little bit more, um, our our come assets, our South Oak assets, is what we call them, we're seeing increased activity and opportunity. Do we see it as a huge growth opportunity in the short term know over time? Uh,

gas prices. Get a little

Stronger. Certainly, I think that becomes an opportunity. Obviously, we we have a plant capacity, so our capital investment, our ability to get Returns on. That is very favorable.

so, um,

I would say there is an increase in activity, it's not huge. Uh hopefully it grows over the coming years and we're well situated to take advantage of that.

Okay, thank you everyone. All right, thank you.

Your next question comes from the line of John McKay with Goldman Sachs. Please go ahead.

Hey, all thanks for time. Uh just 1 quick 1 for me um kind of sticking on on permanent activity levels and the macro earlier this year, we kind of had a couple conversations about how you'd expect the Midland versus the Delaware to ramp, um, just curious kind of where that sits now, what you're hearing from your, you know, customer sets on either side and

Whether or not that view I guess before that kind of Midland plans would ramp quickly Delaware could take some time whether that's shifted at all. Thanks.

yeah, I mean

Say as we're building out our Delaware starting to look more like that. So I think we're really optimistic on all the plants going in to to to be highly utilized.

This clear and I'll actually ask a second 1 just you know, as you look across the Basin um you know certain pockets are are looks like getting more mature than others.

Are you starting to see kind of big swings in goes kind of from 1, you know, region to another and maybe just a, you know, broader comment on kind of how you'd expect that to uh progress from here.

A little bit is producer by producer an area by area dependent, but I'd say that what we continue to see is a broad theme of increasing yours, which we're certainly a beneficiary of and we're not really seeing any changes to that. If anything, it's just continuing to strengthen

All right. Thank you very much. All right. Thanks John.

Your next question comes from the line of Gan Salisbury with Bank of America. Please go ahead.

Hi, good morning. I just wanted to follow up on something. You all mentioned on the last call that processing plant costs had risen; I think you gave a new range of $225 million to $275 million.

Um, I think you took at the time it was partly for more seller gas in the mix as well as tariffs. But I guess my question is if the cost escalation is causing any change to your margin expectations, or if you can pass most of that through.

Yeah, so no I I think that range that we gave is still you know uh you know pretty good range. I think the sour end you're probably in the 250 maybe a little bit more first our plants and you're probably in the low end of that range. If you're putting in a sweet plant, depending on how much treating you want to put in, but it's somewhere around that range. Um, you know, uh, Capital costs aren't a direct pass back to the producers. There are some, you know, Fuel and operating costs that that that do get passed back, but the capital costs. Um, those are, you know, born by Target and it just goes into our overall rates that we're charging and how competitive we are, you know, for for new volumes in the Permian. So we've still had a lot of commercial success. We're still earning good returns through our Integrated Systems, so I still see us being highly competitive, uh, at at at those Capital costs.

Great, I'll leave it there, thanks.

Thank you.

Our next question comes from the line of Jason Gableman with TD Cohen. Please go ahead.

Yeah, hey morning, thanks for taking my question. Um, I want to ask about the competitive Dynamics and the puran Basin you. You mentioned, you secured um, additional acreage dedications over the past quarter and I'm wondering given kind of less producers growing other basins, obviously other oil basins, not growing. Um, how's the competitive landscape? Um, for going after that premium acreage, is it, is it becoming more competitive there and, and are you seeing some of kind of the, the fees that that you're able to extract shrinking? Or, or are you able to leverage some of your competitive advantages to maintain, kind of a pre premium on the, on the fees next

Jason, this is Jen, I'd say that it's always competitive, it's always been competitive. It's likely to continue to always be competitive. I think that our business model is to execute the difficult elements of the Gathering processing business and do that really, really well. And create a lot of fungibility redundancy reliability for our producer customers, and I think that that's part of what separates us. We've talked a little bit about our sour gas strategy, and how we've been sort of a big first, mover in that over many, many years. So now we've got more than a 2 and a half BCF a day capacity on the sour side 7, a GI Wells really well positioned to not only service our existing customers. But to the extent that there are any customers that

Need it. So I really think it's what we already have in place and then, just a continued, strong commercial effort by what I think is the best commercial team in the business to go, and continue to identify ways to both work with our existing customers, and do more business with them. And then, of course, continue to chase New Opportunities, too. And that's part of what you're seeing. We're not resting on our Laurels that we already have millions of Acres, dedicated to the Target and the puran, or in other areas, we're continuing to chase new business because we think we can do a really good job of helping our producer customers and we believe, we offer a differentiated service. And so we'll continue to chase that. And again are having good commercial success that at the end of the day, ends up being additive to that, really strong Foundation of dedicated contracts that we already have in place.

Okay, that's really helpful, caller. Thanks for that answer. Um, and then my other question, just kind of following on to what Gina Andrews asked, uh,

Impact from tariffs and and kind of more. Broadly, how you feel about that 1.6 billion dollar cost, um, for the, for the speedway pipe is that kind of fully baked or, um, do you have? Um, perhaps some contingency baked in there, um, or is there potential for tariffs to to further? Uh,

Increase. That, that cost, thanks, Jason, this is Jen again, I think we feel really good about it. Our engineering team, our supply team did an exceptional job of procuring pipe long before. Um, we made the announced

forward fully with the project publicly. And so, I think that that means that we are in really good position to deliver hopefully under budget to any of our folks that are listening. But at the end of the day, uh, if you'll get about the budget that we put out there, we always do have some contingency and all of the projects that we move forward with. And then I think our team does a really good job of trying to ultimately be that and not use that contingency so similar to all of our

Projects. We just have a really strong team that's working day in and day out to try to outperform relative to the expectations that they've provided us with. And we feel really good about the Speedway project.

All right, I'll leave it there. Thanks. Thank you. All right, thank you.

The next question comes from the line of Sil Sabal with safeport Global Security. Please go ahead.

Hi, good morning. Uh, so, uh, I think last year, uh, your team had, uh, given a kind of a longer term, steady state capex number of 1.7 billion.

Uh, I was curious, you know, where does that number stands today? With with the growth in the portfolio that we've seen

Neil, this is Jen. I think the the Frameworks that we provided back

February 2020. 2024 are very much still helpful and, uh, I think that if you tried to Mark to Market which of course, we haven't done publicly, but if you just looked at some of the pieces 1 we've seen some costs a little bit higher, right? We've just been uh, received a couple of questions around tariffs and uh and so we've got costs that are a little bit higher. We of course have a much bigger footprint today than we did when we published uh that back in February of 2024. But we're not talking about meaningfully higher, you could call it modest modestly higher and then the other additives are when we came out with that framework, we didn't have residue spending and we didn't have CCS CC us spending included in that and again we've got some modest projects underway on both fronts there so I'd say that it's very much still helpful. I think that particularly when you think about what Matt talked about which is a much higher ebit da base. Now, even if the capital is a little bit higher than what we put out back in February 2024, it just highlights that across in

Environments. We have a very robust, very strong and strengthening free cash flow. Free cash flow profile.

Yeah, and just to add on to that, too. The framework we put out with a multi-year average, so kind of baked into that $1.7 billion capital number was an average spending for downstream. We're going to be above average here, kind of through Speedway coming on. And then once Speedway comes on, we'll be less than that average. So it'll be a little bit higher in the short term, and then the medium term will be below, and then it will really just be dependent on the GMP side of things.

Okay, thanks for that. And then seems like you know there has been some growing interest in among the data center community to tap on to the puran gas. Uh I I was curious, you know, is that something that is kind of crossed your interest and if you have any thoughts on that,

Data centers, alongside the doubling of LNG capacity in the U.S., are all really good for Target, and we've got a lot of conversations underway about how we can help customers all the way along the value chain.

Got it, thanks.

All right. Thank you.

For our final question comes from the line of Brandon Bingham with Scotia Bank, please go ahead.

Hey, good morning. Thanks for taking the questions here. I just wanted to maybe go to the NGLS outlook. You announced a plan for 2027 today, not long after announcing the prior one. So, is it just possible that maybe some of those illustrative plants outlined in the slides, starting in 2028, could be pulled forward into earlier years? Or is maybe there a way to, instead of a 1 to 2 a year cadence, that might shift to 2 to 3 for a little bit? Just trying to figure out some of the potential upside to that call it medium to longer-term outlook.

Brandon, this is Jen. Ultimately, the medium- and longer-term outlook will be supported by.

Activity from our producers both on all the contracts that we already have in place and then our commercial execution going forward. I think what you saw us talk about last fall was that we were needing to accelerate some plants because of that incremental Commercial Success that we've had. I think we've heard us talk today about continued commercial success but ultimately over the medium and long term. Are we continuing to talk about low double digit growth? Are we talking?

High single-digit growth. Ultimately, that's what will drive the gathering and processing spending, both for gathering lines, compression, as well as plants, and dictate the cadence of plant adds that we need to think about going forward.

Okay, that makes sense. Um and then just maybe shifting over to the free cash flow inflection, call it late 27 into 28 and just how we can maybe think about the payout Target of 40 to 50% and how that might Shape Up.

Through that point. And then if, if maybe we're, you know, understanding it's a multi-year Outlook and it's an average. But just if, if there might be some catch up, that could happen. Once that free cash flow in selection hits. If if the payout ratio might be a little bit below over the next couple of years, in light of the, the anticipated spending profile. Yeah, you know, um, as we outline that 40 to 50%, you know, return of capital through a combination of, you know, growing dividend and opportunistic, share repurchases, you're right. It's over multiple years. So there could be some years where on, you know, the low end or even lower than it and some years were on the high end and and above it. Um, I think once we get, you know, into into that back half of 27 when Speedway and our export project are completed, we're going to be in a really good position to be deciding what to do with all the free cash flow. Um, I think you'll see continued dividend increases. I think you'll see continued, share opportunistic, share repurchases. And, you know, we've kind of talked about it was years ago, we talked about being at the

The lower end of.

Leverage ratio range: I think giving ourselves a little more flexibility and perhaps lowering our leverage ratio a bit is also something, um, you know, our primary focus will be continuing to invest in the business. So, organic growth, returning capital to shareholders, and reducing leverage, I think we will be in a good position to do all of those things.

Great. Thank you very much. Okay, thank you.

I'm with no further questions. Thank you. I will now hand the call back to Tristan Richardson for closing remarks.

Great. Thank you to everyone for joining the call this morning, and we appreciate your interest in Targa Resources.

Thank you again for joining us today. This does complete today's conference call. You may now disconnect