The operator introduces the Targa Resource Corp.'s third quarter 2023 earnings webcast presentation. Sanjay Lad, Vice President of Finance and Investor Relations, welcomes the participants and introduces the speakers. He also mentions that the third quarter earnings release and presentation are available on the company's website and reminds listeners that statements made during the call are considered forward-looking. The speakers for the call are Matt Meloy, Chief Executive Officer, and Jen Kneale, Chief Financial Officer, along with other senior management team members for the Q&A session. Matt Meloy thanks the employees for their efforts during the third quarter.

In the second paragraph, the article highlights the company's successful operations during a period of hot weather, including record NGL pipeline transportation volumes and completion of an expansion project. The company also returned a significant amount of capital to shareholders and announced plans to recommend an increase in the 2024 annual common dividend. The company's positive momentum is further demonstrated by the commencement of operations at a new plant, the publication of an annual sustainability report, and an upgrade in their ESG rating. The article also mentions the company's plans for returning capital to shareholders in the future.

The company offers a unique value proposition for investors due to its strong financial outlook, integrated asset footprint, and commitment to sustainability. They plan to increase adjusted EBITDA and return 40-50% of cash flow to equity holders. Despite lower-than-expected volumes in the Permian due to weather and lower-margin volumes, the company's dedicated acreage and Permian Midland volumes increased while Permian Delaware volumes decreased.

In the first three quarters of this year, reported inlet volumes have increased significantly across the system, with Permian volumes operating at 150 million cubic feet per day higher than the third quarter average. The new Greenwood plant in Permian Midland has started operations ahead of schedule and the next plant, Greenwood II, is expected to begin operations in the fourth quarter of 2024. In Permian Delaware, activity and volumes are also strong, with two new plants, Wildcat II and Roadrunner II, expected to start operations in the first and second quarters of 2024. In the Central region and Badlands, natural gas volumes have increased 2% sequentially. In the Logistics and Transportation segment, NGL pipeline transportation and fractionation volumes were at record highs in the third quarter, with deliveries into Mont Belvieu increasing by 6%. The fractionation complex in Mont Belvieu is operating at near capacity.

Targa is expecting to restart its GCF and start operations on its Train nine fractionator and Train 10 fractionator in 2024 and 2025 respectively. Their LPG export business at Galena Park saw a 15% increase in loadings due to improved market conditions and completion of a low-cost expansion project. The company remains focused on executing their strategic priorities and reported a 6% increase in adjusted EBITDA for the third quarter.

The company has performed well in a tough operating environment and is on track to meet its adjusted EBITDA range for 2023. They have benefited from fee floor contracts and have a successful hedging program in place. The company has spent $1.6 million on growth capital projects and expects to spend towards the higher end of their range for the year. Their net maintenance capital spending is slightly higher than expected. They have a strong balance sheet and are focused on maintaining investment grade status, investing in high-return projects, and returning capital to shareholders. Their major projects are integral to their business.

The company plans to increase its dividend by 50% in 2024 and expects to continue growing it in the future. They also plan to continue executing share repurchases. The company is optimistic about its long-term outlook and attributes its success to its talented team and strategic priorities.

Jen Kneale, speaking on behalf of Targa, discusses the company's plan for dividend growth and returning capital to investors. They have received many questions about this and believe they have a strong strategy in place. They are confident in the strength of their business and are able to invest in it while also increasing cash flow stability. They plan to return 40-50% of adjusted cash flow from operations to shareholders over multiple years, while also prioritizing a strong balance sheet. This is how Targa and their Board of Directors approach the dividend and return of capital.

The company is focused on maximizing shareholder value through a return of capital strategy, which includes a stable dividend and opportunistic share repurchases. Recent announcements of upstream consolidation in the Permian are consistent with previous announcements and the company has good relationships with the parties involved. The company currently has contracts in place with all the parties mentioned.

The speaker discusses the long-term contracts in the Permian Basin and the strong growth outlook for the region. They mention that there were some temporary operational issues in the third quarter, but overall, the Permian volumes are on track with their guidance. They also note that there was a decrease in volumes in the Delaware region, but this was expected and there is still strong activity in the area.

The company is experiencing delays in adding compression but expects 200 million a day to come online by the end of the year. They are confident in the growth of Permian volumes in the future and have announced NGL pipeline expansions. They had some volume improvements in the third quarter, mostly from third-party volumes, and expect continued growth in 2024. They anticipate this growth to come from both their own upstream volumes and third-party volumes.

The speaker discusses the upcoming Daytona pipeline and its impact on volume growth. They mention the operating leverage and runway it will provide, allowing them to evaluate potential opportunities to move on other pipelines. They also touch on NGL pipeline volumes and their comfort with offloading volumes if necessary.

The company is confident about their long-term prospects with the start-up of pump stations and the completion of the export expansion project. They expect to see increased volumes in the fourth quarter due to improved demand and opportunities in the ARB market.

The company plans to focus on fulfilling their term contracts and taking advantage of spot opportunities while optimizing their operations around the facility. They are still learning about the capabilities of their expansion and will continue to look for ways to optimize. There were some constraints on G&P volumes in the Delaware region due to delays in laying pipelines and getting compression, but the company expects this to be a one-time issue and does not anticipate any lingering problems in the future.

The company is facing pressure issues in the field and is adding a lot of compression to address it. They are confident in their volume growth and have multiple plants under construction. The capital return framework allows for 40-50% of operating cash flow to be returned to equity holders through buybacks and dividends while still meeting their growth objectives and maintaining their target leverage. This is a significant increase in dividends and buybacks compared to previous years.

Jen Kneale is explaining that the company is looking at target specific metrics to provide visibility into their performance. They have a lower LTM return of capital compared to peers, but they expect to have strong total return performance in the future due to their value proposition, EBITDA growth, and strong balance sheet. They are not setting a specific target for returning capital to shareholders, but are using this metric to inform their decisions over a multiyear planning horizon. They have announced a dividend for the first quarter of 2024 and will continue to evaluate their options.

Bobby Muraro from Targa Resources discusses updates on the company's gas solutions and the APEX project in the Permian Basin. The company's priority is to ensure that a solution is in place for the 2026 time frame, whether it is APEX or another pipeline. Targa is open to backing another pipe if needed and is committed to ensuring that gas can continue to flow through their plants and NGLs down their integrated system.

Tristan Richardson asks about the export market tightening up and the capacity for Daytona once it's fully ramped up. Scott Pryor responds that the market currently feels tight and they are pleased with the timing of their recent export expansion. They will continue to optimize and look for ways to facilitate movements across the dock. They also have plans for further expansions at their Galena Park facility, which will provide meaningful capacity improvements while being capital efficient. They are fortunate to have an existing facility that they can add projects to. Neel Mitra from Bank of America asks a question.

The speaker clarifies that the 200 million cubic feet previously mentioned is not a contract roll off, but rather a move to a producer-owned plant. This was part of their planned growth and did not result in any losses to third-party midstream companies. The company is backfilling with higher-margin gas and sees potential in Apex opportunities. They are willing to invest in Apex and may consider being the operator or taking a small equity interest. The maximum amount they would be willing to invest is not specified, but 2025 is expected to be a lower CapEx year compared to 2024.

The speaker, Matt Meloy, discusses the potential for a joint venture between midstream companies and producers to build the next pipeline out of the Permian. This could potentially result in Targa having an ownership interest in the project, similar to their involvement in the GCX pipeline. The company is open to different options for financing and operating the pipeline, and expects their capital spending to decrease after 2024.

Jeremy Tonet from JPMorgan Securities asks about Targa's 2024 outlook and any potential factors that could impact EBITDA growth. Matt Meloy responds that while they are not providing specific guidance, they are optimistic about EBITDA growth in 2024 and beyond. He mentions that the Permian G&P business will play a key role in this growth, with strong volume trends expected in the region. He also notes that Targa will have a significant amount of fractionation capacity coming online in 2024, which could further boost their export capabilities.

The primary driver for Permian gathering and processing growth will be the main focus for Targa Resources. The company is not currently looking to participate in industry consolidation, as they have a strong internal business and multiple growth opportunities in their core business. Their plan is to invest in organic growth projects, lower leverage, and increase distributions to shareholders. They are currently focused on executing their plan and not pursuing bolt-ons or tack-ons.

In response to a question about the operational issues faced by Targa Resources in the third quarter, Pat McDonie and Bobby Muraro discussed the company's capabilities in handling CO2 and H2S, as well as their plans for infrastructure and CO2 sequestration projects. They acknowledged that weather and compression issues, as well as residue gas pipeline problems in the Delaware Basin, have affected operations, but they are working to improve fungibility and keep production flowing. They also mentioned that CO2 production is growing in the Delaware Basin and they are investing in infrastructure to handle it.

Targa Resources is moving forward with their MRP plans and expect to start receiving 45Q credits this year. The company has a lot of organic growth opportunities and they will continue to assess their investments and make return of capital decisions each year based on various factors, including their forecast and sensitivities.

The company has been making progress in increasing the percentage of fee-based contracts in their G&P and downstream businesses. They have also added fee floors to contracts and are currently at or below those floors. This puts them in a good position for future earnings and allows them to invest for producers. If commodity prices increase, the percentage of fee margin may decrease in their gathering and processing business.

The company is pleased with the fee floor structure as it provides stability in cash flow. They aim to have all their gathering and processing contracts be fee-based, combined with their downstream business. The team has been successful in pushing towards this direction. The delays in compression orders have not significantly affected the CapEx, as they are still able to capture initial production with coordination from producers.

The operator thanks Brian Reynolds for his question and introduces Sanjay Lad to answer it. Brian asks about Targa's integration of GMP assets in the Permian and how many volumes are currently being transported on Targa's long-haul system. Matt Meloy responds that while not all volumes will be transported on Targa's system, the majority will be and this number will continue to increase as Targa grows.

The speaker is discussing Targa's capital expenditures and potential projects in the coming years. They mention a potential need for additional processing plants and ethane exports, but state that their focus is currently on increasing connectivity to the domestic petrochemical market. They anticipate higher capital expenditures in 2024, but expect them to decrease in 2025 and beyond.

The speaker, Sanjay Lad, discusses the potential for Targa Resources to benefit from increased ethane consumption due to new petrochemical plants. He thanks the audience for their interest and invites them to follow up with any questions. The conference call is now concluded.

This summary was generated with AI and may contain some inaccuracies.