The operator introduces the Targa Resources First Quarter 2024 Earnings Webcast and Presentation. Sanjay Lad, Vice President of Finance and Investor Relations, welcomes listeners and provides an overview of the company's first quarter earnings release and accompanying presentation. He also reminds listeners that statements made during the call may contain forward-looking statements. Matt Meloy, Chief Executive Officer, then discusses the company's strong first quarter results, including record adjusted EBITDA, Permian and LPG export volumes, and a 50% increase to the common dividend per share. He also mentions the company's successful execution and growth in the Permian region.

Despite operational challenges due to harsh weather in January, the company saw significant volume growth throughout the quarter and is expecting continued growth in the Permian region. To support this growth, the company has announced two major capital projects, a new plant and fractionator, as well as a small project to increase LPG export capacity. These projects will not change the company's estimated growth capital spending for 2024 and 2025.

Despite the current weakness in natural gas and NGL prices, the company remains optimistic about their full year 2024 adjusted EBITDA and their ability to generate high return organic opportunities. They discuss their operations in the Permian, including the construction of new plants and a recent fire at one of their existing plants. The company expects the plant to be back online before the end of the second quarter and does not anticipate a significant impact on volumes. In Permian Delaware, activity and volumes are also strong.

The company's Roadrunner II plant is expected to start operations in June and will be highly utilized. The next plant, Bull Moose, is on track to come online in the second quarter of 2025. The company expects increasing volumes of Permian gas as new compression and plants come online. The company has managed its Permian gas takeaway positions well and is awaiting relief when the Matterhorn pipeline comes online. Construction is continuing on the Daytona NGL pipeline expansion, which is expected to begin operations in the fourth quarter of this year. The company also expects high utilization for its new fractionator in Mont Belvieu and plans to restart its Gulf Coast fractionator joint venture in the second quarter. Construction is ongoing for Train 10 and the company plans to build Train 11, a new fractionator expected to begin operations in the third quarter of 2026. The capital for Train 11 was already included in the company's expected spending for 2024 and 2025.

In the first quarter, Targa's LPG export business at Galena Park reached record loadings due to strong market conditions and nighttime transits for larger vessels. The company's reported adjusted EBITDA for the quarter was a record $966 million, with natural gas inlet volumes in the Permian also reaching a record high. NGL pipeline transportation and fractionation volumes were also strong, while optimization opportunities in the marketing business contributed to the success. However, the second quarter may see weaker EBITDA due to seasonality and the impact of a fire at the Greenwood plant, but EBITDA is expected to increase in the second half of the year. The Targa team was praised for their focus on safety and execution, and the company is appreciative of their efforts.

Targa Resources is well-positioned to weather the current low commodity prices due to their combination of fee and fee floor contracts and hedges. They expect to have strong momentum heading into 2025 with new infrastructure coming online this year. They have also included a new performance metric, adjusted cash flow from operations, in their disclosures. Their estimate for 2024 growth capital spending remains unchanged, and they anticipate generating meaningful free cash flow in 2025. Their priorities for capital allocation include maintaining a strong balance sheet, investing in high returning projects, and returning capital to shareholders. They aim to return 40% to 50% of adjusted cash flow from operations to equity holders over time.

The company's Board has approved a 50% increase in the 2024 annual common dividend to $3 per share, with expectations for continued growth in the future. The company also repurchased $124 million of common shares in the first quarter and has a positive outlook for the short, medium, and long term. The Q&A session is limited to one question and one follow-up. The first question is about LPG volumes, which have remained strong despite global shipping volatility. The company's success in this area has continued into the first quarter, although shipping has moderated.

The company has been able to take advantage of available vessels in the fourth quarter and first quarter of this year for spot opportunities in the propane and butane market. The Panama Canal issues do not seem to be impacting the company, as most shipping is now going around the Cape of Good Hope instead. The company has benefited from their expansion project and nighttime transits, which have been safely operated by the Houston Ship Channel and Pilots Association. The demand for LPG in the East is strong, with new plants coming online in China and developing markets in third world countries. The company expects to continue seeing positive results throughout the year. The exact impact of nighttime transits on effective capacity is not quantified.

The company has seen an improvement in operating rates due to nighttime transits, and they expect continued growth in both Midland and Delaware throughout the rest of the year. However, there may be some disruptions due to residue pipes going down, but the impact of this is uncertain until Matterhorn comes online.

The speakers in the paragraph are discussing Targa's growth outlook for the rest of the year and their optimism despite potential issues. They also mention the company's strong balance sheet and focus on organic growth in their core business. They plan to continue investing in new projects and are excited about the company's short, medium, and long term outlooks.

The speaker discusses the positive outlook for the company's operations in the Permian Basin, with a strong track record of success and a promising future. They also mention potential challenges in the coming months, but overall feel confident about their performance and outlook for the rest of the year.

John Mackay asks about the initial commentary on 2Q EBITDA and how it ties in with the message that Permian volumes should still be growing. Jen Kneale explains that the $10 million expense from the plant outage and marketing rolling-off seasonality will impact the EBITDA, along with expected OpEx increase and seasonal trends. However, they remain optimistic about strong Permian growth and the start-up of Train 9 and GCF capacity.

The company has announced new projects including a plant, frac, and export expansion. The question is whether there is still room for more projects before amending 2025 CapEx guidance.

Matt Meloy and Scott Pryor from the company discussed their plans for growth in the coming year, including the construction of Pembrook II and Train 11. They also mentioned evaluating the need for another plant in the Delaware region. Despite the strong stock performance, the company plans to continue with their buyback program and aim to reach their target payout of 40-50% in the near future.

The company has strong conviction in their outlook and plans to continue using their flexible balance sheet to repurchase shares. The repurchase program will be opportunistic and dependent on market opportunities. The company will not give guidance on their repurchase plans for the rest of the year, but it is an important tool for returning capital to shareholders. The company has a framework for returning capital to shareholders and will reassess in 2024 due to a large growth capital lift this year. The next question is about the company's dividend and capital allocation plans.

The speaker asks about the growth of the company and if it is spread evenly across all producers or if there are specific key producers driving the growth. The company's representatives state that the growth is consistent across all producers and all areas of operation. They also mention that they have good visibility for future gas production and that their capital spending plan of $1.4 billion is flexible enough to account for any additional organic growth or potential acquisitions.

In 2025, the company expects to reach $1.4 billion in revenue. This is largely due to the completion of downstream projects such as Daytona and Train 11, and an export project. The company does not anticipate significant changes in the downstream sector, so any changes in revenue will come from Gathering & Processing. If there is a significant increase in activity or volumes, this could lead to more compression or pipelines being added, but the company already has plans in place for this. Overall, the company is confident in the $1.4 billion projection, but it may be adjusted slightly as the year progresses. During the quarter, one of the factors contributing to higher revenue in the Gathering & Processing segment was increased fees, which could be attributed to various factors such as fixed fee contracts, escalators, or higher fee floors.

The company had a successful quarter due to their commercial team's efforts in securing fee floors in key contracts. This has allowed them to announce a new processing plant despite negative prices. The company expects to earn more fees in their gathering and processing business as a result. On the LNG side, fractionation volumes were down due to scheduled downtime and harsh weather. However, the company is optimistic about the future with the startup of Train 9 and GCF in the second quarter.

The company is expecting a significant increase in frac volumes in the second quarter due to the completion of Train 9 and the partial contribution from GCF. This trend is expected to continue throughout the third and fourth quarters. Scheduled maintenance is done periodically to meet requirements and minimize impact on customer performance. There may be some impact from extreme Waha prices, but the company is mostly fee-based and well-hedged. However, the increasing supply of gas in the Permian may put pressure on the company to move forward with a gas pipeline project like Apex.

The speaker explains that negative prices in Waha have both positive and negative impacts on their gas marketing business, and they are constantly planning and preparing for these fluctuations. They also mention their priority of ensuring gas transport out of the basin and their current efforts to secure a new pipeline by the end of the year.

The speaker is discussing potential progress on a gas pipeline and states that it could potentially be completed earlier than expected, possibly before the end of the year. They mention the location of Waha as a motivating factor for shippers and pipe owners to get things done. The speaker expresses confidence that the pipeline will go forward and mentions that the previous call was only three months ago. The next question is about the company's capital expenditures and the speaker explains that the 2025 guide is lower due to completing a project this year and not needing to spend on NGL transport or export expansion.

Sunil Sibal from Seaport Global asks about the current and future capacity of the Permian portion of Grand Prix and competition for third-party volumes. Scott Pryor responds that with the addition of Daytona in the fourth quarter of this year, capacity will increase to over 600,000 barrels a day. They also have a lot of operating capacity on the South leg and continue to move volumes from third-party pipes.

The company is evaluating when it will need to expand its assets in the South and believes it has room for growth. They primarily focus on their own NGL infrastructure to service their own footprint, but also participate in third-party business. The majority of their activity and growth is in the Permian region, but they are open to opportunities in other regions if they make sense.

The company expects strong business activity in the Badlands for the rest of the year and into next year. They plan to continue growing their business in the area if it is economically viable. The company also reiterates the need for a new pipeline out of the Permian basin by 2026 and expects a decision on this by the end of the year. The construction of the pipeline is expected to take 24 months. The company is confident that a solution will be found to address the '26 basin issue. They are also optimistic about their propane business for the remainder of the year.

The speaker, Scott Pryor, discusses the current state of production and storage in the Permian region and the impact on exports. He mentions expansion projects and increased demand for shipping, which will benefit the company. The moderator, Zack Van Everen, thanks the speakers and the call ends. The CEO, Sanjay Lad, thanks everyone for their interest and mentions that the IR team is available for further questions.

The operator thanks the participants for attending the conference and informs them that the program has ended. They are now free to disconnect from the call.

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