The paragraph introduces the third quarter 2024 earnings call for Targa Resources Corp, conducted by the operator and Tristan Richardson, the Vice President of Investor Relations and Fundamentals. The call presents Targa's third-quarter earnings release and supplemental presentations, available on their website. It notes that forward-looking statements may be made, with actual results potentially differing, and advises consulting their SEC filings for more information. The speakers for the call include CEO Matt Meloy, President Jen Kneale, and CFO Will Byers, with other senior management available for the Q&A session. Matt Meloy begins the main presentation by welcoming Tristan Richardson to Targa.

Tristan, with 13 years of experience in energy sell-side research, will lead Investor Relations and Fundamentals at Targa, alongside Sanjay. The company had a strong third quarter, exceeding expectations and setting a positive trajectory into 2025. Targa expects to surpass its adjusted EBITDA guidance, achieving more than $500 million in year-over-year growth. By mitigating exposure to volatile commodity prices and securing 90% of its margin through fee-based contracts, Targa has improved its market position. Strategic investments and a strengthened balance sheet have enhanced shareholder returns and the company's financial standing. Targa is optimistic about its prospects, particularly due to strong positioning in the Permian region.

The company is expanding its operations in the Permian Basin by developing two new plants and enhancing sour gas treatment infrastructure in the Delaware Basin. An 800 million cubic feet per day sour gas treater and injection well will be operational by early 2025, increasing treatment capacity to over 2.3 billion cubic feet per day. The company is also enhancing infrastructure to capture and sequester CO2, which will result in accruing tax credits. These efforts are expected to increase volumes through downstream assets and generate strong returns, enabling continued capital returns to shareholders. The team is recognized for their focus on safety and execution amid this growth. Jen Kneale is set to discuss operational results and capital allocation in more detail.

In the third quarter, natural gas volumes in the Permian reached a record 6 billion cubic feet per day, a 5% increase from the previous quarter and an 18% rise from last year, boosting NGL transportation and fractionation volumes. This growth has accelerated the need for new processing plants in the Permian Midland and Delaware regions, with several plants scheduled to begin operations between 2025 and 2026. Record NGL pipeline and fractionation volumes were achieved, driven by increased supply from the Permian G&P systems. To accommodate anticipated growth, expansions in downstream systems and a new fractionator at Mont Belvieu are planned for completion by the third quarter of 2026.

In the third quarter, the LPG export business at Galena Park averaged 12.4 million barrels per month, despite a temporary reduction in loading capacity due to a 10-year inspection. The company plans to expand its capacity by an additional 650,000 barrels per month by late 2025, driven by strong global demand for U.S.-sourced LPGs. The company is prioritizing a strong balance sheet, investing in high-return projects, and increasing shareholder capital returns, including repurchasing $168 million in shares during the third quarter and nearly $650 million year-to-date. They aim to return 40% to 50% of adjusted cash flow to shareholders this year, exceeding previous expectations due to business outperformance. Plans are in place to recommend a 33% increase in the 2025 annual dividend, with potential for further annual increases beyond that. The company positions itself as a compelling investment opportunity.

The paragraph discusses Targa's strong financial performance in the third quarter, highlighting a record adjusted EBITDA of $1.07 billion, a 9% increase from the previous quarter, driven by higher volumes in the Permian and optimization of natural gas and NGLs. The Gathering and Processing segment and the Logistics and Transportation segment both set quarterly records in adjusted operating margins. The company anticipates full year 2024 adjusted EBITDA to exceed previous estimates, supported by recent expansions and capacity additions. For the third quarter, net maintenance capital spending was $60 million, with an annual estimate of $225 million, and net growth capital spending was $700 million.

In 2024, Targa expects its net growth capital spending to slightly exceed $2.7 billion, contingent on ordering long lead time items. This spending is projected to further increase in 2025 due to infrastructure investments, enhancing free cash flow relative to 2024, with more details to be provided in February. The company improved its liquidity by extending a $600 million accounts receivable facility to 2025 and completing a $1 billion senior notes offering, which reduced reliance on a commercial paper note program. By the end of Q3, Targa had $1.9 billion of liquidity and a net leverage ratio of approximately 3.6, within its target range. Moody's upgraded its rating to Baa2, aligning with upgrades from all three major rating agencies, maintaining mid-BBB ratings with a stable outlook. The focus remains on sustaining a strong investment-grade balance sheet.

In the Q&A session, Theresa Chen asks about the company's 2025 capital expenditure (CapEx) and capital allocation plans in light of their accelerated growth. Matt Meloy responds by expressing excitement over the company's performance and higher-than-expected EBITDA growth and volumes. He notes that the accelerated growth has led to increased capital spending, particularly in Gathering and Processing, requiring more field-level capital. This acceleration has also resulted in the earlier-than-expected commissioning of plants, like the Falcon 2 plant and East Driver plant, which will drive higher CapEx in 2025.

In the paragraph, the company discusses its ongoing planning process for G&P spending and the timing of new plants, promising more details by February. Theresa Chen inquires about downstream throughput trends, noting a robust fourth quarter following a partial downtime. Scott Pryor responds, highlighting improved third-quarter performance after second-quarter setbacks due to vessel inspections. He expects fourth-quarter volumes to be as strong or stronger than the third quarter, with continued demand for propane and butane and efficient use of both large and smaller docks for closer markets.

The paragraph discusses industry trends and expectations from the third quarter moving into 2025, focusing on the shipping and energy sectors. The speaker highlights the benefits of new vessel deliveries, notably on the VLGC and MGC sides, which keep freight rates low and facilitate supply funding from the U.S. globally. During a Q&A, Jeremy Tonet from JPMorgan inquires about producer activities, especially in the New Mexico area, and how producers' operations vary between integrated, large independents, and smaller players. Matt Meloy responds, noting a mix of customer types with whom they work and an unexpected rise in gas output, attributed to more productive wells, leading to growth expectations for 2025 and 2026.

The paragraph discusses the positive outlook for natural gas growth in the Delaware Basin, particularly in New Mexico, due to a strategic acquisition and integration of Lucid assets in 2022. The acquisition strengthened their position in the region, allowing them to capitalize on increased activity. Additionally, they highlight ongoing projects for gas egress from the basin, including a partnership with Blackcomb, and emphasize the importance of enhancing infrastructure to support future growth needs, projecting future developments around 2028.

The paragraph discusses the growing demand for gas pipelines due to increased gas production and the potential effects of industrial and data center consumption in the basin. There are ongoing discussions with customers about future projects, though the specifics and timing are uncertain. Additionally, Michael Blum from Wells Fargo inquires about the long-term growth capital expenditure trends. Jen Kneale responds that the typical annual growth CapEx is around $1.7 billion in a high-growth environment for the Permian Basin, but this figure could increase if growth surpasses expectations.

The paragraph discusses the need for increased capital spending on infrastructure to support high growth in the Permian region, specifically for the company Targa's systems. The company has experienced significant growth and anticipates continued increase in demand, prompting accelerated investment in gathering lines, compression, and plant infrastructure. Additionally, the company has enjoyed commercial success, leading to further investment plans for 2026. Regarding share buybacks, they are maintaining an opportunistic approach, prioritizing capital allocation without a fixed schedule, despite rising stock prices.

The paragraph discusses Targa's strong momentum heading into the future, particularly from 2024 onwards, and their strategic approach to share repurchases based on this confidence. The company expects to continue opportunistic repurchases to return capital to shareholders, while noting variability in this approach. Keith Stanley from Wolfe Research questions the change in volume outlook and plans for NGL pipeline spending given updated 2024 and 2025 EBITDA and CapEx projections. Scott Pryor responds, mentioning the transportation legs' performance in the third quarter and future expectations with the full implementation of the Daytona and West leg of Grand Prix pipelines, enhancing the contribution from various regions.

The paragraph discusses the company's current operating leverage, particularly related to its pipeline infrastructure, which includes two 24-inch pipes and a 30-inch pipe. The company has entered into third-party agreements to delay the need for expanding the 30-inch pipeline, giving them time to assess future volume requirements. These agreements align with the company's near-term plant growth. Eventually, the company will need to expand the 30-inch pipe, a decision they will evaluate as part of their 2025 budget process regarding capital expenditures. Additionally, Keith Stanley notes strong Q3 marketing performance, querying whether it was due to spot LPG exports or optimization of weak Permian gas. Jen Kneale replies that the year's strong marketing across NGL, natural gas, and export sectors has contributed to their outperformance, although they do not include this in their regular guidance.

The paragraph discusses expectations for strong marketing opportunities driven by the extensive infrastructure and volume movements across gas and NGL systems. Scott Pryor mentions that volumes in the third quarter were slightly impacted by vessel inspections, but improvements are expected in the fourth quarter. The company benefited on the export side by adjusting to smaller vessels and catching up from the downtime. Jean Salisbury inquires about the impact of gas egress on volume results, and Matt Meloy responds that there hasn't been a negative impact on volumes due to gas takeaway issues, as they work with producers to ensure volumes are moved efficiently with their available transport capacity.

The paragraph discusses volume growth and expectations for the upcoming quarter. The company has experienced higher-than-normal volume growth in the second and third quarters, around 300 million a day, but does not expect this level of growth to continue into the fourth quarter due to a lower margin contract rollover and other factors. Jennifer Kneale notes that this contract rollover will reduce quarter-over-quarter volumes. Jean Salisbury inquires about the company's future strategy concerning LPG expansion and whether they would consider utilizing third-party LPG capacity to defer their own spending. Matt Meloy doesn't provide a concrete answer but implies the strategic value of having their own export capacity.

The paragraph discusses the company's plans to expand its LPG export capacity in response to increasing NGL volume growth. They aim to address easy debottlenecks to handle incremental volume growth and plan a substantial LPG export expansion, including pipeline development and additional refrigeration, estimated at around $350 million. The company is currently evaluating the timing and scale of this expansion, considering capital needs for 2025 and beyond. They intend to manage their own export volumes rather than relying on third-party contracts. Additionally, the company is exploring ways to improve piping at their Belvieu and Galena Park facilities to reduce bottlenecks, prioritizing their own supply aggregation and volume management.

In the paragraph, the discussion centers on Targa's operations and future growth in handling sour gas. John Mackay from Goldman Sachs inquires about the potential growth and capital expenditures related to Targa's sour gas business. Matt Meloy responds, highlighting Targa's extensive experience with sour gas, dating back to their Dynegy days. With the Delaware region experiencing increasing sour gas volumes, Targa has ramped up investments to manage H2S and CO2. The company is bringing an 800-million-a-day treater online at the Bull Moose complex and drilling additional wells to handle the growing sour volumes. Handling sour gas is complex, but Targa sees this as an opportunity for long-term growth and collaboration with producers in the Delaware region.

The paragraph discusses the sour plants on the eastern side of the Delaware Basin, highlighting that although they haven't been labeled as such historically, they are now a significant talking point in the industry. John Mackay inquires about the potential impact of 45Q tax credits on cash tax payment requirements. Robert Muraro responds, stating that while the credits are beneficial and align with their infrastructure for handling sour gas, they are not substantial in the grand scheme of Targa's operations. The company continues to develop its carbon capture, utilization, and storage (CCUS) business, although it's not a primary focus.

In the paragraph, Jen Kneale indicates that the company's outlook for cash taxes remains unchanged despite recent developments. They still expect to be affected by the ATM in 2026 and become a full cash taxpayer in 2027, after utilizing their NOL, including considerations related to CCUS. Operator then opens the next question from Manav Gupta at UBS, who congratulates Tristan Richardson for his transition from a sell-side analyst and asks about the Falcon 2 or East Driver plants, specifically their economics or build multiple. Matt Meloy explains that the economic metrics and build multiple remain consistent with previous estimates at around 5.5 times for organic build, driven by increased volumes in the Permian region, which accelerated the decision to proceed with these projects earlier than expected. Robert Muraro, referred to as Bobby, also concludes the response.

In the paragraph, the discussion focuses on the Permian Basin's activity outlook, highlighting a robust level of rig activity on Targa's acreage, with one in three rigs operating there. This high activity level includes both historical large-acreage dedications and new successful commercial ventures, leading to significant gas growth, particularly from gassy formations. The outlook for the next 24 to 36 months is optimistic, with expectations of continued gas growth and activity on their systems. Neal Dingmann, from Truist, acknowledges the positive outlook and seeks details on the rig activity and associated gas forecast.

The paragraph discusses Targa's future capital spending and the potential impact of acquiring new assets on their free cash flow plans for 2025. Matt Meloy mentions that while they haven't provided a firm number for 2025 capital expenditures, they expect significant free cash flow. He indicates that while they continue to evaluate acquisition opportunities, the criteria are high, and their priority is on executing existing organic growth projects. Additionally, A.J. O'Donnell inquires about the impact of the new Matterhorn pipeline on production volumes, questioning whether the observed flows represent increased production or just gas redistribution within the basin.

The paragraph discusses the current situation and trends in the energy sector, specifically regarding oil and gas production and pipeline capacity. It mentions that while some customers might not be producing due to unfavorable Waha pricing or lack of takeaway capacity, the customers on the company's system are generally producing and have sufficient capacity. The matter of volumes shifting with new pipelines like Matterhorn coming online is addressed, amidst some existing pipeline maintenance and disruptions affecting Waha pricing. A question from Sunil Sibal inquires about ethane recovery trends and expectations for the Daytona pipeline system's volumes. Scott Pryor explains that the Daytona and Grand Prix West systems provide operational efficiency and leverage, while ethane prices around $0.18 may lead some areas to consider rejection economics.

The paragraph discusses the recovery of the gas industry, particularly in the Permian Basin, where activity is in full swing to sustain the integrated systems. It contrasts this with some areas outside the Permian that may not be as active due to lower prices. Sunil Sibal inquires about increased crude volumes in the Badlands system. Patrick McDonie responds, stating that the uptick is due to increased activity from producers who obtained permits and were previously inactive. Although robust growth isn't expected, steady activity levels should continue. The call concludes with Tristan Richardson expressing gratitude for participation in the Targa Resources conference call.

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