Targa Resources Q4 2025 Earnings Call Transcript

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Date

Feb. 19, 2026 at 11:00 a.m. ET

Call participants

• Chief Executive Officer — Tristan Richardson
• Chief Financial Officer — Jennifer Kneale
• President — William A. Byers
• Chief Commercial Officer — Benjamin Branstetter

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Takeaways

• Permian gathering volumes -- Averaged 6,650,000,000 cubic feet per day in the fiscal fourth quarter ended Dec. 31, 2025, rising 10% year over year due to sustained producer activity.
• Full-year adjusted EBITDA -- $4,960,000,000 for fiscal 2025, up 20% from fiscal 2024, with a fiscal fourth-quarter figure of $1,340,000,000 showing a 5% sequential increase from the fiscal third quarter.
• NGL transportation -- Achieved a record average of 1,050,000 barrels per day in the fiscal fourth quarter, with the system operating at full capacity.
• Fractionation volumes -- Set a record at 1,140,000 barrels per day in the fiscal fourth quarter.
• Record LPG export volumes -- Fiscal fourth-quarter export volumes averaged 13,500,000 barrels per month, despite minor fog-related disruptions.
• 2026 adjusted EBITDA guidance -- Projected at $5,400,000,000 to $5,600,000,000, representing 11% anticipated growth at the midpoint over fiscal 2025.
• Growth capital spending -- $3,300,000,000 invested in fiscal 2025, with approximately $4,500,000,000 planned for fiscal 2026 driven by major projects and volume growth.
• Net maintenance capital -- $226,000,000 reported for fiscal 2025.
• Share repurchases -- $642,000,000 of common shares were repurchased at a $170.45 average price in fiscal 2025.
• Leverage ratio -- Net consolidated leverage was approximately 3.5x at year-end fiscal 2025, within the long-term 3x–4x target.
• Available liquidity -- $1,900,000,000 as of Jan. 31, 2026, factoring in the Stakeholder acquisition and 2029 note redemption.
• Permian acreage dedications -- Added 350,000 dedicated acres organically in fiscal 2025 and nearly 500,000 through acquisitions, totaling more than 2,000,000 acres in areas of mutual interest.
• Capital program outlook -- Post-Speedway, growth capital is expected to average $2,500,000,000 annually; an increase from the $1,700,000,000 level outlined in fiscal 2024, attributed to a revised expectation of three plants per year and related investments.
• Run-rate adjusted EBITDA projection -- Run-rate over $6,000,000,000 is expected following Speedway project completion.
• Expansion projects -- Announced YETI 2 Delaware processing plant and thirteenth Mont Belvieu fractionator, with long-lead orders for two additional Permian plants planned for early 2028; total of eight plants over two years will add 2,200,000,000 cubic feet per day of processing and approximately 320,000 barrels per day of gross NGL capacity.
• Fee-based margin -- Over 90% of cash flows are fee-based; a 30% move in commodity prices would impact fiscal 2026 adjusted EBITDA by less than 2% at the midpoint.
• Hedging and cash tax outlook -- The company has hedged most non-fee margin for the next three years and does not anticipate paying meaningful cash taxes for at least five years due to bonus depreciation.

Summary

Targa Resources (NYSE:TRGP) delivered record operational and financial results in fiscal 2025, supported by robust Permian system growth and strong commercial performance. Management reaffirmed a multi-year outlook of high single-digit to low double-digit Permian volume growth and introduced additional infrastructure expansions, extending long-term growth visibility. New capital commitments reflect greater expected demand, with the growth capital trajectory increasing post-Speedway and multi-plant expansions underway. Conservative guidance incorporates only currently contracted volumes, and recent bolt-on acquisitions have further enhanced the asset base and inventory. No material change to the capital allocation strategy was indicated.

• Management directly linked increased post-Speedway capital guidance to higher plant development expectations, citing, "around three plants per year versus two plants previously."
• Recent producer acreage dedication revisions to the upside, particularly in the Delaware, were highlighted as "just adding to our outlook" and not dependent on incremental commercial wins for announced capacity utilization.
• The company addressed marketing-related EBITDA variability, making clear that, "we have not factored [additional marketing opportunities] in in a material way" for fiscal 2026, maintaining a risk-controlled approach to guidance.
• Net leverage was managed within the 3x–4x target despite increased spending and acquisitions, signaling balance sheet flexibility amid expansion.
• Management stated, "we do not expect Targa to pay meaningful cash taxes for the next five years," reinforcing projected free cash flow strength.
• Acknowledge that sustained fee-based margin and hedging strategy reduce exposure to commodity price volatility, with greater than 90% of cash flows remaining fee-driven.

Industry glossary

• G&P (Gathering and Processing): The segment of midstream operations focused on collecting raw production from wells and preparing it for transport or sale.
• Waha: A key natural gas pricing and transportation hub in West Texas, relevant for gas price differentials and pipeline egress.
• Frac (Fractionator): A facility that separates mixed natural gas liquids into component products such as ethane, propane, and butanes.
• LPG: Liquefied petroleum gas, principally propane and butane, used in exports and domestic consumption.
• Residue gas: The dry natural gas remaining after NGLs have been removed during processing, typically delivered into pipelines for end-users or further sale.
• Bonus depreciation: An accelerated tax incentive allowing immediate deduction of a substantial portion of capital investment, reducing current tax liabilities.

Full Conference Call Transcript

Thanks, Tristan, and good morning. Before we discuss our results, given this is Scott's last earnings call before his retirement in a couple of weeks, we wanted to thank Scott for his thirty-five years of service to Targa and our predecessor companies. Scott will leave a lasting legacy at Targa. And while we are going to miss him, we are excited about this next phase for Scott, Marcy, and the rest of his family. On behalf of the whole Targa team, thank you, Scott. You leave the team in great hands with Ben taking over for you. And, Ben, we are really excited to have you on the executive team. Matt, thank you for your comments about my retirement.

Jennifer Kneale: It has been an extreme pleasure to work alongside the Targa management team for the past many years. I look forward to watching our continued success while in retirement knowing that our employees, this management team will continue to focus on safety, customer service, and reliability, and do so with a high level of integrity. Thank you to my friends and colleagues in our offices and field operations. I have been a part of a great team here at Targa, and it has been my pleasure to stand on your shoulders. Thank you. Thank you, Scotty. And now turning to our results. 2025 was another exceptional year

Tristan Richardson: for Targa with record volumes across our integrated footprint, which drove record financial performance. Permian volumes grew 11% for the year, an increase of more than 600,000,000 cubic feet per day. NGL transport volumes increased by almost 170,000 barrels per day. Frac volumes increased more than 120,000 barrels per day. And we also had record LPG export volumes. Our operational performance translated into a record $4,960,000,000 of adjusted EBITDA, more than $800,000,000 higher year over year. We are almost two months into 2026, and our momentum continues as we estimate another year of low double-digit Permian volume growth. Our expectations for 2026 are consistent

Jennifer Kneale: with our previous commentary

Tristan Richardson: and our outlook for 2027 and beyond has only improved. We had strong commercial success in the Permian in 2024 and 2025, adding several billion cubic feet per day of gas volume over and above our existing volume growth from long-term acreage dedications. Our best-in-class footprint generates significant growth opportunities as we continue to expand our system and bolt-on growth projects.

Jennifer Kneale: This commercial success further adds to our long-term growth rate and gives us confidence in our capital program. Our returns on investment over the last several years have been best in class, and we are investing in the same types of projects that generated those attractive rates of return.

Tristan Richardson: So with this outlook for strong volume growth, we are announcing two new projects today: our next Delaware processing plant, YETI 2, and our thirteenth fractionator in Mont Belvieu. We are also ordering long-lead items for two additional plants in the Permian planned for early 2028. That is eight plants over the next two years, giving us line of sight to an incremental 2,200,000,000 cubic feet per day of additional processing capacity and gross NGL production of approximately 320,000 barrels per day.

Jennifer Kneale: For perspective,

Tristan Richardson: this incremental plant infrastructure alone

Jennifer Kneale: would amount to the fifth-largest

Tristan Richardson: processor in the basin. This type of volume growth and commercial success we are experiencing is driving more plant and field capital to the Delaware than in previous years. These projects represent more of the same from Targa: attractive investments across our integrated system.

William A. Byers: As we have talked about throughout 2025, we are in an elevated growth capital environment as we invest in G&P and downstream infrastructure. Our larger downstream projects, including Speedway and our LPG export expansion, set to come online in 2027. Following the completion of these projects, we expect to have lower downstream capital spending for years to come while our EBITDA is expected to be meaningfully higher, which results in a strong free cash flow profile. In a high single-digit to low double-digit Targa Permian volume growth environment, or about three plants per year, we would expect multiyear growth capital spending to average around $2,500,000,000 annually post-Speedway. This compares to approximately $1,700,000,000 in the illustrative case we shared in 2024.

Our updated illustrative case is higher because we assume around three plants per year versus two plants previously. We also assume proportional G&P field capital and downstream spending, including fracs, residue projects, and some carbon capture investment. We would note our post-Speedway multiyear growth capital assumes minimal NGL transport and LPG export capital for years. And based on our current visibility, we expect Targa reaching run-rate adjusted EBITDA of over $6,000,000,000 following the completion of Speedway. This combination puts us in position to continue to invest in growth while generating significant free cash flow for years to come.

This continues to align with our focus at Targa: grow adjusted EBITDA, grow our common dividend per share, reduce our common shares outstanding, all with an investment-grade balance sheet, and, once Speedway is complete, also generate significant and growing free cash flow. Before I turn the call over to Jen, I want to thank our employees for their ongoing commitment to safety, reliability, and delivering best-in-class service to our customers. Your efforts were essential to another record year for Targa in 2025, and we have already seen you rise to the challenges of managing successfully through the cold winter weather in January. With that, I will turn the call over to Jen.

Operator: Thanks, Matt. Good morning, everyone. In the fourth quarter, our Permian volumes averaged a record 6,650,000,000 cubic feet per day, up 10% from last year as strong producer activity continued across our systems. We indicated on our November earnings call that we had seen some producer shut-ins from sharply negative Waha pricing in the fourth quarter, but those volumes came back on our system, so we ended up with slightly higher fourth quarter volumes. In January, the impacts of winter storm Fern reduced volumes across our operations, but thanks to the hard work of our employees, our assets proved resilient, remaining online and ready to receive volumes once temperatures improved.

Our volume outlook is a result of the continued strong activity we are seeing from customers across our G&P footprint. And as Matt mentioned, we had strong commercial success in 2025 adding approximately 350,000 dedicated acres. Also, we completed the acquisition of Stakeholder and two bolt-on producer transactions, adding approximately 2,000,000 acres in areas of mutual interest and nearly 500,000 dedicated acres, adding to our long-term growth rate. In 2026, we look forward to placing our next three processing plants in service, including Falcon 2 in the Permian Delaware, and East Pembroke and East Driver in the Permian Midland. We continue to expect our new plants will be much needed at start-up.

Our Falcon 2 plant is expected to come online ahead of schedule and is currently in start-up, and our remaining announced plants underway for 2026 and 2027 remain on track. Also, we announced a new plant in the Delaware to accommodate the activity that we are seeing from our customers. Our YETI 2 plant is scheduled to be in service in 2027. And as Matt mentioned, we are ordering long-lead items associated with our next two Permian plants for early 2028.

Additionally, we continue to add connectivity and redundancy to our Permian residue capabilities, with our announced in-basin natural gas projects, including the Bull Run extension, Buffalo Run, and Forza, which all remain on track subject to the receipt of the necessary regulatory approvals. As demonstrated over the last number of years, we have taken a deliberate approach towards enhancing flow assurance for our customers and have a portfolio of gas takeaway to access multiple premium markets. The Blackcomb and Traverse pipelines, where we have a 17.5% equity interest, are currently under construction, and Blackcomb is expected to be in service in 2026 and Traverse in 2027.

While we do see the Permian natural gas egress environment improving as we exit 2026, we expect natural gas prices at Waha to remain volatile throughout much of the year. Importantly, the prospects for sustained higher Waha prices with improved egress are a long-term positive for Targa and our Permian producers. Turning to our logistics and transportation segment, NGL transportation volumes in the fourth quarter averaged a record 1,050,000 barrels per day, and our NGL transportation system continues to run full. Fractionation volumes averaged a record 1,140,000 barrels per day, and our LPG export volumes averaged 13,500,000 barrels per month.

Our Delaware Express project track trains 11 and 12, and 13, which we announced today, will support continued NGL supply growth from our Permian systems as we look to 2028 and beyond. We are well positioned operationally for the near, medium, and long term and believe that our leading customer service-driven wellhead-to-water strategy puts us in position to continue to execute for our shareholders. Our strategy is unchanged as we execute the same core projects with strong returns along our integrated value chain in the same core areas where we have been building Targa for years. I will now turn the call over to Will to discuss our fourth quarter results, outlook, and capital allocation. Will?

William A. Byers: Thanks, Jen. Targa's reported quarterly adjusted EBITDA for the fourth quarter was $1,340,000,000, a 5% increase over the third quarter. The sequential increase

Jennifer Kneale: attributable to higher system volumes and greater optimization opportunities

William A. Byers: in our marketing business. Full-year 2025 adjusted EBITDA was a record $4,960,000,000, a 20% increase over 2024, supported by record financial and operational performance across the company. We also benefited from broader marketing with approximately $150,000,000 of higher than expected optimization opportunities across 2025. We invested approximately $3,300,000,000 in growth capital projects in 2025, as we executed on our Permian and downstream expansions.

Jennifer Kneale: Net maintenance capital $226,000,000.

William A. Byers: We continue to return meaningful capital to our shareholders, opportunistically repurchasing $642,000,000 of common shares at a weighted average price of $170.45 during 2025. Over the past few months, we have been focusing on completing and integrating our recent bolt-on transactions

Tristan Richardson: and our long-term capital allocation strategy is unchanged.

William A. Byers: We continue to expect opportunistic repurchases to remain part of our all-of-the-above framework in 2026 and beyond. At year-end, our net consolidated leverage ratio was approximately 3.5x, well within our long-term target range of 3x to 4x. Our available liquidity as of 01/31/2026, which includes funding the Stakeholder acquisition and redeeming the 6.875% notes due January 2029, was approximately $1,900,000,000. Turning to 2026, we estimate full-year adjusted EBITDA to be between $5,400,000,000 and $5,600,000,000, an 11% increase over 2025, based on the midpoint of our range. We expect approximately $4,500,000,000 of growth capital spending in 2026, supporting our major projects and continued volume growth.

Our cash flows are greater than 90% fee-based, and we have hedged the majority of our non-fee margin for the next three years. The increasing fee-based margin and fee floors in our G&P business continue to provide cash flow stability and preserve the upside when commodity prices increase. To highlight the fee-based nature of our business, a 30% move higher or lower in commodity prices based on recent strip pricing would represent less than a 2% change relative to the midpoint of our 2026 adjusted EBITDA guidance.

Tristan Richardson: We expect to end 2026 our leverage ratio comfortably within our long-term target range,

William A. Byers: even with our recent acquisitions and a strong growth environment driving higher growth capital spending, highlighting the continued flexibility and strength of our balance sheet. Additionally, as a result of the return of bonus depreciation,

Jennifer Kneale: and based on our current assumptions,

William A. Byers: we do not expect Targa to pay meaningful cash taxes for the next five years. We are in excellent financial shape, with a strong and flexible balance sheet. We are well positioned to continue to create value for our shareholders.

Jennifer Kneale: And with that, I will turn the call back to Tristan.

Tristan Richardson: Thanks, Will. For the Q&A session, we ask that you limit to one question and one follow-up, and reenter the queue if you have additional questions.

Jennifer Kneale: Operator,

Tristan Richardson: please open the line for Q&A.

Operator: And wait for your name to be announced. Our first question will come from Jeremy Tonet with JPMorgan. Line is now open.

Jeremy Bryan Tonet: Hi. Good morning. Morning, Jeremy. Good morning.

Operator: Just want to kind of start off with the outlook ahead for 2026.

Jeremy Bryan Tonet: You have seen steady growth there, you know, double digits, whereas others in the industry we have seen kind of some retrenchment in forward expectations. And wondering if you could walk us through a bit more what is, you know, driving Targa resiliency in the growth outlook in 2026 and versus others? And I guess, what do you see post '26, you know, that gives you confidence in future you know, above-average growth.

William A. Byers: Yeah. Hey. Thanks, Jeremy. I will start, and then if Jen or Pat want to jump in. You know, for us, it kind of starts with our largest footprint across both the Delaware and the Midland, our strong producer relationships, and just our existing customers that we have that have discontinued to drill you know, across our footprint. We have had a lot of commercial success as well in 2024 and 2025, which is kind of continuing to add to our already existing strong growth rate on existing dedicated acreage. So I think it is a combination of just existing customers continuing to drill and continuing to add to our footprint.

You saw that with kind of our two bolt-on acquisitions and some of the larger projects we talked about in 2024 just continuing to add volumes for us. So 2026 looks very strong. You know, we are pointing to low double digits, and that is really pretty similar to what you know, we saw this time last year when we kind of guided to that growth rate for 2026. But all the commercial success we are having and just the activity we are seeing from our bottoms up forecast, forecast from our producers, is giving us even you know, I would say we are more positive on '27 and beyond from, you know, what we see today.

Jeremy Bryan Tonet: More positive. That is great to hear. I think that might tie into my next question. When you talk about the point $5,000,000,000 of CapEx kind of like that mid-cycle, if you will, it is higher than before. It has another plant I think than where you were before. I am just wondering if you could, you know, bridge us through, you know, what the what the drivers are there, and is this an expectation of even better growth versus what you thought before, which is what it sounds like? Good morning, Jeremy. This is Jen. I think that what we wanted to do with that slide was

Operator: really put on one page what we have been spending a lot of time talking to investors about, which is really that next transformation for Targa. When our EBITDA is, as Matt said in his scripted remarks, over $6,000,000,000 once Speedway is online on an annualized basis, and as we think about growth from there, just the amount of free cash flow that we would be able to generate across the scenarios that we would consider to be reasonable for us thinking about the future in terms of, call it, high single-digit to low double-digit growth across our footprint.

So I think we are supported by all the growth that we have seen from our existing contracts over the last couple of years. And then as we talked about on our February call last year and then on this call, we have just had a ton of commercial success. So hats off to our commercial team, of course, supported by our operations, but are just doing a really good job of identifying incremental opportunities for us to grow our already very large footprint.

And as we think about what I would call sort of multiyear average growth capital spend post-Speedway and post our LPG export project coming online, what we wanted to demonstrate is that, one, we are growing off a bigger base. So when we previously put that information out, we have now grown for the last two years at a pretty good clip. So one, it is just off a and that is why we are now saying it could be, call it, two and a half to three plants of spending in there, and that requires incremental field and compression spending as well.

And then there is also incremental spending for residue, has become a bigger part of our business versus where we were two years ago. And, also, there is some carbon capture and other things. But I do think it is a really good of just the amount of free cash flow we are going to be in position to generate as we get Speedway and our LPG export expansion completed, as those are really the two chunkiest projects that we have in our purview.

Jeremy Bryan Tonet: Got it. That is helpful. I will leave it there.

William A. Byers: Okay. Thanks, Jeremy.

Operator: Our next question comes from Theresa Chen with Barclays. Good morning. I would like to unpack that 2027-plus inlet growth assumption that

Theresa Chen: high single-digit to low double-digit rate. How much of this growth is a result of growing with your producers, per their plans? Are there key commodity price assumptions here that underlie this range? Is it contingent upon additional commercial wins or further tuck-in M&A? Any color here would be great.

William A. Byers: Yeah. Sure. You know, and as we, you know, kind of look at our multiyear forecast, you know, we will get bottoms-up, you know, individual forecast from our producers. And our larger independents and majors will typically get several years of forecast. Really, over the last ninety, one hundred eighty days, we have continued to get revisions higher. And it is not just from one producer, it is from several producers. And I would say that is more in the Delaware side than it is in the Midland. There is just kind of more activity and a more diverse customer set over there.

So we are becoming, we announced another Delaware plant today and two long-lead, you know, additional infrastructure for two long-lead plants. Both of those are likely to be in the Delaware. So that would make just a lot of infrastructure going in over there. And so that gives us just more confidence as we look to '27, '28, and even further out in our longer-term growth outlook. When I said I think 2027 is going to be stronger, it is, I would say it is going to be stronger than what we previously had expected at this time last year. We are not commenting relative to '26 or '25 growth.

It is just as we look out for multiple years, we see a stronger growth rate than where we sat at this time last year.

Theresa Chen: Understood. Thank you. And just looking at the results to date, so much of the momentum recently has been a result of commercial success executed a while ago and now coming to fruition. And it is a loaded term given the competitive environment in which you operate. On a go-forward basis, how should we think about the durability of your commercial and your ability to replicate it over time?

William A. Byers: Well, I mean, I would say what is great is even if we do not have a significant amount more commercial success, we are going to have really strong growth for years to come. If you just look at the millions of acres we have dedicated. So what we have done is we have just added to our existing really robust growth profile from our existing customers, and we have a really good commercial team. So if we can find accretive, either bolt-on acquisitions or step-out projects, we will continue to add to that.

But I would say we do not need it to fill the plants up that we have announced, and we do not need it to continue to grow in the Permian. I think further commercial success would just be additive to the growth rate that we are looking on.

Jeremy Bryan Tonet: Now.

Operator: I would just add, Theresa. We reach final investment decision on the projects that we move forward with based on the contracts that we have in hand. There is an assumption of future growth from contracts to be identified in the future or anything else. It is based on what is already executed and how we best position ourselves to service those already executed contracts as we move forward through time.

Theresa Chen: It is very clear. Thank you.

William A. Byers: Okay. Thank you.

Operator: Our next question comes from John Mackay with Goldman Sachs.

William A. Byers: I think I will

Tristan Richardson: I will pick up on this thread a little bit more.

William A. Byers: You are, you know, it looks like you are pointing to continuing to effectively take share in the basin. I think Theresa kind of asked on this, but maybe I will follow up. Are you guys still seeing the same level of margins you have seen historically, or maybe more broadly, you can kind of talk about that, you know, margin per M trajectory you have been seeing?

Tristan Richardson: Thanks.

Operator: This is Jen. I think that, yes, you should expect that we will continue to be able to execute consistent with our track record as it relates to our returns. We have got excellent producers already under contract with long-term contracts and I think we are doing a really good job of hopefully executing at a very high level for them. So it really all starts with our operations team, our engineering team, supply chain, getting all the assets that we need in hand that we can build so that we are in position to execute for our producers.

And I really think it is some of our advantages around having the largest sour system in the Delaware, having the largest footprint across the entire Permian, that puts us in position, as Matt said, to be able to do step-outs from a very economic perspective, from a capital perspective, and continue to generate returns, again, commensurate with the track records that we have been able to demonstrate. So this is not us taking lower returns to continue to execute.

I think it is really working very well with our producers to continue to show a track record of being in position with the assets they need to ensure that their volumes flow and doing a really good job for them is what continues to put us in a really strong position, and that is operations all the way from the wellhead down to the water. And we are really proud of how well our team is continuing to execute.

Jennifer Kneale: That is absolutely clear. Thank you. Maybe just to follow-up is, you guys are

William A. Byers: talking about a lot of gas here. Maybe just share your kind of medium and longer-term view on Waha at this point. Thanks.

Jennifer Kneale: This is Bobby. Yeah. I think we are excited. There has been a lot of public commentary about the pipes that are coming online later this year.

Tristan Richardson: We will be excited to see those pipes come online as well as others, further out the calendar in

Jennifer Kneale: 2028. I think it is going to be, you know, what it has been the last ten years, which is going to be, you know, a bumpy ride as assets come online. We will be in good shape on differentials and then we will fill those pipes up and new ones will come online. So when you think about the medium and longer term, I think we see in our view more pipes coming after the ones that have already been announced.

But it will be kind of the same oscillating mechanic where, you know, we fill up the pipes, basis gets rough, and then new pipes come online and fix it, and more people will have to underwrite more pipes going forward after the ones that have already been announced.

Tristan Richardson: Sorry. Just to make sure we are hearing you right, I guess your view right now is the current set of pipes coming should be mostly filled kind of as they come online?

William A. Byers: Thanks. I do not think that is right. I think they will, they will fill up over time.

Tristan Richardson: I think they will fill up

Jennifer Kneale: probably, you know, I will say faster than people expect at the end of the day, with the results we are seeing in the Permian from our customers. But it is a ramp over time. At the end of the day, the day you turn on a two or two and a half Bcf of pipe, there is not all of a sudden two Bcf or two and a half Bcf of new residue that day. So they do take a little bit of time to ramp up. Maybe you see a little bit more this time with shut-ins that we have heard about in the Permian on other systems.

But at the end of the day, they will take time to ramp up, but it is just, it is the same thing every time. It is the same story, just a different year.

Tristan Richardson: Alright. That is clear. Appreciate the time. Thank you. Thanks, John. Thank you.

Operator: Our next question comes from Keith Stanley with Wolfe Research.

Jennifer Kneale: Hi. Good morning. First, just wanted to clarify, I think you said $150,000,000 of upside from marketing last year.

William A. Byers: What are you assuming on marketing for this year relative to 2025? And what potential opportunities do you think there could be to capture this year?

Operator: Morning, Keith. This is Jen. That is right. In our scripted comments, Will said that for 2025, we had about an extra $150,000,000 of marketing benefits. I would say that consistent with what Bobby just answered, we believe that this is going to be a little bit of a bumpy ride as we move through 2026 around Waha pricing, particularly to the extent we have planned and or unplanned maintenance from pipes that are taking Permian gas volumes out of the basin. To the extent that occurs, that will create additional marketing opportunities for us. We are largely focused on making sure that our producer volumes move. We are in an excellent position to do that.

And so as you think about our 2026 guidance, I think consistent with our past practice, we are very conservative about how we forecast marketing gains. We have got, you know, call it a month and a half here of the year where we have really good visibility, and then we have got the balance of the year where I think there could be some incremental opportunities, but we have not factored that in a material way.

William A. Byers: Got it. Thanks for that. And second one, it kind of following up on some of the earlier ones, but

Jennifer Kneale: just taking the Delaware by itself, for example, you are building four plants now.

Tristan Richardson: You just said the long-lead items for the next two plants are also in the Delaware, so that is six plants in the Delaware.

William A. Byers: How much of the growth outlook

Tristan Richardson: there would you attribute to the Delaware just booming versus

William A. Byers: Targa is taking market share or getting a disproportional amount of the market given a competitive advantage? Yeah. I mean, you know, it is hard for us to really know how much is market share gains. I do not know what is happening, you know, on other systems as we look out several years. I would say what we have seen from several of our producers, we have had some underlying acreage dedications come back to us, come back to us with revisions to the upside. In one producer, it might be 50,000,000 a day. It could be 40,000,000 a day. It could be a and 50,000,000 a day.

We have had several of those over the last six months, which is just adding to our outlook. I would suspect others are having that on other systems as well. So it is a little hard for us to know how much is just total growth from the Delaware versus share gains. We kind of learn a little bit about that in hindsight. I would say we are pretty aware of all the opportunities out there. We do not win everything. You know, I think we win our fair share. And we have really strong and active producers and just a lot of acreage already dedicated to us, and there is just a lot more activity on.

Jeremy Bryan Tonet: I would just add that I think that the acreage that we have dedicated to us has shown a resiliency as well.

Operator: As you have seen rig counts drop in the Delaware, I think we have had really good consistency as we have moved forward through the last couple of years, which we would expect to continue going forward. So some of it is also that we have gained market shares. Rigs have dropped from other areas, but it is not necessarily that we have had a lot of adds to our acreage that is already existing. It is more that I think we have had just consistency and then just better results in that consistent activity on our acreage.

Jeremy Bryan Tonet: Thank you. Okay. Thank you. Our next question comes from Manav Gupta with UBS.

Operator: Good morning. I wanted to ask you something, which is more of an upstream question, but

Manav Gupta: two of your biggest customers are very actively talking about it. They are basically saying, look, our Permian recoveries are improving as we put more science into it, whether it is AI, whether it is lightweight proppants, whether it is surfactants, and so they are basically saying the Permian rates of returns are improving because our wells are performing better as more science is going into that. I am just trying to understand based on what you are seeing out there, are you also seeing that as, you know, more of these newer technologies are going into Permian, the well recovery is improving, which is obviously very positive for Targa. Good morning, Manav.

I would just say that I think it is a combination of factors.

Operator: It is, I think, really exciting for all of us to hear about the developments that our producer customers are making and their excitement about the implications for their improved efficiencies going forward and improved rates of return because of the success that they are having. I think that is part of what we are seeing. I think we are also seeing the benefits of improving GORs in certain areas of operation. Frankly, just more gas coming out of wells than was forecasted as well being a factor too. So for us, I think it is a combination of factors.

The technological developments and the impact on individual wells I think we really have to look to our producer customers and what they are saying for the real commentary around that. But I think there is a variety of factors that are contributing to us seeing more gas coming out of wells than were previously forecasted.

Manav Gupta: Perfect. Thank you. My quick follow-up is you did announce two small bolt-on deals, very interesting opportunities. You help us understand those two a little better, how they came about, and why they fit perfectly into Targa? Thank you.

Tristan Richardson: Yeah. This is Bobby.

Jennifer Kneale: Both those acquisitions were from producers that we have really strong with and have for a long period of time. And discussing their plans going forward and

Tristan Richardson: and how they are going to work at it, it seemed to make more sense for

Jennifer Kneale: us to own those assets and build out the systems, and we are excited about it because it also gives us some assets in areas where we can go leverage and leverage the footprints and grab more acreage as we move through time. At the end of the day, it was kind of a testament to relationships we have with producers and

Tristan Richardson: and

Jennifer Kneale: working with them on a day-to-day basis to make sure they have got what they need to drill their wells and bring gas to us.

Manav Gupta: Thank you so much, and congrats on a good quarter.

Jennifer Kneale: Thank you. Thank you.

Operator: Our next question comes from Michael Blum with Wells Fargo.

William A. Byers: Hey, good morning, everyone. Good morning. Maybe just

Jennifer Kneale: just to stay on the conversation around growth and what is going on out

Michael Jacob Blum: in the Permian with your producers. I was wondering if you could talk a little bit more about Slide 16, which references deeper zone development, and maybe what your producers are seeing there and how that may be contributing to your robust outlook?

William A. Byers: Yeah. You know, what we have seen is, I would say, some early activity from some of our producers in that zone. So most of our growth is from traditional formations, traditional zones, but we are starting to see more activity from a number of our producers in the deep zones. What we wanted to highlight is as you look out over the longer term, as the Barnett Woodford gets developed, it could add to our longer-term growth rate. Yeah. There is some piece of it. There is a little bit that is in '26. And as you move out, there is some more potential as you go forward.

But we kind of view that as more of an upside over the next several years that could get developed. And we are seeing more producers get active, and we have seen early well results be pretty positive there.

Michael Jacob Blum: Okay. Got it. And then, just in light of the volatility we have seen at Waha, you know, the last few months and, you know, the marketing profits you captured in 2025. Can you just remind us how much open pipeline capacity you have to take advantage when spreads widen? And then, I guess, on the flip side, your prepared remarks, you said you are going to benefit as Waha prices improve. So can you just again there, just tell us, you know, a, how much direct Waha price exposure you have at this point, which at least I understand you hedge most of it. So just wanted to understand, you know, both sides of that coin. Thanks. Yeah.

Hey, Michael. So we have, I would say, significant transport

William A. Byers: positions to multiple locations. And as Jen kind of talked about this earlier, it is for flow assurance for our customers to make sure we can get it out. Our primary concern is making sure our customers can produce the gas and we can move that gas to market. So that is kind of where we start. Now a lot of that does create a basis position for us. And so we have the opportunity when there is some price spread to capture some of the differential on those transport positions. We do hedge a lot of that and try and reduce that risk over multiple years.

We have not outlined an exact amount of what that position is because it is always, it is frankly always changing too. We are always hedging it, always trying to just make sure we have transportation to multiple markets. It is a fluid, it is a fluid number. But that is what you see from us is when you see weak prices and even some volume downside shut-ins, we do have an offset in the transportation position.

Michael Jacob Blum: For us longer term,

William A. Byers: I think we benefit more by having plenty of takeaway, higher Waha prices, because a lot of our contracts are fee-based but also fee floors. So when Waha is, you know, moves higher, and we have, you know, NGL prices around where they are, could see us benefit from some upside from higher Waha prices. And I would say, I think we have more length there. Just kind of that in-between area where not really benefiting from marketing and we have low prices, that is really how we guide and factor in our multiyear forecast is in, you know, not being above the floors and not having a lot of marketing.

So to the extent it moves up or moves down, I would say we have some upside really in either direction.

Michael Jacob Blum: Got it. Thank you.

William A. Byers: K. Thank you.

Operator: Our next question comes from Jean Ann Salisbury with Bank of America.

Jean Ann Salisbury: Good morning. One kind of bear case, I guess, that I have heard is that there, that you have seen ethane recovery go up pretty materially as Waha price has been distressed over the last year or two. Do you see any risk that once the Permian gas pipelines come on, Waha price is a little better, that could be a headwind, at least a noticeable headwind, I suppose, to ethane recovery and therefore volume growth?

William A. Byers: No. I mean, Permian is generally in recovery. You have to have a really significant dislocation. I mean, what we see when there is, when economics change is rejection out in other areas, whether you are in Mid-Con or Rockies or a little further away. But generally speaking, Permian has been mostly in recovery even in periods of, you know, kind of price dislocation. We have been in recovery. We would expect to be in recovery, and that is, you know, how we have kind of baked it into our forecast.

Michael Jacob Blum: Forecast.

Jean Ann Salisbury: Great. Thanks.

William A. Byers: K. Thank you.

Operator: Our next question comes from AJ O'Donnell with TPH.

Michael Jacob Blum: I was hoping I could just get a little bit more detail on the bridge on the new CapEx budget, step up of $1,200,000,000. Apologies if I missed this during the prepared, but curious if you could provide some detail on how much is being driven by the new plants and FRAC13 versus, you know, additional field capital compression for the legacy system

William A. Byers: and your recent acquisitions.

Operator: Sure, AJ. This is Jen. I think that the easy items to bridge are ones that you mentioned. Right? You have got the YETI 2 plant in the Delaware. You have got Frac Train 13. And I think the cost of those are very much consistent with the cost that we have outlined before in terms of what a new plant or frac costs us. I think we also announced that we are ordering the long-lead items for our two plants in the Permian Delaware. You can assume that in our guidance, we have assumed that we move forward with those.

Our general track record is we announce we are getting long-lead items as we finalize location and some other key decisions, and then we move forward to final investment decision. So you can assume that there is spending around that as well. I think that we have also got a lot of field gathering and compression, gathering lines and compression spending, and that is both to service what I would call kind of our core contracts already in place and then incremental spending associated with the commercial success that Matt outlined in his commercial remarks. And we have got some hopefully pretty good information in our slides around our commercial success as well.

I will say that we have also seen the lead times for items like pipe, compression, and even some power generation assets get longer. So part of this is also we need to accelerate our spending to be in position to ensure that we can handle the growth that we expect coming to us in 2027, 2028, really beyond. So we are also just trying to make sure that we do not put ourselves in a position where we can continue to provide exemplary service to our producers.

Michael Jacob Blum: Great. Thank you for that. And then maybe if I could just sneak one more in.

William A. Byers: Just overall basin, you know, thinking about

Michael Jacob Blum: some of the higher GORs that you outlined in your deck. And just kind of wondering from that context, you know, if we see, you know, overall base Permian oil production flat in 2026, you give us your latest updates on, you know, how you think overall rich gas production could trend in an environment like that, maybe exit to exit?

William A. Byers: Thanks. Yeah. I mean, we have outlined in our investor presentation, we kind of talk about it. If crude is growing X, that means gas is going to grow Y. And then we have outperformed that. And so if you look at the latest forecast, you know, that we use, we are not necessarily saying it is right, but there is a 4% spread. It would suggest if crude is growing X, gas is going to grow 4% higher than crude. If you looked at recently, it is maybe even a little bit higher than that, so maybe it is even potentially more than that. And then we have typically, over the last several years, have outperformed basin.

So that would point to our growth rate being even higher than that. So I think even in an environment where we have flat to modest crude growth, gas should grow higher from higher GORs and some of the zones that they are targeting just are more gassy and from our continued strong performance in the basin. So I think it points to really, you know, pretty strong growth outlook for us even in a slow to modest growth for crude.

Michael Jacob Blum: Thank you for all the detail. Appreciate it.

William A. Byers: Okay. Thank you.

Operator: Our next question comes from Amit Thacker with BMO Capital Markets.

Jeremy Bryan Tonet: Hi. Thanks for taking my question. Just one quick one for us. It looks like you guys had a nice sequential increase in fourth-quarter export volumes, but it is, I think, about 3% or 4% lower than it was

Tristan Richardson: a year ago. So as we think about the additional export capacity coming online in '27, is your confidence in growing kind of export volumes in tandem with that capacity kind of based on success you have

Jeremy Bryan Tonet: you have had in

Benjamin Branstetter: kind of from your commercial commitments you have been able to secure already, or is it somewhat kind of based on your forward view of kind of where the kind of the S/D balance is in international market? Thanks.

William A. Byers: Hey. This is Ben.

Jennifer Kneale: We had a very nice fourth quarter on the exports.

Benjamin Branstetter: But we were impacted a little bit by fog there. And, honestly, we are shaping up for a really nice first quarter as well. But as I think about how we

Jennifer Kneale: view the export business, that is really part of our integrated value chain. And so as you see us announcing eight plants coming across the Permian, those are integrated molecules that are flowing through

Benjamin Branstetter: our pipe, our frac, and our export. And so we are really excited to have that export project coming online. You know, we remain generally very well contracted across the dock. And, honestly, we are having as many conversations as we have ever had about long-term

Jennifer Kneale: supply kind of globally coming out of the Gulf Coast.

Benjamin Branstetter: Thank you.

Jeremy Bryan Tonet: K. Thank you.

Operator: Our next question comes from Brandon Bingham with Scotiabank.

Jeremy Bryan Tonet: Hey, good morning. Thanks for taking the questions.

Michael Jacob Blum: Just wanted to

Jeremy Bryan Tonet: touch on the EBITDA guidance for this year. Just especially where you came in full-year '25 and just the recent strong performance track record here. Just wondering what it would take to see you come in at

Brandon Bingham: the higher end and what you kind of see as some of the various puts and takes there, and specifically thinking about the commentary around continuous volatility in Waha and what that might do for the year?

Operator: Good morning, Brandon. This is Jen. I would say the range is based on a number of cases that we run. As we think about what would get us to the up, I think the two biggest variables there would be if we just have volume growth be stronger than we are currently forecasting. Wells come online more quickly and or more volume come from wells than we are currently forecasting. That would certainly be something that would, I think, potentially drive us higher. And then the other one, I think you appropriately mentioned at the end of your question, which is we have not factored in a lot of marketing gains, and that is across NGL, gas, and exports.

So to the extent that we are able to move more volumes across any of those and benefit more than we are currently forecasting, that would also drive us, I think, higher to the higher end of the range.

Brandon Bingham: Okay. Makes sense. And then just quickly wanted to go back. You mentioned in prepared remarks a comment about kind of commodity price sensitivity. Just kind of wondering if you could maybe break that out between oil, NGLs, and gas,

Benjamin Branstetter: especially

Brandon Bingham: you know, you have a dollar budgeted for 2026 for Waha prices, but I think calendar '27 is trading nearly 3x that. So just trying to think through over the near term as these pipes come online and just the commentary around Waha and maybe some upside could look like as far as that is concerned and how the sensitivity might change between the three commodities?

Operator: I would just say that we are really well hedged as it relates to our equity volumes. If you think about our direct price exposure, we are really well hedged. So the move higher in prices, we would be a big beneficiary there if prices moved above our fee floor levels. We have not described where our fee floors are, but we have been essentially below fee floors for the vast, vast majority of months over the last two years. So that would result in EBITDA being higher.

I would say that we have had a point of view that I think has worked well for us over the last couple of years that we were going to have a lot of tightness in Waha pricing, and that is why you saw us hedge as much as we have hedged. So I would say that when you think about the streams, probably have more exposure directly on our equity volumes to changes in natural gas liquids prices.

But when you think about marketing opportunities, in 2024 and 2025, we talked about the fact that because we do have a lot of transport to ensure our molecules flow, we have benefited from what we would call outsized marketing gains on the gas side the last couple of years. To the extent we see tightness in the NGL markets, there we have got good opportunity to utilize our storage in Belvieu to potentially be a beneficiary of that. We have not really had that in some time. But we are sitting there with a really attractive position of assets if we do get those opportunities to be a beneficiary.

Brandon Bingham: Great. Really helpful. Thank you.

Jean Ann Salisbury: Okay. Thank you.

Operator: Our next question comes from Jason Gabelman with TD Cowen.

Jeremy Bryan Tonet: Morning. Thanks for taking my questions.

Benjamin Branstetter: Wanted to ask about the

Jeremy Bryan Tonet: downstream growth. You really talk about much additional capital into the downstream part of the business after 2027,

Benjamin Branstetter: but

Manav Gupta: it does

Jeremy Bryan Tonet: look like, I guess, you will be a bit short on Y-grade pipeline capacity. So how do you plan on managing those molecules as new fracs come online later this decade? And then any thoughts on additional fracs that you would need to build

Benjamin Branstetter: beyond the one announced today?

William A. Byers: Yeah. Hey, Jason. You know, I think as we look at our downstream infrastructure, what we kind of talk about is when we get into the back half of '27 is having operating leverage and excess capacity on our NGL transportation. Once Speedway comes online, then with building trains 11, 12, and 13, it should put us in a nice balanced position of having some excess capacity, but not too much on the frac side. So I think we will be pretty well balanced on the frac side and we will have some capacity on the transport side when Speedway comes up.

And as we are expanding our export facility, that should create some nice operating leverage for us as well as there is, you know, significant available capacity with LPG 4 when it comes up. So then as we are growing and these volumes are ramping, it will provide some period of time before we will need another expansion on the export dock. So I think with our downstream side, the reason we are pointing to a little bit lower CapEx post '27 is we are going to have some operating leverage kind of through the footprint on the downstream side.

Jennifer Kneale: But the illustrative case that we have put out there talks about additional potential frac in those numbers as well as other downstream complementary assets, just not the bigger transport or frac or

William A. Byers: Yeah.

William A. Byers: Yeah. That is right. So then as you go forward post '27, it is really ratable fracs will be the large piece of the downstream spend.

Benjamin Branstetter: I would just add for a bridge

Tristan Richardson: for you is just remember we have multiple medium-term flexible offloads in place right now. As you see Grand Prix running full, and that ramps into when Speedway comes on in the third quarter of '27, a baseload of volumes to drive it at

Jennifer Kneale: just

Tristan Richardson: very good project returns.

Benjamin Branstetter: Got it.

Jeremy Bryan Tonet: Thanks. My quick follow-up is just on '26 versus how much spend will be left in '27?

Operator: Total project cost is $1,600,000,000. I would say we had a pretty good amount of spending on it in 2025. Spending in 2026 is more, and then we will just be finishing it up in 2027. So we have not broken out the cost publicly by year, but I would say spending this year is more than it was last year. And then call it the balance of that will probably look more like 2026 than 2025 and 2027 as we finish up that project.

Benjamin Branstetter: Thank you. Yep. Thank you.

Jeremy Bryan Tonet: Our next question comes from Sunil Sibal with Seaport Global. Yeah. Hi. Good morning, everybody, and thanks for the time this morning. So I wanted to start off on the

Sunil K. Sibal: L&T segment. Seems like, you know, operating costs have been trending pretty low there. I was kind of curious if there is any kind of, you know, one-time factors which have helped you in 2025 or is that more of a secular trend in terms of operating cost control?

Operator: I think that the costs are really consistent with volumes moving through the system and when we bring new assets online. Any of the lumpiness that you see is really around when we have got turnarounds, and I think we do a really good job of disclosing that. So as you look quarter to quarter, that is what might be creating some of the variability that you are talking about, Sunil.

Sunil K. Sibal: Okay. Thanks for that. And then, obviously, good to see more acreage dedications coming to Targa. I was curious, you know, when you think about all the dedication you have in Permian, is there a good way to think about that total amount of acreage dedications versus, you know, your current volume rate? Essentially, you know, your inventory of volumes versus your current rates. Is there a kind of good way to think about that metric?

William A. Byers: I am sorry. I do not know that I followed that.

Sunil K. Sibal: Think you could you say it again? Yeah. I was curious, you know, with all the acreage dedications that you are growing. Is there a way for us to think about the total inventory of volumes that you have or that you are building because of the virtue of the dedication versus the current volumes that you are moving on your systems?

Jean Ann Salisbury: Sunil, this is Jen. I think that

Operator: part of why we describe the incremental acreage dedications and with the bolt-on transactions, the very large area of mutual interest that is now dedicated to us is just really highlighting the fact that there is decades of drilling inventory on acreage that is already dedicated to Targa. So it goes a little bit back to some of Matt's earlier comments in Q&A, that we are just sitting in a really strong position. We do not need to continue to execute commercially, but I know we have got the best commercial, Caius, that are continuing to work day in and day out for their producers and for new producers. So we would expect to continue to add to that.

But even if we did not, we have got decades of really attractive inventory on our system. And that is necessitating the infrastructure that we are putting in place today, and that is really what is continuing to support this view that Targa has an exceptionally strong medium- and long-term outlook.

Sunil K. Sibal: Okay. Thanks, thanks for that.

William A. Byers: K. Thank you.

Operator: That concludes today's question and answer session. I would like to turn the call back to Tristan Richardson for closing remarks.

Tristan Richardson: Thanks, Liz. Thanks to everyone for joining the call this morning. We appreciate your interest in Targa Resources.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

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