Targa Resources Corp. Stock

Good day, and thank you for standing by. Welcome to the Targa Resources Corp. Second Quarter 2026 Earnings Webcast and Presentation. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tristan Richardson, Vice President, Investor Relations and Fundamentals. Please go ahead.

Thanks, operator. Good morning, and welcome to the Second Quarter 2026 Earnings Call for Targa Resources Corp. The second quarter earnings release, a supplement presentation and our latest investor presentation are available in the Investors section of our website at targaresources.com. Statements made during this call that may include Targa's expectations or predictions should be considered forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our latest SEC filings.

Our speakers for the call today will be Matt Meloy, Chief Executive Officer; Jen Kneale, President; and Will Byers, Chief Financial Officer. Additionally, members of Targa's senior management will be available for Q&A, including Pat McDonie, President, Gathering and Processing; Ben Branstetter, President, Logistics and Transportation; and Bobby Muraro, Chief Commercial Officer. I'll now turn the call over to Matt.

Thanks, Tristan, and good morning. We had another great quarter where we reported numerous financial and operational records. Adjusted EBITDA increased 38% year-over-year. We reported record volumes again in the Permian, up more than 900 million cubic feet per day from a year ago and up 450 million cubic feet per day compared to Q1. That's almost 2 plants worth of gas in 1 quarter.

This strong Permian growth drove record volumes across our downstream systems, including NGL transportation, fractionation and LPG export. Our customers remain active and the commercial service offering we've built the past many years continues to gain traction with our customers. We continue to benefit from the activity of our producer customers with millions of acres dedicated across the Permian, and that number continues to grow.

With the largest G&P footprint in the Permian, we believe we are positioned very well for continued growth over the long term. And given the strength we have seen so far this year, we now expect to be towards the top end of our previously provided adjusted EBITDA guidance range, suggesting that our 2026 adjusted EBITDA growth over 2025 may be close to $1 billion, all while reducing our share count and increasing our dividend.

This strong performance underscores the value of the organic growth projects that we continue to invest in and positions Targa for success across a range of market conditions. In the first half of 2026 against the backdrop of weather-related challenges in the first quarter, natural gas takeaway constraints, negative Permian gas pricing and broader market volatility, we were still able to deliver record results.

And beyond 2026, we believe we are in an excellent position with our multiple projects underway expected to provide our producer customers with the critical infrastructure needed to grow production. And the global environment is recognizing the value and importance of U.S. energy now more than ever. We expect to benefit from critical long lead demand catalysts, including expanding LNG export capacity, growing power generation needs, increasing global demand for hydrocarbons and increasing recognition of the strategic role U.S. energy plays in supporting economic growth and energy security worldwide.

Against this backdrop, we believe Targa is uniquely positioned to benefit from sustained producer activity and increasing demand for the critical infrastructure services we provide. Our focus at Targa remains unchanged; to deliver the very best operating performance for our customers, to utilize that track record to continue to add contracts with existing and new customers and to deliver on our major projects currently underway. We believe our premier Permian asset footprint, integrated wellhead-to-water system and strong financial position provide a durable competitive advantage.

These strengths allow us to continue investing in high-return integrated growth opportunities that maximize the value of our existing network while supporting our customers' development plans. Before I turn the call over to Jen to discuss operations in more detail, I would like to thank the Targa team for their continued focus on safety and execution while continuing to provide best-in-class service and reliability to our customers.

Thanks, Matt. Good morning, everyone. Second quarter Permian volumes were a record 7.2 billion cubic feet per day, up approximately 7% from the first quarter and 14% from a year ago. We mentioned in early May that we had about 200 million to 400 million cubic feet per day of gas shut in behind our Permian systems on any given day with weak Waha prices. So our volume growth of 450 million cubic feet a day quarter-over-quarter despite a second quarter with shut-ins, demonstrates the robust activity that we are seeing on our assets.

With Hugh Brinson Phase 1 and the GCX expansion now online, we have seen most of the price-driven producer shut-ins return to our system in July, and we continue to see a lot of activity behind our systems, positioning us really well for strong growth in Permian volumes across 2026 that are tracking higher than what we were expecting in February. This will position us well with continued momentum heading into 2027.

The constrained gas egress environment across the past several quarters has created increased marketing opportunities for Targa with our marketing businesses outperforming our expectations by approximately $250 million in the first half of the year, much of which occurred in the second quarter. Waha gas prices have improved, narrowing basis spreads and curtailed volumes are returning to our system, highlighting some of the built-in offsets in our business.

In addition to the strong growth we are seeing from our customers, 2026 is a year of significant execution for Targa as we continue to progress the major projects along our integrated system. In the Permian Delaware, our 5 gas processing plants, Copperhead I and II, Yeti I and II, and Roadrunner III are on track to begin operations as previously announced. In the Permian Midland, our East Driver plant began service late in the second quarter, ahead of schedule. We continue to see growth behind our Midland system and are currently evaluating the timing of our next Midland processing plant.

We also continue to execute on our residue natural gas strategy, adding intrabasin connectivity across our Permian footprint with our key natural gas projects on track, which will enhance our producer customers' access to multiple premium markets.

Blackcomb and Traverse, two natural gas pipelines in which we have an equity interest, remain on track for the fourth quarter of 2026 and mid-2027, contributing to continued improving natural gas egress in the Permian for the near to medium term.

Shifting to Logistics & Transportation, the growth we are experiencing in the Permian is flowing through our integrated footprint, contributing to record NGL transportation volumes of 1.1 million barrels per day and record fractionation volumes of 1.2 million barrels per day. With conflict in the Middle East increasing global demand for U.S. hydrocarbons, our LPG export loadings averaged a record 14.8 million barrels per month during the second quarter. The Targa team was able to respond quickly and serve our customers, and our commercial teams have been active adding to our long-term contract portfolio.

With our strong outlook for continued growth on our Permian G&P footprint, which we expect will create meaningful incremental supply of NGLs, we have several key downstream projects underway. Our Train 11 fractionator came online early in the second quarter and was quickly highly utilized, and our Train 12 and Train 13 fractionators remain on track. Targa's Delaware Express Pipeline, an expansion of our NGL pipeline transportation system within the Permian, came online during the second quarter and will give us much needed capacity for the growing supply of NGLs we are seeing across the Delaware Basin.

Speedway, the large expansion of our NGL transportation system connecting our Permian G&P position to our leading fractionation footprint in Mont Belvieu, remains on track for the third quarter of 2027. Our NGL transportation system has effectively been running full since we announced Speedway and our transportation volumes reflect our proactive and capital efficient efforts to secure medium term transportation agreements on third party pipelines until Speedway comes into service.

We have completed five processing plants in the Permian since we announced Speedway and have five plants currently underway. The growth we expect from our G&P footprint positions us well for a base load of supply for Speedway's initial capacity of 500,000 barrels per day.

Lastly, we expect our large LPG export expansion that will increase our capacity to around 19 million barrels per month will be much needed and remains on track for the third quarter of 2027. We believe that we are exceptionally well positioned operationally and that our wellhead-to-water strategy driven by activity in the Permian Basin will continue to put us in excellent position to execute for our shareholders and customers.

I would also like to thank our employees that have worked tirelessly to continue to perform safely and at an exceptional level for our customers and our shareholders. I will now turn the call over to Will to discuss our financial results and outlook in more detail.

Thanks, Jen. Targa's reported adjusted EBITDA for the second quarter was $1.603 billion, 14% higher than the first quarter. The increase was primarily a result of contributions from higher optimization opportunities in our marketing businesses and record volumes across our operations, including Permian G&P, NGL transportation, fractionation and LPG export.

Given the strength of our performance so far this year, we now expect full year 2026 adjusted EBITDA to be towards the top end of our guidance range of $5.7 billion to $5.9 billion. As has long been our practice, we do not forecast material marketing optimization margin when we provide our financial expectations. The first half of 2026 benefited from marketing opportunities that were not included in our guidance provided in February, and our approach remains unchanged as we look to the balance of the year.

Importantly, the fundamentals supporting our business are very constructive. Improved Permian takeaway capacity and stronger Waha pricing are benefiting our customers and supporting continued growth in liquids-rich natural gas volumes across our integrated system.

Combined with the ongoing execution of our growth projects and the strength of our asset footprint, these factors continue to support our confidence in the outlook for the second half of 2026 and beyond. We continue to estimate net growth capital for 2026 of approximately $4.5 billion, we also continue to estimate 2026 net maintenance capital spending of $250 million.

At the end of the second quarter, we had $3.2 billion of available liquidity and our pro forma consolidated leverage ratio was approximately 3.4x, well within our long-term leverage ratio target range of 3 to 4x. In July, we also extended the maturity of our accounts receivable securitization facility to July 30, 2027, and expanded the total capacity by $200 million.

Shifting to capital allocation, our focus is more of the same from Targa, maintain our strong investment-grade balance sheet, continue to invest in high-returning integrated projects and return an increasing amount of capital to our shareholders.

We declared a second quarter common dividend of $1.25 per share, which is a 25% increase relative to the second quarter common dividend for 2025. We also opportunistically repurchased approximately $80 million in common stock at an average price of $259.93 per share during the second quarter.

We are on track for another record year at Targa across multiple dimensions and remain well positioned to create value for our shareholders over the long term. And with that, I will turn the call back over to Tristan.

Thanks, Will. [Operator Instructions] Operator?

[Operator Instructions] Our first question comes from Jeremy Tonet with JPMorgan Securities.

Just wanted to touch on how you see the volume trajectory at this point. If you could drill in on what type of curtailments you see on the system and what could come back over, I guess, the balance of the year? And just thinking, I guess, some of your competitors say that they're seeing activity picking up quicker than they expected. I'm wondering how you see activity in your system and the trajectory into '27.

Jeremy, this is Jen. I think as I tried to describe in my scripted remarks, volumes are -- volume growth is going really, really well across the Targa system. We had a really good start to the first half of the year, which is pretty remarkable when you think about the weather impacts in the first quarter. And then as we described on our May earnings call, about 200 million cubic feet to 400 million cubic feet a day of shut-ins on any given day during the second quarter. So to have 450 million cubic feet a day of growth quarter-over-quarter, I think, is really reflective of the producers and the activity in and around our systems.

As we look forward, July was another really strong month of volume growth. So as I said, for the year now, I'd say that we are tracking ahead of expectations with a view of continued volume growth across the back half of the year. I think largely, the growth that we're seeing is consistent with what we expected, again, maybe a little bit ahead. But we've got really active producers across the system that I think are feeling supported by a macro backdrop now with both higher crude oil prices and now with the egress situation in the Permian at least temporarily resolved benefiting from higher gas prices.

So it's just a really supportive environment of both an expectation for continued activity back half of '26. And then that, of course, I think, means we're well supported for the continued growth into '27 and beyond.

Got it. And then just wanted to go back, I guess, to any thoughts you could share on the cadence of gas processing plant additions, how you see that going forward each year? Is it 3 a year? Would you expect 3 for '28? Or how should we think about that at this point?

I think you've seen a quick cadence of plant adds for us over the last several years here already this year, getting 2 plants online in the Midland Basin. That's a little bit lumpier for us having 2 plants come online as quickly sort of back-to-back as they did, but part of that was an exceptional job by our engineering and operations team to get East Pembrook online earlier than expected. We've now got 5 plants that are under construction, indicated on the call this morning that we're evaluating the next time or the next -- the appropriate time to move forward with our next Midland plant.

So as we look forward, we put out an illustrative framework now a couple of quarters ago that demonstrated continued cadence of, call it, 3 plants a year if we assume high single-digit, low double-digit Permian growth. I think where we are today with the commercial success that we've had over the last couple of years is accelerated from there.

Ultimately, whether that cadence continues to be accelerated going forward will be a function both of the existing contracts that we've already got in place as well as continued commercial success. I'm biased, but I think we've got by far the best commercial team in the business. And I can assure you that they are not resting on their laurels and are continuing to go out and identify new opportunities to add to the contracts that we already have in place with existing and new producers. So we'll be continuing to work that angle as well. So I think we just feel really good, Jeremy. But ultimately, the pace of growth will drive is it 3 plants, is it more plants? But feel really well positioned for just continued growth going forward.

Our next question comes from Spiro Dounis with Citi.

I want to go back to your comments around the integrated footprint. If I include East Driver, that's about 6 announced plants adding about 240,000 barrels a day of NGLs to the system. It sounds like you're covered on the egress side, frac arguably starting to look a little tight again if you announce another plant. And then on export, I think that's probably where we could see the need for another expansion sooner rather than later.

So curious how you're thinking about downstream infrastructure needs and what a seventh or eighth plant coming online in 2028 might do to the need to expand downstream again?

Spiro, I think we've got really good operating leverage when we think about Speedway coming online in the third quarter of 2027 and our ability to expand Speedway from, call it, 500,000 barrels a day to 1 million barrels a day by just adding incremental pumps as our volume growth continues to ramp, a very cost-efficient way to add a lot of capacity.

So I think we've got good operating leverage there. We are in a really good spot to baseload Speedway with a lot of volumes given everything that we've announced since that came into service. And as you pointed out, on the LPG export side, a lot of operating leverage there when that expansion comes online in the third quarter of 2027 as well.

So I think you really hit all the key points, which is we need to evaluate the timing of our next fractionator. We feel like we're in good position right now with Train 11 online, highly utilized from start-up to like Trains 12 and 13 will be as well. But we'll evaluate the right timing of that next frac.

Otherwise, on the residue side, I feel like we're in a good spot with all the intra-basin activity that we've got underway to really build out our residue capabilities. So ultimately, I think it will continue to be more of the same, which is with the additional plant adds, when do we need another frac. But we do have, I think, material operating leverage across both NGL and transportation and exports once we get those 2 big projects online in the third quarter of 2027.

Got it. That's great to hear. Maybe just to go back to the guidance quickly. And you talked about this a little bit with Jeremy, but it does seem to imply a decline in the second half of the year to hit the high end, which does seem conservative to us. Certainly appreciate the point that Waha marketing gains are probably moderating here, but you had a lot of positive commentary about producer activity and curtailments really coming back and would have thought that had been enough to offset. Could you -- so maybe just walk through some of the assumptions and maybe put a finer point on what you're not counting on that could lead to a positive surprise?

Yes. Spiro, Matt here. No, good question. Look, the first half of the year was really strong underlying volume performance, which Jen talked about. But we also pointed to $250 million of optimization margin that we weren't counting on. And with the basis narrowing, part of that margin comes from our transport position.

So we forecast that pretty conservative in the back half of the year. We have -- we don't have a very significant assumption for continued marketing gains as we go forward from here. And so that's why you're seeing perhaps a conservative view of the second half of this year. But with the volumes that we've seen across our system, Jen talked about the strength that we've had so far this year. Most of the shut-ins have returned. July was a really good month. We've had really good August so far. And we actually still have some volume shut in on our system that are going to come back and add even more volumes in the back half of the year.

So I think we feel really good about the underlying volume trajectory. It's just going to be moderated and offset by perhaps lower marketing opportunities in the back half of the year.

Our next question comes from Jackie Koletas with Goldman Sachs.

First, I just wanted to touch again on the NGL business and extending your platform. Peers are actively expanding the ethane export capacity on the Gulf Coast. I mean where would you say are the economics currently for expanding into ethane capacity at Galena Park? Are you comfortable continuing to rely on the LPG business? Or is there a scale that you can see on ethane export solution?

Jackie, this is Jen. I think it was probably, gosh, 8 or 9 years ago that we first mentioned publicly that we are evaluating ethane export opportunities. Given the vast amount of ethane in our system, I think it puts us in a really good position with a lot of supply. We've managed that supply position thus far by selling into the domestic markets and have really strong relationships with our domestic customers and also with some of our peers that are exporting some of those volumes to the rest of the world. I think that's worked really well for us thus far.

But of course, we're always evaluating opportunities across the entire value chain and ethane exports is no different. We've got a growing supply portfolio as a result of all of our gathering and processing plant adds and then the incremental fracs bringing more ethane into our system. I think our team has done a great job of increasing our domestic connectivity to make sure that we're very comfortable with where those volumes ultimately will find a home.

But certainly, that's something that we continue to evaluate, and we'll continue to evaluate it going forward. But I don't think we feel like it's something that we have to do. I think if it's complementary to what we do and if it makes sense and if it can provide returns that are commensurate with where we can invest across the rest of our portfolio, then we'll certainly continue to consider expanding.

That's very clear. And then just as a follow-up, you mentioned very strong volume recovery. As we see volume growth continue and prices begin to rebound, how do you contemplate the ability to move off of fee floors into '27 and how that may frame up your long-term outlook from here?

I think moving off of fee floors would be very much welcome across the Targa system, we've been below fee floors for a long time, really only having maybe less than a handful of months over the last couple of years where we have benefited from margin above fee floor levels.

I think certainly, with the incremental egress on the natural gas side, you're seeing gas prices move higher. Our fee floors are a combination of both gas and NGL prices. So ultimately, it will depend where sort of the entire barrel moves. But I think that from our perspective, we do believe with all of the tailwinds around the incremental demand for natural gas and NGLs in the U.S. and globally, we're likely to see some price tailwinds as we move forward. And ultimately, that would be certainly additive to our performance as we move through the next several years.

Our next question comes from Julien Dumoulin-Smith with Jefferies.

Maybe following up on what's been discussed here a little bit. Can you follow up on the plant cadence? Can you speak to what are the variables that can surprise the upside to this 3 plant per year model, right? Is it more of the Permian macro versus specific commercial wins? And specifically, given the commercial discussion that you've had here in '25 and obviously, year-to-date '26, are you tracking ahead of that expectation of 3 plants per year or that framework for '28 and onwards here, again, kind of going on your improving backdrop commentary?

Yes. No, good question, and we're always challenging ourselves for what -- how to kind of think about that. I think it's a combination of what you talked about. I think overall, just trends in the Permian Basin with just strong activity, increasing GORs is going to put us in good position to continue to add multiple plants a year for years to come.

But then on top of that, which is a bit more episodic, is our larger commercial wins and other opportunities. And as Jen said, we think we have the best commercial team in the business. So as we continue to have commercial wins, you've seen us talk about that in 2024 and 2025. We're having a good year so far in 2026 and would expect to continue to add more acreage dedications, more volumes from our commercial success.

So I think in any environment, we're going to be adding multiple plants a year. I think that is already outlined, and we have 5 plants coming on and already announced, and we're evaluating the timing of the next plant in the Midland, and we're evaluating more plants in the Delaware for future timing. So we feel really good about adding significant volumes, but I think it's a combination of all those factors.

Awesome. And maybe a related point here. With the Permian Basin continuing to consolidate, can you speak to how you're structuring your commercial strategy going forward, right? Are you pursuing a more volumetric-centric strategy on the G&P front to attract more volume on your system and improve like more of a system-wide ROIC with your downstream assets, if you will? I mean how are you thinking about that, especially given the improving volume writ large we just alluded to?

I think that we have exceptional relationships with our producers and are always trying to add to our portfolio of producers that we have on our systems, Julien. And so part of what we pride ourselves is a willingness to be creative and work with each individual producer to meet their needs whether that's a result of the needs that they have from consolidation or for any other reason.

So for us it's a portfolio approach. We work with each individual producer to try to figure out what their needs are and then best meet those needs and then that all comes together in thinking through what therefore that we need from an infrastructure perspective to support that outlook of growth that portfolio of producer customers will provide for us.

So I think it's really much each producer is different. We work very well with each of the producer customers that we have, are always trying to figure out how to best position our producer customers for success as well as Targa. And that's really, I think, put us in a really good position to both continue to service existing customers and add contracts with existing customers and then go out and win new business as well.

Our next question comes from Gabriel Moreen with Mizuho.

I had a quick question on LPG exports with all the volume you were able to squeeze out during the quarter. And I think some of the co-loading you mentioned with butane allowing you additional capacity. Does that mean that excess capacity becomes underwritable under long-term contracts? And then maybe you can speak a little bit to some of the new contracts you're signing, enter pricing, just directionally speaking. Thank you.

Gabriel, this is Ben. Yes, you hit on it. We had a great second quarter on the export side. I'd like to say thanks to our internal team who really worked hand-in-hand with our customers to utilize every minute the dock space that we could and get product out to the world.

You also hit on part of the record was us being able to load more butane given the global demand for butane. So that did help us move some additional volume across the dock in the second quarter.

As we look forward, we came into the second quarter highly contracted. We remain highly contracted. We're contracted through LEP 4 start-up and for years thereafter. And part of that has been the current environment that's been very strong. We came into this year with a lot of really good discussions underway. Those have only improved with the conflict. We're seeing people that weren't necessarily targeting U.S. supply now targeting U.S. supply. And so we have been able to underwrite some of this current environment into our long-term outlook for our exports.

Yes. And just to add on to that, too, with the increased demand for butane across our dock, we are being -- we are working in more of our longer-term contracts, more butane loadings contracted as opposed to having that open capacity. So it's been nice on that front as well.

Our next question comes from Manav Gupta with UBS.

Congrats on a great quarter. I just wanted to understand, can you help us with the post-Speedway material inflection in free cash flow. So how should we think about those incremental -- usage of those incremental free cash flows once Speedway does come online?

Manav, this is Jen. I think that for us, it's going to continue to be really the approach that we've taken over the last several years, which is we'll continue to invest in the business. We'll materially increase our common dividends per share. We'll opportunistically repurchase stock, and we'll have a really strong to strengthening balance sheet.

I think we're really excited about that inflection when you think about Speedway and our LPG export facility coming online in the third quarter of 2027, which will finally sort of put us in a position to offer our shareholders and prospective shareholders a value proposition that has a really attractive growing EBITDA business and sort of underlying fundamental operational position, combined with also an increasing free cash flow position, too.

So I think that's a spot that we're really excited about getting to. But it's really a function of our continued investment in our business has created opportunities for us to grow our EBITDA to the point where we will be able to both invest in our business and have free cash flow. And that inflection is really what is going to occur when we get Speedway and our LPG export facility online.

Perfect. My quick follow-up here is a little bit. On the last earnings call, Exxon talked about 40 different technologies that they're deploying in Permian, and they're basically saying those are stackable. And what they say is it will materially improve recovery within the Permian.

And Chevron through its advanced chemicals is saying they are seeing material decline in terms of rates when they have deployed these chemicals. So I'm trying to understand, besides the price and other things, do you see technology driving significantly higher Permian volumes? Because once Exxon and Chevron catch on to it, others would also. So trying to understand, are you seeing anything out there in a technological perspective, which could drive higher Permian recovery, which would benefit you guys?

Manav, I think that the producers are the best sources of information around the technologies that they're using and the results that they are driving through those technological improvements. I think we certainly have a view that as we've seen over the last couple of decades, technology will continue to drive improving results and efficiencies for our producer customers, and we'll be a big beneficiary of that. I think there's a lot of talk about helpful technologies now and expected into the future, and that will provide an incremental tailwind for us. So I think there's a lot of reasons that we feel very convicted about our opportunities to grow our volumes as we look out over the next short, medium and long term. Technology is probably a smaller part of that, but it will certainly be a nice to have as our producers continue to make technological improvements.

Our next question comes from Burke Sansiviero with Wolfe Research.

Just one quick one for me today. So G&P volumes were up 7% quarter-over-quarter and then gross margins were up 4%. So per unit margins went down. Any color on what pushed that per unit margin lower? And where should we see it trend from here?

Yes, I can start. I mean we have done a really good job at moving our G&P contracts to fee-based contracts. That said, we still have some part of our G&P contracts that are commodity sensitive. And so that was a slight headwind. And then there are gains, fuel gains, fixed recovery gains, some other gains, which can affect results as well. But overall, a really strong quarter for our G&P, but I'd say it's largely commodity price, which was a slight offset to our G&P business in the quarter.

Our next question comes from Jason Gabelman with TD Cowen.

I was hoping you could elaborate on a couple of points that have already been touched on. First, on the processing plant growth, it seems like the lead time from sanctioning to starting up is somewhere between 20 to 24 months. Is that still what you're seeing? And how are you managing some of the pressure points in the supply chain?

This is Pat. Yes, lead times definitely have gotten extended. And a lot of it is around the electrical infrastructure for plant. It's some of the vessels that are needed for the plant build. But frankly, we've adapted to that. We have good line of sight on our volume growth. I'd say it's more like 18 to 24 months is kind of the time frame that we look at.

Construction part of that is really 10 to 12 months, depending upon is it sweet sour, what the required AGI well, et cetera. But frankly, lead times on compression, lead times on certain components of plants certainly are extended, but it hasn't affected our ability to perform in any way.

Great. That's helpful. And then my follow-up is just I want to understand a bit more the kind of trade-off between the lower marketing margins and then the improvement on Waha prices as it feeds through your fee floors. And I know you've been hesitant to kind of provide any guidance on what commodity price levels result in an increase of fee floors. But just as we sit here where prices are right now, would you expect the net impact from lower marketing margins in 3Q to be offset by an uplift in fee floors? Or is that a net tailwind or headwind based on where commodity prices sit right now versus 2Q?

Jason, I'd say that, that will be a headwind for us third quarter versus second quarter in terms of just the strength of marketing benefits that we had in the second quarter. It wasn't just on the natural gas side with Waha, as Ben talked about. We also had very strong LPG export marketing benefits in the second quarter, which helped us too.

So as we think about the third quarter, I think the biggest beneficiary of higher Waha prices will be our producers, which ultimately puts us in the best possible position. We like when our producers are incentivized to continue to be active, and I think with higher crude prices along with higher gas prices, there's a really supportive macro backdrop for our producer customers.

But for us, I think we will continue to likely be below fee floor levels, sort of in the aggregate across the portfolio in the third quarter. We do have an expectation that gas prices will continue to potentially increase with the demand pull that we are seeing for volumes out of the Permian. And that'll be a tailwind over time for us.

And our final question comes from Sunil Sibal with Seaport Global.

So first, a clarification. I think you suggested that you're still seeing some shut-ins in volumes in Permian. So I just wanted to clarify, is that primarily price related? Or are there any other issues which might be causing that?

Sunil, I'd say that we generally have shut-ins across our assets when producers are shutting in volumes for frac protection and things like that. So I'd say that where we are right now in early August, the vast, vast majority of what I'd call price-related shut-ins are back on our system. We've got a little bit that's still coming back on that will provide a little bit more of a tailwind for us here in the third quarter. But I'd say the vast majority are back online now.

Okay. And then on the gas egress side, I think you touched upon a couple of projects in which you are participant kicking in late in '26 and '27. So I was curious, when you think about the base earnings, which you talked about from your gas marketing business, should we expect that base earnings also to move up as those projects come online? Or is that all capacity that will essentially help you move on the G&P side of things and is all talked about there -- taken care of there, I mean?

We will benefit in terms of our equity earnings as a result of the 17.5% interest that we have in those projects, benefiting from higher equity earnings when those projects come online. In terms of the gas marketing business, that's really where the margin that's reported there is related to our ability to utilize our vast network of infrastructure in place to move volumes to different markets on behalf of our producers and Targa.

So a little bit apples to oranges. So I think in terms of the projects coming online that I talked about with Blackcomb and Traverse, there, we've got a 17.5% equity interest and certainly will be a beneficiary when those projects are online and have ramped fully. And then on the gas marketing side, ultimately, the forward performance will depend on what we see as opportunities in the market. And I think we've had a really strong last several years related to gas marketing. I think we've hopefully demonstrated that we've done a good job of managing the risks across our enterprise such that if Waha gas prices are low, our infrastructure allows us to potentially be a beneficiary of that type of environment.

We have an expectation that gas may get tight again in the future. So we would have those assets in place to be a beneficiary there. Otherwise, we're always trying to figure out how to move gas to higher-priced markets and utilize our assets to do so. And our gas marketing team does a really good job of that quarter in and quarter out. I think what we are just trying to highlight is that the last several quarters and second quarter in particular, we would -- there was material outperformance as a result of the dynamics that we were seeing in the market.

Yes. If I can ask a clarification. It seems like one of your customers recently announced a big behind-the-meter power generation project in Permian to support the data center demand. Is that something that you're seeing more widespread in your operations? And how does that impact your strategy on the gas marketing side?

Yes, sure. No, there's multiple projects out there to support data centers and other needs for gas for power generation. And so we're actually in our gas marketing team having conversations about potentially being a supply for some projects in and around the Permian. We continue to have discussions. And I'd say that is somewhat of an opportunity for us. We think multiple projects like the one you referenced and others are likely to get done and be some additional demand for gas in the region.

This concludes the question-and-answer session. I would now like to turn it back to Tristan Richardson for closing remarks.

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

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

Thank you for standing by, and welcome to Targa Resources Corporation's First Quarter 2026 Earnings Webcast and Presentation. [Operator Instructions] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Tristan Richardson, Vice President, Investor Relations and Fundamentals. Please go ahead, sir.

Thanks, Jonathan. Good morning, and welcome to the First Quarter 2026 Earnings Call for Targa Resources Corp. The first quarter earnings release, a supplement presentation and our latest investor presentation are available in the Investors section of our website at targaresources.com.

Statements made during this call that might include Targa's expectations or predictions should be considered forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our latest SEC filings.

Our speakers for the call today will be Matt Meloy, Chief Executive Officer; Jen Kneale, President; and Will Byers, Chief Financial Officer. Additionally, members of Targa's senior management will be available for Q&A, including Pat McDonie, President, Gathering and Processing; Ben Branstetter, President, Logistics and Transportation; Bobby Muraro, Chief Commercial Officer.

I'll now turn the call over to Matt.

Thanks, Tristan, and good morning. This year is off to a pretty remarkable start here at Targa. We had record first quarter adjusted EBITDA, Permian volumes and NGL fractionation volumes despite the impacts of severe winter weather and periodic producer shut-ins from weak Waha gas prices. We are continuing to see strong production activity in the Permian and are on track for our volume forecast this year despite being impacted by more shut-ins than we previously estimated.

A huge thank you to our field operations and engineering employees who worked tirelessly to support our producer customers through very cold weather across much of late January and early February and to also quickly resolved an unplanned outage towards the end of the quarter at a portion of our LPG export facility. The efforts by the Targa team supported another record quarter and strong start to the second quarter.

The short, medium and long-term outlook for Targa growth has continued to improve. Higher prices and supply disruptions in the Middle East create tailwinds for our business and underscore the importance of secure and reliable energy supply for the United States. With growing cost-advantaged natural gas and NGL supply from the Permian Basin and significant expansions underway across our integrated value chain, Targa is well positioned to meet the growing demand for natural gas and NGLs across domestic and global markets.

We believe that there are significant advantages to being on the Targa platform, a track record of constructing Permian gas processing plants on time or early. We have the largest system with best-in-class redundancy and fungibility across the Permian Basin, and we continue to invest and grow our system as further evidenced by 2 additional gas processing plants in the Permian Delaware announced today. We have a large and growing portfolio of transportation assets in both NGLs and intra-basin residue gas, a leading fractionation footprint in Mont Belvieu with Train 11 now online, 5 trains added over the last 6 years and Trains 12 and 13 currently under construction. And our LPG export facilities, which we are expanding our capacity to more than 19 million barrels per month time very well for the increase in demand for long-term LPG export contracts.

Looking back over the last 6 years, we have brought into service 27 major projects, including 16 Permian processing plants, 5 fractionators and 3 NGL transportation pipelines with every one of these major projects over this period coming online on time or ahead of schedule. We have also successfully and seamlessly integrated several Permian acquisitions. This track record of execution is a credit to our best-in-class engineering and operations teams and to our commercial team for continuing to identify attractive opportunities to grow our footprint.

Today, we increased our adjusted EBITDA outlook for 2026, which is bolstered by continued and disciplined production growth from our customers and a strong opportunity set in our downstream business across LPG export and marketing and optimization opportunities. This increase highlights Targa's strength and the durability of our business across environments. At Targa, we continue to focus on execution and believe the strength of our large integrated asset footprint positions us to be successful across commodity environments as we continue to invest in attractive integrated opportunities and return increasing amounts of capital to our shareholders. Targa now has more than 3,600 employees.

And before I turn the call over to Jen, I want to express my thanks to all my colleagues. We have a lot of positive momentum and a lot going on. And as we discuss internally all the time, safety is our first priority. So a huge thank you to our employees for their continued focus on safety.

Thanks, Matt. Good morning, everyone. Operationally, it was a solid quarter as our Permian natural gas inlet volumes were a new record, primarily driven by the successful integration of and volume contributions from our acquisition that closed at the beginning of the year as well as continued strong producer activity, partially offset by the impacts of Winter Storm Fern and other severely cold weather plus some gas price-related shut-ins.

Currently, our Permian volumes are more than 250 million cubic feet per day higher than the first quarter average, even with more shut-ins to start the second quarter from some of our producers given weaker Waha natural gas prices. Average volumes through the first 4 months of the year are consistent with what we forecasted coming into this year, which is remarkable given we currently have between 200 million and 400 million cubic feet per day of Permian gas temporarily shut in by producers on any given day, depending on what is happening with gas prices. And while it is difficult to predict with precision how producers are managing egress constraints in the short term, we continue to feel good about our low double-digit Permian volume growth estimate for 2026.

Importantly, we have demonstrated the strength of our strategy and resiliency over the last several years by ensuring that we have sufficient takeaway capacity from the Permian for our producers and by continuing to identify marketing optimization opportunities through our growing portfolio of natural gas transportation assets. We expect that marketing opportunities will continue likely until later this year when incremental Permian egress capacity is added.

We are also continuing to execute on our major projects along our Permian footprint to accommodate the growth from our customers. In Permian Midland, our East Pembrook plant, which was scheduled for the second quarter, began service early starting at the end of the first quarter. Our East Driver plant remains on track to begin operations in the third quarter of 2026. In Permian Delaware, our Falcon II plant successfully came online in the first quarter, and our Copperhead, Yeti 1 and Yeti II plants remain on track to begin operations as previously announced. Our new Permian Delaware plants announced today, Roadrunner III and Copperhead II are both expected to begin service in the first quarter of 2028, which will be much needed to accommodate the expected growth from our customers in the very active Delaware Basin.

We have multiple Permian intra-basin residue projects on track as scheduled that will add connectivity and fungibility across our system for our customers and offer access to multiple premium markets. Additionally, we expect Blackcomb, a natural gas pipeline in which we have an equity interest, will provide much needed egress relief for the Permian when in service in the fourth quarter of this year. Traverse will further enhance market connectivity when it comes online in mid-2027. The Permian natural gas egress environment is set to improve as we exit 2026 and the prospects for sustained higher Waha gas prices with improved egress will be a positive for Targa and our Permian producers.

Shifting to our Logistics and Transportation segment, Targa's NGL pipeline transportation volumes averaged 1.02 million barrels per day and fractionation volumes averaged a record 1.145 million barrels per day during the first quarter. Both transportation volumes and fractionation volumes were impacted by the winter weather and shut-ins that impacted our G&P volumes, but consistent with what we are seeing in G&P have rebounded nicely as the underlying fundamentals of our business remain very strong.

We are also making great progress on some of our key downstream projects as our Delaware Express NGL pipeline is currently in startup and our Train 11 fractionator began operations early in the second quarter. Speedway, our large expansion of our NGL pipeline transportation system remains on track for the third quarter of 2027 and Trains 12 and 13 remain on track for the first quarter of '27 and the first quarter of '28. With 4 Permian plants now in service since we announced Speedway and 6 Permian plants now under construction, we continue to expect a meaningful and growing supply of available NGLs behind our system to baseload Speedway's initial capacity of 500,000 barrels per day and supply our Mont Belvieu fractionation and LPG export footprints.

Turning to our LPG export business at Galena Park. Our loadings averaged 13.1 million barrels per month during the first quarter despite the unplanned outage at a portion of our facility that reduced our loadings towards the end of the first quarter and early in the second quarter. Our LPG exports are highly contracted, and our team is doing a great job of trying to figure out how to support the high global demand by getting incremental volumes across the dock. We have some flexibility at our facility to move more butanes during periods of high demand and have been able to secure some additional contracts across this year that we expect will drive record Targa loadings in the second quarter.

Longer term, we are in a really good position to continue to secure incremental multiyear contracts given the increasing supply that will be in our system through all of our G&P, transportation and fractionation expansions underway and increased global demand for U.S. Gulf Coast LPGs. We expect our large LPG export expansion will be much needed when it comes online in the third quarter of 2027. We are exceptionally well positioned operationally and believe that our wellhead-to-water strategy driven by activity in the Permian Basin will continue to put us in excellent position to execute for our customers and shareholders.

I will echo Matt's appreciation for all of our employees that are focused on delivering for our customers and are doing it safely and with great pride. Your efforts are greatly appreciated.

I will now turn the call over to Will to discuss our financial results and outlook in more detail. Will?

Thanks, Jen. Targa's reported adjusted EBITDA for the first quarter was $1.4 billion, which is 5% higher sequentially. The increase was primarily a result of contributions from our Permian Basin acquisition, which closed in early January and from optimization opportunities in our marketing businesses. The increase was partially offset by winter weather that impacted both G&P and L&T volumes. We are increasing our estimate for full year 2026 adjusted EBITDA to be in a range of $5.7 billion to $5.9 billion. The new midpoint is $300 million higher than what we provided in February, supported by higher first quarter adjusted EBITDA than we were estimating, meaningful natural gas marketing and LPG export opportunities for the full year and continued strong performance of our underlying businesses.

We continue to estimate net growth capital for 2026 of approximately $4.5 billion, with no change despite announcing 2 new Permian gas plants today. We also continue to estimate 2026 net maintenance capital spending of $250 million. In March, we successfully completed a $1.5 billion debt offering comprised of 4.35% notes due 2031 and 6.05% notes due 2056. As a result, we are in an excellent liquidity position as we execute on our capital program. At the end of the first quarter, we had $3.1 billion of available liquidity and our pro forma consolidated leverage ratio was approximately 3.6x, well within our long-term leverage ratio target range of 3 to 4x.

Shifting to capital allocation, our focus is more of the same from Targa, maintain our strong investment-grade balance sheet, continue to invest in high-returning integrated projects and return an increasing amount of capital to our shareholders. We declared a first quarter common dividend of $1.25 per share, which is a 25% increase relative to the first quarter common dividend for 2025. We also opportunistically repurchased $55 million in common shares at an average price of $241.43 per share during the first quarter. We expect another record year at Targa across multiple dimensions and remain well positioned to create value for shareholders over the long term.

And with that, I will turn the call back over to Tristan.

Thanks, Will. For the Q&A session, we ask that you limit to 1 question and 1 follow-up and reenter the queue if you have additional questions. Jonathan?

And our first question for today comes from the line of Jeremy Tonet from JPMorgan Securities.

Just want to start off with the Waha basis, if we could, and I guess, the impacts on the basin and Targa going forward here. There's a lot of production that seems being curtailed with the low prices. And just wondering how you see the interplay between GCX and other pipes coming online over the balance of this year, how the basis trends and when these curtailed volumes could return? And then at the same time, the interplay with the uplift that you have gained on the marketing. Just wondering if you could provide some color on how you think that mixes together over the balance of the year.

Jeremy, this is Jen. I'd say that Waha is largely playing out as we expected this year, which is that as we go through the year ahead of the incremental pipes coming online as well as the GCX expansion, it's going to continue to be really tight. And I think you are seeing that manifest really all throughout this year. And it's arguably going to continue to get worse before it gets better as we think about the cadence of volume growth that we're seeing on our system and that we're seeing more broadly in the Permian and how that interplays with not enough takeaway capacity.

I think importantly, from Targa's perspective, we have available capacity to ensure that our producers' volumes flow, which is, of course, of paramount importance to us in making sure that we are delivering for our customers. So for us, it's not physical constraints. It's really the interplay of prices that are resulting in some producers making decisions, frankly, day by day, week by week to shut in volumes in certain areas within our footprint. And I think that's largely based on a view of when there's planned maintenance on pipes coming, that creates more visibility to the fact that it could get a little bit tighter and that could create more weakness in pricing. And of course, if there's unplanned maintenance, then that impacts the basin as well.

As we look forward, the GCX expansion and then Blackcomb and [indiscernible] will bring much needed relief, and we believe that we will see that collapse in basis, and we'll have significant capacity of Permian egress, call it, towards the end of this year and heading into 2027.

[Technical Difficulty]

and prices relative to what we see today for Waha.

That's helpful. And is it fair to say, I guess, the guidance bakes in optimization kind of only what's visible right now? Or just trying to get a sense for how that fits in.

I'd say that we tend to be very conservative about how we forecast optimization opportunities. So we've got 4 months of visibility that's realized so far this year. And then, of course, we've got some visibility into what our expectations are for May. And then beyond that, we try to be modest about how we forecast marketing benefits across a range of scenarios. So really, the guidance uplift for 2026 is driven by strong fundamentals, as we've talked about on the volume side, what we've seen year-to-date on the marketing side, plus some modest expectations for go forward and then just increasing demand for global LPGs where we've been successful operationally in managing to plan to get an incremental cargo or cargoes across our dock across this year as well. So it's a confluence of factors, but the fundamentals are just really strong at Targa, and it sets us up exceptionally well exiting this year.

Got it. That's very helpful. And if I could just follow up on that last point real quick, the LPG export dynamics. Just wondering how much upside that could bring here and particularly as it relates to, I guess, the butane side, as you said, and just wondering what that looks like and what you see.

Jeremy, this is Ben. I think you hit on a key point. As you know, we did have an outage in the first quarter. And I just want to, first of all, say thanks to our operations and engineering team again for bringing it back so quickly. But also thanks to our commercial team and our customers. It was really a hand-in-hand exercise to get as much as we could across the dock during it and then afterwards.

And then part of us getting back on track and having line of sight to additional spot volumes across the dock is, of course, the product mix. And so what we've seen as a result of the Iran conflict is an additional call on butane. So we're working with our core portfolio of customers to move more butane across the dock as they need it and the world needs it. And then that does have the additional benefit of freeing up space on the dock for additional cargoes as we co-load that product. So of course, we came into the year, as we always do, very well contracted across the dock, but that does -- ultimately, that product mix does shift a little dock space in our favor.

And our next question comes from the line of Michael Blum from Wells Fargo.

I wanted to ask -- notwithstanding the recent curtailments and the Waha weakness, I'm curious if you're seeing any change in producer conversations or planned activity in light of the higher price deck and just the Middle East volatility.

Yes, sure, Michael. I think what we're seeing is just really continued strong activity across our footprint. We haven't seen any dramatic changes in response to prices moving up. I think we would suspect as the prices stay elevated for longer and the back end of the curve moves up, I would anticipate there to be some tailwinds for us as we kind of look out into '27, '28 and beyond. But I think what we're seeing this year is just really strong activity, continued, I'd say, outperformance on the gas side. As Jen mentioned, with 200 million to 400 million shut-in, we're on track with our volumes.

I would say kind of coming into this year, thinking there could be some downside to volumes for the year for us, given all the expected shut-ins that we're going to have, it was just kind of a big unknown. I think we're -- now that we're in the midst of really weak Waha prices and that our volumes are on track. I think it sets us up well for kind of back half of this year when that egress comes on for a volume picture and then going into '27.

So I'd expect producers to continue to drill. We've even had some tell us that they're kind of pushing and delaying some of their completions and activity into the back half of this year. And so even with some of that happening, us being on track for our volumes in the first part of the year with these shut-ins, I think it just paints a really good picture for us as that activity ramps when there's sufficient egress on the gas side.

Got it. And then just on the LPG exports, I wanted to ask a little bit of a longer-dated question. I'm just -- clearly, you're seeing an uptick in demand, as you would expect. I'm wondering if you think you'll see higher rates or perhaps longer contracts going forward in light of just the global volatility in that market? And quarter beyond what you've already committed to, what's in flight in terms of expansions, do you think you could see even further expansions of your LPG capacity? And do you have the room to do that if demand was there?

Michael, this is Ben. In terms of expansions, I'd just step back and point to our export program is really part of our integrated system. So that's something that we're looking back to the wellhead across our millions of dedicated acres and seeing what kind of supply we have coming out of the Permian and really across the U.S. And so as we look at expansions, we're really looking at our integrated supply footprint. And clearly, we're very bullish about that, and we see it growing '26 and into '27. And so we'll keep monitoring that and to the extent we see the need for additional chilling to move product through the system. That will, of course, be a nice expansion that we have room for at our Galena Park facility and would be a really relatively inexpensive next step for another chiller. So that always remains on the horizon.

And then in terms of -- you asked about rates and contracts, I'd just say, as I mentioned earlier, on butane, we have seen just additional long-term -- near-term and long-term interest in firm butane volumes. So over time, if that's sustained, we could move a little more than we had initially thought out of our export facility. And then I'd say just generally on the contracting side, we are, of course, working with our current portfolio of customers. And then we have more inbounds than I've certainly ever seen just from others across the world, thinking about getting into the U.S. LPG export market, the surety of supply that comes with working with us here. And I'd say those are multiyear contracts that we are in discussions on and have been actively closing. So I think it's a very constructive environment for us to continue to be highly contracted across our export facilities.

[indiscernible]

Just on the processing side, it seems like you've seemingly been announcing new capacity every quarter here recently. Just curious how you're thinking about the cadence of new plants from here and if you see potential upside to the 3 plant per year run rate that you've outlined in the past?

This is Jen. I think ultimately, it will be the pace of producer activity of our, what I'll call sort of foundational existing contracts already in place and then the cadence of new contract adds that our best-in-class commercial team are working on securing day in and day out that will ultimately dictate how much incremental capacity we need on the processing side and of course, what that will mean for incremental assets that we'll need all along the value chain. I think that we've got a great set of customers. We continue to add contracts. We feel very, very good about the short, medium and long term. You see the cadence of plant adds that we've got going now with the addition of Roadrunner III and Copperhead II. So we'll have 3 plants online in '27, now 2 plants online in the first quarter of 2028.

And I think whether it's 3 plants more or less, that's ultimately going to be dictated by producer activity. But I think we're feeling very bullish about really the short, medium and frankly, long term for continued activity and growth from our Permian Basin contracts that are already in place. And I think that puts us in great stead to just continue to have a portfolio of growth looking forward. But it's a little bit hard to predict 2, 3, 4 years out what exactly the cadence of plant adds will be.

I think the fact that we've got 50 plants built and in progress is recognition that we've got the largest footprint across the basin, which puts us in a great position to compete for incremental contracts as well with the most reliable, most fungible, most redundant system already in place where we've just continued to have a cadence of plant adds year in and year out and bringing those online on time or early, as Matt described in his remarks, is just a testament to our outstanding team. And I think, again, just puts us in a really good position to continue to capture growth going forward.

That's helpful. And maybe just to follow up on your comment there about that process and kind of feeding down the value chain. Can you just remind us your latest expectations here just in terms of how quickly you expect Speedway to ramp once online? And then realize you have 2 more fracs in the works already, but I guess how soon might you need to start thinking about another frac as well?

I think we tried to provide pretty good visibility on the ramp of Speedway by both talking about fairly early that we were going to be overcapacity on our existing Grand Prix line, which meant that we were going to need to utilize third-party offloads, which you can expect we are currently doing and that when Speedway comes online, those volumes will be available to baseload over to Speedway.

And then as I described in my scripted remarks, all of the plants that have come online since we announced Speedway as well as all the incremental plants that we've added since then, mean that we are in a really good position to generate a very attractive rate of return on our Speedway investment similar to what we did for Grand Prix and have, I think, good visibility to continued plant adds beyond the 2 that we announced this morning, which will, again, bring a lot of incremental NGLs in our system, and those will move down our pipeline to our fractionation footprint, and then we'll have incremental propanes and butanes available for export.

And our next question comes from the line of Keith Stanley from Wolfe Research.

How much of the '26 guidance raise would you attribute to marketing with the wide Permian gas spreads and spot LPG exports versus more core volume and margin outperformance in the business? And I'm trying to get at how much of the pretty meaningful guidance raise is repeatable beyond 2026?

Keith, this is Jen. I'd say it's a combination of factors. But certainly, when we forecasted our guidance for 2026 in February, we probably sounded a little bit conservative even on that call in saying that given the visibility we were seeing and the fact that we had only included modest marketing gains, there was definitely the potential for upside there, and we're definitely seeing that play out for this year. But I think what you also heard me say in some of my earlier comments was that what we are including in the revised guidance range is still a relatively modest set of outcomes for the balance of the year. Good visibility to the first 4 months of the year that are realized, good visibility to May. But beyond that, I think that we've been, again, pretty modest in what we have forecasted into our new guidance range. So we'll have to see how that plays out.

I'd say importantly, what is definitely repeatable is what we are seeing on the volume side going all the way through our integrated system. And as Matt described, when we get those Permian lines online, we're going to see pretty good ramp in volumes here across the rest of this year. And that ramp, we believe, is going to continue into 2027 and well beyond that. So I think it's a mix. But of course, a lot of the fact that we're raising guidance by as much as we are a couple of months after we gave our initial guidance range is definitely because we are seeing significant marketing opportunities on the gas side. And then as Ben described, also some good incremental opportunities on the LPG export side, too, which we didn't factor in.

That's helpful. And then I want to kind of revisit growth in a little bit of a different way. You now have 6 plants under construction and 5 in the Delaware. So that's over 1.5 Bcf a day of new plant capacity that you're adding by early '28. Historically, Targa has filled up plants very quickly, almost immediately. Do you expect that to still be the case with these 6 plants under construction? And I ask because -- I mean, it's a 25% increase in your plant capacity relative to your inlet volumes all by early 2028.

This is Jen again. I mean I'd say that we generally try to be incredibly capital efficient, but we also want to make sure that we are creating white space for our producers. So if a producer wants to accelerate and/or if a producer has better results than they're forecasting that we, of course, can handle all of that incremental volume. So a lot of what you're seeing us do, particularly in the Delaware now, which is similar to what we had in place in the Midland Basin already was create a lot of that system reliability and fungibility. We're also adding a lot of sour gas infrastructure to, again, make sure that we're positioned if producers are forecasting less sour gas than materializes, we're going to be able to handle it. And if we've got peers that aren't able to handle it, then hopefully, we can handle incremental volumes even above and beyond what is even contracted at Targa today.

So I'd say that based on our forecasting, we believe that these plants are going to be very much needed and well utilized when they come online. So there's nothing that's different about how we are forecasting when plants are added or how much volume growth we expect when the plants come online. I'd say that part of what we do is we get to a final investment decision on a new plant when we've got visibility with contracts in hand to fill up that next plant. And then what invariably happens is our commercial guys do a great job of going out and adding incremental contracts. So by the time that plant comes online, we've actually added more volumes than we were forecasting when we got to the investment decision. And I think that's part of why our plants continue to be very well utilized. And I can assure you that our commercial teams are working very hard to continue to identify incremental opportunities to add to our already several million acre base of contracts today.

Yes. And -- well said, Jen. And just to add to that, we've talked about over the last couple of years of having kind of outsized commercial wins, some on the sour side, some on the sweet, and it's been disproportionately on the Delaware side. So you see the kind of shift of us putting in more Delaware plants compared to the Midland. We still think Midland is going to have strong growth going forward, but a lot of the success we've had over and above the dedicated acres and the activity on existing contracts, existing acreage that we have, we just had a tremendous amount of success over the last several years. And us building these additional plants is in response to the volume curves we have from producers and what their anticipated drilling activity is going to be.

And our next question comes from the line of Elvira Scotto from RBC Capital Markets.

Just a couple of follow-up questions. Are you embedding any scenario of sustained higher commodity prices in your Q2 plus volume expectations? Or are you assuming prices normalize back to kind of previous levels? Also, can you talk a little bit about what you're seeing on the GOR trends in the Permian?

This is Jen. I'd say related to forecast, we tend to get longer-term forecasts from most of our producers that aren't moving sort of month by month as the price curve shifts. You are seeing some smaller and private producers that may accelerate activity into a higher commodity price environment. But for the most part, we're putting infrastructure in place based on a longer-term forecast. And so I'd say that, that longer-term forecasts are largely consistent with what they were even back in February in a lower commodity price environment. So I wouldn't say that we've got a material increase in activity based on where commodity prices have moved over the last couple of months. It's really more based on a disciplined set of producers that have multiyear programs in place, and they are executing on those multiyear programs.

As it relates to GOR trends, I'd say that we continue to expect that we will have a higher gas-to-oil ratio as we think about where producers are drilling and just the results that we are continuing to see in our system. So that will provide a continued tailwind for us going forward.

Okay. And then just on capital allocation, what's your latest thinking here on opportunistic M&A? You talked about acquisitions. Are you seeing attractive acquisition opportunities in the Permian? And then just kind of thinking about some of your other assets that are not in the Permian, what's the kind of strategic importance of some of those assets? And could they be monetized over the kind of medium to longer term?

This is Jen. I'd say that we're always looking at opportunities to add to our footprint. We have a lot going on organically and very high focus organizationally on making sure that we continue that strong track record of project execution. But we continue to look at opportunities. I think we're really pleased with the acquisition that we made that closed at the beginning of this year and really grateful for the new employees that have joined the Targa team and how successful that integration has been. So I think we have a good track record of executing acquisitions and integrating them well. But again, for us, primary focus right now is executing on what we have under foot in terms of the projects underway.

And then I think related to non-Permian assets, I think related to all of our assets, part of our job is to always evaluate if somebody has a view that something is worth more to them then that's something that we would certainly consider in terms of monetizing assets. But we're in such a strong balance sheet position. And I think we've got a lot of option value in many of our assets that I call non-Permian that we're really excited about the outlook for our entire footprint. And ultimately, our base case is that we will continue to execute with the assets that we have under foot, but of course, are always open to any discussions on any assets that others might value more highly.

And our next question comes from the line of Jackie Koletas from Goldman Sachs.

I just wanted to go back to your comments on guidance. You noted the new guide continues to be somewhat modest on optimization. Where could you expect the most outperformance or upside from here that could kind of drive you to the near or above the top end? And then specifically, what could that come from? Is that all incremental Waha or something else?

Yes, sure. This is Matt. I think Jen kind of articulated where we are in our guidance and how really good we feel about our guide, even albeit $300 million higher. I think from here, we have a relatively conservative forecast for the back half of the year in terms of marketing and optimization. We'll see how that plays out. That could be some further upside. But we'll just kind of see how Waha plays out in the back half of the year with the incremental pipeline capacity coming on.

Then I think just in terms of production activity and volumes through our system, we're still seeing on any given day, it is pretty volatile, the amount of shut-ins we have on our system. When exactly that's coming back, is there, frankly, more gas there than we really think. It's a bit of an unknown of kind of how much comes back and where volumes settle out once we're in an environment where we have sufficient takeaway capacity. So I'd say there's some -- probably some volume up -- potential volume upside and both gas marketing and LPG export upside as well.

Got it. And then just to go back a little bit to capital returns. With '26 capital -- CapEx being maintained for the year and increasing EBITDA guidance, what is your appetite to increase shareholder returns from here?

This is Will. I'll take that one. Thank you for the question. When we look at our return of capital strategy, it's one that we've been pretty consistent adhere to, and that is to have a strong balance sheet to invest along our value chain at attractive returns and return increasing capital to our shareholders. If you just look at the first quarter, we did all of those things. We had a strong balance sheet at 3.6x leverage. We invested in our business and significant capital investments. We also closed an acquisition. We bumped our dividend 25%, and we bought back $55 million worth of stock. So I think you'll see us continue to execute on that plan and try and grow our shareholder value.

And our next question comes from the line of Manav Gupta from UBS.

Congrats on the strong result. Your press release says your inlet volumes in 2Q are trending significantly above your 1Q. I was hoping you could quantify that significant a little bit for us. And also what's driving the quarter-over-quarter volume growth, if you could talk a little bit about that?

Manav, as I said in my scripted remarks, right now, our current volumes are about 250 million cubic feet a day higher than the Q1 average. And then I also described that on any given day, we've got about 200 million to 400 million cubic feet a day of shut-ins on our system that are really driven by the low Waha gas prices that we are seeing. So I think that makes it difficult to forecast the quarter in terms of volumes with precision. But what we are seeing is material growth over the first quarter. The first quarter, again, impacted by severe weather as well as some shut-ins, say, second quarter, seeing really good strong underlying fundamental activity, but also seeing increasing shut-ins because of lower gas prices, and we've got a number of -- we've had some planned maintenance on the egress side and some unplanned maintenance that has impacted that as well.

So those are all the data points that we tried to give this morning and color around our volumes. And really, the underlying premise is just there's a lot of volume growth. And when we get these incremental pipes online later this year, I think you're going to see a material step-up in our volumes just because of the shut-ins that we're experiencing.

Perfect. My quick follow-up here is one of your peers who was somewhat of a late entrant in sour gas is finally acknowledging that they're seeing a big activity in that region. And I was wondering if you're also seeing higher rig count in that part of Delaware and Lea County? And do you expect your sour gas volumes to also ramp up in the second half of this year?

As we've discussed before, we have, for a long time, invested in sour gas infrastructure in the Delaware Basin. And one of the things as the larger producers develop their acreage positions, they really develop sweet gas for a long period of time because they didn't have confidence in sour gas takeaway treating, et cetera. But over the last 3, 4 years, we have seen a significant increase in sour gas activity, certainly because we put the infrastructure in place. We've been able to tie up and dedicate acreage under our sour gas infrastructure. We continue to see volumes ramp. We do have discussions with producers where some of the Bone Spring, Avalon development that they had put off for a period of time, they are now stepping into.

So quick answer is yes, we expect to continue to see sour gas growth. And we have the infrastructure in place, really comparable -- nobody is comparable to us in that footprint. So we feel really good about that incremental opportunity and the margins associated with it.

And our final question for today comes from the line of Brandon Bingham from Scotiabank.

Just wanted to maybe go back to the setup into next year, especially as more producers are coming out with, at least in the Permian, incrementally positive commentary or updates. I think Diamondback, in particular, mentioned pulling forward some Barnett development. Just curious, given all of this plus the forthcoming egress capacity and forward curve pricing, at least on the crude side that sits comfortably above what people would consider mid-cycle. Is there potential for something more than just a modest pulling forward of incremental pads thinking '27, '28 and beyond?

Brandon, this is Jen. I mean I'd say that just the overall environment as we look at short, medium and long term, just feels really constructive for continued producer activity. And given the system that we're sitting on, the contracts that we already have in place, the millions of dedicated acres, I think there's going to be material volume growth here for years to come. I think part of what makes us really well positioned as well is the infrastructure adds that we have underway. So we'll add the East Driver plant on the Midland side here in the third quarter of '26. And then as we get into 2027, we'll add Copperhead on the Delaware side in the first quarter, then Yeti in the third quarter and Yeti II in the fourth quarter.

And all of those incremental adds combined with the largest system just puts us in a really good position to be able to handle any incremental growth above and beyond what we were already expecting to be a very robust growth year in 2027. So I think we're just feeling really good about the outlook, and there's nothing that we're seeing so far this year that doesn't support that continued view that 2027 is going to be a really, really strong year for Targa.

Okay. Great. And then just quickly, it looks like East Pembrook came online ahead of schedule. I think Falcon II was previously pulled forward as well. Just curious how much opportunity is there to continue that trend of plants in service early? Or is it maybe constrained by customer volume expectations or anything out of your control?

I think that our engineers and operations teams do a fantastic job, along with our supply chain team of making sure that we've got the infrastructure to construct of working really well together to try to get assets online as quickly as possible. I think that we try to be very conservative in the initial dates that we come out with relative to our projects, just to make sure that we can deliver both internally and, of course, for our customers.

And then as we move through a project cycle of getting it fully complete, we do sometimes have the opportunity to pull it forward. And I think we're constantly probably quite annoyingly challenging our engineering team with questions of can we move something forward even if it's a week or a month or in some cases, you've seen us successfully move projects forward as much as a quarter or so.

So that's something that I think we just pride ourselves a lot on is making sure that we bring our projects on time or early and are consistently challenging ourselves to do that while also maintaining the high quality of service that I think really sets us apart for our customers.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Tristan Richardson for any further remarks.

Thanks to everyone joining the call this morning, and we appreciate your interest in Targa Resources.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Good day, and thank you for standing by. Welcome to the Targa Resources Fourth Quarter 2025 Earnings Presentation. [Operator Instructions] Please be advised that today's conference is being recorded.

I'd now like to hand the conference over to Tristan Richardson, Vice President of Investor Relations and fundamentals. Please go ahead.

Thanks, Liz. Good morning, and welcome to the Fourth Quarter 2025 Earnings Call for Targa Resources Corp. The fourth quarter earnings release, along with the fourth quarter earnings supplement presentation for Targa Resources that accompany our call are available on our website at targaresources.com in the Investors section. An updated investor presentation has also been posted to our website.

Statements made during this call that might include Targa's expectations or predictions should be considered forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our latest SEC filings.

Our speakers for the call today will be Matt Meloy, Chief Executive Officer; Jen Kneale, President; Will Byers, Chief Financial Officer. Additionally, the following senior management team members will be available for Q&A. Pat McDonie, President, Gathering and Processing; Scott Pryor, President, Logistics and Transportation; Bobby Muraro, Chief Commercial Officer; and Ben Branstetter, Senior Vice President, Downstream Commercial.

I'll now turn the call over to Matt.

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 35 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 then taking over for you. And Ben, we're really excited to have you on the executive team.

Matt, thank you for your comments about my retirement. It's 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 and 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've been a part of a great team here at Targa. And it's been my pleasure to stand on your shoulders. Thank you.

Thank you, Scott. And now turning to our results.

2025 was another exceptional year 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 million 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 $4.96 billion of adjusted EBITDA, more than $800 million higher year-over-year.

We are almost 2 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 with our previous commentary and our outlook for '27 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 volumes, 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. 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're investing in the same types of projects that generated those attractive rates of return.

So with this outlook for strong volume growth, we are announcing 2 new projects today. Our next Delaware processing plant, Yeti II and our 13th fractionator in Mont Belvieu. We are also ordering long lead items for 2 additional plants in the Permian planned for early 2028. That is 8 plants over the next 2 years, giving us line of sight to an incremental 2.2 billion cubic feet per day of additional processing capacity and gross NGL production of approximately 320,000 barrels per day. For perspective, this incremental plant infrastructure alone would amount to the fifth largest processor in the basin.

This type of volume growth and commercial success we're experiencing is driving more plant and field capital in the Delaware than in previous years. These projects represent more of the same from Targa, attractive investments across our integrated system. 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, are set to come online in the second half of 2027.

Following the completion of these projects, we expect to have lower Downstream capital spending for years to come -- sorry, 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 3 plants per year, we would expect multiyear growth capital spending to average around $2.5 billion annually post Speedway. This compares to approximately $1.7 billion in the illustrative case we shared in 2024.

Our updated illustrative case is higher because we assume around 3 plants per year versus 2 plants previously. We also assume proportional GMP 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 billion 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 generates 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 new rides of the challenges of managing successfully through the cold winter weather in January.

With that, I'll turn the call over to Jen.

Thanks, Matt. Good morning, everyone. In the fourth quarter, our Permian volumes averaged a record 6.65 billion 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 firm 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 improve.

Our volume outlook is a result of the continued strong activity we are seeing from our 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 to bolt-on producer transactions, adding approximately 2 million 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 3 processing plants in service, including Falcon II in the Permian Delaware and East Pembrook and East Driver in the Permian Midland. We continue to expect our new plants will be much needed at startup. Our Falcon II plant is expected to come online ahead of schedule and is currently in start-up and our remaining announced plans 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 II plant is scheduled to be in service in the fourth quarter of 2017. And as Matt mentioned, we are ordering long lead items associated with our next 2 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've 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 the fourth quarter of 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 1.05 million barrels per day, and our NGL transportation system continues to run full. Fractionation volumes averaged a record 1.14 million barrels per day, and our LPG export volumes averaged 13.5 million barrels per month. Our Delaware Express project, frac Trains 11 and 12, Speedway in our LPG export expansion, all remain on track and will be much needed at startup. Train 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 excellent 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?

Thanks, Jen. Targa's reported quarterly adjusted EBITDA for the fourth quarter was $1.34 billion, a 5% increase over the third quarter. The sequential increase was attributable to higher system volumes and greater optimization opportunities in our marketing business. Full year 2025 adjusted EBITDA was a record $4.96 billion, a 20% increase over 2024, supported by record financial and operational performance across the company. We also benefited from stronger marketing with approximately $150 million of higher-than-expected optimization opportunities across 2025. We invested approximately $3.3 billion in growth capital projects in 2025 as we executed on our Permian and Downstream expansions.

Net maintenance capital was $226 million. We continue to return meaningful capital to our shareholders, opportunistically repurchasing $642 million 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, and our long-term capital allocation strategy is unchanged. 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 3 to 4x. Our available liquidity as of January 31, 2026, which includes funding the stakeholder acquisition and redeeming the 6.875% notes due January 2029, was approximately $1.9 billion.

Turning to 2026, we estimate full year adjusted EBITDA to be between $5.4 billion and $5.6 billion, an 11% increase over 2025, based on the midpoint of our range. We expect approximately $4.5 billion 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 3 years.

The increase in 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. We expect to end 2026 with our leverage ratio comfortably within our long-term target range, 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 and based on our current assumptions, we do not expect Targa to pay meaningful cash taxes for the next 5 years.

We are in excellent financial shape with a strong and flexible balance sheet, and we are well positioned to continue to create value for our shareholders. And with that, I will turn the call back to Tristan.

Thanks, Will. For the Q&A session, we ask that you limit to one question and one follow-up, and reenter the queue if you have additional questions. Operator, please open the line for Q&A.

[Operator Instructions] Our first question will come from Jeremy Tonet with JPMorgan.

Just wanted to kind of start off with the outlook ahead for 2026. You've seen steady growth there, double digits, where as others in the industry, we've seen kind of some retrenchment in forward expectations. I'm just wondering if you could walk us through a bit more what's driving Targa resiliency and the growth outlook in '26 and versus others? And I guess, what do you see post '26 that gives you confidence in future above average growth?

Thanks, Jeremy. I'll start and then Jen or Pat want to jump in. 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 just continued to drill across our footprint. We've 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's a combination of just existing customers continuing to drill and continuing to add to our footprint. And you saw that with kind of our 2 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. We're pointing to low double digits, and that's really pretty similar to what we saw at this time last year when we kind of guided to that growth rate for 2026. But all the commercial success we're having and just the activity we're seeing from our bottoms-up forecast from our producers is giving us even -- I'd say we're more positive on '27 and beyond from what we see today.

More positive great to hear. I think that might tie into my next question. When you talk about the $2.5 billion of CapEx kind of like that mid-cycle, if you will. It's higher than before and has another plant, I think, than where you were before? And just wondering if you could bridge us through what the drivers are there? And is this an expectation of even better growth in -- versus what you thought before, which is what it sounds like?

Jeremy, this is Jen. I think that what we wanted to do with that slide was really put on one page what we've been spending a lot of time talking to investors and potential investors about, which is really that next transformation for Targa when our EBITDA is, as Matt said in his scripted remarks, over $6 billion when 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 to low double -- high single digit to low double-digit growth across our footprint.

So I think we're supported by all of 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've just had a ton of commercial success. So hats off to our commercial team who, of course, are 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 the what I'd 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're growing off a bigger base. So when we previously put that information out, we've now grown for the last 2 years at a pretty good clip. So one, it's just off a larger base. And that's why we're now saying it could be, call it, 2.5 to 3 plants of spending in there, and that requires incremental field and compression spending as well. And then there's also incremental spending for residue, which has become a bigger part of our business versus where we were 2 years ago, and also there's some carbon capture and other things. But I do think it's a really good indicator 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 2 chunkiest projects that we have in our purview.

Our next question comes from Theresa Chen with Barclays.

I'd like to unpack that 2027 plus inlet growth assumption that high single-digit to low double-digit rate. How much of this growth is a result of growing with your producers for 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.

Yes, sure. And as we kind of look at our multiyear forecast, we'll get bottoms-up individual forecasts from our producers. And our larger independents and majors will typically get several years of forecast. Really, over the last 90, 180 days, we've continued to get revisions higher. And it's not just from one producer, it's from several producers. And I'd say that is more in the Delaware side than it is in the Midland. There's just kind of more activity and a more diverse customer set over there. So we're becoming -- that outlook is becoming stronger and stronger in the Delaware.

We announced another Delaware plant today and two long lead -- 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. And when I said I think 2027 is going to be stronger, it's -- I would say it's going to be stronger than what we previously had expected at this time last year. We're not commenting relative to '26 or '25 growth. It's just as we look out for multiple years, we see a stronger growth rate than where we sat at this time last year.

Understood. 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 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 success and your ability to replicate it over time?

Well, I mean, I'd say what's great is even if we don't have a significant amount more commercial success, we're 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've done is we've just added to our existing really robust growth profile from our existing customers, and we have a really good commercial team. And so if we can find accretive either bolt-on acquisitions or step-out projects, we'll continue to add to that. But I would say we don't need it to fill the plants up that we've announced, and we don't need it to continue to grow in the Permian. I think further commercial success would just be additive to the growth rate that we're looking on now.

I'd just add, Theresa. We reached 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's based on what is already executed and how we best position ourselves to service those already executed contracts as we move forward through time.

Our next question comes from John Mackay with Goldman Sachs.

I think I'll pick up on this thread a little bit more. You are -- it looks like you're pointing to continuing to effectively take share in the basin. I think Teresa kind of asked on this, but maybe I'll follow up. Are you guys still seeing the same level of margins you've seen historically? Or maybe more broadly, you can kind of talk about that margin per M trajectory you've been seeing?

John, 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've got excellent producers already under contract with long-term contracts. And I think we're 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're in position to execute for our producers. And I really think it's 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 a 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 record we've been able to demonstrate. So this isn't us taking lower returns to continue to execute. I think it's 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's operations all the way from the wellhead down to the water, and we're really proud of how well our team is continuing to execute.

That's absolutely clear. Maybe just a follow-up is you guys are talking about a lot of gas here. Maybe to share your kind of medium- and longer-term view on Waha at this point?

This is Bobby. Yes, I think we are excited. There's been a lot of public commentary about the pipes that are coming online later this year. We'll be excited to see those pipes come online as well as others further out the calendar in '28. I think it's going to be what it's been in the last 10 years, which is going to be a bumpy ride as assets come online, we'll be in good shape on differentials and then we'll 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 we felt 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.

Sorry, just to make sure we're 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?

I don't think that's right. I think they will fill up over time. I think they'll fill up probably, I'll say, faster than people expect at the end of the day with the results we're 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 2 or 2.5 Bcf pipe, there is an all of a sudden 2 Bcf or 2.5 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've heard about the Permian on other systems. But at the end of the day, they will take time to ramp up, but it's the same thing every time. It's the same story, just a different year.

Our next question comes from Keith Stanley with Wolfe Research.

First, I just wanted to clarify, I think you said $150 million of upside from marketing last year. 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?

Keith, this is Jen. That's right. In our scripted comments, Will said that for 2025, we had about an extra $150 million of marketing benefits. I'd 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, that occurs, that will create additional marketing opportunities for us. We're largely focused on making sure that our producer volumes move. We're in an excellent position to do that. And so as you think about our 2026 guidance, I think consistent with our past practice, we're very conservative about how we forecast marketing gains. We've got, call it, 1.5 months here of the year where we have really good visibility, and then we've got the balance of the year where I think there could be some incremental opportunities, but we haven't factored that in, in a material way.

Got it. And second one, kind of following up on some of the earlier ones, but just taking the Delaware by itself, for example, you're building 4 plants now. You just said the long lead items for the next 2 plants here also in the Delaware, so that's 6 plants in the Delaware. How much of the growth outlook there would you attribute to the Delaware just booming versus Targa is taking market share or getting a disproportional amount of the market, given a competitive advantage?

Yes. I mean it's hard for us to really know how much is market share gains. I don't know what's happening on other systems as we look out several years. I'd say what we've seen from several of our producers where we've had some underlying acreage dedications come back to us with revisions to the upside. And one producer, it might be 50 million a day, it could be 40 million a day, it could be 150 million a day. We've had several of those over the last 6 months which is just adding to our outlook. I would suspect others are having that on other systems as well. So it's a little hard for us to know how much is just total growth from the Delaware versus share gains. We kind of learned a little bit about that in hindsight. I'd say we're pretty aware of all the opportunities out there. We don't win everything. 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's just a lot more activity on.

I would just add that I think that the acreage that we have dedicated to us has shown a resiliency as well. As you've seen rig counts drop in the Delaware. I think we've had really good consistency as we've moved forward through the last couple of years, which we would expect to continue going forward. So some of it is also that we've gained market share as rigs have dropped from other areas, but it's not necessarily that we've had a lot of adds to our acreage that is already existing. It's more than -- I think we've had just consistency. And then just better results in that consistent activity on our acreage.

Our next question comes from Manav Gupta with UBS.

I wanted to ask you something which is more of an upstream question, but two of your biggest customers are very actively talking about it. They're basically saying, look, our Permian recoveries are improving as we put more science into it, whether it's AI, whether it's lightweight proppants, whether it's surfactants. And so they're basically saying, the Permian rates of returns are improving because our wells are performing better as more science is going into that. I'm just trying to understand based on what you're seeing out there, are you also seeing that as more of these newer technologies are going into Permian, the well recovery is improving, which is obviously very positive for Targa?

Manav, I would just say that I think it's a combination of factors. It's, I think, really exciting for all of us to hear about the technological 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're having. I think that's part of what we're seeing. I think we're also seeing just the benefits of improving GORs in certain areas of operation. Frankly, just more gas coming out of wells than whereas forecasted as well being a factor too. So for us, I think it's 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's a variety of factors that are contributing to us seeing more gas coming out of wells than were previously forecasted.

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

Yes. This is Bobby. Both those acquisitions were from producers that we have really strong relationships with and have for a long period of time and discussing their plans going forward and how they're going to work at it seemed to make more sense for us to own those assets and build out the systems. And we're excited about it because it also gives us some assets in areas where we can go leverage and -- leverage the footprint 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 working with them on a day-to-day basis to make sure they've got what they need to drill their wells and bring gas to us.

Our next question comes from Michael Blum with Wells Fargo.

Maybe just to stay on the conversation around growth and what's going on out 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?

Yes. What we've seen is, I'd say, some early activity from some of our producers in that zone. So most of our growth is from traditional formations or traditional zones, but we are starting to see more activity from a number of our producers in the deeper zones. So what we wanted to highlight is, as you look out over the longer term, this, as the Barnett, Woodford gets developed, it could add to our longer-term growth rate. There's some piece of it. There's a little bit that's in '26. And as you move out, there's 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're seeing more producers get active, and we've seen early well results be pretty positive there.

Okay. Got it. And then just in light of the volatility we've seen at Waha over the last few months and 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, in your prepared remarks, you said you're going to benefit as Waha prices improve. So -- can you just, again, there just tell us, 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 both sides of that coin.

Yes. Michael, so we have, I'd say, significant transport 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 making sure our customers can produce the gas and we can move that gas to market. So that's 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 trying to reduce that risk over multiple years. We haven't outlined an exact amount of what that position is because it's frankly always changing, too. We're always hedging it. We're always trying to just make sure we have transportation to multiple markets, it's a fluid number. But that is what you see from us is when you see weak prices and even some volume downside from shut-ins, we do have an offset in the transportation position.

For us longer term, I think we benefit more by having plenty of takeaway, higher Waha prices because a lot of our contracts are fee-based but also feed floors. And so when Waha moves higher, and we have NGL prices around where they are, you could see us benefit from some upside from higher Waha prices. And I would say, I think we have more length there. So it's just kind of that in-between area where we're not really benefiting from marketing, and we have low prices, that's really how we guide and factor in our multiyear forecast is in not being above the floors and not having a lot of marketing. So to the extent it moves up or moves down, I'd say we have some upside really in either direction.

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

One kind of bare case, I guess, what I've heard is that, that you've seen ethane recovery go up pretty materially as Waha price has been distressed over the last year or 2. Do you see any risk on 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?

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

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

I was hoping I could just give a little bit more detail on the bridge on the new CapEx budget a step-up of $1.2 billion. 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 frac 13 versus additional field capital compression for the legacy system and your recent acquisitions?

Sure, AJ, this is Jen. I think that the easy items to bridge are the ones that you mentioned, right? You've got the Yeti II plant in the Delaware and you've got frac Train 13. And I think the cost of those are very much consistent with the costs that we've outlined before in terms of what a new plant or frac cost us. I think we also announced that we are ordering the long lead items for our next 2 plants in the Permian Delaware. You can assume that in our guidance, we've assumed that we move forward with those. Our general track record is we announced we're getting long lead items as we finalize location and some other key decisions, and then we move forward with the final investment decision. So you can assume that there's spending around that as well.

I think that we've also got a lot of field gathering and compression -- gathering lines and compression spending, and that's both to service what I'd 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've got some, hopefully, pretty good information in our slides around our commercial success as well.

I will say that we've 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 '27, '28 and really beyond.

So we're also just trying to make sure that we don't put ourselves in a position where we can't continue to provide exemplary service to our producers.

Great. And then maybe if I could just sneak one more in. Just the overall basin thinking about some of the higher GORs that you outlined in your deck. And just kind of wondering from that context, if we see overall Permian oil production flat in 2026, can you give us your latest updates on how you think overall rich gas production could trend in an environment like that, maybe exit to exit?

Yes. I mean we've outlined and in our investor presentation, we kind of talk about if crude is growing x, that means gas is going to grow y, and then we've outperformed that. And so if you look at the latest forecast that we use, we're not necessarily saying it's right, but there's a 4% spread. I would suggest if crude is growing x, gas is going to grow 4% higher than crude. If you looked at it recently, it's maybe even a little bit higher than that, so maybe it's even potentially more than that. And then we've typically, over the last several years, have outperformed basins. 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're targeting just are more gassy, and from our continued strong performance in the basin. So I think it points to a really pretty strong growth outlook for us even in slow to modest growth for crude.

Our next question comes from Ameet Thakkar with BMO Capital Markets.

Just one quick one for us. It looks like you guys had a nice sequential increase in fourth quarter export volumes, but it's I think about 3% or 4% lower than it was a year ago. So as we think about the initial export capacity coming online in '27. Is your confidence of growing kind of export volumes ended with that any kind of based on success you've had in kind of your commercial commitments you've been able to procure already? Or is it somewhat kind of based on your forward view of kind of where the kind of the SB balance in national market?

This is Ben. We had a very nice fourth quarter on the exports, but we were impacted a little bit by fog there. And honestly, we're shaping up for a really nice first quarter as well. But as I think about how we view the export business, that's really part of our integrated value chain. And so as you see us announcing 8 plants coming across the Permian, those are integrated molecules that are flowing through our pipe, our frac and our export. And so we're really excited to have that export project coming online. We remain generally very well contracted across the dock. And honestly, we're having as many conversations that we've ever had about long-term supply kind of globally coming out of the Gulf Coast.

Our next question comes from Brandon Bingham with Scotiabank.

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

Brandon, this is Jen. I'd say the range is based on a number of cases that we run. So as we think about what would get us to the upside, 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 volumes 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 haven't factored in a lot of marketing gains, and that's 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're currently forecasting, that would also drive us, I think, higher -- to the higher end of the range.

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, especially 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, what maybe some upside could look like as far as that's concerned and how the sensitivity might change between the 3 commodities?

I would just say that we are really well hedged as it relates to our equity volumes. So when you think about our direct price exposure, we're really well hedged. So the move higher in prices, we'd be a big beneficiary there if prices moved above our fee floor levels, we haven't described where our fee floors are, but we've been essentially below fee floors for the vast, vast majority of months over the last 2 years. So that would result in EBITDA being higher.

I'd say that we've 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's why you saw us hedge as much as we've 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 contango in the NGL markets, there, we've got good opportunity to utilize our storage in Bellevue to potentially be a beneficiary of that. We haven't really had that in some time, but we're sitting there with a really attractive position of assets if we do get those opportunities to be a beneficiary.

Our next question comes from Jason Gabelman with TD Cowen.

I wanted to ask about the Downstream growth. You don't really talk about much additional capital into the Downstream part of the business after 2027. But it does look like, I guess, you'll 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 beyond the one announced today?

Yes. Jason, 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. One Speedway comes online, and 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'll be pretty well balanced on the frac side, and we'll have some capacity on the transport side when Speedway comes up. And as we're expanding our export facility, that should create some nice operating leverage for us as well as there's significant available capacity with LAP 4 when it comes up so that as we're growing and these volumes are ramping, it will provide some period of time before we'll need another expansion on the export dock. So I think with our downstream side, the reason we're pointing to a little bit lower CapEx post '27 is we're going to have some operating leverage kind of through the footprint on the Downstream side.

But the last case that we put out there talks about additional potential fracs in those numbers as well as other downstream complement assets just not the bigger transport or frac...

Yes, that's right. So then as you go forward post '27, it's really ratable fracs will be the large piece of the Downstream spend.

I'd just add for the bridge for us 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 just very good project returns.

SP1 Got it. My quick follow-up just on Speedway CapEx, can you remind us how much of that is concentrated in '26 versus how much spend will be less than '27?

Total project cost is $1.6 billion. I'd say -- we had a pretty good amount of spending on it in 2025. Spending in 2026 is more, and then we'll just be finishing it up in 2027. So we haven't broken out the cost publicly by year. But I'd 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 and 2025 and 2027 as we finish up that project.

Our next question comes from Sunil Sibal with Seaport Global.

So I wanted to start off on the LNG segment. It seems like operating costs have been trending pretty low there. I was kind of curious if there is any kind of onetime factors, which have helped you in 2025? Or is that more of a secular trend in terms of operating cost control?

I think that their 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've 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're talking about, Sunil.

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

Yes, I'm sorry. I don't know that I followed that. Do you think -- could you say it again?

Yes. I was curious 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 acreage dedications versus the current volumes that you are moving on your sales terms?

Sunil, this is Jen. I think that part of why we described 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 don't need to continue to execute commercially. But I know we've got the best commercial guys 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 if we didn't, we've got decades of really attractive inventory on our system. And that's necessitating the infrastructure that we are putting in place today. And that's really what is continuing to support this view that Targa has an exceptional strong medium and long-term outlook.

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

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

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

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Targa Resources Corporation Third Quarter 2025 Earnings Webcast and Presentation.

[Operator Instructions]

It is now my pleasure to turn the call over to Tristan Richardson, Investor Relations and Fundamentals. Please go ahead.

Thanks, Tina. Good morning, and welcome to the Third Quarter 2025 earnings call for Targa Resources Corp. The third quarter earnings release and a supplement presentation that accompany our call are available on our website at targaresources.com. Additionally, an updated investor presentation has also been posted to our website. Statements made during this call that might include Targa's expectations or predictions should be considered forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from the those projected in forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our latest SEC filings.

Our speakers for the call today will be Matt Meloy, Chief Executive Officer; Jen Kneale, President; and Will Byers, Chief Financial Officer. Additionally, members of Targa senior management will be available for Q&A, including Pat McDonie, President, Gathering and Processing; Scott Pryor, President, Logistics and Transportation; Bobby Muraro, Chief Commercial Officer; and Ben Branstetter, Senior Vice President, Downstream.

I'll now turn the call over to Matt.

Thanks, Tristan, and good morning. We had another outstanding quarter with record adjusted EBITDA, driven by record volumes across our footprint. With 3 quarters completed, we now expect our full year 2025 adjusted EBITDA will be around the top end of our previously provided guidance range. .

Our Permian volumes grew more than 340 million cubic feet per day and nearly 700 million cubic feet per day compared to this time last year. Our Permian growth is driving additional NGL volumes through our integrated system as NGL volumes increased about 180,000 barrels per day compared to this time last year. Incrementally, the customer success we achieved in 2024 has started to show up in our volumes, some this year, but really adding to our longer-term confidence of continued Permian volume growth.

Our customers' success has continued as our commercial team has added to our leading Permian G&P position with acreage dedications from new and existing customers in and around our footprint, further bolstering our long-term growth outlook. To accommodate this continued volume growth from our customers, in September, we announced several new growth projects, including our Speedway NGL transportation expansion, the Yeti gas processing plant in Texas in the Permian Delaware and Buffalo Run, an expansion of our Permian natural gas pipeline system. And today, we announced our next gas processing plant Copperhead in New Mexico in the Permian Delaware.

Also, our previously announced Forza natural gas pipeline in the Delaware had a successful open season, and we are moving ahead with that project. We continue to expect meaningful long-term growth in Permian gas and NGL volumes across our footprint. Our conviction is supported by multiple factors, including the bottom-up forecast from our existing producer customers, our continued commercial success and the continued industry trend of rising gas to oil ratios. We have a lot of projects in progress, which means growth capital is elevated in 2025 and 2026, and these attractive investments will drive significant increases in adjusted EBITDA.

Our chunkier downstream projects are set to come online in 2027. Both the Speedway NGL line and our larger LPG export expansion have sufficient capacity to handle our growing volumes for many years. Once these projects are online, we expect our downstream capital spending will be significantly lower for years to come, driving a substantial increase in free cash flow. And this expected increase in free cash flow will be durable, meaning even if we are in a stronger growth environment driving elevated spending on the G&P side, our downstream spending should still be modest.

So in late 2027, our downstream NGL capital is expected to be significantly lower than today's and our adjusted EBITDA is expected to be much higher than today's. This results in a strong and growing free cash flow profile for years. This is what our team is working towards every day, execute our large capital projects in the near term while continuing to invest in high-return projects, leading to Targa's next transformation. A large investment-grade integrated NGL infrastructure company that provides industry-leading growth and generate significant free cash flow year after year. This is a value proposition we are excited to be a part of. This is our focus.

And as we look out over the medium and long term, we expect to be in a unique position to grow adjusted EBITDA, grow common dividends per share, reduce share count generate significant and growing free cash flow and do this all with a strong investment-grade balance sheet.

Before I turn the call over to Jen to go over our operations in more detail, I would like to thank the Targa team for their continued commitment to safety and execution and for consistently delivering reliable, high-quality service to our customers.

Thanks, Matt. Let's talk about our operational results in more detail. Starting in the Permian, our natural gas inlet volumes averaged a record 6.6 billion cubic feet per day in the third quarter, representing an increase of 11% versus a year ago and strong sequential growth. In October, our Permian volumes were impacted by some producer shut-ins from low commodity prices and storms, but these volumes are now largely back online which we have taken into account and the updated color that we expect to be around the top end of our guidance range for adjusted EBITDA.

The second half ramp that we are forecasting at the beginning of the year has materialized and we see at least 10% growth in our Permian volumes for 2025. And based on the visibility that we have today, we see 2026 as another year of strong low double-digit growth. In the Permian Midland, our Pembrook II plant came online during the third quarter and is running at high utilization. And in Permian Delaware, our Bull Moose II plant commenced operations recently in October. We expect our processing infrastructure currently under construction will be much needed at startup and our projects are on track with previously provided time lines.

Largely driven by requests from our customers, we are continuing to build out our intra-basin residue capabilities in the Permian, which will help us manage tightness in natural gas egress from the basin until the next wave of takeaway comes online in 2026. The Bull Run Extension in the Delaware is expected to begin operations in the first quarter of 2027 and Buffalo Run, our Midland residue expansion is expected to be completed in stages and fully complete in early 2028. Our newly announced Forza pipeline, a 36-mile interstate natural gas pipeline to serve growing natural gas production in the Delaware Basin in New Mexico is expected to be in service in mid-2028 subject to receipt of necessary regulatory approvals.

As demonstrated over the last number of years, we've taken a deliberate approach to enhance flow assurance and do an excellent job of managing takeaway for our customers, ensuring we have access to a wide portfolio of markets. The Blackcomb and Traverse pipeline where we have a 17.5% equity interest are currently under construction, and Blackcomb remains on track for the third quarter of 2026 and traversed for 2027.

Shifting to our Logistics and Transportation segment, Targa's NGL pipeline transportation volumes averaged a record 1.02 million barrels per day. Our fractionation volumes ramped sharply in the third quarter, averaging a record 1.13 million barrels per day following the completion of planned maintenance at a portion of our fractionation facilities during part of the first and second quarters of the year. Our LPG export loadings averaged 12.5 million barrels per month during the third quarter.

Given the anticipated growth in our Permian G&P business and corresponding announced [ plant additions ], the outlook for NGL supply growth in our system remains strong, and we have a number of key projects currently underway. In the Permian, our Delaware Express NGL Pipeline expansion remains on track to be complete in the second quarter of 2026. Our next fractionator in Mont Belvieu, Train 11 is expected to be complete in the second quarter of 2026 and Train 12 remains on track for the first quarter of 2027. Our LPG export expansion, which will increase our loading capacity to approximately 19 million barrels per month remains on track for the third quarter of 2027.

Speedway, which will transport NGLs from the Permian to Mont Belvieu with an initial capacity of 500,000 barrels per day is expected to begin operations in the third quarter of 2027. Our existing NGL transportation system is running full. And with 5 Permian plants under construction, we will be leveraging third-party transportation ahead of Speedway coming online. This positions us to aggregate significant baseload volumes that we can transition to our NGL transportation system when Speedway begins operations, meaningfully derisking the project.

Our existing contracts with our best-in-class customer base that allowed us to fill Grand Prix in 6 years will continue to drive the volume growth that will fill Speedway. 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 excellent position to continue to execute for our customers and 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 third quarter results, outlook and capital allocation. Will?

Thanks, Jen. Targa's reported adjusted EBITDA for the third quarter was $1.275 billion, a 19% increase from a year ago and a 10% increase sequentially. The sequential increase in adjusted EBITDA was attributable primarily to record Permian NGL transportation and fractionation volumes generating higher margin across our G&P and L&T segments. Given the strength of our 2025 performance, we now estimate full year 2025 adjusted EBITDA to be around the top end of our $4.65 billion to $4.85 billion range.

At the end of the third quarter, we had $2.3 billion of available liquidity and our pro forma consolidated leverage ratio was approximately 3.6x, comfortably within our long-term leverage ratio target range of 3 to 4x. As we provided in September, we estimate net growth capital spending for 2025 to be approximately $3.3 billion and we continue to estimate 2025 net maintenance capital spending of $250 million. We announced today, we intend to recommend to Targa's directors to increase our annual common dividend to $5 per common share. This incremental $1 per share equates to a 25% increase to the 2025 level. If approved, it would be effective for the first quarter of 2026 and payable in May 2026. We remain active in our opportunistic share repurchase program as part of our all-of-the-above capital allocation strategy.

During the third quarter, we repurchased $156 million in common shares, bringing year-to-date repurchases to $642 million, including purchases made subsequent to the end of the third quarter. We are in excellent financial shape with a strong and flexible balance sheet, and we are well positioned to continue to create value for our shareholders.

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

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

And our first question comes from the line of Jeremy Tonet with JPMorgan. .

Was just curious with you guys trending towards the top end of the guide here. Just wondering how things have unfolded versus original expectations. Is this more wells coming on to the system? Or is this better productivity per well? Or what factors would you say are driving this upside versus original expectations?

Jeremy, this is Jen. For 2025, when we gave our guidance back in February, our biggest caution was that it was predicated on a big back half volume ramp based on the best available information that we had from our producers at the time. I think those volumes have largely materialized consistent to better than our expectations than we initially forecasted, and that's what's driving record Permian NGL transportation and fractionation volumes and providing us with meaningful tailwinds. And we've also seen a fair bit of volatility across the year, which has provided us with some incremental natural gas and NGL marketing opportunities. We don't typically forecast those when we give guidance.

So the fact that we're outperforming a little bit relative to the fact that we really didn't have anything material in our guidance is also a little bit of a tailwind this year. But I'd say the producer is largely performing on track to a little bit better than expectations. We have not seen a material change or shift in activity levels on our systems. And I think that's really supporting the strength of performance that we've seen really across this year. But in particular, you saw a big ramp Q3 relative to Q2. You saw a big ramp Q2 relative to Q1. And then as we look forward to 2026, it just really puts us in a good position ending this year as well. .

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

Jeremy, this is Matt. I think we have the best-in-class footprint in the Permian across both the Midland and the Delaware with really active, high-quality producers. And so when we look out, not only in 2026, but in 2027 and beyond, we get bottoms-up forecast from our producers. And I think that really underpins the confidence we have about continuing to grow even with kind of a flat to even modestly declining rig count, our producers are giving us -- they're well scheduled, and it gives us a lot of confidence as we get into '26 and looking at our locations and longer-term growth plans, it really kind of underpins our multiyear outlook. .

Our next question comes from the line of Spiro Dounis with Citi.

First question, I want to start with operational leverage, and maybe Matt go back to your comments just around that free cash flow inflection that's coming. I guess on my math, I think I've got another 1 to 2 more processing plant announcements before you need another frac. Speedway, of course, has plenty of headroom here, we think. But in terms of the rest of the system, any other expansions to kind of have on our radar, as you keep adding these processing plants? Or does it feel like we're finally heading to that period where you could benefit from some of the white space on the system? .

Yes. Good question. And that is, as we kind of look out over the next couple of years, we do see that we're calling really a transformation as we get into the back half of '27. Once Speedway comes on once our larger scale LPG export comes on, the downstream spending should be relatively modest. And really, at that point, only include ratable fracs and that led to be dependent upon how our G&P is growing between now and '27 and as we're looking out into '28, '29.

So as you're thinking about multiyear model, we've announced Trains 11 and 12. Those are progressing well. We're evaluating Train 13 and when we'll need to announce that and when that one is going to come on. But for the downstream spending, I think on Speedway and our export comes on, it's really going to be ratable fracs through our system. And so when you look out in the back half of '27 with significantly higher EBITDA, even if we're in a strong growth environment rent on the G&P side, just the fact that we have significantly higher EBITDA and lower downstream spending is going to put us in a really good position to have a free cash flow profile for years to come.

Great. That's helpful. Second question, maybe just going to intra-basin residue gas, seeing you lean into that part of the market a little bit more. So just wondering, can you walk us through maybe what that opportunity set looks like and how big that could be? And if we should expect the same kind of 5x to 6x return profile that we see across the rest of the business? .

Spiro, this is Bobby. The way we work on these things is in coordination with our producers on everything. And when you look at what drives that asset -- that infrastructure investment for us, it's coordinated with our producers on where we can add reliability where we can add redundancy to our plants and then where we can make a really good fee and pushing gas through those pipes.

At the end of the day, is that basin has grown and you've seen gas takeaway be more problematic from an individual pipe that is under -- that it's getting worked on at some point in time, and it affects a plant, we end up being able to move gas around the basin and put it into other available capacity, which both our producers and the producers we market for, the producers that market their own gas and the ones we market gas for, look for that optionality in the portfolio. And so ultimately, we've been building these little steps for a little while, we just announced the kind of complete picture recently, and it's all been underwritten by volumes that are flowing on our system that both we market and our big customers that market their own gas market.

So -- and when I think about what the investment multiple is, it's really a high-quality return relative to everything we do. So it smells a lot like all of our other reports that we put out on ROIC. So I think it fits in really well with just to point capital in spots where we have on volumes and customers that want it and at similar returns to the rest of our business.

Our next question is from the line of Theresa Chen with Barclays. .

We have experienced a challenging environment for some time at this point, marked by bearish sentiment on liquids prices and broader macro uncertainty, you've delivered strong results and even guided towards the upper end of your annual guidance range, which underscores the solid momentum that you're seeing. But at the same time, your recent project announcements have drawn scrutiny with some questioning why you didn't leverage or even choose to lever third-party NGL infrastructure for longer versus investing now to increase capacity across your own system. Could you explain the rationale behind this decision and provide additional context supporting your strategy? .

Theresa, this is Jen. I think that we really do try to be very much capital efficient across the portfolio. And what we've tried to do is essentially drop breadcrumbs as we've gone through the last couple of years. And as we've added processing additions continue to have commercial success that's been in addition to the foundational millions of acres already dedicated to us that was going to drive a lot of incremental growth on our system, drop breadcrumbs that Grand Prix was selling quickly, and we are trying very much to be capital efficient around it. We've talked about the fact that we've done third-party offload deals. And that's part of what you'll see in 2026, we'll have some more offload fees than we've had before.

But part of what we're doing there is not that dissimilar to what we did with Grand Prix, which was we derisked the investment by -- at the time that the project will come online with Speedway, we will have already flowing volumes that we can move on to our pipeline. At the end of the day, we are in the business of providing the best-in-class operational support for our producer customers. And we think we do that really well from the wellhead all the way to the water.

And an important part of that is being able to operate our assets, being able to leverage our integrated footprint, being able to provide our producers with flexibility and fungibility and redundancy. And at the end of the day, be able to completely derisk our enterprise and best position Targa to create value for our shareholders. And that's part of what we believe we're doing here.

We've got 5 plants that are in progress. That's going to be a lot of incremental NGLs that we will need to move on our system. And what we will do is we will utilize third-party transportation for a period of time that we're comfortable with. And then again, we will baseload our next investment with those already flowing volumes and then we'll have operating leverage to accommodate the growth from there. And we just believe that, that combination puts us in the best position again, to both deliver for our customers and also to deliver for our shareholders. .

Excellent. And a follow-up question on the intra-basin residue strategy. This clearly has become a key area of investment. Where do you anticipate the next bottlenecks to be within the Permian? .

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

Next question comes from the line of Keith Stanley with Wolfe Research.

So you're pointing to around the top end of the guidance range for the year, which at the exact top end would imply EBITDA is down in Q4 versus Q3? Or are there any headwinds to be aware of? You cite some of the October shut-ins, just how to think about Q4 growth relative to Q3?

Keith, this is Jen. I'd say that I think we tend to be a conservative bunch. So I'll start with that. And I'd say that we feel really good about setting another year of record EBITDA in 2025. I think a little bit of the conservatism is borne out of the fact that we've got 2 months to go in the year. We did see some shut-ins from lower commodity prices in October, which we haven't really seen before, there's continued maintenance on a number of natural gas pipes out of the Permian expected for November. And so a little bit, it's going to be what are the implications of that. Now what's great is we've got a little bit of a natural offset where, to the extent we've got weakness in Waha pricing, we're able to leverage our extensive footprint to benefit on the marketing side. .

But it's a little bit of just some conservatism as we go through the next couple of months, which may be choppy. But I think the key point is we are really well positioned. And it's probably likelier that we're above the top end of the range than below the top end of the range. But with that conservatism, just felt comfortable saying that we felt we'd be around the top end. .

Got it. Other question just on the frac volumes. So Q3 was obviously up, I think it was 17% quarter-over-quarter. Should we think of that as a good run rate from here? Or did you have a lot of unfracked inventory from the maintenance work earlier in the year that boosted Q3. .

Sure, yes. This is Ben. You're right, we did have a turnaround in the first and second quarters that really impacted us to essentially a frac down in terms of available frac capacity. And with the fracs fully back online in the third quarter and the turnaround going well, we were essentially full. And I'd just say, we're very much looking forward to Train 11 and Train 12 coming online, and those will come on highly utilized. .

Our next question comes from the line of Michael Blum with Wells Fargo. .

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

Yes. Michael, we've kind of talked about doing all of the above approach. And when we just look out at our forecast over multiple years, we have a lot of room to meaningfully increase the dividend. So it is a little bit more heart than science. We talk to our Board and say, what is a good balanced approach to increasing the dividend and also being able to have a strong balance sheet to be opportunistic with share repurchases. You've seen us pretty active so far this year on share repurchases. I think that's going to continue to be the framework going forward as we plan to be opportunistic with our share repurchases. It will bounce around from quarter-to-quarter and year to year, but I think that will be part of our return of capital.

So I really think we can do both. I think the dividend growth that we're providing is still something we can look out over multiple years and continue to grow it even from here. And I think that's just supported by our underlying fundamentals in our business of growing EBITDA and free cash flow generation going forward. .

Okay. Makes sense. And then I just wanted to ask on LPG exports. Would you say volumes for this quarter were basically seasonally in line with your expectations? And can you give us an update on end market demand and specifically where you might be seeing areas of strength or weakness across different regions? .

Michael, this is Scott. I would say that typically, throughout the year, at times, the second and third quarter volumes dip a little bit relative to what we see in the fourth quarter and the first quarter of each year. Fundamentally, nothing has changed on the export front. We continue to be highly contracted. The demand is growing really across the globe. There is also some seasonality as it relates to the kind of the product mix relative to propane and butane. But we continue to add contracts and we got some we will get some benefit in the fourth quarter with the small balancing project that is now online that gives us a lot of flexibility and provide some reliability to our export facility.

But really, when you look our export project that we've got coming online in the third quarter of 2027, that's related to expected global demand that is going to continue to grow across various regions. We're going to see increased production from our upstream with the number of plants that we've got coming online. Obviously, Grand Prix and Speedway Pipeline, providing products to our fractionation footprint, which is growing. And then the product itself will just be priced to move across our export dock can provide a lot of operating leverage that we will have going forward. So again, the fundamentals have not changed. The demand is continuing to grow and we'll be a broad participant across various regions across the globe.

Your next question comes from the line of Manav Gupta with UBS.

I wanted to ask you about the Permian sour gas opportunity. You guys were the first mover. You are the biggest processor of Permian sour gas. But as your returns have been very good. Some others are trying to now chase. And I'm just trying to understand the competitive advantage over there. And the growth and opportunity that you see in the that region of Eddy and Lea in terms of Permian sour gas, what are you seeing out there? If you could talk a little bit about that. .

Yes. I think what we said on the last call is that we implemented our sour gas strategy many years ago. We saw the need, we saw the economic benefit of few of the benches in the Delaware specifically that had sour gas, mainly H2S and CO2, that again, were economic benches that weren't getting developed because of the lack of sour gas infrastructure. So Again, a long time ago, we started investing in the sour gas treating facilities.

We began tying up acreage as sour gas began to get developed. So we were really a front runner in front of a lot of other people and were able to get a lot of acreage tied up. We continue to see the development now of those ventures. So our sour gas production continues to grow. Certainly, other people have stepped in to that realm because they've been, frankly, unable to participate in the growth in those benches without that capability. So I'd say we were a first mover. We're well positioned. We've tied up a lot of acreage, and we're seeing the benefit of that strategy unfold and continue to unfold over coming years. .

Yes. And I'd just add on to that, too. I mean we have a system that has fungibility and redundancy really unlike any systems around. I mean our Red Hill system can handle sour gas. Our Bull Moose Wildcat complex can handle sour gas, and we have a 30-inch wet gas line between those that can move volumes in between, and we have multiple AGI wells at several different facilities across Targa. So we offer a service to our producer customers that's really unmatched. .

Just my quick follow-up is on the Forza project. I think you mentioned you had a successful open season. Our understanding is it's a lower CapEx project, so the returns would be very attractive. Could you talk a little bit about this particular project?

I mean Forza is a 36-mile pipeline interstate. So it will allow us to move volumes from New Mexico down into Texas to more liquid markets. I'd say that it's a project that we're excited about, really driven by producer interest. It's in addition to the other projects that we have underway that are really just focused on how can we continue to provide the best services to our customers that allows us to aggregate volumes in different places and then move them to the best markets on behalf of our producers. .

So I think returns, as Bobby articulated earlier around our broad residue strategy are very much commensurate with how we invest across the rest of our portfolio. But what we like about this strategy is it's already taking existing volumes plus some of the growth we have from some of our new plants that are in progress and underway and really leverage all of that additional volume to, again, provide more flexibility to our producer customers. And at the end of the day, it's really that best-in-class service that we think is what differentiates us relative to others.

Next question comes from the line of AJ O'Donnell with TPH.

I wanted to go back to maybe a follow on to something that Spiro asked earlier in the call, just about lumpier downstream projects and just overall CapEx. Looking at the Speedway project, just curious on -- given your volumes have been trending above estimates and continue to perform pretty well, at what point in time do you think you would anticipate needing to expand the pipe to the full 1 million per day design capacity? And if it was sanctioned, is that something that you would pursue the capacity all at once? Or could it be a phased approach?

Yes. No, good question. That would be a good CapEx project for us to undertake for sure, a great CapEx project because most of the capital goes into getting that initial capacity to move from 500,000 barrels up to 1 million is really just putting on pump stations. And so as we see volume growth it would be a fraction of the capital compared to the initial capacity. So we'd be able to highly economically just layer on some pump stations to go from 500,000 to 1 million. And I think we'll just do that ratably over time as opposed to announce, we're going to go from 500,000 to 1 million. It's likely we'll stage them in over time as volumes ramp.

Very much like we did with Grand Prix.

Yes, very much like Grand Prix. Right.

Okay. I appreciate that. And then maybe if I could just shift to the Mid-Con. I think we've seen some commentary from producers and one of your peers specifically talk about activity moving to gassier areas of the basin. Just curious what you guys are seeing on your system and how, if at all, that's impacted your thoughts on your central region platform.

This is Pat. What I would say is that we have seen some levels of activity that we haven't seen over the last 2 to 3 years. I wouldn't say there's a huge surge in activity. Certainly, some of our key producers are starting to poke around and do a little bit more. Our Arkoma assets, our South Oak assets is what we call them. We're seeing increased activity and opportunity. Do we see it as a huge growth opportunity in the short term? No.

Over time, if gas prices get a little stronger, certainly, I think that becomes an opportunity. Obviously, we have plant capacity. So our capital investment and our ability to get returns on that is very favorable. So I would say there is an increase in activity. It's not huge. Hopefully, it grows over the coming years, and we're well situated to take advantage of that.

Your next question comes from the line of John Mackay with Goldman Sachs. .

Just 1 quick one for me. Kind of sticking on Permian activity levels and the macro. Earlier this year, kind of had a couple of conversations about how you'd expect the Midland versus the Delaware to ramp. Just curious kind of where that sits now? What you're hearing from your customer sets on either side, and whether or not that view, I guess, before that kind of Midland plans would ramp quickly, Delaware could take some time, whether that's shifted at all? .

Yes. I mean we've seen, as Jen said, we've seen really good growth across our footprint this year, more or less in line with our expectations. And I think even as we look out into 2016, it's kind of progressing as we had thought. I think what you're seeing now is a little bit and you saw it this quarter, a little bit stronger growth rate in the Delaware. So as we're kind of moving out, I think we're going to see good strong growth in really both sides of the basin, both Midland and the Delaware, but you're seeing a little bit more strength in the Delaware.

So I think both of them are going to be needed at startup. We have had the benefit of just with our expansive system on the Midland side, when you bring up a plant at depressures and you end up getting some flush production that fills it up. I think we're starting to see, as we're building out our Delaware, it's starting to look more like that. So I think we're really optimistic on all the plants going in to be highly utilized.

Is clear. And I'll actually ask a second one. Just a look across the basin, certain pockets are getting more mature than others. Are you starting to see kind of big swings in GORs kind of from one region to another? And maybe just a broader comment on kind of how you'd expect that to progress from here? .

I wouldn't say that we're seeing broad swings or big swings in GORs across the footprint. I mean, a little bit is producer-by-producer and area-by-area dependent. But I'd say that what we continue to see is a broad theme of increasing GORs, which were certainly a beneficiary of. And we're not really seeing any changes to that, if anything, it's just continuing to strengthen. .

Your next question comes from the line of Jean Ann Salisbury with Bank of America.

Just 1 for me. You all mentioned on the last call that processing plant costs had risen. I think you gave a new range of $225 million to $275 million. I think you saw at the time, it was partly for more sour gas and the mix as well as tariffs. But I guess my question is if the cost escalation is causing any change to your margin expectations or if you can pass most of that through.

Yes. So, no, I think that range that we gave is still pretty good range. I think the sour end, you're probably in the $250 million, maybe a little bit more first our plants and you're probably in the low end of that range if you're putting in a sweet plan, depending on how much treating you want to put in, but it's somewhere around that range. .

Capital costs aren't a direct pass back to the producers. There are some fuel and operating costs that do get passed back. But the capital costs, those are borne by Targa, and it just goes into our overall rates that we're charging and how competitive we are for new volumes in the Permian. So still had a lot of commercial success. We're still earning good returns through our integrated systems. So I still see us being highly competitive at those capital costs.

Our next question comes from the line of Jason Gabelman with TD Cowen.

I want to about the competitive dynamics in the Permian Basin. You mentioned you secured additional acreage dedications over the past quarter. And I'm wondering, given kind of less producers growing other basins, obviously, other oil basins not growing. How is the competitive landscape for going after that Permian acreage? Is it becoming more competitive there? And are you seeing some of, kind of, the fees that you're able to extract shrinking? Or are you able to leverage some of your competitive advantages to maintain kind of a premium on the fees? .

Jason, this is Jen. I'd say that it's always competitive. It's always been competitive. It's likely to continue to always be competitive. I think that our business model is to execute the difficult elements of the gathering and processing business and do that really, really well and create a lot of fungibility, redundancy, reliability for our producer customers. And I think that, that's part of what separates us. We've talked a little bit about our sour gas strategy and how we've been sort of a big first mover in that over many, many years. So now we've got more than a 2.5 Bcf a day capacity on the sour side, 7 AGI wells, really well positioned to not only service our existing customers, but to the extent that there are any customers that aren't getting the service that they otherwise need, we can sometimes step in and help as well.

So I think that from our perspective, it really starts with the assets and the systems that we've built out. And then that wellhead to water, value proposition that we're able to provide, I do think we just do it very well. We've been doing this for a long time. We take it very seriously. We invest on behalf of our producers across cycles. We try to make sure that we are exceptional partners to our producers really work well alongside of them. Again, I think that's part of the flexibility that we offer.

And then we've just got some inherent advantages because of the size of our system and the vastness of our system that we're able to step out into areas to the extent it makes sense, more easily sometimes than others or we're able to utilize the fact that we've got more than 40 plants interconnected, many of them interconnected to, again, help our producers where they may need it. So I really think it's what we already have in place and then just a continued strong commercial effort by what I think is the best commercial team in the business to go and continue to identify ways to both work with our existing customers and do more business with them and then, of course, continue to chase new opportunities too.

And that's part of what you're seeing. We're not resting on our laurels that we already have millions of acres dedicated to target in the Permian or in other areas. We're continuing to chase new business because we think we can do a really good job of helping our producer customers, and we believe we offer a differentiated service. And so we'll continue to chase that. And again, are having good commercial success that at the end of the day, ends up being additive to that really strong foundation of dedicated contracts that we already have in place. .

Great. That's really helpful color. And then my other question, just kind of following on to what Jean An just asked. Impact from tariffs and kind of more broadly, how you feel about that $1.6 billion cost for the Speedway pipe. Is that kind of fully baked? Or do you have perhaps some contingency baked in there? Or is there a potential for tariffs to further increase that cost?

Jason, this is Jen again. I think we feel really good about it. Our engineering team, our supply team did an exceptional job of procuring pipe long before we made the announcement that we were moving forward fully with the project publicly. And so I think that, that means that we are in a really good position to deliver, hopefully, under budget to any of our folks that are listening.

But at the end of the day, I feel good about the budget that we put out there. We always do have some contingency in all of the projects that we move forward with. And then I think our team does a really good job of trying to ultimately beat that and not use that contingency. So similar to all of our projects, we just have a really strong team that's working day in and day out to try to outperform relative to the expectations that they've provided us with. And we feel really good about the Speedway project.

Next question comes from the line of Sunil Sibal with Seaport Global Securities. .

So I think last year, your team had given a kind of a longer-term steady-state CapEx number of $1.7 billion. I was curious, where does that number stand today with the growth in the portfolio that we're seeing.

Sunil, this is Jen. I think the frameworks that we provided back in February 2024 are very much still helpful. And I think that if you tried to mark-to-market, which, of course, we haven't done publicly, but if you just look at some of the pieces, one, we've seen some costs a little bit higher. We've just been received a couple of questions around tariffs. And so you've got costs that are a little bit higher. We, of course, have a much bigger footprint today than we did when we published that back in February of 2024. But we're not talking about meaningfully higher, you call it modestly higher.

And then the other additives are when we came out with that framework, we didn't have residue spending, and we didn't have CCS--CCUS spending included in that. And again, we've got some modest projects underway on both fronts there. So I'd say that it's very much still helpful.

I think that particularly when you think about what Matt talked about, which is a much higher EBITDA base now, even if the capital is a little bit higher than what we put out back in February 2024, it just highlights that across environments, we have a very robust, very strong and strengthening free cash flow profile. .

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

Okay. And then it seems like there has been some growing interest among the data center community to tap on to the Permian gas. I was curious, is that something that has kind of crossed your interest? And if you have any thoughts on that? .

This is Jen, Sunil. I'd just say that we're having a ton of conversations with a lot of people. From our perspective, given our position in the Permian and the amount of natural gas that we aggregate and transport every day, we're well positioned to help supply the increasing demand for natural gas and the tailwinds of incremental demand for power generation, for data centers, alongside the doubling of LNG capacity in the U.S., those are all really good for Targa. And we've got a lot of conversations underway about how we can help customers all the way along the value chain.

Our final question comes from the line of Brandon Bingham with Scotiabank. .

Just wanted to maybe go to the NGLs outlook. You announced a plant for 2027 today, not long after announcing the prior one. So is it just possible that maybe some of those illustrative plans outlined in the slides starting in 2028 could be pulled forward into earlier years? Or is maybe they're a way to, instead of a 1 to 2 a year cadence that might shift to 2 to 3 for a little bit? Just trying to figure out some of the potential upside to that, call it, medium, longer-term outlook. .

Brandon, this is Jen. Ultimately, the medium- and longer-term outlook will be supported by activity from our producers, both on all the contracts that we already have in place and then our commercial execution going forward. I think what you saw us talk about last fall was that we were needing to accelerate some plants because of that incremental commercial success that we've had. I think you've heard us talk today about continued commercial success, but ultimately, over the medium and long term, are we continuing to talk about low double-digit growth? Are we talking about high single-digit growth? Ultimately, that's what will drive the gathering and processing spending, both for gathering lines, compression as well as plants and dictate the cadence of plant adds that we need to think about going forward. .

9 Okay. That makes sense. And then just maybe shifting over to the free cash flow inflection, call it, late '27 into '28. And just how we can maybe think about the payout target of 40% to 50% and how that might shape up through that point? And then if maybe we're understanding it's a multiyear outlook and it's an average, just if there might be some catch-up that could happen once that free cash flow inflection hits, if the payout ratio might be a little bit below over the next couple of years in light of the anticipated spending profile?

Yes. As we outlined 40% to 50% return of capital through a combination of growing dividend and opportunistic share repurchases. You're right, it's over multiple years. So there could be some years we're on the low end or even lower than it. And some years, we're on the high end and above it. I think once we get into that back half of '27 when Speedway and our export projects are completed, we're going to be in a really good position to be deciding what to do with all the free cash flow.

I think you'll see continued dividend increases. I think you'll see continued share -- opportunistic share repurchases. And we've kind of talked about it was years ago. We talked about being at the lower end of our leverage ratio range and then giving ourselves a little more flexibility and perhaps lowering our leverage ratio a bit is also something -- our primary focus will be continuing to invest in the business. So organic growth, returning capital to shareholders and reducing leverage. I think we'll be in a good position to do all of those things.

With no further questions in queue. I will now hand the call back to Tristan Richardson for closing remarks.

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

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