Targa Resources, Inc.

Good day, and thank you for standing by. Welcome to TARGA Resources' first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After this presentation, there will be a question and answer session. To ask a question, simply press star 1 on your telephone. If you require any further assistance, please press star 0. I would like to hand the conference over to your speaker today, Sanjay Ladd, Vice President of Finance and Investor Relations. Please go ahead, sir.

Thanks, Carmen. Good morning and welcome to the first quarter 2021 earnings call for Targa Resources Corp. The first quarter earnings release along with the first quarter earnings supplement presentation for Targa Resources that company or call are available on our website, ourtargarresources.com in the investor section. In addition, an updated presentation has also been posted to our website. Statements made during this call that might include target resources, 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 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 Malloy, Chief Executive Officer, and Jen Neal, Chief Financial Officer. Additionally, the following senior management team members will be available for Q&A. Pat McDonough, President, Gathering and Processing, Scott Pryor, President, Logistics and Transportation, and Bobby Muraro, Chief Commercial Officer. And with that, I'll now turn the call over to Matt.

Thanks, Sanjay, and good morning. During the quarter, our overall business continued to perform very well. led by our position in the Permian Basin and our integrated NGL business and positive aggregate benefits from the winter storm. We continue to execute on our key strategic priorities, including prioritizing free cash flow towards debt reduction as we reduced our debt balance by $383 million quarter over quarter. The severe weather from the February winter storm impacted us across our operations during the first quarter. Over a 10-day period around the storm, we experienced on average a 50% reduction across our gathering and processing and downstream system volumes. Our overall system volumes quickly rebounded and returned to around pre-storm levels later in the first quarter. Those operational impacts were offset by storm-related benefits elsewhere in our business, which resulted in an aggregate margin benefit of about $30 million for the quarter. Let's now turn to our operational performance and business outlook. Starting in the Permian, we remain on track and expect our average total 2021 Permian inlet volumes to increase between 5 and 10 percent over last year. We are seeing increasing activity levels across both our Midland and Delaware footprints, with our current Permian inlet gas volumes ahead of pre-storm levels, averaging about 2.7 billion cubic feet per day. With our Permian Midland system running close to capacity, our new 200 million cubic feet per day time plant will be much needed and remains on track to begin operations early in the fourth quarter. We continue to evaluate the timing of our next Midland plant, which we estimate would cost about $150 million and could be needed as early as the second half of 2022. We currently have adequate processing capacity in Permian, Delaware, to accommodate our anticipated near- to medium-term growth. Moving on to the badlands, our gas and crude volumes during the first quarter each sequentially decreased 6%, largely due to the winter conditions in North Dakota. We are seeing completions increase across our system and are having increasing producer dialogue around a ramp in activity levels. Turning to our central region, which continues to largely be in decline, gas inlet volumes in the first quarter were further impacted by the effects of the winter storms. we are currently seeing a modest uptick in completions and activity levels, which could mitigate some of the decline. Across our gathering and processing business, our margins are also benefiting from the inherent tailwinds associated with higher commodity prices and the upside participation embedded in our fee floor arrangements as a result of our recontracting efforts. Shifting to our logistics and transportation segment, our Grand Prix pipeline continues to perform very well, Current Grand Prix deliveries into Mont Bellevue are approximately 380,000 barrels per day, and we expect volumes to continue to ramp from here. We continue to estimate full-year 2021 average deliveries into Mont Bellevue to increase over 25% from 2020 average throughput. Our fractionation volumes in Mont Bellevue rebounded from the winter storm, and we are once again seeing higher volumes of around 630,000 barrels per day. In addition to the winter storm impact, lower sequential frac volumes were also attributable to some minor repairs. And recall that fourth quarter 2020 frac volumes benefited from working down inventory as a result of scheduled maintenance performed in the second half of 2020. In our LPG export services business at Galena Park, first quarter volumes averaged 8.5 million barrels per month and were down 23% sequentially. fourth quarter 2020 volumes benefited from the very strong export fundamentals, which enabled us to capture some shorter-term volumes during the prior quarter. The impact from the winter storm, combined with periods of fog along the Houston ship channel during the first quarter, also contributed to the sequential volume decline. The outlook for full year 2021 and beyond remains strong, and we expect our LPG export volumes to be higher during the second quarter over first quarter levels. Taking into consideration our first quarter results, strong business performance, and continued focus around cost management, coupled with a stronger estimated commodity price outlook for the balance of 2021, we are increasing our full-year estimated 2021 adjusted EBITDA to be between $1.8 to $1.9 billion. 2021 adjusted EBITDA is now estimated to be 13% higher than 2020 based on the midpoint of our new guidance range. With our higher full-year adjusted EBITDA and free cash flow estimate, we expect to end 2021 with reported leverage around four times. As we look forward, our integrated NGL business is poised to continue to benefit from an overall recovery, and we have the ability to capture growth volumes from the Permian without having to spend much incremental CapEx on Grand Prix, Fractionation, or LPG export facilities. This puts Targa in a position to generate strong returns going forward and increasing free cash left dividends available to reduce debt and further strengthen our financial position. With that, I will now turn the call over to Jen.