Targa Resources, Inc.

Good day, and thank you for standing by. Welcome to the Targa Resources Corp. Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during that session, you will need to press star 1 on your telephone. Be the advisor. Today's conference is being recorded, and if you require any assistance in the call, please press star zero. I would now like to hand the conference over to your speaker today, Mr. Sanjay Ladd, Vice President of Finance and Investor Relations. Mr. Ladd, the floor is yours.

Thanks, Chris. Good morning, everyone, and welcome to the fourth quarter 2021 earnings call for Target Resources Corp. The fourth quarter earnings release, along with the fourth quarter earnings supplement presentation for Target Resources that accompany our call are available on our website at TargetResources.com in the Investors section. In addition, an updated investor 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 Mararo, Chief Commercial Officer. And with that, I'll now turn the call over to Matt.

Thanks, NJ, and good morning. This is an exciting time at TARGA, where operational and financial execution in 2021 provided a lot of momentum for 2022. I would first like to recognize and thank TARGET's employees that worked tirelessly across another year of challenges in 2021 to help drive record financial and operational performance. Let's quickly mention some of the highlights from 2021. Record gathering and processing volumes in the Permian, safely bringing the Heim plant online on time and under budget, record volumes across our logistics and transportation assets, record adjusted EBITDA of $2.05 billion, a 25 percent increase over 2020, about $1.2 billion of year-over-year debt reduction and a year-end leverage ratio of 3.2 times, and increasing return of capital to our shareholders through a higher fourth quarter dividend and fourth quarter common share repurchases. Turning to 2022, we already have a number of highlights to mention. Repurchased our Devco joint venture interest in January. Executed agreements to sell our 25% equity interest in Gulf Coast Express Pipeline, or GCX, for approximately 11 times EBITDA. Upgraded to investment grade by Fitch and moved to positive watch by S&P and Moody's. And refinanced our revolving credit facility to a five-year $2.75 billion facility at TRC. We continue to execute on our strategic priorities and have visibility to volume growth across our assets, which is driving increasing EBITDA as we look forward. For 2022, we estimate full-year adjusted EBITDA to be between $2.3 and $2.5 billion, which is a significant increase over 2021. This guidance is based on forward prices where there continues to be backwardation. If prices averaged around today's levels for 2022, we would expect to exceed the top end of our full-year financial guidance. With the repurchase of our DEVCO interests and our flexibility to accelerate redemption of our preferred stock given the sale of GCX, we have already simplified and will continue to simplify our capital structure. We are also demonstrating our increasing ability to return capital to our shareholders with the execution of common share repurchases in the fourth quarter and in addition to the fourth quarter common share dividend increase. As previously discussed, we expect to pay a common dividend of 35 cents per quarter, $1.40 annualized to our shareholders for 2022. The strength of our balance sheet provides significant flexibility to redeem our preferred shares faster than we previously anticipated and to continue to assess opportunistic repurchases of common shares. Let's now turn to our operations. Starting in the Permian, our systems across the Midland and Delaware basins continued to perform well, averaging a record 3 billion cubic feet per day reported inlet during the fourth quarter. Our average 2021 Permian inlet volumes increased 12% over 2020, exceeding the top end of our 2021 guide growth range. We continue to see strong activity levels across both our Midland and Delaware footprints and expect to benefit from this positive momentum as we move through 2022. For full year 2022, we expect our average Permian inlet to increase between 12% to 15% over average 2021. In Permian Midland, our system continues to run near full with our next 275 million cubic feet per day legacy plant on track to begin operations during the fourth quarter of this year. With robust activity levels, Expected to continue into next year and beyond, we are moving forward with the construction of our Legacy II plant, another new 275 million cubic feet per day plant in the Permian Midland. Legacy II is expected to begin operations during the second quarter of 2023. In Permian, Delaware, volumes across our system also continue to ramp. Today, we announced the construction of a new 275 million cubic feet per day plant, the Midway plant. The new Midway plant is expected to begin operations during the third quarter of 2023. Midway will provide us with additional flexibility to flow volumes between our Midland and Delaware systems. We are idling an older plant, which is more prone to operational upsets, has higher operating costs, higher maintenance costs, lower recoveries, and is limited in capacity. The Midway plant improves performance on all of those items and will give us the ability to flow current volumes being processed at Sandhills and an additional 110 million cubic feet per day of capacity that can be filled from the Delaware, Central, or Midland basins. This project is a good example of how to improve overall environmental performance while also providing attractive returns. The strong outlook across our Permian Basin footprint will continue to drive incremental volumes through our NGL downstream businesses and our recently announced expansions in both the Midlands and Delaware position Target to realize very attractive integrated returns and continue to benefit from our embedded operating leverage with modest capital spending. In our central and Badlands regions, we are seeing stronger activity levels given the higher commodity price environment and expect 2022 average central and Badlands volumes in aggregate to be flat relative to 2021, as higher production is expected to largely offset legacy decline in our systems. Shifting to our logistics and transportation segment, NGL transportation volumes continue to increase, and we transported a record 433,000 barrels per day to Mont Bellevue during the fourth quarter. Throughput volumes sequentially increased 4%, driven by increasing NGL production from Targa's Permian plants, including our new Heim plant, and third parties. Fourth quarter fractionation volumes at our Mont Bellevue complex averaged 612,000 barrels per day and were lower sequentially due to an unplanned outage in associated repairs and maintenance, which impacted volumes by about 50,000 barrels per day. The unplanned outage was associated with cooling water exchangers that support a portion of our CBF racks, which resulted in reduced operating rates for the quarter. We have excess fractionation capacity, so we are handling all incoming NGL volumes as well as some volumes that normally would have been fractionated in Q4, so our Q1 average volumes are expected to be higher. We expect to be operating back to normal by the end of the quarter. This outage resulted in higher CapEx, sorry, in higher OpEx in Q4 and is also expected to impact OpEx in Q1 of this year. Looking ahead to 2022, expect higher year-over-year Grand Prix infractionation volumes as our downstream systems continue to benefit from increasing supply from our growing Permian GMP position. In our LPG export services business at Galena Park, fourth quarter volumes rebounded following maintenance completed during the third quarter and increased 19% sequentially as we loaded an average 10.7 million barrels per month during the fourth quarter. The outlook for our LPG export business in 2022 remains robust, complemented by our contracted portfolio and supply position in Mont Belvieu. In response to growing international demand for cleaner feedstocks and US LPGs, we are undertaking an additional low-cost expansion project to increase our loading rates at our Galena Park facilities. This refrigeration expansion will increase our propane loading capabilities more than an incremental 1 million barrels per month by mid-2023. The longer-term outlook for Targa is strong. Our premier integrated Permian NGL business, our talented employees, complemented by our strong balance sheet and financial flexibility, we remain in position to grow our footprint and return increasing capital to our shareholders over time. With that, I will now turn the call over to Jim.