Targa Resources, Inc.

Good day and thank you for standing by and welcome to the TARGA Resources 4th Quarter 2022 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 the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw the question, please press star 1-1 again. Also be advised that today's conference is being recorded. I would now like to hand the conference over to the Vice President of Finance and Investor Relations, Sanjay Ley. Please go ahead.

Thanks, Carmen. Good morning and welcome to the fourth quarter 2022 earnings call for Targa Resources Corp. The fourth quarter earnings release, along with a fourth quarter earnings supplement presentation for Targa that accompany our call are available on our website at targaresources.com in the investor 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 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. With that, I'll now turn the call over to Matt.

Thanks, Sanjay, and good morning to everyone. 2022 was an excellent year for TARGA, and I would like to recognize and thank our employees for their focus, dedication, and execution. Some of our highlights from 2022 include record safety performance based on multi-year low total reportable incident rate, record gathering and processing volumes in the Permian, record volumes across our logistics and transportation assets, Record adjusted EBITDA of $2.9 billion, a 41% increase over 2021, while also reducing our share count. Major projects came online on time, on budget, and have been highly utilized since startup. Execution and successful integration of our Delaware Basin acquisition and our South Texas acquisition. Execution of our corporate simplification with our DevCo repurchase and preferred share redemption. successful sale of our 25% equity interest in Gulf Coast Express Pipeline for approximately 11 times EBITDA, upgrades to investment grade by all of the rating agencies and completion of two successful investment grade offerings, and higher year-over-year return of capital to our shareholders through both an increased common dividend and continued common share repurchases. We expect our momentum to continue through 2023 and beyond given the strength of the business fundamentals underpinning our assets. There is a continued need for critical midstream infrastructure like Targa's to balance and link cost-advantaged U.S. production to domestic and global markets. Global events have underscored the critical nature of safe, reliable, and affordable fossil fuels to support everyday life domestically and around the world. Cost-advantaged basins like the Permian, where we are the largest gatherer and processor of natural gas, will continue to be a key supplier of hydrocarbons for decades to come. We are less than two months into the year and already had some notable announcements, including the successful negotiation and closing of our acquisition of the remaining 25% interest in our Grand Prix NGL pipeline, our early January offering of 10- and 30-year senior notes that funded the Grand Prix acquisition and reduced floating rate borrowings on our revolver, And within this morning's release, our operational and financial estimates for 2023, which are expected to be records across many fronts, including an estimated 24% increase in year-over-year adjusted EBITDA, our transfer and construction of a plant from our South Texas acquisition to the Delaware Basin, which we are calling the Roadrunner 2 plant, where activity around southern New Mexico is currently exceeding our expectations, and an expected 43% year-over-year increase to our 2023 annualized common dividend per share versus last year. For 2023, we estimate that our adjusted EBITDA will be between $3.5 billion and $3.7 billion. The significant year-over-year increase in adjusted EBITDA is driven by higher expected gathering and processing volumes, higher expected NGL transportation, fractionation, and export volumes, higher expected marketing optimization and LPG export opportunities, higher fees from contract escalators, a full-year contribution from our Delaware Basin and South Texas acquisitions, contribution from our acquisition of the remaining 25% interest in Grand Prix, and higher hedge prices. Related to capital allocation, maintaining a strong investment-grade balance sheet across cycles continues to be a priority at Target. We also have attractive opportunities to continue to invest organically, which we believe will support the continued creation of significant shareholder value over time. We currently estimate between $1.8 and $1.9 billion of growth capital in 2023 as we build infrastructure that we expect to be highly utilized across our footprint. Our major projects in progress are core to our business, five new Permian gas processing plants, Train 9 fractionator, and our Daytona NGL pipeline. Along with our partners, we are also in the process of restarting the 135,000 barrel per day Gulf Coast Fractionator in Mont Bellevue, which we expect to be operational in the first quarter of 2024. Beyond those projects already announced and in progress, we are evaluating when we will need additional gas processing capacity in the Permian, and we are ordering long lead time items for our next Midland plant. We believe our organic growth opportunities create value for Targa and our investors over time, as we have demonstrated strong returns over the last five years. As you can see from slide four in our earnings supplement presentation, we generated an attractive 26% return on invested capital since 2017, despite a volatile commodity price backdrop over the last several years. For our recent major capital projects, we have invested at a low single-digit multiple of EBITDA as the immediate high utilization of assets like new gas processing plants have resulted in very attractive returns despite higher build costs from inflation. A strong balance sheet and continued investment in high-return projects positions us to continue to prudently return an increasing amount of capital to our shareholders across cycles. We announced an expectation of a 43% year-over-year increase to our annualized 2023 common dividend per share this morning. The increased dividend will be recommended to our Board in April for the first quarter of 2023 with payment to shareholders in May. Our expected 2023 dividend increase reflects a lot of different factors, including our near and long-term business fundamentals and balance sheet strength across scenarios, flexibility associated with our increasing size, scale, and fee-based margin, and targets positioning relative to our midstream C-corp peers, the S&P 500, and cyclical industries within the S&P 500. We also expect to be in position to continue to execute opportunistically under our common share repurchase program, which will allow us to further increase our return of capital to shareholders and reduce our share count over time. We bought back $225 million worth of common shares in 2022 and had about 144 million remaining under the 500 million share repurchase program we put in place in October 2020. Our current expectation is we will request Board approval to authorize a new $1 billion share repurchase program once we exhaust our existing program. We believe that we will offer a unique value proposition for our shareholders and potential shareholders. Growing EBITDA growing dividend, and reducing share count. We expect to continue to set expectations for our annual common dividend each February when we announce our financial and operational guidance and expect to continue to increase our return of capital to shareholders over time. In addition to our standard annual disclosures around our financial expectations, we also included in our investor presentation this morning describing TARGA across upside and downside commodity price scenarios. We have spent the last many years focused on increasing our cash flow stability and reducing our volatility to downward moving commodity prices. As you can see from slide 12 in our earnings presentation relative to our full year 2023 financial guidance, a 30% move higher in commodity prices from our guidance levels would increase adjusted EBITDA by around $100 million, while a 30% decrease would reduce adjusted EBITDA by around $60 million. This asymmetric risk where we have significantly more upside than downside across commodity prices, continues to be an area of focus at Targa, where our commercial teams are working really well with our producers and other customers to maintain alignment to be in position to continue to invest across cycles. As we look forward, we believe that Targa is in excellent position to continue to provide best-in-class service to our customers and create additional value for our shareholders. I will now turn the call over to Jen to discuss our fourth quarter and full year 2022 results in more detail, as well as our expectations for 2023.