Targa Resources, Inc.

Good day and welcome to the Targa Resources Corporation second quarter 2024 earnings webcast and presentation. At this time, all participants are in a listen-only mode. After the speaker 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 your question, press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Sanjay Ladd, Vice President, Finance and Investor Relations. The floor is yours, sir.

Thanks, Cherie. Good morning and welcome to the second quarter 2024 earnings call for Targa Resources Corp. The second quarter earnings release, along with the second quarter earnings supplement presentation for Targa, that accompany our call are available on our website at TargaResources.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 Targa's forward 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 Molloy, Chief Executive Officer, and Jen Neal, President, Finance and Administration. 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, Bobby Marrero, Chief Commercial Officer, and Will Byers, Chief Financial Officer. With that, I'll turn the call over to Matt.

Thanks, Sanjay, and good morning to everyone. We had another record quarter across multiple fronts, but before we get into all the good things happening here at Targa, I would like to first recognize all our employees impacted by Hurricane Beryl. We prepared for the storm, weathered the storm, and performed across a difficult period to safely keep volumes flowing, providing best-in-class service when many of our employees were also managing without power and had damage to their homes. The hard work and dedication demonstrated during the storm is really something to be proud of, so I'd like to say thank you to the TARGA team for all the extra effort. The storms reduced our volumes for only a short period, so we expect the impact on the third quarter to be minimal, as there was no material damage to any of our assets. I would also like to welcome Will Byers, TARGA's new chief financial officer, to our call this morning. Will officially joined us on July 22nd, and we're excited to have him as part of the TARGA team. Will adds a lot of depth to our organization, given his 20-plus years of midstream finance experience, including serving in CFO roles over the last 10 years. As part of Jen's continued development, she has now transitioned into the role of President, Finance and Administration, and will continue to increase her role and responsibilities. Turning now to our second quarter results, it was another strong quarter of performance across our organization, which sets us up well for the balance of this year and beyond. Record volumes in the Permian drove record NGL transportation and fractionation volumes downstream and record quarterly adjusted EBITDA. We brought our Train 9 fractionator in Montbellevue and our Roadrunner 2 plant in Permian, Delaware, online, on time, on budget, and given increasing volumes across our systems, they were both very much needed. We also executed on a quarterly record $355 million of common share repurchases which is reflective of our performance and strong conviction and outlook for our business going forward. We also just announced our participation in a joint venture supporting the next natural gas pipeline from the Permian Basin. We provided a meaningful volume commitment to support the project, and this provides for a 17.5% ownership interest in the Blackcomb pipeline. Blackcomb will be a 42-inch pipeline transporting gas from the Permian to South Texas. The pipeline is expected to be project financed, so Targa's capital investment should be less than $200 million. Now let's talk a little more about our Permian position and the good things happening there. Activity in the Permian remains very strong, supporting our view of continued long-term growth from the basin. Our Permian volumes during the second quarter increased about 275 million cubic feet per day over the first quarter, which is a full plant. And year over year, our volumes in the Permian are up more than 600 million cubic feet per day. And currently, our volumes in the Permian are up another 200 million cubic feet per day compared to the second quarter. We expected strong growth from our Permian assets, but the growth we have seen this year has exceeded our expectations. We now expect low double-digit percentage volume growth this year, which sets us up well for meaningful growth in 2025 and beyond. This higher growth rate is driving incremental EBITDA and requiring additional great capital investment. These volumes are core to our business, and we benefit across the integrated NGL value chain, driving higher margins into our downstream business and generating strong ROIC. Given higher than anticipated Permian volumes and an outlook for continued strong activity across our Midland and Delaware footprints, we announced our next two plants in the Permian, one in the Midland Basin and another in the Delaware Basin. Some spending for these plants was included in the forecast we provided back in February, but the timing and cadence of spending has accelerated. To support our higher volume and higher EBITDA profile, we are updating our estimate for growth capital spending for 2024 to approximately 2.7 billion. This increase or the increase in growth capital spend from our previously provided range is attributable to the acceleration of timing of plants in the Permian, incremental field capital, compression and gathering lines, the acceleration of downstream infrastructure connections, and other opportunities like spending on enhancing residue gas takeaway. Similarly, we expect stronger than previously estimated Permian volume growth next year and are updating our 2025 estimate for capital spending to $1.7 billion. driven by a similar acceleration of plant and field capital and our investment in Blackcomb. We included a bridge on slide five in our Q2 earnings supplement presentation for our updated estimates for 2024 and 2025 growth capital. The strength of our first half 2024 performance and continued strong outlook going forward, driven largely by higher Permian volumes and higher volumes through our integrated system means the updated midpoint estimate for our full year 2024 adjusted EBITDA is $4 billion, which is a $200 million or 5% increase from our previous estimate. We now expect higher adjusted EBITDA in 2025 and a similar free cash flow estimate to when we compared our outlook to when we provided our outlook in February, with 2025 representing an important inflection for our company as our meaningful free cash flow generation positions us to continue to return an increasing amount of capital to our shareholders while further strengthening our investment-grade balance sheet. We believe that we are uniquely positioned for the short, medium, and long term as an already strong outlook for Permian Basin volume growth from best-in-class producers continues to get stronger, which benefits our entire integrated value chain. Our contract structures support us continuing to invest on behalf of our producers, benefiting from cash flow stability in lower commodity price environments and upside as prices rise. And we are delivering record financial performance despite a weak commodity price backdrop. Before I turn the call over to Jen to discuss our second quarter results in more detail, I'd like to extend a thank you to the Target team for their continued focus on safety and execution while continuing to provide best-in-class service and reliability to our customers.