Targa Resources, Inc.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Targa Resources Corporation Second Quarter 2025 earnings webcast and presentation. 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, you will need to press star 1-1 on your telephone keypad. At this time, I would like to turn the conference over to Mr. Tristan Richardson, Vice President of Investor Relations. Sir, please begin.

Thank you, Howard. Good morning and welcome to the Second Quarter 2025 earnings call for Targa Resources Corp. The Second Quarter earnings release, along with 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 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, Jen Neal, President, and Will Byers, Chief Financial Officer. Additionally, members of Targa's senior management will be available for Q&A, including Pat McDonnie, President, Gathering, and Processing, Scott Pryor, President, Logistics, and Transportation, Bobby Marrero, Chief Commercial Officer, and Ben Bransetter, Senior Vice President, Downstream. I'll now turn the call over to Matt.

Thanks Tristan and good morning. I would like to begin by announcing that after 35 years with Targa and its predecessor companies, Scott Pryor, our President of Logistics and Transportation, has shared with us his intent to retire effective March 1, 2026. Scott has been a critical part of the Targa team and his leadership, work ethic, dedication, integrity, and focus on serving our customers has made it a pleasure to work alongside Scott. On behalf of our board, the leadership team, all of Targa's employees, and our customers, I'd like to thank you Scott. Following Scott's retirement, Ben Bransetter will succeed Scott as President of Logistics and Transportation. Ben has been with Targa for the past eight years in various leadership roles across corporate development and our downstream groups. Scott and Ben have worked closely together for years and will work together over the next many months in transition and we look forward to Ben's continued contribution to Targa in his new role. Turning to the second quarter, we reported strong results with record Permian volumes, record NGL transportation volumes, and continued execution across our footprint, setting us up well for the balance of the year and providing a lot of momentum looking ahead. We saw a strong ramp in volumes in the second quarter as gas on our Permian system increased by about a processing plant worth of volumes during the quarter, up about 270 million cubic feet per day, and we are seeing that strength continue. In July, our volumes were up another 250 million cubic feet per day, meaning we added a plant worth of gas in the second quarter and another plant worth of gas in July, and we are seeing that strength continue so far in August. There has been movement in the broader Permian rig count this year, which has been a focus for investors. Over the last four months, while the Permian rig count has softened, the number of rigs on our system is largely unchanged. While there is a lot of noise and volatility in the macro environment, ongoing discussions with our producers point to continued strong growth on our system for the remainder of 2025 and into 2026 and beyond. Given the strong ramp in volumes we are seeing and our expectations for the remainder of the year, our outlook for 2026 volume growth is as strong now as it was at the beginning of the year, with the potential for it to be stronger by the time we exit this year. We have also added some new material to our investor presentation, which lends support for our continued growth outlook. We have highlighted some factors that demonstrate Targa's differentiated growth profile. Over the past five years, Permian gas production has grown at a higher rate than crude production due to the general increase in gas to oil ratios across the basin over time. While -over-year growth in crude production from the Permian has averaged 8 percent per year, over the past five years, associated gas growth has averaged 13 percent per year. And Targa's volume growth has outperformed crude and gas production over that time frame. Our -over-year volume growth has averaged 17 percent, 4 percent higher than associated gas and 9 percent higher than crude per year. Looking forward, third-party forecasts call for 7 percent growth in Permian associated gas over the next five years. With this strong outlook, coupled with Targa's footprint across the best rock in the basin and world-class producers, we are well positioned for meaningful growth over the long term. There are a lot of tailwinds for Targa. We move a lot of natural gas to end markets, and the demand for natural gas is expected to continue to increase. We transport and fractionate a lot of natural gas liquids to domestic and international end markets, and the demand for NGLs is expected to continue to increase. Our customers across our value chain are very good at what they do, and we think we'll continue to create meaningful growth opportunities for our company. Our conviction is demonstrated by $324 million of common share repurchases during the second quarter across a volatile quarter. Our focus continues to be on increasing adjusted EBITDA and increasing common dividend per share and declining share count while maintaining our strong investment grade balance sheet. We believe that our premier Permian asset footprint, integrated well-head to water system and strong financial position will allow us to continue to invest in integrated growth opportunities, generate attractive returns, and return increasing capital to our shareholders over the long term. Before I turn the call over to Jen to discuss operations in more detail, I would like to thank the target team for their continued focus on safety and execution while continuing to provide -in-class service and reliability to our customers.

Thanks, Matt. Good morning, everyone. Let's talk about our operational results in more detail. Starting in the Permian, our natural gas inlet volumes averaged a record 6.3 billion cubic feet per day in the second quarter, an increase of 11 percent versus a year ago, and a strong rebound from the first quarter, which was impacted by severe weather events. In the Permian Midland, our new Pembroke 2 plant is currently in startup, ahead of schedule, and much needed as our Midland system continues to run at very high utilization. Our East Pembroke and East Driver plants remain on track to begin operations in the second quarter and third quarter of 2026. In Permian Delaware, our Bull Moose 2 plant is ahead of schedule and is now expected to begin operations in the fourth quarter of 2025. Our Falcon 2 plant remains on track to begin operations in the second quarter of 2026. We expect our processing infrastructure currently under construction will be much needed at startup. Lastly, in the Delaware, we recently completed our seventh AGI wealth, further increasing our leading gas treating capabilities across the basin. Looking out further, we are ordering long-lead items for additional Permian plants as we prepare for growth in 2027 and beyond. As production continues to grow, Target is increasingly moving more and more natural gas for our customers across the Midland and Delaware basins. To further enhance connectivity and reliability, we are announcing an extension of our Bull Run natural gas pipeline system in the Delaware basin. The 43-mile, 42-inch intrastate natural gas pipeline extension of Bull Run will enhance take away by increasing connectivity between our Permian Delaware system and the Waha Hub. The extension will add further flow assurance for our customers across the Delaware and increase access to important residue markets. It is scheduled to be in service in the first quarter of 2027. On the Blackcomb and Traverse natural gas pipelines, where we have a .5% equity interest, Blackcomb remains on track and is fully subscribed. The planned capacity of Traverse was recently upsized to 2.5 billion cubic feet per day from 1.75 billion cubic feet per day based on strong customer demand. Shifting to our logistics and transportation segment, Target's NGL pipeline transportation volumes averaged a record 961,000 barrels per day and fractionation volumes averaged 969,000 barrels per day during the second quarter. Our fractionation volumes were meaningfully impacted by our planned turnaround at our fractionation complex in Montbellevue, which reduced our capacity for two-thirds of the second quarter. With a turnaround complete in early June and increasing GMP supply, our fractionation volumes are now more than 1 million barrels per day. Given the anticipated growth in our Permian GMP business and corresponding announced plan our outlook for NGL supply growth on our system remains strong. Looking at our downstream projects currently underway, Delaware Express, our Interbasin NGL pipeline expansion, is ahead of schedule and is now expected to be complete in the second quarter of 2026. Our next fractionator in Montbellevue, Train 11, is also ahead of schedule and is expected to be complete in the second quarter of 2026. Train 12 remains on track for the first quarter of 2027. Turning to our LPG export business at Glena Park, our loadings averaged 12.8 million barrels per month during the second quarter. Despite shifting trade policy and a lot of macro headlines, our docks remained effectively full and we are seeing continued strength in cargo loadings. Our LPG export de Bottleneck expansion is expected to be in service in the fourth quarter and we remain on track with our larger LPG export expansion which will increase our loading capacity to approximately 19 million barrels per month and is scheduled to be online in the third quarter of 2027. To build on Matt's earlier comments, even with commodity price volatility and headlines around global trade, our results highlight our resilient business model. We are well positioned operationally and believe that our leading customer service driven well ahead to water strategy puts us in excellent position to continue to execute for our shareholders. I will now turn the call over to Will to discuss our second quarter results, outlook and capital allocation.

Will? Thanks, Jen. TURG has reported adjusted EBITDA for the second quarter was $1.163 billion, an 18% increase from a year ago. The increase was attributable primarily to higher permanent volumes generating higher margin across our GNP and L&T segments and contribution from 100% ownership of our Badlands assets. Adjusted EBITDA was roughly flat for the first quarter. The record permanent and NGL transportation volumes were offset by lower marketing margin, sequentially weaker commodity prices and the impact of our planned turnaround at our fractionation complex in Montbellvue. 2025 is progressing on track with a strong first half and our continued expectation of increasing permanent volumes for the remainder of the year. We continue to estimate full year 2025 adjusted EBITDA to be in a range of $4.65 billion to $4.85 billion. In June, we successfully completed a $1.5 billion debt offering comprised of $750 million of .9% notes due 2030 and $750 million of .65% notes due 2036. We used the net proceeds from the debt issuance to reduce borrowings on our commercial paper program and in July to retire $705 million of .5% notes due 2027. In July, we also extended the maturity of our accounts receivable securitization facility to August 31, 2026. At the end of the second quarter, we had $3.5 billion of available liquidity and our pro forma consolidated leverage ratio was 3.6 times, comfortably within our long-term leverage ratio target range of 3 to 4 times. With projects tracking ahead of schedule, our announced bull run extension in the Permian Delaware and spending on long lead items for additional Permian gas processing expansions, we now expect net growth capital spending for 2025 to be approximately $3 billion. And we continue to estimate 2025 net maintenance capital spending of $250 million. With the recently enacted tax legislation and its return of 100% bonus depreciation, we expect we will no longer be subject to the corporate alternative minimum tax or CAMT in 2026 and will defer becoming a material cash taxpayer beyond 2027. As we continue to assess the benefit to Targa, we could see deferral of cash taxes further out depending on a variety of factors in the out years. 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. During the second quarter, we repurchased $324 million in common shares at an average price of $165.86 per share. Continuing our track record of executing opportunistic share repurchases as part of our all of the above capital allocation strategy. This week, our board of directors also authorized a new $1 billion common share repurchase program. This brings total available share repurchase capacity to approximately $1.6 billion as of June 30, 2025. This authorization adds to our flexibility and is purely a continuation of our existing program. We remain steadfast in our strategy of continuing to target returning 40 to 50% of adjusted cash flow from operations to equity holders over time through a growing combination of dividends and opportunistic share repurchases. 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. Operator?

Our first question or comment comes from the line of Spiro Denise from Citi. Your line is open,

sir. Thanks, operator. Morning, everybody. First question, Matt, I wanted to go back to your comments in the prepared remarks just a little bit. I think the tone of this call is seemingly starkly different than a lot of your peers this season. I just want to get your latest thoughts on your ability to keep outperforming here, why you think you've been able to consistently do that, and if you're willing, maybe you can put a number on what you think that outperformance might look like going forward.

Yeah, hey, Spiro. Good morning. You know, we have really seen over the years the volumes on our Permian system continue to grow. It feels like we have not only the largest footprint, but a footprint that's really over some of the best rock in both the Midland and the Delaware Basin. So I think it's a combination of having the largest footprint where we can offer redundancy and reliability to our customers, which is highly attractive to them, and just being over some of the best rock in the area. So I think it's a combination of all of those things. We have, I would say, our producer set are some of the largest, most active producers that haven't really varied their drilling plans as maybe much as some others have. So I think it's a combination of all of those things that just gives us continued confidence, not only in the back half of this year, but as we look out in 26 and beyond, the same factors that have allowed us to outperform the basin over the last several years, those attributes are still in place as we look forward.

Right. That's great to hear. Second question, maybe moving to NGL margins. It's another common theme this quarter that seems to be in focus again. I think there's a lot of concern about overbuild, maybe narrower export ARBs, and so there seems to be kind of a pointing down of the margin environment going forward. Just curious if you could just update us, maybe over the medium term, how you see the outlook and if there's any risk the margins cue from here.

Hey, Sparrow. This is Scott, and good morning. As it relates to the export side of the business, first, we would point to the fact that we have a growing supply originating from our gas processing footprint with long-term customers and great producers behind our plants. As a result of that, obviously we've added a tremendous amount of infrastructure on our midstream platform with pipelines, expanding fractionation footprint, and of course, we've got expansions going on in the fourth quarter of this year at our export dock with our D-Bottleneck and then our larger expansion project in the third quarter of 2027. I would also say that we all agree, I think, that we have a growing global demand for LPGs, whether it be on petrochemicals, PDHs, domestic and industrial supply needs across the globe, which is indicative of the fact that we, again, the market is going to continue to grow. We have always been highly contracted at our dock, and with us being highly contracted, we have not always participated heavily in the spot market. So when people talk about things like the market is maturing, we have really had long-term contracts that have matured for a number of years now. We don't see anything, any change in that. There are currently today four exporters along the Texas Gulf Coast. Three of those are supplying product from Mount Bellevue, one further south, and when we talk about further expansions or when we talk about a new additive to the marketplace, I don't see the competitive dynamics really changing because the competitive dynamics have already been there. So with that said, I think it really boils down to who has the source of supply, and I really, really feel strongly about Targ's position as it relates to that. Again, going back to our GMP footprint, the long-term contracts that we have, and of course we put the infrastructure in place to ensure that we can move it across our docks.

Great. Thanks for that, Coler Scott, and congrats on the retirement. I'll leave it there. Thanks, everyone.

Thanks, Farrell. Okay, thank you.

Thank you. Our next question or comment comes from the line of Keith Stanley from Wolf Research. Mr. Stanley, your line is open.

Hi. Good morning. I'm curious how you're thinking about competition in the Northern Delaware. You know, you were kind of a first mover through Lucid and gas treating and AGI Wells, but it seems like it's becoming a bigger and bigger focus for a lot of your peers.

Yeah, I don't disagree. Obviously, you've seen Enterprise and now MPI-Alex come in and buy treating companies to address the sour gas situation in the Delaware basin. As we've said before, obviously, we're the largest treater of sour gas in the Delaware basin. We have the most capability. We have 2.3 BCF a day of treating capacity, seven AGI Wells with eyes on expanding that as our sour gas volumes grow. Frankly, Targa has been treating sour gas almost since its inception, right, with one of the first acquisitions that was done as Targa. And certainly a lot of our employees have been dealing with sour gas for 40 years. It is a core competency, and I think when we started looking at the Delaware basin back in the -17-18 timeframe, we pretty quickly recognized that there were really economic benches that had sour gas production that producers were reluctant to develop because there wasn't solutions to handle that gas. So, I would say as much as seven, eight, nine years ago, we put a strategy in place. One, we bought out rigor right, and they had some sour gas infrastructure. We leveraged off of that as we looked at Lucid. That was part of the overall equation. I mean, it's really a recognition of how much sour gas capability over the long, long term is out there. And what I would say is that the competition is fine. We compete on all bases in the midstream business, obviously. We've got a ton of acreage under contract that continues to get developed. We continue to add, as we said, in our commercial success, acreage that covers sour gas production. And as the Avalon bone springs gets developed in the future, we're very, very well positioned. And certainly the Wolf Camp in certain regions of the basin that we have under contract also has CO2 or H2S. One or the other or both. And Target is very, very well positioned to handle additional growth. And like I said, we've got a ton of it under contract already.

Yeah, and just to add to that, we've been competing in that business for years. And one of the things that gives us, I would say, competitive advantage is our Red Hills Complex over a BCF a day can handle sour. It's connected to our Bull Moose Wildcat Complex, which can also handle sour. So we have the scale and redundancy to offer better run times for our customers. And it's running sour. There's more operational issues that you're going to have than run sweet. And so we offer, I think, a unique set of services to our customers.

Thanks for that detailed response. Second question. So once again, a very growthy tone in your business. You know, as you accelerated some CapEx into 2025, should we think 2026 CapEx is going to be even lower year over year or maybe not given the growth you're seeing? And it seems like NGL pipeline capacity is filling up pretty quick as well.

Keith, this is Jen. I'd say that from where we sit today, the assets that we have in progress right now, we expect them to come online and be highly utilized. And hats off to our engineering and operations teams for figuring out if there are certain projects that they could get on a week, a month, or in some cases a quarter sooner, because again, they will be very much needed. Look, it's August right now. I think that from our perspective, it doesn't make sense to front run producer budgeting cycles this fall. We'll get a lot more information from producers around 2026 that will inform our 2026 capital budget that we'll come out with in February. But certainly we believe that where we are spending capital is very much along our core competencies, very much consistent with the rates of return and track record that we've been able to demonstrate previously. And I think you're trying to see us continue to be capital efficient where it makes sense such that when projects come online, there are volumes essentially available to base load them such that the returns are better than we made an investment decision. So I think all of that means that we'll continue to work through our growth capital plan for 2026. We believe there's a lot of growth on our system and we believe that we can execute on that growth and continue to generate attractive returns, which at the end of the day is what will create shareholder value.

Thank you. Thank you.

Thank you. Our next question or comment comes from the line of Jeremy Tonnett from JP Morgan Securities LLC. Mr. Tonnett, your line is open.

Hi, good morning.

Hey,

good morning, Jeremy. Matt, I think you talked about going into the end of the year into 25, heading into 26, potentially even in a stronger position. Just wondering if you could share more data points you're seeing that provide the confidence there.

Yeah, sure. You know, we really saw, I'd say volumes for the first half of this year were more or less kind of in line with our expectations at the beginning of the year. Maybe first quarter was a little bit softer with some operational issues. What we really saw, I would say... Hello?

Yes, I'm here.

All right, we just heard a beep. Okay. And then what we saw, I'd say later in the second quarter, we really saw volumes start to ramp. And then I gave the color on the call. We've seen in July volumes up, you know, another processing plant worth of gas just in the month of July relative to the second quarter. And while I didn't give a number, August is up, you know, a fair amount from even the July numbers. So that's giving us confidence that the well connect that we have on our schedule, the volumes coming on are starting to really flow through our system. And then with Pembroke 2 coming on, that should provide some relief as well. Midland's pretty much full right now. So we really need that Pembroke 2 plant to come on, and that should give us further volumes over the back half of the year. So we're only just in early August, but we would expect it for the momentum we have kind of early in the first part of the second half of this year. If that continues, it just puts us in a really strong position as we exit. And that's what we're trying to articulate.

Got it. That's very helpful. That's it for me. Thank you.

Okay. Thanks, Jeremy.

Thank you. Our next question or comment comes from the line of Jackie Colladas from Golden Saks. Your line is open.

Hi. Good morning. Thank you so much for the time. I was wondering if you could just provide a little bit more detail on the associated CAPEX expectations or potential returns on the Bull Run extension and what the commercial structure, if any, looks like there.

Jackie, this is Jen. I'd say that from our perspective, Bull Run and the extension is just a natural extension of capabilities that we are already very good at in terms of putting pipe in the ground and moving molecules and trying to provide our producers with better solutions. So from our perspective, this extension is taking essentially gas from our bull moose and wildcat complex up in the Delaware, bringing volumes down to Waha on a 42-inch pipeline. So it's really supported by the volumes that we already have flowing in our existing assets there and then the expected growth that we would expect from the Delaware going forward. So not that dissimilar to other parts of our business where we're able to aggregate volumes on the gathering and processing side and then enhance our capabilities for our producers, provide better redundancy, better outlets to our producers by essentially enhancing our capabilities as we move through time. So this is just a natural extension of that.

We got it. That makes sense. And then just second, buybacks in the quarter were fairly strong and you authorized a new repurchase program as well. How do you anticipate to balance future buybacks with other uses of capital over time and just talking about the cadence of potential buybacks going forward?

This is Jen again. I think we very consistently try to demonstrate that our share repurchase program is opportunistic and that is the standard that our board of directors holds us to as we allocate capital to that repurchase program. You clearly saw us be very active in the second quarter. We thought that there was an opportunity where global macro concerns were disconnecting a little bit from what we perceive to be the fundamentals of the Targa business and the intrinsic value of Targa. And as we look at our short, medium and long-term outlooks, really weren't seeing anything change that was reflected by some of the downward activity that we were seeing in our share price and that's why you saw us step in. I think we'll continue to be the all of the above approach that we've demonstrated so far which means that your ability to predict our activity quarter by quarter is going to continue to be very difficult. We're continuing to allocate capital to very attractive organic growth capital projects but we have a very strong balance sheet and that provides us with a lot of flexibility as well to continue to execute in returning more capital to our shareholders. So it just puts us in a really good position to be able to pull different levers as we believe we see the opportunities present themselves.

Thank you so much for your time. Appreciate the color.

Thank you. Okay,

thank you.

Thank you. Our next question or comment comes from a line of Manav Gupta from UBS. Mr. Gupta, your line is open.

Good morning. I just wanted to go back earlier in the year you did take 100% ownership of Badlands. I just want to understand has that transaction met your expectations and your goals and have those assets been performing in line with your expectations and how does owning 100% change your view of the asset versus not owning the same percentage as you did before? So if you could talk about that.

Yeah, sure. Yeah, so the Badlands transaction that we announced earlier this year was really taking out Black Zone, which we really viewed. They had a preferred interest, so it was refinancing their preferred interest and had some cash flow savings because we could just put it on balance sheet. So it's been performing as expected. Overall, volumes up there have continued to be relatively flat. There's some signs that production could be increasing here over the next one to two years or so, but it's been relatively flat and it's been performing, I'd say, in line with our expectations. You know, I'd say with the enhanced competition, you know, as you look out going forward for NGLs, I'd say, yeah, those assets do pose more strategic value and there's some more opportunities there to do something on the NGL side of the business. And so we're just evaluating all those opportunities and we'll think thoughtfully about what makes the best sense for Target.

Perfect. Thank you, and you obviously have a very strong line of organic growth projects, but we are also seeing, you know, multiple transactions getting executed in the Permian. I think two were announced last Monday or so. And in terms of you have the balance sheet, trying to understand what could be a good criteria for any bolt-on M&A that you could undertake just to further increase your presence and that could add to your existing footprint.

Yeah, and we continue to look at acquisitions. You know, we haven't, you know, had anything of really significant size and kind of the asset market, you know, for a while, you know, kind of going back to Lucid in 2022. But we continue to look. I'd say we have a really strong footprint on the GMP side of the business. We have really strong NGL presence. So we have all the strategic needs of our core business met. And so now what we're really looking for, are there nice bolt-ons that could supplement our base strategy? So our focus has been on organic growth. We have a lot of growth opportunities, just executing the number of plants that we have in our downstream business. That continues to be our focus. But if there's something that bolts on really nicely to our GMP footprint, we'll continue to look at it. I'd say, you know, as I said before, the bar continues to be high for us because we have all strategic needs met. But if there's some nice synergies or opportunities, we'll continue to be thoughtful and look at those.

Thank you so much.

OK, thank you.

Thank you. Our next question or comment comes from the line of Michael Bloom from Wells Fargo. Mr. Bloom, your line is open.

Thanks. Hey, everybody. Good morning. So I wanted to ask on the LPG export docs, you mentioned that it was effectively full for the quarter, but as I look at the chart, I mean, the volumes were down sequentially the last two quarters. I think you're below your total existing capacity. So just one of you can just kind of square that, and especially in light of the fact that I think you're very, you know, you're highly, highly contracted. And then maybe I'll just throw in my second question here at the same time. Appreciate your competitive position. But as I'm sure you know, there's new entrants coming to the market. Just wondering how you're thinking about that as you get those growing competition from the Permian on pipe all the way to the export docs. So just want to get your thoughts on how you're going to approach that. Thanks.

Hey, Michael, this is Scott again. I'll start on the export side and then perhaps given the fact that we've got Ben here with us today and he's been working the transportation fractionation side of our business, he can talk a little bit about NGO pipes out of the basin as well. But I'd really refer back to my earlier comments and that is, you know, our strategy around the export doc really starts with our availability of supply that is originating from our gas processing plants. Again, long term contracts that will feed into our overall system, whether it be pipe, frac, et cetera, all the way down to our export doc. Again, adding another potential entrant or participant in the export business along the Texas Gulf Coast really does not change our overall strategy. We will be competitive. But I think, again, given the fact that we have been highly contracted for term business and business, quite frankly, with a lot of those contracts has volumes that ramp up over time that will complement our expansion on the back half of this year and then the expansion we've gotten in the third quarter of 2027. That was what I would call mature rates. I feel very comfortable with our overall position as it relates to that. You know, when you look out there, the market, again, has been competitive for a while and we've done very, very well in that sector on the export side of our business. And again, I think it goes back to the availability of supply that will stay on our system and move across our overall docs and feeding a growing global demand. And then I'll turn it over to Ben just to talk a little bit about NGO pipes out of the basin.

Thanks, Scott. I think you said it well across our entire downstream footprint. We are really expanding it on the back of millions of dedicated acres across various basins. We have line of sight to volumes on. And on top of that, we continue to have commercial success as our customers see the great offering we have across our integrated system and wide footprint with a lot of redundancy. So that's really how we're looking at all the expansions on the downstream side that's being underpinned with.

Thank you.

Okay, thanks, Michael.

Thank you. Our next question or comment comes from the line of Jean Ann Salisbury from Bank of America. Your line is open.

Permian gas egress has been tight year to date, which you can see in the depressed Waha pricing. But there's a lot of pipeline capacity coming on next year that most people, including us, think will unlock the basin for the rest of the decade. Is that how you see it as well? And when those pipelines come on next year, would you expect to see a sustained move for you off your fee floors?

This is Bobby. Yeah, no, we've been excited to see all the egress pipes get announced. It's a little bit of a bull run, bolt on, because we get to get that gas to the hub where our producers can think about which direction do they want to go in, what pipe do they want to go on and have a lot of optionality as opposed to like a pipe or two pipes out of our plant. As we think about egress and how it relates to the basin, again, kind of same comment, we're excited to see it happen. Our residue strategy hasn't changed. If we can put gas on a pipe and make it happen, if we can build a pipe, if we can participate in a pipe, we want to see egress happen. And with it happening at the rate it's going, I think we're going to be well supplied with egress for a little bit here when all these pipes come online. Relative to fee floors, I'm not going to speculate on where price is going to go, but stronger WHA pricing ultimately is good for those fee floors. I would love to be above those fee floors because we've essentially been below them for most of recent history. And that would be just an incremental tailwind to our business out there.

Great. Thank you. And now that Grand Prix is filling up, can you talk about the pros and cons of using more third-party and GL transport from here? I mean, I guess the pros, like obviously, you don't have to spend a lot of capex, but should we expect a cent or two per gallon of extra cost on your incremental downstream volumes from here if you're using third-party transport?

This is Jen. I'll start and then I'll throw it to Ben. I think that from our perspective, what utilizing third-party transport allows us to do is one, provide a little bit of diversification and just ensuring that not all of our volumes are flowing on our pipe, but two, it's really to be capital efficient. And I think that's an indication really of how well we're all working across the space. I think that an over-build situation doesn't really benefit anybody. So you're seeing us work very well with our peers to figure out how to continue to move our molecules and a lot of the growth that we have, but do it in a manner that's efficient across the space. I think that the way that we evaluate it is one, just making sure that volumes will continue to move. We're adding a lot of processing plants and a lot of incremental processing plants are going to drive a lot of additional NGL volumes into our system and ensuring that we are continuing to provide our customers with the best possible service is what is paramount to us. So that's really evaluating what are the alternatives out there, what do those alternatives cost and therefore with all of that put together, what makes the most sense for Targa over both the short medium and really the long term. Ben?

I think that is all right, Jen. I just remind everyone, you know, we have multiple flexible medium-term offloads that our volumes are growing. We can move into those and time any future expansion in the most optimized way for bringing it online and for the capital spend. And then when that expansion comes online, we'll have volumes to put out at driving good returns.

Great. Thank you. Thank you.

Thank you. Our next question to comment comes from a line of Sunil Sibal from Seaport Global. Your line is open.

Hi. Good morning. First of all, congratulations to Scott on his retirement and also to Ben on his new role. So it seems like, you know, from your comments that you probably are getting ready for the next set of processing capacity additions. I was curious, you know, how should we think about capital costs, you know, for those processing grants? Are you seeing any meaningful change considering the inflationary environment, especially on the material side? And how does it impact any of your returns?

Thanks. Good morning, Sunil. This is Jen. First of all, I'd say that our engineering team does a phenomenal job of assessing all of the options really available to us, both in terms of utilizing the target standard plant design and then figuring out whether a system is sweet or sour, what additional information we'll need, and then identifying the right third parties for us to work with that can really keep our costs as low as possible. So definitely a big congratulations to our engineering team for the success on the plants that they are bringing online, the plants in progress, and then of course they're already thinking about the plants in the future. I think you're right that from our perspective costs have risen, but we've also done a really good job of managing those rising costs. You're seeing us co-locate plants. So instead of just having one plant at a site, you're seeing a lot of sort of vintage two like the Bull Moose 2 plant, Pembroke 2 plants. That allows us to benefit from some of the share services across facilities, which helps us manage our costs. And again, I think that's part of the benefit of having such a large and flexible system in place like we have. But we have seen costs rise. So depending on whether a plant is sweet or sour, costs are probably averaging more between, call it $225 million to $275 million. But again, our team is doing a really good job of managing plant design, supply chain, making sure that we are ahead of any potential constraints and issues that could create rising costs to just make sure that we are continuing to build -in-class facilities at -in-class costs.

Thank you. Okay, thank you.

Thank you. Our next question or comment comes from a line of Jason Gabelman from TD Cowan. Mr. Gabelman, your line is open.

Yeah, hey, morning. Thanks for taking my question. I wanted to try asking again about something that's already been asked, which is the direction of kind of fixed fees within the Permian Basin. And it sounds like there's a lot of crosscurrents. You noted pretty full system in the Midland Basin, but also costs rising and more competition in the Delaware AGI side. So just wondering when you put that all together, what the direction of travel is on the fees that you're able to secure from competitors or from customers. Is it up, down, flat? Any color would help.

Yeah, sure, Jason. I'll start, and if, again, you or Pat want to jump in. You know, as Pat mentioned earlier, we've faced competition all along. It's changed. It used to be you go back years, there was a lot of private equity coming into the space, and there was a lot of competition on the GMP side. We've been competing with the recent acquisitions. You go back over the years, we were competing with the predecessor, and now we're competing with the acquirer. So there's been a lot of competition on GMP. Our base business, we have long-term contracts. Typically, GMP contracts are 10 years. We have a lot of 15-year contracts. So we have long-term contract protection, and we have multiple plans, reliability, redundancy, the largest system, which affords us a really good opportunity to compete with others as they're comparing the target offering versus the next best competition. So there's always been competition. I think we compete pretty well all the way from GMP and all the way through downstream.

This is Jen. I just add that I think from our perspective, we've got the best commercial team in the business, which means that we are creative and entrepreneurial and willing to work with our customers. And so to the extent that there's an opportunity, for example, to think more about the longer term game than the shorter term game, if there's a chance to go and acquire more acreage, but means that we blend down into a lower fee, we'll of course play whatever game best supports our producers and creates the most value over the long term for our shareholders as well. So I think we just do a really good job of working well with our producers and broader customers to figure out what are their needs, how are those needs changing and evolving, and then how can we best structure our contracts to meet those needs.

Yeah, that's great. Thanks. My follow up is just on the EBITDA guide and the 200 million range is unchanged. There's only a few months left in the year here. So wondering, as you look at the balance of the year, the risks to kind of coming in at the high end or the low end of that range.

I'd say that it still feels like there's a lot of the year left to go. It feels more like we're halfway through the year here with a bunch left to go. But I think from our perspective, as Matt's comments indicated, we feel really, really good about where we are for 2025. A big part of what we came out in February and said was that our guide and the range was really predicated on us continuing to see volume growth, particularly in the back half on the GMP systems and bringing that incremental volumes through the rest of our integrated system. And clearly with all the data points that we've provided today, those volumes are materializing. And I think we've got a lot of conviction based on where we know producers are with well completions and continued activity back half of this year. Starting to feel really good about the volume outlook for Target not only back half of this year, but then the implications for 2026. I think there are some potential tailwinds that ultimately we'll have to see how those present rest of the year. Related to commodity prices, we saw weaker commodity prices in the second quarter. We've seen lower gas prices on the Waha side. Thus far here in the third quarter. So commodity prices, we don't have a ton of exposure. But in the first quarter, we benefited from about $10 million of margin above P4 levels. In the second quarter, we really had no margin above P4 levels. So to the extent we get any tailwinds there, certainly that would be additive in the back half of this year. And then we also don't tend to forecast our marketing business on both the natural gas and the NGL side. So to the extent we see some tailwinds there, that would be additive back half of the year as well. And fourth quarter is where we typically see more strength in marketing opportunities than the second and third quarter.

That's great. Thanks for that, caller.

Thank you. Thank you.

I'm sure no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.

Thanks to everyone for joining the call this morning. And we appreciate your interest in Target resources.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.