Targa Resources Corp. (NYSE:TRGP) Q1 2023 Earnings Conference Call May 4, 2023 11:00 AM ET Company Participants Sanjay Lad - Vice President-Finance and Investor Relations Matt Meloy - Chief Executive Officer Jennifer Kneale - Chief Financial Officer Pat McDonie - President-Gathering and Processing Scott Pryor - President-Logistics and Transportation Bobby Muraro - Chief Commercial Officer and General Partner Conference Call Participants Michael Blum - Wells Fargo Brian Reynolds - UBS Jeremy Tonet - JPMorgan ...

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q For the quarterly period ended March 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number: 001-34991 TARGA RESOURCES CORP. (Exact name of registrant as specified in its charter) Delaware 20-3701075 (State or other jurisdi ...

Financial Data and Key Metrics Changes - Targa Resources reported a record adjusted EBITDA of $2.9 billion for 2022, representing a 41% increase over 2021, with Q4 2022 adjusted EBITDA at $840 million, a 9% sequential increase [4][15] - The consolidated leverage ratio at the end of 2022 was 3.7x, well within the long-term target range [15] - The company expects 2023 adjusted EBITDA to be between $3.5 billion and $3.7 billion, indicating a 24% year-over-year increase based on the midpoint of the range [8][18] Business Line Data and Key Metrics Changes - Record gathering and processing volumes were achieved in the Permian Basin, contributing to the overall growth in adjusted EBITDA [4][15] - The company anticipates significant increases in NGL transportation, fractionation, and export volumes in 2023, driven by higher expected gathering and processing volumes [8][20] Market Data and Key Metrics Changes - The average Permian Basin natural gas inlet volumes for 2023 are projected to increase by about 10% over the average Q4 2022 volumes [19] - The company expects record LPG export volumes in 2023, supported by the completion of projects that enhance propane loading capabilities [20] Company Strategy and Development Direction - Targa Resources aims to maintain a strong investment-grade balance sheet while pursuing organic growth opportunities to create shareholder value [9][11] - The company is focused on expanding its midstream infrastructure to connect U.S. production to domestic and global markets, particularly in cost-advantaged basins like the Permian [6][10] - Targa plans to continue increasing its common dividend, with a projected 43% year-over-year increase for 2023 [11][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's momentum continuing through 2023, citing strong business fundamentals and the critical need for midstream infrastructure [6][8] - The management team highlighted the importance of fee-based margins and the implementation of fee floors to reduce downside exposure to commodity price fluctuations [41][50] Other Important Information - Targa completed the acquisition of the remaining 25% interest in the Grand Prix NGL pipeline for approximately $1.05 billion, enhancing operational flexibility and capital synergies [17] - The company has approximately $2.5 billion of available liquidity, providing flexibility for future investments [17] Q&A Session Summary Question: Insights on 2023 guidance and Permian volume growth - Management noted significant activity across their acreage, with expectations of outperforming average growth in the Permian Basin due to recent acquisitions and increased rig activity [25][26] Question: Capital allocation and future dividend increases - Management emphasized a strong balance sheet and the ability to grow EBITDA while increasing dividends, indicating potential for future significant dividend increases [30][31] Question: Commodity sensitivity and fee floors - Management highlighted the implementation of fee floors across gathering and processing businesses, which significantly reduces downside exposure to commodity price declines [40][41] Question: Outlook on fractionation and demand for LPGs - Management expressed confidence in the fractionation capacity and demand for LPGs, citing upcoming expansions and strong market conditions [46][48] Question: CapEx guidance and future plant needs - Management indicated that while current CapEx guidance includes announced projects, they are evaluating the need for additional plants based on market conditions and volume growth [63][64]

Targa Resources Corp. Fourth Quarter 2022 Earnings Supplement February 22, 2023 Forward Looking Statements Certain statements in this presentation are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this release that address activities, events or developments that the Company expects, believes or anticipates will ...

Commodity Price and Demand Risks - The company is exposed to commodity price risk through percent-of-proceeds arrangements, which can lead to revenue fluctuations based on natural gas, NGL, and crude oil prices [173]. - A reduction in demand for NGL products could materially adversely affect the company's business and financial condition, particularly due to economic conditions and competition [174]. - The demand for propane, a key product, is significantly influenced by weather conditions and global economic growth, impacting sales during warmer periods [176]. - Unexpected volume changes due to production variability may expose the company to commodity price fluctuations [202]. - The company may face increased exposure to commodity price risks if it fails to balance its purchases and sales of commodities [242]. - The effectiveness of hedging activities may vary, potentially increasing cash flow variability and exposing the company to commodity price risks [239]. Operational Challenges - The company faces challenges in maintaining throughput levels on gathering systems due to the natural decline in production from existing wells and the need for new supply sources [182]. - The company does not own most of the land for its pipelines and facilities, which could disrupt operations and increase costs if rights of way are not renewed [193]. - The company relies on third-party pipelines and facilities for transportation, and any unavailability could adversely affect revenues [188]. - Climatic events may damage infrastructure and increase operational costs, adversely impacting the company's financial condition [195]. - Climatic events may disrupt operations, leading to potential losses from equipment damage and operational cessation [196]. - Rising sea levels and erosion could significantly impact pipeline infrastructure, resulting in increased repair costs and operational challenges [197]. - The company faces increased competition for qualified personnel, which could affect its ability to execute business strategies [186]. - The company may face challenges in integrating acquired assets, which could inhibit growth and lead to unexpected costs [222]. Financial Condition and Capital Management - The company recorded a non-cash pre-tax impairment of $452.3 million in Q4 2021, primarily related to gas processing facilities and gathering systems [238]. - Inflationary pressures have led to increased costs for goods, services, and personnel, impacting capital expenditures and operating costs [234]. - The company is exposed to credit risks from customers, with potential nonpayment affecting cash flow and results of operations [232]. - The company's total indebtedness as of December 31, 2022, was $11.6 billion, with $7.8 billion at fixed interest rates and $3.6 billion at variable interest rates [266]. - A hypothetical change of 100 basis points in the rate of variable interest rate debt would impact the company's consolidated annual interest expense by $36 million [266]. - The company's senior unsecured debt was rated "BBB-" by Fitch, "Baa3" by Moody's, and "BBB-" by S&P as of December 31, 2022 [270]. - The company has $1.4 billion of additional borrowing capacity available under the TRGP Revolver after accounting for $33.2 million of letters of credit [266]. - The company faces significant operating and financial restrictions due to covenants in its debt agreements, which may limit its ability to pay dividends, incur additional debt, or engage in certain business activities [275][276]. Regulatory and Compliance Risks - Regulatory changes from PHMSA may require additional capital projects and increased operating costs for pipeline integrity management [211]. - Compliance with Texas Railroad Commission's Weather Emergency Preparedness Standards may incur substantial costs for weatherization of facilities [198]. - Increased insurance premiums and deductibles following severe weather events could adversely affect financial conditions [201]. - The company is subject to increasing regulatory risks related to climate change, including potential costs from a methane emissions fee starting at $900 per ton in 2024, which could rise to $1,500 per ton by 2026 [280]. - Proposed regulations by the EPA could impose stricter emissions reduction requirements, potentially increasing operating costs and impacting financial results [281]. - The company may face litigation risks from local governments alleging public nuisances related to climate change, which could adversely affect its financial condition [285]. - The SEC's proposed rule for climate risk reporting may lead to increased compliance costs and litigation risks related to disclosures, affecting the company's operations [286]. - Compliance with stringent occupational safety and health regulations may incur significant costs, affecting financial condition [294]. - Non-compliance with FERC regulations could result in substantial penalties, with civil penalties for violations potentially reaching approximately $1.5 million per violation per day in 2023 [312]. Climate Change and ESG Considerations - Access to capital may be restricted due to climate change policies, as institutional investors shift focus towards sustainability, impacting funding for fossil fuel-related activities [286]. - Increased costs of compliance due to stringent GHG emissions regulations could reduce demand for oil and natural gas services and products [287]. - Climate change may lead to physical damage to assets and increased operational costs, impacting financial condition and results of operations [288]. - The company faces risks from changing weather conditions affecting energy demand, which could adversely impact financial performance [289]. - Heightened attention to ESG matters may result in increased costs, reduced demand for products, and negative impacts on stock price and access to capital markets [290]. - The establishment of a Sustainability Committee aims to enhance ESG practices, but achieving aspirational ESG targets may face unforeseen costs and technical difficulties [291]. - Unfavorable ESG ratings could lead to negative investor sentiment and reduced access to capital for growth projects [292]. - Increased scrutiny of ESG statements may result in litigation risks and negative sentiment, impacting investment [293]. Tax and Accounting Risks - Future tax liability may be greater than expected if NOL carryforwards are limited or if tax authorities challenge certain tax positions [248]. - Changes in tax laws, such as the 15% minimum tax imposed under the IRA, could materially increase the company's tax obligations [251]. - As of December 31, 2022, the company has U.S. federal NOL carryforwards of $6.8 billion, with some expiring between 2036 to 2037 and others having no expiration date [246]. - Changes in accounting standards could materially impact the company's financial results and compliance with debt obligations [231]. - The company’s ability to maintain effective internal controls is crucial for accurate financial reporting and fraud prevention [230].

Targa Resources Corp. (NYSE:TRGP) Q3 2022 Earnings Conference Call November 3, 2022 11:00 AM ET Company Participants Sanjay Lad - Vice President, Finance & Investor Relations Matt Meloy - Chief Executive Officer Pat McDonie - President-Gathering & Processing Scott Pryor - President, Logistics and Transportation Jen Kneale - Chief Financial Officer Robert Muraro - Chief Commercial Officer Conference Call Participants Colton Bean - Tudor Pickering Holt & Co. Jeremy Tonet - JPMorgan Brian Reynolds - UBS Keith ...

Targa Resources Corp. Third Quarter 2022 Earnings Supplement November 3, 2022 Forward Looking Statements Certain statements in this presentation are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this release that address activities, events or developments that the Company expects, believes or anticipates will or ...

Targa Resources Corp. Second Quarter 2022 Earnings Supplement August 4, 2022 Forward Looking Statements Certain statements in this presentation are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this release that address activities, events or developments that the Company expects, believes or anticipates will or ...

Financial Data and Key Metrics Changes - Targa Resources reported a quarterly adjusted EBITDA of $666.4 million, a 6% sequential increase driven by higher commodity prices and volumes across gathering and processing and logistics and transportation systems, partially offset by lower marketing margins and higher operating expenses [25][26] - The company updated its full-year 2022 adjusted EBITDA guidance to a range of $2.85 billion to $2.95 billion, reflecting the completion of the Delaware Basin acquisition [11][32] - The consolidated net leverage ratio was reported at 3.1x at the end of the second quarter, with an expectation to end the year around 3.5x [28][32] Business Line Data and Key Metrics Changes - In the Gathering and Processing segment, record inlet volumes averaged 3.1 Bcf per day during the second quarter, with expectations for continued growth in both the Permian Midland and Delaware positions [17][11] - NGL transportation volumes reached a record 492,000 barrels per day, with fractionation volumes at Mont Belvieu also hitting a record of 737,000 barrels per day [21][25] - The company announced new projects including a 275 million cubic feet per day processing plant in the Permian Midland and a 120,000 barrel per day fractionator in Mont Belvieu [13][14] Market Data and Key Metrics Changes - The Delaware Basin acquisition increased Targa's processing capacity to a combined total of 6.4 Bcf per day across the Permian Basin [14] - The logistics and transportation segment is experiencing a tightening fractionation market, with expectations for continued supply growth from Targa's G&P systems and third parties [21][76] Company Strategy and Development Direction - Targa is focused on executing strategic priorities to drive increasing EBITDA, reduce common share count, and maintain leverage within target ranges [10][32] - The company is investing in organic growth projects across its integrated footprint, which is expected to provide attractive returns and enhance shareholder capital returns [13][34] - Management emphasized the importance of integrating recent acquisitions and capturing synergies while maintaining a strong balance sheet [44][45] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about continued strong performance and growth in volumes across both the Permian Midland and Delaware positions [11][10] - The company is actively managing inflation impacts, benefiting from inflation-linked fee escalators across commercial contracts [26][27] - Management highlighted the potential for increased cash flow and capital returns to shareholders in 2023, while maintaining a focus on organic investments [39][40] Other Important Information - Targa has repurchased approximately 2.4 million common shares at a cost of around $154 million year-to-date, with plans for continued share repurchases [24][28] - The company is significantly hedged for the remainder of 2022 and has added hedges for 2023 at higher weighted average prices than in 2022 [30][115] Q&A Session Summary Question: Capital allocation thoughts for 2023 - Management indicated strong flexibility for capital allocation in 2023, focusing on organic investments and increasing returns to shareholders [39][40] Question: Commodity exposure post-Lucid acquisition - The Lucid acquisition is expected to marginally increase fee-based margins over time, with continued investments in both G&P and logistics and transportation [48][50] Question: Lucid synergies and near-term opportunities - Management discussed near-term synergies from moving volumes to Targa's existing systems and the gradual increase in NGLs captured over time [58][60] Question: Impact of Inflation Reduction Act on cash taxes - Management expects to be a material cash taxpayer by 2024, with potential minimum tax implications starting in 2024 [61][62] Question: Expansion and demand for additional products - Management noted a tightening frac market and increasing demand for fractionation services, with ongoing evaluations for additional transportation capacity [76][68] Question: Hedging strategy for 2023 - Management confirmed that hedges for 2023 are at higher prices than in 2022, providing a potential tailwind for the company [115][116]

Construction and Expansion Projects - Targa Resources Corp. announced the construction of a new 275 MMcf/d cryogenic natural gas processing plant in Permian Midland, expected to begin operations in late Q3 2022[144]. - The company plans to construct another 275 MMcf/d cryogenic natural gas processing plant in Permian Delaware, with operations expected to start in Q3 2023[147]. - A new 120 MBbl/d fractionation train (Train 9) is set to begin operations in Mont Belvieu, Texas, in Q2 2024[148]. - Targa completed the acquisition of Lucid Energy Delaware, LLC for approximately $3.55 billion, enhancing its natural gas gathering and processing capabilities in the Delaware Basin[152]. - The company closed on the acquisition of Southcross Energy Operating LLC for $201.9 million, integrating its assets into SouthTX Gathering and Processing operations[150]. Financial Performance - Net income attributable to Targa Resources Corp. for the three months ended June 30, 2022, was $596.4 million, compared to $56.2 million for the same period in 2021[186]. - Adjusted EBITDA for the six months ended June 30, 2022, was $1,292.1 million, up from $975.7 million in the same period of 2021, reflecting a significant increase in operational performance[186]. - Distributable Cash Flow for the three months ended June 30, 2022, was $533.4 million, compared to $339.5 million for the same period in 2021, indicating improved cash generation capabilities[186]. - Adjusted Free Cash Flow for the six months ended June 30, 2022, was $707.5 million, an increase from $592.6 million in the same period of 2021, showcasing strong financial health[186]. - Total revenues for the three months ended June 30, 2022, were $6,055.8 million, an increase of 77% compared to $3,415.9 million in the same period of 2021[1]. Capital Expenditures and Investments - Targa's capital investments included a $926.3 million purchase of interests in development company joint ventures, resulting in a 75% interest in Grand Prix Pipeline LLC[149]. - Capital expenditures for growth projects reached $326.3 million for the six months ended June 30, 2022, compared to $151.8 million in 2021, indicating a significant increase in investment[266]. - The company expects to invest between $1.0 to $1.1 billion in net growth capital expenditures for announced projects in 2022[268]. - Maintenance capital expenditures for 2022 are expected to be approximately $150 million, net of noncontrolling interests[268]. Debt and Liquidity - Targa raised $1.5 billion through a public offering of senior notes, with proceeds used to fund the Lucid Acquisition and repay outstanding borrowings[159]. - Targa's TRGP Revolver provides a revolving credit facility of up to $2.75 billion, maturing on February 17, 2027[156]. - Total liquidity as of July 29, 2022, was $1,267.1 million, after accounting for outstanding borrowings[231]. - The company established a Commercial Paper Program with a maximum aggregate face amount of $2.75 billion, with no amounts outstanding as of July 29, 2022[234]. - The company redeemed all issued and outstanding shares of Series A Preferred at a redemption price of $1,050.00 per share, resulting in a total consideration paid of $973.4 million, with a deemed dividend of $215.5 million recorded in Q2 2022[265]. Operational Metrics - Operating expenses remain stable and are primarily driven by labor, contract services, and maintenance, with fluctuations based on system expansions[176]. - The company aims to enhance adjusted operating margin by limiting volume losses and increasing efficiency through remote monitoring capabilities[174]. - Natural gas inlet volumes in the Permian increased by 10% to 2,132.0 MMcf/d in Q2 2022 compared to 1,929.7 MMcf/d in Q2 2021[1]. - Total NGL production rose by 12% to 623.3 MBbl/d in Q2 2022 from 556.6 MBbl/d in Q2 2021[1]. - Operating expenses for Q2 2022 were $474.7 million, a 58% increase from $301.2 million in Q2 2021[1]. Commodity Prices and Sales - Sales of commodities increased by 82% to $5,624.2 million, driven by higher NGL, natural gas, and condensate prices, as well as increased volumes[1][2]. - Average realized price for natural gas increased by 150% to $6.12/MMBtu in Q2 2022 from $2.45/MMBtu in Q2 2021[1]. - The increase in product purchases and fuel was attributed to higher prices and volumes of NGL and natural gas, totaling $5,047.3 million, an 86% increase from $2,709.0 million in 2021[1][3]. Shareholder Returns - The company paid $30.0 million in dividends to preferred shareholders during the three months ended June 30, 2022[264]. - The Series A Preferred shares were fully redeemed in May 2022 for a total consideration of $973.4 million, including unpaid dividends[265].