Targa(TRGP) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights Targa Resources Corp. reported strong Q2 2025 financial results, including significant net income and adjusted EBITDA growth, record volumes, and accelerated growth projects Second Quarter 2025 Financial Overview Targa Resources Corp. reported strong financial results for Q2 2025, with significant year-over-year increases in net income and adjusted EBITDA, driven by record Permian and NGL transportation volumes Q2 2025 Financial Performance (YoY) | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (Millions) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :---------------- | :--------- | | Net Income Attributable to TRGP | $629.1 | $298.5 | $330.6 | 111% | | Adjusted EBITDA | $1,163.0 | $984.3 | $178.7 | 18% | Key Highlights Key highlights for Q2 2025 include a declared quarterly dividend, significant share repurchases, record Permian and NGL transportation volumes, and accelerated completion timelines for several growth projects, alongside a new share repurchase program - Declared a quarterly cash dividend of $1.00 per common share ($4.00 annualized) for Q2 2025, totaling approximately $215 million[5] - Repurchased 1.96 million shares for $324.3 million in Q2 2025, with $566.2 million remaining under the existing $1.0 billion program. A new $1.0 billion share repurchase program was approved in August 2025[6][10] - Achieved record Permian and NGL transportation volumes during Q2 2025[10] - Expect early completion of the Pembrook II plant in Permian Midland (August 2025), Bull Moose II plant in Permian Delaware (Q4 2025), Delaware Express Pipeline (Q2 2026), and Train 11 fractionator (Q2 2026)[10][15][16] - Announced a 43-mile extension of the Bull Run natural gas pipeline to enhance connectivity from Permian Delaware to WAHA, expected to begin operations in Q1 2027[10][17] Sequential Quarter Over Quarter Commentary Adjusted EBITDA for Q2 2025 remained relatively flat compared to Q1 2025, despite a planned turnaround at Mont Belvieu fractionation facilities. This was supported by record Permian and NGL transportation volumes, offsetting lower marketing margin, commodity prices, and higher operating expenses - Q2 2025 adjusted EBITDA of $1,163.0 million was relatively flat sequentially, despite a planned turnaround at Mont Belvieu fractionation facilities[7] - G&P segment adjusted operating margin was flat due to strong Permian natural gas inlet volumes and higher recoveries, offset by significantly lower commodity prices[8] - L&T segment adjusted operating margin was sequentially flat, as record NGL pipeline transportation volumes were offset by lower marketing margin and reduced fractionation volumes due to the planned turnaround[9] Capitalization, Financing and Liquidity Targa's total consolidated debt was $16.85 billion as of June 30, 2025, supported by strong liquidity of approximately $3.5 billion Debt and Financing Activities As of June 30, 2025, Targa's total consolidated debt was $16.85 billion. The company completed a $1.5 billion public offering of notes in June 2025, using proceeds to redeem existing notes and for general corporate purposes Consolidated Debt as of June 30, 2025 | Debt Type | Amount (Millions) | | :------------------------ | :---------------- | | Total Consolidated Debt | $16,850.5 | | Senior Unsecured Notes | $16,034.4 | | Commercial Paper Program | $667.0 | | Finance Lease Liabilities | $304.5 | - Completed an underwritten public offering of 4.900% Notes due 2030 and 5.650% Notes due 2036 in June 2025, generating approximately $1.5 billion in net proceeds[12] - Net proceeds from the debt issuance were used to redeem 6.500% Notes due 2027 and for general corporate purposes, including repayment of Commercial Paper Program borrowings[12] Liquidity Position Targa maintained strong liquidity, with approximately $3.5 billion available as of June 30, 2025, and extended its Securitization Facility maturity to August 31, 2026 Consolidated Liquidity as of June 30, 2025 | Source | Amount (Millions) | | :------------------------- | :---------------- | | Total Consolidated Liquidity | ~$3,500.0 | | TRGP Revolver | $2,800.0 | | Securitization Facility | $600.0 | | Cash | $113.1 | - Extended the maturity of its Securitization Facility to August 31, 2026, in July 2025[14] Growth Projects Update Targa is accelerating completion timelines for several G&P and L&T projects, including new plants and pipeline extensions, with operations expected from Q4 2025 to Q1 2027 Gathering and Processing (G&P) Segment Projects Targa anticipates early completion of its Pembrook II plant in Permian Midland by August 2025 and the Bull Moose II plant in Permian Delaware by Q4 2025. Construction continues on other Permian plants, and the company is acquiring long-lead items for future expansions - Pembrook II plant (275 MMcf/d) in Permian Midland expected to be completed early in August 2025[15] - Bull Moose II plant (275 MMcf/d) in Permian Delaware expected to begin operations in Q4 2025, earlier than previously anticipated[15] - Construction continues on East Pembrook and East Driver plants in Permian Midland, and Falcon II plant in Permian Delaware[15] - Acquiring long-lead items for next gas processing expansions in the Permian to accommodate future growth[15] Logistics and Transportation (L&T) Segment Projects The Delaware Express Pipeline expansion and Train 11 fractionator are now expected to begin operations earlier, in Q2 2026. Construction also continues on Train 12 fractionator and GPMT LPG Export Expansion - Delaware Express Pipeline expansion and Train 11 fractionator (150 MBbl/d) in Mont Belvieu expected to begin operations in Q2 2026, earlier than previously anticipated[16] - Construction continues on Train 12 fractionator in Mont Belvieu and GPMT LPG Export Expansion[16] New Pipeline Extensions Targa announced a 43-mile extension of its Bull Run intrastate natural gas pipeline in the Permian Delaware, aiming to enhance connectivity to WAHA, with operations expected to commence in Q1 2027 - Announced a 43-mile extension of the Bull Run intrastate natural gas pipeline in Permian Delaware to expand connectivity to WAHA[17] - The Bull Run Extension is expected to begin operations in Q1 2027[17] 2025 Outlook Targa maintains its 2025 adjusted EBITDA guidance of $4.65 billion to $4.85 billion, with increased growth capital expenditures of $3.0 billion Adjusted EBITDA Guidance Targa maintains its full-year 2025 adjusted EBITDA estimate between $4.65 billion and $4.85 billion, anticipating record Permian, NGL pipeline transportation, fractionation, and LPG export volumes - Full year 2025 adjusted EBITDA is estimated to be between $4.65 billion and $4.85 billion[18] - Forecasted growth across Permian G&P footprint is expected to drive record Permian, NGL pipeline transportation, fractionation, and LPG export volumes in 2025[18] Capital Expenditures Due to accelerated project completions and new expansions, Targa's estimated net growth capital expenditures for 2025 have increased to approximately $3.0 billion, while maintenance capital expenditures remain unchanged at $250 million - Estimated total net growth capital expenditures for 2025 are approximately $3.0 billion, an increase due to accelerated projects and new expansions[19] - Estimated 2025 net maintenance capital expenditures remain unchanged at approximately $250 million[19] Consolidated Financial Results of Operations Targa reported strong financial performance for Q2 and H1 2025, with significant increases in total revenues, net income, and Adjusted EBITDA year-over-year Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 For Q2 2025, Targa experienced a 20% increase in total revenues, driven by higher commodity sales from increased NGL volumes, natural gas prices, and favorable hedges. Net income attributable to Targa Resources Corp. surged by 111%, and Adjusted EBITDA increased by 18% year-over-year Consolidated Financial Results (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (Millions) | Change (%) | | :---------------------------------------- | :----------------- | :----------------- | :---------------- | :--------- | | Total Revenues | $4,260.1 | $3,562.0 | $698.1 | 20% | | Income from Operations | $1,033.6 | $627.2 | $406.4 | 65% | | Net Income Attributable to TRGP | $629.1 | $298.5 | $330.6 | 111% | | Adjusted EBITDA | $1,163.0 | $984.3 | $178.7 | 18% | | Adjusted Cash Flow from Operations | $934.4 | $808.5 | $125.9 | 16% | | Adjusted Free Cash Flow | $(9.6) | $(43.0) | $33.4 | 78% | - Increase in commodity sales was due to higher NGL volumes ($304.2 million), higher natural gas prices ($296.4 million), and favorable hedges ($290.5 million), partially offset by lower NGL and condensate prices ($217.3 million)[24] - Increase in fees from midstream services primarily from higher gas gathering and processing fees and export volumes, partially offset by lower transportation and fractionation fees due to a planned turnaround[25] - Operating expenses increased due to higher labor and maintenance costs, and taxes associated with system expansions and the Mont Belvieu turnaround[26] Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 For the first half of 2025, total revenues increased by 9%, and net income attributable to Targa Resources Corp. grew by 57%. Adjusted EBITDA saw a 20% increase, driven by similar factors as the quarterly performance, including higher natural gas prices and NGL volumes Consolidated Financial Results (H1 2025 vs. H1 2024) | Metric | H1 2025 (Millions) | H1 2024 (Millions) | Change (Millions) | Change (%) | | :---------------------------------------- | :----------------- | :----------------- | :---------------- | :--------- | | Total Revenues | $8,821.6 | $8,124.4 | $697.2 | 9% | | Income from Operations | $1,576.9 | $1,266.7 | $310.2 | 24% | | Net Income Attributable to TRGP | $899.6 | $573.7 | $325.9 | 57% | | Adjusted EBITDA | $2,341.5 | $1,950.8 | $390.7 | 20% | | Adjusted Cash Flow from Operations | $1,904.4 | $1,547.2 | $357.2 | 23% | | Adjusted Free Cash Flow | $318.6 | $(40.0) | $358.6 | NM | - Increase in commodity sales reflected higher natural gas prices ($503.7 million), higher NGL volumes ($133.8 million), and favorable hedges ($34.4 million), partially offset by lower condensate prices and natural gas/condensate volumes[30] - Increase in fees from midstream services was primarily due to higher gas gathering and processing fees and export volumes, partially offset by lower transportation and fractionation fees due to a planned turnaround[31] - Operating expenses increased due to higher labor and maintenance costs, and taxes associated with system expansions and the Mont Belvieu turnaround[32] Review of Segment Performance Both G&P and L&T segments demonstrated strong adjusted operating margin growth in Q2 and H1 2025, driven by increased volumes and new infrastructure, while the 'Other' segment saw significant gains from derivative activities Gathering and Processing Segment The G&P segment saw a 4% increase in adjusted operating margin for Q2 2025 and a 6% increase for H1 2025, primarily driven by higher natural gas inlet volumes in the Permian Basin due to new plant additions and strong producer activity, despite lower volumes in other areas Gathering and Processing Segment Performance | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (%) | H1 2025 (Millions) | H1 2024 (Millions) | Change (%) | | :-------------------------- | :----------------- | :----------------- | :--------- | :----------------- | :----------------- | :--------- | | Operating Margin | $587.6 | $572.6 | 3% | $1,189.8 | $1,128.9 | 5% | | Adjusted Operating Margin | $807.0 | $778.3 | 4% | $1,617.4 | $1,522.6 | 6% | | Total Plant Natural Gas Inlet (MMcf/d) | 7,894.0 | 7,390.2 | 7% | 7,711.3 | 7,246.8 | 6% | | Total NGL Production (MBbl/d) | 1,025.2 | 965.7 | 6% | 984.5 | 904.8 | 9% | - Permian natural gas inlet volumes increased by 11% in Q2 2025 and H1 2025, driven by the addition of Roadrunner II (Q2 2024), Greenwood II (Q4 2024), and Bull Moose (Q1 2025) plants, and continued strong producer activity[39][41][43] - Operating expenses increased primarily due to higher volumes and multiple plant additions in the Permian[42][44] Logistics and Transportation Segment The L&T segment reported a 17% increase in adjusted operating margin for Q2 2025 and an 18% increase for H1 2025. This growth was fueled by higher pipeline transportation and fractionation volumes, primarily from Permian G&P systems, and increased LPG export margin, despite a planned turnaround at Mont Belvieu Logistics and Transportation Segment Performance | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (%) | H1 2025 (Millions) | H1 2024 (Millions) | Change (%) | | :-------------------------- | :----------------- | :----------------- | :--------- | :----------------- | :----------------- | :--------- | | Operating Margin | $632.4 | $547.7 | 15% | $1,279.1 | $1,079.8 | 18% |\ | Adjusted Operating Margin | $737.8 | $633.1 | 17% | $1,480.0 | $1,255.2 | 18% | | NGL Pipeline Transportation Volumes (MBbl/d) | 961.2 | 783.5 | 23% | 902.7 | 750.6 | 20% | | Fractionation Volumes (MBbl/d) | 969.1 | 902.2 | 7% | 974.5 | 849.7 | 15% | | Export Volumes (MBbl/d) | 423.1 | 394.1 | 7% | 435.3 | 416.6 | 4% | - Increase in adjusted operating margin was due to higher pipeline transportation and fractionation margin, and higher LPG export margin[48][50] - Pipeline transportation and fractionation volumes benefited from higher supply from Permian G&P systems and full operation of Train 9 (Q2 2024), Daytona NGL Pipeline (Q3 2024), and Train 10 (Q4 2024)[48][50] - Operating expenses increased predominantly due to a planned turnaround and system expansions[49][51] Other Segment The 'Other' segment primarily reflects commodity derivative activity, including mark-to-market gains/losses on derivative contracts not designated as cash flow hedges. For Q2 2025, this segment reported an operating margin and adjusted operating margin of $280.5 million, a significant increase from a negative $46.6 million in Q2 2024 Other Segment Performance | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (Millions) | H1 2025 (Millions) | H1 2024 (Millions) | Change (Millions) | | :-------------------------- | :----------------- | :----------------- | :---------------- | :----------------- | :----------------- | :---------------- | | Operating Margin | $280.5 | $(46.6) | $327.1 | $31.7 | $(68.7) | $100.4 | | Adjusted Operating Margin | $280.5 | $(46.6) | $327.1 | $31.7 | $(68.7) | $100.4 | - The 'Other' segment contains results from commodity derivative activity mark-to-market gains/losses related to derivative contracts not designated as cash flow hedges[52] Company Overview Targa Resources Corp. is a leading independent North American midstream services provider, operating diversified infrastructure for natural gas, NGLs, and crude oil - Targa Resources Corp. is a leading provider of midstream services and one of the largest independent infrastructure companies in North America[53] - The company's operations include gathering, compressing, treating, processing, transporting, purchasing, and selling natural gas; transporting, storing, fractionating, treating, purchasing, and selling NGLs and NGL products (including services to LPG exporters); and gathering, storing, terminaling, purchasing, and selling crude oil[53] - Targa is a FORTUNE 500 company and is included in the S&P 500[54] Non-GAAP Financial Measures Targa utilizes non-GAAP financial measures like Adjusted EBITDA and Adjusted Free Cash Flow to assess performance, providing detailed reconciliations to GAAP measures Introduction and Limitations Targa uses non-GAAP financial measures like adjusted EBITDA, adjusted cash flow from operations, adjusted free cash flow, and adjusted operating margin to analyze performance. These measures are supplemental and should not replace GAAP measures, as they have limitations and may not be comparable to similarly titled measures used by other companies - Non-GAAP measures used include adjusted EBITDA, adjusted cash flow from operations, adjusted free cash flow, and adjusted operating margin (segment)[56] - These measures are supplemental and should not be considered an alternative to GAAP measures, having important limitations as analytical tools[57] - Management reviews comparable GAAP measures and understands the differences to incorporate insights into decision-making[57] Adjusted Operating Margin Adjusted operating margin is defined as revenues less product purchases and fuel, reflecting the core profitability of operations. It is influenced by volumes, commodity prices, contract mix, and hedging programs, and is used by management and external users to assess financial performance and capital returns - Adjusted operating margin for segments is defined as revenues less product purchases and fuel, impacted by volumes, commodity prices, contract mix, and commodity hedging[58] - For G&P, it includes service fees for natural gas and crude oil gathering/processing, and revenues from commodity sales less settlements, fuel, transport, and equity volume hedge settlements[61] - For L&T, it includes service fees, system product gains/losses, and NGL/natural gas sales less purchases, fuel, third-party transportation, and net inventory change[61] Adjusted EBITDA Adjusted EBITDA is defined as Net income (loss) attributable to Targa Resources Corp. before interest, income taxes, depreciation and amortization, and other items adjusted for core operating performance. It is used by management and external users to measure the ability of assets to generate cash for interest costs, indebtedness, and dividends - Adjusted EBITDA is Net income (loss) attributable to Targa Resources Corp. before interest, income taxes, depreciation and amortization, and other adjustments consistent with core operating performance[62] - Used to measure the ability of assets to generate cash sufficient to pay interest costs, support indebtedness, and pay dividends[62] Adjusted Cash Flow from Operations and Adjusted Free Cash Flow Adjusted cash flow from operations is adjusted EBITDA less cash interest expense and cash tax. Adjusted free cash flow further subtracts maintenance and growth capital expenditures (net of contributions). These measures assess the company's ability to generate cash earnings for corporate purposes like dividends, debt retirement, or other financing arrangements - Adjusted cash flow from operations is adjusted EBITDA less cash interest expense on debt obligations and cash tax (expense) benefit[63] - Adjusted free cash flow is adjusted cash flow from operations less net maintenance and growth capital expenditures (including contributions to unconsolidated affiliates)[63] - These measures assess the company's ability to generate cash earnings (after servicing debt and funding capital expenditures) for corporate purposes such as dividends, debt retirement, or redemption of other financing arrangements[63] Reconciliation Tables The report provides detailed reconciliations of non-GAAP financial measures (Adjusted EBITDA, Adjusted Cash Flow from Operations, Adjusted Free Cash Flow) to their most directly comparable GAAP measures for both the three and six months ended June 30, 2025 and 2024, as well as an estimated reconciliation for full-year 2025 Reconciliation of Net Income to Adjusted EBITDA, Adjusted Cash Flow from Operations, and Adjusted Free Cash Flow (Q2 & H1 2025 vs. 2024) | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | H1 2025 (Millions) | H1 2024 (Millions) | | :---------------------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Net income (loss) attributable to TRGP | $629.1 | $298.5 | $899.6 | $573.7 | | Interest (income) expense, net | $218.4 | $176.0 | $415.5 | $404.6 | | Income tax expense (benefit) | $184.1 | $94.3 | $256.3 | $177.1 | | Depreciation and amortization expense | $373.7 | $348.6 | $741.3 | $689.1 | | Risk management activities | $(280.5) | $46.6 | $(31.7) | $68.8 | | Adjusted EBITDA | $1,163.0 | $984.3 | $2,341.5 | $1,950.8 | | Interest expense on debt obligations | $(214.3) | $(172.4) | $(407.5) | $(397.3) | | Cash taxes | $(14.3) | $(3.4) | $(29.6) | $(6.3) | | Adjusted Cash Flow from Operations | $934.4 | $808.5 | $1,904.4 | $1,547.2 | | Maintenance capital expenditures, net | $(58.9) | $(52.8) | $(106.2) | $(102.7) | | Growth capital expenditures, net | $(885.1) | $(798.7) | $(1,479.6) | $(1,484.5) | | Adjusted Free Cash Flow | $(9.6) | $(43.0) | $318.6 | $(40.0) | Reconciliation of Estimated Net Income to Estimated Adjusted EBITDA (2025E) | Metric | 2025E (Millions) | | :---------------------------------------- | :--------------- | | Net income attributable to Targa Resources Corp. | $1,830.0 | | Interest expense, net | $865.0 | | Income tax expense | $485.0 | | Depreciation and amortization expense | $1,510.0 | | Equity earnings | $(22.0) | | Distributions from unconsolidated affiliates | $26.0 | | Compensation on equity grants | $70.0 | | Risk management and other | $(17.0) | | Noncontrolling interests adjustments | $3.0 | | Estimated Adjusted EBITDA | $4,750.0 | Additional Information This section outlines Targa's Regulation FD compliance and provides disclaimers regarding forward-looking statements, emphasizing inherent uncertainties and risks Regulation FD Disclosures Targa complies with Regulation FD by using press releases, SEC filings, public conference calls, and its website to disclose material information, encouraging investors to monitor these channels - Targa uses press releases, SEC filings, public conference calls, or its website (www.targaresources.com) to comply with Regulation FD disclosure obligations[67] - The company routinely posts important and potentially material information on its website[67] Forward-Looking Statements The release contains forward-looking statements regarding future activities, financial performance, capital spending, and dividends, which are subject to various uncertainties, factors, and risks, including commodity price volatility, weather, political, economic, and market conditions. Targa does not undertake to update or revise these statements - Statements in the release regarding future activities, events, or developments, including projected financial performance, capital spending, and future dividends, are forward-looking statements[68] - These statements rely on assumptions and are subject to uncertainties, factors, and risks, such as actions by hydrocarbon-producing countries, weather, political, economic, and market conditions, commodity price volatility, and changes in laws and regulations[68] - Targa does not undertake an obligation to update or revise any forward-looking statement[68]