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    TRGP
    Earnings call· Dec 2025(Q4 FY25)

    Targa Resources Q4 FY25 earnings call TRGP

    Feb 19, 2026 Source

    Executive summary

    Targa Resources Q4 FY25 — Record Performance and Accelerated Permian Expansion

    Targa delivered record financial and operational results in Q4 FY25, driven by robust Permian volume growth and NGL infrastructure utilization. The company is accelerating its Permian expansion with 8 new plants planned over the next two years, necessitating increased capital investment. This strategy is expected to yield over $6 billion in run-rate adjusted EBITDA post-Speedway completion, supporting continued shareholder returns and a strong balance sheet.

    Highlights

    5

    • Achieved record adjusted EBITDA of $4.96 billion in FY25, an increase of over $800 million year-over-year.

    • Permian volumes grew 11% for FY25, adding over 600 million cubic feet per day.

    • NGL transport volumes increased by almost 170,000 barrels per day and frac volumes by over 120,000 barrels per day in FY25.

    • Announced 8 new Permian plants over the next two years, adding 2.2 Bcf/d processing capacity and 320,000 bbl/d gross NGL production.

    • Provided FY26 adjusted EBITDA guidance of $5.4 billion to $5.6 billion, representing an 11% increase at the midpoint over FY25.

    Concerns

    3

    • Elevated growth capital environment, with multiyear growth capital spending expected to average around $2.5 billion annually post-Speedway, up from $1.7 billion previously.

    • Waha natural gas prices are expected to remain volatile throughout much of 2026.

    • Winter storm Fern reduced volumes across operations in January 2026.

    Guidance & targets

    6
    CategoryTargetConfidence
    Adjusted EBITDA
    $5.4 billion and $5.6 billion
    high materiality
    High
    Growth capital spending
    approximately $4.5 billion
    high materiality
    High
    Multiyear growth capital spending
    around $2.5 billion annually
    high materiality
    Medium
    Run-rate Adjusted EBITDA
    over $6 billion
    high materiality
    High
    Permian volume growth
    low double-digit
    high materiality
    High
    Cash taxes
    not expect to pay meaningful cash taxes
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Gathering and Processing (G&P)
    Permian volumes averaged a record 6.65 Bcf/d in Q4 FY25, up 10% from last year, driven by strong producer activity. Strong commercial success in 2025 added 350,000 dedicated acres and bolt-on acquisitions added nearly 500,000 dedicated acres and 2 million acres in areas of mutual interest.
    Permian volumes: 6.65 Bcf/d (Q4 FY25)Permian volumes growth: 10% YoY (Q4 FY25)Dedicated acres added: 350,000 (2025)Acquired dedicated acres: nearly 500,000Acquired acres in areas of mutual interest: approximately 2 million
    		————
    Logistics and Transportation
    NGL transportation volumes averaged a record 1.05 million bbl/d in Q4 FY25, with the system running full. Fractionation volumes averaged a record 1.14 million bbl/d, and LPG export volumes averaged 13.5 million bbl/month.
    NGL transportation volumes: 1.05 million bbl/d (Q4 FY25)Fractionation volumes: 1.14 million bbl/d (Q4 FY25)LPG export volumes: 13.5 million bbl/month (Q4 FY25)
    		————

    Operational metrics

    16
    Adjusted EBITDA
    $1.34 billion5% increase QoQ
    Q4 FY25

    Sequential increase attributable to higher system volumes and greater optimization opportunities in marketing business.

    Adjusted EBITDA
    $4.96 billion20% increase YoY
    Full Year 2025

    Record performance, supported by record financial and operational performance and approximately $150 million of higher-than-expected optimization opportunities across 2025.

    Net maintenance capital
    $226 million
    Full Year 2025
    Common shares repurchased
    $642 million
    2025

    Opportunistically repurchased.

    Net consolidated leverage ratio
    3.5x
    Year-end 2025

    Well within long-term target range.

    Available liquidity
    $1.9 billion
    January 31, 2026

    Includes funding the Stakeholder acquisition and redeeming 6.875% notes due January 2029.

    Cash flows from fee-based margin
    greater than 90%
    2026

    Majority of non-fee margin hedged for the next 3 years.

    Adjusted EBITDA sensitivity to commodity prices
    less than 2% change30% move higher or lower in commodity prices
    2026

    Based on recent strip pricing relative to the midpoint of 2026 adjusted EBITDA guidance.

    Permian volumes
    over 600 million cubic feet per day11% growth YoY
    Full Year 2025

    Record volumes.

    NGL transport volumes
    almost 170,000 barrels per day
    Full Year 2025

    Record volumes.

    Frac volumes
    more than 120,000 barrels per day
    Full Year 2025

    Record volumes.

    LPG export volumes
    Record
    Full Year 2025
    Permian volumes
    6.65 billion cubic feet per day10% increase YoY
    Q4 FY25

    Record average volumes.

    NGL transportation volumes
    1.05 million barrels per day
    Q4 FY25

    Record average volumes, system running full.

    Fractionation volumes
    1.14 million barrels per day
    Q4 FY25

    Record average volumes.

    LPG export volumes
    13.5 million barrels per month
    Q4 FY25

    Record average volumes.

    Industry KPIs

    5
    MetricValueDetails
    Pipeline throughput storage1.05 million barrels per daybbl/d
    Sanctioned expansion backlog8 plants
    Basin level production volume6.65 billion cubic feet per dayBcf/d
    FCF shareholder distributions$642 millionUSD
    Weather event volume earnings impactreduced volumes

    Deals & partnerships

    2
    Stakeholderacquisition

    Completed the acquisition of Stakeholder, adding significant acreage and dedicated acres.

    Two producersacquisition

    Completed two bolt-on producer transactions, adding to acreage and dedicated acres. These were from producers with strong relationships, where it made sense for Targa to own the assets and build out systems.

    Capital programs

    13
    Yeti II Delaware processing plantunderway

    Next Delaware processing plant, scheduled to be in service in the fourth quarter of 2027.

    13th Fractionator in Mont Belvieu (Train 13)underway

    Will support continued NGL supply growth from Permian systems as we look to 2028 and beyond.

    Two additional Permian plantsannounced

    Ordering long lead items for 2 additional plants in the Permian planned for early 2028. Both likely in the Delaware.

    Falcon 2 plantnearing completion

    Expected to come online ahead of schedule and is currently in start-up.

    East Pembrook plantunderway

    Scheduled to be in service in 2026.

    East Driver plantunderway

    Scheduled to be in service in 2026.

    Speedway Projectunderway$1.6 billion

    Larger Downstream project, set to come online in the second half of 2027. Total project cost is $1.6 billion.

    LPG Export Expansionunderway

    Set to come online in the second half of 2027. Significant available capacity with LAP 4.

    Blackcomb Pipelineunderway

    Targa has a 17.5% equity interest. Expected to be in service in the fourth quarter of 2026.

    Traverse Pipelineunderway

    Targa has a 17.5% equity interest. Expected to be in service in 2027.

    Bull Run extensionunderway

    In-basin natural gas project, remains on track subject to regulatory approvals.

    Buffalo Rununderway

    In-basin natural gas project, remains on track subject to regulatory approvals.

    Forzaunderway

    In-basin natural gas project, remains on track subject to regulatory approvals.

    Risks & headwinds

    4
    Elevated growth capital environmentMultiyear post-Speedway

    Multiyear growth capital spending to average around $2.5 billion annually post-Speedway, up from $1.7 billion previously.

    Mitigation: Investing in same types of projects that generated attractive rates of return; expected meaningfully higher EBITDA and strong free cash flow profile post-completion of major projects.

    Waha natural gas price volatility2026

    Expected to remain volatile throughout much of 2026.

    Mitigation: Significant transport positions to multiple locations for flow assurance; hedged majority of non-fee margin for next 3 years; fee floors in G&P business provide cash flow stability; long-term positive for Targa with improved egress.

    Winter storm impactsJanuary 2026

    Reduced volumes across operations in January (Winter Storm Fern).

    Mitigation: Assets proved resilient, remaining online and ready to receive volumes once temperatures improved.

    Longer lead times for equipmentOngoing

    Lead times for items like pipe, compression, and power generation assets are getting longer.

    Mitigation: Accelerating spending to ensure ability to handle expected growth and provide exemplary service to producers.

    Q&A highlights

    7

    What drives Targa's continued double-digit growth outlook in 2026 compared to industry retrenchment, and what gives confidence for above-average growth post-2026?

    Matt Meloy attributed resilience to Targa's large Permian footprint, strong producer relationships, and existing customers' continued drilling. He also highlighted significant commercial success in 2024-2025, adding to the robust growth profile. The outlook for 2027 and beyond has improved, with more positive sentiment than a year ago.

    “I'd say we're more positive on '27 and beyond from what we see today.”

    asked by Jeremy Tonet · answered by Matt Meloy

    2 min read6 chapters

    Detailed Narrative

    01

    Record 2025 Performance and Permian Growth

    Targa achieved record financial performance in 2025 with adjusted EBITDA of $4.96 billion, an increase of over $800 million year-over-year. This was driven by record volumes across its integrated footprint, including 11% Permian volume growth (over 600 MMcf/d), NGL transport volumes up 170,000 bbl/d, frac volumes up 120,000 bbl/d, and record LPG export volumes. The company expects continued low double-digit Permian volume growth in 2026.

    02

    Strategic Infrastructure Expansion

    To support anticipated volume growth, Targa announced two new projects: the Yet II Delaware processing plant and the 13th fractionator in Mont Belvieu. Additionally, long-lead items are being ordered for two more Permian plants planned for early 2028. This represents a total of 8 new plants over the next two years, adding 2.2 Bcf/d of processing capacity and 320,000 bbl/d of gross NGL production.

    03

    Elevated Capital Investment and Future Free Cash Flow

    Targa is in an elevated growth capital environment, with approximately $4.5 billion planned for 2026. Multiyear growth capital spending post-Speedway is projected to average around $2.5 billion annually, an increase from previous estimates, reflecting the accelerated pace of plant additions. Following the completion of major downstream projects like Speedway (Q3 2027) and the LPG export expansion, the company expects significantly higher EBITDA (over $6 billion run-rate) and a strong free cash flow profile.

    04

    Commercial Success and Acreage Dedications

    The company experienced strong commercial success in 2024 and 2025, adding several billion cubic feet per day of gas volumes beyond existing acreage dedications and approximately 350,000 dedicated acres in 2025. This, combined with bolt-on acquisitions, has added nearly 500,000 dedicated acres and 2 million acres in areas of mutual interest, enhancing Targa's long-term growth rate and providing decades of drilling inventory.

    05

    Permian Egress and Waha Volatility

    While the Permian natural gas egress environment is expected to improve as new pipelines come online in late 2026 and 2027 (Blackcomb, Traverse), Waha natural gas prices are anticipated to remain volatile throughout much of 2026. Targa maintains significant transport positions to multiple locations, which helps ensure flow assurance for customers and provides marketing opportunities during price dislocations, though the company is well-hedged on equity volumes.

    06

    Financial Strength and Shareholder Returns

    Targa ended 2025 with a net consolidated leverage ratio of approximately 3.5x, within its 3x-4x target range. The company repurchased $642 million of common shares in 2025 at an average price of $170.45. With over 90% fee-based cash flows and hedges on non-fee margin, Targa expects to pay no meaningful cash taxes for the next five years due to bonus depreciation, supporting continued investment, dividend growth, and share repurchases.

    AI-generated summary of the company’s earnings call. Not investment advice.