Participants

Tristan Richardson; Vice President, Investor Relations and fundamentals; Targa Resources Corp

Matthew Meloy; Chief Executive Officer, Director; Targa Resources Corp

Jennifer Kneale; President of Finance & Administration; Targa Resources Corp

William Byers; Executive VP & CFO; Targa Resources Corp

Patrick Mcdonie; President - Gathering and Processing; Targa Resources Corp

Robert Muraro; Chief Commercial Officer; Targa Resources Corp

Douglas Pryor; President - Logistics and Transportation; Targa Resources Corp

Jeremy Tonet; Analyst; JPMorgan Chase & Co

Keith Stanley; Analyst; Wolfe Research

Unidentified Partticipant

Manav Gupta; Analyst; UBS Investment Bank

Andrew John O'Donnell; Analyst; Tudor, Pickering, Holt & Co. Securities

Michael Blum; Analyst; Wells Fargo Securities

Neal Dingmann; Analyst; Truist Securities, Inc.

Theresa Chen; Analyst; Barclays Bank

Brandon Bingham; Analyst; Scotiabank Global Banking and Markets

Harry Mateer; Analyst; Barclays Bank

Sunil Sibal; Analyst; Seaport Research Partners

Presentation

Operator

Thank you for standing by, and welcome to Targa Resource Corp's fourth quarter 2024 Earnings Conference Call. (Operator Instructions).
I would now like to hand the call over to Tristan Richardson, Vice President, Investor Relations and fundamentals. Please go ahead.

Tristan Richardson

Thanks, Latif. Good morning, and welcome to the Fourth Quarter 2024 Earnings Call for Targa Resources Corp. The fourth quarter earnings release, along with the fourth quarter earnings supplement presentation for Targa Resources that accompany our call are available on our website at targaresources.com in the Investors section.
In addition, an updated investor presentation has also been posted to our website. Statements made during this call that might include Targa's expectations or predictions should be considered forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our latest SEC filings.
Our speakers for the call today will be Matt Meloy, Chief Executive Officer; Jen Kneale, President; and Will Byers, Chief Financial Officer. Additionally, the following senior management team members will be available for Q&A: Pat McDonie, President, Gathering and Processing; Scott Pryor, President, Logistics and Transportation; and Bobby Muraro, Chief Commercial Officer.
I'll now turn the call over to Matt.

Matthew Meloy

Thanks, Tristan, and good morning, everyone. 2024 was a great year, and we are continuing to build on our momentum. Our 2024 results demonstrate our differentiated positioning with record volumes from the Permian significantly outperforming initial expectations driving record NGL transportation, fractionation and export volumes that also exceeded expectations.
As we look forward to 2025 and beyond, we believe that we are uniquely positioned to continue to deliver significant growth for our shareholders. We have a demonstrated track record of adding infrastructure that is highly utilized and 2024 was no different.
With our additional 2 Permian processing plants, 2 additional NGL fractionators and our Daytona NGL pipeline all much needed at start-up. And we announced 3 new projects this morning. Our Delaware Express project, a 100-mile 30-inch diameter intra Delaware Basin pipeline expansion of Grand Prix that will provide us with additional NGL capacity in the Delaware.
Train 12, our next 150,000 barrels per day NGL fractionator in Mont Belvieu and our new LPG export expansion at Galena Park, which will increase our effective export capacity to 19 million barrels per month. Our newly announced projects are needed to accommodate incremental NGL volumes from our 5 Permian processing plants currently under construction.
These critical projects are core to target strengths positioning us to continue to demonstrate attractive returns on invested capital. We have recently accelerated projects and growth spending relative to our thoughts on when we would need additional downstream infrastructure at this time last year. This was driven by more organic growth than previously estimated plus the execution of multiple new commercial deals.
In 2024, our Permian G&P volumes grew by 14% year-over-year with an incremental 709 million cubic feet per day moving through our system. We expected meaningful volume increases, but we were surprised to the upside as our growth far exceeded the high single-digit growth we were talking about last February.
Our volume outperformance was really driven by a combination of the advantages of our Permian systems and dedicated acreage being on the best rock in the Midland and Delaware Basins, lower declines on existing volumes, increased producer activity and performance in certain areas relative to initial expectations.
Higher gas to oil ratios and commercial success, bringing new volumes onto our systems. While we expect to continue to benefit from similar trends in 2025, we currently estimate that our Permian G&P volume growth will be more second half weighted. This growth, along with several large commercial wins that began adding volumes late in 2025 and into 2026, positions us to drive even stronger volume growth in 2026.
These trends and the volume growth, we expect to see on our system will drive further increases in year-over-year adjusted EBITDA and the generation of meaningful adjusted free cash flow. In 2024, our record adjusted EBITDA of $4.1 billion was 17% higher than 2023. We estimate another year of record financial and operational results in 2025 with over $600 million in EBITDA growth expected this year.
We are also in a position to deliver significant growth in 2026 and beyond with 4 new Permian G&P plants coming online in 2026, driving significant NGL volume growth through our downstream assets. The strength of our results positions us to continue to return an increasing amount of capital to our shareholders over time with a 50% increase to our common dividend for 2024 versus 2023, and the record $755 million of common share repurchases during the year.
Looking forward, we announced in November, we expect to recommend a 33% year-over-year increase to our annualized 2025 common dividend per share. Our focus isn't changing. Our balance sheet is strong, providing us with flexibility to continue to invest in attractive organic growth and to continue to return capital to our shareholders, including opportunistic common share repurchases.
Before I turn the call over to Jen, I would like to recognize and thank our employees for their continued focus on safety and execution while providing best-in-class service and reliability to our customers. Every group within Targa played a huge role in our execution across the year, and we are proud of their efforts.
We provided our shareholders with the ninth highest total return in the S&P 500, which is a tremendous accomplishment that we want to build on. Lastly, I am pleased to announce that Jen Kneale is moving into the President role, effective March 1, 2025. After leading our finance and administrative functions for the last 7 years and has, as part of Jen's continuing development, she is going to shift her focus to now lead our commercial engineering and operations functions across Targa.
Over to you, Jen.

Jennifer Kneale

Thanks, Matt. Good morning, everyone. Building on Matt's remarks, there is a lot of activity on our acreage in the Permian. Starting in the Delaware, our new bolus plant is now online and highly utilized. We also completed the addition of our 800 million cubic feet per day of front-end sour gas treating and the 30-inch gas pipeline that connects Targa 2 largest treating and processing facilities in the Delaware Basin.
These projects bring Targa's Delaware treating capacity to approximately 2.3 billion cubic feet per day and create significant system fungibility. We are continuing to make progress on our next two plants that are under construction in the Delaware with our Bull Moose II plant expected online in the first quarter of 2026, and our Falcon II plant online in the second quarter of 2026, with 2 plants coming online within a quarter in 2026, we expect to be in great position to handle customer volume growth in the Delaware.
Moving to the Midland Basin. Our Greenwood I plant came online in late October and was fully utilized at startup. We currently have 3 additional plants under construction with our Pembrook 2 plant expected online in the fourth quarter of 2025, our East Pembrook plant online in the second quarter of 2026, and our East driver plant online in the third quarter of 2026. Across both the Midland and the Delaware, we are evaluating when we will need to move forward with our next Permian plants to accommodate continued growth on our systems.
Turning to our Logistics and Transportation segment. Targa's NGL pipeline transportation volumes averaged a record 872,000 barrels per day and fractionation volumes averaged a record 1.1 million barrels per day during the fourth quarter as we benefited from our Daytona NGL pipeline coming into service in late August and our Train 10 fractionator coming into service in late October.
Our 30-inch 100-mile intra Delaware Basin expansion of Grand Prix that we announced this morning is needed to accommodate growing Delaware Basin volumes. By moving forward with a 30-inch diameter pipeline, we have the flexibility to consider repurposing part of our existing Grand Prix NGL lines to large diameter gathering lines or residue service. providing the opportunity to further enhance flow assurance and takeaway options for our producers.
Our outlook of increasing long-haul NGL transportation volumes has continued to strengthen, and Daytona coming online plus the third-party medium-term transportation deals that we mentioned previously provide us with flexibility looking forward. Given the anticipated growth in our Permian G&P business, our outlook for NGL supply growth remains robust and our downstream system expansions will be much needed to handle growth from our systems.
Our next fractionator in Mont Belvieu, Train 11, remains on track for the third quarter of 2026 and is expected to be much needed at startup. Our newly announced Train 12 is also expected to be much needed with start-up estimated in the first quarter of 2027. In our LPG export business at Galena Park our loadings averaged a record 14 million barrels per month during the fourth quarter, and we remain on track to complete our 650,000 barrel per month expansion in the fourth quarter of 2025.
Given our fractionation expansions that will result in incremental propane and butanes in the Targa system plus the continued strength in global demand for US-sourced LPG's. We expect our LPG export expansion project announced this morning to be much needed when it comes online in the third quarter of 2027. The addition of a new pipeline between Mont Belvieu and Galena Park and another refrigeration unit, will significantly increase our loading rates and enhance our facility flexibility.
During the fourth quarter, we purchased BP's 12% interest in Cedar Bayou fractionators for net cash consideration of approximately $111 million and we now own 100% of CBF. This transaction allows us to provide our partner with liquidity while simplifying our operational structure at an attractive return. We also announced this morning a definitive agreement to repurchase all of the outstanding preferred equity in Targa Badlands LLC, which holds our North Dakota assets for approximately $1.8 billion.
When we executed the Badlands transaction in February 2019, we were in the midst of building our largest project ever, Grand Prix and multiple plants and fracs to help commercialize Grand Prix. We maximize proceeds without any TRGP dilution with the structure, which was critical to us at the time, given our large capital lift and strength of conviction in our outlook. We have now taken out the last piece of creative financing that we utilized back then to keep investing without dilution.
The rationale for taking out Blackstone now is simple. The preferred had a low double-digit cost essentially $180 million of fixed annual charges. With the strength of our balance sheet, we can refinance it with much lower cost debt, providing more than $80 million of annual cash savings and have minimal impact to our leverage ratio.
We will now own 100% of the Badlands again, which is a strong fee-based free cash flow asset, characteristics that made it attractive for joint venture investment in 2019 and make it attractive for us to fully own now. With an effective date of January 1, we will benefit from owning 100% of Badlands for all of 2025, resulting in approximately $180 million of incremental EBITDA. As Matt mentioned, we have accelerated significant spending into 2025, that we were not forecasting at this time last year because of the outperformance of volume growth in 2024 and our expectations for continued growth looking forward.
Through the end of 2024, our ROIC over the past 5 years was 21% and which is strong, given we had the second largest project in Targa's history, Daytona and several other major projects come online and only partially contribute to 2024.
We provided an illustrative framework last February that detailed a multiyear growth capital spend of approximately $1.7 billion to support high single-digit growth in Permian volumes. While this framework holds, we clearly benefited from a lot more volume growth than that in 2024. And given our additional commercial success are likely to see more volume growth going forward. This growth accelerated several downstream projects which added capital to 2025.
The framework should continue to be helpful in a lower growth environment, but our capital spend over the next few years is likely to be higher. 4 plants come online in 2026 and we will need additional processing in 2027 and beyond, and that volume growth has accelerated downstream spend. Importantly, these projects are all core to Targa and leverage our existing footprint and we believe will continue to result in attractive rates of return, driving increasing EBITDA and free cash flow over time.
As a result of our strong returns and attractive growth we continue to return meaningful increases in capital to our investors. We opportunistically repurchased $755 million of common shares at a weighted average price of $127.20 during 2024. A substantial increase over the $347 million of share repurchases for full year 2023.
In 2024, we returned 42% of our adjusted cash flow from operations to shareholders. This was higher than we expected at the beginning of last year, with the strength of our results positioned us to return capital to shareholders more quickly. Consistent with the multiyear framework we've previously discussed, we continue to model returning more than 40% of cash flow from operations to shareholders on a multiyear basis looking forward. We will continue to focus on an all-of-the-above approach to creating value for our shareholders.
Maintaining our strong balance sheet positions us to both continue to invest in attractive organic growth opportunities while increasing our return of capital to shareholders. Our compelling value proposition continues to be supported by growing EBITDA, meaningful increases to common dividends per share, a reducing share count and an excellent outlook.
2024 was a big year for our company, and I'm so appreciative of the efforts of our employees. We have a lot of momentum and are excited about the future.
I'll now turn the call over to Will to discuss our fourth quarter results and our 2025 outlook. Will?

William Byers

Thanks, Jen. Targa's reported quarterly adjusted EBITDA for the fourth quarter was $1.122 billion, a 5% increase over the third quarter. The sequential increase was attributable to higher Permian volumes, which resulted in higher system volumes through our integrated NGL business.
Full year 2024 adjusted EBITDA was a record $4.1 billion, a 17% increase over 2023 and was supported by record financial and operational metrics across the company despite weak natural gas and NGL prices. We also benefited from stronger-than-expected natural gas and NGL marketing opportunities across 2024 with approximately $100 million of optimization opportunities that were not included in our original guidance.
During 2024, we spent approximately $3 billion on growth capital projects. Growth capital spending came in ahead of our previous estimates as a result of the acceleration of spending attributable to our Permian commercial success and various growth projects that shifted spending into 2024.
Our net maintenance capital was $232 million. At the end of the year, our net consolidated leverage ratio was was approximately 3.4x below the midpoint of our long-term leverage ratio target range of 3 to 4x. With our strong balance sheet, we have stable mid-BBB investment-grade rating.
Turning to 2025 we are very excited about our outlook and expectations. We estimate full year 2025 adjusted EBITDA to be between $4.65 billion and $4.85 billion, a 15% increase over 2024 based on the midpoint of our range. We expect continued volume growth in the Permian Basin will drive operating margin across our businesses.
The Logistics & Transportation segment is well positioned to benefit from full year contributions of our Daytona NGL pipeline and Train 9 and 10. Our outlook assumes commodity prices of $1.55 per MMBtu for Waha natural gas, $0.65 per gallon for our weighted average NGL barrel and $70 a barrel for WTI crude. Our cash flows are greater than 90% fee-based, and we have hedged about 90% of the remaining 10% nonfee margin through 2026.
The increasing fee-based margin across our businesses will continue to provide us with cash flow stability and the fee floors and our G&P business support our ability to invest across lower commodity price environments while positioning us to benefit from higher commodity prices. Relative to our full year 2025 financial guidance, a 30% move higher in commodity prices would increase full year adjusted EBITDA by around $130 million, while a 30% decrease would reduce adjusted EBITDA by around $80 million. This momentum will position us well going into 2026.
We estimate $2.6 billion to $2.8 billion of growth capital spending for 2025 and our capital budget includes spending on the 3 new downstream projects announced today, in addition to the 5 Permian plants and Train 11 currently underway, spending associated with the recent commercial success that Matt highlighted, modest spending associated with long lead time items for our next potential Permian system expansions, and we are continuing to evaluate when we will need to move forward with spending on incremental long-haul NGL transportation.
As Jen mentioned, our third-party medium-term NGL transportation agreements provide us with flexibility and baseload volumes for our next NGL pipeline expansion when needed. Our estimate for net maintenance capital spending is $250 million. Similar to year-end 2024, we expect to end 2025 with our leverage ratio comfortably within our long-term target range of 3 to 4x providing continued flexibility going forward. In February, we closed on a new 5-year, $3.5 billion revolving credit facility maturing February 2030. The upsized revolver enhances our liquidity position and flexibility to continue to execute on our strategic priorities. Our available liquidity at the end of the fourth quarter, pro forma for the new revolver was approximately $2.8 billion.
There is no change to our assumption that we may be subject to the federal minimum tax in 2026 and a full cash taxpayer in 2027. Any favorable tax policy changes by the new administration such as reinstating bonus depreciation or eliminating AMT would reduce our cash taxes relative to our expectations. I would like to join Matt and Jen in thanking our 3,400 employees who have made our success possible. the team effort every day as we continue to execute on our growth program.
And with that, I will turn the call back over to Tristan.

Tristan Richardson

Thanks, Will. (Operator Instructions) Latif, please open the line for Q&A.

Question and Answer Session

Operator

(Operator Instructions)
Jeremy Tonet of JPMorgan.

Jeremy Tonet

Jen, congratulations there, first off. And just wanted to go, I guess, into, I guess, the forward outlook at this point with the guidance you provided, I believe those commentary that activity would accelerate over the back half of the year. And if I think about the CapEx pull forward here, it seems like things are going better than previously expected growing faster. I'm just wondering any high-level thoughts you could share, I guess, on how the trajectory of EBITDA could grow across the year, the back half higher? And really, how we should think about 2026 at this point given the trajectory later in the year as well as some of these growth projects being pulled forward here?

Matthew Meloy

Yes. Sure, Jeremy. I'll start. The growth outlook, I'd say, for us, is really strong relative to where we were sitting last year at this time. I'd say the multiyear growth outlook has improved really for every year. As we look at this year specifically, we're pointing to more back half growth. Last year, we saw really strong volumes in the first part of the year and that continued through the rest of the year.
This year, as we look at our producer forecast, it is more back-half weighted and the commercial success on the deals we talked about in 2024 really start contributing kind of second part of '25 and into '26, this year is also for Q1 is impacted by weather. We've had just round after round of freezing weather that's impacted our Permian volumes and then impacted our NGL volumes downstream. So we have had some weather headwinds here in the first quarter.
But our outlook for this year is really strong. And we just kind of look through the bottoms-up build of our producer forecast 2026 looks like it's potentially even a stronger year than 2025.

Jennifer Kneale

And Jeremy, I'd just add, when you think about 4 plants coming online in 2026, we're not trying to look too far beyond this year. We're really excited about this year. But 4 plants coming online next year as well. We've just got a tremendously strong outlook of multiyears of growth here that we're really excited about.

Jeremy Tonet

Got it. So 2026 looking better than 2025 at this point and long-term growth outlook today looking better than it did in the past. So got it there. And then I believe there was some comments on optimization that occurred in '24 and is not, I guess, in the EBITDA guide for '25. And obviously, you're not baking the business around this, but is there any reason to think that some optimization does not materialize again in '25? Just wondering how we should think about that?

Jennifer Kneale

I would say that we're already -- we're always pretty conservative when we guide to full year EBITDA. And when we think about marketing opportunities and our footprint across both the natural gas and the natural gas liquids side, each year opportunities present themselves, but it's not part of what we forecast in a meaningful way. We let those present.
That's one of the reasons that in 2024, you saw us increase our guidance range in August, then you saw us in November, so we thought we'd be at the high end of the range. And then you've, of course, seen us today beat all of that with where we ended up for 2024. So similarly, as we think about this year, I'd expect opportunities to present themselves, but it's not something that we bake into our overall planning process until they're accounted for essentially.

Jeremy Tonet

Got it. So optimization is still very much possible upside to the plan. I think that's it for me.

Operator

Keith Stanley of Wolfe Research.

Keith Stanley

I wanted to start on the Badlands buy-in and just clarity, did Blackstone have an option to put the preferred interest back to you at a certain point -- or is the timing just you have excess balance sheet capacity. And I think, Jen, you noted $80 million a year of cash savings from doing this, and so you're just opportunistic on it?

Jennifer Kneale

I'd say that what we announced today was us being opportunistic in saying that from our perspective, with the strength of our balance sheet, with the cash savings from refinancing a higher cost, low double-digit preferred, being able to put it on our balance sheet at a much lower cost of debt, made all the sense in the world to us and we quantified for the savings for you of around $80 million on the call.
As with any structure like that, yes, there are eventual options for a partner like Blackstone to get out, but by no means were we anywhere where we had to make a decision. For us, it just was really on the backs of a really strong 2024 year-end leverage ratio of 3.4 times. We're taking on a tiny bit of leverage here and generating $80 million of cash savings and now go back to owning 100% of a stable fee-based asset that's throwing off a lot of free cash flow.

Keith Stanley

Great. Second, I just wanted to ask on buybacks given some of the growth commentary, including '26 potentially even being stronger than '25. So, when you think about buybacks and just capital allocation generally, the stock has rerated a lot. You're getting great returns on organic growth. You could probably get pretty good returns on M&A as well. So, how are you thinking about prioritizing capital allocation at this point, including buybacks, just given kind of the overwhelming growth potential that you're seeing?

Jennifer Kneale

For us, it continues to be in all of the above approach. I think that we clearly have a lot of really attractive organic growth capital investment opportunities that we can invest in, and you're seeing us do that and support our producers and customers.
And that will, of course, be a core area of focus for us moving forward. While we're doing that, you also saw us execute on record repurchases in 2024. Meaningfully increase the dividend in 2024. And now of course, we have the (technical difficulty) of a 33% increase to the common dividend in 2025. What we really like about our repurchase program is it's opportunistic.
So to the extent we see a disconnect between our belief of the value of Targa and what the market is presenting itself or is presenting to us, we've got the financial flexibility with the strength of our balance sheet to step in. So you saw us in 2024 execute a lot of repurchases in the second quarter. We knew how strong our 2024 was going to be.
We were relying on volume growth showing up. It was showing up in spades even more than we expected. So you saw us step in because that was supporting a strengthening short, medium and long-term outlook of growth. Similarly, we executed on a lot of great commercial opportunities. That's supporting an outlook of significant growth in 2026 and beyond.
We've got a ton of conviction in what we have going on here and are really proud of our employee execution across engineering, operations, commercial, accounting, everybody in the organization is moving in the right direction. And that means that as we look out over the short, medium and long term, our forecast is strengthening, and that's on the backs of really strong organic opportunities. And we've got the flexibility financially to execute opportunistically on repurchases when we think that it makes sense.

Operator

Jackie Gillettes of Goldman Sachs. Jackie.

Unidentified Partticipant

First, just wanted to start, you pointed to commercial success really driving some of the capital spending higher. Where are you seeing the success across your footprint is mostly on the sour gas opportunities? Or is this more across the entire GMP segment as a whole?

Matthew Meloy

Yes. Sure, Jackie. I'll touch on that. And then, Pat, if you want to jump in. I mean, I'd say we've really seen good commercial success in both the Midland and the Delaware. We actually included in our investor presentation slide, which highlighted we characterize as 3 larger deals. All 3 of those were in the Delaware side of the basin. It just shows that there's still a lot of activity and a lot of acreage positions available. And we have millions of acres already dedicated. That's going to provide us nice growth. But we continue to execute and have some wins with our producer customers on, I call it, kind of step-out acreage developments. And we've seen that on both suite and sour.
So I think the fungibility of our system being able to have a significant amount of treating for both CO2 and H2S and the fund's ability to continue to operate when plants are in maintenance, just provides an overall very good level of service for our customers, and it's really paying off for us.

Patrick Mcdonie

Yes. I think the only thing I would add is, as Matt alluded to in the investor presentation, really the example we gave there was just illustrative. I mean, there is a long list of new transactions that we did in '24 and have already completed in 2025 that is adding to the overall acreage position that we have under contract and our growth going forward.
And, that's why when you listen to our prepared comments, et cetera, we say back half loaded '25 and '26. We've got a lot of line of sight on -- the stuff we've had under contract plus this new added acreage and drilling commitments that our producers are bringing to us. So we really are excited about the short- and long-term outlook for our growth in the Permian Basin.

Unidentified Partticipant

Got it. Appreciate that. And then just moving on to what the faster-than-expected Permian growth kind of implies looking at those long lead items for potential Permian expansions and evaluating incremental additional long haul. What does the cadence kind of flows additional plans beyond '26 might look like? And at what point would you kind of expect to move forward with its additional infrastructure from here?

Matthew Meloy

Sure. Yes. Good question. And frankly, internally, we're trying to estimate and do the best we can for having the right amount of capacity and not too much and not too little. What you see is 4 plants coming on in 2026. That's higher than normal. If you look in '25. We have 2 plants coming on. So you're kind of a 3-plant average for those 2. We're currently evaluating '27 and '28. We have multiple sites already picked out for new processing plants in the Delaware and Midland, and we're determining best location and best timing for those.
So I think as Jen mentioned, we gave a framework which pointed to $1.7 billion of CapEx for, call it, 2 plants a year. I think what we're seeing is here in the short, medium term, it feels like we're higher than that. And that's why you've seen CapEx move higher and it's accelerated some downstream spending, all of which is core to us, it's kind of right down our fairway of what we do, gather and process and then handle the NGL volumes downstream.
So we'll continue to kind of figure out what the right cadence for plant is -- it's 2 for '25, we have 4 for '26 and I'd say we're evaluating '27 and '28, but we see significant growth really in all of those years.

Operator

Manav Gupta of UBS.

Manav Gupta

My question here relates to -- you are obviously involved with the Permian gas egress pipeline. I'm just trying to understand the scope over there. Obviously, it looks like a very strong demand outlook driven by LNG, coal to gas switching and data center. So just trying to understand this entire conversation that you're having with the people about possibly investing more with Permian gas egress out there?

Robert Muraro

This is Bobby. Yes, as we announced our partnership with Whitewater and Blackcomb, we're excited to get that done, excited to get that pipe online in '26. We continue to talk to anyone and everyone about egress. Obviously, there's another pipe that got announced coming out of the Permian that will help with egress of natural gas as well as supplying new demand from LNG and data centers.
That team is out there figuring out what the next pipe is, where the next demand is, data centers, LNG, those conversations are ongoing constantly. And we're in that mix every day. So, we're figuring out when that next pipe is needed, where that next demand center is.
And as we evaluate some of that intra Permian Basin pipe we've got where we can deliver gas that can get burned at data centers or power plants in the Permian. So, we're working on those things every day and all day and figuring that out. But we're excited to see Blackcomb come online in '26 because it will be much needed when it does.

Manav Gupta

Perfect. Obviously, you have a very strong organic growth pipeline. I was just trying to understand the appetite for some bolt-on deals also. And the reason I'm asking is one of your midstream/refining peers, you're seeing some activist pressure to start divesting some of their midstream assets. And I'm just trying to understand if there is -- what would be the appetite for small bolt-on deals that you could do?

Matthew Meloy

Yes, sure. In terms of gas takeaway, we invested 17.5% in Blackcomb. And as we look at being part of the solution for additional takeaway in the Permian, I think there will be other opportunities afforded to us to invest in other pipes. And as Bobby mentioned, we're looking at multiple opportunities. When is the next one going to be needed and what would be an opportunity for us to make a commitment to a pipe and then have some investment opportunities.
So yes, I'd say we'll continue to look to invest and long-haul takeaway. We're also evaluating, we mentioned, as we're putting in the Delaware Express 30-inch NGL line. We have some Grand Prix pipeline in the Delaware, and we're evaluating whether we want to make those large diameter gathering lines or potentially making that residue lines as well to continue to aggregate natural gas residue from our plants to aggregate for additional long-haul pipe takeaway.
So, we do have additional opportunities on the residue gas side. And as we continue to grow, we'll continue to look to see if additional investments there makes sense. And on the broader topic of M&A, I don't really think our posture has changed a whole lot. I mean we have a lot of organic growth opportunities that we see.
That is our primary focus. That is what we're going to be spending most of our time on. We've looked at some of these bolt-on transactions. We -- I'd say we have a high bar and nothing has either transacted with other parties or they've held. So we've continued to focus on organic growth. I think the bar for us continues to be high, and we'll just kind of continue on that path.

Operator

AJ O'Donnell of TPH.

Andrew John O'Donnell

Maybe the first question is just on the outlook. I was wondering if you could spend a bit of time just talking about the expected returns on the projects that have been announced. Should we still be thinking about these around that 5.5 times build multiple that you've guided before? Or have the returns in any way changed?

Jennifer Kneale

AJ, this is Jen. I'd say that everything that we provided in the framework before really holds, which is we've got a demonstrated track record of being able to do better than that 5.5x multiple. And our expectation is that we ought to be able to continue that track record going forward. You saw in 2024, the strength of our results with really weak commodity prices.
To the extent we do ever see commodity prices move higher on the natural gas and NGL side. We've got that asymmetric skewed to the upside, which would provide incremental returns that you really haven't seen play out here recently despite us putting up really attractive rates of return on what we've invested in.
So I think continuing to use the 5.5% or a little bit better is a reasonable starting point as you're modeling out our business. And of course, we're working every day to figure out how to utilize those assets to drive those returns higher. I think what's been great for us is everything that we brought online has essentially been full at start-up. Other than Daytona, which is an asset that we expect to ramp over time.
But even the ramp there has been faster than expected, and that's why we had to do some of those medium-term NGL transportation agreements. So part of how we get better returns is that when assets come online, we've been able to commercialize the volume growth more quickly than when we made the FID decision and the strength of our commercial team is certainly helping us to do that, and we'd expect that to continue going forward as well.

Andrew John O'Donnell

Okay. Great. Maybe just one more then on Q4 results and kind of talking about how these assets ramp in the service pretty quickly. But just noticing that there was a pretty big step up in frac volumes versus NGL production. Just wondering if you could provide some comments on there. Was there any third-party step-up involved in that increase?

Douglas Pryor

AJ, this is Scott. Yes, we saw a really nice quarter in the fourth quarter. When you look at our volumes overall, when you look at fourth quarter of '23 to fourth quarter '24, our volume grew by 29% over that time frame. A lot of that was because we brought on frac Train 9 during the third quarter and then, of course, frac train 10 that came online in the fourth quarter.
So that allowed us basically to utilize frac volumes that we had been offloading at times to other third parties as well as our volume growth that we saw from all of our processing plants and then being able to work off inventory that we had stored.
So -- all of that is really part of the benefit that we saw of the 1.1 million barrels that we saw during the fourth quarter. Needless to say, when you think about the number of plants that we've announced on the Delaware side on the plans that we've announced on the Midland side, in each of those plants contributes 35,000 to 40,000 barrels a day of volume, much of which will be directed to our pipelines and much of which will be coming to our fractionators.
That gives us line of sight in the reasons why Train 11 was announced previously and today Train 12. So when you think about when those are coming online in the third quarter of '26 and then, of course, frac Train 12 now in the first quarter of 2027 all that lines up very well with the plant cadence that we've already announced today.

Operator

Michael Blum of Wells Fargo.

Michael Blum

I have two questions on volumes. I'll just stack together. The first is on the fourth quarter. Your premium volume sequentially, we're up only a little bit, only modest Q3 to Q4 and that'sby the fact that you brought on plants in the second half of the year. So just wanted to -- maybe you can just talk a little bit about any dynamics going on there. We should be aware of that. I thought maybe the volumes will be a bit higher. And then for the full year, you said you grew volumes overall 14% in 2024, what does guidance assume in '25 for volume growth?

Jennifer Kneale

Related to the fourth quarter Permian volumes, I mean the trajectory of growth that we've been on was pretty staggering when you think about moving across the year and volumes moving up 277 million cubic feet a day, Q2 to Q1, 311 million cubic feet a day, Q3 to Q2. And then the 83 million cubic feet a day of growth, Q4 relative to Q3.
We tried to call it out in our press release quarter-over-quarter commentary that we did have a low margin contract that rolled over at the very beginning of the fourth quarter. So that's what was going to create some of that noise quarter-to-quarter.
That we certainly wanted to make sure that we highlighted it for you. I'd say that when we think about our growth, '25 relative to '26, we had the Bull Moose plant just come online. We've got another plant that comes online, later this year. We've talked about a back half ramp. We're certainly above that low -- that sort of high single-digit framework that we said underpinned the growth in the $1.7 billion case that we published last February.
So I'd say higher growth than that. 2024 was a really strong year. We're really pointing to 2026 and the 4 plants as our next strong year, but we're going to continue to have really attractive Permian growth across 2024 -- or sorry, excuse me, 2025 as well. But again, just trying to remind everybody, we're going to see a lot of that growth materialize back half because as Matt said, that's when a lot of those commercial arrangements really start to ramp up in the back half '25 and then provide significant incremental growth in 2026, which is what is underpinning the 4 plants in 2026.

Operator

Neal Dingmann of Truist Securities.

Neal Dingmann

First question, just going to ask before I just want to ask maybe a different way on the Badlands deal. I understand the lower cost of capital and financial ability there. I'm just wondering maybe how this fits into the overall integrated NGL strategy. And again, of course, for the right price, would you all consider selling this asset?

Matthew Meloy

Yes. What thinking about the Badlands is our strategy is obviously invest in gathering and processing and move the NGLs into our downstream footprint. We actually get those NGLs into our fraction, we don't have transport all the up to the Badlands, but it is tied into our fractionation and those volumes are available for export. So we do get some synergies from the NGL downstream business on the Badlands.
With us refinancing at lower cost debt, any options that we would have to do anything out there, whether it's with a partner or something strategic, those are, frankly, a little bit easier with us owning 100% of it. So it doesn't change any of the dynamics about what's the best way for Targa to look at all of its assets, right? No, if anything, it kind of improves that position.

Neal Dingmann

Sure, love the the flexibility. And then second question, maybe just on your North Texas to Mont Belvieu NGL pipeline. I'm just really wondering, what's the timing and when would you all need new capital there maybe along with how you are using offloads to bridge that need?

Matthew Meloy

Scott, you want to.

Douglas Pryor

Yes. Well, first off, obviously, we announced the Delaware Express line. That is just to give a little bit more description on that. That line is a 30-inch line that will basically allow us to move the incremental growth that we're seeing on the Delaware Basin side. In the fourth quarter, we had about 390,000 barrels of NGL production on the Delaware, and much of that was moving on Grand Prix.
But when you think about the number of plants that we're adding on the Delaware side with Bull Moose I, Bull Moose II and then, of course, Falcon 2, all of which will be online in the second quarter of 2026. That volume will find its way and be necessary to move on our Delaware Express, which ties into Daytona and Grand Prix. Our capacity all the way into Bellevue with our South leg is about 1.1 million barrels per day. We moved 872,000 barrels a day on Grand Prix during the fourth quarter.
So we still have some operating leverage there. And then certainly, the third-party offload deals that we've done allows us to ramp into our cadence of plants and gives us a lot of flexibility on when we would need to announce a further long-haul pipe. It's certainly something that we're looking at, trying to stay in front of. And again, with our success that we're seeing on our upstream plan adds is something that, obviously, we've alluded to in our notes that we're studying that hard.

Neal Dingmann

I'm sure you all stay right in front of everything.

Operator

Theresa Chen of Barclays.

Theresa Chen

Looking more to the medium term, as you see visibly the strong back half acceleration in 2025, tying into the 4 plants coming up next year. I'm curious if you can quantify in any way how strong is strong growth in 2026 from a volume metric perspective as you look at your inlet volumes. And then beyond that, clearly, you're curious of accelerated and above-average growth and CapEx and including the downstream infrastructure that needs to come online. But based on what you see today, when do we kind of revert back to normal, if ever, I would love to get your thoughts there?

Matthew Meloy

Yes, sure. Part of giving multiyear volume guidance is difficult. I mean, as you saw in 2024, we thought we had a good estimate, and we far exceeded that ended up being more active, wells came on better, GORs increased, they didn't decline as much. So we saw a good outperformance in '24. A part of what goes into '26 is also just how strong things do ramp in the back half of '25 and what our exit is for '25. So -- that's why we're not giving '26, when you just look at it on an annual basis, we see a higher year-over-year in '26.
We still see strong growth in '25. I'd say not as strong as we saw in '24. It's definitely south of that. But we still see pretty strong growth in '25. But just the indicators we're getting is from the commercial success we've had and just the drilling plans we currently have from producers. It's looking like that back half of '25 is setting up very nicely for 2026.
And then, yes when you get into kind of more normal capital cadence, we have some, again, some chunkier downstream projects that we've announced here this morning with the export terminal, an additional frac. We have Train 9 and 10 just came on.
We have 11 and 12. We have a looping out in the -- for the Delaware Express. Once a lot of those get in service you could expect to see, again, after this next build cycle on the downstream side, perhaps lower CapEx cadence at that point. But we're still sorting through what that looks like and what it's all going to be dependent on what the volume growth is on the G&P side.

Theresa Chen

Understood. And turning to the export component of your infrastructure value chain completely understanding that these supply push purity products need to move, and you will collect the fees on the growing volumes. But also curious to hear your view on the ebbs and flows of demand from your international customers?

Douglas Pryor

Theresa, this is Scott. First off, when you look at just the tremendous growth that we've seen with LPG volumes coming out of the U.S. just less than 10 years, the LPG market has grown 2.5 to 3x in that time frame. And then when you look at the market share that the U.S. has today, if it's grown from 29% to 46% just in that time frame as well, and that's again on a growing volume.
We would expect that trend to continue. There is still a vast majority of volumes that can find their way predominantly to the Asian marketplace and to growing market centers that are out there for LPG. That's both on the propane and on the butane side. There's a number of countries, obviously, that are still in need of mobile fuel, fuel that is clean burning and efficient, and that's something that the LPG molecule provides in a very effective manner.
So, we would just see that trend continue. And so for us, when we look at our export expansion project, it's an expansion that includes a pipeline. It includes a refrigeration unit, and all of that is adding a cost of just less than $400 million. So that is a very attractive project for us. It provides the ability for us to continue to compete and make sure that the volumes stay on our system and can be exported to the marketplace.

Operator

Brandon Bingham of Scotiabank.

Brandon Bingham

I just wanted to quickly go back on the strong Permian activity for this year and then sort of the near and medium-term outlook I wanted to just more specifically focus in and ask if there's been any discussions with customers or if there's any contemplation within the development schedules that you're getting for delineation efforts on deeper benches in the basin? And if that's something that could potentially be tailwinds to your outlook this year or outer years?

Patrick Mcdonie

Yes. This is Pat. It's kind of a loaded question, just to be frank. But, certainly, when you think about the Permian, the primary benches have been Wolfcamp related, et cetera, right? And we are definitely seeing some parties in both the Delaware and Midland side, now look at the Woodford, Barnett, which is a little bit deeper horizon.
And I would say that we're in the initial stages of that getting tested and drilled up probably a little bit ahead in the Delaware relative to the Delaware versus the Midland. And then certainly, in both sides of the basin, there's multiple horizons for different reasons, either the quality of the rock relative to the other benches or a sour component in the Delaware that have waited to be developed.
And frankly, there's good economics with all of us. And the expectation is they will get developed over time. But I guess the short answer is, yes, we are seeing a little bit of interest in the deeper horizons, and we'll see how that plays out.

Brandon Bingham

Got it. And then if we could just quickly go back to shareholder returns. I know it was previously asked about buybacks, but just kind of thinking through that and how you see it shaping up this year with the stock above where you executed the buybacks in 4Q? Just how all that fits in with the 40% to 50% payout target? And if you might consider any other alternative levers like a special dividend or something understanding you don't want to get the base dividend too high taking a through the cycle sort of approach there. But just how you guys are thinking through that with where the stock currently sits today?

Jennifer Kneale

Brandon, this is Jen. I'd say that it's really consistent with how we've been thinking about it going all the way back to when we put our share repurchase program in place in the third quarter of 2020. With a strong balance sheet, we've got a lot of flexibility. Really since then, we have been buying each quarter at higher prices than the previous quarter irrespective of a couple of quarters where maybe we saw a little bit of dislocation, and that's where you really saw a step in.
We've got a really strong short, medium and long-term outlook. And we continue to have conviction that we can provide our shareholders with an increasing return on capital from utilizing that opportunistic share repurchase program. But we really like the fact that we get to report it after we've executed on it. And so I don't think you're going to hear us come out and say, this is how you should think about it quarter-to-quarter or this is what we're forecasting for this year or next year.
I think that the 40% to 50% framework holds, and that's a combination of dividends and thoughts on opportunistic repurchases that we have running through our models. And that, of course, is a multiyear framework. We got above 40% in 2024. And I think we've got expectations that we'll continue to return a meaningful increase in capital to shareholders as we move forward through time. And it will be a combination of dividends and repurchases.
But what you're definitely hearing us say is we value flexibility and we value balance sheet strength. And we value the ability to continue to invest in high returning organic growth capital projects. And then we value the fact that we can return capital to our shareholders as well. And I think that all of the above approach has really worked well for us. And so we really don't see a need to change it as we look forward.

Operator

Harry Mateer of Barclays.

Harry Mateer

I want to talk about the balance sheet a little bit. So the -- I mean, the narrative even leverage has been very consistent from you for the past few years at 3.0 to 4.0, but you also previously messaged a preference to be in the lower half of that range. So with CapEx now expected to be higher in the next few years. I'm just wondering how we should think about the prospects for Targa being in the lower half of that range on leverage in the near to medium term?

Jennifer Kneale

Harry, this is Jen. I think that's still definitely our preference. But I think that consistent with what we've also said before, we don't see a need to force our way there. We ended 2024 at 3.4 times. The Badlands repurchase takes us a little bit higher. But then as we look out over the next several years, what we really like is the trajectory of our leverage fairly quickly coming down into that lower end of the 3 times to 3.5 times.
But at the end of the day, we're very comfortable managing this business where we currently are from a leverage ratio perspective. But I do think that just as a natural movement through the current growth capital cycle. As these projects come online, we benefit from meaningful increases in year-over-year EBITDA contributions our leverage ratio will just naturally move down towards that lower end of the 3 to 3.5x.

Harry Mateer

Okay. And then with you consolidating Badlands and optimizing cost of capital, just wondering, generally, any thoughts on more comprehensively addressing some of your higher cost debt, given you do have some callable notes with coupons that are still off market versus where your bonds trade today?

Jennifer Kneale

I think we're always looking at how best we can essentially save money across our entire organization and the finance team has held to that same level of accountability, which says, if there are opportunities to take out higher cost debt, then certainly, and we'll evaluate it. Right now, we've got more than $1 billion drawn on our revolver. We've got, of course, the Badlands repurchase. So probably more focused short term on helping to manage that liquidity position, but we're always looking at those higher coupon callable notes and trying to assess what the right time maybe to bring them in and refinance either utilizing our new revolver or potentially terming out. That will continue to be a consistent evaluation by our finance team. .

Operator

Sunil Sibal of Seaport Global.

Sunil Sibal

Yes. Hi. Good morning, everybody, and thanks for the time. So I wanted to start off on the capital program. It seems like inflation in the US continues to be sticky. And if tariffs come into play, cost to build anything in the US is probably going up. I was curious, you know how that environment you manage your returns on new investments? Are you able to pass on all these potential costs to customers or any risk management aspects of your capital program?

Matthew Meloy

Yes, sure. Sunil. Yes, we've actually seen steel prices move up here. Just kind of the talk of tariffs. We have seen that happen -- no, it impacts our capital costs, whether it's a processing plant or NGL pipes we're putting in place, as steel prices move up, it does impact our overall CapEx budget. But as you look at the steel cost as a percent of an overall processing plant or an NGL pipe, it's -- I'd say it's a modest contribution.
So then you have a percent increase on a modest contribution of the overall CapEx. I'd say it's a manageable a manageable headwind on any of these projects. We'll still get good returns. We've actually worked with some of the -- some of our projects working in supplying U.S. steel. So we aren't subject to the tariffs. So our procurement group is managing it. It will be a bit of a headwind, but I think it's a manageable one.

Sunil Sibal

And then on the NGL export side of things, it seems like the competitive landscape is heating up a bit. You obviously announced this significant expansion today. I was curious if you could talk about the competitive landscape there. And if I remember correctly, I believe you were mostly targeting the Latin American market. Has that changed recently?

Matthew Meloy

Yes, sure. I'll start, and then Scott, you can add on. The NGL -- or the LPG export market is competitive. So there's multiple players. So with another facility being built, it's competitive now. It will be competitive when another one gets built. So we've been able to manage and do quite well with our -- we have a really good team. We move our volumes from our system across our dock, and we expect to continue to do that. Scott, anything to add?

Douglas Pryor

Yes. I would just add that, again, from our comments earlier, this is a very attractive brownfield project. us. Again, it's less than $400 million to add a pipeline from now Mont Belvieu down to Galena Park, along with a new refrigeration unit gives us a lot of operating leverage going forward, complements our overall business all the way back to the well ahead.
When we look at contracting for this, we always stay very well contracted. We do a tremendous job with our export team of renewing existing contracts, adding new contracts, both long term and short term in certain situations. And as it relates to this project coming online in the third quarter of 2027, it's needed because it fits very well with the cadence of plants, pipelines and fractionation that we need to move the LPGs across our docks.
So, we'll continue to contract heavily and take advantage of that marketplace. I also like the fact that we've got a number of contracts, the volume actually ramps up over time to fit this new expansion project. So, we feel very comfortable with our project and the market share that we have today. And again, the U.S. is continuing to dominate the overall export market in general, and it will continue to grow.

Operator

Thank you. I would now like to turn the conference back to Tristan Richardson for closing remarks. Sir?

Tristan Richardson

Thanks, operator. Thanks, everyone, for joining the call this morning. We appreciate your interest in Targa Resources.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.