Release Date: February 20, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Can you provide insights into the growth trajectory for EBITDA in 2025 and expectations for 2026? A: Matthew Meloy, CEO, explained that the growth outlook is strong, with expectations for more back-half growth in 2025. The commercial success from 2024 will contribute significantly in the latter part of 2025 and into 2026. Despite weather-related headwinds in Q1 2025, the company anticipates a robust year, with 2026 potentially being even stronger due to four new plants coming online.
Q: How does the Badlands buy-in fit into your strategy, and what are the financial benefits? A: Jennifer Kneale, President of Finance & Administration, stated that the buy-in was opportunistic, leveraging their strong balance sheet to refinance higher-cost preferred equity with lower-cost debt, saving approximately $80 million annually. This move allows Targa to own 100% of a stable, fee-based asset generating significant free cash flow.
Q: With the stock's rerating and strong growth prospects, how are you prioritizing capital allocation, including buybacks? A: Jennifer Kneale emphasized an "all-of-the-above" approach, focusing on attractive organic growth opportunities while also executing record share repurchases and increasing dividends. The company values flexibility and will continue to opportunistically repurchase shares when market conditions present a disconnect between perceived value and market price.
Q: What is driving the increased capital spending, and where are you seeing commercial success? A: Matthew Meloy highlighted significant commercial success in both the Midland and Delaware Basins, with new deals primarily in the Delaware. The fungibility of Targa's system and its ability to handle both sweet and sour gas have been advantageous, leading to increased capital spending to accommodate growth.
Q: How are you managing inflation and potential tariff impacts on your capital program? A: Matthew Meloy acknowledged that rising steel prices due to tariff talks impact capital costs but noted that steel is a modest part of overall project costs. Targa is managing these headwinds through strategic procurement, including sourcing U.S. steel to avoid tariffs, ensuring that project returns remain attractive.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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