Targa Resources Corp. (TRGP)·Q1 2025 Earnings Summary

Executive Summary

• Record Q1 2025 adjusted EBITDA of $1,178.5M (+22% y/y) despite weather-related volume headwinds; sequential adjusted EBITDA rose ~5% vs Q4 2024 on Badlands contribution and higher marketing margin .
• Guidance maintained: FY 2025 adjusted EBITDA range $4.65B–$4.85B; net growth capex $2.6B–$2.8B; maintenance capex ~$250M .
• Capital returns: dividend increased to $1.00/qtr ($4.00 annual, +33% y/y); share repurchases totaled ~$$214M through April (651K shares in Q1; 532K post-quarter) .
• Catalyst: management highlighted meaningful rebound in Permian volumes post-weather, continued optimization opportunities, and strong fee-based mix (>90%) underpinning confidence into 2H 2025 and 2026 .

What Went Well and What Went Wrong

What Went Well

• Record adjusted EBITDA ($1,178.5M) with resilient fee-based model and optimization; “we reported — record quarterly adjusted EBITDA despite our volumes being impacted by several winter weather events” — CEO Matt Meloy .
• Permian volumes rebounded in April, trending ~200 MMcf/d above Q1 levels; additional well completions expected to drive back-half growth — President Jen Kneale .
• Marketing margin strength provided sequential upside; “we kind of beat our expectations in terms of our marketing… maybe up around $10 million or so first quarter” — CEO Matt Meloy .

What Went Wrong

• Winter weather reduced G&P and L&T volumes; NGL pipeline transportation volumes and fractionation volumes were negatively impacted; Cedar Bayou fractionation turnaround also weighed on Q1 .
• Total revenues were essentially flat y/y at $4,561.5M; revenue missed S&P Global consensus for Q1 2025 (see Estimates Context) .
• Fractionation volumes fell sequentially due to planned turnaround; L&T adjusted operating margin was sequentially flat as higher marketing offset lower transportation volumes .

Financial Results

• Values with asterisk (*) retrieved from S&P Global.

Segment performance and operating statistics:

Additional Q1 data points:

• Operating income: $543.3M; interest expense (net): $197.1M; depreciation & amortization: $367.6M .
• Total consolidated debt: $16,208.7M; liquidity: ~$2.7B including $2.6B revolver availability and $151.4M cash .
• Commodity hedge settlements within G&P adjusted operating margin: net gain of $1.5M in Q1 2025 (gas +$7.4M, NGL -$6.6M, crude +$0.7M) .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We reported — record quarterly adjusted EBITDA despite our volumes being impacted by several winter weather events… we feel very good about our outlook” — CEO Matt Meloy .
• “Permian volumes have rebounded meaningfully and are trending approximately 200 MMcf/d higher than the first quarter… we expect significantly higher back half volumes” — President Jen Kneale .
• “Pro forma consolidated leverage ratio was approximately 3.6x… within our long-term target range of 3x to 4x” — CFO Will Byers .
• “We’ve hedged 90% of [remaining length] through 2026… even with Waha at ~0, we’re setting records in terms of EBITDA” — CEO Matt Meloy .
• “Our docks were effectively full… fully contracted through the balance of this year and beyond” — President L&T Scott Pryor .

Q&A Highlights

• Producer activity resilience and customer mix: multiyear drilling programs with well-capitalized majors and large independents; differentiated Permian footprint supports drilling through cycles .
• Capital allocation and buybacks: opportunistic repurchases amid dislocations; ~$125M in Q1 at $191.86 avg; ~$89M in early April at $167.28 avg .
• Marketing optimization: sequential upside vs expectations; benefits on gas and NGL marketing with growing footprint .
• Hedging strategy and fee floors: below fee floors across G&P; hedged ~90% through 2026; continued layering of hedges .
• Infrastructure outlook: Traverse pipeline demand tied to LNG and South Texas markets; plants expected to ramp efficiently (Midland faster; Delaware more discrete) .

Estimates Context

How results compared to Wall Street consensus (S&P Global):

• Actuals for revenue in this table reflect company-reported totals; EPS actuals and all consensus values are from S&P Global. Values with asterisk (*) retrieved from S&P Global.
• Adjusted EBITDA (company-defined) was $1,178.5M in Q1 2025, above typical EBITDA consensus ranges; estimate definitions may differ from company non-GAAP reporting .

Key Takeaways for Investors

• Q1 was a quality beat on adjusted EBITDA with resilient fee-based margins and optimization offsetting weather impacts; volumes already rebounding in April, setting up for stronger 2H .
• Guidance intact across EBITDA and capex, supporting confidence despite macro volatility and tariff uncertainty; mitigation via pre-purchased steel and contingency buffers .
• Capital returns accelerating: dividend now $4.00 annual (+33% y/y) and opportunistic buybacks amid volatility; leverage ~3.6x within target .
• Permian remains the growth engine (Midland/Delaware); near-term project adds (Pembrook II Q3 2025) and downstream expansions (Delaware Express, Trains 11/12, LPG debottleneck) drive operating leverage into 2026–27 .
• Risk posture improved: ~90% hedged through 2026 and below fee floors reduce commodity sensitivity; supports stability even with Waha volatility near zero .
• L&T segment strength: transportation and fractionation volumes up sharply y/y; LPG exports fully contracted with flexible destination switching mitigating tariff disruptions .
• Tactical focus: watch volume ramp pace post-weather, marketing optimization sustainability, and any revisions to producer drilling programs; near-term catalyst is confirmation of rising volumes and execution on project timelines .

Appendix: Additional Data Points and Prior Quarter Context

• Q4 2024 adjusted EBITDA: $1,122.2M; record Permian, transportation, fractionation, LPG export volumes; Daytona pipeline and Train 10 supported growth .
• Q3 2024 adjusted EBITDA: $1,069.7M; strong optimization and record volumes; announced East Driver and Falcon II plants .
• Debt financing: $2.0B notes in February 2025 (5.550% due 2035; 6.125% due 2055) to fund Badlands preferred equity repurchase and repay CP borrowings .
• Liquidity: ~$2.7B at Q1 end; revolver availability $2.6B; cash $151.4M .
• Hedge settlements detail (G&P Q1 2025): gas +$7.4M, NGL -$6.6M, crude +$0.7M (net +$1.5M) .