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Targa Resources Corp. (TRGP)·Q4 2024 Earnings Summary
Executive Summary
- Record quarter: Adjusted EBITDA reached $1.122B in Q4 2024 (+5% QoQ) and $4.142B for FY 2024 (+17% YoY), driven by record Permian G&P, NGL pipeline transportation, fractionation, and LPG export volumes, supported by Daytona coming online and Train 10 start-up .
- Solid P&L: Q4 revenue was $4.405B with net income attributable to TRGP of $351M; sequential gains came from volumes while marketing margin declined from Q3’s optimization strength .
- 2025 outlook raised: New FY 2025 adjusted EBITDA guidance of $4.65–$4.85B (midpoint +15% YoY), net growth capex $2.6–$2.8B, maintenance capex ~$250M, and a recommended 33% dividend increase to $4.00 annualized beginning with Q1 2025 .
- Strategic moves: Repurchasing $1.8B Badlands preferred equity (estimated >$80M annual cash savings), upsized $3.5B revolver, and announced Delaware Express, Train 12, and Galena Park LPG export expansion to ~19 MMBbl/month .
- Near-term stock catalysts: Back-half weighted 2025 volume ramp and four new Permian G&P plants in 2026, with potential upside from marketing optimization not embedded in guidance .
What Went Well and What Went Wrong
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What Went Well
- Record volumes and returns across the platform; CEO: “record NGL transportation, fractionation and export volumes that also exceeded expectations” and record adjusted EBITDA in 2024 (+17% YoY) .
- Strong balance sheet/liquidity to fund growth and returns: revolver upsized to $3.5B (~$2.8B pro forma liquidity at year-end) and leverage ~3.4x exiting 2024 (mid-BBB IG) .
- Capital returns accelerated: $755M share repurchases in 2024; recommending a 33% dividend per share increase to $4.00 annualized starting Q1 2025 .
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What Went Wrong
- Sequential marketing margin headwind in Q4: lower optimization opportunities reduced L&T marketing margin vs Q3, partially offsetting record throughput .
- Higher operating costs with expansion: operating expenses rose on volume growth and new assets coming online in both segments .
- Weather impact into Q1 2025: multiple freeze events pressured Permian and downstream NGL volumes early in the year (temporary) .
Financial Results
Quarterly performance (oldest → newest):
Segment performance and volumes (oldest → newest):
Operating KPIs (oldest → newest):
Context and drivers:
- Sequential Q4 strength stemmed from record G&P inlet and record L&T throughput (pipeline, fractionation, and LPG exports), aided by Daytona and Train 10 start-ups; partially offset by lower Q4 marketing margin vs Q3 .
- Q4 fee revenue rose YoY (+8%) on higher gathering/processing, transportation, fractionation fees and export volumes .
- Non-GAAP adjustments: Q4 adjusted EBITDA add-backs included $78.2M of risk management activities; 2024 benefited from ~+$100M optimization not embedded in 2025 guidance .
Note: EPS per share was not disclosed in the press release/8-K; we present net income attributable to TRGP instead .
Guidance Changes
Earnings Call Themes & Trends
Management Commentary
- Strategic positioning: “We have a demonstrated track record of adding infrastructure that is highly utilized… our newly announced projects are needed to accommodate incremental NGL volumes from our 5 Permian processing plants currently under construction.” (CEO) .
- Multi-year growth: “We estimate another year of record… in 2025 with over $600 million in EBITDA growth… 4 new Permian G&P plants coming online in 2026” (CEO) .
- Capital returns: “We provided our shareholders with the ninth highest total return in the S&P 500…” and intend a 33% dividend increase in 2025 (CEO/CFO) .
- Badlands preferred buy-in: “Refinancing… low double-digit preferred with much lower cost debt, providing more than $80 million of annual cash savings” (President) .
- Downstream cadence: “Train 11… Q3 2026… Train 12… Q1 2027… LPG export expansion to be much needed when it comes online in Q3 2027” (President L&T) .
Q&A Highlights
- 2025/2026 trajectory: Back-half weighted 2025 growth; 2026 potentially stronger as commercial wins ramp and four plants start up .
- Badlands repurchase: Opportunistic given balance sheet; ~$80M annual cash savings from refinancing preferred into debt; improves strategic flexibility .
- Capital allocation: “All-of-the-above” with high-return organic capex prioritized; buybacks remain opportunistic alongside a 33% dividend increase .
- Returns on projects: Management targets ~5.5x build multiples or better, with assets typically full at start-up, lifting realized returns .
- Gas egress and demand: Blackcomb in service 2H26 expected; broader egress needs tied to LNG and data centers; Targa active in next-pipe discussions .
- Operational color: Q4 Permian inlet grew modestly sequentially due to a low-margin contract roll-off; anticipate higher growth back half 2025 .
- Cost environment: Steel/tariff headwinds manageable; procurement strategies include U.S. steel to mitigate tariff risk .
- LPG export demand: U.S. share has grown materially with continued expansion opportunities; project economics attractive (~<$400M for new line + refrigeration) .
Estimates Context
- Wall Street consensus (S&P Global) for Q4 2024 and Q1 2025 was unavailable due to data access limits at the time of analysis; therefore, beat/miss versus consensus cannot be reliably assessed. We instead benchmark results to company guidance and sequential/YoY trends .
- Notably, management outperformed its 2024 trajectory (record $4.142B adjusted EBITDA vs. prior expectations improving through the year) and introduced FY 2025 EBITDA guidance of $4.65–$4.85B .
Key Takeaways for Investors
- Integrated growth engine: Record Permian G&P throughput is directly driving record downstream pipeline, fractionation, and export volumes—creating durable, largely fee-based EBITDA compounding into 2025–2026 .
- 2025 guidance and cadence: Mid-teens EBITDA growth expected with back-half weighted ramp; four plants in 2026 set up another step-up year .
- Capital intensity higher near term: 2025 net growth capex raised to $2.6–$2.8B to accelerate needed capacity (Delaware Express, Train 12, LPG export expansion) to capture volumes .
- Balance sheet flexibility: New $3.5B revolver and Badlands preferred buy-in (> $80M annual cash savings) support funding and capital returns while maintaining 3–4x leverage target .
- Dividend and buybacks: Recommended 33% dividend increase to $4.00 annualized for 2025 and continued opportunistic repurchases (42% of adjusted CFO returned in 2024) .
- Upside levers: Marketing optimization (not embedded in guidance) and potential additional egress/expansion investments could add to the base plan .
- Watch items: Weather-driven Q1 noise, steel/tariff cost inflation, and commodity sensitivity (90% fee-based margin, residual hedged through 2026, with +/-30% commodity moves impacting EBITDA by +
$130M/-$80M around 2025 guidance) .
Additional Reference Details
- Capitalization and Liquidity (12/31/24): Total debt $14,174.6M (net), total liquidity ~$2.0B; pro forma liquidity ~$2.8B with new revolver .
- Shareholder returns (2024): $754.7M buybacks at $127.20 average; Q4 buybacks $108.0M at $176.86; $0.75 quarterly dividend for Q4 2024 (paid Feb 14, 2025) .
- Projects timeline: Delaware Express (3Q26), Train 11 (3Q26), Train 12 (1Q27), Galena Park LPG expansion (3Q27) .
All figures and statements are sourced directly from Targa’s Q4 2024 8-K and press releases and the Q4 2024 earnings call transcript: .