Thank you for standing by, and welcome to the Targa Resources First Quarter 2021 Earnings Webcast and Presentation. As a reminder, today's program is being recorded.

Thanks, Jonathan. Good morning, and welcome to the First Quarter 2024 Earnings Call for Targa Resources Corp. The first quarter earnings release, along with the first quarter earnings supplement presentation for Targa that accompanies 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; and Jen Kneale, Chief Financial Officer. Additionally, members of the senior management team 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 will now turn the call over to Matt.

Thanks, Sanjay, and good morning. We are proud of our first quarter results as we continue to execute across the organization to deliver another quarter of record adjusted EBITDA, Permian volumes, and LPG export volumes, along with a 50% increase to our common dividend per share and $124 million of common share repurchases. For the quarter, we really benefited from strong volume growth in the back half of the quarter. January was impacted by operational upsets associated with harsh weather. From there, volumes significantly increased throughout the quarter, which helped drive record results and positions us well looking forward. We are adding a substantial amount of compression across the rest of the year and our expectation is for continued Permian volume growth, recognizing that prior to Matterhorn initiating service and adding incremental natural gas takeaway capacity, gas markets will remain tight. As we saw in March and April, there were upsets associated with pipeline maintenance that created further constraints which may affect volumes and significantly impact Waha gas prices. Short-term constraints aside, given our outlook for increasing Permian volumes and resulting NGL supply growth, we announced this morning that we are moving forward with two major growth capital projects. Our next Permian Midland plant, Pembrook II, and our next fractionator in Mont Belvieu, Train 11, to support the infrastructure needs of our customers. We mentioned in February that we are ordering long lead items for both projects and have since received Board approval to move forward with no change to our estimates for 2024 and 2025 net growth capital spend. I am pleased to announce that we are also moving forward with a small capital project at our Galena Park facility that will increase our LPG export capacity by approximately 650,000 barrels per month within the second half of 2025. This project is an excellent example of our organization balancing capital efficiency while ensuring our ability to support increasing volumes through our systems and not changing our estimates for growth capital spending. Despite the current weakness in Waha natural gas and NGL prices, we continue to estimate full-year 2024 adjusted EBITDA between $3.7 billion and $3.9 billion, which we believe is reflective of the importance of our fees and fee floors in our Gathering and Processing business, which are supporting our continued investment in infrastructure despite a lower commodity pricing environment. Looking ahead, our premier Permian supply aggregation position, coupled with our integrated NGL system, positions us nicely to continue to generate high return organic opportunities and be able to continue to return incremental capital to our shareholders. Let’s now discuss our operations in more detail. Starting in the Permian, activity continues to remain strong across our dedicated acreage. In Permian Midland, construction continues on our new Greenwood II plant and remains on track to begin operations in the fourth quarter of this year. Greenwood II is expected to be highly utilized when it comes online which necessitates moving forward with Pembrook II, which is expected to begin operations in the fourth quarter of 2025. As you may have seen publicly, we had a fire at our Greenwood I plant in Permian Midland on April 16. There were no injuries, and we appreciate the work by our Targa team and first responders who were able to extinguish the fire safely and quickly. With 19 plants and a broad footprint across the Permian Midland, we are leveraging our operational flexibility to move gas around to handle all existing volumes and planned production growth to continue providing reliable service to our producer customers while the plant is down. We expect the plant to be back online before the end of the second quarter and do not expect the plant downtime to significantly impact our Midland volumes for the second quarter. We estimate about $10 million of repairs related to the incident. In Permian Delaware, activity and volumes across our footprint are also running strong. Our Roadrunner II plant is expected to commence operations in June and is also expected to be highly utilized. Our next Delaware plant, Bull Moose, remains on track to come online in the second quarter of 2025. We continue to expect increasing Permian volumes as we move through the rest of the year as we benefit from new compression and plants coming online. For the second quarter, Waha gas prices are averaging around negative $1.30 as residue gas pipeline downtime for maintenance and operational upsets have resulted in additional tightness in the Permian Basin. We have done a good job of managing our Permian gas takeaway position to ensure surety of flow from our producers as the market awaits some relief when the Matterhorn pipeline comes on later this year. Shifting to our Logistics and Transportation segment, construction continues on our Daytona NGL pipeline expansion, and we remain on track to begin operations in the fourth quarter of this year. The outlook for NGL supply growth continuing means our Daytona expansion will be much needed to handle incremental barrels. We are currently starting up our new fractionator in Mont Belvieu, Train 9, and expect it to be highly utilized. We expect to restart our Gulf Coast fractionator joint venture during the second quarter, which we also expect our portion of the capacity to be highly utilized at start-up. Construction continues on our Train 10 fractionator, which is also expected to be much needed when it comes online. Given our outlook for increasing NGL production growth to Mont Belvieu supports us officially moving forward with Train 11, a new 150,000 barrel per day fractionator. Train 11 is expected to begin operations in the third quarter of 2026. The capital associated with Train 11 was already included in our expectations for spending that we provided publicly for both 2024 and 2025. In our LPG export business at Galena Park, our loadings were a record 13.3 million barrels per month during the first quarter as we continue to benefit from strong market conditions and the Houston Ship Channel's allowance of nighttime transits for larger vessels. Before I turn the call over to Jen to discuss our first quarter results in more detail, I would like to extend a thank you to the Targa team for their continued focus on safety and execution while continuing to provide best-in-class service and reliability to our customers. Our employees continue to rise to the challenges of our business, and we appreciate their efforts.

Thanks, Matt. Good morning, everyone. Targa's reported quarterly adjusted EBITDA for the first quarter was a record $966 million, a 1% increase over the fourth quarter. For the first quarter, our natural gas inlet volumes in the Permian averaged a record 5.4 billion cubic feet per day, a 2% increase when compared to the fourth quarter. Large Permian volumes were stronger than estimated when we hosted our February earnings call and significantly higher than January, which translated into additional volumes downstream. For the full quarter, our NGL pipeline transportation volumes averaged 718,000 barrels per day. Our fractionation volumes averaged 797,000 barrels per day, including the impacts of scheduled maintenance at our Mont Belvieu complex. Our LPG export loadings were a record 13.3 million barrels per month, and we benefited from optimization opportunities in our marketing business. As we look across the rest of 2024, second quarter EBITDA may be weaker than Q1, given seasonality in our business, the impacts on the quarter of the fire at our Greenwood plant, and the tight Permian residue gas market, with EBITDA increasing through the back half of the year. The combination of our fee and fee floor contracts in our Gathering and Processing segment and our hedges mean we are largely insulated from current commodity prices that are significantly lower than our guidance prices. As Matt said, we continue to estimate full year 2024 adjusted EBITDA between $3.7 billion and $3.9 billion and expect to exit 2024 with a lot of momentum heading into 2025, given our new infrastructure that comes online this year. This morning, we included a new performance metric in our disclosures, adjusted cash flow from operations, which is adjusted EBITDA, less interest expense and cash taxes. This is a metric that we first started discussing last November around our return of capital framework looking forward, and we thought it made sense for us to also include it in our disclosures. Including the new growth projects announced this morning, there is no change to our estimate for 2024 growth capital spending of between $2.3 billion and $2.5 billion. We also continue to estimate approximately $1.4 billion of net growth capital expenditures in 2025, which will result in meaningful free cash flow generation. Our current year estimate for net maintenance capital spending remains $225 million. At quarter end, we had $2.6 billion of available liquidity, and our consolidated net leverage ratio was 3.6x, well within our long-term leverage ratio target range of 3 to 4x. Shifting to capital allocation, our priorities remain the same, which are to maintain a strong investment-grade balance sheet to continue to invest in high-return integrated projects, and to return an increasing amount of capital to our shareholders across cycles, and we are delivering on those priorities. We continue to model the ability over time to return 40% to 50% of adjusted cash flow from operations to equity holders and believe that this is a useful framework for thinking about Targa's return of capital proposition over time. Consistent with previously announced expectations, our Board approved the declaration of a 50% increase to the 2024 annual common dividend to $3 per share, and we expect to be able to grow the annual common dividend meaningfully thereafter. We also repurchased $124 million of common shares during the first quarter at a weighted average price of approximately $104 per share. We believe that we continue to offer a unique value proposition for our shareholders and potential shareholders; growing EBITDA, a growing common dividend per share, reducing share count and excellent short, medium and long-term outlooks. Our talented team continues to execute on our strategic priorities and safely operate our assets to deliver the energy that enhances our everyday lives. And we are so thankful for the efforts of all of our employees.

Thanks, Jen. For the Q&A session, we kindly ask that you limit yourselves to one question and one follow-up and reenter the lineup if you have additional questions. Jonathan, would you please open the line for Q&A?

And our first question comes from the line of Michael Blum from Wells Fargo.

I want to start with the LPG volumes. It seems like you still had really strong volumes in the quarter. The Panama Canal issues and global shipping volatility are not really impacting U.S. cargoes or your cargoes. So I wonder if you could just speak to what you're seeing in the global markets and then how you see the rest of the year shaping up.

Michael, this is Scott. Yes, we continue to have great success across the dock. Obviously, in the fourth quarter of last year, and that continued through the first quarter of this year. To your point around shipping, shipping has certainly moderated. It does not seem to be an issue today. We were able to take advantage of that in the fourth quarter, and again, in the first quarter of this year, with vessels being available, so our spot opportunities really persisted throughout the quarter both on propane as well as on butane. Panama Canal issues don't seem to be really impacting at all. I will say that overall, shipping has kind of resolved itself to really go around the Cape of Good Hope as opposed to transiting through the Panama Canal, though there are still some LPG vessels that are going through. But again, it's not near the level that you've seen historically, probably 2 to 3 vessels per week are transiting the Panama Canal on an LPG-type basis. For us, certainly, the spot opportunities were there during the first quarter, but we really benefited from a continuation of our expansion project that we had last third quarter of last year as well as the nighttime transits, which we continue to benefit from, and we would really see that continuing. Again, hats off to the Houston Ship Channel; the Houston Pilots Association has operated those nighttime transits very safely and accommodating the industry as a whole, and I really believe that will just continue for years to come. So, for the balance of the year, we'll just have to see how things shake out. I think demand is really strong in the East with new PDH plants coming online in China, though that will somewhat marginalize some of the older plants. But again, in the domestic market, demands that are happening in the third-world countries that are developing their marketplaces, it really just looks good for us throughout the balance of this year.

Great. Maybe just a follow-up on this topic. The nighttime transits, can you quantify how much that adds for the quarter? Or just in general, how much you think that adds on an effective capacity basis? And would you say this is kind of a new normal?

I think we alluded to the fact that last quarter we saw it probably in the range of 7% or something like that. I would actually suggest that we've actually seen better percentage benefit to us. It really just allows us to operate our refrigeration units at a higher utilization rate with those nighttime transits. So we're getting significantly above, say, a 10% type improvement over our overall operating rates.

And our next question comes from the line of Theresa Chen from Barclays.

Maybe turning to the upstream side of things. Just given the strength of the inlet volumes in Q1, which arguably was higher than many expected, given the weather impact this year, and I appreciate the intra-quarter commentary, Matt. But how do you view the cadence for growth for the remainder of 2024, taking into account the Waha egress issues?

Yes, sure. I'll start. Then, Pat, if you want to add anything. Yes, we were, I’d say, pleasantly surprised with how volumes responded post the harsh weather in January. We're starting to see it in February, and then March was a very strong month. That's really setting us up well here in the second quarter. So I expect there to be continued growth in both Midland and Delaware, really from now throughout the end of the year, given a lot of producer activity. So barring any upsets, we have seen residue pipes go down from time to time, which can cause us to move gas around the system, resulting in some lower volumes for a short period of time. It's hard to know the exact impact that will have until the Matterhorn comes on. I think we're still optimistic about continued growth from now through the end of the year, even despite those issues.

I would agree, Matt. Barring constraints caused by residue issues, we have great line of sight with our producers, and the activity continues. We've got infrastructure going in place to handle it. So we're set up very well for that continued growth throughout the year.

Got it. And great to see the CapEx unchanged while taking into account the new projects as you previously telegraphed, with the backdrop of the free cash flow inflection next year as CapEx lowers, returning more cash to shareholders. I was wondering what is Targa's next area of strategic focus from here?

Well, really, I think it's more of the same. Our top priority, as Jen mentioned, is ensuring we have a strong balance sheet and good financial flexibility and then investing in our core business through organic growth. I think we're going to continue to do that. We announced Train 11, Pembrook II. We're looking at when we're going to need the next plant in Delaware. We're already evaluating when we'll need the next plan after Pembrook II. So it's really continued organic growth along our core business, which is gathering and processing. Then moving those NGLs through our Grand Prix, Daytona, and our fractionation and export. That's been our focus, and that's going to continue to be our focus.

And Theresa, this is Jen. I would just add that I think that's part of why we're so excited about the short, medium, and long-term outlooks for Targa. When we think about the millions of acres that are already dedicated to us in the Permian, where we've got a great set of producers that have been very successful with their drilling activity; it feels like we just have an excellent runway in front of us for the foreseeable future.

And our next question comes from the line of Jeremy Tonet from JPMorgan Securities.

Just wanted to see how you're thinking about taking stock of results so far in the plant. Seems like that's a minor issue there. Do you see yourselves within the guidance range that you reaffirmed? Do you see yourself tracking towards the higher end or the lower end? Or how do you see, I guess, factors that could drive upside versus downside at this point?

Jeremy, this is Jen. I’d say that it’s early. It’s April. But so far, our employees have done a really excellent job of executing on a really strong first quarter and April that has had its challenges. So we're pleased with the efforts of all of our employees to date. I think that's setting us up well for the rest of the year as well. We’ve talked a little about the fact that we are certainly assuming that volumes are going to continue to ramp in both the Delaware and the Midland Basin, which is not without some potential constraints. It’s early, and we want to see how the rest of the year shapes up, but we're clearly feeling good about our performance to date and the outlook we have going forward.

And our next question comes from the line of John MacKay from Goldman Sachs.

Maybe let's pick that last one up again, if you don't mind. I understand the initial commentary on 2Q EBITDA, but I was wondering if you could just tie that with the message that Permian volumes should still be growing quarter-over-quarter. Is it the $10 million of expense from the plant outage? Is it marketing rolling off, seasonality? Maybe just kind of bridge that and balance that against, again, the quarter-over-quarter Permian growth.

John, this is Jen. I think you’ve covered a lot of the pieces already, which is with the Greenwood fire, Matt quantified that we see about $10 million of additional expense. Some of that will be in capital in terms of the repairs that we need to make, but some of it will also be in operating expenses. We’d also expect OpEx to rise Q2 relative to Q1 as we do have new assets coming into service. And we have a lot of seasonality in our businesses that generally tend to result in weaker second quarters versus the fourth or first quarters of the year. So I think as we look at all of that, it’s just playing some conservatism through our guidance. We really want to get through this quarter, continuing to put up strong growth numbers in the Permian that will result in more volumes through the rest of our integrated system. We are happy that Train 9 is starting up, which is very much needed at this point in time. Our capacity at GCF will also be needed as well. It also relates to the fact that we have some operational and facility constraints that have put a little bit of a limit on us, which is easing up in the second quarter and that sets us up very well when we think about the third and fourth quarters and beyond.

Appreciate that. And maybe if we just zoom out a bit, taking into account some of these infrastructure issues we’ve seen in the first half and also the fact that most producers are talking about second-half weighted activity levels for their Permian plans overall. Are we seeing any shifts in producer activity? Or does it feel like that second-half ramp that we're expecting for the Permian more broadly is still in hand?

Well, I'd say across our systems, we've seen pretty consistent growth. The first half of this year looks robust. We have put a lot of infrastructure in place today and have a lot more specifically for compression. Obviously, Jen and Matt have talked about the plans we're bringing on compression to put in place. That is solely focused on production that we know is getting drilled and being brought online. If I look at first half versus second half of the year, across our system, sure, there’s some incremental volume there, but it’s really strong growth throughout the entire year for us.

And our next question comes from the line of Spiro Dounis from Citi.

First question, maybe just to go to some of the projects announced this morning. You've got another plant, another frac, and a small export expansion. As we think about 2025 CapEx, do you still have room to announce more projects before the need to amend guidance, and with everything you announced today, do you even see the need to announce anything else to facilitate that growth into next year?

Yes, sure. The Pembrook II and Train 11 were both contemplated and in our base case multi-year plan. As we look forward, we're always assessing when we're going to need additional plants in the Gathering and Processing, especially out in the Permian. We had other plants planned there, so I’d say we're tracking towards what we had expected when we initially came with that guidance. I'd say, yes, we have some room to handle some incremental growth in our business through ‘25 as planned. I’ve already mentioned we're evaluating when we're going to need another Delaware plant, so we're looking into that. I wouldn't think those are going to have a material impact on our outlook for capital for 2025.

And Spiro, this is Scott. As it relates to the small expansion project that Matt mentioned in his script, that is a small capital investment for us to expand the export capacity. It basically gives us another VLGC a month starting in, call it, the third quarter of 2025. It really just complements our operations and our engineering teams for continuing to find ways to debottleneck our current assets, giving us a runway not only with last year’s expansion, nighttime transits, as we mentioned earlier in the call, but along with this expansion, it gives us a good runway likely through Train 11.

Understood. Switching gears a bit, let's return to the topic of capital return. There has been a significant increase quarter-over-quarter in the buyback, despite the strong performance of the stock. I assume you still see considerable value in your stock at this point. I'm interested in your thoughts on how you plan to approach the rest of the year and when we might start seeing a closer alignment with your 40% to 50% payout target.

Spiro, this is Jen. I think relative to repurchases, we clearly have strong conviction in our outlook. Our flexible balance sheet is strong today, and it's only going to strengthen as we move through 2024 and into 2025 and have a much lower growth capital spend next year. I think that we're really looking at our repurchase program as continuing to be opportunistic and it's one of the tools that we will continue to use to be able to return an increasing amount of capital to our shareholders. You see some variability quarter-to-quarter, and that's largely dependent on the opportunities we see in the market to repurchase shares, as well as many other factors related to our spending. So I’m not going to give guidance on where we expect to take this quarter-to-quarter, for the rest of the year. But it is certainly a very important tool that we will use to return capital to our shareholders. We said that when we laid out the framework of returning 40% to 50% of cash flow from operations, that would be our internal guide for how we can return capital over a five-year planning horizon. We said that 2024 might not reach that range just because of our growth capital in 2024, but ultimately, we’ll just have to see how the rest of the year unfolds.

And our next question comes from the line of Neil Dickman from Truth Securities.

This is Jake Nivasch on for Neil. Two for me, and I know we touched on this a good amount, but I want to ask it differently. In terms of the upstream growth we're discussing here, are you seeing it across all of your producers? Are there key producers that you think will drive this growth? Just curious about the dynamics or split that looks like there.

What I would say is that it's pretty consistent across all our producers. Certainly, some have more rigs running, and they’re a little more of a greater percentage increase than others. But activity levels across our entire producer base are pretty robust, and it spans the Delaware, the Central, and the Midland Basin. It’s not area-specific; it’s not producer-specific. It’s really strong, steady activity across the producer base, so we feel good about how our producers are performing. We're also getting infrastructure in place to be ready to handle it.

And this is Bobby. As we think about our expectations at the end of the day, so much of our gas is coming from low-pressure gathering. This is a step that’s coordinated out months and a year at a time, so we have really good visibility regarding what we think comes online, when, and where.

Sure. And then just a follow-up here. With regards to capital spending, I guess, in 2025, how sticky is that growth CapEx number that you are looking at—$1.4 billion? The reason I ask is you're talking about investing more organically, and I see some additional opportunities out there. How do you balance that with inorganic growth, acquiring something? And is this all accounted for in that $1.4 billion for these organic projects? Or do you think there could be some more upside?

Yes, sure. Good question. Look, when we think about $1.4 billion in 2025, what gives us confidence in that number being relatively sticky is that a lot of the large-scale downstream projects are accounted for. Daytona is coming online later this year. We've already announced Train 11. That's in there. We've talked about an export project, so on the downstream side, we don’t see a whole lot being added to 2025. It really just comes down to Gathering and Processing. What could move it, plus or minus, is just overall field activity. If volumes are a lot stronger, we may need to put in more compression or more pipelines. That could lead to some adjustments depending on overall volumes and adding processing plants. We have already accounted for, as we mentioned, Pembrook II. We’re ordering long lead times for the next Delaware plant, which was already contemplated, so it would need to be a pretty significant change in growth expectations for us to see a large-scale move. That’s why we feel confident about the $1.4 billion. As we go through the year and provide guidance, we'll refine it. It could move down a little or up a little, but we feel good about the $1.4 billion for next year.

And our next question comes from the line of Neel Mitra from Bank of America.

I was looking at the year-over-year bridge for the G&P segment, and one of the tailwinds in the quarter was higher fees. I was wondering if you could explain what that is? Is it moving to more fixed fee contracts, escalators, or higher fee floors? Just trying to understand that comment and what the driver looks like for the quarter?

Neel, this is Jen. We talked very openly on our February call, and you can see it in our proxy and some of our disclosures that our commercial team was really successful continuing to put fee floors into key contracts in the fourth quarter of 2023. That’s what's allowing us to announce a new processing plant, despite negative Waha prices today and very low NGL prices. We appreciate the support and alignment of our producers regarding that capital spend. As you start to look at our results year-over-year, I think you'll see that more and more, particularly in a commodity price environment that looks like today; we will earn more in fees in our Gathering and Processing business due to more fee-based volume growth, as well as fee floor growth.

Okay, perfect. And for the second question on the L&T side, fractionation volumes were down, looks like scheduled downtime. Could you maybe provide how often you have scheduled downtime on the frac side? And then if you incur third-party frac costs this quarter that we publish and run through for the rest of the year.

Yes, Neel, this is Scott. When you look at the first quarter relative to the fourth quarter of last year, yes, our frac volumes were down, but our fractionators were full in the fourth quarter, they were full in the first quarter, but were limited in terms of availability of space due to scheduled downtime as well as impacts of the harsh winter weather we experienced in January. Looking forward for us into the second quarter, obviously, as Jen mentioned, we're really happy to see Train 9 in startup mode. We'll also be excited to see GCF start up in this quarter as well. Therefore, when you look at our frac volumes, you can expect a meaningful step-up in volumes in the second quarter as we come out of that with Train 9 online and GCF contributing at the back end of the quarter too. So I anticipate that to continue throughout the third and fourth quarters with all our operating facilities.

And our next question comes from the line of Keith Stanley from Wolfe Research.

So I know the company is more fee-based than well-hedged this year, but I want to make sure that with Waha prices being pretty extreme here, there's no meaningful impact from prices themselves on the company this year. And then related to that, just given that Permian gas supply continues to beat expectations continuously, at what point do you start to feel more pressure to move forward on a gas pipeline project like Apex? Do you need to see something happen by the summer or the fall? How are you thinking about that overall?

Okay, Keith, yes, good question. I'll start with just talking a little bit about Waha, and then Bobby and Pat can elaborate on the Permian supply. Yes, there are pluses and minuses for us when we have really weak Waha prices. We still have some commodity sensitivity and some exposure for gas in our G&P business. A lot of that is protected by floors and hybrids and fee-based contracts. We still have some exposure to natural gas, and when you see negative prices, that is a negative for us. We also move a lot of gas intra-basin and out of the basin, and we have large transport positions to ensure we can exit the gas out of the basin. When you have dislocations in Waha, we do have some gas marketing upticks relative to our transportation position. So depending on where we're moving it and getting it to, there could be some positives there. Overall, we prefer higher Waha prices than lower; it’s good for our customers and our business, but there are benefits and downsides to volatility in Waha prices.

Yes. A couple of things regarding what Matt said. Every couple of years we see Waha get crushed. We have defined forecasts about the pipeline connections. We are always planning and coordinating with our producers who market their own gas and the producers we market for. We are ahead of this and planning to ensure we can move all the gas that comes out of our plants. The immediate issue is ignoring pipe issues that aren't expected. We're always prepared for this since it happens every two years. Regarding the next pipeline, it’s similar to what I’ve said before. Targa is prioritizing making sure gas moves out of the basin so that our producers can flow their gas out of our plants. We are working on multiple fronts, with multiple options and multiple pipes, all of which have good traction. I expect the gas pipeline will reach final investment decision (FID) by the end of this year. If we make good progress on one of the options the industry uses, it could happen even earlier. I won't speculate on the exact month, but I’m fully confident that something will go FID this year.

And our next question comes from the line of Tristan Richardson from Scotiabank.

A lot has been asked and answered. But maybe just one for me on the CapEx side. I think last quarter in the call, you offered that illustrative annual spending example. If we look at '25, it seems like with another Midland plant and another frac announced today, 2025 will look a lot like what you laid out in that hypothetical, but the '25 guidance is quite a bit below, 20% below. So just thinking about where we’re deviating from some of that illustrative example, and where you're seeing actuals in '25 looking better than some of that illustrative spend that you laid out last quarter?

Yes, Tristan, I think probably the biggest delta versus the average is completing Daytona this year. We shouldn't have any NGL transport to speak of on a multi-year basis. That’s one item.

And then the other one would be the really low-cost export expansion we have. We should not expect to need to do in a meaningful way in 2025 for both transport and exports.

And our next question comes from the line of Sunil Sibal from Seaport Global.

I wanted to start off on the infrastructure side in Permian. I think you've previously talked about how you'll kind of debottleneck the Permian portion of Grand Prix through pump capacity additions and all that. Could you talk about where your current capacity stands there? And obviously, Daytona comes online later this year. How should we think about volume trending on that and competition for third-party volumes per se?

Sunil, this is Scott. Yes, with Daytona coming online in the fourth quarter of this year, just as a reminder, when we bring that online, we're anticipating the initial throughput or capacity to be around 400,000 barrels per day. We have the ability to add pump stations over time where it makes sense as we see the growth in our G&P business filtering in and through our pipelines. Similar to what we did on the West leg of Grand Prix, that could put us over 600,000 barrels per day between that. That gives us a lot of operating leverage on the West side of the Grand Prix with Daytona coming online. The South leg has a lot of operating capacity. The capacity is around 1 million barrels per day. We’re bringing in just over 700,000 barrels per day currently, providing us with operating leverage. We also move a lot of volume that comes into our facility from third-party pipes. We participate in moving some volume on some of those third-party pipes as well as our customers do. I would anticipate continuing to see that happening over a period of time. We’ll have to evaluate when we would need a South leg expansion. We have a lot of runway for now, and we can participate on third-party pipes where it makes sense both physically and economically.

And this is Bobby. Yes, about third-party competition. We've talked about this before. We are a wellhead-to-water company. We build Grand Prix, we build Daytona, and our NGL structure is to service the G&P footprint going out to the wellhead. The vast majority of the liquids that come out of our plants go down our NGL pipes, and we anticipate that being the same going forward. The third-party business exists within Targa, but that's not the driver of Targa's NGL business; it is our wellhead-to-water structure.

Okay. And then as a follow-up, I mean, on the strategic side, I was curious how do you think of your assets outside of Permian? Seems like, if I remember correctly, the Badlands JV is past the five-year mark. How should we think about those assets outside the Permian? Do you still consider them free cash flow positive assets, or are there any investment opportunities outside that?

Yes. Most of the activity is obviously around our Permian and related NGL infrastructure, where the activity and growth are happening. There’s not a lot to do, especially with weaker gas prices. We’ve seen some activity when gas prices increase in '22, but now we’re seeing volumes move off, which is not unexpected. There are some limited opportunities in the Central region to acquire gas packages and compete, and we look to grow where makes sense. Up in the Badlands, we’re through the remainder of this year and into next year seeing some strong activity, and we expect growth in our Badlands business over the rest of this year into next year. We’ve seen good activity up there, and if it’s economic and makes sense for us, we’ll continue to grow that business. There are just fewer opportunities outside the Permian.

And for our final question today comes from the line of Zach Van Everen from TPH & Company.

Just want to go back to the Permian egress solution. You mentioned FID by the end of this year potentially. Just curious how you think about markets in 2026. Consensus seems to be that '26 is when we'll need a new pipe. So I'm curious if you agree with that. Is the two-year timeframe what you guys are hearing to build another gas egress pipe?

This is Bobby. Yes. We’ve reiterated that on multiple calls. We see ‘26 as the year for needing another full pipe out of the basin, whether that’s earlier in the year or later in the year. We’ll be prepared for whatever that answer is moving forward. I think, generally speaking, yes, the 24-month timeline from FID is the number that everyone talks about. Sometimes you might hear ‘22, or maybe ‘28, but ‘24 is the guideline that the whole industry uses for the construction of that pipe. Yes, I am fully confident that we will reach FID before the end of the year to solve the ‘26 basin issue.

Got it. Perfect. And then flipping over to propane. I just want to get your views for the rest of the year. We've seen production come in pretty hot, and storage is still over the five years. So I want to get your views there. And then you could remind us how much marketing you guys have on the docks that can capture that international spread.

Zach, this is Scott. We've certainly seen increased production across the board, relating to the added production coming out of the Permian from a U.S. perspective. The draws of late have been weak, so yes, we’re seeing similar inventory levels year-on-year. That's part of why you’re also seeing max levels or high utilization levels of exports across the dock, whether it’s us or the competition in the marketplace. Some of that is going to get resolved by the expansion projects already announced. We do have a complementary project that we just announced this morning. Product will need to be priced to move typically onto the water, aiding in developing other markets across the globe, whether for domestic use, petrochemical use, or PDH use. I fully anticipate that to continue as we move forward in time.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Sanjay for any further remarks.

Thanks to everyone on the call this morning, and we appreciate your interest in Targa Resources. The IR team will be available for any follow-up questions you may have. Have a great day.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.