- Record Permian Volumes: Natural gas inlet volumes averaged 6.3 Bcf/day, up 11% YoY, driven by high Permian Midland utilization and new processing infrastructure.
- Strong Financial Performance: Adjusted EBITDA rose 18% to $1.163 billion, with $3.5 billion liquidity and a 3.6x pro forma leverage ratio.
- Share Repurchase Momentum: $324 million in common shares repurchased during Q2, with a new $1 billion program authorized to return capital to shareholders.
- Growth Capital Efficiency: Processing plant costs increased to $225–275 million per plant, but co-location strategies and third-party NGL transport enhance capital efficiency.
- EBITDA Guidance Stability: $200 million range maintained, with volume growth and potential commodity price tailwinds expected to support 2026 and 2025 results.
Operational Strength Drives Volume Growth
The company's operational results were strong, with the Permian Midland system running at high utilization, and new processing infrastructure being added to meet growing demand. The Logistics and Transportation segment reported record NGL pipeline transportation volumes, and fractionation volumes are expected to increase with the completion of a planned turnaround and increasing G&P supply. As Meloy stated, "Our volume growth has averaged 17% per year over the past five years, outperforming associated gas and crude production."
Capital Allocation Priorities
Targa's capital allocation strategy remains focused on maintaining a strong balance sheet, investing in high-return integrated projects, and returning capital to shareholders. During the quarter, the company repurchased $324 million in common shares and authorized a new $1 billion common share repurchase program. The company's strong investment-grade balance sheet provides flexibility, with $3.5 billion of available liquidity and a pro forma consolidated leverage ratio of 3.6x.
Competitive Advantage in the Northern Delaware Basin
Management discussed the company's competitive position in the Northern Delaware Basin, where they have a strong footprint and a long history of treating sour gas. They believe their capabilities and scale give them a competitive advantage, and they're well-positioned to handle additional growth. The company is focused on organic growth, but they're also open to bolt-on acquisitions that supplement their strategy.
Valuation Metrics
With a P/E Ratio of 21.88, P/B Ratio of 13.82, and EV/EBITDA of 11.62, Targa Resources appears to be reasonably valued. The company's strong balance sheet, operational performance, and growth prospects support its valuation. The dividend yield of 2.12% and free cash flow yield of 1.2% also provide attractive income opportunities for investors.