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Thank you for standing by, and welcome to the Targa Resources First Quarter 2021 Earnings Webcast and Presentation. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Sanjay Lad, Vice President of Finance and Investor Relations. Please go ahead, sir.

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 accompany 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, the following senior management team members 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 back half of the quarter Permian volume growth. January was impacted by operational upsets associated with harsh weather. From there, volumes significantly increased throughout the quarter, which helped drive record results and sets us up 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 are upsets associated with pipeline maintenance that create further constraints, it 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 2 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 between capital efficient, while ensuring our ability to support increasing volumes through our systems and also does not change 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 G&P business, which are supporting our continued investment in infrastructure despite a lower commodity price 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 is necessitating 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 to be able to provide reliable service to our producer customers while the plant is down. We expect the plant 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 in volumes across our footprint are also running strong. Our Roadrunner II plant is expected to commence operations in June and is also expected to begin service 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. And 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 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 are appreciative of 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 the 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 made 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-returning integrated projects and to return an increasing amount of capital to our shareholders across cycles, and we are delivering on those priorities. We are continuing 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. And with that, I will turn the call back over to Sanjay.

Thanks, Jen. For the Q&A session, we kindly ask that you limit 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 still had really strong volumes in the quarter. It seems like the Panama canal issues while the global shipping volatility is 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 that 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 it at all. I will say that overall shipping has kind of resolved itself to really going 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 to the level that you have 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, they have operated that -- those nighttime transits very safely and accommodating the industry as a whole and I really believe that, 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 the 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, is there -- can you quantify how much of that add for the quarter? Or just in general, how much you think that adds on sort of effective capacity basis? And would you say this is kind of a new normal?

I think we alluded to the fact that last quarter that we saw it probably in the range of, call it, 7% or something like that. I would actually suggest to you 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 -- in 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 growth for the remainder of 2024, taking into account the Waha egress issues?

Yes, sure. I'll start. And 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. And that's really setting us up really 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, there's a lot of producer activity. So kind of barring any upsets, we have seen residue pipes go down from time to time, which can cause us to move gas around the system and can result in some lower volumes for a short period of time. It's hard to see -- it's hard to know exactly what impact that will have until Matterhorn comes on. I think we're still optimistic we're going to have continued growth from now through the end of the year, even despite those issues.

I would agree, Matt. Borrowing constraints on -- 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, and we expected 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 [ that's lowering ], returning more cash to shareholders, you hit a decent run rate. And I was wondering what is Targa's next area of strategic focus from here?

Well, really, I think it's more of the same. I think it's -- our top priority, as Jen mentioned, is making sure, first, we have a strong balance sheet and good financial flexibility and then investing in our core business through organic growth. And I think we're going to continue to do that. We announced Train 11. We announced Pembrook II. We're looking at when we're going to need the next plan in the Delaware. We're already looking at when we'll need the next plan after Pembrook II. So it's really continued organic growth along, kind of, our -- along our core business, which is gathering and processing. And then moving those NGLs through our [ Grand Prix ], Daytona and our fractionation and export. So I think 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 so successful with their drilling activity. It feels like we just have an excellent runway in front of us over that short, medium and long term to just continue to do what I think we've put up a very credible track record around doing successfully, really for as far as the eye can see.

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 itself tracking towards the higher end or the lower end? Or how do you see, I guess, factors that could drive upside versus the downside at this point of the -- within the range?

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 just really pleased of the efforts of all of our employees to date. And I think that's setting us up really well for the rest of the year as well. We've talked a little bit about the fact that we certainly are assuming that volumes are going to continue to ramp in both the Delaware and the Midland Basin, and that's not without some potential constraints. So ultimately, it's early, and we'd like to see how the rest of the year shapes up, but we're clearly feeling really 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, and I understand the kind of 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 kind of expense from the plant outage? Is it marketing rolling off, seasonality? Maybe just kind of bridge that and kind of balance that against, again, the quarter-over-quarter Permian growth.

John, this is Jen. I think you've got 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 that will be in operating expenses as well. We'd also expect OpEx to rise Q2 relative to Q1 as we do have new assets coming into service. And we do have a lot of seasonality in our businesses that generally tend to result in weaker second quarters versus certainly the fourth or the first quarters of the year. So I think as we look at all of that, it's just playing some conservatism through our minds that we really just want to get through this quarter, continue to put up strong growth numbers in the Permian that will result in more volumes through the rest of our integrated system. We are very happy that Train 9 is starting up. That is very much needed at this point in time. Our capacity at GCF will be very much needed as well. So it also has to do with the fact that we've got some operational and really sort of facility constraints that have put a little bit of a limit on us that's coming off now here in the second quarter that again sets us up really well when we think about the third and fourth quarters and beyond.

Appreciate that. And maybe if we just zoom out a little bit, taking into account the kind of some of these infrastructure issues we've seen in the first half and also the fact that most of the 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, that's still in hand.

Well, I would say across our systems, we've seen pretty consistent growth. Frankly, the first half of this year is pretty robust. We put a lot of infrastructure in place today and have a lot more specifically compression. And obviously, Jen and Matt have talked about the plans we're bringing on compression to put in place. And 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, if 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 even more projects before the need to amend guidance and just with everything you announced today, do you even see the need to announce anything else to facilitate that growth into next year?

Yes, sure. Yes. So the Pembrook II and Train 11 were both contemplated and in our base case multiyear 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. So we had other plants in there. So I'd say we're kind of tracking towards what we had expected when we initially came with that guidance. And I'd say, yes, we have some room to handle some incremental growth in our business, kind of through '25 as planned. And I already mentioned, we're already 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 dollars for us to expand the export capacity. It basically gives us another VLGC a month starting in, call it, the third quarter of 2025. And really just a complement to our operations and our engineering teams for continuing to find ways to debottleneck our current assets and 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. [indiscernible] color there. Switching gears a bit, maybe just to go back to capital return. Some meaningful step up quarter-over-quarter in the buyback despite some of the really strong stock performance. So I suspect you still see a lot of value of your stock here. So curious -- maybe just comment on thinking through the rest of the year. Maybe one we could see you start to track closer to that 40% to 50% payout target.

Spiro, this is Jen. I think relative to repurchases, we clearly have very strong conviction in our outlook. Our flexible balance sheet is strong today, and it's only going to strengthen as we really move through 2024 and into 2025 and have a much lower growth capital spend next year. So 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 that we're seeing in the market to repurchase shares as well as a whole lot of other things that are happening relative to when we're spending, what we're spending, what we have in terms of what's coming in on the margin side, there's just a lot that is factored into what we're doing every day related to our repurchase program. So I'm not going to give guidance on where we expecting to take this quarter-to-quarter, the rest of the year. But it is certainly a very important tool that we will continue to utilize to return capital to our shareholders. And I think we've been pretty open that when we laid out the framework of 40% to 50% of cash flow from operations and that really being what we are using internally as the guidepost for how we can return capital to shareholders over sort of a 5-year planning horizon. We said that 2024, we may not be in that

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 just want to ask it a different way. In terms of the, I guess, the upstream growth that we're talking about here, are you seeing it across all of your producers? Is it -- are there a select few key producers that are -- that you think are going to drive this growth? Just curious, I guess, what the dynamic or split looks like there.

What I would say is that it's pretty consistent across all our producers, I mean, certainly, some have more rigs running and they're a little more of a greater percentage increase than others. But activity level across our entire producer base is pretty robust. It's across 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, across the entirety of the Midland Basin. So right now, we feel really good about the way our producers are performing. And frankly, we're getting, like I said earlier, 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 for 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, I guess, how sticky is that growth CapEx number that you guys are looking at that $1.4 billion? And the reason I ask is, I guess, you're talking about investing more organically and see some additional opportunities out there. And I guess, how do you balance that between an inorganic growth, acquiring something? And is this all accounted for in that $1.4 billion, these organic projects? Or do you think there could be some more upside here?

Yes, sure. No, good question. Look, when we think about $1.4 billion in 2025, what gives us some confidence in that number, it being a relatively sticky number is, 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 really see a whole lot being added to 2025. So it really just comes to Gathering and Processing. And so there, I think what could move it, plus and minus is just overall field activity. If volumes are a lot stronger, we need to put in even more compression or more pipelines. There could be some upward or downward just depending on overall volumes and then adding processing plants. We've already got, as we mentioned, the Pembrook II that added in there. We're ordering long lead times for the next Delaware plant. That was already contemplated. So it would need to be a pretty big delta, I'd say, in overall growth expectations or growth realizations for us in G&P to have a large scale move. So that's why we feel pretty good about the $1.4 billion. As we go through the year and we give guidance, we'll refine it. And could have moved down a little bit up a little bit. We'll see. But I think we feel pretty 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 on the G&P segment, and one of the tailwinds in the quarter was higher fees. I was just 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 what that comment is and what the driver looks for the quarter?

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

Okay. Perfect. And the second question on the L&T side. Fractionation volumes were down, looks 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 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 just limited in terms of availability of space because of the downtime that we had that was scheduled as well as some of the impacts of the harsh winter weather that we had in January as well. . Looking forward for us into the second quarter, obviously, as Jim mentioned, we're really happy to see Train 9 in startup mode. And then we'll be really happy to see GCF start up sometime during this quarter as well. So when you look at our frac volumes, you're going to see a meaningful step-up in volumes into the second quarter for us when we come out of that quarter with Train 9 online and with GCF giving a partial contribution at the back end of the quarter as well. So I would anticipate that really to continue throughout third quarter and fourth quarter, again, with all the operating facilities. In terms of scheduled maintenance, those just come periodically. There's no really -- there's scheduled maintenance that we have on certain vessels that we have to inspect due to requirements. And we work those in and try to make those really not impact us in terms of being able to perform for our customers overall.

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 with Waha prices being pretty extreme here that there's no meaningful impact from prices themselves on the company this year. And then related to that, just given Permian gas supply continues to beat expectations kind of over and over. At what point do you start to feel more pressure to move forward on a gas pipeline project like Apex? Is it -- do you need to see something happen by the summer, the fall or how you're 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 talk a little bit about that in the Permian supply. Yes. So there are pluses and minuses for us when we have really weak Waha prices. We have just -- still have some commodity sensitivity and some length 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 length on natural gas. So 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 make sure we can get the gas out of the basin. So when you have dislocations in Waha, we do have some gas marketing upticks relative to our transportation position. So that could be depending on where we're moving it and where we're able to get it to, there could be some positives there. So I'd say there's pluses and minuses. Overall, we would prefer higher Waha prices than lower. It's good for our customers, it's good for our business, but there are pluses and minuses to volatility in Waha and weaker Waha prices. And then on the Permian supply and gas lines, Bobby, you want to talk about that?

Yes. So a couple of things relative to what Matt said, not use a phrase, it's [indiscernible] right? So every couple of years, we see Waha get crushed. We have those really defined forecasts relative to the wallet connection. So we're always planning, and Pat mentioned it earlier, with both our producers that market their own gas and taking kind and producers that we market for it. We are ahead of this and planning to make sure we can move all the gas that comes out of our plants. So the immediate issue is ignoring issues on pipes that aren't expected. We're always set up to be ready for this because this happens every 2 years. Then relative to thinking about the next pipe, it's a similar refrain to what I've said before. Target is #1 priority, making sure gas moves out of the basin that our producers can flow their gas out of our plants and we can move the gas, if we move for producers out of our plants. And we are working on multiple fronts, multiple options, multiple pipes, all that have, I'll call, very good traction. I fully expect -- I've said this before, that pipe will go FID by the end of this year. If we make good progress on one of the options that the industry does, it could go earlier than year-end. I won't guess to what month, but I fully expect gas pipeline to go and go this year. When you think about Waha, where it is, things like that on the margin, motivate shippers and pipe owners even more to get things done. So I have as much confidence today. It's just 3 months closer than last call that something will go FID.

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 [indiscernible] call, you offered that illustrative annual spending example [ one ]. And 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've laid out in that hypothetical, but the '25 guide is quite a bit below, 20% below. So just thinking about maybe where we're deviating from some of that illustrative example. And just maybe where you're seeing actuals in '25 looking better than some of that illustrative spend that you guys 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 multiyear basis. That's one item.

And then the other one would be really low-cost export expansion we have, we've got in that illustrative multiyear guidance spending, for both transport and exports, that we wouldn't expect to need to do in a meaningful way in 2025.

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

So 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 does your kind of 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 the 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 a day. And with 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. So those capacities, similar to what we did on the West leg of Grand Prix, that can put us over 600,000 barrels a day between that. So that gives us a lot of operating leverage on the West side of the portion of Grand Prix with Daytona coming online. When you look at our South leg, we've got a lot of operating capacity there. Again, the capacity is around 1 million barrels a day. We're bringing in just over 700,000 barrels a day currently. So that gives us also some operating leverage as it relates to that. And when you look at the numbers, we move today, there's a lot of volume that still comes into our facility that comes from third-party pipes. We participate in moving some volume on some of those third-party pipes as well as our customers do. And I would anticipate continuing to see that happening over a period of time. We'll have to evaluate relative to when we would have to do a South leg expansion, if you will. But I think we've got a lot of runway for right now, and then we can look to participate on third-party pipes where it makes sense, both physically as well as economically for us.

And this is Bobby. Yes, about third-party competition. We've talked about this before. We are a wellhead-to-water company, right? So we build Grand Prix, we build Daytona, we build our NGL structure service our G&P footprint that goes out to the wellhead. A 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 starting at the wellhead.

Okay. And then as a follow-up, I think, on the strategic side of things, 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 5-year mark. How should we think about your assets outside the Permian, you still kind of give them as 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. That's where the activity is. That's where the growth is happening. And the other assets, there's not a lot at -- especially with weaker gas prices. When gas prices moved up in '22, we started to see some activity, but you're seeing volumes move off, which is not unexpected. So to the extent there are some opportunities and there are some limited opportunities in the Central region to go get packages of gas and compete, we go do that, and we're looking to grow where it makes sense or get additional packages of gas where it makes sense in those businesses. I'd say, up in the Badlands we're actually through the remainder of this year and into next year, seeing some strong activity, we'd expect there actually to probably be some growth in our Badlands business over the rest of this year into next year. So we're seeing some good activity up there. And if it's economic and it makes sense for us, we'll go and continue to grow that business and other businesses. It's just there's less opportunities outside the Permian.

And for our final question today comes from the line of

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 like '26 is when we'll need a new pipe. So curious on if you kind of agree with that. And is the 2-year time frame, what you guys are hearing to build another gas egress pipe.

This is Bobby. Yes. No, I think we've reiterated that on multiple calls. We see '26 as the year for a need for 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, as we move forward in time. And I think, generally speaking, yes, the 24 months from FID is kind of the number that everybody talks about, sometimes you talk about '26, maybe it's '22, maybe it's '28, but '24 is the good guideline that I think the whole industry uses for the construction of that pipe. So -- and yes, I'm fully confident that if we'll go -- something will go FID before the end of the year that solves 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 5 years. So I just want to get your views there. And then you could remind us of how much marketing you guys have on the docks that can capture that international spread.

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 that was 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 have. Have a great day.