Jennifer Kneale - Director at TPH Partners Joe Bob Perkins - Chief Executive Officer Matt Meloy - Chief Financial Officer.

Schneur Gershuni - UBS Brian Lasky - Morgan Stanley Brad Olsen - Tudor, Pickering Sunil Sibal - Global Hunter Securities J.R. Weston - Raymond James TJ Schultz - RBC Capital John Edwards - Credit Suisse Michael Blum - Wells Fargo Jerren Holder - Goldman Sachs Andy Gupta - HITE hedge.

Good day, ladies and gentlemen and welcome to the Targa Resources’ First Quarter 2015 Earnings Webcast and Presentation. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time.

[Operator instructions] I would now like to introduce the host for todays’ conference call Miss Jennifer Kneale. You may begin Ma’am..

Thank you, Kevin. I'd like to welcome everyone to our first quarter 2015 investor call for both Targa Resources Corp. and Targa Resources Partners LP.

Before we get started, I would like to mention that Targa Resources Corp., TRC, or the Company and Targa Resources Partners LP, Targa Resources Partners or the Partnership, have published their joint earnings release, which is available on our website www.targaresources.com.

We will also be posting an updated investor presentation to the website later today.

I would like to remind you that any statements made during this call that might include the Company’s or the Partnership’s expectations or predictions should be considered forward-looking statements and are covered by the Safe Harbor provision of the Securities Acts of 1933 and 1934.

Please note that actual results could differ materially from those projected in any forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings, including the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2014 and quarterly reports on Form 10-Q.

Speaking on the call today will be Joe Bob Perkins, Chief Executive Officer; and Matt Meloy, Chief Financial Officer. Joe Bob will start off with a high level review of performance and highlights. He will then it over to Matt to review the partnerships consolidated financial results, segments results and other financial matters.

Matt will also review key financial matters related to Targa Resources Corp. Following Matt’s comments Joe Bob will provide some concluding remarks and then we will take your questions. There are also several other members of the management team available who may assist in the Q&A session. With that, I will turn the call over to Joe Bob Perkins..

Thanks, Jen. Good morning to everyone. Before we turn to Targa’s first quarter results, I’d like to remind Jen that we closed the acquisition of Atlas Pipeline Partners, L.P and Atlas Energy L.P. on February 27. Atlas Pipeline Partners is now Targa Pipeline Partners or TPL.

And we are still training ourselves to use the appropriate name and acronym internally and externally. Given the end of February effective close, our first quarter reported financials include one month of contributions from TPL, but we will also provide on this call some pro forma full quarter data points.

In many ways pro forma full quarter adjusted EBITDA, full quarter adjusted distributable cash flow and full quarter coverage or more representatives for the combined entity.

Under the terms of the merger agreement, net cash from operations did not leave the Targa Pipeline Partner System prior to closing except for things like first quarter distributions and onetime merger related expenses.

And therefore, what we are calling pro forma full quarter adjusted EBITDA DCF [ph] and coverage or more representative of the combined business performance. We will carefully label such pro forma numbers when we refer to them this morning. So let’s dive into results and highlights.

Our reported first quarter adjusted EBITDA was $258 million as compared to $234 million for the first quarter of last year.

The Logistics asset segment produced quarterly reported operating margin of $125 million up 30% compared to last year, primarily driven by partial recognition of the renegotiated commercial arrangements related to our condensate splitter project with Noble, which we have discussed before plus higher LPG exports as we benefitted from a full quarter contribution from the fully completed second phase of our LPG export facility.

In the Field Gathering and Processing segment reported operating margin was $79 million, a decrease of 16% versus the first quarter of 2014, primarily due to significantly lower commodity prices offset by the inclusion of one month of results from TPL and by increased volumes from almost all other business units.

I would add that pro forma all TPL business units’ also experienced higher volumes over last year.

Now pro forma distributable cash flow which includes contribution from TPL for the full quarter and includes deducts from the full quarter TPL interest and maintenance expense that pro forma distributable cash flow of $228 million resulted in pro forma quarterly distribution coverage of approximately 1.2 times, based on our first quarter declared distribution of $0.82 or $3.28 on an annual basis.

Pro forma full quarter adjusted EBITDA excluding someone items was $314 million with a $126 million of pro forma operating margin coming from a Field G&P segment. As I said, we believe the pro forma estimates are very representative for the combined entity.

Compared to the first quarter of 2014, the partnerships first quarter distribution represents an 8% increase. At the TRC level, compared to the first quarter of 2014 the first quarter dividend of $0.83 or $3.32 annualized represents a 28% increase.

Now as part of the Atlas mergers we amended our partnership agreement to reallocate certain IDR cash flow from the general partner pro rata to the limited partners.

For the first quarter, the announced distribution includes the $9.375 IDR Giveback transfer which reallocates that $9.375 million of IDR cash flow from the GP pro rata to the LP unit holders. When we announced our first quarter 2015 distributions and dividends, we also provided a revised outlook for 2015.

Given the continued uncertainty around producer activity and a lower commodity price environment we have certainly reviewed multiple forecast, multiple inputs and outcomes and of course consistent with how we always approach dividend and distribution declarations we have run multiple, multiyear commodity price and volume scenarios, including flat price cases, strip price cases and cases with other price forecast along with our best attempts to understand producer activity and volume expectations across each of those price outlooks and we continue to do that analysis.

With that ongoing analysis, we provided a likely range for selected dimensions of our revised outlook. We said that we currently believe that Field Gathering and Processing Operations would likely have a flat to low single digit 2015 average volume growth compared to the first quarter 2014 volumes.

Now, with the publication of this quarter I can provide you a little more information on our Field G&P Volumes. I just said that volumes were up for Q1 2015 versus Q1 2014 for essentially all of our Field Gathering and Processing Business Units.

Also, total Field G&P Volumes in Q1 2015 were higher than Q4, 2014, but were lower in several of our Field Systems due to cold weather and related freeze-offs.

I am happy to say that current total Field G&P volumes are higher than the first quarter and that essentially all of our systems across the combined companies are higher than the first quarter at today’s current volumes.

And all, I repeat all of our Texas and Permian Basin business units are up on current volumes versus the first quarter, so that’s good news. We also said that the logistics and marketing 2015 operating margin may be modestly lower than the 2014 operating margin.

In the first quarter of 2015, we exported approximately 5.8 million barrels per month of LPGs. We currently continue to see interest in long term contracts for LPGs but given the current market dynamics expected activity in 2015 maybe lower and lower than the back half of 2014 activity, also with lower fee margins than the back half of 2014.

We exported less volume in the first quarter of 2015 versus the fourth quarter of 2014, impacted by more challenging market dynamics including international price pressures, this [ph] used with ship availability and high vessel freight cost impacting our customers and other international buyers.

So the overall result of our analysis for the Targa businesses in 2015 is a range of expectations of 4% to 7% distribution growth at TRP in 2015 relative to 2014. That range of distribution growth with approximately a one times coverage. At TRC, we therefore expect 25% plus of dividend growth in 2015 over 2014 with approximately one times coverage.

Underneath that TRC expectation we expect an effective cash tax rate of 5% to 10% for 2015 and going forward at TRC, we will continue to benefit from depreciation associated with Atlas mergers and expect an annual effective cash rate less than 15% in the near term beyond 2015. That wraps up my initial comments and now I hand it over to Matt..

Thanks, Joe Bob. I'd like to add my welcome and thank you for joining our call today. As mentioned, reported adjusted EBITDA for the quarter was $258 million compared to $234 million for the same period last year.

The increase was driven by the addition of TPL, higher gathering and processing volumes, partial recognition of our renegotiated commercial arrangements related to our condensate splitter project with Noble and higher LPG exports, offset by significantly lower commodity prices.

Overall, reported operating margin increased 9% for the first quarter compared to the first quarter last year. I will review the drivers of this performance in the segment reviews. Reported net maintenance capital expenditures were $20 million in the first quarter of 2015 compared to $14 million in the first quarter of 2014.

Included in the revised outlook for 2015 provided in April was an expectation for $110 million of reported net maintenance CapEx in 2015 which includes 10 months of maintenance CapEX related to the TPL systems.

Turning to the segment level, I’ll summarize the first quarter's performance on a year-over-year basis, starting with the Logistics and Marketing division, first quarter reported operating margin increased 19% compared to the first quarter of 2014 driven by partial recognition of our renegotiated commercial contract arrangements related to our condensate splitter project at Noble and higher LPG and fractionation activity.

For the quarter we loaded an average of 5.8 million barrels per month of LPG exports compared to 3.5 million barrels per month during the first quarter of 2014. Fractionation volumes increased by 9% in the first quarter of 2015 versus the same time period last year.

Turning to the Gathering and Processing division, reported operating margin decreased by 28% compared to last year primarily due to significantly lower commodity prices, partially offset by one month of contribution from TPL and by volumes increases at essentially all of our Field G&P business units.

First quarter reported 2015 natural gas plant inlet volumes for the Field Gathering and Processing segment were 1,488 million cubic feet per day an increase of over 74% compared to the same period in 2014. We benefitted from the inclusion of one month of TPL volumes and growth at essentially all of our Field G&P business units.

The overall increase in natural gas inlet volumes was also due to the addition of the 200 million cubic feet per day High Plains Plant in SAOU in the Permian Basin in the 200 million cubic feet per day Longhorn Plant in North Texas, both of which were completed in the second quarter of 2014, plus the addition of our 40 million cubic feet per day Little Missouri 3 plant in our Badlands operations in North Dakota that was placed in service during the first quarter.

Crude oil gathered increased to 101,000 barrels per day in the first quarter, a 35% increase versus the same time period last year, as a result of producer activities. Let’s now move briefly to capital structure and liquidity.

We were very active in the capital markets in the first quarter utilizing the debt in equity market successfully across our capital structure to maintain our strong liquidity position. As of March 31st, we had 840 million of outstanding borrowings under the Partnership's 1.6 billion senior secured revolving credit facility due 2017.

With outstanding letters of credit of 25 million, availability quarter end was 735 million. At quarter end we had borrowings of 198 million under accounts receivable securitization facility.

From January through April 2015 we received gross proceeds of approximately 200 million from equity issuances including general partner contributions and 155 million of net proceeds under our at the market equity program which allows us to sell equity at prevailing market prices.

On a debt compliance basis which provides us adjusted EBITDA credit per material growth projects that are in process but not yet complete, and makes other adjustments, TRPs total leverage ratio at the end of the first quarter was 3.5 times.

Next, I’d like to make a few comments about our fee based margin, hedging and capital spending programs for the year. For the first quarter of 2014, our operating margin was 76% fee based. We continue to expect operating margin to be at least 65% to 70% fee based during 2015.

Since our fourth quarter earnings call in mid February we have entered into some additional hedge contracts including costless collars.

For non-fee based operating margin, relative to the partnerships current estimate of equity volumes from Field G&P we estimate that we have hedged approximately 65% of remaining 2015 natural gas, 60% of the remaining 2015 condensate and approximately 30% of remaining 2015 NGL volumes.

For 2016, we estimate that we have hedged approximately 35% of natural gas, 30% of condensate and approximately 15% of NGL volumes. Moving onto capital spending, we estimate approximately 700 million to 900 million of reported growth capital expenditures in 2015. This includes 10 months of CapEx spending for TPL.

Next, I’d like to make a few brief remarks about the results of Targa Resources Corp. Targa Resources Corp standalone distributable cash flow for the first quarter was $52 million and TRC declared approximately 47 million in dividends for the quarter resulting in dividend coverage of approximately 1.1 times.

On April 21, TRC declared a first quarter cash dividend of $0.83 per common share or $3.32 per common share on an annualized basis, representing an approximately 28% increase over the first quarter of 2014.

On March 12th, we priced at successful underwritten public offering of 3.25 million shares of TRC common stock an additional 487, 500 shares of TRC common stock repurchased through the exercise of the green shoot resulting in total gross proceeds of approximately $340 million.

As of March 31, we had 460 million of outstanding borrowings and 210 million of availability under TRCs 670 million senior secured revolving credit facility and 242 million of outstanding borrowings under TRCs senior secured term loan due 2022 resulting in a 2.7 times debt compliance ratio.

As mentioned by Joe Bob earlier, we expect a 5% to 10% effective cash tax rate for TRC for the full year in 2015 and in the near term beyond 2015 annual effective cash tax rate less than 15%. That concludes my review. And I will now turn the call back over to Joe Bob..

Thank you, Matt. Thank you to my team and for a few listeners sending me an email correcting a speaking error. I really apologize. But before I go on to some more color I want to correct that.

As I repeated our volume guidance from a few weeks ago, I should have said that we believe that Field Gathering and Processing Operations will likely have flat to single digit 2015 average volume growth compared to fourth quarter 2014. Currently an inability to read I said first quarter 2014; it did not change our guidance.

But that’s actually kind of a nice opportunity incase you got distracted by my inability to read, to repeat that we are also the same, just sharing the facts with you that you can see now Q1, 2015 versus Q1 2014 volumes were up across Field Gathering and Processing.

There were a few business units in Gathering and Processing that were a little down due to the kind of normal seasonal cold weather and freeze also that affected them.

But I also will add that current volumes today over the last week that those current volumes which aren’t published anywhere are up in total in the Field Gathering and Processing versus what we just published for Q1.

That’s true for essentially all of our systems across the combined companies and it is true for all of our Texas and Permian Basin business units, and that’s when I said that’s good news.

The volume in those business units has exceeded our first review expectations and that’s supportive of our strong beliefs about 2015 and the multiple scenarios we’ve earned. Now with a little bit more color and then I’ll wrap it up for your Q&A, please feel free to email any other questions you have about my ability to read.

On the downstream side, our Train 5 is under construction and is expected to be operational by mid 2016. We are also working closely with Noble as they evaluate whether to move forward with a new terminal with significant storage capacity at Patriot, a condensate splitter at Channelview as originally had announced or both projects.

Repeating what I think I said before there were renegotiated agreements with Noble have resulted in increased opportunity for Targa versus the original deal without Targa taking own any additional risk. And we expect Noble decisions on the project or projects later this year.

Turning to our Gathering and Processing division, we have spent a substantial amount of time reviewing all of our potential projects. As appropriate sizing and timing is obviously dependant on our view of future expected producer activity levels.

In North Dakota, we completed our 40 million cubic feet a day Little Missouri 3 Badlands expansion in the first quarter.

We continue to review the appropriate sizing and timing of additional plant capacity and related infrastructure in North Dakota and in the Permian Basin and have included ranges for potential 2015 for both of these areas in our growth CapEx forecast.

We are also spending capital in 2015 and a number of other high returning G&P projects that individually require relatively small capital outlays. Examples of that kind of work include additional compression at Stonewall, Oklahoma to increase capacity to $200 million cubic feet a day.

That project was originally expected to be completed in the first quarter of this year. It will now be done late in the second. Another example would be adding infrastructure to increase our reach into the Delaware Basin, to more increasing volumes to available processing capacity across our multi-plant Versado system.

And we remained very enthusiastic about opportunities across our entire Permian Basin footprint, where volumes to-date have been better than our first year expectation for opportunities for smaller high return project are expected to continue and where the super system creates opportunities to met customer needs with greater capital efficiency as to what many refer to as our development backlog.

We continue to pursue an additional $3 billion plus of growth projects that we have discussed publicly. And of course there are other projects that are public that we’re working on. The public ones include, Train 6 where we’ve applied for a permit and have passed the first public notice period with the design similar to Trains 4 and 5.

We do not currently have the timeline for Train 6 like some of the other projects on this list. It’s a matter of when, not if, we will need additional fractionation at Mont Belvieu. In addition to Train 6 the other when, not if projects included on our investor slide or Train 7, and of course additional G&P expansion programs.

The potential Targa’s ethane export project has a little different characterization. We believe that there will be another ethane export project on the Gulf Coast and believe that we have a good shot at it.

Discussions are active including new enquiries that off take decisions for new infrastructure are developing more slowly in the current environment. We’re not the only candidate for the second Gulf Coast ethane project, but we have a good shot at it.

We are now approximately 70 days in to our merger with Atlas and are pleased with the performance of the employees and assets particularly in this uncertain environment. When we announced the mergers we provided expectations of synergies and we have realized a sizeable amount of synergies through interest in G&A savings alone.

We are already witnessing the potential from the breath of relationships and opportunities that our increased asset footprint affords which for me is the most important as I think about Targa’s long-term opportunities.

We’re on track to realize our initial announced synergy expectations and we do not expect to provide an ongoing checklist of individual line items related to synergies going forward. You will see our combined results.

Our day-to-day operations across multiple areas are managed as one Targa’s business with one collective Targa goal to work collaboratively, send capital efficiently and drive our bottom line results. The current environment continues to be challenging as the volatility and commodity prices creates uncertainly around producer activity levels.

We believe that the combination of our asset footprint and our fee based margin positions us well to continue to deliver results. As I said earlier, given everything we know today, we are projecting 4% to 7% distribution growth at TRP and 25% dividend growth at TRC for 2015.

And importantly, managing our businesses prudently today with the same multiyear view will position us to continue to perform in the future. So with that, we’ll open it up to questions. I’ll turn it back to you operator..

[Operator Instructions] Our first question comes from Schneur Gershuni from UBS..

Hi. Good morning, guys..

Hey, good morning..

I guess my first question and maybe you touched on this in your prepared remarks.

But given that you have had the assets now for about two months with respect to Atlas and so forth, and it sounds like so far the flavor has been positive rather than negative, but is there any way to sort of give us some color in terms of incremental opportunities that you were talking about, beyond what you were thinking about when the assets were put together? You had mentioned high-return, low-multiple type projects.

Can you give us a little bit of a sense of where those returns would shake out and so forth in how they relate? Just a little bit more color would be great?.

I understand the question Schneur. Targa standalone frequently had high return projects that didn’t hit the radar scope of our investors or kind of the large board approved projects. When we put these together we have even more of those. The Atlas standalone list was the same.

And the combined list comes with things that we want on either one of the individual list. Even in this price environment and maybe even more so in this price because we don’t have to run as hard for some of those big project, we get engineers and commercial people, operations people looking for those opportunities.

And we can certainly fund high return opportunities, whereas outlays by itself may have add a little bit more cash constraints. Our people like going after those opportunities and that collaborative effort across the teams just keeps turning them up.

I expect that will be – will continue to be exceeding our expectations and I know you would like more numbers around that but you ask for more color around it..

Okay. As a follow-up question, lot of your peers talked about it during their fourth quarter calls, about pulling off the playbook from the last time we had commodity collapse and efforts that they were taking to reduce cost and so forth and recognize that you’re in the process of going through the merger and so forth.

Can we sort of expect this playbook out of Targa and especially with opportunities as you look at rationalizing both sets of businesses?.

I’m quite sure that other companies use the term playbook as well. We use the term playbook in an employee presentation in December of last year that became public as it happened to have the word Atlas in it, and I think we talked about it in our year-end call. We absolutely are using that playbook and coming up with other ways of attacking it.

And I think because of the experience and urgency of the situation post-Thanksgiving given at last year I’m very proud of our employees. If you look at our financial results just the published you can see traction on the cost reduction scenario.

It doesn’t show up everywhere but what I know is we’re making real and significant progress on operating expense reduction, G&A reduction, maintenance cap door reduction all with out reducing safety or reducing our ability to meet environmental regulations and additionally we tell people to think about the small dollars to spend to retain the options to grow, but we’re still getting that cost and cash savings.

So, I’m proud of the efforts I’m not comparing myself to others, but internally continue to keep – we intent to keep working on that through 2015 and 2016..

Great, one last final question, you distribution growth rate for NGLS is fairly wide. You had a pro forma coverage ratio at 1.2 times.

Is it fair to assume that if you hold this ratio throughout the balance of the year that we can see the growth rate towards the top end of that range?.

A range that we thought was a likely range. I feel pretty good about it..

Yes. We made our best estimate kind of given current conditions, prices, volumes that we’re seeing. We thought we would be at about 1.0 times distribution coverage. And so with that 1.0 distribution coverage we thought we would at 4% to 7%.

So, it is maybe a bit of a wide range but finding kind of clarity on where things are going to shake out with balance of the year we wanted to give ourselves some cushion..

Great. Thank you very much guys..

Our next question comes from Brian Lasky with Morgan Stanley..

Hi. Good morning, everyone..

Hi, Brian..

Just to start out, have you guys disclosed what the benefit of the commercial arrangement renegotiation was within your logistics segment for the quarter?.

No..

Is that a number we can get or no? Just order of magnitude?.

The way I would like to put it is, we’ve got a very important commercial arrangement with Noble..

Okay..

We got a close relationship with them. We probably could assume that we’ve got some confidentiality arrangements with them. Sometimes in confidentiality arrangements what you say publicly is driven by what you’re required to say working with accounts and auditors we’ve published what we believe is appropriate for disclosure..

Fair enough.

In terms of -- I just if you could just kind of talk about the change in your tax rate at the TRC level within your most recent guidance and how that could potentially change, maybe just kind of walk through kind of the major moving parts there?.

Yes. There are really two large buckets, one of them is the additional benefit from the depreciation we’ll get approximately $1.6 billion amortization of let’s call it goodwill over 15 year straight line in conjunction with closing the Atlas ATLS acquisition. So that’s one piece.

The other piece is the amount of taxable income that slows up from NGLS up to TRC through its ownership in the LP units and with the EBITDA on taxable being lower than previous expectations when we put the merger estimates out there for EBITDA and income and the like taxable income is down from there as well.

So it’s really those two buckets that brought our tax rate down. It was close to about 2% and Q1 we’ll expect that to kind of increase over the year and we’re currently expecting give or take 5% to 10%, although probably more – probably closer to the low side of that range..

Got it. Got it. So relative to your previous guidance that you provided post the merger, the second bucket there is the biggest delta.

So if your taxable income goes up here, you’d expect to kind of migrate back toward the previous level there?.

Yes. And its also IDR growth and distribution growth at the partnership, so whereas the previous estimates were 11% to 13%, now 4% to 7% distribution growth, lower associated IDR associated with that you get no depreciation, that’s all taxable income at the IDRs. So with the lower distribution profile that also brought the tax rate down..

Got it; makes sense. And then in terms of your volumes, you guys mentioned in your deck the volumes could be down in 2016 relative to 2015. I was just wondering what assumptions were baked in there.

Maybe if you guys can just break it up by region how you are thinking of volume trajectories from the balance of the year, particularly in the Bakken which was obviously up pretty strong in the first quarter here?.

Yes. I would say it reflected our current discussion we’ve had with our producers across the multiple basis. So we haven’t -- producer the discussion down the Permian and Mid-Continent, South Texas, North Dakota, across all of our systems and that factored in our best estimates given those producer discussions that we had.

And it pointed to potentially lower 2016 volume versus 2015..

And then, just one final one from me, in terms of you guys mentioned about different factors for your – for why your export volumes came in where they did, how much of do you think was driven by the environment versus kind of ship availability and pricing and the other factor that you mentioned there?.

When we describe the environment, okay and market dynamics, it’s including that full combination, global prices, ship availability, ship availability and supply/demand impact the freight costs, so it’s intertwined and I don’t think I can break it apart for you..

Okay.

And then just in terms of frac volumes, is there anything specific this quarter that occur?.

No, nothing specific, the frac volumes across CBF are impacted by volumes out in the field which we saw the weather, cold weather can impact volume. It hit our fields a little bit too and it will hit the associated NGL production..

We have – our own maintenance work like everyone else, but I won’t say there was anything out of the norm at all particularly for our Q1..

Perfect. I will jump back in queue. Thank you..

Our next question comes from Brad Olsen with Tudor, Pickering..

Good morning, gentlemen..

Hey, good morning..

Just a relatively big-picture question here.

As we see liquids inventories start to move up or beyond uncharted territories and we had the release on Force Majeure at Hattiesburg, can you just outline what this year and maybe the next hold as far as NGL supply/demand and the process of maybe taking a little breather here on production growth versus export terminal capacity builds?.

Actually I'm going to the question again, maybe I just didn’t hear the last part of it correctly..

I’m just looking for a near term supply demand outlook on liquids as we move through this year, volume growth versus export terminal capacity growth?.

The export terminal capacity across the U.S. has expanded. There are now three LPG export facilities in the Gulf Coast and those are connected to the market hub. Our crystal ball on supply for LPG across the U.S. and supplies for LPG’s to U.S Gulf Coast comes with the pretty wide range and we’re trying to work multiple scenarios for it.

Broadly I think your question somewhat provided the directional answer and that is decreasing number of wells being drilled and either slower growth or slightly reduced production depending on where you are looking specially as lowered overall supply, but the export terminal still are higher necessary for balancing supply to U.S.

demand and then to global demand. You use the term I think of something like a cooling down of U.S.

driven supply that helps with the inventory problem you were talking about and it slows the need for additional export facilities but probably says that the export facilities are still necessary to balance supply and demand that’s what exports from the U.S. has always done and I probably don’t have anything more specific in that podium..

Fair enough. Appreciate the color, though. And then second question going down at the micro level, Buffalo expansion, presumably tied to Pioneer's plans for the back half of this year.

Can you just – so you pushed that project, the incremental capacity, out into 2016? Is Pioneer or just kind of how does that sync up with the potential for Pioneer to add another 12 rigs in the back half of this year? Does that timeline change? Or is that anticipating that ramp back up in activity?.

Our official timeline of sometime in 2016 is unchanged. We have some options for capacity out there, not only the Buffalo plant but there is also 45 million embedded plant out in that area. And then potential they connect to the legacy Targa SAOU systems for capacity as well.

So we’ll be working through all of those scenarios and trying to come up with we’re not only meeting pioneers needs but the other producers in the area..

Again thank for the color. Helpful. Thanks guys..

Our next question comes from Sunil Sibal with Global Hunter Securities..

Hey, Sunil..

Hi. Good morning, guys. Congrats on the good solid quarter. Couple of questions from me, changing the track little bit.

I was kind of curious with regard to you ethane export project, do you think this slowing down of discussions, is it primarily driven by Brent price or the other factors like slow demand in Asia and all that, which is contributing to that?.

I think its multiple factors and uncertainties slowed it down. Some of those are related. But I still believes it’s a question of if, not when and it’s certainly will be driven by customers..

Sure.

Any guess you would like to take in terms of where you need to see Brent prices to be for discussion to become really active again?.

No. I think it’s more complicated than just Brent pricing..

Okay. Fair enough.

And then just one clarification with regard to where your current volumes are tracking in the field G&P, so seems like you had some weather disruptions in the Q1 which impacted those volumes and that’s of course been resolved ex those disruption would you say you’re still tracking higher or even with the Q1 volume?.

We believe that we’re up on almost every business unit, kind of no matter how you parse it..

Right. And we’re up over – current volumes are up over Q1. They are also up over Q4 as well..

Okay. That’s helpful.

And then lastly on the Badlands side on the crude gathering volumes, any specific trends you’re seeing currently with all activity level going on?.

We’re foreseeing some reduced activity and completions in that area. You saw sequentially the volumes down a bit, up in that region, part of it is due to the cold weather and just being the winter there is less activity in the first quarter. So far currently we’re seeing volumes not continuing that decline.

So far we kind of add or above where we were in the first quarter. We’ll see if that hold, but that’s what we really seen here over the last few lines..

And we continue to have opportunities for backlog volumes can quality, I’m not going to quantify them for you, but we are working hard on projects to help with that on the gas side and the crude side..

All right. That’s very helpful and that’s all I had..

Our next question comes from J.R. Weston with Raymond James..

Hi. Good morning, guys..

Hi. Good morning. .

Just thinking about the Field G&P segments, what do you think are maybe the geographic segments that you are most concerned about, just on the unit volume side.

And then may asking another way with all your discussions you been having with producers what are some of the areas that maybe that taking a little bit higher on the cost curve would be maybe for Western or Southern Oklahoma segments or somewhere else?.

My biggest concern just kind of the way you described it continues to be North Dakota because it’s hard to see where pricing shakes out and what that means for longer term activity in the Bakken. I think its got greater challenges because of the differentials to WTI as well as where WTI might shake up, but it also had some compensating opportunities.

More cost reduction available to help producer activity levels. But we aren’t a whole lot smarter than the past few months when we talked about this.

We’re trying to work through multiple uncertainties, understanding and getting a better understanding why Basin or how producers are likely to drive their activity levels relative to different price scenarios. But the price scenarios are still uncertain..

Okay, sure. Thank you.

Then maybe switching gears a little bit to the downstream segments, are you guys seeing anything at all in terms of more opportunities with butane? Just with the overall move in crude and purity product pricing the last six to nine months, maybe exporting a little bit more butane as a portion of overall LPG exports, or maybe moving a little bit further downstream and getting into some products like maybe high-purity isobutylene or something like that, where you can kind of arbitrage maybe the, I guess, pricing there between normal butane and isobutylene.

Or then also capture the fee for loading either one onto the vessels through your docks?.

I don’t have specific projects to describe like that. I would go back to your comment on butane. We have opportunities to export butane, have some long-term options with our shippers to do so. We continue to export butane every quarter. These changes one month to the next about where is the best arbitrage will drive.

Our shippers request to use those options and we’re prepared to provide that service propanes, butanes and we sometime look it other projects..

Okay, great. Thank you. That's all I had. .

The next question comes from TJ Schultz with RBC Capital..

Hi, TJ.

Hi, TJ.

Hi. Good morning.

Maybe Matt, can you just explain on the distribution coverage outlook, against the interim one time this year? As volumes are trending higher and I guess the simple read-through is that you may trend higher or to the higher end of your revised distribution growth range, can you get there -- to the higher end of that range and have some excess coverage? Or what is your view on coverage? You've said before you would have comfort with a one times coverage for a period of time if you have a view that prices are going to improve.

So are you still comfortable there? Or has that view on commodity prices changed at all into 2016?.

You know, TJ, I think I’d just say, we baked in to that assumption kind of flat to low single-digit volume growth.

Where we stand today maybe things are looking up bit better but its still early in the year, I think we’re still comfortable that at a 4% to 7% distribution growth range we’ve covered almost all the likely outcomes for our distribution growth for the year and under a range of those scenarios we get to around one, if we’re on the high side of that I think we’re still around one, maybe a little higher.

If we’re in the low side of some of those estimates maybe we’re at one or maybe a little below, but we didn’t put a range on distribution coverage for those it takes a fair amount of op margin change to move that needle from around one..

Okay. Maybe just clarify for me the comments on volume. I guess the press release two weeks ago read a little bit more conservatively on volumes than what I think I am hearing today, that it seems like things are exceeding your expectations.

So, I guess if you could just clarify that for me?.

And TJ I think the point we wanted to draw was in several of our systems Q1 was sequentially lower than Q4, so we didn’t want to just give you that information and not provide you an update. We aren’t seeing that continued decline we saw in Q1.

The Q1 decline we saw in some of our field volumes was due to seasonal weather effects, so we’re bit higher than that, that doesn’t mean we’re bullish and where volumes are going to be for now for the rest of the year. We just wanted to share that data point that you necessary just draw straight line as things have peaks and rolled over.

But it’s still early and we’ll have to see where volumes shake out..

And just in case anyone is parsing the text or parsing the answers to the questions TJ, we haven’t changed our outlook from the time we gave guidance with the last distribution declaration.

We did provide some additional information and consistent with when we gave distribution declaration additional outlook/guidance, we had seen volumes behave better than our first of your expectations, that was into that guidance of multiple scenarios and what we should provide as a likely occurrence for distribution and dividends, does that help a little..

Yes. No, that does; I appreciate the clarification. Just one last thing I think to follow-up. I guess like some constraints for export on ship availability. Is that something that continues as a headwind, or how much of a constraint other ships? Supply/demand are impacting ship availability for our customers and other international buyers.

With the current fleet, I mean, we know of some of the fleet being moved to longer hauls. If you take a portion of the fleet and it’s taking longer hauls, you certainly have less capacity like, because the turnaround takes longer. All other ships coming on that will relieve the constraint on ship probably lower vessel freight cost over time.

It is a market dynamic than we try to use that term challenging market dynamics, some of which will get better for customers and other international buyers every time..

Okay. Thank you very much..

Our next question comes from John Edwards of Credit Suisse..

Yes, good morning, everybody..

Hi. Good morning, John..

If I could ask about just on your distribution guidance, just parse that a little bit. So you are basically saying 4% to 7% given a range of commodity price scenarios and volume scenarios that you are considering. And so, I don't think, unless I missed it, I don't think you've given us any guidance beyond that.

But I am just thinking, I mean, if you were looking at, say, you are at the upper end of your range, would you hold back a little bit so you could, say, smooth it out going forward? Or how are you thinking now about sort of the three-year outlook, if you will?.

Fighting over who would answer the question..

Back and forth on who's going to answer the question? Of course we look – first thing, we’re not provide 2016 or beyond guidance. But I would say with each quarterly distribution, recommendation we make we look out multiple years and we’re trying to move a distribution growth rate and dividend growth rate appropriately smooth.

So, we’re looking out one, two, three, four even five years under multiple scenarios, growth scenarios, sensitivity scenarios, so of course we look at those years, but I’m going to – we’re not going to provide any early indication in the 2016..

That’s helpful. And that’s it from me. Thank you..

Okay. Thanks John..

Our next question comes from Michael Blum with Wells Fargo..

Good morning guys..

Hey, good morning..

A couple of quick questions. One, maybe just one more question on the coverage. Can you – so now you have Atlas inside the family, so to speak, I understand what's going on in 2015.

But in terms of your long-term target for coverage, where would you say that is now?.

Yes. I’d say that remains unchanged in the 1.1 to 1.2 times target distribution coverage..

Mike, I think there one could make an argument that the increase scale and diversity might be worthy of a lower target than that, but we haven’t change that target and weather sounds a whole lot like a phrase use with the rating agencies right after the announcement and then the next one the sort of agreement about that but we haven’t changed it and we’re probably not that smart..

And we think it’s still appropriate. It makes sense..

Okay.

And the thought for this year, having a one times coverage is that we're in a low commodity price environment?.

Yes..

Okay. Another question, just a comment you made in talking about the LPG export business, you talked about anticipating for this year lower fee margins.

And I just want to know, does that mean you’re seeing lower spot margins? Or is that that you – as you are signing up short-term contracts they're at lower rates? Just trying to?.

I had understand the question. We try to signal about as much as we want to do commercially, but that is an appropriate conclusion to come to that with near term lower demand for the short-term contract volumes, those lower spot margins are probably been under more pressure than the term margins.

And we got the benefit of some of those higher short term contract margins in the back half of 2014 and we were therefore contrasting what we’re likely to report in 2015 back to the second half of 2014 and I think you have come to the right conclusion..

Okay, great. Then last question. Just looking at the trend in volume in the Permian, both at SAOU and Sand Hills, we can keep the Atlas stuff out of this for now. So you saw volumes sequentially down, but now you are seeing them uptick here in I guess early second quarter.

I guess, what do you attribute that to?.

Well, so as you got those the pieces there, Michael I know your point is Sand Hills, Sand Hills is essentially full, so there’s some minor moves a few million a day up and down, but its all and it has been basically full. So we’re moving 20 plus million a day closer to 525 million a day over the pipeline over to High Plains SAOU.

So – and then we’ve seen SAOU quarter-to-quarter relatively flat down slightly due to some weather and seasonal effects but we’re backup a little bit now..

Okay. Great. Thank you..

Broadly Permian basin activity is pretty darn good given the price environment and the uncertainty and our volume increases have been robust. We’re looking for little ways to create capacity. I like using the little ways, because they don’t hit your radar scope.

How can we add capacity to the Sand Hill system perhaps with small plant tack-on plant, small acquired plant. Heck, we're adding capacity to Sand Hill system by moving gas from Sand Hills to the High Plains, that’s added capacity on the East side and then help a lot on the west side and we move gas around.

We now have an expanded and increasingly overtime interconnected footprint of the super system and that allows us to create ways to add small capacity for the benefit of the Sand Hills opportunities. But that’s not the only place that’s growing. I mean, I can’t tell you how happy I am to see the growth in Versado.

Michael, you remember how many years we went saying that flat is slightly down. We’re just building up existing capacity there..

Got it. Thank you, Joe Bob..

Our next question comes from Jerren Holder with Goldman Sachs..

Hi.

Just wanted to start off with -- is there any change as far as the commodity hedging strategy now that you have Atlas combined in there?.

No, I’d say no change to our strategies. I think going forward put in I’d say maybe slightly more programmatic approach disciplined approach to be kind of putting some on quarter to quarter but it will be the similar you hedge more volumes kind of in the first year and then declined volumes in year two and three for crude NGLs and natural gas..

I know before you guys had for ethane and propane, you were leaving those mainly open.

Is that how we should think about it still, going forward?.

I would say for NGLs even in ethane and propane we could possibly add some hedges and look at some hedges down there. I don’t know that we will get all the ways that kind of made up into our target range 75% year one, 50% year 2, 25% year 3 I don’t know that we get all the way there [Indiscernible] but probably more than zero..

Okay, that's helpful. Just in terms of M&A strategy, obviously there are a lot of assets out there; and of course there have been buyers or potential bidders for you guys as well.

How has that strategy changed on bought angles, at all? How should we think about the Targa approach in this environment?.

How has it changed on what?.

How should we think about your current M&A strategy in this environment, whether or not you would be looking at some of the midstream assets that are out there? Or is the focus just more internally integrating the Atlas system and getting through this environment?.

Our strategy is not really any different. We look at acquisitions every day. In this environment kind of a little uncertain everyone was trying to be a little conservative and prudent. The acquisitions we like to best are smaller tack-on ones because that won’t have any real impact on our leverage and has an immediate impact on our cash flows.

Those are wonderful ones when you find them. Strategic acquisitions that make the current businesses we have better, that gets most attention. A step out without leverage to our existing assets, we still look at but it’s get less of our attention today. And all of that’s fairly natural.

Also in the cycle of buyers and sellers before everything starts gets rosier that may be some – be the time for some of the best bargains and we would want not be looking for..

Thanks, that's helpful. Then lastly, I know you mentioned on the synergies that you see in the G&A this is definitely an area where you've seen like immediate savings.

The run rate that we are seeing here in first quarter, should we use that as to -- maybe in the next few quarters use that as a guideline? Or should we expect that number to go up, down over time? How should we think about that?.

Q1 is going to be tough. We only had one month of TPLs in there. So I think if you look at APLs previous G&A and then you’ll have to – it will be lower than – because they have some allocations from APL unless they are going to be going away.

There is a line item you can see that essentially says New York and Philadelphia G&A charges on it, that’s not there anymore, but you just have not seen enough and we are going to be working the synergy spread sheet for you and it will be shown in our overall results and very encouraged by how that will all account..

All right. Thank you..

The last question comes from Andy Gupta with HITE hedge..

Well hi congratulations on your quarter. A couple of questions, one is in South Texas, I was curious if you can give some more color on activity there you’ve got a really good plant that can potentially give you some volumes.

What are you seeing in terms of prospects for that?.

I understand the question; our employees on the TPL side were sort of used to providing business unit by business unit detailed in with South Texas being one of dozen business units listed there.

I’m not going to go into more detail other than to say based on our past statements we feel good about South Texas and what we paid for it upside potential from where it currently exists and a stronger ability to compete that as the combined companies then Atlas on – with by themselves.

If there is anything to announce there or sub sense of materiality we’ll report that in due course but not how it’s going..

Understood. No, thanks for that color.

And one last question is, in terms of funding plans for your growth CapEx, can you give us a sense of -- given where your leverage levels are, how do you plan to fund this? Would it be through an ATM? Do you plan to come to market for equity, or it's going to be more debt?.

You know our growth CapEx for the year is about $700 million to $900 million in growth capital. We’ve – our target is about 50% debt, 50% equity and if you look over the last several years we’ve been pretty good at staying for that target. But in any given year we can vary those percentages.

So in a year like this, it’s likely to be more skewed to the equity side. Then I’ll just say on equity raises we’ve been active in the ATM. We’ve have good success there. But I am not going to handicap or tip my hat on what we may or may not do.

We have all options available to us and we’ll continue to look at all available options and what the best way to raise that equity is. The ATM has been working and with the ATM working that makes those other options even more available if you wanted them..

Yes. This is great. Thank you so much..

Thank you..

This concludes the question and answer portion of today’s conference. I’d like to turn the call back over to Joe Bob Perkins..

Thank you, operator. Thank you everyone for your patience and interest in what maybe our record long call. If you have any other questions, feel free to give Jen, Matt, me or any other rest of the team at call. Have a good day..

Well ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day..