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Introduction & Market Context
Targa Resources Corp. (NYSE:TRGP) released its first quarter 2025 earnings presentation on May 1, revealing a 22% year-over-year increase in Adjusted EBITDA to $1,178.5 million, despite operational challenges from winter weather events. The company’s shares were trading lower in premarket activity, down 2.57% to $166.51, following a 4.05% decline in the previous session.
The midstream energy company continues to benefit from its strategic positioning in the Permian Basin and its expanding logistics and transportation infrastructure, with approximately 90% of its business now fee-based, providing stability against commodity price fluctuations.
Quarterly Performance Highlights
Targa’s first quarter 2025 Adjusted EBITDA of $1,178.5 million represented not only a 22% increase compared to Q1 2024 ($966.2 million) but also a 5% improvement over Q4 2024 ($1,122.1 million). This growth was driven by stronger performance in both major business segments.
The Gathering & Processing (G&P) segment operating margin increased by $46 million year-over-year, primarily due to higher Permian inlet volumes and increased fees in the region. Meanwhile, the Logistics & Transportation (L&T) segment saw an even more substantial improvement, with operating margin growing by $115 million compared to Q1 2024, fueled by higher NGL pipeline transportation and fractionation volumes, increased LPG export volumes, and improved marketing margins.
As shown in the following chart comparing Q1 2025 to Q1 2024 performance, the company achieved significant growth in Adjusted EBITDA:
Sequential performance also showed improvement, with Q1 2025 Adjusted EBITDA increasing 5% compared to Q4 2024. The G&P segment operating margin rose by $4 million quarter-over-quarter, as higher fees in the Permian and lower operating expenses offset winter weather impacts on inlet volumes. However, the L&T segment operating margin decreased by $9 million from the previous quarter, with higher marketing margin being offset by lower NGL transportation volumes due to winter weather, reduced fractionation volumes from maintenance activities, and higher operating expenses.
Operational Performance by Segment
Targa’s operational metrics revealed mixed results across its business segments, with winter weather creating headwinds during the quarter. In the Gathering & Processing segment, field G&P natural gas inlet volumes for the Permian region reached 6,006 MMcf/d in Q1 2025, slightly down from 6,065 MMcf/d in Q4 2024 but still representing a 11.3% increase from 5,395 MMcf/d in Q1 2024.
The following chart illustrates the company’s G&P volume trends over the past five quarters:
In the Logistics & Transportation segment, NGL pipeline transportation volumes reached 844 MBbl/d in Q1 2025, down from 872 MBbl/d in Q4 2024 but up from 718 MBbl/d in Q1 2024. Fractionation volumes were 980 MBbl/d, lower than the 1,090 MBbl/d in Q4 2024 due to a major planned turnaround at the Cedar Bayou Fractionation facilities, but still significantly higher than the 797 MBbl/d recorded in Q1 2024.
LPG export volumes showed strong performance at 14.0 MBbl/d in Q1 2025, up from 12.4 MBbl/d in Q4 2024 and 13.3 MBbl/d in Q1 2024, despite weather-related challenges.
Business Mix and Strategic Position
Targa’s business mix continues to evolve, with the Logistics & Transportation segment now representing 52% of the company’s operating margin, compared to 48% for the Gathering & Processing segment. This shift reflects the company’s strategic investments in midstream infrastructure and the growing importance of its downstream operations.
The following chart breaks down Targa’s business mix for Q1 2025:
The company’s financial performance benefits from its predominantly fee-based business model, with approximately 90% of the business insulated from commodity price fluctuations. This provides stability while still allowing for some upside potential from commodity price increases. According to the presentation, a 30% increase in commodity prices would positively impact Adjusted EBITDA by approximately $130 million, while a 30% decrease would result in only about an $80 million reduction.
2025 Outlook and Forward-Looking Statements
Targa reaffirmed its 2025 outlook, originally presented in February 2025, projecting Adjusted EBITDA between $4,650 million and $4,850 million. The company also maintained its capital expenditure guidance, with net growth capex of $2,600-$2,800 million and net maintenance capex of $250 million.
Key drivers for 2025 growth include continued volume increases in the Permian Basin, higher NGL and fractionation volumes, increased LPG export volumes, and benefits from the Badlands refinancing. The company also expects to realize the full impact of system expansions from projects completed in 2024 and 2025.
The following chart details Targa’s 2025 outlook and key growth drivers:
For the full year 2025, Targa projects net income attributable to Targa Resources Corp. of approximately $1,555 million, which reconciles to an estimated Adjusted EBITDA of $4,750 million (the midpoint of the guidance range).
Executive Summary
Targa Resources delivered strong financial results in the first quarter of 2025, with Adjusted EBITDA increasing 22% year-over-year to $1,178.5 million, despite operational challenges from winter weather events. The company’s strategic shift toward a more balanced business mix, with the Logistics & Transportation segment now representing 52% of operating margin, demonstrates the success of its integrated midstream strategy.
With approximately 90% of its business being fee-based, Targa maintains a stable financial foundation while continuing to invest in growth projects. The company reaffirmed its 2025 outlook, projecting Adjusted EBITDA between $4,650 million and $4,850 million, supported by ongoing volume growth in the Permian Basin and expansion of its logistics and transportation infrastructure.
As Targa continues to execute its growth strategy, investors will be watching closely to see if the company can maintain its momentum throughout 2025 and deliver on its financial projections despite the operational challenges experienced in the first quarter.
Full presentation:
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