Targa Resources (TRGP) Set a Record Quarter and Then Raised the Bar
On August 6, Targa Resources Corp. reported a record second quarter, with adjusted EBITDA reaching $1.60 billion, a 38% increase from the same period a year earlier. Management expects full-year results near the top of its guidance range. Targa, which moves and processes natural gas and natural gas liquids from the Permian Basin, attributes the strength to volume, not just price.
Adjusted EBITDA also rose 14% from the first quarter, driven by Permian gas volumes that increased daily throughput by over 450 million cubic feet. Some producers reduced output due to negative Waha gas prices, but Targa still set a volume record. NGL pipeline volumes, fractionation, and LPG exports also hit records, aided by Train 11, a new fractionator in Mont Belvieu, Texas, that began operations early in the quarter.
Construction is progressing on schedule, with East Driver, a new processing plant for the Midland side of the Permian, starting up late in the quarter ahead of schedule. The company declared a $1.25 per share quarterly dividend on July 16, 25% higher than the payout in the second quarter of 2025. Targa plans to invest about $4.5 billion in net growth this year, with consolidated debt at $19,578 million as of June 30.
Liquidity stands at $3.2 billion, providing a cushion. The company extended its receivables securitization facility to July 30, 2027, raising the size to as much as $800 million. However, lower natural gas prices trimmed margins in the gathering business, and Waha curtailments showed producers can pull back when local prices turn unfavorable.
Hedge fund ownership rose to 54% from 49% in the prior quarter, indicating more big investors are building positions. With a forward earnings multiple of 23.26 as of September 18, the stock is priced for continued growth, but bulls need the new plants and fractionators to keep filling with Permian volume, while bears only need a softer marketing quarter or more curtailed gas to make the debt feel heavier.
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