Targa Resources sets $6 billion adjusted EBITDA floor for 2026

By Tom Whitfield

$6 billion is the floor for Targa Resources’ 2026 adjusted EBITDA, more than $1 billion and more than 21% above 2025. CEO Matt Meloy attributed the outlook to record Permian Basin volumes and a 20-year ExxonMobil agreement that supports further infrastructure expansion.

What does the earnings signal show?

Third-quarter adjusted EBITDA was $1.5 billion, down 6% from the second quarter. Record volumes in Permian gathering and processing, NGL transportation and fractionation were offset by fewer marketing and optimization opportunities and lower liquefied petroleum gas exports.

Record throughput did not prevent a sequential earnings decline.

How strong is Permian growth?

President Jen Kneale said Permian natural gas volumes reached a record 7.5 billion cubic feet per day in the third quarter, up about 5% from the prior quarter and 14% from a year earlier. Volumes curtailed by some producers in the second quarter returned as added pipeline capacity improved Waha natural gas prices.

Meloy expects Permian volume growth in 2027 to match this year’s pace. Customer activity and recent contract wins support several years of double-digit percentage growth, although management gave no numerical schedule for all those years.

The August ExxonMobil agreements are additive to Targa’s existing growth outlook. The 20-year, fee-based contracts cover gathering, processing and downstream services and include acreage dedications in the Delaware and Midland basins.

Asked about economics, Meloy said: “Exxon drove a hard bargain in a competitive process.” Targa nevertheless believes the agreement will earn attractive returns on capital, though the call did not quantify those returns.

Kneale said additional development of the Woodford and Barnett zones could provide upside, but Targa has not factored much of it into the forward outlook because visibility remains limited.

The near-term growth case rests on Permian volumes and the ExxonMobil contracts, not on those less-visible formations.

Which processing projects arrive, and when?

• Copperhead: The Delaware Basin processing plant was in startup ahead of schedule.
• Yeti and Yeti II: The plants are expected to start in the second and third quarters of 2027, respectively, also ahead of schedule.
• Wrangler, Ranger and Ranger II: All three Delaware plants are planned for the second quarter of 2028.
• Long-lead orders: Targa is ordering equipment for two more Delaware plants and one Midland plant, likely needed in 2028 or early 2029.

The project slate is moving ahead of schedule, but most new processing capacity remains a 2027-2029 event.

What does downstream expansion add?

Growth in Permian production contributed to record third-quarter NGL transportation volumes of 1.17 million barrels per day and fractionation volumes of 1.26 million barrels per day, Kneale said. LPG export loadings averaged 13.7 million barrels per month, up 10% from a year earlier but below the second-quarter record.

Train 12 recently began operating ahead of schedule. Train 13 remains on track for the first quarter of 2028, while a planned 14th train at Mont Belvieu is expected to start in the first quarter of 2029. Completion would raise Targa’s operated fractionation capacity at Mont Belvieu to approximately 1.8 million barrels per day.

The Speedway NGL transportation expansion and a major LPG export expansion remain on track for the third quarter of 2027. The export project should increase capacity to about 19 million barrels per month, and Targa has ordered additional Speedway pumps as volumes grow.

More downstream capacity is coming, but the export step-up is scheduled for late 2027.

How much spending and cash return are involved?

CFO Ben Branstetter said Targa’s 2026 growth capital spending outlook remains approximately $5 billion, including projects announced on the call, while estimated net maintenance capital spending is $250 million. Capital spending is likely to remain elevated in 2027, but management provided no total for that year.

Branstetter expects “a meaningful increase in free cash flow in 2028 as major projects enter service.” The call did not provide a free-cash-flow figure.

Targa ended the third quarter with $2.9 billion of available liquidity and a pro forma consolidated leverage ratio of approximately 3.4 times, within its long-term target of three to four times.

Targa declared a third-quarter dividend of $1.25 per share in October, up 25% from a year earlier. Management intends to recommend that the board raise the annual dividend by 20% in 2027 to $6 per share; the increase still requires a board decision.

Through the first nine months of 2026, Targa repurchased approximately $187 million of common stock at an average price of about $261 per share, Branstetter said.

The plan carries substantial spending before the expected cash-flow improvement, while liquidity and leverage remain inside stated limits.

Targa Resources (NYSE: TRGP) is a midstream energy company that gathers, processes, transports and stores natural gas and natural gas liquids, and provides crude oil gathering and terminaling services. Its infrastructure connects producers with pipelines, processing facilities, fractionators, storage sites, and domestic and international markets.

The infrastructure schedule is advancing; the expected cash-flow improvement still depends on projects entering service in 2028.