Targa Remains Leveraged to Permian Gas and Natural Gas Liquids Growth

Targa Resources is primarily a gatherer and processor of natural gas, with 70% of its gathering and processing assets in the Permian, which generates about 80% of its volumes. The firm has historically outgrown Permian production growth, given its leverage to growth-oriented customers and robust gas/oil ratios. It has aggressively made acquisitions as well, with Lucid in 2022 for $3.5 billion its biggest deal yet. To date, it has contributed to very healthy near-term growth. However, we expect its fee floors and balance sheet to be tested in a down market over the next few years.