Targa Resources Investor Presentation Second Quarter 2016 August - PowerPoint PPT Presentation

Targa Resources Investor Presentation Second Quarter 2016 August 3, 2016

Forward Looking Statements Certain statements in this presentation are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this presentation that address activities, events or developments that Targa Resources Corp. (NYSE: TRGP; “Targa”, “TRC” or the “Company”) expects, believes or anticipates will or may occur in the future are forward- looking statements. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties, factors and risks, many of which are outside the Company’s control, which could cause results to differ materially from those expected by management of Targa Resources Corp. Such risks and uncertainties include, but are not limited to, weather, political, economic and market conditions, including declines in the production of natural gas or in the price and market demand for natural gas and natural gas liquids, the timing and success of business development efforts, the credit risk of customers and other uncertainties. These and other applicable uncertainties, factors and risks are described more fully in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 and other reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. 2

Targa’s Corporate Structure TRC Public Shareholders (166,630,466 Shares) (1) Targa Resources Corp. TRC Closed in March 2016  Term Loan B (NYSE: TRGP) Preferred ~$1 billion Series A Preferred Stock  Revolving Credit Facility (S&P: BB- Shareholders 9.5% dividend paid quarterly  Moody’s: Ba2) 100% Interest Senior Notes Targa Resources Partners LP TRP Issued in October 2015  Revolving Credit Facility (S&P: BB-/BB- Preferred $125 million Series A Preferred Units  Moody’s: Ba2/Ba3) Unitholders A/R Securitization Facility 9% distribution paid monthly  (2) 53% of 2Q 2016 Operating Margin 47% of 2Q 2016 Operating Margin Logistics and Marketing Segment Gathering and Processing Segment (“Downstream”) (1) Represents outstanding shares of our common stock beneficially owned and outstanding as of July 29, 2016 (2) Includes the effects of commodity derivative hedging activities 3

Strong Asset Base Poised for Growth Drive Targa’s A Strong Footprint in And a Leading Position at Active Basins Mont Belvieu Long-Term Growth Premier Permian Basin footprint Fractionation ownership Minimal hedges beyond 2016 will    across Midland Basin, Central position in NGL market hub at provide tailwinds in a rising Basin Platform and Delaware Mont Belvieu commodity price environment Basin Most flexible LPG export facility Disciplined balance sheet   Dedicated acreage across the on the US Gulf Coast management means Targa is well  most attractive counties positioned across any Positions not easily replicated exposed to Bakken activity  environment Additional NGL volumes will Midcontinent position well Continued G&P expansions as    flow to Mont Belvieu as ethane exposed to SCOOP play and activity increases demand increases from US Targa developing options to ethane exports and new Will add fractionation over time access STACK play  petchem crackers to support NGL supply increases Growing Eagle Ford presence  through attractive JV 4

Attractive Asset Footprint  Targa’s footprint has been impacted by reduced activity, but is positioned in some of the best basins / areas  Diversified customer base U.S. Land Rig Count by Basin (1) 2,000 Permian 1,800 Eagle Ford 1,600 Williston 1,400 Marcellus 1,200 Mississippian Asset Highlights 1,000 Granite Wash 800  ~8 Bcf/d gross processing capacity DJ-Niobrara 600  39 natural gas processing plants Haynesville 400  Over 25,000 miles of natural gas and crude oil pipelines Utica  Gross NGL production of 321 MBbls/d in Q2 2016 200  3 crude and refined products terminals (2.5 MMBbls of storage) Barnett 0  Over 670 MBbl/d gross fractionation capacity Q1 - Q2 - Q3 - Q4 - Q1 - Q2 - Q3 - Q4 - Q1 - Q2 - July - Others 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016  7.0 MMBbl/month or more capacity LPG export terminal (1) Source: Baker Hughes; data through July 22, 2016 5

Producer Activity Drives NGL Flows to Mont Belvieu  Growing field NGL production Rockies increases NGL flows to Mont Belvieu  Increased NGL production will support Targa’s expanding Mont Belvieu and Galena Park presence  Petrochemical investments, fractionation and export services will continue to clear additional supply  Targa’s Mont Belvieu and Galena Park businesses very well positioned Mont Belvieu NGL Production (1) Galena 350 Park 300 NGL Production (MBbl/d) 250 200 306 150 303 Rest of the 282 251 World 100 206 178 169 50 0 2010 2011 2012 2013 2014 2015 YTD 2016 (1) Pro forma Targa/TPL for all years 6 6

Business Mix, Diversity and Fee Based Margin Business Mix – Field G&P Diversity – Q2 2016 Operating Margin Q2 2016 Natural Gas Inlet Volumes 2% 9% 16% 24% 47% 53% 17% 5% 12% 6% 9% * * * SAOU WestTX Sand Hills Downstream G&P * Versado North Texas WestOK Fee-Based Margin – SouthOK SouthTX Badlands Q2 2016 * Permian Basin At IPO in 2007, TRP operated a single G&P system  (North Texas), with ~100% POP exposure 22% Since then, TRP has developed into a fully diversified  midstream services provider: Significant margin contributions from both  Downstream and G&P operations Diversification across 10+ shale/resource plays  78% Diversification in downstream activities  (fractionation, LPG exports, treating, storage, etc.) Greater than 75% fee-based margin for 2016E  Fee Percent of Proceeds provides cash flow stability 7

Strategic Focus – 2H 2016 In addition to ongoing cost reduction efforts across all businesses (opex and capex), the following reflects Targa’s  second half 2016 strategic focus: Protecting and improving the balance sheet remains a priority  Continued Balance Sheet Depending on market conditions, continue to utilize ATM to issue common equity  Improvement ~$250 million of proceeds raised since May 2016  Capital spending focused on efficiently meeting customer needs  Capital Delaying/deferring some Field G&P projects, and accelerating others depending on  Investment expected activity levels Efficiency Identifying and pursuing low cost investments/options that benefit from price recovery  cases Continuing to focus efforts on enhancing gross margin through re-contracting efforts  across our G&P footprint, which often includes the addition of incremental fees Continuing to Investing around our assets and around our customer contracts – strong existing asset  Identify and base creates opportunities Capture Utilizing existing infrastructure to continue to grow or gain entry into most attractive G&P  Opportunities areas – Wolfcamp/Spraberry, Delaware Basin, SCOOP and STACK Executing on compelling downstream projects that leverage existing footprint  8

Leverage and Financial Position Senior Note Maturities (1) Protecting and improving the balance sheet has  remained a focus $2,000 Senior Note Maturities ($ in MM) TRC’s acquisition of TRP on February 17 th  $1,600 improved Targa’s credit profile by increasing No overall retained cash flow $1,192 significant $1,200 TRP’s $1.6 billion revolver and TRC’s $670 million maturities  revolver remain outstanding $749 $734 $800 $580 TRP’s Series A Preferred Units remain outstanding  $485 $439 $323 $400 On March 16 th , Targa closed a ~$1 billion 9.5%  private placement of Series A Preferred Stock $0 Treated as equity under TRC credit agreement  2016 2017 2018 2019 2020 2021 2022 2023 2024 Use of proceeds to reduce debt, including open  Pro Forma Leverage and Liquidity market repurchases of ~$575 million principal of senior notes TRP Compliance Leverage Targa Liquidity Nearest-term 2018 maturity senior notes have  $2,500 6.0x been reduced from $1.1 billion to $734 million TRP Compliance Covenant $2,098 Since late May, Targa has raised ~$250 million of $2,000  5.0x $1,677 proceeds via equity issuances through an ATM ($ in millions) $1,500 program 3.9x 4.0x 3.6x As of June 30, estimated TRP compliance leverage $1,000  ratio was 3.6x (5.5x covenant), and liquidity, 3.0x including availability under both TRP and TRC $500 revolvers, was ~$2.1 billion 2.0x $0 Year End Q2 2016 Year End Q2 2016 2015 2015 (1) As of June 30, 2016 includes TRP senior notes and TRC Term Loan B. Excludes TRP and TRC revolvers 9