Initiate At Buy: Full Throttle Ahead For The Permian Polesitter; $314 PT

研报英文原文证据摘录

Initiate At Buy: Full Throttle Ahead For The Permian Polesitter; $314 PT

Targa Resources Corp. (TRGP)

Equity Research

June 18, 2026

Taken together, we find comfort in underwriting a longer-term view into TRGP’s financial plan vs other

peer midstream operators that have a comparatively higher degree of sensitivity to the commodity

macro. Case in point: OKE’s investment thesis relies more heavily on the recovery of Bakken production

volume under a higher for longer crude backdrop, while KNTK’s thesis anchors on the recovery of the

Waha basis to incentivize production from smaller private producers.

NT valuation premium could be a point of push back, but we argue TRGP's fundamentals warrant a

longer-term valuation framework. A common point of investors' reservation on TRGP is its premium

valuation. We acknowledge that TRGP does screen expensive on a FY1 or FY2 basis (+32%/+18%

premium vs NGL peers), but the premium quickly compresses in FY3 and beyond (+15%/+7%/+2%

premium vs NGL peers).

At its core, our thesis argues that TRGP's fundamentals and earnings durability warrant a longer-term

valuation framework. Traditional valuation analysis of NGL businesses is anchored on FY 1 or FY2

earnings, given the businesses' underlying exposure to commodity cycle. But, TRGP's earnings profile

differentiates and has proven to be more durable amidst a soft commodity backdrop (i.e. in FY24-25),

as its unique customer composition of large integrated O&G majors boast more efficient drilling

economics that can sustain activities throughout the cycle. The same customer composition also

offers TRGP more visibility as they operate on a multi-year production plan, as compared to smaller

privates whose drilling economics and products plans are more susceptible to commodity pricing.