Americas Pipelines and MLPs: Permian Gas Processing Outlook: Plenty of Growth, Own TRGP for Further Share Gains and KNTK for M&A

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Equity Research

10 September 2026 | 4:02PM EDT

Americas Pipelines and MLPs: Permian Gas Processing Outlook: Plenty

of Growth, Own TRGP for Further Share Gains and KNTK for M&A

We introduce our Permian Basin natural gas processing capacity model,

supporting our view that: 1) Targa should continue to grow its already-leading

market share, and 2) Kinetik looks increasingly attractive as a M&A target. In this

note we: 1) discuss our view of significant Permian natural gas production growth,

where we see a ~6% volume CAGR (wet gas) 2025-32; 2) outline required gas

processing additions - with at least ~11.5 bcf/d needed and ~14 bcf/d likely to be

added, with ~7 bcf/d already announced/under construction; 3) note market share

across the various gathering and processing companies (G&Ps); and 4) break down

our views of who will gain or lose share going forward. Overall, we expect midstream

capex levels in the Permian will need to remain high, but we do not expect

processing capacity to constrain overall supply growth; periods of tightness are more

likely driven by gas pipeline capacity (2H27-early 2028, and again 1H29 before

Solitude and DSW come online), gas compression (potentially YE27+), and water

disposal (Northern Delaware later this decade). From a company perspective, we see

Targa (TRGP, Buy) as most likely to gain further processing share in the basin on the

back of continued organic wins (most notably their recent agreement with XOM),

moving to ~27% by 2032 on GSe from an already-leading ~23% currently. Otherwise,

we expect the balance of our coverage to largely maintain their relative shares as

new large organic packages appear more limited, while smaller-scale privates and/or

E&P operators are more likely to lose share over time as the value of downstream

NGL integration becomes more critical. Given their existing NGL capacity and large

incumbent G&P footprints, we acknowledge room for Energy Transfer (ET, Neutral)

and Enterprise (EPD, Neutral) to potentially outperform our forecasts, while others

may need larger downstream footprints (MPLX) and/or have to accept lower margins

to gain significant share (OKE).…