Targa Resources Partners LP Analyst Presentation June 1, 2011 2011 Proprietary and Confidential Information
Agenda Part 1 Company Overview Targa Resources Executive Summary Targa Resources Partners LP Business Overview Part 2 Business Description Targa Business Description Introduction Natural Gas Gathering and Processing Division…
Targa Resources Executive Summary 2011 Proprietary and Confidential Information 4
The Targa Story Execution and Growth Targa has clearly demonstrated a powerful, post drop-down growth strategy 1 billion in acquisitions and expansion expenditures completed over the last 5 quarters while operating well inside our…
Targa Management Rene Joyce Chief Executive Officer Executive team possesses over 250 years combined experience Experience Jim Whalen operating, acquiring and Executive Chairman of the Board integrating energy businesses Joe Bob…
Executing Our Growth Strategy with Financial Discipline 1,200 100% Equity as % of Total Capital Raised 1,000 Total Capital Raised ( 000) 75% 800 50% 55% 600 50% 39% 35% 400 25% 200 0 0% Permian/Straddles Versado…
Targa Family Credit Update in millions TRC Standalone(1) 1,254 1,196 Delivered powerful deleveraging to lenders and note holders on a standalone 697 basis 89 89 Fully repaid 500 million senior secured credit facility in less…
Targa Corporate Structure Management & Public Warburg Pincus LLC Directors Shareholders 23.2% interest (42,349,738 Common Shares) TRGP Targa Resources Corp. 2% GP interest (NYSE: TRGP) 100% of IDRs 100% Indirect Ownership…
Industry Dynamics Favor Targa 2011 Proprietary and Confidential Information 10
Partnership Growth Drivers Strong fundamentals and positive industry dynamics create additional organic growth opportunities with attractive returns: CAPEX Project ( Millions) CBF Train 4 expansion (100 MBbl/d) 360 Approved Organic…
Fee-based Contract Mix Percentage Increasing Over 45% of total operating margin could be fee based over the next 3+ years 2013-2014+: The announced 100 MBbl/d CBF Train 4 expansion and potential expansion of import / export…
TRGP Leveraged to the Partnerships Distribution Growth Hypothetical Annualized Pre-Tax Cash Flow to TRGP * in millions 150 131.8 125 112.5 Distributions to TRGP IDRs 100 93.3 73.9 75 Q1 2011 Announced 57.6…
Targa Highlights The Partnership An industry leader well diversified and integrated across the midstream value chain Scale gathering and processing positions in attractive oil and gas producing basins Integrated Logistics Assets…
Targa Resources Partners LP Business Overview 2011 Proprietary and Confidential Information 16
The Midstream Natural Gas Industry The Partnership is one of the few midstream companies with leadership positions in both gathering and processing and NGL logistics Natural Gas Gathering and Processing and Marketing Logistics…
The Partnerships Operations Gathering and Processing Gathering and Processing Highlights 21 natural gas processing plants 11,372 miles of natural gas pipeline Leading position across Permian Basin benefitting from oil production…
The Partnerships Operations Logistics and Marketing Key Assets 800 miles of NGL pipeline 385 MBbl/d net fractionation and treating capacity 1.4 MMBbl above ground storage capacity 65 MMBbl salt dome storage capacity Logistics…
Industry Dynamics Impacting Platform Advances in petrophysical, drilling and completion techniques Strong oil and NGL prices Enhance producer economics and support throughput both in G&P and Downstream Frac spread drives attractive…
The Partnerships Business Unit Overview Division: Gas Gathering and Processing Logistics and Marketing Marketing & Segment: Field Coastal Logistics Assets Distribution NGL Distribution & North Texas System Coastal Straddles…
The Partnerships Business and Contract Mix 2010 Segment Operating Margin Contract Discussion Points Marketing and Other 3% Field Gathering and Processing contracts Distribution 15% are almost entirely POP (percent-of- proceeds)…
Gathering and Processing Contract Mix Q4 2010 Plant Inlet Volumes 2010 Operating Margin Fee 3.8% POP Coastal G&P 28.6% Segment 31% Hybrid 42.5% Field G&P Segment POL 69% 11.0% KW/WH 14.1% Contract Mix By…
Disciplined and Consistent Hedging Program NGL and Condensate Hedge Arrangements as of 03/31/2011 14,000 2.50 12,000 Weighted average price 2.00 Volume (Bbls/d) 10,000 1.50 (/gallon) 8,000 6,000 1.00 4,000 0.50…
Focus on Disciplined Capex CBF Train 4 100 MBbl/d expansion anchored by multi-year supply agreement with DCP Midstream LLC (BBB/NR) CBF Train 3 78 MBbl/d low cost expansion anchored by 10-year fee-based contract with ONEOK (BBB/Baa2)…
Solid Financial Profile Positions the Partnership for Growth NGLS Leverage Ratio and Unit Price Since IPO Throughout Targas history, and through 6.0x 40 major capital market/commodity price 5.5x cycles, Targa has maintained Low…
Conservative TRP Capital Structure Debt / 2010A EBITDA (1) Committed to maintaining relatively 6.0x conservative capital structure to underpin access to capital 5.0x 4.5x TRP has lowest leverage relative to peers 4.0x 3.8x 3.5x 3.7x…
TRP Credit Metrics and Liquidity ( in millions) Pricing / Actual Actual Current Capitalization Maturity Coupon 12/31/10 Changes 3/31/11 Cash and cash equivalents 76.3 (12.7) 63.6 Revolving Credit Facility (1,100) Jul-15 L + 275 bps…
NGLS Key Investment Considerations Producers driven by technology and economics to exploit oil production and combo oil-gas plays Strong industry and oilier shale regions of Barnett, Wolfberry, Bone Springs/Avalon dynamics Strong oil…
Business Description Introduction 2011 Proprietary and Confidential Information 35
Commercial and Operational Management Field G&P Coastal G&P Logistics Assets Marketing & Distribution Products & NGL Wholesale North Coastal Permian (1) SAOU LOU Logistics Crude, Storage Marketing & Marketing & Texas Straddles…
The Partnerships Operations Gathering and Processing Gathering and Processing Highlights 21 natural gas processing plants 11,372 miles of natural gas pipeline Leading position across Permian Basin benefitting from oil production…
The Partnerships Operations Logistics and Marketing Key Assets 800 miles of NGL pipeline 385 MBbl/d net fractionation and treating capacity 1.4 MMBbl above ground storage capacity 65 MMBbl salt dome storage capacity…
Natural Gas Gathering and Processing Division Field G&P Segment 2011 Proprietary and Confidential Information 34
SAOU Overview Description 1,580 miles of gathering pipelines and three processing plants Three cryogenic plants operating, gross capacity of 145 MMcf/d, including Conger plant start up (25 MMcf/d) Rich associated gas with recovered…
SAOU Well Positioned Strong competitive position and proven location result in volume capture of the majority of wells in area Excellent runtime (99%+) and no line losses make Targa a preferred gatherer Contracts are on a theoretical…
SAOU Area Permitting All permits are for oil wells This is an oil play High GPM associated gas 2011 Proprietary and Confidential Information 37
SAOU Area Well Permits SAOU Area Drilling Permits All Oil Wells 2,400 2,100 1,800 1,500 1,200 900 600 300 0 2004 2005 2006 2007 2008 2009 2010 2011 Actual Annualized 2011 Proprietary and Confidential Information…
SAOU Operating Profile SAOU Volumes Operating Discussion 2011 inlet volumes should be meaningfully higher than 2010 100 20 14.1 14.1 14.1 15.3 Favorable outlook for oil/NGL pricing in 2011- 75 15 2014 makes these oil focused…
Permian Overview Description Sand Hills Gathering and Processing System is the primary asset in the Permian Business 100% owned and operated 1,297 miles of pipeline 854 active meters 70,000 compression HP 1983 cryogenic plant with…
Sand Hills Well Positioned Strong competitive position results in volume capture of the majority of wells in area Excellent runtime (99%+) and low losses make Targa a preferred gatherer Low field pressure for producers which enhance…
Oil Well Activity (Sand Hills Area) High drilling, completion and new well connect activity Ector, Midland and Upton Counties (Wolfberry) In 2009, 33 new connects added to the system (lower due to 3000 commodity price and capital…
Sand Hills Operating Profile Sand Hills Volumes Operating Discussion 2011 inlet volumes should meet or exceed 2010 14.4 120 13.2 13.1 15 11.6 Favorable outlook for oil/NGL pricing in 100 2011 - 2013 and new technology 80 10…
Versado Overview Description Targa 63% / Chevron 37% Eunice Gathering and Processing System 860 miles of pipeline 765 active meters 41,000 compression HP 1983 Cryogenic plant with a gross processing capacity of 115 MMcf/d…
Oil Well Permit History Well positioned gathering system for oil focused environment Benefiting from infill drilling behind existing production batteries in an existing oil field Volumes added with little capital investment Rich…
Versado Operating Profile Versado Volumes Operating Discussion 2011 inlet volumes should approximate 2010 250 30 23.0 19.8 Versado is primarily an oil field, driven by oil 22.2 25 200 20.4 prices, declines are partially offset…
North Texas Overview Description Chico Gathering and Processing System 100% owned and operated Approximately 2,107 miles of gathering pipeline 2,253 active meters 92,115 compression HP 2002 cryogenic plant with a processing…
North Texas Assets Well Positioned Well positioned to benefit from operating advantages and cost efficiencies Excellent run time (99%+) and losses less than 2% Two levels of field pressures for producers which enhance their production…
Well Permit History Montague, Cooke, Clay and Wise The oily part of the Barnett Shale 1000 is located in Montague, Wise, Clay 800 and Cooke Counties 600 Drilling peaked in 2008 in the high 400 commodity price environment 200 0…
North Texas Operating Profile North Texas Volumes Operating Discussion 2011 inlet volumes should be meaningfully higher than 2010 200 25 20.1 20.7 18.5 19.0 2010 has seen shift to oily part of the 20 150 Barnett shale in…
Natural Gas Gathering and Processing Division Coastal G&P Segment 2011 Proprietary and Confidential Information 51
Coastal G&P - LOU and Related Businesses Overview Gathering System 100% owned and operated Approximately 700 miles of pipeline Delivers to Targa owned processing plants at Gillis, Acadia, or Lowry 85 active meters Connections with…
Coastal Straddle Assets NOTE: OTHER TARGA ASSETS INDICATED IN BLUE TEXT 2011 Proprietary and Confidential Information 53
Coastal G&P Coastal Straddles & VESCO Capacity The gross asset capacity of the Coastal Straddles and VESCO represents about half of the total gas plant capacity across the GOM Currently our net gas supply throughput is 1.5 Bcf/d for a…
Gulf of Mexico Gas Production GOM production has been declining but is still a significant contributor of overall US production at 6-7 Bcf/d (8 10% of US gas supply) Industry projections for future GOM production vary basically flat…
Coastal G&P Competitive Environment LOU Onshore gathering for Gillis and Acadia capture most wellhead gas in the area Recent connections to other pipelines have taken advantage of LOUs ability to process fairly lean gas in attractive…
Coastal G&P Operating Profile Coastal G&P Volumes Operating Discussion 1,680 1,530 1,558 LOU 2011 inlet volumes should approximate 2010 Connections to other pipelines with processable gas result in 50 additional operating margin…
Logistics and Marketing Division Logistics Assets Segment 2011 Proprietary and Confidential Information 59
Downstream Business Dynamics Shale plays are resetting the landscape of the NGL downstream business According to Pervin & Gertz May 2011, gas production from shale plays to double between now and 2015 (13 to 27 Bcf/d) and NGLs from…
North American Shale Plays 2011 Proprietary and Confidential Information 61
Estimated Y-Grade Expansion Capacity 2,400 Y-Grade Pipeline Capacity and Annual Additions - 2033 New capacity will be built to 2,000 accommodate increasing y-grade from 1,600 Rocky Mountains, Mid- Continent, Permian Basin and…
Fractionators Expand 1,500 Estimated Fractionation Capacity and Annual Additions 1293 50 years to get to 680 MBbl/d 1,200 Then 2X in five years 943 900 825 Inbound and outbound connectivity and 680 supporting infrastructure are…
Logistics Assets Segment Overview Ethylene Production & Feedstock Flexibility 5000 1,800 Once feedstock supply is proved, 1659 ethylene manufacturing will increase 1,600 capacity due to globally competitive cost 4000 1,400…
Logistics Assets Segment Overview Logistics Assets Strategically Located Logistics Assets Highlights Difficult to replicate Integrated asset base Belvieu fractionation: full and expanding 78 MBbl/d CBF Train 3 expansion 40 MBbl/d…
CBF Train 4 Expansion Expansion Review Expansion Review 100 MBbl/d full train 360 million total cost 1/3 cost is for infrastructure to ensure reliability Y-Grade well Ethane well Brine pond Utility infrastructure Condensed…
Products and Crude, Storage and Terminaling (in Logistics Assets Segment) 2011 Proprietary and Confidential Information 67
Products and Crude, Storage and Terminaling Value Proposition Majority of revenue generated through long-term fixed-fee contracts based on volume capacity with take-or-pay features No direct commodity risk, no price regulation…
Positive Business Attributes with Synergy Potential Positive Business Attributes Prospects located in key hubs with multiple modes of transportation (ship, barge, rail, truck, pipeline) Potential to add long-lived, non-seasonal assets…
Multifaceted Business and Growth Strategy Acquire and Build Strategically Positioned Assets Located on waterways and deep water ports with low transportation costs and access to international markets and with links to other petroleum…
Industry Growth Drivers Much of todays energy needs have been met by the utilization of excess capacity that was created by the last investment cycle which ended over 20 years ago Significant dollars will need to be invested in energy…
Asset Map Selected Active Prospects Targa Channelview Terminal Transaction Closed March 2011 2011 Proprietary and Confidential Information 72
Targa Channelview Terminal Targa Channelview Terminal - Channelview, TX Location: Houston Ship Channel - Carpenters Bayou Storage and terminaling facility with truck and barge The Partnership acquired March 2011 Assets 544 MBbl 32…
Targa Channelview Terminal in Relation to Other Targa Assets 2011 Proprietary and Confidential Information 74
Logistics and Marketing Division Marketing and Distribution Segment 2011 Proprietary and Confidential Information 75
Marketing and Distribution Business and Strategy NGL Marketing NGL Marketing Strategy Manages physical distribution of mixed NGLs and Purchase at/or below market for the purpose of reselling at specification products using owned and…
Storage and Terminaling Assets Market Overview Storage and Distribution Terminals NGL Supply/Demand Trends and Impacts 2010 Throughput Facility (millions Higher domestic NGL production increases throughput Count Facility…
Transportation and Distribution Assets Market Overview Pressurized NGL Barges NGL Supply/Demand Trends and Impacts 21 barges with 320 MBbl of For barges, traditional propane movements have been capacity (14 inland, 7 sea-going)…
Marketing and Distribution Business Dynamics NGL Inventories Margin Drivers 3,000 NGL bid/ask spread on spot contracts 2,500 Market Liquidity 2,000 Commodity Price (Domestic and International) 1,500 1,000 Weather 500 Disruptions…
Price Environment Favors US Export Growth US Propane - Import & Export* US Butane - Import & Export* 45 0.40 30 0.25 40 0.35 0.20 25 0.30 35 0.15 0.25 30 20 0.10 per gallon 0.20 per gallon MMBbls MMBbls 25…
International NGL Market Growth NGL International Price vs. Mont Belvieu Market Discussion International price environment favors US exports to 1.90 Central/South America and the Mediterranean 1.80 1.70 1.60 Targa participating in…
Conclusion 2011 Proprietary and Confidential Information 83
Highlights of Fundamental Targa Story North Texas activity driven by oilier portions of Barnett Shale Shift to Oil Montague, Cooke, Clay and Wise Counties Production and Available processing capacity at Chico plant Richer Gas Plays…
Appendix 2011 Proprietary and Confidential Information 85
Non-GAAP Measures Reconciliation This presentation includes non-GAAP financial measures of Adjusted EBITDA, operating margin and distributable cash flow. The presentation provides reconciliations of these non-GAAP financial measures…
Non-GAAP Measure Reconciliation Adjusted EBITDA The following table presents a reconciliation of as reported adjusted EBITDA to net income (loss) for the periods shown: Three Months Twelve Months Ended December 31, Ended March…
Non-GAAP Measure Reconciliation - DCF The following table presents a reconciliation of reported distributable cash flow to net income (loss) for the periods shown: Millions Three Months Ended 31-Mar 30-Jun 30-Sep 31-Dec 31-Mar…
Non-GAAP Measure Reconciliation Operating Margin Twelve Months Ended December 2010 2009 ( in millions) Reconciliation of gross margin and operating margin to net income (loss): Gross margin 772.2 710.9 Operating expenses (259.5)…
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