Targa Resources Corp. (NYSE:TRGP) has been on a strong run this year, posting gains of almost 55% since the beginning of 2026. A primary driver behind the rally is the 20-year fee-based agreement that the company signed with ExxonMobil in August.
Despite the stock’s substantial gains and concerns that its rally could be nearing its peak, the analysts over at Truist see further upside ahead. On September 21, Truist raised its price target on TRGP from $312 to $345, while reaffirming a ‘Buy’ rating on the shares. The target boost implies an upside of over 19% from the current levels, and even exceeds the stock’s all-time high of just under $308 achieved last month.
The firm revised its estimates to incorporate Targa’s agreement with ExxonMobil for Permian processing and downstream volumes. Truist views the agreement favorably, citing the longer contract runway and improved terms. The deal also expands Targa’s acreage dedications and G&P inlet volumes, with additional growth potential from downstream NGL and residue gas volumes.
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Targa’s Exxon Deal Unlocks Long-Term Growth:
A major positive from Targa’s agreement with ExxonMobil is that it provides greater visibility into future volumes while shifting more of its Permian earnings base toward a contracted, fee-based structure.
The company is also adding infrastructure tied to the planned production growth, potentially providing a multi-decade source of gathering, processing, and downstream cash flows. Targa has planned three new natural gas processing plants in the Permian Delaware as part of the deal, with an aggregate capacity of roughly 825 MMcf/day. Additionally, it is planning a 70-mile natural gas pipeline, Bull Run II, to transport gas from the new plants to the Waha hub. The pipeline is supported by take-or-pay commitments, giving the company contractual protection around the new takeaway investment.
Targa is also evaluating up to five additional new processing plants and an additional fractionation train in Mont Belvieu. This suggests that the Exxon agreement could become the foundation of a broader infrastructure buildout if Permian production continues to expand.
Targa expects this agreement to add significantly to its “strong growth rate well into the next decade and bolster its outlook for durable and growing adjusted free cash flow over the long term”. The company now expects its full-year 2026 adjusted EBITDA to be at the top end of its guidance range of $5.7 billion to $5.9 billion, driven by stronger marketing margins in the first half of the year and continued growth in volumes across its integrated asset network.
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Targa’s Growth Comes with a Heavy Price:
The primary concern here is that the long-term growth opportunity requires substantial upfront capital before the associated cash flows fully materialize. Therefore, Targa raised its growth capital estimates for FY 2026 to $5 billion, reflecting investments in the new Delaware processing plants, associated field capital, and the Bull Run II pipeline.
There is also a timing risk, as the company’s planned three plants and Bull Run II pipeline are not expected to enter service until the first half of 2028. Targa has several projects under construction already, and any delays or cost overruns could reduce returns on its growth capital program.
Conclusion:
Truist’s raised price target reflects the market’s growing confidence in Targa’s recent agreement with ExxonMobil. Despite the high growth capital and execution risks, the deal’s long-term contracted volumes and downstream opportunities provide a credible path to sustained cash flow growth.
Market Sentiment:
Targa Resources Corp. was held by 54 hedge funds at the end of Q2 2026 in the Insider Monkey database, with a total investment value of just over $1.7 billion. This is up from 49 hedge fund investors with a cumulative stake value of approximately $1.6 billion in the previous quarter.
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This article is originally published at Insider Monkey.
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