01—Abstract
Summary
Summary of the 10-K filed February 19, 2013. Cited figures are marked; the original filing is the authoritative source.
Targa Resources Corp. (TRC), in its 2012 10-K filing, primarily acts as a holding company whose main source of revenue is its ownership interests in Targa Resources Partners LP (the Partnership).
The Partnership is a significant midstream energy company engaged in gathering, processing, logistics, and marketing of natural gas and natural gas liquids (NGLs). TRC holds a 2%a general partner interest, all incentive distribution rights (IDRs), and a 12.7% limited partnership interest in the Partnership. The Partnership experienced strong growth in 2012, driven by acquisitions and organic growth projects, notably the acquisition of Badlands in the Williston Basin.
The company's operations are divided into Gathering and Processing, and Logistics and Marketing, serving diverse basins and end-markets. The filing highlights the Partnership's strategically located asset base, leading fractionation position, comprehensive midstream services, efficient operations, and a diverse business mix with an increasing percentage of fee-based revenue as key competitive strengths. The company's financial performance is directly tied to the cash distributions received from the Partnership.
While the Partnership reported strong operational results, TRC, as the parent, navigates the complexities of consolidated financial reporting, non-controlling interests, and its own corporate-level debt and expenses. Investors should monitor the Partnership's ability to generate distributable cash flow and its capacity to fund growth projects and service debt, as these factors directly impact TRC's ability to pay dividends to its shareholders.
02—Key points
Key Highlights
- Targa Resources Corp. (TRC) operates as a holding company with its primary revenue stream derived from its interests in Targa Resources Partners LP (NGLS), a midstream energy company.
- The Partnership made significant acquisitions in 2012, including the $975.8 million acquisition of Badlands operations in the Williston Basin, enhancing its footprint in key growth areas.
- Targa Resources Partners LP continues to execute on its organic growth strategy, with approximately $1.3 billion in announced growth capital expenditures planned through 2014 across various fractionation and processing plant expansions and new projects.
- The Partnership has a diversified asset base across two divisions: Gathering and Processing (Field and Coastal segments) and Logistics and Marketing (Logistics Assets and Marketing and Distribution segments).
- The company's financial health and ability to pay dividends are directly linked to the cash distributions received from the Partnership.
- TRC's significant ownership of the Partnership's Incentive Distribution Rights (IDRs) means a substantial portion of its cash flow is tied to the Partnership's increasing distribution levels.
- The filing indicates a strong focus on growth drivers such as shale plays, producer activity in liquids-rich natural gas areas, and international export opportunities for NGLs.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 19, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Gross Profit | $1.01B$955.50M | +5.4% |
| Operating Income | $336.30M$351.10M | −4.2% |
| Interest Expense | $120.80M$111.70M | +8.1% |
| Net Income | $38.10M$30.70M | +24.1% |
| EPS (Basic) | $0.93$0.75 | +24.0% |
| EPS (Diluted) | $0.91$0.74 | +23.0% |
| Shares Outstanding (Basic) | 41.00M41.00M | 0.0% |
| Shares Outstanding (Diluted) | 41.80M41.40M | +1.0% |
05—Questions
Frequently Asked Questions
What is Targa Resources Corp.'s primary business and how does it relate to Targa Resources Partners LP?
Targa Resources Corp. (TRC) does not directly own operating assets. Its primary business is to hold its interests in Targa Resources Partners LP (the Partnership), which is a leading provider of midstream natural gas and NGL services. TRC's cash flow is generated from the distributions it receives from its general partner interest, limited partner interest, and incentive distribution rights (IDRs) in the Partnership.
What were the key growth strategies and achievements for Targa Resources Partners LP in 2012?
In 2012, the Partnership pursued growth through significant acquisitions, such as the $975.8 million acquisition of Badlands in North Dakota, and organic growth projects, including expansions of fractionation capacity and new processing plants. The company also highlighted strong supply and demand fundamentals for its services, particularly in liquids-rich natural gas shale plays, and leveraged its integrated asset base for international NGL export opportunities.
How is Targa Resources Corp.'s financial performance linked to the Partnership's performance?
TRC's financial performance is directly dependent on the cash distributions made by the Partnership. The Partnership's ability to generate cash flow and make distributions is influenced by commodity prices, operational volumes, contract terms, and its capital expenditure programs. Any reduction in the Partnership's distributions would directly impact TRC's cash available for dividends to its shareholders.
What are the main risks identified that could affect Targa Resources Corp. and its Partnership?
Key risks include the Partnership's substantial indebtedness, commodity price volatility affecting revenues and margins, the Partnership's ability to secure new supplies of natural gas and NGLs, potential disruptions to operations, regulatory changes (especially regarding hydraulic fracturing and environmental matters), and the Partnership's reliance on external financing for growth. For TRC, risks also include its dependence on Partnership distributions and its own corporate-level debt and expenses.
06—Continue