01—Abstract
Summary
Summary of the 10-K filed February 20, 2020. Cited figures are marked; the original filing is the authoritative source.
Targa Resources Corp. (TRGP) operates as a leading independent midstream energy company in North America, providing essential services for natural gas, NGLs, and crude oil.
The company's operations are primarily divided into two segments: Gathering and Processing, and Logistics and Transportation. In 2019, TRGP continued to expand its asset base through significant organic growth projects, particularly in the Permian Basin, with the completion and ongoing construction of new processing plants and pipeline expansions. The Logistics and Transportation segment also saw growth with expansions in fractionation capacity and LPG export capabilities.
Financially, the company managed its debt levels through strategic debt issuances and the use of proceeds for debt repayment and capital programs. While facing a dynamic commodity price environment, Targa's focus on fee-based contracts, particularly in its Downstream Business, and its hedging strategies aimed to mitigate commodity price exposure and ensure stable cash flows.
The company's outlook involves continued investment in organic growth projects and a strategic approach to acquisitions, leveraging its integrated midstream platform to capture value across the energy supply chain. Investors should note the company's substantial debt, which, while managed, remains a key financial consideration.
02—Key points
Key Highlights
- Targa Resources operates two primary segments: Gathering and Processing, and Logistics and Transportation, offering integrated midstream services.
- The company made significant investments in growth capital expenditures in 2019, totaling approximately $2.6 billion, with an estimated $1.2 to $1.3 billion planned for 2020.
- Key expansions in 2019 included new cryogenic natural gas processing plants in the Permian Basin and progress on the Grand Prix NGL Pipeline.
- Targa Resources actively manages its debt, issuing $1.75 billion in Senior Notes in January 2019 and $1.0 billion in November 2019, primarily to refinance existing debt and fund operations.
- A substantial portion of Targa's revenue is derived from fee-based contracts, especially in its Logistics and Transportation segment, which helps to mitigate commodity price volatility.
- The company sold a 45% interest in Targa Badlands in April 2019 for $1.6 billion, using the proceeds for debt reduction and capital programs.
- Despite lower commodity prices in 2019 compared to 2018, Targa reported an increase in operating margin and Adjusted EBITDA, driven by higher volumes and fee-based services.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2019, Targa Resources Corp. lost $0.02.
- Revenue$8.67B100.0%
- Cost of revenue−$6.12B70.6%
- Gross profit$2.55B29.4%
- Operating costs−$2.36B27.2%
- Operating income$192.9M2.2%
- Interest, other & tax−$402.1M4.6%
- Net income−$209.2M2.4%
Where FY2019 revenue went
$8.67B- Cost of revenue: $6.21B, 72% of revenue
- Operating costs: $2.27B, 26% of revenue
- Operating income: $192.9M, 2.2% of revenue
Kept 2.2% as operating incomeOperating income $192.9M · 2.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 20, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $8.67B$10.48B | −17.3% |
| Cost of Revenue | $6.21B$8.24B | −24.6% |
| Gross Profit | $2.55B$2.25B | +13.7% |
| Operating Income | $192.90M$237.50M | −18.8% |
| Net Income | -$209.20M$1.60M | −13175.0% |
| EPS (Basic) | $-1.44$-0.53 | −171.7% |
| EPS (Diluted) | $-1.44$-0.53 | −171.7% |
| Shares Outstanding (Basic) | 232.50M224.20M | +3.7% |
| Shares Outstanding (Diluted) | 232.50M224.20M | +3.7% |
05—Questions
Frequently Asked Questions
What are Targa Resources' primary business segments?
Targa Resources' operations are organized into two main segments: Gathering and Processing, and Logistics and Transportation (also referred to as the Downstream Business).
How did Targa Resources manage its debt in 2019?
In 2019, Targa Resources managed its debt by issuing $750 million of 6.5% Senior Notes due July 2027 and $750 million of 6.875% Senior Notes due January 2029, and later $1.0 billion of 5.5% Senior Notes due March 2030. Proceeds were used to refinance existing debt and for general partnership purposes.
What is Targa Resources' strategy for future growth?
Targa Resources plans to grow through a combination of organic growth projects, such as expanding existing facilities and building new infrastructure, and strategic third-party acquisitions. The company aims to leverage its integrated midstream platform to capitalize on production growth in key basins.
How does Targa Resources mitigate its exposure to commodity price fluctuations?
Targa Resources utilizes a combination of fee-based contracts, particularly in its Logistics and Transportation segment, and commodity hedging activities. These strategies are designed to reduce the impact of volatile commodity prices on its cash flows and financial performance.
06—Continue