01—Abstract
Summary
Summary of the 10-K filed February 20, 2025. Cited figures are marked; the original filing is the authoritative source.
Targa Resources Corp. (NYSE: TRGP) reported a strong 2024 operating year, with Adjusted EBITDA rising 17% to $4.14 billiona, driven by Permian gathering volume growth (total plant inlet up 10%), higher fee-based revenue (up 19% to $2.49 billion), and expanding Logistics and Transportation margins (adjusted operating margin up 19%).
GAAP net income attributable to Targa fell slightly to $1.31 billionb, and the company's risk management results were a drag: a $164.6 million mark-to-market loss in the 'Other' segment versus a $275.5 million gain in 2023. Adjusted free cash flow fell 64% to $140.1 million because growth capex climbed to roughly $3.0 billion, reflecting an aggressive build-out of new processing plants, fractionation trains, and pipelines. Balance sheet and capital allocation were active.
The company issued $1.0 billionc of 5.500% notes due 2035, received rating upgrades to BBB / Baa2 from S&P, Fitch, and Moody's, and entered a new $3.5 billion revolver maturing in 2030. Shareholder returns were significant: dividends were raised to $0.75 per quarter and $754.7 million of common stock was repurchased, with $1.0 billion remaining under authorizations. Liquidity was approximately $2.9 billion as of February 18, 2025.
Subsequent to year-end, Targa agreed to acquire Blackstone's 45% interest in Targa Badlands for about $1.8 billiond and announced further fractionation and LPG export expansions. Key risks for investors include commodity price exposure (the derivative book moved to a $172.2 million net liability), rising leverage given roughly $14.2 billion of total debt, a pending FERC proceeding on whether the Badlands crude system qualifies for a rate waiver, an NMED proposed civil penalty of about $47.8 million related to the Red Hills facility, and the likelihood of becoming subject to the corporate alternative minimum tax as early as 2026.
02—Key points
Key Highlights
- Adjusted EBITDA increased 17% to $4,142.3 million in 2024 from $3,530.0 million in 2023, reflecting strong Permian volume growth and fee-based margin expansion.
- Total revenues rose 2% to $16,381.5 million, with fees from midstream services up 19% to $2,489.7 million, supporting a more fee-based earnings profile.
- Net income attributable to Targa Resources Corp. declined 3% to $1,312.0 million, and diluted EPS was $5.74 versus $3.66 in 2023, aided by lower share count and the absence of prior-year premium charges.
- Adjusted free cash flow fell 64% to $140.1 million as growth capital expenditures rose to $3,000.4 million, driven by new Permian processing plants, Mont Belvieu fractionation Trains 11 and 12, and the Blackcomb pipeline.
- Shareholder returns remained substantial: quarterly dividend raised to $0.75 per share, $754.7 million of share repurchases in 2024, and $1,015.4 million remaining under repurchase authorizations.
- Credit profile improved with upgrades to BBB (S&P and Fitch) and Baa2 (Moody's), and a new $3.5 billion revolving credit facility maturing in February 2030 replaced the prior facility.
- Subsequent to year-end, Targa agreed to acquire Blackstone's 45% interest in Targa Badlands for approximately $1.8 billion, which will give it full ownership of the Badlands assets.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2024, Targa Resources Corp. kept $0.08.
- Revenue$16.38B100.0%
- Cost of revenue−$10.70B65.3%
- Gross profit$5.68B34.7%
- Operating costs−$2.98B18.2%
- Operating income$2.70B16.5%
- Interest, other & tax−$1.42B8.6%
- Net income$1.28B7.8%
Where FY2024 revenue went
$16.38B- Cost of revenue: $10.70B, 65% of revenue
- Operating costs: $2.98B, 18% of revenue
- Net income: $1.28B, 7.8% of revenue
- Interest, other & tax: $1.42B, 8.6% of revenue
Kept 7.8% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2024filed February 20, 2025Financial Statements
FY2024 against FY2023
| Line item | FY2024FY2023 | Change |
|---|---|---|
| Revenue | $16.38B$16.06B | +2.0% |
| Cost of Revenue | $10.70B$10.68B | +0.2% |
| Gross Profit | $5.68B$5.38B | +5.5% |
| Operating Income | $2.70B$2.63B | +2.6% |
| Net Income | $1.28B$835.80M | +53.0% |
| EPS (Basic) | $5.77$3.69 | +56.4% |
| EPS (Diluted) | $5.74$3.66 | +56.8% |
| Shares Outstanding (Basic) | 220.20M224.60M | −2.0% |
| Shares Outstanding (Diluted) | 221.30M226.00M | −2.1% |
05—Questions
Frequently Asked Questions
Why did adjusted free cash flow decline so sharply in 2024 even though EBITDA grew?
Adjusted EBITDA grew to $4.14 billion, but growth capital spending increased to about $3.0 billion, up from $2.2 billion in 2023, as Targa built multiple new cryogenic processing plants in the Permian, expanded fractionation, and invested in the Blackcomb pipeline. Because adjusted free cash flow subtracts growth capex, it fell to $140.1 million. Management expects these projects to generate future fee-based cash flows as they come online in 2025 through 2027.
How much did commodity hedging and mark-to-market accounting affect 2024 results?
Results were meaningfully affected. The 'Other' segment, which captures unrealized mark-to-market changes on derivatives not designated as cash flow hedges, recorded an operating margin loss of $164.6 million in 2024, compared with a gain of $275.5 million in 2023. The company attributes the loss mainly to unfavorable movements in natural gas forward basis prices. The net derivative position moved from a $74.4 million asset at year-end 2023 to a $172.2 million net liability at year-end 2024, so these non-cash swings can create earnings volatility.
What is the Badlands transaction and why does it matter?
On February 18, 2025, Targa agreed to buy the 45% interest in Targa Badlands LLC held by funds managed by Blackstone for about $1.8 billion. Targa currently owns 55%, and after closing it will own 100% of the Bakken-focused Badlands gathering, processing, and crude oil assets. The deal removes a minimum quarterly distribution priority held by Blackstone and simplifies ownership, but it adds significant leverage and capital needs. Investors should also note the pending FERC proceeding on whether Badlands crude pipelines qualify for a rate waiver, since an adverse ruling could require tariff filings and affect rates.
How leveraged is Targa and what are the main debt risks?
Total debt obligations were about $14.2 billion at December 31, 2024, with the majority in fixed-rate senior unsecured notes issued by Targa and its Partnership. Variable-rate borrowings were about $1.5 billion, and a 100 basis point rate increase would raise annual interest expense by about $14.6 million. Interest expense rose 12% to $767.2 million, partly due to a $55.8 million charge related to the Splitter Agreement litigation. The new revolver requires a consolidated leverage ratio of no more than 5.50 to 1.00. Management reports compliance with all covenants and investment grade ratings, but the company notes that a downgrade could raise funding costs.
What regulatory and legal exposures could affect investors?
Several matters merit attention. New Mexico's Environment Department issued a proposed administrative compliance order with a civil penalty of about $47.8 million related to air permit violations at the Red Hills facility, which Targa has contested. A FERC administrative law judge found that the Badlands crude system no longer qualifies for a waiver from common carrier obligations, and FERC has not yet ruled. The company also faces potential corporate alternative minimum tax liability as early as 2026, though management expects its impact to be mainly timing-related. Targa states that none of the pending environmental and legal matters is expected to be material, except that the NMED penalty and FERC outcome remain uncertain.
06—Continue