10-QPeriod: Q1 FY2012

Targa Resources Corp. Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 4, 2012For Securities:TRGP

Summary

Targa Resources Corp. (TRC) reported its first quarter 2012 financial results, showing a significant increase in net income to $69.2 million, up from $40.8 million in the same period of 2011. This growth was driven by higher commodity sales volumes and increased fee-based revenues within its Logistics and Marketing segment. The company also benefited from a substantial increase in gross margin, up 20% year-over-year, indicating improved operational performance and cost management. Financially, Targa Resources demonstrated solid operational execution. The company's balance sheet reflects total assets of $3.70 billion as of March 31, 2012, with a notable increase in Property, plant and equipment, net, to $2.87 billion. Long-term debt stood at $1.47 billion. Cash provided by operating activities was strong at $138.8 million for the quarter, supporting its operational needs and strategic initiatives. Investors should note the company's focus on growing its fee-based revenue streams and managing commodity price exposure through hedging activities.

Financial Highlights

46 data points
Beta

Net Income

$9.60M

EPS (Diluted)

$0.23

Total Assets

$3.70B

Cash & Equivalents

$121.20M

Free Cash Flow

$35.80M

Financial Statements
Beta
Gross Profit$261.60M
Operating Expenses$1.54B
Operating Income$107.70M
Interest Expense$30.50M
Net Income$9.60M
EPS (Basic)$0.23
EPS (Diluted)$0.23
Shares Outstanding (Basic)41.00M
Shares Outstanding (Diluted)41.80M

Key Highlights

  • 1Net income increased significantly to $69.2 million for the three months ended March 31, 2012, compared to $40.8 million in the prior year period.
  • 2Gross margin saw a healthy increase of 20% to $261.6 million, reflecting improved revenue capture and cost management.
  • 3Operating margin increased by 25% to $190.0 million, demonstrating enhanced core operational profitability.
  • 4The company reported strong operating cash flow of $138.8 million for the quarter.
  • 5Targa Resources completed significant financing activities in January 2012, including a public offering of common units by the Partnership and a senior notes offering, raising substantial proceeds used for general partnership purposes and debt reduction.
  • 6Property, plant and equipment, net, increased to $2.87 billion, reflecting continued investment in infrastructure.
  • 7The company's ownership in the Partnership increased to 16.2% from 15.5% in the prior year, benefiting from strategic unit purchases.

Frequently Asked Questions

Revenue growth was primarily driven by higher commodity sales volumes ($105.3 million increase) and increased fee-based and other revenues ($69.1 million increase), partially offset by lower realized prices for natural gas and NGLs.

Targa Resources, primarily through its Partnership, utilizes derivative instruments such as swaps and purchased puts (floors) to hedge exposure to commodity price risk for a portion of its expected natural gas, NGL, and condensate equity volumes. These hedges aim to reduce volatility in operating cash flow.

The noncontrolling interests represent the portion of the Partnership's equity not owned by Targa Resources Corp. Since Targa consolidates the Partnership's financial results due to its control over the general partner, net income attributable to noncontrolling interests reflects the share of the Partnership's net income belonging to other limited partners.

In January 2012, the Partnership completed a public offering of common units, raising approximately $150 million (net of discounts), and also issued $400 million in senior notes, raising approximately $395.6 million. Targa Resources' subsidiary also purchased common units of the Partnership as part of the equity offering. These proceeds were used for general partnership purposes and debt reduction.