Targa Resources Corp. Quarterly Report for Q2 Ended Jun 30, 2012

Summary

Targa Resources Corp. (TRC) reported its second-quarter and first-half 2012 financial results, showcasing a period marked by fluctuating commodity prices and strategic operational adjustments. While consolidated revenues saw a decline year-over-year due to lower realized commodity prices, the company's operational performance, particularly within the Partnership's Logistics Assets segment, demonstrated resilience and growth. The company's strategic focus remains on increasing cash available for dividends to stockholders, largely driven by distributions from its interests in Targa Resources Partners LP (the Partnership). Significant capital expenditures were allocated towards expansion projects in gathering and processing infrastructure, as well as logistics assets, indicating a commitment to future growth. The company's balance sheet as of June 30, 2012, indicates total assets of $3.78 billion and total liabilities of $2.27 billion, with total owners' equity at $1.51 billion. Debt levels, particularly for the Partnership, remain substantial, though management asserts compliance with debt covenants. The company's liquidity appears adequate, with sufficient resources expected from internally generated cash flow, credit facilities, and potential equity/debt offerings to meet obligations over the next twelve months. Investors should monitor the impact of commodity price volatility, regulatory changes (such as new EPA rules on air emissions), and the Partnership's continued ability to execute its growth strategy.

Key Highlights

• 1Consolidated revenues decreased by 24% for the three months ended June 30, 2012, compared to the prior year, primarily due to lower commodity prices, partially offset by higher volumes and fee-based revenues.
• 2Operating margin for the consolidated entity showed a decrease of 7% for the three months ended June 30, 2012, compared to the prior year, impacted by lower gross margin and increased operating expenses.
• 3The Logistics Assets segment experienced a significant 37% increase in operating margin for the three months ended June 30, 2012, driven by capacity expansions and acquisitions.
• 4Targa Resources Partners LP completed a public offering of common units and a senior notes offering in January 2012, raising approximately $563.9 million in combined net proceeds to fund general partnership purposes and repay debt.
• 5As of June 30, 2012, Targa Resources Corp. held a 14.5% limited partnership interest in Targa Resources Partners LP, along with a 2% general partner interest and all Incentive Distribution Rights (IDRs).
• 6Capital expenditures for the six months ended June 30, 2012, totaled $238.7 million, primarily for expansion projects in gathering, processing, and logistics assets.
• 7The company reported a net income available to common shareholders of $8.6 million for the three months ended June 30, 2012, down from $10.5 million in the same period of 2011.

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