10-QPeriod: Q3 FY2012

Targa Resources Corp. Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 1, 2012For Securities:TRGP

Summary

Targa Resources Corp. (TRC) reported its third-quarter 2012 financial results, showing a decrease in revenues compared to the prior year, primarily driven by lower commodity prices, though partially offset by increased sales volumes and the addition of petroleum product revenues. The company's operating margin, a key profitability indicator, saw a healthy increase, reflecting strong performance in its Logistics and Marketing segments, particularly in fractionation, treating, terminaling, and export activities. Despite revenue declines, the company emphasized its commitment to shareholder returns through distributions from its subsidiary, Targa Resources Partners LP (the Partnership), and highlighted strategic debt management, including refinancing credit facilities and issuing new senior notes to optimize its capital structure. Key financial metrics indicate resilience amidst challenging commodity price environments. The company's focus remains on operational efficiency and strategic growth through acquisitions and expansions within the Partnership. Investors should note the ongoing impact of commodity price volatility and the company's reliance on the Partnership's cash flows for dividend distributions. The company also reported several subsequent events in October 2012, including credit facility amendments and the redemption and issuance of senior notes, aimed at enhancing financial flexibility and reducing borrowing costs.

Financial Highlights

46 data points
Beta

Net Income

$8.70M

EPS (Diluted)

$0.21

Total Assets

$3.88B

Cash & Equivalents

$120.70M

Free Cash Flow

-$40.20M

Financial Statements
Beta
Gross Profit$240.50M
Operating Income$59.00M
Interest Expense$30.00M
Net Income$8.70M
EPS (Basic)$0.21
EPS (Diluted)$0.21
Shares Outstanding (Basic)41.00M
Shares Outstanding (Diluted)41.90M

Key Highlights

  • 1Revenues decreased by 19% for the three months ended September 30, 2012, compared to the prior year, primarily due to lower commodity prices, partially offset by higher volumes and new revenue streams.
  • 2Operating margin increased by 7% for the nine months ended September 30, 2012, indicating improved core operational profitability.
  • 3The company announced several significant subsequent events in October 2012, including refinancing its Senior Secured Revolving Credit Facility, extending maturity and reducing borrowing costs, and repurchasing outstanding notes.
  • 4Targa Resources Partners LP (the Partnership) completed a $400 million senior notes offering and utilized proceeds to reduce borrowings and for general partnership purposes.
  • 5Net income available to common shareholders increased by 78% to $8.7 million for the three months ended September 30, 2012, compared to $4.9 million in the prior year.
  • 6The company continues to rely on distributions from the Partnership for its cash flow, with specific declared distributions for the quarter of $0.6625 per common unit.
  • 7Capital expenditures for the nine months ended September 30, 2012, totaled $400.2 million, with a significant portion allocated to expansion and acquisitions, reflecting a focus on growth.

Frequently Asked Questions

The primary driver for the revenue decline was the impact of lower realized commodity prices. While sales volumes increased and new petroleum product revenues were added, these were not sufficient to offset the negative impact of lower prices.

Targa Resources Corp. has been actively managing its debt through refinancing efforts. Subsequent to the quarter, they amended their Senior Secured Revolving Credit Facility to extend its maturity and lower borrowing costs. They also repurchased outstanding notes. The company's liquidity relies heavily on distributions from Targa Resources Partners LP, and they have access to credit facilities for additional funding.

Targa Resources Corp. is the parent company that owns interests in Targa Resources Partners LP, which is a publicly traded limited partnership. TRC consolidates the Partnership's financial results and its own cash flows are largely derived from distributions received from the Partnership. TRC aims to increase cash available for dividends to its stockholders by supporting the Partnership's strategy and growth.

The Partnership utilizes commodity derivative instruments, such as swaps and purchased puts (floors), to hedge a portion of its expected natural gas and NGL equity volumes. These hedging activities aim to reduce fluctuations in operating cash flow resulting from commodity price changes. The effectiveness and impact of these hedges are reported in the financial statements.