10-QPeriod: Q1 FY2013

Targa Resources Corp. Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 3, 2013For Securities:TRGP

Summary

Targa Resources Corp. (TRGP) reported its first quarter 2013 financial results, showing a decrease in net income to $33.8 million compared to $69.2 million in the same period of 2012. This decline was primarily driven by lower revenues, which fell to $1.40 billion from $1.65 billion year-over-year, largely due to decreased realized prices for NGLs and condensate. Despite the dip in net income, Targa Resources Corp.'s net income available to common shareholders increased to $13.4 million ($0.32 per diluted share) from $9.6 million ($0.23 per diluted share) in the prior year's quarter, indicating improved profitability for its common shareholders. The company's operational performance was impacted by fluctuating commodity prices and system volume changes across its segments. The Field Gathering and Processing segment saw a decrease in operating margin, while the Logistics Assets segment reported a significant increase. The company also highlighted its ongoing integration of the recently acquired Badlands assets and its strategic efforts to grow through expansions and potential acquisitions, funded by a combination of operating cash flow, debt, and equity issuances.

Financial Highlights

47 data points
Beta

Net Income

$13.40M

EPS (Diluted)

$0.32

Total Assets

$5.15B

Cash & Equivalents

$112.70M

Free Cash Flow

-$28.90M

Financial Statements
Beta
Gross Profit$260.30M
Operating Income$73.90M
Interest Expense$32.10M
Net Income$13.40M
EPS (Basic)$0.32
EPS (Diluted)$0.32
Shares Outstanding (Basic)41.60M
Shares Outstanding (Diluted)42.00M

Key Highlights

  • 1Net income for the quarter decreased to $33.8 million from $69.2 million in Q1 2012, primarily due to lower revenues resulting from decreased commodity prices.
  • 2Net income available to common shareholders increased to $13.4 million from $9.6 million in Q1 2012, with diluted EPS rising to $0.32 from $0.23.
  • 3Total assets grew slightly to $5.15 billion from $5.11 billion at year-end 2012.
  • 4Long-term debt increased to $2.52 billion from $2.48 billion at year-end 2012, with the company utilizing a new accounts receivable securitization facility.
  • 5The company invested $202.9 million in property, plant, and equipment, significantly up from $103.0 million in the prior year's quarter, indicating a focus on growth and expansion.
  • 6Cash flows from operating activities increased to $174.0 million from $138.8 million year-over-year, demonstrating improved operational cash generation.
  • 7Targa Resources Partners LP continued its integration of the Badlands assets, acquired in late 2012, with an anticipated rapid growth in volumes.

Frequently Asked Questions

The primary driver of the decrease in net income was a decline in revenues, which fell by approximately 15% year-over-year. This was mainly due to lower realized prices for NGLs and condensate, partially offset by higher natural gas prices and increased fee-based revenues.

Capital expenditures for property, plant, and equipment significantly increased to $202.9 million in the first quarter of 2013, up from $103.0 million in the same period of 2012. This substantial increase indicates a strong focus on strategic growth initiatives, including system expansions and integration of recent acquisitions, such as the Badlands assets.

The increase in net income available to common shareholders (from $9.6 million to $13.4 million) and the corresponding rise in diluted EPS (from $0.23 to $0.32) is positive for common shareholders. This suggests that while overall profitability was lower, the portion of earnings attributable to common equity holders improved, potentially due to changes in noncontrolling interests or other factors impacting the allocation of earnings.

Long-term debt increased to $2.52 billion. The company utilized a new accounts receivable securitization facility in January 2013, providing up to $200 million in borrowing capacity. This, along with existing credit facilities, is part of their strategy to fund operations, capital expenditures, and meet debt obligations.