10-QPeriod: Q2 FY2013

Targa Resources Corp. Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 2, 2013For Securities:TRGP

Summary

Targa Resources Corp. (TRC) reported its financial results for the second quarter and first half of 2013, showing mixed performance compared to the prior year. While consolidated revenues increased year-over-year for the quarter, they declined for the six-month period, primarily due to lower NGL prices. Despite revenue headwinds, the company's strategic expansion projects and acquisitions, notably the Badlands acquisition, are progressing. The company is focused on growing its fee-based businesses within its Gathering and Processing and Logistics and Marketing segments. Management highlighted efforts to manage commodity price volatility through hedging activities and maintain compliance with debt covenants. Investors should note the significant capital expenditures for growth projects and the ongoing integration of recent acquisitions. The company's ability to generate distributable cash flow and fund dividends to shareholders remains a key focus, supported by distributions from Targa Resources Partners LP.

Financial Highlights

47 data points
Beta

Net Income

$15.00M

EPS (Diluted)

$0.36

Total Assets

$5.41B

Cash & Equivalents

$82.90M

Free Cash Flow

-$252.90M

Financial Statements
Beta
Gross Profit$265.20M
Operating Income$60.90M
Interest Expense$32.40M
Net Income$15.00M
EPS (Basic)$0.36
EPS (Diluted)$0.36
Shares Outstanding (Basic)41.60M
Shares Outstanding (Diluted)42.10M

Key Highlights

  • 1Consolidated revenues increased by 9% to $1.44 billion for the three months ended June 30, 2013, compared to $1.32 billion in the prior year, driven by higher natural gas prices and volumes, as well as increased fee-based revenues.
  • 2For the six months ended June 30, 2013, consolidated revenues decreased by 4% to $2.84 billion from $2.96 billion in the prior year, largely due to lower NGL prices, partially offset by higher natural gas and condensate prices and increased volumes.
  • 3Operating expenses increased by 24% for the quarter and 22% for the six months, primarily due to system expansions, growth projects, the Badlands acquisition, and higher labor and maintenance costs.
  • 4Depreciation and amortization expenses saw a significant increase of 36% for both the quarter and six-month period, driven by the Badlands acquisition and system expansions.
  • 5The company completed the integration of the Badlands acquisition, which is expected to contribute to rapid growth in volumes and system build-out.
  • 6Total assets grew to $5.41 billion as of June 30, 2013, from $5.11 billion at December 31, 2012, reflecting investments in property, plant, and equipment.
  • 7Long-term debt increased to $2.73 billion as of June 30, 2013, from $2.48 billion at December 31, 2012, primarily to fund business expansion and acquisitions.

Frequently Asked Questions

For the three months ended June 30, 2013, Targa Resources Corp. reported a 9% increase in consolidated revenues to $1.44 billion, driven by higher natural gas prices and volumes, and increased fee-based revenues. However, net income available to common shareholders decreased to $15.0 million from $8.6 million in the prior year, impacted by higher operating expenses, depreciation, and general and administrative costs.

The Badlands acquisition, completed on December 31, 2012, contributed to an increase in property, plant, and equipment and associated depreciation and amortization expenses. Management anticipates rapid growth of volumes and build-out of the Badlands system, with its results included in the Field Gathering and Processing segment. The contingent consideration related to this acquisition was re-estimated, leading to a decrease in the associated liability.

As of June 30, 2013, Targa Resources Corp. and Targa Resources Partners LP had substantial liquidity. The company stated its belief that internally generated cash flow, borrowings under credit facilities, and proceeds from unit offerings would be sufficient to finance operations, capital expenditures, and debt obligations for at least the next twelve months. They intend to pay quarterly dividends to stockholders based on distributions received from Targa Resources Partners LP.

The company, through Targa Resources Partners LP, employs commodity hedging activities primarily to manage exposure to price volatility in natural gas, NGLs, and condensate. These hedges are generally designated as cash flow hedges and involve derivative instruments like swaps and options to mitigate the impact of price fluctuations on operating cash flow.