10-QPeriod: Q1 FY2014

Targa Resources Corp. Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 2, 2014For Securities:TRGP

Summary

Targa Resources Corp. (TRGP) reported strong financial performance for the first quarter of 2014, with revenues significantly increasing by 68% year-over-year to $2.35 billion. This growth was driven by higher commodity sales prices and volumes, as well as increased fee-based revenues, particularly from export activities and fractionation fees. The company's operating margin saw a substantial increase of 58%, reflecting improved operational efficiency and expansion projects coming online. Net income available to common shareholders rose by 46% to $19.6 million, or $0.47 per diluted share. The company also maintained a healthy liquidity position with $91.5 million in total liquidity, supported by strong cash flows from its consolidated operations, which are primarily driven by its interests in Targa Resources Partners LP. Management highlighted increased capital expenditures related to growth projects, signaling continued investment in expanding the company's asset base.

Financial Highlights

49 data points
Beta

Net Income

$19.60M

EPS (Diluted)

$0.47

Total Assets

$6.06B

Cash & Equivalents

$94.90M

Free Cash Flow

$121.00M

Financial Statements
Beta
Gross Profit$379.60M
Operating Income$158.40M
Interest Expense$33.90M
Net Income$19.60M
EPS (Basic)$0.47
EPS (Diluted)$0.47
Shares Outstanding (Basic)42.00M
Shares Outstanding (Diluted)42.10M

Key Highlights

  • 1Revenues increased significantly by 68% to $2.35 billion in Q1 2014 compared to Q1 2013.
  • 2Operating margin grew by 58% to $275.3 million, indicating strong operational performance and leverage from expanded assets.
  • 3Net income available to common shareholders increased by 46% to $19.6 million, with diluted EPS of $0.47.
  • 4Strong growth in Logistics and Marketing segments, particularly driven by increased LPG export activities and fractionation volumes.
  • 5Capital expenditures for growth projects remain a priority, with significant investments in expansion projects.
  • 6Healthy liquidity position maintained with $91.5 million in total liquidity.
  • 7Partnership's operational statistics show substantial increases in crude oil gathered and export volumes.

Frequently Asked Questions

The substantial revenue increase was primarily driven by higher commodity sales prices ($459.8 million), increased commodity volumes ($401.2 million), and higher fee-based and other revenues ($94.1 million). This was particularly boosted by increased export activities and fractionation fees in the Logistics and Marketing segments, as well as expanded throughput volumes from system expansions in the Field Gathering and Processing segment.

Targa Resources Corp.'s capital expenditures are primarily funded through internally generated cash flow from operations, borrowings under its credit facilities, and potentially through the issuance of additional equity and debt securities. For the first quarter of 2014, capital expenditures of $197.7 million were largely funded by operating activities. The company anticipates significant future investment in growth projects.

Targa Resources Corp. (TRGP) is the parent company and owns general and limited partner interests, including Incentive Distribution Rights (IDRs), in Targa Resources Partners LP (NGLS). TRGP consolidates NGLS's financial results because it controls the general partner. TRGP's primary business objective is to increase cash available for dividends to its stockholders by assisting NGLS in executing its business strategy and receiving cash distributions from its interests in NGLS.

The Partnership's commodity hedging activities are primarily used to mitigate the impact of commodity price fluctuations on operating cash flow. While some derivative instruments are designated as cash flow hedges, changes in fair value are deferred in other comprehensive income. For derivatives not designated as hedges, changes in fair value are recognized in earnings, which can cause non-cash volatility. In this quarter, hedging activities had a negative impact on operating margin in the 'Other' segment, reflecting the settlement of derivative contracts against a backdrop of rising commodity prices.