10-QPeriod: Q3 FY2015

Targa Resources Corp. Quarterly Report for Q3 Ended Sep 30, 2015

Filed November 3, 2015For Securities:TRGP

Summary

Targa Resources Corp.'s (TRC) third-quarter 2015 results reflect a significant strategic shift following the substantial acquisition of Atlas Energy, L.P. (ATLS) and Atlas Pipeline Partners, L.P. (APL) earlier in the year. While consolidated revenues declined compared to the prior year, driven by lower commodity prices, the integration of Atlas assets boosted fee-based revenues and expanded operational scale. The company's financial performance highlights the ongoing impact of integrating these large-scale acquisitions, which have increased the company's asset base and complexity. Despite a challenging commodity price environment, TRC has maintained a focus on its midstream operations, with its Targa Resources Partners LP (the Partnership) segment showing increased throughput volumes and growth in fee-based services. The company's balance sheet reflects the significant increase in assets, liabilities, and goodwill associated with the Atlas transactions. Management is actively managing its debt and capital structure, with a significant amount of debt added due to the acquisitions. The company's liquidity remains adequate, supported by its credit facilities and cash flow from operations, though the low commodity price environment presents ongoing risks.

Financial Highlights

50 data points
Beta

Net Income

$12.70M

EPS (Diluted)

$0.23

Total Assets

$13.37B

Cash & Equivalents

$102.90M

Free Cash Flow

$22.20M

Financial Statements
Beta
Gross Profit$468.80M
Operating Income$115.30M
Net Income$12.70M
EPS (Basic)$0.23
EPS (Diluted)$0.23
Shares Outstanding (Basic)56.00M
Shares Outstanding (Diluted)56.10M

Key Highlights

  • 1Total revenues for the nine months ended September 30, 2015, decreased to $5.01 billion from $6.58 billion in the prior year period, largely due to lower commodity prices.
  • 2Net income attributable to common shareholders for the nine months ended September 30, 2015, significantly decreased to $31.4 million from $76.8 million in the prior year period.
  • 3The company's total assets more than doubled from $6.45 billion at December 31, 2014, to $13.42 billion at September 30, 2015, primarily due to the Atlas mergers.
  • 4Long-term debt increased substantially from $2.89 billion to $5.94 billion, reflecting financing for the Atlas acquisitions.
  • 5The Atlas mergers resulted in the addition of $551.4 million in goodwill.
  • 6The company's Field Gathering and Processing segment showed strong growth in operating margin, up 21% for the nine months ended September 30, 2015, compared to the prior year, driven by increased throughput and the inclusion of acquired assets.
  • 7A subsequent event disclosed is the agreement for Targa Resources Corp. to acquire all outstanding common units of Targa Resources Partners LP, expected to close in the first quarter of 2016.

Frequently Asked Questions

The substantial increase in assets and debt on the balance sheet is primarily attributable to the completion of the Atlas mergers (ATLS and APL) in February 2015. These acquisitions significantly expanded the company's midstream infrastructure and operational footprint.

Lower commodity prices significantly impacted Targa's results, leading to a decrease in revenues from commodity sales and a corresponding reduction in product purchases. While this resulted in a lower overall revenue figure, the impact on gross margin was partially mitigated by hedging activities and increased fee-based service revenues.

The proposed 'buy-in' acquisition of Targa Resources Partners LP by Targa Resources Corp. aims to simplify the corporate structure by consolidating all operations under a single entity. This is expected to eliminate the incentive distribution rights (IDRs) and streamline management, potentially leading to greater financial flexibility and efficiency.

The integration of Atlas assets significantly bolstered the Field Gathering and Processing segment, contributing to a notable increase in operating margin due to expanded capacity and pipeline mileage. However, other segments like Coastal Gathering and Processing and Logistics and Marketing experienced some margin compression due to lower commodity prices and specific market dynamics.