10-QPeriod: Q3 FY2019

Targa Resources Corp. Quarterly Report for Q3 Ended Sep 30, 2019

Filed November 7, 2019For Securities:TRGP

Summary

Targa Resources Corp. (TRGP) reported its third-quarter 2019 financial results, demonstrating resilience and strategic execution in a dynamic energy market. While total revenues saw a significant decrease year-over-year, largely due to lower commodity prices impacting commodity sales, the company's operational performance remained strong, with an increase in operating margin by 6%. This growth in operating margin was driven by increased volumes across its Permian and Badlands gathering and processing operations and robust performance in its Logistics and Marketing segment. The company also made significant strides in its growth projects, including the full service of the Grand Prix NGL pipeline and the commencement of new processing plants. Financially, TRGP managed its debt effectively, utilizing proceeds from asset sales, notably the divestiture of a 45% stake in Targa Badlands, to strengthen its balance sheet. The company maintained its dividend payments to common shareholders, underscoring its commitment to returning capital to investors. Looking ahead, TRGP is focused on continued growth through strategic expansions in key basins like the Permian and advancing its downstream infrastructure projects. The company's prudent financial management, demonstrated by its ability to fund substantial capital expenditures and service its debt obligations, positions it favorably to navigate market volatility and capitalize on future opportunities in the midstream energy sector.

Financial Highlights

47 data points
Beta

Revenue

$1.90B

30.2% Gross Margin

Net Income

-$47.30M

-2.5% Net Margin

EPS (Diluted)

$-0.34

Total Assets

$18.92B

Cash & Equivalents

$326.30M

Free Cash Flow

-$316.40M

Financial Statements
Beta
Revenue$1.90B
Cost of Revenue$1.33B
Gross Profit$574.40M
Operating Income$41.60M
Net Income-$47.30M
EPS (Basic)$-0.34
EPS (Diluted)$-0.34
Shares Outstanding (Basic)232.70M
Shares Outstanding (Diluted)232.70M

Key Highlights

  • 1Total revenues decreased by 36% year-over-year for the three months ended September 30, 2019, primarily due to lower commodity prices impacting commodity sales.
  • 2Operating margin increased by 6% for the nine months ended September 30, 2019, compared to the same period in 2018, driven by growth in both the Gathering and Processing and Logistics and Marketing segments.
  • 3The Grand Prix NGL pipeline commenced full service into Mont Belvieu in Q3 2019, a key component of the Logistics and Marketing segment's expansion.
  • 4The company completed the sale of a 45% interest in Targa Badlands for $1.6 billion in April 2019, using the proceeds to repay debt and fund its growth capital program.
  • 5Capital expenditures for growth projects remained substantial, with $2,203.4 million invested in the nine months ended September 30, 2019, primarily in the Permian Basin and downstream expansions.
  • 6Targa Resources Corp. declared and/or paid common stock dividends of $0.91 per share for each quarter of the nine months ended September 30, 2019.
  • 7The company reported a net loss attributable to common shareholders of $(78.6) million for the three months ended September 30, 2019, compared to $(54.0) million in the prior year period.

Frequently Asked Questions

For the three months ended September 30, 2019, Targa Resources reported total revenues of $1,902.5 million, a decrease from $2,986.4 million in the same period of 2018. This decrease was primarily driven by lower commodity sales due to reduced prices. However, the company's operating margin saw a slight decrease to $374.2 million from $408.0 million, while gross margin also decreased to $574.4 million from $602.9 million. Despite the revenue decline, the company's operating margin performance indicates effective cost management and operational efficiency.

The Gathering and Processing segment's operating margin decreased by 18% to $208.6 million, impacted by lower commodity prices and South Texas volumes, partially offset by higher Permian and Badlands volumes. The Logistics and Marketing segment showed strong performance, with operating margin increasing by 32% to $228.9 million, driven by higher NGL transportation, fractionation, and export volumes, including contributions from the Grand Prix pipeline and Train 6.

As of September 30, 2019, Targa Resources had $326.3 million in cash and cash equivalents and significant availability under its credit facilities, totaling $1,800.5 million on a consolidated basis. The company's total debt obligations were $7,537.7 million. The company repaid debt using proceeds from asset sales and managed its debt profile effectively, maintaining compliance with debt covenants. The company believes its liquidity and cash flow are sufficient to meet its obligations for at least the next twelve months.

Targa Resources continued to invest heavily in growth projects. For the nine months ended September 30, 2019, growth capital expenditures totaled $2,203.4 million. Key initiatives included the expansion of processing plants in the Permian Basin (Midland and Delaware), the construction of fractionation trains (Train 7 and Train 8) in Mont Belvieu, and the extension of the Grand Prix NGL pipeline. Maintenance capital expenditures were $101.5 million.