10-QPeriod: Q1 FY2022

Targa Resources Corp. Quarterly Report for Q1 Ended Mar 31, 2022

Filed May 5, 2022For Securities:TRGP

Summary

Targa Resources Corp. (TRGP) reported solid financial results for the first quarter of 2022, demonstrating strong revenue growth driven by higher commodity prices and increased fee-based services. Total revenues increased by 37% year-over-year to $4.96 billion, with commodity sales up 36% and midstream service fees up 48%. This top-line growth translated into a significant increase in Adjusted EBITDA, which rose 21% to $625.8 million. Operationally, the company saw robust growth in its Gathering and Processing segment, with a 45% increase in operating margin, largely fueled by higher natural gas inlet volumes and realized commodity prices, particularly in the Permian Basin. The Logistics and Transportation segment also showed positive momentum, with a 1% increase in adjusted operating margin driven by higher NGL pipeline transportation, fractionation, and export volumes. Despite a challenging operational environment in early 2021 due to extreme weather, Targa has successfully navigated market dynamics, executing strategic acquisitions and divestitures, including the acquisition of Southcross Energy and the sale of its GCX interest. The company also strengthened its balance sheet through new credit facilities and debt management, positioning itself for continued growth and shareholder returns.

Financial Highlights

48 data points
Beta

Revenue

$4.96B

15.2% Gross Margin

Net Income

$88.00M

1.8% Net Margin

EPS (Diluted)

$0.06

Total Assets

$15.30B

Cash & Equivalents

$135.90M

Free Cash Flow

$543.80M

Financial Statements
Beta
Revenue$4.96B
Cost of Revenue$4.20B
Gross Profit$755.00M
Operating Income$295.80M
Net Income$88.00M
EPS (Basic)$1.64
EPS (Diluted)$0.06
Shares Outstanding (Basic)228.50M
Shares Outstanding (Diluted)232.40M

Key Highlights

  • 1Total revenues surged 37% to $4.96 billion, driven by a 36% increase in commodity sales and a 48% rise in midstream service fees.
  • 2Adjusted EBITDA increased 21% to $625.8 million, showcasing strong operational performance and profitability.
  • 3Gathering and Processing segment operating margin grew 45%, supported by increased natural gas inlet volumes and higher commodity prices, especially in the Permian.
  • 4Logistics and Transportation segment experienced a 1% increase in adjusted operating margin, attributed to higher NGL pipeline, fractionation, and export volumes.
  • 5The company repurchased 737,799 shares of common stock under its repurchase program and continues to focus on shareholder returns.
  • 6Targa completed the acquisition of Southcross Energy for approximately $200 million, enhancing its South Texas operations, and expects to receive approximately $857 million from the sale of its GCX interest in Q2 2022.
  • 7The company entered into a new $2.75 billion senior revolving credit facility and obtained investment-grade credit ratings, enhancing financial flexibility and reducing borrowing costs.

Frequently Asked Questions

Targa Resources reported a significant increase in total revenues, up 37% to $4.96 billion for the three months ended March 31, 2022, compared to $3.63 billion in the same period of 2021. This growth was primarily driven by a 36% increase in sales of commodities and a substantial 48% increase in fees from midstream services.

The company demonstrated strong profitability, with Adjusted EBITDA increasing by 21% to $625.8 million for the first quarter of 2022 compared to $515.7 million in the prior year. This improvement was supported by higher commodity prices, increased throughput volumes, and successful fee-based service revenue growth across its key segments.

Targa Resources completed several key strategic transactions. They acquired Southcross Energy Operating LLC for approximately $200 million to expand their South Texas operations. They also announced the agreement to sell their 25% equity interest in Gulf Coast Express Pipeline (GCX) for approximately $857 million, expected to close in the second quarter of 2022. Additionally, the company exercised its option to repurchase Stonepeak's interests in their development joint ventures for $926.3 million.

The company has enhanced its financial flexibility by entering into a new $2.75 billion senior revolving credit facility in February 2022 and has obtained investment-grade credit ratings from S&P, Fitch, and Moody's. They also engaged in debt management activities, including the redemption of certain senior notes. In May 2022, post-quarter, Targa redeemed all outstanding Series A Preferred stock, simplifying its capital structure.