10-QPeriod: Q2 FY2022

Targa Resources Corp. Quarterly Report for Q2 Ended Jun 30, 2022

Filed August 4, 2022For Securities:TRGP

Summary

Targa Resources Corp. (TRGP) reported strong financial performance for the second quarter and first half of 2022, demonstrating significant growth in revenues and net income, driven by higher commodity prices and increased volumes across its midstream operations. The company successfully navigated a dynamic market, with total revenues surging by 77% year-over-year for the quarter and 56% for the first half. This robust performance translated into substantial improvements in profitability, with net income attributable to common shareholders rising significantly. Targa also made strategic moves, including the significant acquisition of Lucid Energy Delaware, LLC, and the divestiture of its stake in GCX, indicating active portfolio management. The company's commitment to returning capital to shareholders is evident through increased common dividends and share repurchases, alongside the redemption of its Series A Preferred Stock.

Financial Highlights

49 data points
Beta

Revenue

$6.06B

16.7% Gross Margin

Net Income

$596.40M

9.8% Net Margin

EPS (Diluted)

$1.61

Total Assets

$15.33B

Cash & Equivalents

$154.00M

Free Cash Flow

$420.40M

Financial Statements
Beta
Revenue$6.06B
Cost of Revenue$5.05B
Gross Profit$1.01B
Operating Income$451.90M
Net Income$596.40M
EPS (Basic)$1.64
EPS (Diluted)$1.61
Shares Outstanding (Basic)227.80M
Shares Outstanding (Diluted)231.70M

Key Highlights

  • 1Total revenues increased by 77% to $6.1 billion for the three months ended June 30, 2022, compared to $3.4 billion for the same period in 2021.
  • 2Net income attributable to common shareholders grew substantially to $372.7 million ($1.61 per diluted share) for the second quarter of 2022, up from $34.4 million ($0.15 per diluted share) in the prior year period.
  • 3The company completed the significant acquisition of Lucid Energy Delaware, LLC for approximately $3.55 billion, expanding its footprint in the Delaware Basin.
  • 4Targa Resources divested its stake in Gulf Coast Express Pipeline (GCX) for $857.0 million, recognizing a gain of $435.9 million.
  • 5The Series A Preferred Stock was fully redeemed in May 2022, simplifying the capital structure.
  • 6The company's total assets increased slightly to $15.3 billion as of June 30, 2022, from $15.2 billion at December 31, 2021, reflecting strategic investments and acquisitions.
  • 7Targa announced construction of multiple new processing plants and a fractionation train, signaling continued investment in growth and capacity expansion.

Frequently Asked Questions

The substantial increase in revenue was primarily driven by higher commodity prices for NGLs, natural gas, and condensate, coupled with higher volumes across both the Gathering and Processing and Logistics and Transportation segments. Sales of commodities saw an 82% increase year-over-year for the quarter.

The acquisition of Lucid Energy Delaware, LLC for approximately $3.55 billion, closed on July 29, 2022, post-quarter end, will significantly expand Targa's natural gas gathering, treating, and processing services in the Delaware Basin. While the full purchase accounting impacts are still being evaluated, it is expected to be a substantial addition to its asset base and operational capabilities, likely impacting the balance sheet through increased property, plant, and equipment and long-term debt.

The redemption of all outstanding Series A Preferred Stock in May 2022 simplifies Targa's capital structure by eliminating a class of preferred equity. This move also removes the associated dividend payments, which will improve net income available to common shareholders and reduce future cash outflows for dividends. The redemption resulted in a deemed dividend of $215.5 million.

Targa utilizes derivative instruments such as swaps, futures, and options to hedge its exposure to commodity price volatility for natural gas, NGLs, and crude oil. These hedging activities are designed to reduce fluctuations in operating cash flows. While hedging provides protection, it can also limit upside participation in rising commodity price environments. As of June 30, 2022, the company had a net liability position of $556.5 million related to its derivative instruments.