10-QPeriod: Q1 FY2023

Targa Resources Corp. Quarterly Report for Q1 Ended Mar 31, 2023

Filed May 4, 2023For Securities:TRGP

Summary

Targa Resources Corp. (TRGP) reported its first-quarter 2023 financial results, showing a significant increase in net income to $555.2 million compared to $168.6 million in the prior year. This strong performance was driven by a substantial increase in income from operations, which more than tripled year-over-year, fueled by higher fees from midstream services and effective cost management, particularly in product purchases and fuel. The company's strategic focus on expanding its fee-based midstream services, evidenced by ongoing construction projects in the Permian Basin and Mont Belvieu, positions it well for future growth. Targa also demonstrated a commitment to shareholder returns through share repurchases and a recent dividend increase. Despite increased interest expenses and operating costs, the overall financial health appears robust, with ample liquidity and compliance with debt covenants providing a stable outlook for the coming periods.

Financial Highlights

48 data points
Beta

Revenue

$4.52B

33.2% Gross Margin

Net Income

$6.30M

0.1% Net Margin

EPS (Diluted)

$0.03

Total Assets

$19.03B

Cash & Equivalents

$211.80M

Free Cash Flow

$694.10M

Financial Statements
Beta
Revenue$4.52B
Cost of Revenue$3.02B
Gross Profit$1.50B
Operating Income$836.70M
Net Income$6.30M
EPS (Basic)$0.03
EPS (Diluted)$0.03
Shares Outstanding (Basic)226.40M
Shares Outstanding (Diluted)229.30M

Key Highlights

  • 1Net income surged to $555.2 million, a significant increase from $168.6 million in Q1 2022, driven by robust operational performance.
  • 2Income from operations more than tripled to $836.7 million, reflecting strong fee-based midstream service revenue and improved commodity management.
  • 3The company repurchased $52.0 million of its common stock and declared a dividend increase to $0.50 per share quarterly, signaling confidence and commitment to shareholder returns.
  • 4Targa completed the acquisition of Blackstone Energy Partners’ 25% interest in the Grand Prix Joint Venture for $1.05 billion, consolidating full ownership of this key NGL pipeline.
  • 5Significant capital expenditures of $454.3 million were made, primarily in growth projects within the Permian region and downstream facilities, indicating a strong focus on expansion and future capacity.
  • 6Total revenues decreased by 9% to $4.52 billion, largely due to lower commodity sales prices, though this was partially offset by higher volumes and increased fees from midstream services.
  • 7The company remains in compliance with all debt covenants, and its liquidity remains strong with $2.62 billion in total liquidity as of March 31, 2023.

Frequently Asked Questions

The substantial increase in net income to $555.2 million was primarily driven by a more than threefold increase in income from operations to $836.7 million. This was achieved through higher fees from midstream services, effective management of product purchases and fuel costs, and a favorable impact from commodity hedging activities, which together offset lower commodity sales prices.

Targa is actively investing in growth through significant capital expenditures, totaling $454.3 million in Q1 2023. Key investments include ongoing construction of new natural gas processing plants in the Permian region (Legacy II, Greenwood, Midway, Wildcat II, Roadrunner II), fractionation train expansions in Mont Belvieu (Train 9, Train 10), and the new Daytona NGL Pipeline. The company also recently acquired full ownership of the Grand Prix NGL Pipeline.

Targa demonstrated its commitment to shareholder returns by repurchasing $52.0 million of its common stock during the quarter under its share repurchase program. Furthermore, in April 2023, the company announced an increase in its common dividend to $0.50 per share quarterly ($2.00 annualized). A new $1.0 billion share repurchase program was also authorized in May 2023.

Targa maintained compliance with all debt covenants as of March 31, 2023. The company reported strong liquidity, with total available liquidity of $2.62 billion. This includes cash on hand, availability under the accounts receivable securitization facility, and the TRGP revolving credit facility and commercial paper program. Targa also recently raised approximately $1.7 billion in net proceeds from senior note issuances in January 2023.