TRGP Targa Resources Corporation

 

 

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):

November 5, 2024

TARGA RESOURCES CORP.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		001-34991 (Commission File Number)		20-3701075 (IRS Employer Identification No.)

811 Louisiana, Suite 2100

Houston, TX 77002

(Address of principal executive office and Zip Code)

(713) 584-1000

(Registrants’ telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock	TRGP	New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging Growth Company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

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Item 2.02 Results of Operations and Financial Condition.

 

On November 5, 2024, Targa Resources Corp. (the “Company”) issued a press release regarding its financial results for the three months ended September 30, 2024. A conference call to discuss these results is scheduled for 11:00 a.m. Eastern time (10:00 a.m. Central time) on Tuesday, November 5, 2024. The conference call will be webcast live and a replay of the webcast will be available through the Investors section of the Company’s web site (http://www.targaresources.com). A copy of the earnings press release is furnished as Exhibit 99.1 to this report, which is hereby incorporated by reference into this Item 2.02.

 

The press release and accompanying schedules and/or the conference call discussions include the non-generally accepted accounting principles (“non-GAAP”) financial measures of adjusted EBITDA, adjusted cash flow from operations, adjusted free cash flow and adjusted operating margin (segment). The press release provides reconciliations of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Our non-GAAP financial measures should not be considered as alternatives to GAAP measures and have important limitations as analytical tools.

 

Item 7.01 Regulation FD Disclosure.

The Company uses any of the following to comply with its disclosure obligations under Regulation FD: press releases, SEC filings, public conference calls, or the Company’s website. The Company routinely posts important information on its website (http://www.targaresources.com), including information that may be deemed to be material. The Company encourages investors and others interested in the Company to monitor these distribution channels for material disclosures.

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit
Number		Description
Exhibit 99.1		Targa Resources Corp. Press Release dated November 5, 2024.
Exhibit 104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any filing under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Targa Resources Corp.

 

 

Date: November 5, 2024	By:	/s/ Jennifer R. Kneale
		Jennifer R. Kneale
		President – Finance and Administration (Principal Financial Officer)

 

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Targa Resources Corp. Reports Record Third Quarter 2024 Results and Announces Expectations for a 33% Year-Over-Year Increase to its 2025 Common Dividend

 

HOUSTON – November 5, 2024 - Targa Resources Corp. (NYSE: TRGP) (“TRGP,” the “Company” or “Targa”) today reported third quarter 2024 results.

 

Third quarter 2024 net income attributable to Targa Resources Corp. was $387.4 million compared to $220.0 million for the third quarter of 2023. The Company reported adjusted earnings before interest, income taxes, depreciation and amortization, and other non-cash items (“adjusted EBITDA”)(1) of $1,069.7 million for the third quarter of 2024 compared to $840.2 million for the third quarter of 2023.

 

Highlights

 

On October 10, 2024, the Company declared a quarterly cash dividend of $0.75 per common share, or $3.00 per common share on an annualized basis, for the third quarter of 2024. Total cash dividends of approximately $164 million will be paid on November 15, 2024 on all outstanding shares of common stock to holders of record as of the close of business on October 31, 2024.

 

Targa repurchased 1,150,107 shares of its common stock during the third quarter of 2024 at a weighted average per share price of $146.02 for a total net cost of $167.9 million. As of September 30, 2024, there was $1.1 billion remaining under the Company’s Share Repurchase Programs.

 

Third Quarter 2024 - Sequential Quarter over Quarter Commentary

 

Targa reported record third quarter adjusted EBITDA of $1,069.7 million, representing a 9 percent increase compared to the second quarter of 2024. The sequential increase in adjusted EBITDA was attributable to higher volumes across Targa’s Gathering and Processing (“G&P”) and Logistics and Transportation (“L&T”) systems. In the G&P segment, higher sequential adjusted operating margin was attributable to record Permian natural gas inlet volumes, higher Badlands crude volumes, and higher fees. In the L&T segment, record NGL pipeline transportation and fractionation volumes, higher marketing margin and higher LPG export volumes drove the sequential increase in segment adjusted operating margin. Increasing NGL pipeline transportation and fractionation volumes were attributable to higher supply volumes from Targa’s Permian G&P systems and the start-up of Targa’s Daytona NGL Pipeline. Marketing margin increased due to greater optimization opportunities and higher LPG export volumes benefited from improved market conditions. Higher segment operating expenses were attributable to higher system volumes and expansions.

 

Capitalization and Liquidity

 

The Company’s total consolidated debt as of September 30, 2024 was $14,254.7 million, net of $91.6 million of debt issuance costs and $29.7 million of unamortized discount, with $12,534.4 million of outstanding senior notes, $951.0 million outstanding under the Commercial Paper Program, $600.0 million outstanding under the Securitization Facility, and $290.6 million of finance lease liabilities.

 

Total consolidated liquidity as of September 30, 2024 was approximately $1.9 billion, including $1.8 billion available under the TRGP Revolver and $127.2 million of cash.

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Financing Update

 

In August 2024, Targa completed an underwritten public offering of $1.0 billion aggregate principal amount of its 5.500% Senior Notes due 2035 (the “5.500% Notes”), resulting in net proceeds of approximately $990.1 million. Targa used the net proceeds from the issuance to repay borrowings under the Commercial Paper Program, a portion of which were incurred to repay the remaining balance under the Term Loan Facility, and for general corporate purposes.

 

In August 2024, the Partnership amended its $600.0 million accounts receivable securitization facility (the “Securitization Facility”) to extend the termination date of the Securitization Facility to August 29, 2025.

 

In August 2024, Fitch Ratings Inc. (“Fitch”) upgraded the Company’s corporate investment grade credit rating to ‘BBB’ from ‘BBB-’. In October 2024, Moody’s Ratings (“Moody’s”) upgraded the Company’s corporate investment grade credit rating to ‘Baa2’ from ‘Baa3’.

 

Growth Projects Update

 

In the third quarter of 2024, Targa commenced operations on its Daytona NGL Pipeline ahead of schedule and under-budget. In October 2024, Targa commenced operations at its new 275 MMcf/d Greenwood II plant in Permian Midland and its new 120 MBbl/d Train 10 fractionator in Mont Belvieu. Targa expects to complete the reactivation of Gulf Coast Fractionators (“GCF”) in Mont Belvieu in November 2024. In its G&P segment, construction continues on Targa’s 275 MMcf/d Pembrook II and East Pembrook plants in Permian Midland and its 275 MMcf/d Bull Moose and Bull Moose II plants in Permian Delaware. In its L&T segment, construction continues on Targa’s 150 MBbl/d Train 11 fractionator in Mont Belvieu. Targa now expects to complete its East Pembrook plant ahead of schedule in the second quarter of 2026 and remains on-track to complete its other expansions as previously disclosed.

 

In November 2024, in response to increasing production and to meet the infrastructure needs of its customers, Targa announced the construction of a new 275 MMcf/d cryogenic natural gas processing plant in Permian Delaware (the “Falcon II plant”) and a new 275 MMcf/d cryogenic natural gas processing plant in Permian Midland (the “East Driver plant”). Falcon II and East Driver are expected to commence operations in the second and third quarters of 2026.

 

2024 and 2025 Outlook

 

Targa’s adjusted EBITDA and growth capital projections are trending higher than previously estimated from the acceleration of spending on infrastructure to handle additional volume growth. The Company is in the middle of its planning process, and consistent with previous years, Targa plans to detail its full year 2025 operational and financial outlook in February 2025 in conjunction with its fourth quarter 2024 earnings announcement. For 2024, the Company estimates full year adjusted EBITDA to be above the top end of its $3.95 billion to $4.05 billion range. Targa continues to anticipate a meaningful inflection in 2025 adjusted free cash flow generation relative to 2024.

 

Capital Allocation Update

 

For the first quarter of 2025, Management intends to recommend to Targa’s Board of Directors an increase to its common dividend to $1.00 per common share or $4.00 per common share annualized. The recommended common dividend per share increase, if approved, would be effective for the first quarter of 2025 and payable in May 2025. Beyond 2025, Targa expects to be in position to continue to provide meaningful annual increases to its common dividend. For the nine months ended September 30, 2024, Targa has repurchased 5,322,367 shares of common stock at a weighted average per share price of $121.50 for a total net cost of $646.7 million. Targa expects to continue to be in position to opportunistically repurchase its stock going forward with approximately $1.1 billion remaining under its common Share Repurchase Programs.

 

An earnings supplement presentation and updated investor presentation are available under Events and Presentations in the Investors section of the Company’s website at www.targaresources.com/investors/events.

 

Conference Call

 

The Company will host a conference call for the investment community at 11:00 a.m. Eastern time (10:00 a.m. Central time) on November 5, 2024 to discuss its third quarter results. The conference call can be accessed via webcast under Events and Presentations in the Investors section of the Company’s website at www.targaresources.com/investors/events, or by going directly to https://edge.media-server.com/mmc/p/yf8cw4hf/. A webcast replay will be available at the link above approximately two hours after the conclusion of the event.

 

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Targa Resources Corp. – Consolidated Financial Results of Operations

 

	Three Months Ended September 30,																Nine Months Ended September 30,
	2024				2023				2024 vs. 2023								2024				2023				2024 vs. 2023
	(In millions)
Revenues:
Sales of commodities	$	3,217.0			$	3,374.3			$	(157.3	)			(5	%)		$	10,126.2			$	10,314.0			$	(187.8	)		(2	%)
Fees from midstream services		634.8				522.3				112.5				22	%			1,850.0				1,506.8				343.2			23	%
Total revenues		3,851.8				3,896.6				(44.8	)			(1	%)			11,976.2				11,820.8				155.4			1	%
Product purchases and fuel		2,365.0				2,690.0				(325.0	)			(12	%)			7,780.4				7,777.9				2.5			—
Operating expenses		301.0				277.7				23.3				8	%			869.7				808.4				61.3			8	%
Depreciation and amortization expense		355.4				331.3				24.1				7	%			1,044.5				988.2				56.3			6	%
General and administrative expense		102.6				90.0				12.6				14	%			287.4				253.4				34.0			13	%
Other operating (income) expense		(0.4	)			2.5				(2.9	)			(116	%)			(0.7	)			2.0				(2.7	)		(135	%)
Income (loss) from operations		728.2				505.1				223.1				44	%			1,994.9				1,990.9				4.0			—
Interest expense, net		(184.9	)			(175.1	)			(9.8	)			6	%			(589.5	)			(509.8	)			(79.7	)		16	%
Equity earnings (loss)		2.2				3.0				(0.8	)			(27	%)			7.9				6.2				1.7			27	%
Gain (loss) from financing activities		—				—				—				—				(0.8	)			—				(0.8	)		(100	%)
Other, net		(0.4	)			(0.1	)			(0.3	)		NM					1.1				(4.9	)			6.0			122	%
Income tax (expense) benefit		(97.0	)			(53.9	)			(43.1	)			80	%			(274.1	)			(260.7	)			(13.4	)		5	%
Net income (loss)		448.1				279.0				169.1				61	%			1,139.5				1,221.7				(82.2	)		(7	%)
Less: Net income (loss) attributable to noncontrolling interests		60.7				59.0				1.7				3	%			178.5				175.4				3.1			2	%
Net income (loss) attributable to Targa Resources Corp.		387.4				220.0				167.4				76	%			961.0				1,046.3				(85.3	)		(8	%)
Premium on repurchase of noncontrolling interests, net of tax		—				—				—				—				—				490.7				(490.7	)		(100	%)
Net income (loss) attributable to common shareholders	$	387.4			$	220.0			$	167.4				76	%		$	961.0			$	555.6			$	405.4			73	%
Financial data:
Adjusted EBITDA (1)	$	1,069.7			$	840.2			$	229.5				27	%		$	3,020.3			$	2,570.1			$	450.2			18	%
Adjusted cash flow from operations (1)		884.6				667.2				217.4				33	%			2,431.7				2,060.6				371.1			18	%
Adjusted free cash flow (1)		124.2				8.6				115.6			NM					84.2				319.1				(234.9	)		(74	%)

 

NM Due to a low denominator, the noted percentage change is disproportionately high and as a result, considered not meaningful.

 

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

 

The decrease in commodity sales reflects lower natural gas and NGL prices ($504.7 million) and the unfavorable impact of hedges ($49.2 million), partially offset by higher NGL volumes ($400.0 million).

 

The increase in fees from midstream services is primarily due to higher gas gathering and processing fees, higher transportation fees and higher export volumes, partially offset by lower fractionation fees.

 

The decrease in product purchases and fuel reflects lower natural gas and NGL prices, partially offset by higher NGL volumes.

 

The increase in operating expenses is primarily due to higher labor and maintenance costs as a result of increased activity and system expansions, partially offset by lower taxes.

 

See “—Review of Segment Performance” for additional information on a segment basis.

 

The increase in depreciation and amortization expense is primarily due to the impact of system expansions on the Company’s asset base that have been placed in service since September 30, 2023.

 

The increase in general and administrative expense is primarily due to higher compensation and benefits.

 

The increase in interest expense, net, is due to higher borrowings, partially offset by an increase in capitalized interest.

 

The increase in income tax expense is primarily due to an increase in pre-tax book income.

 

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Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

 

Commodity sales are relatively flat reflecting lower natural gas prices ($1,051.9 million) and the unfavorable impact of hedges ($559.2 million), offset by higher NGL, natural gas and condensate volumes ($1,369.1 million), and higher NGL and condensate prices ($53.9 million).

 

The increase in fees from midstream services is primarily due to higher gas gathering and processing fees, higher transportation fees and higher export volumes.

 

Product purchases and fuel are relatively flat reflecting higher NGL and natural gas volumes, offset by lower natural gas prices.

 

The increase in operating expenses is primarily due to higher labor and rental costs as a result of increased activity and system expansions.

 

See “—Review of Segment Performance” for additional information on a segment basis.

 

The increase in depreciation and amortization expense is primarily due to the impact of system expansions on the Company’s asset base that have been placed in service since September 30, 2023, partially offset by the shortening of depreciable lives of certain assets that were idled in the second quarter of 2023 and subsequently shut down in the third quarter of 2023.

 

The increase in general and administrative expense is primarily due to higher compensation and benefits.

 

The increase in interest expense, net, is due to recognition of cumulative interest on a 2024 legal ruling associated with the Splitter Agreement and higher borrowings, partially offset by an increase in capitalized interest.

 

The increase in income tax expense is primarily due to the release of state valuation allowance in 2023, partially offset by a decrease in pre-tax book income.

 

The premium on repurchase of noncontrolling interests, net of tax is due to the acquisition of Blackstone Energy Partners’ 25% interest in the Grand Prix Joint Venture in 2023.

 

Review of Segment Performance

The following discussion of segment performance includes inter-segment activities. The Company views segment operating margin and adjusted operating margin as important performance measures of the core profitability of its operations. These measures are key components of internal financial reporting and are reviewed for consistency and trend analysis. For a discussion of adjusted operating margin, see “Non-GAAP Financial Measures ― Adjusted Operating Margin.” Segment operating financial results and operating statistics include the effects of intersegment transactions. These intersegment transactions have been eliminated from the consolidated presentation.

 

The Company operates in two primary segments: (i) Gathering and Processing; and (ii) Logistics and Transportation.

 

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Gathering and Processing Segment

The Gathering and Processing segment includes assets used in the gathering and/or purchase and sale of natural gas produced from oil and gas wells, removing impurities and processing this raw natural gas into merchantable natural gas by extracting NGLs; and assets used for the gathering and terminaling and/or purchase and sale of crude oil. The Gathering and Processing segment’s assets are located in the Permian Basin of West Texas and Southeast New Mexico (including the Midland, Central and Delaware Basins); the Eagle Ford Shale in South Texas; the Barnett Shale in North Texas; the Anadarko, Ardmore, and Arkoma Basins in Oklahoma (including the SCOOP and STACK) and South Central Kansas; the Williston Basin in North Dakota (including the Bakken and Three Forks plays); and the onshore and near offshore regions of the Louisiana Gulf Coast.

 

The following table provides summary data regarding results of operations of this segment for the periods indicated:

 

	Three Months Ended September 30,																			Nine Months Ended September 30,
	2024					2023					2024 vs. 2023									2024					2023					2024 vs. 2023
		(In millions, except operating statistics and price amounts)
Operating margin	$		584.3			$		505.0			$		79.3				16	%		$		1,713.4			$		1,545.9			$		167.5				11	%
Operating expenses			203.7					189.6					14.1				7	%				597.2					560.8					36.4				6	%
Adjusted operating margin	$		788.0			$		694.6			$		93.4				13	%		$		2,310.6			$		2,106.7			$		203.9				10	%
Operating statistics (1):
Plant natural gas inlet, MMcf/d (2) (3)
Permian Midland (4)			3,082.0					2,566.9					515.1				20	%				2,898.8					2,474.1					424.7				17	%
Permian Delaware			2,900.2					2,485.4					414.8				17	%				2,785.2					2,513.7					271.5				11	%
Total Permian			5,982.2					5,052.3					929.9				18	%				5,684.0					4,987.8					696.2				14	%
SouthTX (5)			329.9					394.4					(64.5	)			(16	%)				324.8					373.9					(49.1	)			(13	%)
North Texas			184.2					212.0					(27.8	)			(13	%)				186.8					205.2					(18.4	)			(9	%)
SouthOK (5)			348.5					394.6					(46.1	)			(12	%)				355.7					391.2					(35.5	)			(9	%)
WestOK			215.5					206.2					9.3				5	%				213.6					207.1					6.5				3	%
Total Central			1,078.1					1,207.2					(129.1	)			(11	%)				1,080.9					1,177.4					(96.5	)			(8	%)
Badlands (5) (6)			145.4					128.3					17.1				13	%				138.8					129.6					9.2				7	%
Total Field			7,205.7					6,387.8					817.9				13	%				6,903.7					6,294.8					608.9				10	%
Coastal			402.1					535.6					(133.5	)			(25	%)				464.3					532.4					(68.1	)			(13	%)
Total			7,607.8					6,923.4					684.4				10	%				7,368.0					6,827.2					540.8				8	%
NGL production, MBbl/d (3)
Permian Midland (4)			450.6					373.1					77.5				21	%				422.6					357.4					65.2				18	%
Permian Delaware			377.4					322.5					54.9				17	%				349.7					325.3					24.4				8	%
Total Permian			828.0					695.6					132.4				19	%				772.3					682.7					89.6				13	%
SouthTX (5)			30.6					42.3					(11.7	)			(28	%)				33.9					42.1					(8.2	)			(19	%)
North Texas			22.0					24.2					(2.2	)			(9	%)				22.5					23.8					(1.3	)			(5	%)
SouthOK (5)			28.4					46.4					(18.0	)			(39	%)				33.3					44.2					(10.9	)			(25	%)
WestOK			17.0					12.3					4.7				38	%				14.7					12.6					2.1				17	%
Total Central			98.0					125.2					(27.2	)			(22	%)				104.4					122.7					(18.3	)			(15	%)
Badlands (5)			18.3					15.5					2.8				18	%				17.0					15.5					1.5				10	%
Total Field			944.3					836.3					108.0				13	%				893.7					820.9					72.8				9	%
Coastal			33.9					40.6					(6.7	)			(17	%)				35.8					37.9					(2.1	)			(6	%)
Total			978.2					876.9					101.3				12	%				929.5					858.8					70.7				8	%
Crude oil, Badlands, MBbl/d			122.4					101.6					20.8				20	%				105.4					105.6					(0.2	)			—
Crude oil, Permian, MBbl/d			26.7					27.2					(0.5	)			(2	%)				27.4					27.4					—				—
Natural gas sales, BBtu/d (3)			2,842.9					2,758.2					84.7				3	%				2,779.2					2,668.4					110.8				4	%
NGL sales, MBbl/d (3)			581.5					508.8					72.7				14	%				550.1					487.4					62.7				13	%
Condensate sales, MBbl/d			17.3					17.0					0.3				2	%				19.2					18.7					0.5				3	%
Average realized prices (7):
Natural gas, $/MMBtu			0.09					2.03					(1.94	)			(96	%)				0.54					1.97					(1.43	)			(73	%)
NGL, $/gal			0.44					0.46					(0.02	)			(4	%)				0.45					0.46					(0.01	)			(2	%)
Condensate, $/Bbl			77.20					70.07					7.13				10	%				75.60					74.20					1.40				2	%

 

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The following table presents the realized commodity hedge gain (loss) attributable to the Company’s equity volumes that are included in the adjusted operating margin of the Gathering and Processing segment:

 

		Three Months Ended September 30, 2024												Three Months Ended September 30, 2023
		(In millions, except volumetric data and price amounts)
		Volume Settled				Price Spread (1)				Gain (Loss)				Volume Settled				Price Spread (1)				Gain (Loss)
Natural gas (BBtu)			9.4			$	2.53			$	23.8				15.0			$	0.62			$	9.3
NGL (MMgal)			102.8				0.08				8.2				166.0				0.04				7.2
Crude oil (MBbl)			0.6				(0.67	)			(0.4	)			0.6				(13.17	)			(7.9	)
										$	31.6											$	8.6

 

		Nine Months Ended September 30, 2024												Nine Months Ended September 30, 2023
		(In millions, except volumetric data and price amounts)
		Volume Settled				Price Spread (1)				Gain (Loss)				Volume Settled				Price Spread (1)				Gain (Loss)
Natural gas (BBtu)			35.6			$	1.94			$	69.2				50.0			$	1.24			$	62.2
NGL (MMgal)			348.9				0.04				14.9				515.0				0.07				34.4
Crude oil (MBbl)			1.4				(5.57	)			(7.8	)			1.8				(7.17	)			(12.9	)
										$	76.3											$	83.7

 

 

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

 

The increase in adjusted operating margin was primarily due to higher natural gas inlet volumes and higher fees in the Permian, partially offset by lower natural gas prices. The increase in natural gas inlet volumes in the Permian was attributable to the addition of the Greenwood I and Wildcat II plants during the fourth quarter of 2023, the Roadrunner II plant during the second quarter of 2024, and continued strong producer activity. The increase in Badlands crude was due to higher production.

 

The increase in operating expenses was primarily due to higher volumes in the Permian and the addition of the Greenwood I, Wildcat II and Roadrunner II plants in the Permian.

 

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

 

The increase in adjusted operating margin was primarily due to higher natural gas inlet volumes and higher fees in the Permian, partially offset by lower natural gas prices. The increase in natural gas inlet volumes in the Permian was attributable to the addition of the Legacy II plant during the first quarter of 2023, the Midway plant during the second quarter of 2023, the Greenwood I and Wildcat II plants during the fourth quarter of 2023, the Roadrunner II plant during the second quarter of 2024, and continued strong producer activity.

 

The increase in operating expenses was primarily due to higher volumes in the Permian and the addition of the Legacy II, Midway, Greenwood I, Wildcat II and Roadrunner II plants.

 

Logistics and Transportation Segment

 

The Logistics and Transportation segment includes the activities and assets necessary to convert mixed NGLs into NGL products and also includes other assets and value-added services such as transporting, storing, fractionating, terminaling, and marketing of NGLs and NGL products, including services to LPG exporters and certain natural gas supply and marketing activities in support of the Company’s other businesses. The Logistics and Transportation segment also includes Grand Prix NGL Pipeline, which connects the Company’s gathering and processing positions in the Permian Basin, Southern Oklahoma and North Texas with the Company’s Downstream facilities in Mont Belvieu, Texas. The Company’s Downstream facilities are located predominantly in Mont Belvieu and Galena Park, Texas, and in Lake Charles, Louisiana.

 

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The following table provides summary data regarding results of operations of this segment for the periods indicated:

 

	Three Months Ended September 30,																	Nine Months Ended September 30,
	2024					2023					2024 vs. 2023							2024					2023					2024 vs. 2023
	(In millions, except operating statistics)
Operating margin	$		619.2			$		457.4			$		161.8			35%		$		1,699.0			$		1,394.4			$		304.6			22%
Operating expenses			98.1					88.8					9.3			10%				273.5					247.9					25.6			10%
Adjusted operating margin	$		717.3			$		546.2			$		171.1			31%		$		1,972.5			$		1,642.3			$		330.2			20%
Operating statistics MBbl/d (1):
NGL pipeline transportation volumes (2)			829.2					660.2					169.0			26%				777.0					606.4					170.6			28%
Fractionation volumes			953.8					793.4					160.4			20%				884.7					782.3					102.4			13%
Export volumes (3)			403.9					349.3					54.6			16%				412.3					341.9					70.4			21%
NGL sales			1,162.0					997.9					164.1			16%				1,136.1					984.1					152.0			15%

 

 

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

 

The increase in adjusted operating margin was due to higher pipeline transportation and fractionation margin, higher marketing margin, and higher LPG export margin. Pipeline transportation and fractionation volumes benefited from higher supply volumes primarily from our Permian Gathering and Processing systems and the addition of Train 9 during the second quarter of 2024. Marketing margin increased due to greater optimization opportunities. LPG export margin increased due to higher volumes as the company benefited from the completion of its export expansion during the third quarter of 2023 and the Houston Ship Channel allowing night-time vessel transits, partially offset by maintenance and required inspections.

 

The increase in operating expenses was due to higher system volumes, higher compensation and benefits, higher taxes and the addition of Train 9 during the second quarter of 2024.

 

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

 

The increase in adjusted operating margin was due to higher pipeline transportation and fractionation margin, higher marketing margin, and higher LPG export margin. Pipeline transportation and fractionation volumes benefited from higher supply volumes primarily from our Permian Gathering and Processing systems and the addition of Train 9 during the second quarter of 2024. Marketing margin increased due to greater optimization opportunities. LPG export margin increased due to higher volumes as the company benefited from the completion of its export expansion during the third quarter of 2023 and the Houston Ship Channel allowing night-time vessel transits, partially offset by maintenance and required inspections.

 

The increase in operating expenses was due to higher system volumes, higher compensation and benefits, higher repairs and maintenance, higher taxes, and the addition of Train 9 during the second quarter of 2024.

 

Other

 

		Three Months Ended September 30,												Nine Months Ended September 30,
		2024				2023				2024 vs. 2023				2024				2023				2024 vs. 2023
		(In millions)
Operating margin		$	(17.7	)		$	(33.5	)		$	15.8			$	(86.3	)		$	294.3			$	(380.6	)
Adjusted operating margin		$	(17.7	)		$	(33.5	)		$	15.8			$	(86.3	)		$	294.3			$	(380.6	)

 

Other contains the results of commodity derivative activity mark-to-market gains/losses related to derivative contracts that were not designated as cash flow hedges. The Company has entered into derivative instruments to hedge the commodity price associated with a portion of the Company’s future commodity purchases and sales and natural gas transportation basis risk within the Company’s Logistics and Transportation segment.

 

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About Targa Resources Corp.

 

Targa Resources Corp. is a leading provider of midstream services and is one of the largest independent midstream infrastructure companies in North America. The Company owns, operates, acquires and develops a diversified portfolio of complementary domestic midstream infrastructure assets and its operations are critical to the efficient, safe and reliable delivery of energy across the United States and increasingly to the world. The Company’s assets connect natural gas and NGLs to domestic and international markets with growing demand for cleaner fuels and feedstocks. The Company is primarily engaged in the business of: gathering, compressing, treating, processing, transporting, and purchasing and selling natural gas; transporting, storing, fractionating, treating, and purchasing and selling NGLs and NGL products, including services to LPG exporters; and gathering, storing, terminaling, and purchasing and selling crude oil.

 

Targa is a FORTUNE 500 company and is included in the S&P 500.

 

For more information, please visit the Company’s website at www.targaresources.com.

 

Non-GAAP Financial Measures

 

This press release includes the Company’s non-GAAP financial measures: adjusted EBITDA, adjusted cash flow from operations, adjusted free cash flow and adjusted operating margin (segment). The following tables provide reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures.

 

The Company utilizes non-GAAP measures to analyze the Company’s performance. Adjusted EBITDA, adjusted cash flow from operations, adjusted free cash flow and adjusted operating margin (segment) are non-GAAP measures. The GAAP measures most directly comparable to these non-GAAP measures are income (loss) from operations, Net income (loss) attributable to Targa Resources Corp. and segment operating margin. These non-GAAP measures should not be considered as an alternative to GAAP measures and have important limitations as analytical tools. Investors should not consider these measures in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. Additionally, because the Company’s non-GAAP measures exclude some, but not all, items that affect income and segment operating margin, and are defined differently by different companies within the Company’s industry, the Company’s definitions may not be comparable with similarly titled measures of other companies, thereby diminishing their utility. Management compensates for the limitations of the Company’s non-GAAP measures as analytical tools by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating these insights into the Company’s decision-making processes.

 

Adjusted Operating Margin

 

The Company defines adjusted operating margin for the Company’s segments as revenues less product purchases and fuel. It is impacted by volumes and commodity prices as well as by the Company’s contract mix and commodity hedging program.

 

Gathering and Processing adjusted operating margin consists primarily of:

 

Logistics and Transportation adjusted operating margin consists primarily of:

 

The adjusted operating margin impacts of mark-to-market hedge unrealized changes in fair value are reported in Other.

 

Adjusted operating margin for the Company’s segments provides useful information to investors because it is used as a supplemental financial measure by management and by external users of the Company’s financial statements, including investors and commercial banks, to assess:

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Management reviews adjusted operating margin and operating margin for the Company’s segments monthly as a core internal management process. The Company believes that investors benefit from having access to the same financial measures that management uses in evaluating the Company’s operating results. The reconciliation of the Company’s adjusted operating margin to the most directly comparable GAAP measure is presented under “Review of Segment Performance.”

 

Adjusted EBITDA

 

The Company defines adjusted EBITDA as Net income (loss) attributable to Targa Resources Corp. before interest, income taxes, depreciation and amortization, and other items that the Company believes should be adjusted consistent with the Company’s core operating performance. The adjusting items are detailed in the adjusted EBITDA reconciliation table and its footnotes. Adjusted EBITDA is used as a supplemental financial measure by the Company and by external users of the Company’s financial statements such as investors, commercial banks and others to measure the ability of the Company’s assets to generate cash sufficient to pay interest costs, support the Company’s indebtedness and pay dividends to the Company’s investors.

 

Adjusted Cash Flow from Operations and Adjusted Free Cash Flow

 

The Company defines adjusted cash flow from operations as adjusted EBITDA less cash interest expense on debt obligations and cash tax (expense) benefit. The Company defines adjusted free cash flow as adjusted cash flow from operations less maintenance capital expenditures (net of any reimbursements of project costs) and growth capital expenditures, net of contributions from noncontrolling interest and contributions to investments in unconsolidated affiliates. Adjusted cash flow from operations and adjusted free cash flow are performance measures used by the Company and by external users of the Company’s financial statements, such as investors, commercial banks and research analysts, to assess the Company’s ability to generate cash earnings (after servicing the Company’s debt and funding capital expenditures) to be used for corporate purposes, such as payment of dividends, retirement of debt or redemption of other financing arrangements.

 

The following table presents a reconciliation of Net income (loss) attributable to Targa Resources Corp. to adjusted EBITDA, adjusted cash flow from operations and adjusted free cash flow for the periods indicated:

 

	Three Months Ended September 30,								Nine Months Ended September 30,
	2024				2023				2024				2023
	(In millions)
Reconciliation of Net income (loss) attributable to Targa Resources Corp. to Adjusted EBITDA, Adjusted Cash Flow from Operations and Adjusted Free Cash Flow
Net income (loss) attributable to Targa Resources Corp.	$	387.4			$	220.0			$	961.0			$	1,046.3
Interest (income) expense, net		184.9				175.1				589.5				509.8
Income tax expense (benefit)		97.0				53.9				274.1				260.7
Depreciation and amortization expense		355.4				331.3				1,044.5				988.2
(Gain) loss on sale or disposition of assets		(1.0	)			(0.9	)			(2.7	)			(3.9	)
Write-down of assets		2.7				3.4				4.0				6.0
(Gain) loss from financing activities		—				—				0.8				—
Equity (earnings) loss		(2.2	)			(3.0	)			(7.9	)			(6.2	)
Distributions from unconsolidated affiliates		4.4				5.3				16.6				14.1
Compensation on equity grants		17.7				15.7				47.4				45.7
Risk management activities		17.7				33.5				86.3				(294.3	)
Noncontrolling interests adjustments (1)		1.6				(1.0	)			2.6				(3.2	)
Litigation expense (2)		4.1				6.9				4.1				6.9
Adjusted EBITDA	$	1,069.7			$	840.2			$	3,020.3			$	2,570.1
Interest expense on debt obligations (3)		(181.2	)			(172.1	)			(578.5	)			(500.9	)
Cash taxes		(3.9	)			(0.9	)			(10.1	)			(8.6	)
Adjusted Cash Flow from Operations	$	884.6			$	667.2			$	2,431.7			$	2,060.6
Maintenance capital expenditures, net (4)		(62.0	)			(65.0	)			(167.1	)			(153.0	)
Growth capital expenditures, net (4)		(698.4	)			(593.6	)			(2,180.4	)			(1,588.5	)
Adjusted Free Cash Flow	$	124.2			$	8.6			$	84.2			$	319.1

 

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The following table presents a reconciliation of estimated net income of the Company to estimated adjusted EBITDA for 2024:

 

	2024E
	(In millions)
Reconciliation of Estimated Net Income Attributable to Targa Resources Corp. to
Estimated Adjusted EBITDA
Net income attributable to Targa Resources Corp.	$	1,370.0
Interest expense, net (1)		765.0
Income tax expense		375.0
Depreciation and amortization expense		1,370.0
Equity earnings		(5.0	)
Distributions from unconsolidated affiliates		20.0
Compensation on equity grants		65.0
Risk management and other		90.0
Noncontrolling interests adjustments (2)		—
Estimated Adjusted EBITDA	$	4,050.0

 

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Regulation FD Disclosures

The Company uses any of the following to comply with its disclosure obligations under Regulation FD: press releases, SEC filings, public conference calls, or our website. The Company routinely posts important information on its website at www.targaresources.com, including information that may be deemed to be material. The Company encourages investors and others interested in the company to monitor these distribution channels for material disclosures.

 

Forward-Looking Statements

 

Certain statements in this release are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future, are forward-looking statements, including statements regarding our projected financial performance, capital spending and payment of future dividends. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties, factors and risks, many of which are outside the Company’s control, which could cause results to differ materially from those expected by management of the Company. Such risks and uncertainties include, but are not limited to, actions by the Organization of the Petroleum Exporting Countries (“OPEC”) and non-OPEC oil producing countries, weather, political, economic and market conditions, including a decline in the price and market demand for natural gas, natural gas liquids and crude oil, the timing and success of our completion of capital projects and business development efforts, the expected growth of volumes on our systems, the impact of pandemics or any other public health crises, commodity price volatility due to ongoing or new global conflicts, the impact of disruptions in the bank and capital markets, including those resulting from lack of access to liquidity for banking and financial services firms, and other uncertainties. These and other applicable uncertainties, factors and risks are described more fully in the Company’s filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K, and any subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The Company does not undertake an obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

 

Targa Investor Relations

InvestorRelations@targaresources.com

(713) 584-1133

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v3.24.3

Document and Entity Information	Nov. 05, 2024
Cover [Abstract]
Amendment Flag	false
Entity Central Index Key	0001389170
Document Type	8-K
Document Period End Date	Nov. 05, 2024
Entity Registrant Name	TARGA RESOURCES CORP.
Entity Incorporation State Country Code	DE
Entity File Number	001-34991
Entity Tax Identification Number	20-3701075
Entity Address, Address Line One	811 Louisiana
Entity Address, Address Line Two	Suite 2100
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77002
City Area Code	(713)
Local Phone Number	584-1000
Written Communications	false
Soliciting Material	false
Pre Commencement Tender Offer	false
Pre Commencement Issuer Tender Offer	false
Security 12b Title	Common Stock
Trading Symbol	TRGP
Security Exchange Name	NYSE
Entity Emerging Growth Company	false

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