Targa Resources Corp. [TRGP] Filings

10-Q 1 trgp-20230930.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 001-34991

TARGA RESOURCES CORP.

(Exact name of registrant as specified in its charter)


Delaware		20-3701075
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

811 Louisiana Street, Suite 2100, Houston, Texas		77002
(Address of principal executive offices)		(Zip Code)

(713) 584-1000

(Registrant’s telephone number, including area code)

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of October 31, 2023, there were 222,975,600 shares of the registrant’s common stock, $0.001 par value, outstanding.

TABLE OF CONTENTS


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements		4

Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022		4

Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022		5

Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2023 and 2022		6

Consolidated Statements of Changes in Owners’ Equity and Series A Preferred Stock for the three and nine months ended September 30, 2023 and 2022		7

Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022		11

Notes to Consolidated Financial Statements		12

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		28

Item 3. Quantitative and Qualitative Disclosures About Market Risk		43

Item 4. Controls and Procedures		45

PART II—OTHER INFORMATION

Item 1. Legal Proceedings		47

Item 1A. Risk Factors		47

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		47

Item 3. Defaults Upon Senior Securities		47

Item 4. Mine Safety Disclosures		48

Item 5. Other Information		48

Item 6. Exhibits		48

SIGNATURES

Signatures		50

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

Targa Resources Corp.’s (together with its subsidiaries, including Targa Resources Partners LP (the “Partnership”), “we,” “us,” “our,” “Targa,” “TRGP,” or the “Company”) reports, filings and other public announcements may from time to time contain statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements.” You can typically identify 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, by the use of forward-looking statements, such as “may,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “potential,” “plan,” “forecast” and other similar words.

All statements that are not statements of historical facts, including statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements.

These forward-looking statements reflect our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside our control. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Known risks and uncertainties include, but are not limited to, the following risks and uncertainties:

•

the level and success of crude oil and natural gas drilling around our assets, our success in connecting natural gas supplies to our gathering and processing systems, oil supplies to our gathering systems and natural gas liquid supplies to our logistics and transportation facilities and our success in connecting our facilities to transportation services and markets;

•

the timing and extent of changes in natural gas, natural gas liquids, crude oil and other commodity prices, interest rates and demand for our services;

•

our ability to access the capital markets, which will depend on general market conditions, including the impact of increased interest rates and the potential for additional increases, and associated Federal Reserve policies and potential economic recession, our credit ratings and debt obligations, and demand for our common equity, senior notes and commercial paper;

•

downside commodity price volatility from a variety of potential factors;

•

actions taken by other countries with significant hydrocarbon production;

•

the timing and success of business development efforts;

•

the amount of collateral required to be posted from time to time in our transactions;

•

our success in risk management activities, including the use of derivative instruments to hedge commodity price risks;

•

the level of creditworthiness of counterparties to various transactions with us;

•

changes in laws and regulations, such as the Inflation Reduction Act of 2022 (the “IRA”), particularly with regard to taxes, safety and the protection of the environment;

•

the impact of outbreaks of illnesses, pandemics or any other public health crises;

•

weather and other natural phenomena, and related impacts;

•

industry changes, including the impact of consolidations, changes in competition and the drive to reduce fossil fuel use and substitute alternative forms of energy for oil and gas;

•

our ability to timely obtain and maintain necessary licenses, permits and other approvals;

•

our ability to grow through internal growth capital projects or acquisitions and the successful integration and future performance of such assets;

•

general economic, market and business conditions;

•

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

•

the risks described in our Annual Report on Form 10-K for the year ended December 31, 2022 (“Annual Report”) and our reports and registration statements filed from time to time with the United States Securities and Exchange Commission (“SEC”).

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate, and, therefore, we cannot assure you that the forward-looking statements included in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 (“Quarterly Report”) will prove to be accurate. Some of these and other risks and uncertainties that could cause actual results to differ materially from such forward-looking statements are more fully described in our Annual Report. Except as may be required by applicable law, we undertake no obligation to publicly update or advise of any change in any forward-looking statement, whether as a result of new information, future events or otherwise.

As generally used in the energy industry and in this Quarterly Report, the identified terms have the following meanings:


Bbl		Barrels (equal to 42 U.S. gallons)
BBtu		Billion British thermal units
Bcf		Billion cubic feet
Btu		British thermal units, a measure of heating value
/d		Per day
FERC		Federal Energy Regulatory Commission
GAAP		Accounting principles generally accepted in the United States of America
gal		U.S. gallons
LPG		Liquefied petroleum gas
MBbl		Thousand barrels
MMBbl		Million barrels
MMBtu		Million British thermal units
MMcf		Million cubic feet
MMgal		Million U.S. gallons
NGL(s)		Natural gas liquid(s)
NYMEX		New York Mercantile Exchange
NYSE		New York Stock Exchange
SCOOP		South Central Oklahoma Oil Province
SOFR		Secured Overnight Financing Rate
STACK		Sooner Trend, Anadarko, Canadian and Kingfisher

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

TARGA RESOURCES CORP.

CONSOLIDATED BALANCE SHEETS


	September 30, 2023			December 31, 2022
	(Unaudited)
	(In millions)
ASSETS
Current assets:
Cash and cash equivalents	$	139.5		$	219.0
Trade receivables, net of allowances of $2.6 and $2.2 million at September 30, 2023 and December 31, 2022		1,241.1			1,408.4
Inventories		536.2			393.8
Assets from risk management activities		84.2			179.9
Other current assets		138.3			155.5
Total current assets		2,139.3			2,356.6
Property, plant and equipment, net		15,333.5			14,214.6
Intangible assets, net		2,446.6			2,734.6
Long-term assets from risk management activities		17.7			24.5
Investments in unconsolidated affiliates		138.3			131.3
Other long-term assets		114.2			98.4
Total assets	$	20,189.6		$	19,560.0

LIABILITIES, SERIES A PREFERRED STOCK AND OWNERS’ EQUITY
Current liabilities:
Accounts payable	$	1,581.3		$	1,448.8
Accrued liabilities		292.0			289.5
Interest payable		101.0			174.0
Liabilities from risk management activities		105.8			320.1
Current debt obligations		602.0			834.3
Total current liabilities		2,682.1			3,066.7
Long-term debt		12,318.4			10,702.1
Long-term liabilities from risk management activities		34.8			140.1
Deferred income taxes, net		418.3			327.7
Other long-term liabilities		358.2			341.2
Contingencies (see Note 12)
Series A Preferred 9.5% Stock, $1,000 per share liquidation preference (1,200,000 shares authorized, zero shares issued and outstanding as of September 30, 2023 and December 31, 2022), net of discount		—			—
Owners’ equity:
Targa Resources Corp. stockholders’ equity:
Common stock ($0.001 par value, 450,000,000 shares authorized as of September 30, 2023 and December 31, 2022)		0.2			0.2
Issued Outstanding
September 30, 2023 240,087,974 223,080,697
December 31, 2022 237,939,058 226,042,229
Preferred stock ($0.001 par value, after designation of Series A Preferred Stock: 98,800,000 shares authorized, zero shares issued and outstanding)		—			—
Additional paid-in capital		3,061.5			3,702.3
Retained earnings (deficit)		305.5			(626.8	)
Accumulated other comprehensive income (loss)		(5.3	)		54.7
Treasury stock, at cost (17,007,277 shares as of September 30, 2023 and 11,896,829 shares as of December 31, 2022)		(855.8	)		(464.7	)
Total Targa Resources Corp. stockholders’ equity		2,506.1			2,665.7
Noncontrolling interests		1,871.7			2,316.5
Total owners’ equity		4,377.8			4,982.2
Total liabilities, Series A Preferred Stock and owners’ equity	$	20,189.6		$	19,560.0

See notes to consolidated financial statements.

TARGA RESOURCES CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
	(Unaudited)
	(In millions, except per share amounts)
Revenues:
Sales of commodities	$	3,374.3		$	4,800.3		$	10,314.0		$	14,990.7
Fees from midstream services		522.3			559.8			1,506.8			1,384.3
Total revenues		3,896.6			5,360.1			11,820.8			16,375.0
Costs and expenses:
Product purchases and fuel		2,690.0			4,306.3			7,777.9			13,557.8
Operating expenses		277.7			261.3			808.4			660.6
Depreciation and amortization expense		331.3			287.2			988.2			766.2
General and administrative expense		90.0			79.1			253.4			217.2
Other operating (income) expense		2.5			(3.8	)		2.0			(4.4	)
Income (loss) from operations		505.1			430.0			1,990.9			1,177.6
Other income (expense):
Interest expense, net		(175.1	)		(125.8	)		(509.8	)		(300.5	)
Equity earnings (loss)		3.0			1.7			6.2			8.7
Gain (loss) from financing activities		—			—			—			(49.6	)
Gain (loss) from sale of equity method investment		—			—			—			435.9
Other, net		(0.1	)		(14.6	)		(4.9	)		(14.6	)
Income (loss) before income taxes		332.9			291.3			1,482.4			1,257.5
Income tax (expense) benefit		(53.9	)		(12.0	)		(260.7	)		(122.0	)
Net income (loss)		279.0			279.3			1,221.7			1,135.5
Less: Net income (loss) attributable to noncontrolling interests		59.0			86.2			175.4			258.0
Net income (loss) attributable to Targa Resources Corp.		220.0			193.1			1,046.3			877.5
Premium on repurchase of noncontrolling interests, net of tax		—			—			490.7			53.1
Dividends on Series A Preferred Stock		—			—			—			30.0
Deemed dividends on Series A Preferred Stock		—			—			—			215.5
Net income (loss) attributable to common shareholders	$	220.0		$	193.1		$	555.6		$	578.9

Net income (loss) per common share - basic	$	0.97		$	0.85		$	2.44		$	2.54
Net income (loss) per common share - diluted	$	0.97		$	0.84		$	2.43		$	2.50
Weighted average shares outstanding - basic		223.8			226.6			225.2			227.6
Weighted average shares outstanding - diluted		225.1			230.3			226.5			231.5

See notes to consolidated financial statements.

TARGA RESOURCES CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


	Three Months Ended September 30,
	2023								2022
	Pre-Tax			Related Income Tax		After Tax			Pre-Tax		Related Income Tax			After Tax
	(Unaudited)
	(In millions)
Net income (loss)						$	279.0							$	279.3
Other comprehensive income (loss):
Commodity hedging contracts:
Change in fair value	$	(153.8	)	$	34.9		(118.9	)	$	225.4	$	(50.4	)		175.0
Settlements reclassified to revenues		(22.2	)		5.0		(17.2	)		121.7		(27.0	)		94.7
Other comprehensive income (loss)		(176.0	)		39.9		(136.1	)		347.1		(77.4	)		269.7
Comprehensive income (loss)							142.9								549.0
Less: Comprehensive income (loss) attributable to noncontrolling interests							59.0								86.2
Comprehensive income (loss) attributable to Targa Resources Corp.						$	83.9							$	462.8


	Nine Months Ended September 30,
	2023									2022
	Pre-Tax			Related Income Tax			After Tax			Pre-Tax			Related Income Tax			After Tax
	(Unaudited)
	(In millions)
Net income (loss)							$	1,221.7								$	1,135.5
Other comprehensive income (loss):
Commodity hedging contracts:
Change in fair value	$	39.6		$	(9.0	)		30.6		$	(136.7	)	$	30.5			(106.2	)
Settlements reclassified to revenues		(117.2	)		26.6			(90.6	)		425.2			(94.8	)		330.4
Other comprehensive income (loss)		(77.6	)		17.6			(60.0	)		288.5			(64.3	)		224.2
Comprehensive income (loss)								1,161.7									1,359.7
Less: Comprehensive income (loss) attributable to noncontrolling interests								175.4									258.0
Comprehensive income (loss) attributable to Targa Resources Corp.							$	986.3								$	1,101.7

See notes to consolidated financial statements.

TARGA RESOURCES CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS’ EQUITY AND SERIES A PREFERRED STOCK

Retained

Accumulated