Targa Resources Corp. [TRGP] Filings

10-Q 1 trgp-10q_20220630.htm TRGP 10-Q 20220630 trgp-10q_20220630.htm

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 June 30, 2022

☐

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 St, 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 July 29, 2022, there were 226,557,413 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 June 30, 2022 and December 31, 2021		4

Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021		5

Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2022 and 2021		6

Consolidated Statements of Changes in Owners' Equity and Series A Preferred Stock for the three and six months ended June 30, 2022 and 2021		7

Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021		11

Notes to Consolidated Financial Statements		12

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		30

Item 3. Quantitative and Qualitative Disclosures About Market Risk		49

Item 4. Controls and Procedures		52

PART II—OTHER INFORMATION

Item 1. Legal Proceedings		53

Item 1A. Risk Factors		53

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		53

Item 3. Defaults Upon Senior Securities		54

Item 4. Mine Safety Disclosures		54

Item 5. Other Information		54

Item 6. Exhibits		54

SIGNATURES

Signatures		56

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, our credit ratings and our debt obligations, and demand for our common equity and our senior notes;

•

the impact of outbreaks of illnesses, pandemics (like COVID-19) or any other public health crises;

•

commodity price volatility due to ongoing conflict in Ukraine;

•

actions by the Organization of the Petroleum Exporting Countries (“OPEC”) and non-OPEC oil producing countries;

•

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, particularly with regard to taxes, safety and protection of the environment;

•

weather and other natural phenomena, and related impacts;

•

industry changes, including the impact of consolidations and changes in competition;

•

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; and

•

the risks described in our Annual Report on Form 10-K for the year ended December 31, 2021 (“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 June 30, 2022 (“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
LIBOR		London Inter-Bank Offered Rate
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

	June 30, 2022			December 31, 2021
	(Unaudited)
	(In millions)
ASSETS
Current assets:
Cash and cash equivalents	$	154.0		$	158.5
Trade receivables, net of allowances of $0.1 million and $0.1 million at June 30, 2022 and December 31, 2021		1,612.6			1,331.9
Inventories		202.2			153.4
Assets from risk management activities		80.8			43.1
Other current assets		114.5			82.9
Total current assets		2,164.1			1,769.8
Property, plant and equipment, net		11,878.3			11,667.7
Intangible assets, net		1,038.8			1,094.8
Long-term assets from risk management activities		20.5			7.7
Investments in unconsolidated affiliates		137.1			586.5
Other long-term assets		95.5			81.7
Total assets	$	15,334.3		$	15,208.2

LIABILITIES, SERIES A PREFERRED STOCK AND OWNERS' EQUITY
Current liabilities:
Accounts payable	$	1,901.0		$	1,402.3
Accrued liabilities		255.2			272.2
Distributions payable		25.3			64.5
Interest payable		131.8			138.5
Liabilities from risk management activities		425.5			258.2
Current debt obligations		414.6			162.8
Total current liabilities		3,153.4			2,298.5
Long-term debt		7,046.2			6,434.4
Long-term liabilities from risk management activities		232.3			109.3
Deferred income taxes, net		213.4			136.0
Other long-term liabilities		288.1			301.6
Contingencies (see Note 14)
Series A Preferred 9.5% Stock, $1,000 per share liquidation preference (1,200,000 shares authorized, zero and 919,300 shares issued and outstanding as of June 30, 2022 and December 31, 2021), net of discount (see Note 9)		—			749.7
Owners' equity:
Targa Resources Corp. stockholders' equity:
Common stock ($0.001 par value, 450,000,000 shares authorized as of June 30, 2022 and December 31, 2021)		0.2			0.2
Issued Outstanding
June 30, 2022 237,204,119 227,062,130
December 31, 2021 236,105,293 228,221,122
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		3,834.4			4,268.9
Retained earnings (deficit)		(1,137.9	)		(1,822.3	)
Accumulated other comprehensive income (loss)		(276.4	)		(230.9	)
Treasury stock, at cost (10,141,989 shares as of June 30, 2022 and 7,884,171 shares as of December 31, 2021)		(350.4	)		(204.1	)
Total Targa Resources Corp. stockholders' equity		2,069.9			2,011.8
Noncontrolling interests		2,331.0			3,166.9
Total owners' equity		4,400.9			5,178.7
Total liabilities, Series A Preferred Stock and owners' equity	$	15,334.3		$	15,208.2

See notes to consolidated financial statements.

TARGA RESOURCES CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(Unaudited)
	(In millions, except per share amounts)
Revenues:
Sales of commodities	$	5,624.2		$	3,091.6		$	10,190.3		$	6,459.3
Fees from midstream services		431.6			324.3			824.6			589.4
Total revenues		6,055.8			3,415.9			11,014.9			7,048.7
Costs and expenses:
Product purchases and fuel		5,047.3			2,709.0			9,251.5			5,545.3
Operating expenses		215.8			184.8			399.3			355.8
Depreciation and amortization expense		269.9			211.9			479.0			428.0
General and administrative expense		71.0			63.7			138.0			125.1
Other operating (income) expense		(0.1	)		0.7			(0.6	)		4.6
Income (loss) from operations		451.9			245.8			747.7			589.9
Other income (expense):
Interest expense, net		(81.2	)		(94.8	)		(174.7	)		(193.2	)
Equity earnings (loss)		1.4			12.8			7.0			24.6
Gain (loss) from financing activities		(33.8	)		(1.9	)		(49.6	)		(16.6	)
Gain (loss) from sale of equity method investment		435.9			—			435.9			—
Other, net		0.5			0.1			—			0.2
Income (loss) before income taxes		774.7			162.0			966.3			404.9
Income tax (expense) benefit		(87.1	)		(6.6	)		(110.1	)		(21.6	)
Net income (loss)		687.6			155.4			856.2			383.3
Less: Net income (loss) attributable to noncontrolling interests		91.2			99.2			171.8			180.7
Net income (loss) attributable to Targa Resources Corp.		596.4			56.2			684.4			202.6
Premium on repurchase of noncontrolling interests, net of tax		—			—			53.1			—
Dividends on Series A Preferred Stock		8.2			21.8			30.0			43.7
Deemed dividends on Series A Preferred Stock		215.5			—			215.5			—
Net income (loss) attributable to common shareholders	$	372.7		$	34.4		$	385.8		$	158.9

Net income (loss) per common share - basic	$	1.64		$	0.15		$	1.69		$	0.70
Net income (loss) per common share - diluted	$	1.61		$	0.15		$	1.66		$	0.69
Weighted average shares outstanding - basic		227.8			228.6			228.1			228.5
Weighted average shares outstanding - diluted		231.7			231.3			232.0			230.9

See notes to consolidated financial statements.

TARGA RESOURCES CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Three Months Ended June 30,
	2022							2021
	Pre-Tax		Related Income Tax			After Tax		Pre-Tax			Related Income Tax		After Tax
	(Unaudited)
	(In millions)
Net income (loss)						$	687.6						$	155.4
Other comprehensive income (loss):
Commodity hedging contracts:
Change in fair value	$	25.2	$	(5.7	)		19.5	$	(232.6	)	$	55.7		(176.9	)
Settlements reclassified to revenues		157.7		(35.2	)		122.5		53.6