Targa(US:TRGP)2021-11-03 16:00PART I—FINANCIAL INFORMATION Item 1. Financial Statements Presents Targa Resources Corp.'s unaudited consolidated financial statements for Q3 and nine months ended September 30, 2021, reflecting increased revenues and profitability Consolidated Balance Sheets Details the company's financial position as of September 30, 2021, showing total assets of $15.97 billion and total liabilities of $9.82 billion Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $1,993.3 | $1,460.3 | | Total Assets | $15,972.7 | $15,875.7 | | Total Current Liabilities | $2,868.3 | $1,779.4 | | Total Liabilities | $9,823.1 | $9,671.1 | | Total Owners' Equity | $5,399.9 | $5,903.2 | Consolidated Statements of Operations Reports Q3 2021 total revenues of $4.46 billion and net income of $160.4 million, significantly improving from a prior-year loss Key Operational Results (in millions, except per share data) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $4,459.7 | $2,115.1 | $11,508.2 | $5,687.5 | | Income from Operations | $366.5 | $295.5 | $956.4 | $(1,568.9) | | Net Income (Loss) Attributable to Common Shareholders | $160.4 | $36.9 | $319.3 | $(1,684.0) | | Net Income (Loss) per Common Share - Diluted | $0.66 | $0.16 | $1.38 | $(7.22) | Consolidated Statements of Cash Flows Shows net cash from operations at $1.80 billion for the nine months ended September 30, 2021, an increase from $1.10 billion in 2020 Consolidated Cash Flow Summary (Nine Months Ended Sep 30, in millions) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $1,798.8 | $1,095.7 | | Net Cash Used in Investing Activities | $(299.6) | $(654.0) | | Net Cash Provided by (Used in) Financing Activities | $(1,513.4) | $(497.8) | | Net Change in Cash and Cash Equivalents | $(14.2) | $(56.1) | Notes to Consolidated Financial Statements Provides detailed explanations for financial statements, covering accounting policies, debt, derivatives, segment information, and legal contingencies - As of September 30, 2021, total debt obligations stood at $6.79 billion, a decrease from $7.76 billion at year-end 2020. The company actively managed its debt profile, issuing $1.0 billion in new notes and redeeming several series of existing notes during 2021556062 - The company operates in two primary segments: Gathering and Processing, and Logistics and Transportation. For the nine months ended September 30, 2021, the Gathering and Processing segment generated an operating margin of $938.2 million, while the Logistics and Transportation segment generated $920.5 million112121 - The company has estimated minimum revenue of $3.19 billion related to unsatisfied performance obligations from long-term contracts with remaining terms of 1 to 18 years104105 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operational results, highlighting strong performance from higher commodity prices and volumes, capital allocation, and liquidity Recent Developments and Outlook Details Targa's Permian Midland processing capacity expansion, updated capital allocation strategy, and debt management activities - The Heim Plant (200 MMcf/d) began operations in Q3 2021, and construction of the new Legacy Plant (250 MMcf/d) in the Midland Basin is underway, with operations expected in Q4 2022134135 - The company announced a new capital allocation strategy, intending to recommend a dividend increase to $0.35 per common share for Q4 2021, repurchase JV interests for ~$925 million, and potentially redeem Series A Preferred Stock137 - In 2021, the company actively managed its debt by issuing $1.0 billion of 4% Senior Notes due 2032 and redeeming several other series of notes, including the 5⅛% Notes due 2025 and 4¼% Notes due 2023138140 Results of Operations Consolidated results show significant year-over-year improvement, with Q3 2021 net income up 163% and Adjusted EBITDA increasing 21% Consolidated Financial Highlights (in millions) | Metric | Q3 2021 | Q3 2020 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $4,459.7 | $2,115.1 | 111% | | Net Income Attributable to TRC | $182.2 | $69.3 | 163% | | Adjusted EBITDA | $505.9 | $419.1 | 21% | Segment Operating Margin (in millions) | Segment | Q3 2021 | Q3 2020 | % Change | | :--- | :--- | :--- | :--- | | Gathering and Processing | $361.4 | $261.0 | 38% | | Logistics and Transportation | $280.7 | $280.4 | 0% | - The Gathering and Processing segment's performance was driven by higher realized commodity prices and a 15% increase in Total Permian natural gas inlet volumes year-over-year190196 - The Logistics and Transportation segment saw a 38% increase in pipeline throughput and a 12% increase in fractionation volumes, driven by higher supply from the Permian200202 Liquidity and Capital Resources Reviews Targa's liquidity of $3.13 billion as of October 29, 2021, and outlines capital expenditure estimates for 2021 Consolidated Liquidity as of October 29, 2021 (in millions) | Source | Amount | | :--- | :--- | | Cash on hand | $307.1 | | Availability under Revolvers | $2,870.0 | | Total Liquidity | $3,128.3 | - Net cash from operating activities increased by $703.1 million to $1.8 billion for the first nine months of 2021 compared to the same period in 2020, primarily due to higher collections from customers227229 - The company estimates 2021 net growth capital expenditures of $350 million to $450 million and net maintenance capital expenditures of approximately $120 million239 Quantitative and Qualitative Disclosures About Market Risk Details the company's exposure to market risks, including commodity prices, interest rates, and counterparty credit, and its hedging strategies - The company hedges a portion of its expected natural gas, NGL, and condensate equity volumes through 2025 to reduce cash flow variability244246 Sensitivity of Derivative Fair Value to 10% Price Change (as of Sep 30, 2021, in millions) | Commodity | Fair Value | Result of 10% Price Decrease | Result of 10% Price Increase | | :--- | :--- | :--- | :--- | | Total | $(527.4) | $(378.3) | $(676.5) | - A hypothetical 100 basis point change in interest rates would impact annual interest expense by $3.4 million based on September 30, 2021 variable-rate debt balances254 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes in internal control - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2021259 - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls260 PART II—OTHER INFORMATION Legal Proceedings Details a significant legal proceeding with Vitol Americas Corp., where a court awarded Vitol $129.0 million plus interest and $10.5 million in damages, which Targa has appealed - Vitol Americas Corp. filed a lawsuit against a former Targa subsidiary, Targa Channelview LLC, seeking recovery of $129.0 million in payments related to a terminated Splitter Agreement263 - On October 15, 2020, a district court awarded Vitol $129.0 million (plus interest) and an additional $10.5 million in damages. The company has filed an appeal, which is currently pending264 Risk Factors Supplements annual risk factors by highlighting the adverse impact of severe weather events and potential climate changes on operations and financial results - The company's operations are subject to disruption from severe weather, such as the February 2021 winter storms, which can adversely affect operations and the financial condition of counterparties267 - Potential climate changes may increase the frequency and severity of storms, floods, and other climatic events, which could have a material adverse effect on the company's business267 Unregistered Sales of Equity Securities and Use of Proceeds Reports no unregistered equity sales and details share repurchases, with $408.5 million remaining under the $500 million repurchase program as of September 30, 2021 - There were no unregistered sales of equity securities during the period269 - As of September 30, 2021, approximately $408.5 million remained available for repurchase under the company's $500 million authorized share repurchase program270271 Other Items (Items 3, 4, 5, 6) Covers items with no substantive disclosures, including defaults, mine safety, and other information, and lists exhibits filed with the quarterly report - There were no defaults upon senior securities during the period272 - Item 6 lists the exhibits filed with the Form 10-Q, including certifications and supplemental indentures275277