Targa Resources Corp
For the period ended Jun 30, 2024. Filed Aug 1, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 1, 2024
TRGP$264.59-2.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-02.
0000950170-24-051853
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-01.
0000950170-24-089135
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 154 previous paragraphs and 175 current paragraphs.
126 unchanged; 28 reworded; 11 added; 0 removed; 0 previous and 10 current paragraphs rearranged.
Tables are not compared: 14 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
In August 2024, we announced the construction of a new 275 MMcf/d cryogenic natural gas processing plant in Permian Midland (the “East Pembrook plant”). The East Pembrook plant is expected to begin operations in the third quarter of 2026.
Current report
Joint Venture
Current report
On July 31, 2024, we entered into an agreement with the WPC Joint Venture (“WPC”) to move forward with the Blackcomb Pipeline (“Blackcomb”). Blackcomb is designed to transport up to 2.5 Bcf/d of natural gas through approximately 365 miles of 42-inch pipeline from the Permian Basin in West Texas to the Agua Dulce area in South Texas, and is expected to be in service in the second half of 2026, pending the receipt of customary regulatory and other approvals. Blackcomb is a joint venture owned 70.0% by WPC, 17.5% by Targa, and 12.5% by MPLX LP. WPC is a joint venture owned 50.6% by WhiteWater, 30.4% by MPLX LP, and 19.0% by Enbridge Inc.
Current report
Financing Activities
Current report
On May 21, 2024, we repaid all $500.0 million outstanding under the $1.5 billion unsecured term loan facility due July 2025 (the “Term Loan Facility”) and subsequently the Term Loan Facility was terminated. As a result of the repayment, we recorded a loss due to debt extinguishment of $0.8 million.
Current report
The increase in general and administrative expense is primarily due to higher compensation and benefits.
Current report
The increase in commodity sales reflects higher NGL, natural gas and condensate volumes ($985.8 million) and higher NGL prices ($158.0 million), partially offset by lower natural gas prices ($632.3 million) and the unfavorable impact of hedges ($510.0 million).
Current report
The increase in product purchases and fuel reflects higher NGL, natural gas and condensate volumes and higher NGL prices, partially offset by lower natural gas prices.
Current report
The increase in general and administrative expense is primarily due to higher compensation and benefits.
Current report
The increase in operating expenses was primarily due to higher volumes in the Permian and the addition of the Midway, Greenwood, Wildcat II and Roadrunner II plants.
Current report
The increase in operating expenses was due to higher system volumes, higher compensation and benefits, and the addition of Train 9, partially offset by lower repairs and maintenance.
Reworded paragraphs (28)
Previous wording
Our 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 and the Gulf of Mexico.
Current wording
Our 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.
Previous wording
In February 2023, we announced the transfer of an existing cryogenic natural gas processing plant acquired in the purchase of Southcross Energy Operating LLC and its subsidiaries to the Permian Delaware. The plant will be installed as a new 230 MMcf/d cryogenic natural gas processing plant (the “Roadrunner II plant”). The Roadrunner II plant is expected to begin operations in the second quarter of 2024.
Current wording
In February 2023, we announced the transfer of an existing cryogenic natural gas processing plant acquired in the purchase of Southcross Energy Operating LLC and its subsidiaries to the Permian Delaware. The plant was installed as a new 230 MMcf/d cryogenic natural gas processing plant (the “Roadrunner II plant”). The Roadrunner II plant commenced operations in the second quarter of 2024.
Previous wording
In August 2023, we announced the construction of a new 275 MMcf/d cryogenic natural gas processing plant in Permian Delaware (the “Bull Moose plant”). The Bull Moose plant is expected to begin operations in the second quarter of 2025.
Current wording
In August 2023, we announced the construction of a new 275 MMcf/d cryogenic natural gas processing plant in Permian Delaware (the “Bull Moose plant”). The Bull Moose plant is expected to begin operations in the first quarter of 2025.
Previous wording
In August 2022, we announced plans to construct a new 120 MBbl/d fractionation train in Mont Belvieu, Texas (“Train 9”). Train 9 is expected to begin operations in the second quarter of 2024.
Current wording
In August 2022, we announced plans to construct a new 120 MBbl/d fractionation train in Mont Belvieu, Texas (“Train 9”). Train 9 commenced operations in the second quarter of 2024.
Previous wording
In January 2023, we reached an agreement with our partners in Gulf Coast Fractionators (“GCF”) to reactivate GCF’s 135 MBbl/d fractionation facility. The facility is expected to be operational in the second quarter of 2024.
Current wording
In January 2023, we reached an agreement with our partners in Gulf Coast Fractionators (“GCF”) to reactivate GCF’s 135 MBbl/d fractionation facility. The facility is expected to begin operations in the third quarter of 2024.
Previous wording
In May 2023, we announced plans to construct a new 120 MBbl/d fractionation train in Mont Belvieu, Texas (“Train 10”). Train 10 is expected to begin operations in the first quarter of 2025.
Current wording
In May 2023, we announced plans to construct a new 120 MBbl/d fractionation train in Mont Belvieu, Texas (“Train 10”). Train 10 is expected to begin operations late in the fourth quarter of 2024.
Previous wording
In May 2023, our Board of Directors authorized a $1.0 billion common share repurchase program (the “2023 Share Repurchase Program”). For the three months ended March 31, 2024, we repurchased 1,186,444 shares of our common stock at a weighted average per share price of $104.26 for a total net cost of $123.7 million. As of March 31, 2024, there was $646.4 million remaining under the 2023 Share Repurchase Program. We are not obligated to repurchase any specific dollar amount or number of shares under the 2023 Share Repurchase Program and may discontinue the program at any time.
Current wording
In May 2023, our Board of Directors approved a $1.0 billion common share repurchase program (the “2023 Share Repurchase Program”). In July 2024, our Board of Directors approved a new $1.0 billion common share repurchase program (the “2024 Share Repurchase Program” and, together with the 2023 Share Repurchase Program, the “Share Repurchase Programs”). The amount authorized under the 2024 Share Repurchase Program is in addition to the amount remaining under the 2023 Share Repurchase Program. We are not obligated to repurchase any specific dollar amount or number of shares under the Share Repurchase Programs and may discontinue these programs at any time.
Previous wording
As of March 31, 2024, Internal Revenue Service (the “IRS”) examinations are currently in process for the 2019, 2020 and 2021 taxable years of certain wholly-owned and consolidated subsidiaries that are treated as partnerships for U.S federal income tax purposes. We are responding to information requests from the IRS with respect to these audits. We are not aware of any potential audit findings that would give rise to adjustments to taxable income and do not anticipate material changes related to these audits.
Current wording
As of June 30, 2024, Internal Revenue Service (the “IRS”) examinations are currently in process for the 2019, 2020, 2021 and 2022 taxable years of certain wholly-owned and consolidated subsidiaries that are treated as partnerships for U.S federal income tax purposes. We are responding to information requests from the IRS with respect to these audits. We do not expect there to be any audit adjustments that would materially change our taxable income.
Previous wording
Federal statutes of limitations for returns filed in 2020 (for calendar year 2019) have expired, except for the 2019 returns under examination that have a statute extension to April 2025. For Texas, the statute of limitations has expired for 2019 returns (for calendar year 2018). Similarly, the statute of limitations expired on substantially all 2019 state income tax returns that were filed prior to October 15, 2020. However, tax authorities could review and adjust carryover attributes (e.g., net operating losses) generated in a closed tax year if utilized in an open tax year.
Current wording
Federal statutes of limitations for returns filed in 2020 (for calendar year 2019) have expired, except for the 2019 returns under examination that have a statute extension to April 2025. The statute of limitations expired on substantially all 2019 state income tax returns that were filed prior to October 15, 2020. For Texas, the statute of limitations has expired for 2019 returns (for calendar year 2018). However, tax authorities could review and adjust carryover attributes (e.g., net operating losses) generated in a closed tax year if utilized in an open tax year.
Previous wording
Excludes amortization of interest expense. The three months ended March 31, 2024 includes $54.9 million of interest expense associated with the Splitter Agreement ruling.
Current wording
Excludes amortization of interest expense. The three and six months ended June 30, 2024 includes $0.9 million and $55.8 million, respectively, of interest expense associated with the Splitter Agreement ruling.
Previous wording
The decrease in commodity sales reflects lower natural gas and NGL prices ($589.0 million), the unfavorable impact of hedges ($258.4 million) and lower condensate volumes ($7.4 million), partially offset by higher NGL and natural gas volumes ($759.3 million) and higher condensate prices ($23.4 million).
Current wording
The increase in commodity sales reflects higher NGL prices ($357.7 million) and higher NGL, natural gas and condensate volumes ($272.7 million), partially offset by lower natural gas and condensate prices ($302.5 million) and the unfavorable impact of hedges ($251.6 million).
Previous wording
The increase in product purchases and fuel reflects higher NGL and natural gas volumes and higher condensate prices, partially offset by lower natural gas and NGL prices.
Current wording
The increase in product purchases and fuel reflects higher NGL prices and higher NGL, natural gas and condensate volumes, partially offset by lower natural gas and condensate prices.
Previous wording
The increase in operating expenses is primarily due to higher rental and labor costs as a result of increased activity and system expansions.
Current wording
The increase in operating expenses is primarily due to higher labor and rental costs as a result of increased activity and system expansions.
Previous wording
The decrease in income tax expense is primarily due to a decrease in pre-tax book income.
Current wording
The decrease in income tax expense is primarily due to a decrease in pre-tax book income, partially offset by the release of valuation allowance in 2023.
Previous wording
The increase in adjusted operating margin was due to higher natural gas inlet volumes and higher fees in the Permian, partially offset by lower natural gas and NGL 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 and Wildcat II plants during the fourth quarter of 2023, and continued strong producer activity. Natural gas inlet volumes in the Central region decreased primarily due to lower volumes in SouthTX and lower producer activity in the first quarter of 2024.
Current wording
The increase in adjusted operating margin was due to higher natural gas inlet volumes and higher fees in the Permian, partially offset by lower commodity 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 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.
Previous wording
The increase in operating expenses was primarily due to higher volumes in the Permian and the addition of the Legacy II, Midway, Greenwood and Wildcat II plants.
Current wording
The increase in operating expenses was primarily due to higher volumes in the Permian and the addition of the Legacy II, Midway, Greenwood, Wildcat II and Roadrunner II plants.
Previous wording
The increase in adjusted operating margin was due to higher pipeline transportation and fractionation margin and higher LPG export margin, largely offset by lower marketing margin which benefited from greater seasonal optimization opportunities in the prior year. Pipeline transportation and fractionation volumes benefited from higher supply volumes primarily from our Permian Gathering and Processing systems and higher fees. 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.
Current wording
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 we benefited from the completion of our 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.
Previous wording
The increase in operating expenses was due to higher system volumes, higher repairs and maintenance and higher compensation and benefits.
Current wording
The increase in operating expenses was due to higher system volumes, higher compensation and benefits, higher repairs and maintenance, and the addition of Train 9.
Previous wording
As of March 31, 2024, inclusive of our consolidated joint venture accounts, we had $109.9 million of Cash and cash equivalents on our Consolidated Balance Sheets. We believe our cash positions, our cash flows from operating activities, our free cash flow after dividends and remaining borrowing capacity on our credit facilities (discussed below in “Short-term Liquidity”) are adequate to allow us to manage our day-to-day cash requirements and anticipated obligations as discussed further below. Our liquidity and capital resources are managed on a consolidated basis.
Current wording
As of June 30, 2024, inclusive of our consolidated joint venture accounts, we had $166.4 million of Cash and cash equivalents on our Consolidated Balance Sheets. We believe our cash positions, our cash flows from operating activities, our free cash flow after dividends and remaining borrowing capacity on our credit facilities (discussed below in “Short-term Liquidity”) are adequate to allow us to manage our day-to-day cash requirements and anticipated obligations as discussed further below. Our liquidity and capital resources are managed on a consolidated basis.
Previous wording
A portion of our capital resources are allocated to letters of credit to satisfy certain counterparty credit requirements. As of March 31, 2024, we had $32.5 million in letters of credit outstanding under the TRGP Revolver. The letters of credit also reflect certain counterparties’ views of our financial condition and ability to satisfy our performance obligations, as well as commodity prices and other factors.
Current wording
A portion of our capital resources are allocated to letters of credit to satisfy certain counterparty credit requirements. As of June 30, 2024, we had $26.0 million in letters of credit outstanding under the TRGP Revolver. The letters of credit also reflect certain counterparties’ views of our financial condition and ability to satisfy our performance obligations, as well as commodity prices and other factors.
Previous wording
Working capital as of March 31, 2024 decreased $275.2 million compared to December 31, 2023. The decrease was primarily due to lower NGL inventory, higher product purchases and fuel payables due to higher NGL prices and volumes, reclassification of liabilities from long-term to current as a result of a 2024 legal ruling associated with the Splitter Agreement, and lower net liabilities for hedging activities, partially offset by lower net borrowings on the Securitization Facility.
Current wording
Working capital as of June 30, 2024 decreased $457.7 million compared to December 31, 2023. The decrease was primarily due to lower net commodity receivables and payables resulting from lower natural gas prices and lower NGL volumes, higher accounts payable related to capital spending on growth projects, and higher net liabilities for hedging activities.
Previous wording
The decrease in net cash used in financing activities was due to lower repurchases of noncontrolling interests primarily due to the Grand Prix Transaction in 2023, partially offset by lower borrowings of debt, higher repurchases of common stock and higher dividends paid in 2024.
Current wording
The decrease in net cash used in financing activities was due to lower repurchases of noncontrolling interests primarily due to the Grand Prix Transaction in 2023, partially offset by lower borrowings of debt primarily due to the repayment of all amounts outstanding under the Term Loan Facility in May 2024, higher repurchases of common stock and higher dividends paid in 2024.
Previous wording
The following table details the dividends on common stock declared and/or paid by us for the three months ended March 31, 2024:
Current wording
The following table details the dividends on common stock declared and/or paid by us for the six months ended June 30, 2024:
Previous wording
The following table details cash outlays for capital projects for the three months ended March 31, 2024 and 2023:
Current wording
The following table details cash outlays for capital projects for the six months ended June 30, 2024 and 2023:
Previous wording
Growth capital expenditures, net of contributions from noncontrolling interests and including contributions to investments in unconsolidated affiliates, were $685.8 million and $415.4 million for the three months ended March 31, 2024 and 2023.
Current wording
Growth capital expenditures, net of contributions from noncontrolling interests and including contributions to investments in unconsolidated affiliates, were $1,484.5 million and $994.9 million for the six months ended June 30, 2024 and 2023.
Previous wording
Maintenance capital expenditures, net of contributions from noncontrolling interests, were $49.8 million and $41.8 million for the three months ended March 31, 2024 and 2023.
Current wording
Maintenance capital expenditures, net of contributions from noncontrolling interests, were $102.7 million and $88.0 million for the six months ended June 30, 2024 and 2023.
Previous wording
With our announced natural gas processing additions currently under construction in the Permian region, coupled with the construction of our Daytona NGL Pipeline and Train 9, 10 and 11 fractionators in Mont Belvieu, we currently estimate that in 2024 we will invest between $2.3 billion to $2.5 billion in net growth capital expenditures for announced projects. Future growth capital expenditures may vary based on investment opportunities. We expect that 2024 maintenance capital expenditures, net of noncontrolling interests, will be approximately $225 million.
Current wording
With our announced natural gas processing additions currently under construction in the Permian region, coupled with the construction of our Daytona NGL Pipeline and Train 9, 10 and 11 fractionators in Mont Belvieu, we currently estimate that in 2024 we will invest approximately $2.7 billion in net growth capital expenditures for announced projects. Future growth capital expenditures may vary based on investment opportunities. We expect that 2024 maintenance capital expenditures, net of noncontrolling interests, will be approximately $225 million.
Previous wording
As of March 31, 2024, there were $87.1 million in surety bonds outstanding related to various performance obligations. These are in place to support various performance obligations as required by (i) statutes within the regulatory jurisdictions where we operate, and (ii) counterparty support. Obligations under these surety bonds are not normally called, as we typically comply with the underlying performance requirement.
Current wording
As of June 30, 2024, there were $100.6 million in surety bonds outstanding related to various performance obligations. These are in place to support various performance obligations as required by (i) statutes within the regulatory jurisdictions where we operate, and (ii) counterparty support. Obligations under these surety bonds are not normally called, as we typically comply with the underlying performance requirement.
Rearranged current paragraphs (10)
Current report — wording carried from elsewhere
In August 2024, we announced the construction of a new 275 MMcf/d cryogenic natural gas processing plant in Permian Delaware (the “Bull Moose II plant”). The Bull Moose II plant is expected to begin operations in the first quarter of 2026.
Current report — wording carried from elsewhere
For the three and six months ended June 30, 2024, we repurchased 2,985,816 shares and 4,172,260 shares of our common stock at a weighted average per share price of $118.91 and $114.75 for a total net cost of $355.1 million and $478.8 million, respectively. As of June 30, 2024, there was $291.3 million remaining under the 2023 Share Repurchase Program.
Current report — wording carried from elsewhere
For additional information about our recent debt-related transactions, see Note 6 – Debt Obligations to our Consolidated Financial Statements.
Current report — wording carried from elsewhere
The increase in fees from midstream services is primarily due to higher gas gathering and processing fees, and higher export volumes, partially offset by lower transportation and fractionation fees.
Current report — wording carried from elsewhere
The increase in interest expense, net, is due to higher borrowings, partially offset by an increase in capitalized interest.
Current report — wording carried from elsewhere
The increase in operating expenses is primarily due to higher labor and rental costs as a result of increased activity and system expansions.
Current report — wording carried from elsewhere
See “—Results of Operations—By Reportable Segment” for additional information on a segment basis.
Current report — wording carried from elsewhere
The increase in depreciation and amortization expense is primarily due to the impact of system expansions on our asset base, 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.
Current report — wording carried from elsewhere
The increase in adjusted operating margin was due to higher natural gas inlet volumes and higher fees in the Permian, partially offset by lower natural gas and condensate prices. The increase in natural gas inlet volumes in the Permian was attributable to the addition of the Midway plant during the second quarter of 2023, the Greenwood 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.
Current report — wording carried from elsewhere
The increase in adjusted operating margin was due to higher pipeline transportation and fractionation margin and higher LPG export margin, partially offset by lower marketing 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. LPG export margin increased due to higher volumes as we benefited from the completion of our 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. Greater seasonal optimization opportunities drove marketing margin higher during the first quarter of 2023.