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, Nov. 05, 2024 (GLOBE NEWSWIRE) -- 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
Record adjusted EBITDA for the third quarter of $1.07 billion
Record Permian, NGL transportation, and fractionation volumes during the third quarter
Completed its Daytona NGL Pipeline expansion during the third quarter
Repurchased approximately $168 million of common stock during the third quarter, and $647 million for the nine months ended September 30, 2024 at a weighted average price of $121.50
Estimate full year 2024 adjusted EBITDA to be above the top end of $3.95 billion to $4.05 billion range
In August and October, upgraded by Fitch to BBB and by Moody's to Baa2
In October, commenced operations at its new 275 million cubic feet per day ("MMcf/d") Greenwood II plant in Permian Midland and its new 120 thousand barrels per day ("MBbl/d") Train 10 fractionator in Mont Belvieu
Announced two new 275 MMcf/d gas plants in the Permian
Expect to recommend to Targa's Board of Directors an annual common dividend per share of $4.00 in 2025, a 33% increase to 2024
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.
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.
(1) Adjusted EBITDA is a non-GAAP financial measure and is discussed under "Non-GAAP Financial Measures."
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
%)
_________________________
(1) Adjusted EBITDA, adjusted cash flow from operations and adjusted free cash flow are non-GAAP financial measures and are discussed under "Non-GAAP Financial Measures."
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.
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.
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)
