HOUSTON, Feb. 18, 2021 (GLOBE NEWSWIRE) -- Targa Resources Corp. (NYSE: TRGP) today reported fourth quarter and full year 2020 results.
Fourth Quarter and Full Year 2020 Financial Results
Fourth quarter 2020 net income (loss) attributable to Targa Resources Corp. was $33.6 million compared to ($112.8) million for the fourth quarter of 2019. In the fourth quarter of 2019, the Company recorded a non-cash pre-tax impairment charge of $225.3 million for the partial impairment of certain gas processing facilities and gathering systems associated with Targa’s Central and Coastal operations. For the full year 2020, net income (loss) attributable to Targa was ($1,553.9) million compared to ($209.2) million for 2019. In 2020, the Company recorded a non-cash pre-tax impairment charge of $2,442.8 million for the partial impairment of certain gas processing facilities and gathering systems associated with Targa’s Central operations and full impairment of Targa’s Coastal operations - all of which are in the Gathering and Processing segment.
The Company reported adjusted earnings before interest, income taxes, depreciation and amortization, and other non-cash items (“Adjusted EBITDA”) of $438.1 million for the fourth quarter of 2020 compared to $465.2 million for the fourth quarter of 2019 and $1,636.6 million for the full year 2020 compared to $1,435.5 million for the full year 2019 (see the section of this release entitled “Targa Resources Corp. - Non-GAAP Financial Measures” for a discussion of Adjusted EBITDA, distributable cash flow, free cash flow, gross margin and operating margin, and reconciliations of such measures to their most directly comparable financial measures calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”)).
On January 20, 2021, TRC declared a quarterly dividend of $0.10 per share of its common stock for the three months ended December 31, 2020, or $0.40 per share on an annualized basis. Total cash dividends of approximately $22.9 million were paid on February 16, 2021 on all outstanding shares of common stock to holders of record as of the close of business on February 1, 2021. Also on January 20, 2021, TRC declared a quarterly cash dividend of $23.75 per share of its Series A Preferred Stock. Total cash dividends of approximately $22.9 million were paid on February 12, 2021 on all outstanding shares of Series A Preferred Stock to holders of record as of the close of business on February 1, 2021.
The Company reported distributable cash flow and free cash flow before dividends for the fourth quarter of 2020 of $293.9 million and $214.5 million. For the full year 2020, the Company reported distributable cash flow and free cash flow before dividends of $1,172.8 million and $574.9 million, respectively.
Fourth Quarter 2020 - Sequential Quarter over Quarter Commentary
Targa reported fourth quarter 2020 Adjusted EBITDA of $438.1 million, representing a 5 percent increase over the third quarter. The sequential increase in Adjusted EBITDA was predominantly attributable to full quarter contributions from projects that began operations during the third quarter, combined with strong operational performance across Targa’s Logistics and Transportation (“L&T”) systems, partially offset by higher operating expenses. In the Gathering and Processing (“G&P”) segment, the sequential increase in segment gross margin was partially attributable to higher Permian natural gas inlet volumes and higher Permian fee-based margin. In the L&T segment, the sequential increase in gross margin was primarily attributable to strong Grand Prix NGL Pipeline (“Grand Prix”) transportation throughput, and higher fractionation and liquefied petroleum gas (“LPG”) export volumes, combined with higher marketing margin. Fourth quarter Grand Prix volumes increased 18 percent sequentially, driven by incremental NGL volumes from Targa’s Permian plants, including the new Gateway Plant in Permian Midland which began operations during the third quarter. Targa’s LPG export volumes achieved a record 11.3 million barrels per month during the quarter, increasing 20 percent over the third quarter and benefited from a full quarter of the phased expansion completed in the third quarter. Fourth quarter fractionation volumes benefited from higher Permian volumes, in addition to inventory as a result of the scheduled maintenance performed during the third quarter, which shifted the timing of incremental volumes to be fractionated to the fourth quarter. Higher sequential operating expenses were attributable to recently completed system expansions and certain one-time maintenance expenses including hurricane damage repairs and integrity spending during the fourth quarter, while higher general and administrative expenses were largely attributable to compensation and legal costs.
Capitalization and Liquidity
The Company’s total consolidated debt as of December 31, 2020 was $7,755.7 million including $555.0 million outstanding under TRC’s $670.0 million senior secured revolving credit facility. The consolidated debt included $7,200.7 million of Targa Resources Partners LP’s (“TRP” or the “Partnership”) debt, net of $45.5 million of debt issuance costs, with $280.0 million outstanding under TRP’s $2.2 billion senior secured revolving credit facility, $350.0 million outstanding under TRP’s accounts receivable securitization facility, $6,585.4 million of outstanding TRP senior notes, net of unamortized premiums, and $30.8 million of finance lease liabilities.
Total consolidated liquidity as of December 31, 2020, was over $2.2 billion and included $242.8 million of cash. As of December 31, 2020, TRC had available borrowing capacity under its senior secured revolving credit facility of $115.0 million. TRP had $280.0 million of borrowings and $44.4 million in letters of credit outstanding under its $2.2 billion senior secured revolving credit facility, resulting in available senior secured revolving credit facility capacity of $1,875.6 million.
Financing Update
In November 2020, the Partnership redeemed the $559.6 million remaining balance of its 5¼% Senior Notes due 2023 with available liquidity under the Partnership’s senior secured revolving credit facility (the “TRP Revolver”). The Company recorded a loss due to debt extinguishment of $1.8 million comprised of a write-off of debt issuance costs.
In December 2020, the Partnership redeemed all of its 5,000,000 issued and outstanding 9.00% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the “Preferred Units”) at a redemption price of $25.00 per unit, plus an amount equal to all unpaid distributions up to the date of redemption. The redemption of the Preferred Units is consistent with the Company’s ongoing efforts to simplify the Company’s capital structure and to identify opportunities to generate additional cash flow by enabling the Company to realize annual cash savings associated with the elimination of Preferred Unit distributions.
In December 2020, Targa repurchased 45,800 shares of the Company’s Series A Preferred Stock at $1,000 per share (the “Liquidation Preference”), plus an amount equal to all unpaid dividends through the repurchase date. The repurchase was executed at a discount relative to the redemption price of $1,100 per share (the Liquidation Preference multiplied by 110%), which becomes effective March 16, 2021. The partial repurchase is consistent with Targa’s ongoing efforts to opportunistically simplify the Company’s capital structure and to identify opportunities to generate additional cash flow by enabling the Company to realize annual cash savings associated with the reduction of preferred stock dividends.
In February 2021, the Partnership issued $1.0 billion of 4% Senior Notes due 2032, resulting in net proceeds of approximately $992 million. A portion of the net proceeds from the issuance were used to fund the concurrent cash tender offer and subsequent redemption payment for the Partnership’s 5?% Senior Notes due 2025, with the remainder used for repayment of borrowings under the TRP Revolver and the Company’s senior secured revolving credit facility. Additionally, Targa Pipeline Partners LP (“TPL”) issued notices of redemption for all of the outstanding TPL 4¾% Senior Notes due 2021 and TPL 5?% Senior Notes due 2023. These notes will be redeemed on February 22, 2021 with available liquidity under the TRP Revolver.
Share Repurchase Update
In October 2020, the Company’s Board of Directors approved a share repurchase program (the “Share Repurchase Program”) for the repurchase of up to $500 million of the Company’s outstanding common stock. As of February 12, 2021, the Company has repurchased 5,485,874 shares at a weighted average price of $16.68 for a total net cost of $91.5 million. There is approximately $408.5 million remaining under the Share Repurchase Program.
2021 Operational and Financial Expectations
The 2021 operational and financial expectations presented herein were developed in advance of the impacts of the severe winter weather currently being experienced across Targa’s operations. Both G&P and L&T operations have been affected and the impacts are being evaluated.
Targa estimates 2021 average Permian natural gas inlet volumes will increase 5 percent to 10 percent over its 2020 average Permian natural gas inlet volumes. Targa estimates 2021 average total Field Gathering and Processing natural gas inlet volumes will be flat over the 2020 average. In its L&T segment, Targa estimates average Grand Prix volume deliveries into Mont Belvieu to increase 25 percent or more over 2020.
For 2021, Targa estimates full year Adjusted EBITDA to be between $1,675 million and $1,775 million, with the midpoint of the range representing a 5 percent increase over full year 2020 Adjusted EBITDA. Targa’s full year Adjusted EBITDA outlook assumes natural gas liquids (“NGL”) composite barrel prices average $0.55 per gallon, crude oil prices average $50 per barrel and Henry Hub and Waha natural gas prices average $3.00 and $2.65 per million British Thermal Units (“MMBtu”) for the year. Targa expects approximately 85 percent of its margin to be fee-based in 2021. Targa’s estimate for 2021 net growth capital expenditures is between $350 million to $450 million, based on announced projects and other identified spending, with the midpoint of the range representing a 33 percent decrease over full year 2020 net growth capital expenditures. Net maintenance capital expenditures for 2021 are estimated to be approximately $130 million.
An earnings supplement presentation and an updated investor presentation are available under Events and Presentations in the Investors section of the Company’s website at www.targaresources.com/investors/events.
About Targa Resources Corp.
Targa Resources Corp. is a leading provider of midstream services and is one of the largest independent midstream infrastructure companies in North America. The Company owns, operates, acquires and develops a diversified portfolio of complementary midstream infrastructure assets. The Company is primarily engaged in the business of: gathering, compressing, treating, processing, transporting and purchasing and selling natural gas; transporting, storing, fractionating, treating and purchasing and selling NGLs and NGL products, including services to LPG exporters; and gathering, storing, terminaling and purchasing and selling crude oil.
For more information, please visit the Company’s website at www.targaresources.com.
