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 September 30, 20192020
or
☐ |
| 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.) |
|
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|
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:
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|
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 |
| ☐ |
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|
| 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 November 1, 2019,2, 2020, there were 232,786,493229,013,171 shares of the registrant’s common stock, $0.001 par value, outstanding.
TABLE OF CONTENTS
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Consolidated Balance Sheets as of September 30, |
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Consolidated Statements of Cash Flows for the nine months ended September 30, |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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SIGNATURES |
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1
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
Targa Resources Corp.’s (together with its subsidiaries, including Targa Resources Partners LP (the “Partnership” or “TRP”), “we,” “us,” “our,” “Targa,” “TRC,” 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 |
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• | 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, the credit ratings for the Partnership’s and our debt obligations, and demand for our common |
• | the impact of outbreaks of illnesses, pandemics (like COVID-19) or any other public health crises; |
| • | 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; |
| • | 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 |
| • | general economic, market and business conditions; and |
| • | the risks described in our Annual Report on Form 10-K for the year ended December 31, |
Additionally, while we have not been previously materially impacted by prior outbreaks of illnesses, pandemics or other public health crises, there are potential risks to us from the continued impact on global demand for commodities related to the COVID-19 pandemic. The COVID-19 pandemic reduced economic activity and the related demand for energy commodities, which contributed to weakened commodity prices compared to historical levels and price volatility during the nine months ended September 30, 2020 and is expected to continue to impact demand over the short-to-medium term.
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 September 30, 20192020 (“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.
2
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 |
GAAP |
| Accounting principles generally accepted in the United States of America |
gal |
| U.S. gallons |
LIBOR |
| London Interbank 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 |
STACK |
| Sooner Trend, Anadarko, Canadian and Kingfisher |
3
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
TARGA RESOURCES CORP.
CONSOLIDATED BALANCE SHEETS
|
| September 30, 2019 |
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| December 31, 2018 |
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| September 30, 2020 |
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| December 31, 2019 |
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| (Unaudited) |
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| (Unaudited) |
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| (In millions) |
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ASSETS | ASSETS |
| ASSETS |
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Current assets: |
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Cash and cash equivalents |
| $ | 326.3 |
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| $ | 232.1 |
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| $ | 275.0 |
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| $ | 331.1 |
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Trade receivables, net of allowances of $0.0 and $0.1 million at September 30, 2019 and December 31, 2018 |
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| 744.0 |
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| 865.5 |
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Trade receivables, net of allowances of $0.1 and $0.0 million at September 30, 2020 and December 31, 2019 |
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| 609.8 |
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| 855.0 |
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Inventories |
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| 210.9 |
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| 164.7 |
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| 261.7 |
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| 161.5 |
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Assets from risk management activities |
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| 140.1 |
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| 115.3 |
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| 88.9 |
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| 103.3 |
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Deposits |
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| 110.1 |
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| 35.4 |
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Held for sale assets |
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| 62.2 |
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| 137.7 |
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Other current assets |
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| 54.7 |
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| 41.3 |
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| 36.7 |
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| 34.3 |
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Total current assets |
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| 1,476.0 |
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| 1,418.9 |
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| 1,444.4 |
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| 1,658.3 |
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Property, plant and equipment |
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| 19,596.0 |
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| 17,220.7 |
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Accumulated depreciation and amortization |
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| (4,899.1 | ) |
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| (4,292.3 | ) | ||||||||
Property, plant and equipment, net |
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| 14,696.9 |
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| 12,928.4 |
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| 12,292.8 |
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| 14,548.5 |
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Intangible assets, net |
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| 1,854.4 |
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| 1,983.2 |
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| 1,417.6 |
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| 1,735.0 |
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Goodwill, net |
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| 46.6 |
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| 46.6 |
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Long-term assets from risk management activities |
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| 60.0 |
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| 34.1 |
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| 79.5 |
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| 35.5 |
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Investments in unconsolidated affiliates |
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| 718.5 |
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| 490.5 |
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| 718.8 |
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| 738.7 |
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Other long-term assets |
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| 66.1 |
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| 36.5 |
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| 99.0 |
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| 99.1 |
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Total assets |
| $ | 18,918.5 |
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| $ | 16,938.2 |
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| $ | 16,052.1 |
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| $ | 18,815.1 |
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LIABILITIES, SERIES A PREFERRED STOCK AND OWNERS' EQUITY | LIABILITIES, SERIES A PREFERRED STOCK AND OWNERS' EQUITY |
| LIABILITIES, SERIES A PREFERRED STOCK AND OWNERS' EQUITY |
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Current liabilities: |
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Accounts payable and accrued liabilities |
| $ | 1,327.8 |
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| $ | 1,737.3 |
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Accounts payable |
| $ | 617.7 |
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| $ | 954.8 |
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Accrued liabilities |
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| 69.5 |
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| 114.4 |
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Dividends payable |
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| 125.9 |
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| 122.6 |
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Interest payable |
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| 95.3 |
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| 125.7 |
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Accrued taxes |
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| 85.9 |
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| 62.4 |
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Liabilities from risk management activities |
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| 83.5 |
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| 33.6 |
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| 121.1 |
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| 104.1 |
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Current debt obligations |
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| 258.0 |
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| 1,027.9 |
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| 261.9 |
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| 382.2 |
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Held for sale liabilities |
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| 3.6 |
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| 6.4 |
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Total current liabilities |
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| 1,669.3 |
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| 2,798.8 |
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| 1,380.9 |
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| 1,872.6 |
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Long-term debt |
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| 7,279.7 |
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| 5,632.4 |
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| 7,652.2 |
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| 7,440.2 |
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Long-term liabilities from risk management activities |
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| 46.1 |
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| 3.1 |
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| 62.9 |
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| 40.8 |
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Deferred income taxes, net |
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| 527.7 |
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| 525.2 |
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| 131.1 |
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| 434.2 |
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Other long-term liabilities |
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| 305.7 |
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| 262.2 |
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| 307.0 |
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| 305.6 |
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Contingencies (see Note 18) |
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Series A Preferred 9.5% Stock, $1,000 per share liquidation preference, (1,200,000 shares authorized, 965,100 shares issued and outstanding ), net of discount (see Note 12) |
|
| 270.1 |
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| 245.7 |
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Contingencies (see Note 13) |
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Series A Preferred 9.5% Stock, $1,000 per share liquidation preference, (1,200,000 shares authorized, 965,100 shares issued and outstanding), net of discount (see Note 7) |
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| 306.5 |
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| 278.8 |
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Owners' equity: |
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Targa Resources Corp. stockholders' equity: |
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Common stock ($0.001 par value, 300,000,000 shares authorized) |
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| 0.2 |
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| 0.2 |
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| 0.2 |
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| 0.2 |
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Issued Outstanding |
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September 30, 2019 233,783,495 232,782,846 |
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December 31, 2018 232,456,283 231,790,530 |
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September 30, 2020 234,745,594 233,517,921 |
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December 31, 2019 233,852,810 232,843,526 |
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Preferred stock ($0.001 par value, after designation of Series A Preferred Stock: 98,800,000 shares authorized, 0 shares issued and outstanding) |
|
| — |
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| — |
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| 0 |
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| 0 |
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Additional paid-in capital |
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| 5,457.2 |
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| 6,154.9 |
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| 4,911.7 |
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| 5,221.2 |
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Retained earnings (deficit) |
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| (226.8 | ) |
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| (130.4 | ) |
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| (1,927.1 | ) |
|
| (339.6 | ) |
Accumulated other comprehensive income (loss) |
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| 140.9 |
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| 94.3 |
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| (90.8 | ) |
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| 92.5 |
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Treasury stock, at cost (1,000,649 shares as of September 30, 2019 and 665,753 shares as of December 31, 2018) |
|
| (53.1 | ) |
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| (39.6 | ) | ||||||||
Treasury stock, at cost (1,227,673 shares as of September 30, 2020 and 1,009,284 shares as of December 31, 2019) |
|
| (59.0 | ) |
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| (53.5 | ) | ||||||||
Total Targa Resources Corp. stockholders' equity |
|
| 5,318.4 |
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| 6,079.4 |
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| 2,835.0 |
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| 4,920.8 |
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Noncontrolling interests |
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| 3,501.5 |
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| 1,391.4 |
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| 3,376.5 |
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| 3,522.1 |
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Total owners' equity |
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| 8,819.9 |
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| 7,470.8 |
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| 6,211.5 |
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| 8,442.9 |
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Total liabilities, Series A Preferred Stock and owners' equity |
| $ | 18,918.5 |
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| $ | 16,938.2 |
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| $ | 16,052.1 |
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| $ | 18,815.1 |
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See notes to consolidated financial statements.
4
TARGA RESOURCES CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| Three Months Ended September 30, |
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| Nine Months Ended September 30, |
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| 2019 |
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| 2018 |
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| 2019 |
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| 2018 |
| 2020 |
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| 2019 |
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| 2020 |
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| 2019 |
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| (Unaudited) |
| (Unaudited) |
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| (In millions, except per share amounts) |
| (In millions, except per share amounts) |
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Revenues: |
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Sales of commodities |
| $ | 1,594.2 |
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| $ | 2,654.1 |
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| $ | 5,254.8 |
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| $ | 6,981.4 |
| $ | 1,840.8 |
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| $ | 1,594.2 |
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| $ | 4,900.8 |
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| $ | 5,254.8 |
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Fees from midstream services |
|
| 308.3 |
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| 332.3 |
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|
| 942.4 |
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| 904.9 |
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| 274.3 |
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| 308.3 |
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| 786.7 |
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| 942.4 |
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Total revenues |
|
| 1,902.5 |
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| 2,986.4 |
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| 6,197.2 |
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| 7,886.3 |
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| 2,115.1 |
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| 1,902.5 |
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| 5,687.5 |
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| 6,197.2 |
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Costs and expenses: |
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Product purchases |
|
| 1,328.1 |
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| 2,383.5 |
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| 4,415.7 |
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| 6,229.7 |
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| 1,303.2 |
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|
| 1,328.1 |
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| 3,346.8 |
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| 4,415.7 |
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Operating expenses |
|
| 200.2 |
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|
| 194.9 |
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|
| 600.8 |
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|
| 538.7 |
|
| 181.9 |
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|
| 200.2 |
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|
| 565.1 |
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|
| 600.8 |
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Depreciation and amortization expense |
|
| 244.3 |
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|
| 206.3 |
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|
| 718.9 |
|
|
| 607.1 |
|
| 203.7 |
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|
| 244.3 |
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|
| 647.3 |
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|
| 718.9 |
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General and administrative expense |
|
| 69.9 |
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|
| 63.2 |
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|
| 223.5 |
|
|
| 176.9 |
|
| 58.6 |
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|
| 69.9 |
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|
| 180.6 |
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|
| 223.5 |
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Impairment of long-lived assets |
| — |
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|
| — |
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|
| 2,442.8 |
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|
| — |
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Other operating (income) expense |
|
| 18.4 |
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|
| 61.8 |
|
|
| 21.7 |
|
|
| 15.7 |
|
| 72.2 |
|
|
| 18.4 |
|
|
| 73.8 |
|
|
| 21.7 |
|
Income (loss) from operations |
|
| 41.6 |
|
|
| 76.7 |
|
|
| 216.6 |
|
|
| 318.2 |
|
| 295.5 |
|
|
| 41.6 |
|
|
| (1,568.9 | ) |
|
| 216.6 |
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Other income (expense): |
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|
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|
|
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Interest expense, net |
|
| (89.1 | ) |
|
| (78.2 | ) |
|
| (241.8 | ) |
|
| (124.2 | ) |
| (97.7 | ) |
|
| (89.1 | ) |
|
| (292.4 | ) |
|
| (241.8 | ) |
Equity earnings (loss) |
|
| 10.0 |
|
|
| 3.0 |
|
|
| 15.9 |
|
|
| 6.4 |
|
| 18.6 |
|
|
| 10.0 |
|
|
| 54.1 |
|
|
| 15.9 |
|
Gain (loss) from financing activities |
|
| — |
|
|
| — |
|
|
| (1.4 | ) |
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| (2.0 | ) |
| (13.7 | ) |
|
| — |
|
|
| 47.4 |
|
|
| (1.4 | ) |
Gain (loss) from sale of equity-method investment |
|
| 65.8 |
|
|
| — |
|
|
| 65.8 |
|
|
| — |
|
| — |
|
|
| 65.8 |
|
|
| — |
|
|
| 65.8 |
|
Change in contingent considerations |
|
| — |
|
|
| (16.6 | ) |
|
| (8.8 | ) |
|
| (12.1 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| (8.8 | ) |
Other, net |
| 1.4 |
|
|
| — |
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|
| 2.2 |
|
|
| — |
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Income (loss) before income taxes |
|
| 28.3 |
|
|
| (15.1 | ) |
|
| 46.3 |
|
|
| 186.3 |
|
| 204.1 |
|
|
| 28.3 |
|
|
| (1,757.6 | ) |
|
| 46.3 |
|
Income tax (expense) benefit |
|
| 3.8 |
|
|
| 3.9 |
|
|
| 10.0 |
|
|
| (37.7 | ) |
| (31.9 | ) |
|
| 3.8 |
|
|
| 286.6 |
|
|
| 10.0 |
|
Net income (loss) |
|
| 32.1 |
|
|
| (11.2 | ) |
|
| 56.3 |
|
|
| 148.6 |
|
| 172.2 |
|
|
| 32.1 |
|
|
| (1,471.0 | ) |
|
| 56.3 |
|
Less: Net income (loss) attributable to noncontrolling interests |
|
| 79.4 |
|
|
| 12.5 |
|
|
| 152.7 |
|
|
| 40.4 |
|
| 102.9 |
|
|
| 79.4 |
|
|
| 116.5 |
|
|
| 152.7 |
|
Net income (loss) attributable to Targa Resources Corp. |
|
| (47.3 | ) |
|
| (23.7 | ) |
|
| (96.4 | ) |
|
| 108.2 |
|
| 69.3 |
|
|
| (47.3 | ) |
|
| (1,587.5 | ) |
|
| (96.4 | ) |
Dividends on Series A Preferred Stock |
|
| 22.9 |
|
|
| 22.9 |
|
|
| 68.8 |
|
|
| 68.8 |
|
| 22.9 |
|
|
| 22.9 |
|
|
| 68.8 |
|
|
| 68.8 |
|
Deemed dividends on Series A Preferred Stock |
|
| 8.4 |
|
|
| 7.4 |
|
|
| 24.4 |
|
|
| 21.5 |
|
| 9.5 |
|
|
| 8.4 |
|
|
| 27.7 |
|
|
| 24.4 |
|
Net income (loss) attributable to common shareholders |
| $ | (78.6 | ) |
| $ | (54.0 | ) |
| $ | (189.6 | ) |
| $ | 17.9 |
| $ | 36.9 |
|
| $ | (78.6 | ) |
| $ | (1,684.0 | ) |
| $ | (189.6 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share - basic |
| $ | (0.34 | ) |
| $ | (0.24 | ) |
| $ | (0.82 | ) |
| $ | 0.08 |
| $ | 0.16 |
|
| $ | (0.34 | ) |
| $ | (7.22 | ) |
| $ | (0.82 | ) |
Net income (loss) per common share - diluted |
| $ | (0.34 | ) |
| $ | (0.24 | ) |
| $ | (0.82 | ) |
| $ | 0.08 |
| $ | 0.16 |
|
| $ | (0.34 | ) |
| $ | (7.22 | ) |
| $ | (0.82 | ) |
Weighted average shares outstanding - basic |
|
| 232.7 |
|
|
| 226.5 |
|
|
| 232.4 |
|
|
| 222.1 |
|
| 233.4 |
|
|
| 232.7 |
|
|
| 233.2 |
|
|
| 232.4 |
|
Weighted average shares outstanding - diluted |
|
| 232.7 |
|
|
| 226.5 |
|
|
| 232.4 |
|
|
| 223.8 |
|
| 233.8 |
|
|
| 232.7 |
|
|
| 233.2 |
|
|
| 232.4 |
|
See notes to consolidated financial statements.
5
TARGA RESOURCES CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
| Three Months Ended September 30, |
| |||||||||||||||||||||
|
| 2019 |
|
| 2018 |
| ||||||||||||||||||
|
| Pre-Tax |
|
| Related Income Tax |
|
| After Tax |
|
| Pre-Tax |
|
| Related Income Tax |
|
| After Tax |
| ||||||
|
| (Unaudited) |
| |||||||||||||||||||||
|
| (In millions) |
| |||||||||||||||||||||
Net income (loss) |
|
|
|
|
|
|
|
| $ |
| 32.1 |
|
|
|
|
|
|
|
|
| $ |
| (11.2 | ) |
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity hedging contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value | $ |
| 118.2 |
| $ |
| (28.8 | ) |
|
| 89.4 |
| $ |
| (139.6 | ) | $ |
| 32.3 |
|
|
| (107.3 | ) |
Settlements reclassified to revenues |
|
| (41.5 | ) |
|
| 10.0 |
|
|
| (31.5 | ) |
|
| 23.9 |
|
|
| (4.5 | ) |
|
| 19.4 |
|
Other comprehensive income (loss) |
|
| 76.7 |
|
|
| (18.8 | ) |
|
| 57.9 |
|
|
| (115.7 | ) |
|
| 27.8 |
|
|
| (87.9 | ) |
Comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
| 90.0 |
|
|
|
|
|
|
|
|
|
|
| (99.1 | ) |
Less: Comprehensive income (loss) attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
| 79.4 |
|
|
|
|
|
|
|
|
|
|
| 12.5 |
|
Comprehensive income (loss) attributable to Targa Resources Corp. |
|
|
|
|
|
|
|
| $ |
| 10.6 |
|
|
|
|
|
|
|
|
| $ |
| (111.6 | ) |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
| ||||||||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||||||||||||||||||||||||||||||||||
|
| Pre-Tax |
|
| Related Income Tax |
|
| After Tax |
|
| Pre-Tax |
|
| Related Income Tax |
|
| After Tax |
|
| Pre-Tax |
|
| Related Income Tax |
|
| After Tax |
|
| Pre-Tax |
|
| Related Income Tax |
|
| After Tax |
| ||||||||||||
|
| (Unaudited) |
|
| (Unaudited) |
| ||||||||||||||||||||||||||||||||||||||||||
|
| (In millions) |
|
| (In millions) |
| ||||||||||||||||||||||||||||||||||||||||||
Net income (loss) |
|
|
|
|
|
|
|
| $ |
| 56.3 |
|
|
|
|
|
|
|
|
| $ |
| 148.6 |
|
|
|
|
|
|
|
|
| $ |
| 172.2 |
|
|
|
|
|
|
|
|
| $ |
| 32.1 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity hedging contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value | $ |
| 167.8 |
| $ |
| (40.7 | ) |
|
| 127.1 |
| $ |
| (178.0 | ) | $ |
| 43.0 |
|
|
| (135.0 | ) | $ |
| (128.7 | ) | $ |
| 31.7 |
|
|
| (97.0 | ) | $ |
| 118.2 |
| $ |
| (28.8 | ) |
|
| 89.4 |
|
Settlements reclassified to revenues |
|
| (106.1 | ) |
|
| 25.6 |
|
|
| (80.5 | ) |
|
| 58.3 |
|
|
| (14.1 | ) |
|
| 44.2 |
|
|
| (19.2 | ) |
|
| 3.8 |
|
|
| (15.4 | ) |
|
| (41.5 | ) |
|
| 10.0 |
|
|
| (31.5 | ) |
Other comprehensive income (loss) |
|
| 61.7 |
|
|
| (15.1 | ) |
|
| 46.6 |
|
|
| (119.7 | ) |
|
| 28.9 |
|
|
| (90.8 | ) |
|
| (147.9 | ) |
|
| 35.5 |
|
|
| (112.4 | ) |
|
| 76.7 |
|
|
| (18.8 | ) |
|
| 57.9 |
|
Comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
| 102.9 |
|
|
|
|
|
|
|
|
|
|
| 57.8 |
|
|
|
|
|
|
|
|
|
|
| 59.8 |
|
|
|
|
|
|
|
|
|
|
| 90.0 |
|
Less: Comprehensive income (loss) attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
| 152.7 |
|
|
|
|
|
|
|
|
|
|
| 40.4 |
|
|
|
|
|
|
|
|
|
|
| 102.9 |
|
|
|
|
|
|
|
|
|
|
| 79.4 |
|
Comprehensive income (loss) attributable to Targa Resources Corp. |
|
|
|
|
|
|
|
| $ |
| (49.8 | ) |
|
|
|
|
|
|
|
| $ |
| 17.4 |
|
|
|
|
|
|
|
|
| $ |
| (43.1 | ) |
|
|
|
|
|
|
|
| $ |
| 10.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
| Nine Months Ended September 30, |
| |||||||||||||||||||||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
| ||||||||||||||||||||||||||||||||||||||||||
|
| Pre-Tax |
|
| Related Income Tax |
|
| After Tax |
|
| Pre-Tax |
|
| Related Income Tax |
|
| After Tax |
| ||||||||||||||||||||||||||||||
|
| (Unaudited) |
| |||||||||||||||||||||||||||||||||||||||||||||
|
| (In millions) |
| |||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) |
|
|
|
|
|
|
|
| $ |
| (1,471.0 | ) |
|
|
|
|
|
|
|
| $ |
| 56.3 |
| ||||||||||||||||||||||||
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Commodity hedging contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Change in fair value | $ |
| (102.6 | ) | $ |
| 23.5 |
|
|
| (79.1 | ) | $ |
| 167.8 |
| $ |
| (40.7 | ) |
|
| 127.1 |
| ||||||||||||||||||||||||
Settlements reclassified to revenues |
|
| (139.4 | ) |
|
| 35.2 |
|
|
| (104.2 | ) |
|
| (106.1 | ) |
|
| 25.6 |
|
|
| (80.5 | ) | ||||||||||||||||||||||||
Other comprehensive income (loss) |
|
| (242.0 | ) |
|
| 58.7 |
|
|
| (183.3 | ) |
|
| 61.7 |
|
|
| (15.1 | ) |
|
| 46.6 |
| ||||||||||||||||||||||||
Comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
| (1,654.3 | ) |
|
|
|
|
|
|
|
|
|
| 102.9 |
| ||||||||||||||||||||||||
Less: Comprehensive income (loss) attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
| 116.5 |
|
|
|
|
|
|
|
|
|
|
| 152.7 |
| ||||||||||||||||||||||||
Comprehensive income (loss) attributable to Targa Resources Corp. |
|
|
|
|
|
|
|
| $ |
| (1,770.8 | ) |
|
|
|
|
|
|
|
| $ |
| (49.8 | ) |
See notes to consolidated financial statements.
6
TARGA RESOURCES CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS' EQUITY AND SERIES A PREFERRED STOCK
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
| Earnings |
|
|
| Other |
|
| Treasury |
|
|
|
|
|
|
|
| Total |
|
| Series A |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Retained |
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
| Common Stock |
|
|
| Paid in |
|
|
| (Accumulated |
|
|
| Comprehensive |
|
| Shares |
|
|
| Noncontrolling |
|
|
| Owner's |
|
| Preferred |
|
|
|
|
|
|
|
|
|
| Additional |
|
| Earnings |
|
| Other |
|
| Treasury |
|
|
|
|
|
| Total |
|
| Series A |
| ||||||||||||||||||||||||||||
|
| Shares |
|
|
| Amount |
|
|
| Capital |
|
|
| Deficit) |
|
|
| Income (Loss) |
|
| Shares |
|
|
| Amount |
|
|
| Interests |
|
|
| Equity |
|
| Stock |
|
| Common Stock |
|
| Paid in |
|
| (Accumulated |
|
| Comprehensive |
|
| Shares |
|
| Noncontrolling |
|
| Owner's |
|
| Preferred |
| ||||||||||||||||||||||||||
|
| (Unaudited) |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit) |
|
| Income (Loss) |
|
| Shares |
|
| Amount |
|
| Interests |
|
| Equity |
|
| Stock |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| (In millions, except shares in thousands) |
|
| (Unaudited) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (In millions, except shares in thousands) |
| |||||||||||||||||||||||||||||||||||||
Balance, June 30, 2019 |
|
| 232,476 |
|
|
| $ | 0.2 |
|
|
| $ | 5,687.8 |
|
|
| $ | (179.5 | ) |
|
| $ | 83.0 |
|
|
| 896 |
|
|
| $ | (49.2 | ) |
|
| $ | 3,396.8 |
|
|
| $ | 8,939.1 |
|
| $ | 261.7 |
| ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2020 |
|
| 233,177 |
|
| $ | 0.2 |
|
| $ | 4,949.1 |
|
| $ | (1,996.4 | ) |
| $ | 21.6 |
|
|
| 1,116 |
|
| $ | (56.9 | ) |
| $ | 3,351.5 |
|
| $ | 6,269.1 |
|
| $ | 297.0 |
| |||||||||||||||||||||||||||||||||||||||||||||||
Compensation on equity grants |
|
| — |
|
|
|
| — |
|
|
|
| 16.1 |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 16.1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16.4 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16.4 |
|
|
| — |
|
Distribution equivalent rights |
|
| — |
|
|
|
| — |
|
|
|
| (3.7 | ) |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (3.7 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1.9 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1.9 |
|
|
| — |
|
Shares issued under compensation program |
|
| 412 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| 453 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Shares and units tendered for tax withholding obligations |
|
| (105 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| 105 |
|
|
|
| (3.9 | ) |
|
|
| — |
|
|
|
| (3.9 | ) |
|
| — |
|
|
| (112 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 112 |
|
|
| (2.1 | ) |
|
| — |
|
|
| (2.1 | ) |
|
| — |
|
Series A Preferred Stock dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends - $23.75 per share |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (22.9 | ) |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (22.9 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (22.9 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (22.9 | ) |
|
| — |
|
Dividends in excess of retained earnings |
|
| — |
|
|
|
| — |
|
|
|
| (22.9 | ) |
|
|
| 22.9 |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (22.9 | ) |
|
| 22.9 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Deemed dividends - accretion of beneficial conversion feature |
|
| — |
|
|
|
| — |
|
|
|
| (8.4 | ) |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (8.4 | ) |
|
| 8.4 |
|
|
| — |
|
|
| — |
|
|
| (9.5 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9.5 | ) |
|
| 9.5 |
|
Common stock dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends - $0.91 per share |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (211.7 | ) |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (211.7 | ) |
|
| — |
| ||||||||||||||||||||||||||||||||||||||||
Dividends - $0.10 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23.3 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23.3 | ) |
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||
Dividends in excess of retained earnings |
|
| — |
|
|
|
| — |
|
|
|
| (211.7 | ) |
|
|
| 211.7 |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23.3 | ) |
|
| 23.3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Distributions to noncontrolling interests |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| (90.0 | ) |
|
|
| (90.0 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (113.1 | ) |
|
| (113.1 | ) |
|
| — |
|
Contributions from noncontrolling interests |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| 115.3 |
|
|
|
| 115.3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7.7 |
|
|
| 7.7 |
|
|
| — |
|
Non-cash allocation to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 27.5 |
|
|
| 27.5 |
|
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 57.9 |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 57.9 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (112.4 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (112.4 | ) |
|
| — |
|
Net income (loss) |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (47.3 | ) |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| 79.4 |
|
|
|
| 32.1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 69.3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 102.9 |
|
|
| 172.2 |
|
|
| — |
|
Balance, September 30, 2019 |
|
| 232,783 |
|
|
| $ | 0.2 |
|
|
| $ | 5,457.2 |
|
|
| $ | (226.8 | ) |
|
| $ | 140.9 |
|
|
| 1,001 |
|
|
| $ | (53.1 | ) |
|
| $ | 3,501.5 |
|
|
| $ | 8,819.9 |
|
| $ | 270.1 |
| ||||||||||||||||||||||||||||||||||||||||
Balance, September 30, 2020 |
|
| 233,518 |
|
| $ | 0.2 |
|
| $ | 4,911.7 |
|
| $ | (1,927.1 | ) |
| $ | (90.8 | ) |
|
| 1,228 |
|
| $ | (59.0 | ) |
| $ | 3,376.5 |
|
| $ | 6,211.5 |
|
| $ | 306.5 |
|
See notes to consolidated financial statements.
7
TARGA RESOURCES CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS' EQUITY AND SERIES A PREFERRED STOCK
|
|
|
|
|
|
|
|
|
|
|
|
|
| Retained |
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Retained |
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
| Additional |
|
| Earnings |
|
| Other |
|
| Treasury |
|
|
|
|
|
| Total |
|
| Series A |
|
|
|
|
|
|
|
|
|
| Additional |
|
| Earnings |
|
| Other |
|
| Treasury |
|
|
|
|
|
| Total |
|
| Series A |
| |||||||||||||||||||||||||||
|
| Common Stock |
|
|
| Paid in |
|
|
| (Accumulated |
|
| Comprehensive |
|
| Shares |
|
| Noncontrolling |
|
| Owner's |
|
| Preferred |
|
| Common Stock |
|
| Paid in |
|
| (Accumulated |
|
| Comprehensive |
|
| Shares |
|
| Noncontrolling |
|
| Owner's |
|
| Preferred |
| |||||||||||||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit) |
|
| Income (Loss) |
|
| Shares |
|
| Amount |
|
| Interests |
|
| Equity |
|
| Stock |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit) |
|
| Income (Loss) |
|
| Shares |
|
| Amount |
|
| Interests |
|
| Equity |
|
| Stock |
| |||||||||||||||||||||||||||
|
| (Unaudited) |
|
| (Unaudited) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| (In millions, except shares in thousands) |
|
| (In millions, except shares in thousands) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance, June 30, 2018 |
|
| 225,487 |
|
| $ | 0.2 |
|
| $ | 6,233.7 |
|
| $ | 60.0 |
|
| $ | (37.9 | ) |
|
| 640 |
|
| $ | (38.2 | ) |
| $ | 1,032.4 |
|
| $ | 7,250.2 |
|
| $ | 230.6 |
| |||||||||||||||||||||||||||||||||||||||||||||||
Impact of accounting standard adoption |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2019 |
|
| 232,476 |
|
| $ | 0.2 |
|
| $ | 5,687.8 |
|
| $ | (179.5 | ) |
| $ | 83.0 |
|
|
| 896 |
|
| $ | (49.2 | ) |
| $ | 3,396.8 |
|
| $ | 8,939.1 |
|
| $ | 261.7 |
| |||||||||||||||||||||||||||||||||||||||||||||||
Compensation on equity grants |
|
| — |
|
|
| — |
|
|
| 13.8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13.8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16.1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16.1 |
|
|
| — |
| |||||||
Distribution equivalent rights |
|
| — |
|
|
| — |
|
|
| (3.8 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3.8 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3.7 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3.7 | ) |
|
| — |
| |||||||
Shares issued under compensation program |
|
| 126 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 412 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||
Shares and units tendered for tax withholding obligations |
|
| (26 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 26 |
|
|
| (1.4 | ) |
|
| — |
|
|
| (1.4 | ) |
|
| — |
|
|
| (105 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 105 |
|
|
| (3.9 | ) |
|
| — |
|
|
| (3.9 | ) |
|
| — |
| |||||||
Issuance of common stock |
|
| 3,696 |
|
|
| — |
|
|
| 202.5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 202.5 |
|
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||
Exercise of warrants - shares settled |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||
Series A Preferred Stock dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Dividends - $23.75 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (22.9 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (22.9 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (22.9 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (22.9 | ) |
|
| — |
| |||||||
Dividends in excess of retained earnings |
|
| — |
|
|
| — |
|
|
| 37.1 |
|
|
| (37.1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (22.9 | ) |
|
| 22.9 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||
Deemed dividends - accretion of beneficial conversion feature |
|
| — |
|
|
| — |
|
|
| (7.4 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7.4 | ) |
|
| 7.4 |
|
|
| — |
|
|
| — |
|
|
| (8.4 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8.4 | ) |
|
| 8.4 |
| |||||||
Common stock dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Dividends - $0.91 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (205.4 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (205.4 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (211.7 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (211.7 | ) |
|
| — |
| |||||||
Dividends in excess of retained earnings |
|
| — |
|
|
| — |
|
|
| (205.4 | ) |
|
| 205.4 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (211.7 | ) |
|
| 211.7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||
Distributions to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (20.6 | ) |
|
| (20.6 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (90.0 | ) |
|
| (90.0 | ) |
|
| — |
| |||||||
Contributions from noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 164.4 |
|
|
| 164.4 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 115.3 |
|
|
| 115.3 |
|
|
| — |
| |||||||
Other comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (88.0 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (88.0 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 57.9 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 57.9 |
|
|
| — |
| |||||||
Net income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23.8 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12.6 |
|
|
| (11.2 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (47.3 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 79.4 |
|
|
| 32.1 |
|
|
| — |
| |||||||
Balance, September 30, 2018 |
|
| 229,283 |
|
| $ | 0.2 |
|
| $ | 6,270.5 |
|
| $ | (23.8 | ) |
| $ | (125.9 | ) |
|
| 666 |
|
| $ | (39.6 | ) |
| $ | 1,188.8 |
|
| $ | 7,270.2 |
|
| $ | 238.0 |
| |||||||||||||||||||||||||||||||||||||||||||||||
Balance, September 30, 2019 |
|
| 232,783 |
|
| $ | 0.2 |
|
| $ | 5,457.2 |
|
| $ | (226.8 | ) |
| $ | 140.9 |
|
|
| 1,001 |
|
| $ | (53.1 | ) |
| $ | 3,501.5 |
|
| $ | 8,819.9 |
|
| $ | 270.1 |
|
See notes to consolidated financial statements.
8
TARGA RESOURCES CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS' EQUITY AND SERIES A PREFERRED STOCK
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Retained |
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Retained |
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
| Earnings |
|
|
| Other |
|
| Treasury |
|
|
|
|
|
|
|
| Total |
|
| Series A |
|
|
|
|
|
|
|
|
|
| Additional |
|
| Earnings |
|
| Other |
|
| Treasury |
|
|
|
|
|
| Total |
|
| Series A |
| |||||||||||||||||||||
|
| Common Stock |
|
|
| Paid in |
|
|
| (Accumulated |
|
|
| Comprehensive |
|
| Shares |
|
|
| Noncontrolling |
|
|
| Owner's |
|
| Preferred |
|
| Common Stock |
|
| Paid in |
|
| (Accumulated |
|
| Comprehensive |
|
| Shares |
|
| Noncontrolling |
|
| Owner's |
|
| Preferred |
| ||||||||||||||||||||||||||||||||||
|
| Shares |
|
|
| Amount |
|
|
| Capital |
|
|
| Deficit) |
|
|
| Income (Loss) |
|
| Shares |
|
|
| Amount |
|
|
| Interests |
|
|
| Equity |
|
| Stock |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit) |
|
| Income (Loss) |
|
| Shares |
|
| Amount |
|
| Interests |
|
| Equity |
|
| Stock |
| ||||||||||||||||||||
|
| (Unaudited) |
|
| (Unaudited) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| (In millions, except shares in thousands) |
|
| (In millions, except shares in thousands) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018 |
|
| 231,791 |
|
|
| $ | 0.2 |
|
|
| $ | 6,154.9 |
|
|
| $ | (130.4 | ) |
|
| $ | 94.3 |
|
|
| 666 |
|
|
| $ | (39.6 | ) |
|
| $ | 1,391.4 |
|
|
| $ | 7,470.8 |
|
| $ | 245.7 |
| ||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2019 |
|
| 232,844 |
|
| $ | 0.2 |
|
| $ | 5,221.2 |
|
| $ | (339.6 | ) |
| $ | 92.5 |
|
|
| 1,010 |
|
| $ | (53.5 | ) |
| $ | 3,522.1 |
|
| $ | 8,442.9 |
|
| $ | 278.8 |
| |||||||||||||||||||||||||||||||||||||||||||||||
Compensation on equity grants |
|
| — |
|
|
|
| — |
|
|
|
| 49.0 |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 49.0 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 49.5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 49.5 |
|
|
| — |
|
Distribution equivalent rights |
|
| — |
|
|
|
| — |
|
|
|
| (10.5 | ) |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (10.5 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3.5 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3.5 | ) |
|
| — |
|
Shares issued under compensation program |
|
| 1,327 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| 892 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Shares and units tendered for tax withholding obligations |
|
| (335 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| 335 |
|
|
|
| (13.5 | ) |
|
|
| — |
|
|
|
| (13.5 | ) |
|
| — |
|
|
| (218 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 218 |
|
|
| (5.5 | ) |
|
| — |
|
|
| (5.5 | ) |
|
| — |
|
Series A Preferred Stock dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends - $71.25 per share |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (68.8 | ) |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (68.8 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (68.8 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (68.8 | ) |
|
| — |
|
Dividends in excess of retained earnings |
|
| — |
|
|
|
| — |
|
|
|
| (68.8 | ) |
|
|
| 68.8 |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (68.8 | ) |
|
| 68.8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Deemed dividends - accretion of beneficial conversion feature |
|
| — |
|
|
|
| — |
|
|
|
| (24.4 | ) |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (24.4 | ) |
|
| 24.4 |
|
|
| — |
|
|
| — |
|
|
| (27.7 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27.7 | ) |
|
| 27.7 |
|
Common stock dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
Dividends - $2.73 per share |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (634.8 | ) |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (634.8 | ) |
|
| — |
| ||||||||||||||||||||||||||||||||||||||||
Dividends - $1.11 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (259.0 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (259.0 | ) |
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||
Dividends in excess of retained earnings |
|
| — |
|
|
|
| — |
|
|
|
| (634.8 | ) |
|
|
| 634.8 |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (259.0 | ) |
|
| 259.0 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Distributions to noncontrolling interests |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| (181.1 | ) |
|
|
| (181.1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (322.9 | ) |
|
| (322.9 | ) |
|
| — |
|
Contributions from noncontrolling interests |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| 518.8 |
|
|
|
| 518.8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 33.3 |
|
|
| 33.3 |
|
|
| — |
|
Sale of ownership interest in subsidiaries, net |
|
| — |
|
|
|
| — |
|
|
|
| (8.2 | ) |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| 1,619.7 |
|
|
|
| 1,611.5 |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||||||
Non-cash allocation to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 27.5 |
|
|
| 27.5 |
|
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 46.6 |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 46.6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (183.3 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (183.3 | ) |
|
| — |
|
Net income (loss) |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (96.4 | ) |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| 152.7 |
|
|
|
| 56.3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,587.5 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 116.5 |
|
|
| (1,471.0 | ) |
|
| — |
|
Balance, September 30, 2019 |
|
| 232,783 |
|
|
| $ | 0.2 |
|
|
| $ | 5,457.2 |
|
|
| $ | (226.8 | ) |
|
| $ | 140.9 |
|
|
| 1,001 |
|
|
| $ | (53.1 | ) |
|
| $ | 3,501.5 |
|
|
| $ | 8,819.9 |
|
| $ | 270.1 |
| ||||||||||||||||||||||||||||||||||||||||
Balance, September 30, 2020 |
|
| 233,518 |
|
| $ | 0.2 |
|
| $ | 4,911.7 |
|
| $ | (1,927.1 | ) |
| $ | (90.8 | ) |
|
| 1,228 |
|
| $ | (59.0 | ) |
| $ | 3,376.5 |
|
| $ | 6,211.5 |
|
| $ | 306.5 |
|
See notes to consolidated financial statements.
9
TARGA RESOURCES CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS' EQUITY AND SERIES A PREFERRED STOCK
|
|
|
|
|
|
|
|
|
|
|
|
|
| Retained |
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Retained |
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
| Additional |
|
| Earnings |
|
| Other |
|
| Treasury |
|
|
|
|
|
| Total |
|
| Series A |
|
|
|
|
|
|
|
|
|
| Additional |
|
| Earnings |
|
| Other |
|
| Treasury |
|
|
|
|
|
| Total |
|
| Series A |
| |||||||||||||||||||||||||||
|
| Common Stock |
|
|
| Paid in |
|
|
| (Accumulated |
|
| Comprehensive |
|
| Shares |
|
| Noncontrolling |
|
| Owner's |
|
| Preferred |
|
| Common Stock |
|
| Paid in |
|
| (Accumulated |
|
| Comprehensive |
|
| Shares |
|
| Noncontrolling |
|
| Owner's |
|
| Preferred |
| |||||||||||||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit) |
|
| Income (Loss) |
|
| Shares |
|
| Amount |
|
| Interests |
|
| Equity |
|
| Stock |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit) |
|
| Income (Loss) |
|
| Shares |
|
| Amount |
|
| Interests |
|
| Equity |
|
| Stock |
| |||||||||||||||||||||||||||
|
| (Unaudited) |
|
| (Unaudited) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| (In millions, except shares in thousands) |
|
| (In millions, except shares in thousands) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance, December 31, 2017 |
|
| 217,567 |
|
| $ | 0.2 |
|
| $ | 6,302.8 |
|
| $ | (77.2 | ) |
| $ | (29.9 | ) |
|
| 586 |
|
| $ | (35.6 | ) |
| $ | 595.7 |
|
| $ | 6,756.0 |
|
| $ | 216.5 |
| |||||||||||||||||||||||||||||||||||||||||||||||
Impact of accounting standard adoption |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5.2 |
|
|
| (5.2 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2018 |
|
| 231,791 |
|
| $ | 0.2 |
|
| $ | 6,154.9 |
|
| $ | (130.4 | ) |
| $ | 94.3 |
|
|
| 666 |
|
| $ | (39.6 | ) |
| $ | 1,391.4 |
|
| $ | 7,470.8 |
|
| $ | 245.7 |
| |||||||||||||||||||||||||||||||||||||||||||||||
Compensation on equity grants |
|
| — |
|
|
| — |
|
|
| 40.7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 40.7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 49.0 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 49.0 |
|
|
| — |
| |||||||
Distribution equivalent rights |
|
| — |
|
|
| — |
|
|
| (10.3 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10.3 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10.5 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10.5 | ) |
|
| — |
| |||||||
Shares issued under compensation program |
|
| 361 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,327 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||
Shares and units tendered for tax withholding obligations |
|
| (80 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 80 |
|
|
| (4.0 | ) |
|
| — |
|
|
| (4.0 | ) |
|
| — |
|
|
| (335 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 335 |
|
|
| (13.5 | ) |
|
| — |
|
|
| (13.5 | ) |
|
| — |
| |||||||
Issuance of common stock |
|
| 11,376 |
|
|
| — |
|
|
| 572.0 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 572.0 |
|
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||
Exercise of warrants - shares settled |
|
| 59 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||
Series A Preferred Stock dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Dividends - $71.25 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (68.8 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (68.8 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (68.8 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (68.8 | ) |
|
| — |
| |||||||
Dividends in excess of retained earnings |
|
| — |
|
|
| — |
|
|
| (8.8 | ) |
|
| 8.8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (68.8 | ) |
|
| 68.8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||
Deemed dividends - accretion of beneficial conversion feature |
|
| — |
|
|
| — |
|
|
| (21.5 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (21.5 | ) |
|
| 21.5 |
|
|
| — |
|
|
| — |
|
|
| (24.4 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (24.4 | ) |
|
| 24.4 |
| |||||||
Common stock dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Dividends - $2.73 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (604.4 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (604.4 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (634.8 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (634.8 | ) |
|
| — |
| |||||||
Dividends in excess of retained earnings |
|
| — |
|
|
| — |
|
|
| (604.4 | ) |
|
| 604.4 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (634.8 | ) |
|
| 634.8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||
Distributions to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (60.0 | ) |
|
| (60.0 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (181.1 | ) |
|
| (181.1 | ) |
|
| — |
| |||||||
Contributions from noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 611.7 |
|
|
| 611.7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 518.8 |
|
|
| 518.8 |
|
|
| — |
| |||||||
Acquisition of related party |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1.1 |
|
|
| 1.1 |
|
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||
Purchase of noncontrolling interests in subsidiary |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.1 | ) |
|
| (0.1 | ) |
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||
Sale of ownership interests in subsidiaries, net |
|
| — |
|
|
| — |
|
|
| (8.2 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,619.7 |
|
|
| 1,611.5 |
|
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (90.8 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (90.8 | ) |
|
| — |
|
|
| — |
| �� |
| — |
|
|
| — |
|
|
| — |
|
|
| 46.6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 46.6 |
|
|
| — |
| |||||||
Net income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 108.2 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 40.4 |
|
|
| 148.6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (96.4 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 152.7 |
|
|
| 56.3 |
|
|
| — |
| |||||||
Balance, September 30, 2018 |
|
| 229,283 |
|
| $ | 0.2 |
|
| $ | 6,270.5 |
|
| $ | (23.8 | ) |
| $ | (125.9 | ) |
|
| 666 |
|
| $ | (39.6 | ) |
| $ | 1,188.8 |
|
| $ | 7,270.2 |
|
| $ | 238.0 |
| |||||||||||||||||||||||||||||||||||||||||||||||
Balance, September 30, 2019 |
|
| 232,783 |
|
| $ | 0.2 |
|
| $ | 5,457.2 |
|
| $ | (226.8 | ) |
| $ | 140.9 |
|
|
| 1,001 |
|
| $ | (53.1 | ) |
| $ | 3,501.5 |
|
| $ | 8,819.9 |
|
| $ | 270.1 |
|
See notes to consolidated financial statements.
10
TARGA RESOURCES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| Nine Months Ended September 30, |
| |||||||||||||
|
| 2019 |
|
| 2018 |
|
| Nine Months Ended September 30, |
| |||||||
|
| (Unaudited) |
|
| 2020 |
|
| 2019 |
| |||||||
|
| (In millions) |
|
| (Unaudited) |
| ||||||||||
|
|
|
|
|
|
|
|
|
| (In millions) |
| |||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | 56.3 |
|
| $ | 148.6 |
|
| $ | (1,471.0 | ) |
| $ | 56.3 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization in interest expense |
|
| 7.6 |
|
|
| 8.1 |
|
|
| 8.5 |
|
|
| 7.6 |
|
Compensation on equity grants |
|
| 49.0 |
|
|
| 40.7 |
|
|
| 49.5 |
|
|
| 49.0 |
|
Depreciation and amortization expense |
|
| 718.9 |
|
|
| 607.1 |
|
|
| 647.3 |
|
|
| 718.9 |
|
Impairment of long-lived assets |
|
| 2,442.8 |
|
|
| — |
| ||||||||
Accretion of asset retirement obligations |
|
| 3.7 |
|
|
| 2.8 |
|
|
| 2.6 |
|
|
| 3.7 |
|
Increase (decrease) in redemption value of mandatorily redeemable preferred interests |
|
| — |
|
|
| (66.3 | ) | ||||||||
Deferred income tax expense (benefit) |
|
| (10.0 | ) |
|
| 37.7 |
|
|
| (269.8 | ) |
|
| (10.0 | ) |
Equity (earnings) loss of unconsolidated affiliates |
|
| (15.9 | ) |
|
| (6.4 | ) |
|
| (54.1 | ) |
|
| (15.9 | ) |
Distributions of earnings received from unconsolidated affiliates |
|
| 26.0 |
|
|
| 16.0 |
|
|
| 65.5 |
|
|
| 26.0 |
|
Risk management activities |
|
| 100.8 |
|
|
| 9.6 |
|
|
| (214.2 | ) |
|
| 100.8 |
|
(Gain) loss on sale or disposition of assets |
|
| 3.6 |
|
|
| 14.3 |
| ||||||||
Write-down of assets |
|
| 17.9 |
|
|
| — |
| ||||||||
(Gain) loss on sale or disposition of business and assets |
|
| 58.0 |
|
|
| 3.6 |
| ||||||||
Write-downs of assets |
|
| 13.5 |
|
|
| 17.9 |
| ||||||||
(Gain) loss from financing activities |
|
| 1.4 |
|
|
| 2.0 |
|
|
| (47.4 | ) |
|
| 1.4 |
|
(Gain) loss from sale of equity-method investment |
|
| (65.8 | ) |
|
| — |
|
|
| — |
|
|
| (65.8 | ) |
Change in contingent considerations |
|
| 8.8 |
|
|
| 12.1 |
|
|
| — |
|
|
| 8.8 |
|
Changes in operating assets and liabilities, net of business acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables and other assets |
|
| 98.4 |
|
|
| (225.3 | ) |
|
| 168.7 |
|
|
| 98.4 |
|
Inventories |
|
| (89.7 | ) |
|
| (16.6 | ) |
|
| (115.8 | ) |
|
| (89.7 | ) |
Accounts payable and other liabilities |
|
| 8.0 |
|
|
| 330.2 |
| ||||||||
Accounts payable, accrued liabilities and other liabilities |
|
| (158.0 | ) |
|
| (4.2 | ) | ||||||||
Interest payable |
|
| (30.4 | ) |
|
| 12.2 |
| ||||||||
Net cash provided by operating activities |
|
| 919.0 |
|
|
| 914.6 |
|
|
| 1,095.7 |
|
|
| 919.0 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outlays for property, plant and equipment |
|
| (2,434.1 | ) |
|
| (2,033.6 | ) |
|
| (803.1 | ) |
|
| (2,434.1 | ) |
Proceeds from sale of assets |
|
| 2.7 |
|
|
| 71.5 |
| ||||||||
Proceeds from sale of business and assets |
|
| 135.9 |
|
|
| 2.7 |
| ||||||||
Investments in unconsolidated affiliates |
|
| (243.7 | ) |
|
| (223.7 | ) |
|
| (2.2 | ) |
|
| (243.7 | ) |
Proceeds from sale of equity-method investment |
|
| 70.3 |
|
|
| — |
|
|
| — |
|
|
| 70.3 |
|
Return of capital from unconsolidated affiliates |
|
| 1.1 |
|
|
| 2.2 |
|
|
| 10.7 |
|
|
| 1.1 |
|
Other, net |
|
| (16.3 | ) |
|
| (9.2 | ) |
|
| 4.7 |
|
|
| (16.3 | ) |
Net cash used in investing activities |
|
| (2,620.0 | ) |
|
| (2,192.8 | ) |
|
| (654.0 | ) |
|
| (2,620.0 | ) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings under credit facilities |
|
| 2,630.0 |
|
|
| 1,275.0 |
|
|
| 1,460.0 |
|
|
| 2,630.0 |
|
Repayments of credit facilities |
|
| (2,500.0 | ) |
|
| (1,295.0 | ) |
|
| (1,360.0 | ) |
|
| (2,500.0 | ) |
Proceeds from borrowings under accounts receivable securitization facility |
|
| 770.0 |
|
|
| 440.0 |
|
|
| 476.4 |
|
|
| 770.0 |
|
Repayments of accounts receivable securitization facility |
|
| (804.0 | ) |
|
| (500.0 | ) |
|
| (596.4 | ) |
|
| (804.0 | ) |
Proceeds from issuance of senior notes |
|
| 1,500.0 |
|
|
| 1,000.0 |
|
|
| 1,000.0 |
|
|
| 1,500.0 |
|
Redemption of senior notes |
|
| (749.4 | ) |
|
| — |
|
|
| (831.0 | ) |
|
| (749.4 | ) |
Principal payments of finance leases |
|
| (8.5 | ) |
|
| — |
|
|
| (9.3 | ) |
|
| (8.5 | ) |
Proceeds from issuance of common stock |
|
| — |
|
|
| 576.5 |
| ||||||||
Costs incurred in connection with financing arrangements |
|
| (25.2 | ) |
|
| (23.3 | ) |
|
| (9.6 | ) |
|
| (25.2 | ) |
Payment of contingent consideration |
|
| (317.1 | ) |
|
| — |
|
|
| — |
|
|
| (317.1 | ) |
Repurchase of shares and units under compensation plans |
|
| (13.5 | ) |
|
| (4.0 | ) |
|
| (5.5 | ) |
|
| (13.5 | ) |
Sale of ownership interests in subsidiaries |
|
| 1,619.7 |
|
|
| — |
|
|
| — |
|
|
| 1,619.7 |
|
Purchase of noncontrolling interests in subsidiary |
|
| — |
|
|
| (0.1 | ) | ||||||||
Contributions from noncontrolling interests |
|
| 518.8 |
|
|
| 611.7 |
|
|
| 33.3 |
|
|
| 518.8 |
|
Distributions to noncontrolling interests |
|
| (98.9 | ) |
|
| (51.6 | ) |
|
| (310.6 | ) |
|
| (98.9 | ) |
Distributions to Partnership unitholders |
|
| (8.4 | ) |
|
| (8.4 | ) |
|
| (8.4 | ) |
|
| (8.4 | ) |
Dividends paid to common and Series A preferred shareholders |
|
| (718.3 | ) |
|
| (676.6 | ) |
|
| (336.7 | ) |
|
| (718.3 | ) |
Net cash provided by financing activities |
|
| 1,795.2 |
|
|
| 1,344.2 |
| ||||||||
Net cash provided by (used in) financing activities |
|
| (497.8 | ) |
|
| 1,795.2 |
| ||||||||
Net change in cash and cash equivalents |
|
| 94.2 |
|
|
| 66.0 |
|
|
| (56.1 | ) |
|
| 94.2 |
|
Cash and cash equivalents, beginning of period |
|
| 232.1 |
|
|
| 137.2 |
|
|
| 331.1 |
|
|
| 232.1 |
|
Cash and cash equivalents, end of period |
| $ | 326.3 |
|
| $ | 203.2 |
|
| $ | 275.0 |
|
| $ | 326.3 |
|
See notes to consolidated financial statements.
TARGA RESOURCES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Except as noted within the context of each footnote disclosure, the dollar amounts presented in the tabular data within these footnote disclosures are stated in millions of dollars.
Note 1 — Organization and Operations
Our Organization
Targa Resources Corp. (“TRC”) is a publicly traded Delaware corporation formed in October 2005. Our common stock is listed on the New York Stock Exchange under the symbol “TRGP.” In this Quarterly Report, unless the context requires otherwise, references to “we,” “us,” “our,” “the Company” or “Targa” are intended to mean our consolidated business and operations. TRC controls the general partner of and owns all of the outstanding common units representing limited partner interests in Targa Resources Partners LP, referred to herein as the “Partnership” or “TRP.”
Our Operations
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. |
See Note 2218 – Segment Information for certain financial information regarding our business segments.
Note 2 — Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and disclosures required by GAAP. Therefore, this information should be read in conjunction with our consolidated financial statements and notes contained in our Annual Report. The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results of the interim periods reported. All significant intercompany balances and transactions have been eliminated in consolidation. Certain amounts in prior periods may have been reclassified to conform to the current year presentation. Operating results for the three and nine months ended September 30, 2019,2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.2020.
Note 3 — Significant Accounting Policies
The accounting policies that we follow are set forth in Note 3 – Significant Accounting Policies of the Notes to Consolidated Financial Statements in our Annual Report. Other than the updates noted below, there were no significant updates or revisions to our accounting policies during the nine months ended September 30, 2019.2020.
Recent Accounting Pronouncements
Recently issued accounting pronouncements not yet adopted
Convertible Debt and Equity Instruments
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in this update simplify the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and embedded conversion features that can be recognized separately from the primary contract. These amendments also enhance transparency and improve disclosures for convertible instruments and earnings per share guidance. These amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2021, with early adoption permitted. This update permits the use of either the modified retrospective or full retrospective method of adoption. We are currently evaluating the effects of such amendments on our consolidated financial statements.
Recently adopted accounting pronouncements
Leases
Measurement of Credit Losses
In FebruaryJune 2016, the FASB issued ASU 2016-13, Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2016-02, LeasesInstruments—Credit Losses (Topic 842)326): Measurement of Credit Losses on Financial Instruments. The amendments in this update supersedemodify the leases guidanceimpairment model for financial instruments, including trade and other receivables, held-to-maturity debt securities and other instruments.
The amendments require entities to consider historical information, current conditions, and supportable forecasts to estimate expected credit losses, which may result in Topic 840. We adopted Topic 842earlier recognition of losses. The amendments were effective for us on January 1, 20192020 and were adopted by applying the optionalmodified retrospective transition method in ASU 2018-11, which permits an entity to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.approach. The adoption of Topic 842 did 0tnot result in a cumulative effect adjustment to retained earnings on January 1, 2019.2020. As parta result of our adoption, see Accounting Policy Updates – Allowance for Doubtful Accounts below.
Accounting Policy Updates
Allowance for Doubtful Accounts
Estimated losses on accounts receivable are provided through an allowance for doubtful accounts. We estimate the allowance for doubtful accounts through various procedures, including extensive review of our trade receivable balances by counterparty, assessing economic events and conditions, our historical experience with counterparties, the counterparty’s financial condition and the amount and age of past due accounts.
We continuously evaluate our ability to collect amounts owed to us. Receivables are considered past due if full payment is not received by the contractual due date. These procedures also include performing account reconciliations, dispute resolution and payment confirmation. We may involve our legal counsel to pursue the recovery of defaulted trade receivables.
As the financial condition of any counterparty changes, circumstances develop or additional information becomes available, adjustments to our allowance may be required.
Note 4 — Property, Plant and Equipment and Intangible Assets
|
| September 30, 2020 |
|
| December 31, 2019 |
|
| Estimated Useful Lives (In Years) | ||
Gathering systems |
| $ | 9,125.2 |
|
| $ | 8,976.8 |
|
| 5 to 20 |
Processing and fractionation facilities |
|
| 6,138.3 |
|
|
| 5,143.0 |
|
| 5 to 25 |
Terminaling and storage facilities |
|
| 1,514.8 |
|
|
| 1,495.5 |
|
| 5 to 25 |
Transportation assets |
|
| 2,422.6 |
|
|
| 2,292.4 |
|
| 10 to 50 |
Other property, plant and equipment |
|
| 123.9 |
|
|
| 184.1 |
|
| 3 to 50 |
Land |
|
| 160.7 |
|
|
| 159.7 |
|
| — |
Construction in progress |
|
| 697.5 |
|
|
| 1,576.5 |
|
| — |
Finance lease right-of-use assets |
|
| 51.3 |
|
|
| 48.8 |
|
|
|
Property, plant and equipment |
|
| 20,234.3 |
|
|
| 19,876.8 |
|
|
|
Accumulated depreciation, amortization and impairment |
|
| (7,941.5 | ) |
|
| (5,328.3 | ) |
|
|
Property, plant and equipment, net |
| $ | 12,292.8 |
|
| $ | 14,548.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
| $ | 2,643.5 |
|
| $ | 2,643.5 |
|
| 10 to 20 |
Accumulated amortization and impairment |
|
| (1,225.9 | ) |
|
| (908.5 | ) |
|
|
Intangible assets, net |
| $ | 1,417.6 |
|
| $ | 1,735.0 |
|
|
|
During the preparation of the adoptionCompany's first quarter 2019 consolidated financial statements, the Company identified an error related to depreciation expense on certain assets that should have been placed in-service during 2018. The Company does not believe this error is material to its previously issued historical consolidated financial statements for any of Topic 842, we recognizedthe periods impacted and accordingly, has not adjusted the historical financial statements. The Company recorded the cumulative impact of a net right-of-use assetone-time $12.5 million overstatement of $74.6depreciation expense during the first quarter of 2019.
During the three and nine months ended September 30, 2020, depreciation expense was $168.5 million (net of $16.3and $538.5 million, of lease incentives/deferred rent) respectively. During the three and lease liability of $90.9 million. Other practical expedients we elected include:nine months ended September 30, 2019, depreciation expense was $201.4 million and $590.1 million, respectively.
Asset Impairments
|
|
|
|
|
|
|
|
|
|
|
We recognizereview and evaluate our long-lived assets, including intangible assets, for impairment when events or changes in circumstances indicate that the followingrelated carrying amount of such assets may not be recoverable, and changes to our estimates could have an impact on our assessment of asset recoverability.
During the nine months ended September 30, 2020, global commodity prices declined due to factors that significantly impacted both demand and supply. As the COVID-19 pandemic spread, causing travel and other restrictions to be implemented globally, the demand for commodities declined. Additionally, the supply shock late in the first quarter from certain major oil producing nations increasing production also significantly contributed to the sharp drop in commodity prices. While these major oil and gas producing countries subsequently agreed to collectively decrease production and global economies are beginning to re-open, these events, combined with the outbreak of the COVID-19 pandemic, contributed to volatility and depressed commodity prices. The drop in commodity prices resulted in prompt reactions from some domestic producers, including significantly reducing capital budgets and resultant drilling activity and shutting-in production. Commodity prices remain weak relative to historical levels and have remained volatile as uncertainty around global commodity supply and demand continues due to the COVID-19 pandemic.
In the first quarter of 2020, we determined that indicators of impairment existed for certain asset groups reported primarily within our Gathering and Processing segment. For each asset group for which undiscounted future net cash flows were not sufficient to recover the net book value, fair value was determined through use of discounted estimated cash flows to measure the impairment loss.
The estimated cash flows used to assess recoverability of our long-lived assets and measure fair value of our asset groups are derived from current business plans, which are developed using near-term price and volume projections reflective of the current environment and management's projections for long-term average prices and volumes. In addition to near and long-term price assumptions, other key assumptions include volume projections, operating costs, timing of incurring such costs and the use of an appropriate discount rate. We believe our estimates and models used to determine fair value are similar to what a market participant would use.
The fair value measurement of our long-lived assets was based, in part, on significant inputs not observable in the market (as discussed above) and thus represents a Level 3 measurement. The significant unobservable inputs used include discount rates and terminal value exit multiples. We utilized a weighted average discount rate of 14.0% when deriving the fair value of the asset groups impaired during the first quarter of 2020. The weighted average discount rate and exit multiples reflect management’s best estimate of inputs a market participant would utilize.
In the first quarter of 2020, we recorded non-cash pre-tax impairments of $2,442.8 million primarily associated with the partial impairment of gas processing facilities and gathering systems associated with our Mid-Continent operations and full impairment of our Coastal operations - all leases (withof which are in our Gathering and Processing segment. Our first quarter impairment assessment forecasted further decline in natural gas production across the exceptionMid-Continent and Gulf of short-term leases)Mexico. The carrying value adjustments are included in Impairment of long-lived assets in our Consolidated Statements of Operations. There were no indicators of impairment identified during the second or third quarters of 2020.
Intangible Assets
Intangible assets consist of customer contracts and customer relationships acquired in prior business combinations. The fair value of these acquired intangible assets were determined at the commencement date:
|
|
|
|
We determine if an arrangement is or contains a lease at inception. Leases with an initial termdate of twelve months or less are considered short-term leases, which are excluded from the balance sheet. Right-of-use assets and lease liabilities are recognized at the commencement dateacquisition based on the present valuevalues of estimated future lease paymentscash flows. Amortization expense attributable to these assets is recorded over the lease term. The right-of-use asset also includes any lease prepayments and excludes lease incentives. As most of the Company’s leases do not provide an implicit interest rate,periods in which we use our incremental borrowing rate as the discount ratebenefit from services provided to compute the present value of our lease liability. The discount rate applied is determined based on information available on the date of adoption for all leases existing as of that date, and on the date of lease commencement for all subsequent leases.customers.
Our lease arrangements may include variable lease payments based on an index or market rate, or may be based on performance. For variable lease payments based on an index or market rate, we estimate and applyAs a rate based on information available at the commencement date. Variable lease payments based on performance are excluded from the calculationresult of the right-of-use assettriggering events and lease liability,analysis described above, in the first quarter of 2020, we recognized a non-cash pre-tax impairment loss associated with certain intangible customer relationships for which undiscounted future net cash flows were not sufficient to recover the net book value.
The estimated annual amortization expense for intangible assets is approximately $144.0 million, $130.9 million, $122.7 million, $117.5 million and $113.7 million for each of the years 2020 through 2024, respectively.
The changes in our intangible assets are as follows:
Balance at December 31, 2019 |
| $ | 1,735.0 |
|
Impairment |
|
| (208.6 | ) |
Amortization |
|
| (108.8 | ) |
Balance at September 30, 2020 |
| $ | 1,417.6 |
|
|
|
|
|
|
Assets and Liabilities Held for Sale
In October 2020, we executed agreements to sell our assets in Channelview, Texas for approximately $58 million (the “October 2020 Sale”). As of September 30, 2020, we classified our assets as held for sale and measured the fair value of the disposal group using the expected sales price under a contract with a third party (an input within Level 3 of the fair value hierarchy). We recognized a loss of $58.3 million included within other operating (income) expense in our Consolidated Statements of Operations whenfor the contingency underlying such variable lease paymentsthree and nine months ended September 30, 2020 to reduce the carrying value of our assets to their recoverable amounts.
The sale closed in October 2020, and we used the proceeds for general corporate purposes. The sale of the assets is resolved. Our lease terms may include options to extend or terminate the lease. Such options are included in the measurement of our right-of-use assetLogistics and liability, provided we determineTransportation segment and does not qualify for reporting as a discontinued operation, as its divestiture did not represent a strategic shift that we are reasonably certain to exercise the option.would have a major effect on our operations or financial results.
See Note 11 – LeasesThe adjusted carrying amounts of the assets and liabilities held for additional details.sale as of September 30, 2020 are as follows:
|
| September 30, 2020 |
| |
Current assets: |
|
|
|
|
Property, plant and equipment, net of accumulated depreciation and estimated loss on sale |
| $ | 61.0 |
|
Other current assets |
|
| 1.2 |
|
Total assets held for sale |
| $ | 62.2 |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable and accrued liabilities |
| $ | 1.0 |
|
Other long-term obligations |
|
| 2.6 |
|
Total liabilities held for sale |
| $ | 3.6 |
|
Note 4 5 — Divestitures Debt Obligations
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||
Current: |
|
|
|
|
|
|
|
|
Obligations of the Partnership: (1) |
|
|
|
|
|
|
|
|
Accounts receivable securitization facility, due April 2021 (2) |
| $ | 250.0 |
|
| $ | 370.0 |
|
Finance lease liabilities |
|
| 11.9 |
|
|
| 12.2 |
|
Current debt obligations |
|
| 261.9 |
|
|
| 382.2 |
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
|
|
|
|
|
|
TRC obligations: |
|
|
|
|
|
|
|
|
TRC Senior secured revolving credit facility, variable rate, due June 2023 (3) |
|
| 435.0 |
|
|
| 435.0 |
|
Obligations of the Partnership: (1) |
|
|
|
|
|
|
|
|
Senior secured revolving credit facility, variable rate, due June 2023 (4) |
|
| 100.0 |
|
|
| 0 |
|
Senior unsecured notes: |
|
|
|
|
|
|
|
|
5¼% fixed rate, due May 2023 |
|
| 559.6 |
|
|
| 559.6 |
|
4¼% fixed rate, due November 2023 |
|
| 583.9 |
|
|
| 583.9 |
|
6¾% fixed rate, due March 2024 |
|
| 0 |
|
|
| 580.1 |
|
5⅛% fixed rate, due February 2025 |
|
| 481.0 |
|
|
| 500.0 |
|
5⅞% fixed rate, due April 2026 |
|
| 963.2 |
|
|
| 1,000.0 |
|
5⅜% fixed rate, due February 2027 |
|
| 468.1 |
|
|
| 500.0 |
|
6½% fixed rate, due July 2027 |
|
| 705.2 |
|
|
| 750.0 |
|
5% fixed rate, due January 2028 |
|
| 700.3 |
|
|
| 750.0 |
|
6⅞% fixed rate, due January 2029 |
|
| 679.3 |
|
|
| 750.0 |
|
5½% fixed rate, due March 2030 |
|
| 949.6 |
|
|
| 1,000.0 |
|
4⅞% fixed rate, due February 2031 |
|
| 1,000.0 |
|
|
| 0 |
|
TPL notes, 4¾% fixed rate, due November 2021 (5) |
|
| 6.5 |
|
|
| 6.5 |
|
TPL notes, 5⅞% fixed rate, due August 2023 (5) |
|
| 48.1 |
|
|
| 48.1 |
|
Unamortized premium |
|
| 0.2 |
|
|
| 0.3 |
|
|
|
| 7,680.0 |
|
|
| 7,463.5 |
|
Debt issuance costs, net of amortization |
|
| (48.5 | ) |
|
| (49.1 | ) |
Finance lease liabilities |
|
| 20.7 |
|
|
| 25.8 |
|
Long-term debt |
|
| 7,652.2 |
|
|
| 7,440.2 |
|
Total debt obligations |
| $ | 7,914.1 |
|
| $ | 7,822.4 |
|
Irrevocable standby letters of credit: |
|
|
|
|
|
|
|
|
Letters of credit outstanding under the TRC Senior secured credit facility (3) |
| $ | 0 |
|
| $ | 0 |
|
Letters of credit outstanding under the Partnership senior secured revolving credit facility (4) |
|
| 35.3 |
|
|
| 88.2 |
|
|
| $ | 35.3 |
|
| $ | 88.2 |
|
(1) | While we consolidate the debt of the Partnership in our financial statements, we do not have the obligation to make interest payments or debt payments with respect to the debt of the Partnership. |
(2) | As of September 30, 2020, the Partnership had $250.0 million of qualifying receivables under its $250.0 million accounts receivable securitization facility (“Securitization Facility”), resulting in 0 availability. During the second quarter of 2020, the Partnership amended the Securitization Facility to decrease the facility size from $400.0 million to $250.0 million to more closely align with our expectations for borrowing needs given commodity prices and to extend the facility termination date to April 21, 2021. |
(3) | As of September 30, 2020, availability under TRC’s $670.0 million senior secured revolving credit facility (“TRC Revolver”) was $235.0 million. |
(4) | As of September 30, 2020, availability under the Partnership’s $2.2 billion senior secured revolving credit facility (“TRP Revolver”) was $2,064.7 million. |
(5) | “TPL” refers to Targa Pipeline Partners LP. |
The following table shows the range of interest rates and weighted average interest rate incurred on variable-rate debt obligations during the nine months ended September 30, 2020:
Range of Interest Rates Incurred | Weighted Average Interest Rate Incurred | ||||
TRC Revolver | 1.9% - 3.5% | 2.5% | |||
TRP Revolver | 1.9% - 6.0% | 2.3% | |||
Partnership's Securitization Facility | 1.5% - 2.7% | 2.0% |
Compliance with Debt Covenants
Train 7 Joint Venture
In February 2019,As of September 30, 2020, we announced an extension of the Grand Prix NGL Pipeline (“Grand Prix”) from Southern Oklahoma to the STACK region of Central Oklahoma where it will connectwere in compliance with the Williams Companies, Inc. (“Williams”) Bluestem Pipeline and link the Conway, Kansas, and Mont Belvieu, Texas, NGL markets. In connection with this project, Williams has committed significant volumes to us that we will transport on Grand Prix and fractionate at our Mont Belvieu facilities. Williams also had an initial option to purchase a 20% equity interest in one of our recently announced 110 MBbl/d fractionation trains (Train 7 or Train 8) in Mont Belvieu. Williams exercised its option to acquire a 20% equity interest in Train 7 and subsequently executed a joint venture agreement with us in the second quarter of 2019. Certain fractionation-related infrastructure for Train 7, including storage caverns and brine handling, will be funded and owned 100% by Targa. We present Train 7 on a consolidated basiscovenants contained in our consolidated financial statements.various debt agreements.
Senior Unsecured Notes Issuance
SaleIn August 2020, the Partnership issued $1.0 billion aggregate principal amount of Interest4⅞% Senior Notes due 2031 (the “August 2020 Offering”), resulting in Targa Badlands LLC
On April 3, 2019, we closed on the salenet proceeds of a$991.0 million. The 454⅞% interest in Targa Badlands LLC (“Targa Badlands”),Senior Notes due 2031 have substantially similar terms and covenants as our other series of Senior Notes. A portion of the entitynet proceeds from the issuance were used to fund the concurrent cash tender offer (the “Tender Offer”) of the Partnership’s 6¾% Senior Notes due 2024 and redeem any 6¾% Senior Notes due 2024 that holds substantiallyremained outstanding after consummation of the Tender Offer, with the remainder used for repayment of borrowings under the Partnership’s senior secured revolving credit facility. See “Debt Extinguishments and Repurchases” for further details of the concurrent tender offer.
Debt Extinguishments and Repurchases
Concurrent with the August 2020 Offering, the Partnership commenced the Tender Offer to purchase for cash, subject to certain terms and conditions, any and all of our assets in North Dakota, to funds managed by GSO Capital Partners and Blackstone Tactical Opportunities (collectively, “Blackstone”)outstanding 6¾% Senior Notes due 2024. We accepted for $1.6 billion in cash. We usedpurchase all the net cash proceeds to repay debt and for general corporate purposes, including funding our growth capital program. Future growth capital of Targa Badlands is expected to be funded on a pro rata ownership basis. Targa Badlands pays a minimum quarterly distribution (“MQD”) to Blackstone and Targa, with Blackstone having a priority right on such MQDs. Once Blackstone receives funds sufficient to meet a predetermined fixed return on their invested capital, their interest will convert to a 7.5% equity interest in Targa Badlands, and it will no longer have a priority right on MQDs. Additionally, upon a sale of Targa Badlands, Blackstone’s capital contributions would have a liquidation preference equal to a predetermined fixed return on their invested capital.
After the seventh anniversarynotes that were validly tendered as of the closingearly tender date, or uponwhich totaled $262.1 million.
Subsequent to the occurrence of certain triggering events, we have the option to acquire all of Blackstone’s interest in Targa Badlands for a purchase price payable to Blackstone based on their liquidation preference after taking into account all prior distributions to Blackstone, plus a set percentage on a multipleclosing of the trailing twelve-month EBITDATender Offer in August 2020, the Partnership redeemed the 6¾% Senior Notes due 2024 for the remaining note balance of Targa Badlands. Targa will continue to control the management of Targa Badlands pending the occurrence of certain triggering events, including if Blackstone has not received funds sufficient to meet its liquidation preference and Targa has not exercised its purchase right to acquire Blackstone’s interest by April 3, 2029.
We continue to be the operator of Targa Badlands and hold majority governance rights.$318.0 million (the “2024 Note Redemption”). As a result of the Tender Offer and the 2024 Note Redemption, we continuerecorded a loss due to present Targa Badlands ondebt extinguishment of $13.7 million comprised of $11.1 million premiums paid and a consolidated basis in our consolidated financial statements and Blackstone’s contributions are reflected as noncontrolling interests.write-off of $2.6 million of debt issuance costs.
Debt Repurchases
The following table summarizes the Partnership’s senior note repurchases for the nine months ended September 30, 2020:
Debt Repurchased |
| Book Value |
|
| Payment |
|
| Gain (Loss) |
|
| Write-off of Debt Issuance Costs |
|
| Net Gain |
| |||||
5⅛% Senior Notes due 2025 |
| $ | 19.0 |
|
| $ | (14.6 | ) |
| $ | 4.4 |
|
| $ | (0.1 | ) |
| $ | 4.3 |
|
5⅞% Senior Notes due 2026 |
|
| 36.8 |
|
|
| (29.7 | ) |
|
| 7.1 |
|
|
| (0.2 | ) |
|
| 6.9 |
|
5⅜% Senior Notes due 2027 |
|
| 31.9 |
|
|
| (26.6 | ) |
|
| 5.3 |
|
|
| (0.2 | ) |
|
| 5.1 |
|
6½% Senior Notes due 2027 |
|
| 44.8 |
|
|
| (35.5 | ) |
|
| 9.3 |
|
|
| (0.4 | ) |
|
| 8.9 |
|
5% Senior Notes due 2028 |
|
| 49.7 |
|
|
| (38.0 | ) |
|
| 11.7 |
|
|
| (0.4 | ) |
|
| 11.3 |
|
6⅞% Senior Notes due 2029 |
|
| 70.7 |
|
|
| (55.2 | ) |
|
| 15.5 |
|
|
| (0.6 | ) |
|
| 14.9 |
|
5½% Senior Notes due 2030 |
|
| 50.4 |
|
|
| (40.2 | ) |
|
| 10.2 |
|
|
| (0.5 | ) |
|
| 9.7 |
|
6¾% Senior Notes due 2024 |
|
| 580.1 |
|
|
| (591.2 | ) |
|
| (11.1 | ) |
|
| (2.6 | ) |
|
| (13.7 | ) |
|
| $ | 883.4 |
|
| $ | (831.0 | ) |
| $ | 52.4 |
|
| $ | (5.0 | ) |
| $ | 47.4 |
|
We or the Partnership may retire or purchase various series of the Partnership’s outstanding debt through cash purchases and/or exchanges for other debt, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Contractual Obligations
The following table summarizes payment obligations for debt instruments after giving effect to the debt repurchases detailed above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Payments Due By Period |
| |||||||||||||||||
|
|
|
|
|
| Less Than |
|
|
|
|
|
|
|
|
|
| More Than |
| ||
|
| Total |
|
| 1 Year |
|
| 1-3 Years |
|
| 3-5 Years |
|
| 5 Years |
| |||||
|
|
|
|
|
|
|
|
|
| (in millions) |
|
|
|
|
|
|
|
|
| |
Long-term debt obligations (1) |
| $ | 7,679.8 |
|
| $ | - |
|
| $ | 1,149.2 |
|
| $ | 1,064.9 |
|
| $ | 5,465.7 |
|
Interest on debt obligations (2) |
|
| 2,754.7 |
|
|
| 411.3 |
|
|
| 807.1 |
|
|
| 657.6 |
|
|
| 878.7 |
|
|
| $ | 10,434.5 |
|
| $ | 411.3 |
|
| $ | 1,956.3 |
|
| $ | 1,722.5 |
|
| $ | 6,344.4 |
|
(1) | Represents scheduled future maturities of consolidated debt obligations for the periods indicated. |
(2) | Represents interest expense on debt obligations based on both fixed debt interest rates and prevailing September 30, 2020 rates for floating debt. |
Subsequent EventIntangible Assets
Intangible assets consist of customer contracts and customer relationships acquired in prior business combinations. The fair value of these acquired intangible assets were determined at the date of acquisition based on the present values of estimated future cash flows. Amortization expense attributable to these assets is recorded over the periods in which we benefit from services provided to customers.
As a result of the triggering events and analysis described above, in the first quarter of 2020, we recognized a non-cash pre-tax impairment loss associated with certain intangible customer relationships for which undiscounted future net cash flows were not sufficient to recover the net book value.
The estimated annual amortization expense for intangible assets is approximately $144.0 million, $130.9 million, $122.7 million, $117.5 million and $113.7 million for each of the years 2020 through 2024, respectively.
The changes in our intangible assets are as follows:
Balance at December 31, 2019 |
| $ | 1,735.0 |
|
Impairment |
|
| (208.6 | ) |
Amortization |
|
| (108.8 | ) |
Balance at September 30, 2020 |
| $ | 1,417.6 |
|
|
|
|
|
|
Assets and Liabilities Held for Sale
In November 2019,October 2020, we executed agreements to sell our crude gathering and storage businessassets in the Permian DelawareChannelview, Texas for approximately $135 million. Subject to customary regulatory approvals$58 million (the “October 2020 Sale”). As of September 30, 2020, we classified our assets as held for sale and closing conditions,measured the sale isfair value of the disposal group using the expected to close in the fourth quarter of 2019.
We have also engaged Jefferies LLC to evaluate the potential divestiture of our crude gathering business in the Permian Midland, which includes crude gathering and storage assets. The potential divestiture is predicated onsales price under a contract with a third party valuations adequately capturing our forward growth expectations for the assets, and no assurance can be made that a sale will be consummated.
Note 5 — Inventories
|
| September 30, 2019 |
|
| December 31, 2018 |
| ||
Commodities |
| $ | 202.6 |
|
| $ | 151.1 |
|
Materials and supplies |
|
| 8.3 |
|
|
| 13.6 |
|
|
| $ | 210.9 |
|
| $ | 164.7 |
|
Note 6 — Property, Plant and Equipment and Intangible Assets
|
| September 30, 2019 |
|
| December 31, 2018 |
|
| Estimated Useful Lives (In Years) | ||
Gathering systems |
| $ | 8,767.6 |
|
| $ | 7,547.9 |
|
| 5 to 20 |
Processing and fractionation facilities |
|
| 4,968.0 |
|
|
| 4,007.7 |
|
| 5 to 25 |
Terminaling and storage facilities |
|
| 1,459.1 |
|
|
| 1,138.7 |
|
| 5 to 25 |
Transportation assets |
|
| 2,221.9 |
|
|
| 445.1 |
|
| 10 to 50 |
Other property, plant and equipment |
|
| 302.2 |
|
|
| 334.5 |
|
| 3 to 25 |
Land |
|
| 154.4 |
|
|
| 144.3 |
|
| — |
Construction in progress |
|
| 1,675.9 |
|
|
| 3,602.5 |
|
| — |
Finance lease right-of-use assets |
|
| 46.9 |
|
|
| — |
|
| — |
Property, plant and equipment |
|
| 19,596.0 |
|
|
| 17,220.7 |
|
|
|
Accumulated depreciation and amortization |
|
| (4,899.1 | ) |
|
| (4,292.3 | ) |
|
|
Property, plant and equipment, net |
| $ | 14,696.9 |
|
| $ | 12,928.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
| $ | 2,736.6 |
|
| $ | 2,736.6 |
|
| 10 to 20 |
Accumulated amortization |
|
| (882.2 | ) |
|
| (753.4 | ) |
|
|
Intangible assets, net |
| $ | 1,854.4 |
|
| $ | 1,983.2 |
|
|
|
During the preparation(an input within Level 3 of the Company's first quarter 2019 consolidated financial statements, the Company identified an error related to depreciationfair value hierarchy). We recognized a loss of $58.3 million included within other operating (income) expense on certain assets that should have been placed in-service during 2018. The Company does not believe this error is material to its previously issued historical consolidated financial statementsin our Consolidated Statements of Operations for any of the periods impacted and accordingly, has not adjusted the historical financial statements. The Company recorded the cumulative impact of the adjustment in the period of identification, resulting in a one-time $12.5 million overstatement of depreciation expense.
During the three and nine months ended September 30, 2019, depreciation expense was $201.4 million2020 to reduce the carrying value of our assets to their recoverable amounts.
The sale closed in October 2020, and $590.1 million. Duringwe used the threeproceeds for general corporate purposes. The sale of the assets is included in our Logistics and Transportation segment and does not qualify for reporting as a discontinued operation, as its divestiture did not represent a strategic shift that would have a major effect on our operations or financial results.
The adjusted carrying amounts of the assets and liabilities held for sale as of September 30, 2020 are as follows:
|
| September 30, 2020 |
| |
Current assets: |
|
|
|
|
Property, plant and equipment, net of accumulated depreciation and estimated loss on sale |
| $ | 61.0 |
|
Other current assets |
|
| 1.2 |
|
Total assets held for sale |
| $ | 62.2 |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable and accrued liabilities |
| $ | 1.0 |
|
Other long-term obligations |
|
| 2.6 |
|
Total liabilities held for sale |
| $ | 3.6 |
|
Note 5 — Debt Obligations
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||
Current: |
|
|
|
|
|
|
|
|
Obligations of the Partnership: (1) |
|
|
|
|
|
|
|
|
Accounts receivable securitization facility, due April 2021 (2) |
| $ | 250.0 |
|
| $ | 370.0 |
|
Finance lease liabilities |
|
| 11.9 |
|
|
| 12.2 |
|
Current debt obligations |
|
| 261.9 |
|
|
| 382.2 |
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
|
|
|
|
|
|
TRC obligations: |
|
|
|
|
|
|
|
|
TRC Senior secured revolving credit facility, variable rate, due June 2023 (3) |
|
| 435.0 |
|
|
| 435.0 |
|
Obligations of the Partnership: (1) |
|
|
|
|
|
|
|
|
Senior secured revolving credit facility, variable rate, due June 2023 (4) |
|
| 100.0 |
|
|
| 0 |
|
Senior unsecured notes: |
|
|
|
|
|
|
|
|
5¼% fixed rate, due May 2023 |
|
| 559.6 |
|
|
| 559.6 |
|
4¼% fixed rate, due November 2023 |
|
| 583.9 |
|
|
| 583.9 |
|
6¾% fixed rate, due March 2024 |
|
| 0 |
|
|
| 580.1 |
|
5⅛% fixed rate, due February 2025 |
|
| 481.0 |
|
|
| 500.0 |
|
5⅞% fixed rate, due April 2026 |
|
| 963.2 |
|
|
| 1,000.0 |
|
5⅜% fixed rate, due February 2027 |
|
| 468.1 |
|
|
| 500.0 |
|
6½% fixed rate, due July 2027 |
|
| 705.2 |
|
|
| 750.0 |
|
5% fixed rate, due January 2028 |
|
| 700.3 |
|
|
| 750.0 |
|
6⅞% fixed rate, due January 2029 |
|
| 679.3 |
|
|
| 750.0 |
|
5½% fixed rate, due March 2030 |
|
| 949.6 |
|
|
| 1,000.0 |
|
4⅞% fixed rate, due February 2031 |
|
| 1,000.0 |
|
|
| 0 |
|
TPL notes, 4¾% fixed rate, due November 2021 (5) |
|
| 6.5 |
|
|
| 6.5 |
|
TPL notes, 5⅞% fixed rate, due August 2023 (5) |
|
| 48.1 |
|
|
| 48.1 |
|
Unamortized premium |
|
| 0.2 |
|
|
| 0.3 |
|
|
|
| 7,680.0 |
|
|
| 7,463.5 |
|
Debt issuance costs, net of amortization |
|
| (48.5 | ) |
|
| (49.1 | ) |
Finance lease liabilities |
|
| 20.7 |
|
|
| 25.8 |
|
Long-term debt |
|
| 7,652.2 |
|
|
| 7,440.2 |
|
Total debt obligations |
| $ | 7,914.1 |
|
| $ | 7,822.4 |
|
Irrevocable standby letters of credit: |
|
|
|
|
|
|
|
|
Letters of credit outstanding under the TRC Senior secured credit facility (3) |
| $ | 0 |
|
| $ | 0 |
|
Letters of credit outstanding under the Partnership senior secured revolving credit facility (4) |
|
| 35.3 |
|
|
| 88.2 |
|
|
| $ | 35.3 |
|
| $ | 88.2 |
|
(1) | While we consolidate the debt of the Partnership in our financial statements, we do not have the obligation to make interest payments or debt payments with respect to the debt of the Partnership. |
(2) | As of September 30, 2020, the Partnership had $250.0 million of qualifying receivables under its $250.0 million accounts receivable securitization facility (“Securitization Facility”), resulting in 0 availability. During the second quarter of 2020, the Partnership amended the Securitization Facility to decrease the facility size from $400.0 million to $250.0 million to more closely align with our expectations for borrowing needs given commodity prices and to extend the facility termination date to April 21, 2021. |
(3) | As of September 30, 2020, availability under TRC’s $670.0 million senior secured revolving credit facility (“TRC Revolver”) was $235.0 million. |
(4) | As of September 30, 2020, availability under the Partnership’s $2.2 billion senior secured revolving credit facility (“TRP Revolver”) was $2,064.7 million. |
(5) | “TPL” refers to Targa Pipeline Partners LP. |
The following table shows the range of interest rates and weighted average interest rate incurred on variable-rate debt obligations during the nine months ended September 30, 2018, depreciation expense was $161.7 million2020:
Range of Interest Rates Incurred | Weighted Average Interest Rate Incurred | ||||
TRC Revolver | 1.9% - 3.5% | 2.5% | |||
TRP Revolver | 1.9% - 6.0% | 2.3% | |||
Partnership's Securitization Facility | 1.5% - 2.7% | 2.0% |
Compliance with Debt Covenants
As of September 30, 2020, we were in compliance with the covenants contained in our various debt agreements.
Senior Unsecured Notes Issuance
In August 2020, the Partnership issued $1.0 billion aggregate principal amount of 4⅞% Senior Notes due 2031 (the “August 2020 Offering”), resulting in net proceeds of $991.0 million. The 4⅞% Senior Notes due 2031 have substantially similar terms and $470.9covenants as our other series of Senior Notes. A portion of the net proceeds from the issuance were used to fund the concurrent cash tender offer (the “Tender Offer”) of the Partnership’s 6¾% Senior Notes due 2024 and redeem any 6¾% Senior Notes due 2024 that remained outstanding after consummation of the Tender Offer, with the remainder used for repayment of borrowings under the Partnership’s senior secured revolving credit facility. See “Debt Extinguishments and Repurchases” for further details of the concurrent tender offer.
Debt Extinguishments and Repurchases
Concurrent with the August 2020 Offering, the Partnership commenced the Tender Offer to purchase for cash, subject to certain terms and conditions, any and all of our outstanding 6¾% Senior Notes due 2024. We accepted for purchase all the notes that were validly tendered as of the early tender date, which totaled $262.1 million.
Subsequent to the closing of the Tender Offer in August 2020, the Partnership redeemed the 6¾% Senior Notes due 2024 for the remaining note balance of $318.0 million (the “2024 Note Redemption”). As a result of the Tender Offer and the 2024 Note Redemption, we recorded a loss due to debt extinguishment of $13.7 million comprised of $11.1 million premiums paid and a write-off of $2.6 million of debt issuance costs.
Debt Repurchases
The following table summarizes the Partnership’s senior note repurchases for the nine months ended September 30, 2020:
Debt Repurchased |
| Book Value |
|
| Payment |
|
| Gain (Loss) |
|
| Write-off of Debt Issuance Costs |
|
| Net Gain |
| |||||
5⅛% Senior Notes due 2025 |
| $ | 19.0 |
|
| $ | (14.6 | ) |
| $ | 4.4 |
|
| $ | (0.1 | ) |
| $ | 4.3 |
|
5⅞% Senior Notes due 2026 |
|
| 36.8 |
|
|
| (29.7 | ) |
|
| 7.1 |
|
|
| (0.2 | ) |
|
| 6.9 |
|
5⅜% Senior Notes due 2027 |
|
| 31.9 |
|
|
| (26.6 | ) |
|
| 5.3 |
|
|
| (0.2 | ) |
|
| 5.1 |
|
6½% Senior Notes due 2027 |
|
| 44.8 |
|
|
| (35.5 | ) |
|
| 9.3 |
|
|
| (0.4 | ) |
|
| 8.9 |
|
5% Senior Notes due 2028 |
|
| 49.7 |
|
|
| (38.0 | ) |
|
| 11.7 |
|
|
| (0.4 | ) |
|
| 11.3 |
|
6⅞% Senior Notes due 2029 |
|
| 70.7 |
|
|
| (55.2 | ) |
|
| 15.5 |
|
|
| (0.6 | ) |
|
| 14.9 |
|
5½% Senior Notes due 2030 |
|
| 50.4 |
|
|
| (40.2 | ) |
|
| 10.2 |
|
|
| (0.5 | ) |
|
| 9.7 |
|
6¾% Senior Notes due 2024 |
|
| 580.1 |
|
|
| (591.2 | ) |
|
| (11.1 | ) |
|
| (2.6 | ) |
|
| (13.7 | ) |
|
| $ | 883.4 |
|
| $ | (831.0 | ) |
| $ | 52.4 |
|
| $ | (5.0 | ) |
| $ | 47.4 |
|
We or the Partnership may retire or purchase various series of the Partnership’s outstanding debt through cash purchases and/or exchanges for other debt, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Contractual Obligations
The following table summarizes payment obligations for debt instruments after giving effect to the debt repurchases detailed above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Payments Due By Period |
| |||||||||||||||||
|
|
|
|
|
| Less Than |
|
|
|
|
|
|
|
|
|
| More Than |
| ||
|
| Total |
|
| 1 Year |
|
| 1-3 Years |
|
| 3-5 Years |
|
| 5 Years |
| |||||
|
|
|
|
|
|
|
|
|
| (in millions) |
|
|
|
|
|
|
|
|
| |
Long-term debt obligations (1) |
| $ | 7,679.8 |
|
| $ | - |
|
| $ | 1,149.2 |
|
| $ | 1,064.9 |
|
| $ | 5,465.7 |
|
Interest on debt obligations (2) |
|
| 2,754.7 |
|
|
| 411.3 |
|
|
| 807.1 |
|
|
| 657.6 |
|
|
| 878.7 |
|
|
| $ | 10,434.5 |
|
| $ | 411.3 |
|
| $ | 1,956.3 |
|
| $ | 1,722.5 |
|
| $ | 6,344.4 |
|
(1) | Represents scheduled future maturities of consolidated debt obligations for the periods indicated. |
(2) | Represents interest expense on debt obligations based on both fixed debt interest rates and prevailing September 30, 2020 rates for floating debt. |
Intangible Assets
Intangible assets consist of customer contracts and customer relationships acquired in prior business combinations. The fair value of these acquired intangible assets were determined at the date of acquisition based on the present values of estimated future cash flows. Amortization expense attributable to these assets is recorded over the periods in which we benefit from services provided to customers.
As a result of the triggering events and analysis described above, in the first quarter of 2020, we recognized a non-cash pre-tax impairment loss associated with certain intangible customer relationships for which undiscounted future net cash flows were not sufficient to recover the net book value.
The estimated annual amortization expense for intangible assets is approximately $171.6$144.0 million, $159.4$130.9 million, $149.5$122.7 million, $141.2$117.5 million and $136.0$113.7 million for each of the years 20192020 through 2023.2024, respectively.
The changes in our intangible assets are as follows:
|
|
|
|
|
Balance at December 31, 2018 |
| $ | 1,983.2 |
|
Amortization |
|
| (128.8 | ) |
Balance at September 30, 2019 |
| $ | 1,854.4 |
|
Note 7 – Investments in Unconsolidated Affiliates
Our investments in unconsolidated affiliates consist of the following:
Gathering and Processing Segment
|
|
|
|
Logistics and Marketing Segment
|
|
|
|
|
|
Balance at December 31, 2019 |
| $ | 1,735.0 |
|
Impairment |
|
| (208.6 | ) |
Amortization |
|
| (108.8 | ) |
Balance at September 30, 2020 |
| $ | 1,417.6 |
|
|
|
|
|
|
The terms of these joint venture agreements do not afford us the degree of control requiredAssets and Liabilities Held for consolidating them in our consolidated financial statements, but do afford us the significant influence required to employ the equity method of accounting.Sale
The T2 Joint Ventures were formedIn October 2020, we executed agreements to provide servicessell our assets in Channelview, Texas for the benefit of their joint venture owners and have capacity lease agreements with their joint venture owners, which cover costs of operations (excluding depreciation and amortization)approximately $58 million (the “October 2020 Sale”). On April 1, 2019, we assumed the operatorship of the T2 Joint Ventures.
During the third quarter of 2019, we closed on the sale of an equity-method investment for $70.3 million that resulted in the recognition of a gain of $65.8 million during the three months ended September 30, 2019, which is reported as part of Other (income) expense.
The following table shows the activity related to our investments in unconsolidated affiliates:
|
| Balance at December 31, 2018 |
|
| Equity Earnings (Loss) |
|
| Cash Distributions |
|
| Disposition |
|
| Contributions |
|
| Balance at September 30, 2019 |
| ||||||
GCX (1) |
| $ | 211.6 |
|
| $ | 8.9 |
|
| $ | (5.3 | ) |
| $ | — |
|
| $ | 210.4 |
|
| $ | 425.6 |
|
T2 Eagle Ford (2) |
|
| 99.0 |
|
|
| (7.5 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 91.5 |
|
Little Missouri 4 |
|
| 67.3 |
|
|
| 0.1 |
|
|
| — |
|
|
| — |
|
|
| 33.0 |
|
|
| 100.4 |
|
T2 LaSalle (2) |
|
| 49.3 |
|
|
| (3.5 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 45.8 |
|
GCF |
|
| 40.3 |
|
|
| 14.0 |
|
|
| (14.7 | ) |
|
| — |
|
|
| — |
|
|
| 39.6 |
|
Cayenne |
|
| 16.6 |
|
|
| 5.4 |
|
|
| (6.7 | ) |
|
| — |
|
|
| 0.3 |
|
|
| 15.6 |
|
Agua Blanca |
|
| 6.4 |
|
|
| (1.5 | ) |
|
| (0.4 | ) |
|
| (4.5 | ) |
|
| — |
|
|
| — |
|
Total |
| $ | 490.5 |
|
| $ | 15.9 |
|
| $ | (27.1 | ) |
| $ | (4.5 | ) |
| $ | 243.7 |
|
| $ | 718.5 |
|
|
|
| As |
Note 8 — Accounts Payable and Accrued Liabilities
|
| September 30, 2019 |
|
| December 31, 2018 |
| ||
Commodities |
| $ | 612.0 |
|
| $ | 721.9 |
|
Other goods and services |
|
| 364.5 |
|
|
| 478.6 |
|
Interest |
|
| 92.1 |
|
|
| 79.9 |
|
Income and other taxes |
|
| 79.9 |
|
|
| 47.7 |
|
Permian Acquisition contingent consideration |
|
| — |
|
|
| 308.2 |
|
Compensation and benefits |
|
| 57.8 |
|
|
| 57.3 |
|
Preferred Series A dividends payable |
|
| 22.9 |
|
|
| 22.9 |
|
Accrued distributions to noncontrolling interests |
|
| 73.8 |
|
|
| — |
|
Other |
|
| 24.8 |
|
|
| 20.8 |
|
|
| $ | 1,327.8 |
|
| $ | 1,737.3 |
|
Accounts payable and accrued liabilities includes $15.6 million and $52.6 million of liabilities to creditors to whom we have issued checks that remained outstanding as of September 30, 20192020, we classified our assets as held for sale and December 31, 2018.
Permian Acquisition Contingent Consideration
As a result of a 2017 acquisition of certain gas gathering and processing and crude gathering assets in the Permian Basin (the “Permian Acquisition”), we includedmeasured the fair value of the contingent considerationdisposal group using the expected sales price under a contract with a third party (an input within Level 3 of the fair value hierarchy). We recognized a loss of $58.3 million included within other operating (income) expense in accounts payableour Consolidated Statements of Operations for the three and accruednine months ended September 30, 2020 to reduce the carrying value of our assets to their recoverable amounts.
The sale closed in October 2020, and we used the proceeds for general corporate purposes. The sale of the assets is included in our Logistics and Transportation segment and does not qualify for reporting as a discontinued operation, as its divestiture did not represent a strategic shift that would have a major effect on our operations or financial results.
The adjusted carrying amounts of the assets and liabilities held for sale as of December 31, 2018. The contingent consideration earn-out period ended on February 28, 2019 and resulted in a $317.1 million payment in May 2019.September 30, 2020 are as follows:
|
| September 30, 2020 |
| |
Current assets: |
|
|
|
|
Property, plant and equipment, net of accumulated depreciation and estimated loss on sale |
| $ | 61.0 |
|
Other current assets |
|
| 1.2 |
|
Total assets held for sale |
| $ | 62.2 |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable and accrued liabilities |
| $ | 1.0 |
|
Other long-term obligations |
|
| 2.6 |
|
Total liabilities held for sale |
| $ | 3.6 |
|
Note 95 — Debt Obligations
|
| September 30, 2019 |
|
| December 31, 2018 |
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||||
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of the Partnership: (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable securitization facility, due December 2019 (2) |
| $ | 246.0 |
|
| $ | 280.0 |
| ||||||||
Senior unsecured notes, 4⅛% fixed rate, due November 2019 |
|
| — |
|
|
| 749.4 |
| ||||||||
|
|
| 246.0 |
|
|
| 1,029.4 |
| ||||||||
Debt issuance costs, net of amortization |
|
| — |
|
|
| (1.5 | ) | ||||||||
Accounts receivable securitization facility, due April 2021 (2) |
| $ | 250.0 |
|
| $ | 370.0 |
| ||||||||
Finance lease liabilities |
|
| 12.0 |
|
|
| — |
|
|
| 11.9 |
|
|
| 12.2 |
|
Current debt obligations |
|
| 258.0 |
|
|
| 1,027.9 |
|
|
| 261.9 |
|
|
| 382.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRC obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRC Senior secured revolving credit facility, variable rate, due June 2023 (3) |
|
| 435.0 |
|
|
| 435.0 |
|
|
| 435.0 |
|
|
| 435.0 |
|
Obligations of the Partnership: (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior secured revolving credit facility, variable rate, due June 2023 (4) |
|
| 830.0 |
|
|
| 700.0 |
|
|
| 100.0 |
|
|
| 0 |
|
Senior unsecured notes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5¼% fixed rate, due May 2023 |
|
| 559.6 |
|
|
| 559.6 |
|
|
| 559.6 |
|
|
| 559.6 |
|
4¼% fixed rate, due November 2023 |
|
| 583.9 |
|
|
| 583.9 |
|
|
| 583.9 |
|
|
| 583.9 |
|
6¾% fixed rate, due March 2024 |
|
| 580.1 |
|
|
| 580.1 |
|
|
| 0 |
|
|
| 580.1 |
|
5⅛% fixed rate, due February 2025 |
|
| 500.0 |
|
|
| 500.0 |
|
|
| 481.0 |
|
|
| 500.0 |
|
5⅞% fixed rate, due April 2026 |
|
| 1,000.0 |
|
|
| 1,000.0 |
|
|
| 963.2 |
|
|
| 1,000.0 |
|
5⅜% fixed rate, due February 2027 |
|
| 500.0 |
|
|
| 500.0 |
|
|
| 468.1 |
|
|
| 500.0 |
|
6½% fixed rate, due July 2027 |
|
| 750.0 |
|
|
| — |
|
|
| 705.2 |
|
|
| 750.0 |
|
5% fixed rate, due January 2028 |
|
| 750.0 |
|
|
| 750.0 |
|
|
| 700.3 |
|
|
| 750.0 |
|
6⅞% fixed rate, due January 2029 |
|
| 750.0 |
|
|
| — |
|
|
| 679.3 |
|
|
| 750.0 |
|
5½% fixed rate, due March 2030 |
|
| 949.6 |
|
|
| 1,000.0 |
| ||||||||
4⅞% fixed rate, due February 2031 |
|
| 1,000.0 |
|
|
| 0 |
| ||||||||
TPL notes, 4¾% fixed rate, due November 2021 (5) |
|
| 6.5 |
|
|
| 6.5 |
|
|
| 6.5 |
|
|
| 6.5 |
|
TPL notes, 5⅞% fixed rate, due August 2023 (5) |
|
| 48.1 |
|
|
| 48.1 |
|
|
| 48.1 |
|
|
| 48.1 |
|
Unamortized premium |
|
| 0.3 |
|
|
| 0.3 |
|
|
| 0.2 |
|
|
| 0.3 |
|
|
|
| 7,293.5 |
|
|
| 5,663.5 |
|
|
| 7,680.0 |
|
|
| 7,463.5 |
|
Debt issuance costs, net of amortization |
|
| (40.7 | ) |
|
| (31.1 | ) |
|
| (48.5 | ) |
|
| (49.1 | ) |
Finance lease liabilities |
|
| 26.9 |
|
|
| — |
|
|
| 20.7 |
|
|
| 25.8 |
|
Long-term debt |
|
| 7,279.7 |
|
|
| 5,632.4 |
|
|
| 7,652.2 |
|
|
| 7,440.2 |
|
Total debt obligations |
| $ | 7,537.7 |
|
| $ | 6,660.3 |
|
| $ | 7,914.1 |
|
| $ | 7,822.4 |
|
Irrevocable standby letters of credit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Letters of credit outstanding under the TRC Senior secured credit facility (3) |
| $ | — |
|
| $ | — |
|
| $ | 0 |
|
| $ | 0 |
|
Letters of credit outstanding under the Partnership senior secured revolving credit facility (4) |
|
| 73.8 |
|
|
| 79.5 |
|
|
| 35.3 |
|
|
| 88.2 |
|
|
| $ | 73.8 |
|
| $ | 79.5 |
|
| $ | 35.3 |
|
| $ | 88.2 |
|
(1) | While we consolidate the debt of the Partnership in our financial statements, we do not have the obligation to make interest payments or debt payments with respect to the debt of the Partnership. |
(2) | As of September 30, |
(3) | As of September 30, |
(4) | As of September 30, |
(5) | “TPL” refers to Targa Pipeline Partners LP. |
The following table shows the range of interest rates and weighted average interest rate incurred on variable-rate debt obligations during the nine months ended September 30, 2019:2020:
|
| Range of Interest Rates Incurred |
| Weighted Average Interest Rate Incurred |
|
TRC Revolver |
|
|
|
|
|
TRP Revolver |
|
|
|
|
|
Partnership's |
|
|
|
|
|
Compliance with Debt Covenants
As of September 30, 2019,2020, we were in compliance with the covenants contained in our various debt agreements.
Senior Unsecured Notes Issuance
In January 2019,August 2020, the Partnership issued $750.0 million$1.0 billion aggregate principal amount of 6½4⅞% Senior Notes due July 2027 and $750.0 million2031 (the “August 2020 Offering”), resulting in net proceeds of 6⅞$991.0 million. The 4⅞% Senior Notes due January 2029, resulting in total net proceeds2031 have substantially similar terms and covenants as our other series of $1,486.6 million. TheSenior Notes. A portion of the net proceeds from the issuance were used to redeem in fullfund the concurrent cash tender offer (the “Tender Offer”) of the Partnership’s 4⅛6¾% Senior Notes due 2019, at par value plus accrued interest through2024 and redeem any 6¾% Senior Notes due 2024 that remained outstanding after consummation of the redemption date,Tender Offer, with the remainder used for general partnership purposes, which included repayment of borrowings under the Partnership’s senior secured revolving credit facilities.facility. See “Debt Extinguishments and Repurchases” for further details of the concurrent tender offer.
Debt ExtinguishmentExtinguishments and Repurchases
In February 2019,Concurrent with the August 2020 Offering, the Partnership redeemed in full itscommenced the Tender Offer to purchase for cash, subject to certain terms and conditions, any and all of our outstanding 4⅛6¾% Senior Notes due 2019 at par value plus accrued interest through2024. We accepted for purchase all the redemptionnotes that were validly tendered as of the early tender date, which totaled $262.1 million.
Subsequent to the closing of the Tender Offer in August 2020, the Partnership redeemed the 6¾% Senior Notes due 2024 for the remaining note balance of $318.0 million (the “2024 Note Redemption”). The redemption resulted inAs a non-cashresult of the Tender Offer and the 2024 Note Redemption, we recorded a loss due to debt extinguishment of $13.7 million comprised of $11.1 million premiums paid and a write-off $1.4of $2.6 million of unamortized debt issuance costs, which is included in Gain (loss) from financing activities in costs.
Debt Repurchases
The following table summarizes the Consolidated Statements of Operations.Partnership’s senior note repurchases for the nine months ended September 30, 2020:
Debt Repurchased |
| Book Value |
|
| Payment |
|
| Gain (Loss) |
|
| Write-off of Debt Issuance Costs |
|
| Net Gain |
| |||||
5⅛% Senior Notes due 2025 |
| $ | 19.0 |
|
| $ | (14.6 | ) |
| $ | 4.4 |
|
| $ | (0.1 | ) |
| $ | 4.3 |
|
5⅞% Senior Notes due 2026 |
|
| 36.8 |
|
|
| (29.7 | ) |
|
| 7.1 |
|
|
| (0.2 | ) |
|
| 6.9 |
|
5⅜% Senior Notes due 2027 |
|
| 31.9 |
|
|
| (26.6 | ) |
|
| 5.3 |
|
|
| (0.2 | ) |
|
| 5.1 |
|
6½% Senior Notes due 2027 |
|
| 44.8 |
|
|
| (35.5 | ) |
|
| 9.3 |
|
|
| (0.4 | ) |
|
| 8.9 |
|
5% Senior Notes due 2028 |
|
| 49.7 |
|
|
| (38.0 | ) |
|
| 11.7 |
|
|
| (0.4 | ) |
|
| 11.3 |
|
6⅞% Senior Notes due 2029 |
|
| 70.7 |
|
|
| (55.2 | ) |
|
| 15.5 |
|
|
| (0.6 | ) |
|
| 14.9 |
|
5½% Senior Notes due 2030 |
|
| 50.4 |
|
|
| (40.2 | ) |
|
| 10.2 |
|
|
| (0.5 | ) |
|
| 9.7 |
|
6¾% Senior Notes due 2024 |
|
| 580.1 |
|
|
| (591.2 | ) |
|
| (11.1 | ) |
|
| (2.6 | ) |
|
| (13.7 | ) |
|
| $ | 883.4 |
|
| $ | (831.0 | ) |
| $ | 52.4 |
|
| $ | (5.0 | ) |
| $ | 47.4 |
|
May 2019 Shelf Registration
We or the Partnership may retire or purchase various series of the Partnership’s outstanding debt through cash purchases and/or exchanges for other debt, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Our universal shelf registration statement on Form S-3 filed in May 2016 (the “May 2016 Shelf”) expired in May 2019. Accordingly, in May 2019, we filed withContractual Obligations
The following table summarizes payment obligations for debt instruments after giving effect to the SEC a universal shelf registration statement on Form S-3 that registersdebt repurchases detailed above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Payments Due By Period |
| |||||||||||||||||
|
|
|
|
|
| Less Than |
|
|
|
|
|
|
|
|
|
| More Than |
| ||
|
| Total |
|
| 1 Year |
|
| 1-3 Years |
|
| 3-5 Years |
|
| 5 Years |
| |||||
|
|
|
|
|
|
|
|
|
| (in millions) |
|
|
|
|
|
|
|
|
| |
Long-term debt obligations (1) |
| $ | 7,679.8 |
|
| $ | - |
|
| $ | 1,149.2 |
|
| $ | 1,064.9 |
|
| $ | 5,465.7 |
|
Interest on debt obligations (2) |
|
| 2,754.7 |
|
|
| 411.3 |
|
|
| 807.1 |
|
|
| 657.6 |
|
|
| 878.7 |
|
|
| $ | 10,434.5 |
|
| $ | 411.3 |
|
| $ | 1,956.3 |
|
| $ | 1,722.5 |
|
| $ | 6,344.4 |
|
(1) | Represents scheduled future maturities of consolidated debt obligations for the periods indicated. |
(2) | Represents interest expense on debt obligations based on both fixed debt interest rates and prevailing September 30, 2020 rates for floating debt. |
Subsequent Event
On November 2, 2020, the issuance and salePartnership redeemed the $559.6 million remaining balance of certain debt and equity securities from time to time in one or more offerings (the “May 2019 Shelf”). The May 2019 Shelf will expire in May 2022. See Note 13 – Common Stock and Related Matters.
its 5¼% Senior Notes due 2023.
Note 106 — Other Long-term Liabilities
Other long-term liabilities isare comprised of deferred revenue, asset retirement obligations and operating lease liabilities.
Deferred Revenue
We have certain long-term contractual arrangements for which we have received consideration that we are not yet able to recognize as revenue. The resulting deferred revenue will be recognized once all conditions for revenue recognition have been met.
Deferred revenue as of September 30, 20192020 and December 31, 2018,2019, was $173.0$169.4 million and $175.5$172.0 million, respectively, which includes $129.0 million of payments received from Vitol Americas Corp. (“Vitol”) (formerly known as Noble Americas Corp.), a subsidiary of Vitol US Holding Co., in 2016, 2017, and 2018 as part of an agreement (the “Splitter Agreement”) related to the construction and operation of a crude oil and condensate splitter. In December 2018, Vitol elected to terminate the Splitter Agreement. The Splitter Agreement provides that the first three annual payments are ours if Vitol elects to terminate, which Vitol disputes. The timing of revenue recognition related to the Splitter Agreement deferred revenue is dependent upon resolutionon the outcome of the disputecurrent litigation with Vitol. Deferred revenue also includes nonmonetary consideration received in a 2015 amendment to a gas gathering and processing agreement and consideration received for other construction activities of facilities connected to our systems.
Note 11 – Leases
We have non-cancellable operating leases primarily associated with our office facilities, rail assets, land, and storage and terminal assets. We have finance leases primarily associated with our tractors and vehicles. Our leases have remaining lease terms of 1 to 10 years, some of which include options to extend the lease term See Part II—Item 1. Legal Proceedings for up to 20 years.
The balances of right-of-use assets and liabilities of finance leases and operating leases, and their locations on our Consolidated Balance Sheets are as follows:
|
| Balance Sheet Location |
| September 30, 2019 |
| |
Right-of-use assets |
|
|
|
|
|
|
Operating leases, gross |
| Other long-term assets |
| $ | 41.8 |
|
Finance leases, gross |
| Property, plant and equipment |
|
| 46.9 |
|
|
|
|
|
|
|
|
Lease liabilities |
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
Operating leases |
| Accounts payable and accrued liabilities |
| $ | 7.4 |
|
Finance leases |
| Current debt obligations |
|
| 12.0 |
|
Non-current: |
|
|
|
|
|
|
Operating leases |
| Other long-term liabilities |
| $ | 49.2 |
|
Finance leases |
| Long-term debt |
|
| 26.9 |
|
Operating lease costs and short-term lease costs are included in Operating expenses or General and administrative expense in our Consolidated Statements of Operations, dependingfurther details on the nature of the leases. Finance lease costs are included in Depreciation and amortization expense and Interest expense, net in our Consolidated Statements of Operations. The components of lease expense were as follows:
|
| Three Months Ended September 30, 2019 |
|
| Nine Months Ended September 30, 2019 |
| ||
Lease cost |
|
|
|
|
|
|
|
|
Operating lease cost |
| $ | 2.7 |
|
| $ | 7.2 |
|
Short-term lease cost |
|
| 6.7 |
|
|
| 22.4 |
|
Variable lease cost |
|
| 1.3 |
|
|
| 5.1 |
|
Finance lease cost |
|
|
|
|
|
|
|
|
Amortization of right-of-use assets |
|
| 3.4 |
|
|
| 9.7 |
|
Interest expense |
|
| 0.4 |
|
|
| 1.2 |
|
Total lease cost |
| $ | 14.5 |
|
| $ | 45.6 |
|
Other supplemental information related to our leases are as follows:litigation.
|
|
|
| Nine Months Ended September 30, 2019 |
| |
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
|
Operating cash flows for operating leases |
|
|
| $ | 6.4 |
|
Operating cash flows for finance leases |
|
|
|
| 1.2 |
|
Financing cash flows for finance leases |
|
|
|
| 8.5 |
|
The weighted-average remaining lease terms for operating leases and finance leases are 7 years and 3 years, respectively. The weighted-average discount rates for operating leases and finance leases are 4.0% and 3.9%, respectively.
The following table presents the maturities of our lease liabilities under non-cancellable leases as of September 30, 2019:
|
| Operating Leases |
|
| Finance Leases |
| ||
Future Minimum Lease Payments Beginning After September 30, |
|
|
|
|
|
|
|
|
2019 |
| $ | 9.5 |
|
| $ | 13.3 |
|
2020 |
|
| 10.4 |
|
|
| 11.4 |
|
2021 |
|
| 10.0 |
|
|
| 10.3 |
|
2022 |
|
| 8.5 |
|
|
| 6.1 |
|
2023 |
|
| 6.4 |
|
|
| 0.6 |
|
Thereafter |
|
| 21.0 |
|
|
| — |
|
Total undiscounted cash flows |
|
| 65.8 |
|
|
| 41.7 |
|
Less imputed interest |
|
| (9.2 | ) |
|
| (2.8 | ) |
Total lease liabilities |
| $ | 56.6 |
|
| $ | 38.9 |
|
The following table presents future minimum payments under non-cancellable leases as of December 31, 2018:
|
| Leases |
| |
2019 |
| $ | 20.9 |
|
2020 |
|
| 20.2 |
|
2021 |
|
| 18.5 |
|
2022 |
|
| 16.5 |
|
2023 |
|
| 9.8 |
|
Thereafter |
|
| 24.9 |
|
Total payments |
| $ | 110.8 |
|
Note 12 –7 — Preferred Stock
Preferred Stock Dividends
As of September 30, 2019,2020, we have accrued cumulative preferred dividends of $22.9 million on our Series A Preferred Stock (“Series A Preferred”), which will be paid on November 14, 2019.13, 2020. During the three and nine months ended September 30, 2019,2020, we paid $22.9 million and $68.8 million of dividends to preferred shareholders, and recorded deemed dividends of $8.4$9.5 million and $24.4$27.7 million attributable to accretion of the preferred discount resulting from the beneficial conversion feature accounting. Such accretion is included in the book value of the Series A Preferred.
Note 138 — Common Stock and Related Matters
New Shelf Registration Statement and Continuation of ATM Programs
On May 9, 2017, we entered into an equity distribution agreement (the “May 2017 EDA”), pursuant to which we may sell through our sales agents, at our option, up to an aggregate amount of $750.0 million of our common stock (the “2017 ATM Program”). Such shares of common stock were registered for sale under our May 2016 Shelf and the related prospectus supplement filed in May 2017.
On September 20, 2018, we entered into an equity distribution agreement (the “September 2018 EDA”), pursuant to which we may sell through our sales agents, at our option, up to an aggregate amount of $750.0 million of our common stock (the “2018 ATM Program”). Such shares of common stock were registered for sale under our May 2016 Shelf and the related prospectus supplement filed in September 2018.
The May 2016 Shelf expired in May 2019. Accordingly, in May 2019, we filed (i) the May 2019 Shelf, (ii) a new prospectus supplement to continue the 2017 ATM Program and (iii) a new prospectus supplement to continue the 2018 ATM Program.
For the nine months ended September 30, 2019, we did 0t issue shares of common stock under either the May 2017 EDA or the September 2018 EDA.
As of September 30, 2019, we have $382.1 million remaining under the May 2017 EDA and $750.0 million remaining under the September 2018 EDA.
CommonSubsequent Event
On November 2, 2020, the Partnership redeemed the $559.6 million remaining balance of its 5¼% Senior Notes due 2023.
Note 6 — Other Long-term Liabilities
Other long-term liabilities are comprised of deferred revenue, asset retirement obligations and operating lease liabilities.
Deferred Revenue
We have certain long-term contractual arrangements for which we have received consideration that we are not yet able to recognize as revenue. The resulting deferred revenue will be recognized once all conditions for revenue recognition have been met.
Deferred revenue as of September 30, 2020 and December 31, 2019, was $169.4 million and $172.0 million, respectively, which includes $129.0 million of payments received from Vitol Americas Corp. (“Vitol”) (formerly known as Noble Americas Corp.), a subsidiary of Vitol US Holding Co., in 2016, 2017, and 2018 as part of an agreement (the “Splitter Agreement”) related to the construction and operation of a crude oil and condensate splitter. In December 2018, Vitol elected to terminate the Splitter Agreement. The Splitter Agreement provides that the first three annual payments are ours if Vitol elects to terminate, which Vitol disputes. The timing of revenue recognition related to the Splitter Agreement deferred revenue is dependent on the outcome of current litigation with Vitol. Deferred revenue also includes nonmonetary consideration received in a 2015 amendment to a gas gathering and processing agreement and consideration received for other construction activities of facilities connected to our systems. See Part II—Item 1. Legal Proceedings for further details on the related litigation.
Note 7 — Preferred Stock
Preferred Stock Dividends
The following table details the dividends declared and/or paid by us to common shareholders for the nine months endedAs of September 30, 2019:
Three Months Ended |
| Date Paid or To Be Paid |
| Total Common Dividends Declared |
|
| Amount of Common Dividends Paid or To Be Paid |
|
| Accrued Dividends (1) |
|
| Dividends Declared per Share of Common Stock |
| ||||
(In millions, except per share amounts) |
| |||||||||||||||||
September 30, 2019 |
| November 15, 2019 | $ |
| 215.5 |
| $ |
| 211.8 |
| $ |
| 3.7 |
| $ |
| 0.91000 |
|
June 30, 2019 |
| August 15, 2019 |
|
| 215.1 |
|
|
| 211.5 |
|
|
| 3.6 |
|
|
| 0.91000 |
|
March 31, 2019 |
| May 15, 2019 |
|
| 215.2 |
|
|
| 211.5 |
|
|
| 3.7 |
|
|
| 0.91000 |
|
December 31, 2018 |
| February 15, 2019 |
|
| 215.2 |
|
|
| 211.2 |
|
|
| 4.0 |
|
|
| 0.91000 |
|
|
|
Note 14 — Partnership Units and Related Matters
Distributions
We are entitled to receive all Partnership distributions from available cash2020, we have accrued cumulative preferred dividends of $22.9 million on the Partnership’s common units after payment of preferred unit distributions each quarter.
The following table details the distributions declared and paid by the Partnership for the nine months ended September 30, 2019:
Three Months Ended |
| Date Paid or To Be Paid |
| Total Distributions |
|
| Distributions to Targa Resources Corp. |
| ||
September 30, 2019 |
| November 13, 2019 | $ |
| 242.1 |
| $ |
| 239.3 |
|
June 30, 2019 |
| August 13, 2019 |
|
| 242.4 |
|
|
| 239.6 |
|
March 31, 2019 |
| April 5, 2019 |
|
| 437.8 |
|
|
| 435.0 |
|
December 31, 2018 |
| February 13, 2019 |
|
| 241.3 |
|
|
| 238.5 |
|
Contributions
All capital contributions to the Partnership continue to be allocated 98% to the limited partner and 2% to the general partner; however, no unitsour Series A Preferred Stock (“Series A Preferred”), which will be issued for those contributions.paid on November 13, 2020. During the three and nine months ended September 30, 20192020, we made total contributions to the Partnership of $10.0paid $22.9 million and $200.0 million.$68.8 million of dividends to preferred shareholders, and recorded deemed dividends of $9.5 million and $27.7 million attributable to accretion of the preferred discount resulting from beneficial conversion feature accounting. Such accretion is included in the book value of the Series A Preferred.
Preferred UnitsNote 8 — Common Stock and Related Matters
The Partnership’s issued and outstanding Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the “Preferred Units”) rank senior to the Partnership’s common units with respect to the distribution rights. Distributions on the Partnership’s 5,000,000 Preferred Units are cumulative from the date of original issue in October 2015 and are payable monthly in arrears on the 15th day of each month of each year, when, as and if declared by the board of directors of the Partnership’s general partner. Distributions on the Preferred Units are payable out of amounts legally available at a rate equal to 9.0% per annum. On and after November 1, 2020, distributions on the Preferred Units will accumulate at an annual floating rate equal to the one-month LIBOR plus a spread of 7.71%.
The Partnership paid $2.8 million and $8.4 million of distributions to the holders of Preferred Units (“Preferred Unitholders”) for the three and nine months ended September 30, 2019. The Preferred Units are reported as noncontrolling interests in our financial statements.
Subsequent Event
On November 2, 2020, the Partnership redeemed the $559.6 million remaining balance of its 5¼% Senior Notes due 2023.
Note 6 — Other Long-term Liabilities
Other long-term liabilities are comprised of deferred revenue, asset retirement obligations and operating lease liabilities.
Deferred Revenue
We have certain long-term contractual arrangements for which we have received consideration that we are not yet able to recognize as revenue. The resulting deferred revenue will be recognized once all conditions for revenue recognition have been met.
Deferred revenue as of September 30, 2020 and December 31, 2019, was $169.4 million and $172.0 million, respectively, which includes $129.0 million of payments received from Vitol Americas Corp. (“Vitol”) (formerly known as Noble Americas Corp.), a subsidiary of Vitol US Holding Co., in 2016, 2017, and 2018 as part of an agreement (the “Splitter Agreement”) related to the construction and operation of a crude oil and condensate splitter. In December 2018, Vitol elected to terminate the Splitter Agreement. The Splitter Agreement provides that the first three annual payments are ours if Vitol elects to terminate, which Vitol disputes. The timing of revenue recognition related to the Splitter Agreement deferred revenue is dependent on the outcome of current litigation with Vitol. Deferred revenue also includes nonmonetary consideration received in a 2015 amendment to a gas gathering and processing agreement and consideration received for other construction activities of facilities connected to our systems. See Part II—Item 1. Legal Proceedings for further details on the related litigation.
Note 7 — Preferred Stock
Preferred Stock Dividends
As of September 30, 2020, we have accrued cumulative preferred dividends of $22.9 million on our Series A Preferred Stock (“Series A Preferred”), which will be paid on November 13, 2020. During the three and nine months ended September 30, 2020, we paid $22.9 million and $68.8 million of dividends to preferred shareholders, and recorded deemed dividends of $9.5 million and $27.7 million attributable to accretion of the preferred discount resulting from beneficial conversion feature accounting. Such accretion is included in the book value of the Series A Preferred.
Note 8 — Common Stock and Related Matters
Common Stock Dividends
The following table details the dividends declared and/or paid by us to common shareholders for the nine months ended September 30, 2020:
Three Months Ended |
| Date Paid or To Be Paid |
| Total Common Dividends Declared |
|
| Amount of Common Dividends Paid or To Be Paid |
|
| Accrued Dividends (1) |
|
| Dividends Declared per Share of Common Stock |
| ||||
(In millions, except per share amounts) |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
| November 16, 2020 | $ |
| 23.8 |
| $ |
| 23.3 |
| $ |
| 0.5 |
| $ |
| 0.10000 |
|
June 30, 2020 |
| August 17, 2020 |
|
| 23.7 |
|
|
| 23.3 |
|
|
| 0.4 |
|
|
| 0.10000 |
|
March 31, 2020 |
| May 15, 2020 |
|
| 23.7 |
|
|
| 23.3 |
|
|
| 0.4 |
|
|
| 0.10000 |
|
December 31, 2019 |
| February 18, 2020 |
|
| 216.0 |
|
|
| 212.0 |
|
|
| 4.0 |
|
|
| 0.91000 |
|
(1) | Represents accrued dividends on restricted stock and restricted stock units that are payable upon vesting. |
Subsequent Event
In October 2020, our Board of Directors approved a share repurchase program (the “Share Repurchase Program”) for the repurchase of up to $500 million of our outstanding common stock. As of November 2, 2020, we have repurchased 4,505,507 shares at a weighted average price of $16.33 for a total net cost of $73.6 million. There is approximately $426 million remaining under the Share Repurchase Program. We may discontinue the Share Repurchase Program at any time and are not obligated to repurchase any specific dollar amount or number of shares.
Note 9 — Partnership Units and Related Matters
Distributions
We are entitled to receive all Partnership distributions from available cash on the Partnership’s common units after payment of preferred unit distributions each quarter.
The following table details the distributions declared and paid by the Partnership for the nine months ended September 30, 2020:
Three Months Ended |
| Date Paid or To Be Paid |
| Total Distributions |
|
| Distributions to Targa Resources Corp. |
| ||
September 30, 2020 |
| November 13, 2020 | $ |
| 51.7 |
| $ |
| 48.9 |
|
June 30, 2020 |
| August 13, 2020 |
|
| 51.7 |
|
|
| 48.9 |
|
March 31, 2020 |
| May 13, 2020 |
|
| 53.1 |
|
|
| 50.3 |
|
December 31, 2019 |
| February 13, 2020 |
|
| 241.9 |
|
|
| 239.1 |
|
Contributions
All capital contributions to the Partnership continue to be allocated 98% to the limited partner and 2% to the general partner; however, no units will be issued for those contributions. For the nine months ended September 30, 2020, we made a total of $50.0 million in contributions to the Partnership.
Preferred Units
The Partnership’s issued and outstanding Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the “Preferred Units”) rank senior to the Partnership’s common units with respect to the distribution rights. Distributions on the Partnership’s 5,000,000 Preferred Units are cumulative from the date of original issue in October 2015 and are payable monthly in arrears on the 15th day of each month of each year, when, as and if declared by the board of directors of the Partnership’s general partner. Distributions on the Preferred Units are payable out of amounts legally available at a rate equal to 9.0% per annum. On and after November 1, 2020, distributions on the Preferred Units will accumulate at an annual floating rate equal to the one-month LIBOR plus a spread of 7.71%.
The Partnership paid $2.8 million and $8.4 million of distributions to the holders of Preferred Units (“Preferred Unitholders”) for the three and nine months ended September 30, 2020. The Preferred Units are reported as noncontrolling interests in our financial statements.
Subsequent Event
In October 2019,2020, the board of directors of the general partner of the Partnership declared a cash distribution of $0.1875 per Preferred Unit, resulting in approximately $0.9 million in distributions that will be paid on November 15, 2019.16, 2020.
Note 1510 — Earnings per Common Share
The following table sets forth a reconciliation of net income and weighted average shares outstanding (in millions) used in computing basic and diluted net income per common share:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Net income (loss) |
| $ | 32.1 |
|
| $ | (11.2 | ) |
| $ | 56.3 |
|
| $ | 148.6 |
|
Less: Net income attributable to noncontrolling interests |
|
| 79.4 |
|
|
| 12.5 |
|
|
| 152.7 |
|
|
| 40.4 |
|
Less: Dividends on preferred stock |
|
| 31.3 |
|
|
| 30.3 |
|
|
| 93.2 |
|
|
| 90.3 |
|
Net income attributable to common shareholders for basic earnings per share |
| $ | (78.6 | ) |
| $ | (54.0 | ) |
| $ | (189.6 | ) |
| $ | 17.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic |
|
| 232.7 |
|
|
| 226.5 |
|
|
| 232.4 |
|
|
| 222.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available per common share - basic |
| $ | (0.34 | ) |
| $ | (0.24 | ) |
| $ | (0.82 | ) |
| $ | 0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
| 232.7 |
|
|
| 226.5 |
|
|
| 232.4 |
|
|
| 222.1 |
|
Dilutive effect of common stock equivalents (1) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1.7 |
|
Weighted average shares outstanding - diluted |
|
| 232.7 |
|
|
| 226.5 |
|
|
| 232.4 |
|
|
| 223.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available per common share - diluted |
| $ | (0.34 | ) |
| $ | (0.24 | ) |
| $ | (0.82 | ) |
| $ | 0.08 |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Net income (loss) attributable to Targa Resources Corp. |
| $ | 69.3 |
|
| $ | (47.3 | ) |
| $ | (1,587.5 | ) |
| $ | (96.4 | ) |
Less: Dividends on preferred stock |
|
| 32.4 |
|
|
| 31.3 |
|
|
| 96.5 |
|
|
| 93.2 |
|
Net income (loss) attributable to common shareholders for basic earnings per share |
| $ | 36.9 |
|
| $ | (78.6 | ) |
| $ | (1,684.0 | ) |
| $ | (189.6 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
| 233.4 |
|
|
| 232.7 |
|
|
| 233.2 |
|
|
| 232.4 |
|
Dilutive effect of unvested stock awards (1) |
|
| 0.4 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Weighted average shares outstanding – diluted |
|
| 233.8 |
|
|
| 232.7 |
|
|
| 233.2 |
|
|
| 232.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available per common share - basic and diluted |
| $ | 0.16 |
|
| $ | (0.34 | ) |
| $ | (7.22 | ) |
| $ | (0.82 | ) |
(1) |
|
The following potential common stock equivalents are excluded from the determination of diluted earnings per share because the inclusion of such shares would have been anti-dilutive (in millions on a weighted-average basis):
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Unvested restricted stock awards |
|
| 1.2 |
|
|
| 2.2 |
|
|
| 1.1 |
|
|
| — |
|
Series A Preferred Stock (1) |
|
| 46.5 |
|
|
| 46.5 |
|
|
| 46.5 |
|
|
| 46.5 |
|
|
| Stock were antidilutive because a net loss existed for those respective periods. |
Note 1611 — Derivative Instruments and Hedging Activities
The primary purposepurposes of our commodity risk management activities isare to manage our exposure to commodity price risk and reduce volatility in our operating cash flow due to fluctuations in commodity prices. We have entered into derivative instruments to hedge the commodity price risks associated with a portion of our expected (i) natural gas, NGL, and condensate equity volumes in our Gathering and Processing operations that result from percent-of-proceeds processing arrangements, (ii) future commodity purchases and sales in our Logistics and MarketingTransportation segment and (iii) natural gas transportation basis risk in our Logistics and MarketingTransportation segment. The hedge positions associated with (i) and (ii) above will move favorably in periods of falling commodity prices and unfavorably in periods of rising commodity prices and are designated as cash flow hedges for accounting purposes.
The hedges generally match the NGL product composition and the NGL delivery points of our physical equity volumes. Our natural gas hedges are a mixture of specific gas delivery points and Henry Hub. The NGL hedges may be transacted as specific NGL hedges or as baskets of ethane, propane, normal butane, isobutane and natural gasoline based upon our expected equity NGL composition. We believe this approach avoids uncorrelated risks resulting from employing hedges on crude oil or other petroleum products as “proxy” hedges of NGL prices. Our natural gas and NGL hedges are settled using published index prices for delivery at various locations.
We hedge a portion of our condensate equity volumes using crude oil hedges that are based on the NYMEX futures contracts for West Texas Intermediate light, sweet crude, which approximates the prices received for condensate. This exposes us to a market differential risk if the NYMEX futures do not move in exact parity with the sales price of our underlying condensate equity volumes.
We also enter into derivative instruments to help manage other short-term commodity-related business risks. We have not designated these derivatives as hedges and record changes in fair value and cash settlements to revenues.
At September 30, 2019,2020, the notional volumes of our commodity derivative contracts were:
Commodity | Instrument | Unit | 2019 |
| 2020 |
| 2021 |
| 2022 |
| 2023 |
| 2024 |
| Instrument | Unit | 2020 |
| 2021 |
| 2022 |
| 2023 |
| 2024 |
| 2025 |
| ||||||||||||
Natural Gas | Swaps | MMBtu/d |
| 172,254 |
| 96,130 |
| 85,151 |
| 7,500 |
| - |
| - |
| Swaps | MMBtu/d |
| 168,317 |
| 166,216 |
| 90,600 |
| 33,350 |
| 0 |
| 0 |
| ||||||||||
Natural Gas | Basis Swaps | MMBtu/d |
| 398,098 |
| 352,260 |
| 339,360 |
| 200,000 |
| 200,000 |
| 40,000 |
| Basis Swaps | MMBtu/d |
| 445,084 |
| 471,168 |
| 295,390 |
| 250,000 |
| 90,000 |
| 5,000 |
| ||||||||||
NGL | Swaps | Bbl/d |
| 30,468 |
| 20,305 |
| 8,396 |
| 3,236 |
| - |
| - |
| Swaps | Bbl/d |
| 30,909 |
| 29,261 |
| 16,848 |
| 2,627 |
| 0 |
| 0 |
| ||||||||||
NGL | Futures | Bbl/d |
| 29,620 |
| 15,495 |
| - |
| - |
| - |
| - |
| Futures | Bbl/d |
| 52,685 |
| 25,526 |
| 0 |
| 0 |
| 0 |
| 0 |
| ||||||||||
NGL | Options | Bbl/d |
| 410 |
| - |
| - |
| - |
| - |
| - |
| |||||||||||||||||||||||||
Condensate | Swaps | Bbl/d |
| 4,170 |
| 4,140 |
| 3,154 |
| 1,110 |
| - |
| - |
| Swaps | Bbl/d |
| 5,190 |
| 4,872 |
| 2,125 |
| 515 |
| 0 |
| 0 |
| ||||||||||
Condensate | Options | Bbl/d |
| 590 |
| - |
| - |
| - |
| - |
| - |
|
Our derivative contracts are subject to netting arrangements that permit our contracting subsidiaries to net cash settle offsetting asset and liability positions with the same counterparty within the same Targa entity. We record derivative assets and liabilities on our Consolidated Balance Sheets on a gross basis, without considering the effect of master netting arrangements. The following schedules reflect the fair value of our derivative instruments and their location on our Consolidated Balance Sheets as well as pro forma reporting assuming that we reported derivatives subject to master netting agreements on a net basis:
|
|
|
| Fair Value as of September 30, 2019 |
|
| Fair Value as of December 31, 2018 |
|
|
|
| Fair Value as of September 30, 2020 |
|
| Fair Value as of December 31, 2019 |
| ||||||||||||||||||||
|
| Balance Sheet |
| Derivative |
|
| Derivative |
|
| Derivative |
|
| Derivative |
|
| Balance Sheet |
| Derivative |
|
| Derivative |
|
| Derivative |
|
| Derivative |
| ||||||||
|
| Location |
| Assets |
|
| Liabilities |
|
| Assets |
|
| Liabilities |
|
| Location |
| Assets |
|
| Liabilities |
|
| Assets |
|
| Liabilities |
| ||||||||
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts |
| Current |
| $ | 138.2 |
|
| $ | (11.4 | ) |
| $ | 112.5 |
|
| $ | (18.9 | ) |
| Current |
| $ | 58.4 |
|
| $ | 116.1 |
|
| $ | 102.1 |
|
| $ | 11.6 |
|
|
| Long-term |
|
| 56.6 |
|
|
| (1.1 | ) |
|
| 31.6 |
|
|
| (1.5 | ) |
| Long-term |
|
| 14.0 |
|
|
| 62.8 |
|
|
| 33.7 |
|
|
| 6.4 |
|
Total derivatives designated as hedging instruments |
|
|
| $ | 194.8 |
|
| $ | (12.5 | ) |
| $ | 144.1 |
|
| $ | (20.4 | ) |
|
|
| $ | 72.4 |
|
| $ | 178.9 |
|
| $ | 135.8 |
|
| $ | 18.0 |
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts |
| Current |
| $ | 1.9 |
|
| $ | (72.1 | ) |
| $ | 2.8 |
|
| $ | (14.7 | ) |
| Current |
| $ | 30.5 |
|
| $ | 5.0 |
|
| $ | 1.2 |
|
| $ | 92.5 |
|
|
| Long-term |
|
| 3.4 |
|
|
| (45.0 | ) |
|
| 2.5 |
|
|
| (1.6 | ) |
| Long-term |
|
| 65.5 |
|
|
| 0.1 |
|
|
| 1.8 |
|
|
| 34.4 |
|
Total derivatives not designated as hedging instruments |
|
|
| $ | 5.3 |
|
| $ | (117.1 | ) |
| $ | 5.3 |
|
| $ | (16.3 | ) |
|
|
| $ | 96.0 |
|
| $ | 5.1 |
|
| $ | 3.0 |
|
| $ | 126.9 |
|
Total current position |
|
|
| $ | 140.1 |
|
| $ | (83.5 | ) |
| $ | 115.3 |
|
| $ | (33.6 | ) |
|
|
| $ | 88.9 |
|
| $ | 121.1 |
|
| $ | 103.3 |
|
| $ | 104.1 |
|
Total long-term position |
|
|
|
| 60.0 |
|
|
| (46.1 | ) |
|
| 34.1 |
|
|
| (3.1 | ) |
|
|
|
| 79.5 |
|
|
| 62.9 |
|
|
| 35.5 |
|
|
| 40.8 |
|
Total derivatives |
|
|
| $ | 200.1 |
|
| $ | (129.6 | ) |
| $ | 149.4 |
|
| $ | (36.7 | ) |
|
|
| $ | 168.4 |
|
| $ | 184.0 |
|
| $ | 138.8 |
|
| $ | 144.9 |
|
The pro forma impact of reporting derivatives on our Consolidated Balance Sheets on a net basis is as follows:
|
| Gross Presentation |
|
| Pro Forma Net Presentation |
|
|
| Gross Presentation |
|
| Pro Forma Net Presentation |
| ||||||||||||||||||||||||||||
September 30, 2019 | Asset |
|
| Liability |
|
| Collateral |
|
| Asset |
|
| Liability |
| |||||||||||||||||||||||||||
September 30, 2020 | September 30, 2020 |
| Asset |
|
| Liability |
|
| Collateral |
|
| Asset |
|
| Liability |
| |||||||||||||||||||||||||
Current Position | Current Position |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current Position |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Counterparties with offsetting positions or collateral | $ | 103.9 |
|
| $ | (69.5 | ) |
| $ | (25.2 | ) |
| $ | 62.5 |
|
| $ | (53.3 | ) | Counterparties with offsetting positions or collateral |
| $ | 80.3 |
|
| $ | (121.1 | ) |
| $ | 60.1 |
|
| $ | 31.5 |
|
| $ | (12.2 | ) |
| Counterparties without offsetting positions - assets |
| 36.2 |
|
|
| - |
|
|
| - |
|
|
| 36.2 |
|
|
| - |
| Counterparties without offsetting positions - assets |
|
| 8.6 |
|
|
| - |
|
|
| - |
|
|
| 8.6 |
|
|
| - |
|
| Counterparties without offsetting positions - liabilities |
| - |
|
|
| (14.0 | ) |
|
| - |
|
|
| - |
|
|
| (14.0 | ) | Counterparties without offsetting positions - liabilities |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
| 140.1 |
|
|
| (83.5 | ) |
|
| (25.2 | ) |
|
| 98.7 |
|
|
| (67.3 | ) |
|
|
| 88.9 |
|
|
| (121.1 | ) |
|
| 60.1 |
|
|
| 40.1 |
|
|
| (12.2 | ) |
Long Term Position | Long Term Position |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Long Term Position |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Counterparties with offsetting positions or collateral |
| 47.1 |
|
|
| (46.1 | ) |
|
| - |
|
|
| 32.1 |
|
|
| (31.1 | ) | Counterparties with offsetting positions or collateral |
|
| 63.4 |
|
|
| (62.6 | ) |
|
| - |
|
|
| 26.3 |
|
|
| (25.5 | ) |
| Counterparties without offsetting positions - assets |
| 12.9 |
|
|
| - |
|
|
| - |
|
|
| 12.9 |
|
|
| - |
| Counterparties without offsetting positions - assets |
|
| 16.1 |
|
|
| - |
|
|
| - |
|
|
| 16.1 |
|
|
| - |
|
| Counterparties without offsetting positions - liabilities |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| Counterparties without offsetting positions - liabilities |
|
| - |
|
|
| (0.3 | ) |
|
| - |
|
|
| - |
|
|
| (0.3 | ) |
|
|
| 60.0 |
|
|
| (46.1 | ) |
|
| - |
|
|
| 45.0 |
|
|
| (31.1 | ) |
|
|
| 79.5 |
|
|
| (62.9 | ) |
|
| - |
|
|
| 42.4 |
|
|
| (25.8 | ) |
Total Derivatives | Total Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Counterparties with offsetting positions or collateral |
| 151.0 |
|
|
| (115.6 | ) |
|
| (25.2 | ) |
|
| 94.6 |
|
|
| (84.4 | ) | Counterparties with offsetting positions or collateral |
|
| 143.7 |
|
|
| (183.7 | ) |
|
| 60.1 |
|
|
| 57.8 |
|
|
| (37.7 | ) |
| Counterparties without offsetting positions - assets |
| 49.1 |
|
|
| - |
|
|
| - |
|
|
| 49.1 |
|
|
| - |
| Counterparties without offsetting positions - assets |
|
| 24.7 |
|
|
| - |
|
|
| - |
|
|
| 24.7 |
|
|
| - |
|
| Counterparties without offsetting positions - liabilities |
| - |
|
|
| (14.0 | ) |
|
| - |
|
|
| - |
|
|
| (14.0 | ) | Counterparties without offsetting positions - liabilities |
|
| - |
|
|
| (0.3 | ) |
|
| - |
|
|
| - |
|
|
| (0.3 | ) |
|
| $ | 200.1 |
|
| $ | (129.6 | ) |
| $ | (25.2 | ) |
| $ | 143.7 |
|
| $ | (98.4 | ) |
|
| $ | 168.4 |
|
| $ | (184.0 | ) |
| $ | 60.1 |
|
| $ | 82.5 |
|
| $ | (38.0 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross Presentation |
|
| Pro Forma Net Presentation |
|
|
| Gross Presentation |
|
| Pro Forma Net Presentation |
| ||||||||||||||||||||||||||||
December 31, 2018 | Asset |
|
| Liability |
|
| Collateral |
|
| Asset |
|
| Liability |
| |||||||||||||||||||||||||||
December 31, 2019 | December 31, 2019 |
| Asset |
|
| Liability |
|
| Collateral |
|
| Asset |
|
| Liability |
| |||||||||||||||||||||||||
Current Position | Current Position |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current Position |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Counterparties with offsetting positions or collateral | $ | 100.0 |
|
| $ | (33.6 | ) |
| $ | (14.2 | ) |
| $ | 70.0 |
|
| $ | (17.8 | ) | Counterparties with offsetting positions or collateral |
| $ | 99.8 |
|
| $ | (85.0 | ) |
| $ | (4.9 | ) |
| $ | 56.0 |
|
| $ | (46.1 | ) |
| Counterparties without offsetting positions - assets |
| 15.3 |
|
|
| - |
|
|
| - |
|
|
| 15.3 |
|
|
| - |
| Counterparties without offsetting positions - assets |
|
| 3.5 |
|
|
| - |
|
|
| - |
|
|
| 3.5 |
|
|
| - |
|
| Counterparties without offsetting positions - liabilities |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| Counterparties without offsetting positions - liabilities |
|
| - |
|
|
| (19.1 | ) |
|
| - |
|
|
| - |
|
|
| (19.1 | ) |
|
|
| 115.3 |
|
|
| (33.6 | ) |
|
| (14.2 | ) |
|
| 85.3 |
|
|
| (17.8 | ) |
|
|
| 103.3 |
|
|
| (104.1 | ) |
|
| (4.9 | ) |
|
| 59.5 |
|
|
| (65.2 | ) |
Long Term Position | Long Term Position |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Long Term Position |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Counterparties with offsetting positions or collateral |
| 8.9 |
|
|
| (3.1 | ) |
|
| - |
|
|
| 5.9 |
|
|
| (0.1 | ) | Counterparties with offsetting positions or collateral |
|
| 33.3 |
|
|
| (40.5 | ) |
|
| - |
|
|
| 18.1 |
|
|
| (25.3 | ) |
| Counterparties without offsetting positions - assets |
| 25.2 |
|
|
| - |
|
|
| - |
|
|
| 25.2 |
|
|
| - |
| Counterparties without offsetting positions - assets |
|
| 2.2 |
|
|
| - |
|
|
| - |
|
|
| 2.2 |
|
|
| - |
|
| Counterparties without offsetting positions - liabilities |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| Counterparties without offsetting positions - liabilities |
|
| - |
|
|
| (0.3 | ) |
|
| - |
|
|
| - |
|
|
| (0.3 | ) |
|
|
| 34.1 |
|
|
| (3.1 | ) |
|
| - |
|
|
| 31.1 |
|
|
| (0.1 | ) |
|
|
| 35.5 |
|
|
| (40.8 | ) |
|
| - |
|
|
| 20.3 |
|
|
| (25.6 | ) |
Total Derivatives | Total Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Counterparties with offsetting positions or collateral |
| 108.9 |
|
|
| (36.7 | ) |
|
| (14.2 | ) |
|
| 75.9 |
|
|
| (17.9 | ) | Counterparties with offsetting positions or collateral |
|
| 133.1 |
|
|
| (125.5 | ) |
|
| (4.9 | ) |
|
| 74.1 |
|
|
| (71.4 | ) |
| Counterparties without offsetting positions - assets |
| 40.5 |
|
|
| - |
|
|
| - |
|
|
| 40.5 |
|
|
| - |
| Counterparties without offsetting positions - assets |
|
| 5.7 |
|
|
| - |
|
|
| - |
|
|
| 5.7 |
|
|
| - |
|
| Counterparties without offsetting positions - liabilities |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| Counterparties without offsetting positions - liabilities |
|
| - |
|
|
| (19.4 | ) |
|
| - |
|
|
| - |
|
|
| (19.4 | ) |
|
| $ | 149.4 |
|
| $ | (36.7 | ) |
| $ | (14.2 | ) |
| $ | 116.4 |
|
| $ | (17.9 | ) |
|
| $ | 138.8 |
|
| $ | (144.9 | ) |
| $ | (4.9 | ) |
| $ | 79.8 |
|
| $ | (90.8 | ) |
Our payment obligations in connection with a majority of these hedging transactions are secured by a first priority lien in the collateral securing the TRP Revolver that ranks equal in right of payment with liens granted in favor of the Partnership’s senior secured lenders. Some of our hedges are futures contracts executed through brokers that clear the hedges through an exchange. We maintain a margin deposit with the brokers in an amount sufficient enough to cover the fair value of our open futures positions. The margin deposit is considered collateral, which is located within other current assetsDeposits on our Consolidated Balance Sheets and is not offset against the fair value of our derivative instruments.
The fair value of our derivative instruments, depending on the type of instrument, was determined by the use of present value methods or standard option valuation models with assumptions about commodity prices based on those observed in underlying markets. The estimated fair value of our derivative instruments was a net assetliability of $70.5$15.6 million as of September 30, 2019.2020. The estimated fair value is net of an adjustment for credit risk based on the default probabilities as indicated by market quotes for the counterparties’ credit default swap rates. The credit risk adjustment was immaterial for all periods presented. Our futures contracts that are cleared through an exchange are margined daily and do not require any credit adjustment.
The following tables reflect amounts recorded in Other comprehensive income (“OCI”) and amounts reclassified from OCI to revenue for the periods indicated:
|
| Gain (Loss) Recognized in OCI on Derivatives (Effective Portion) |
|
| Gain (Loss) Recognized in OCI on Derivatives (Effective Portion) |
| ||||||||||||||||||||||||||
Derivatives in Cash Flow |
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
Hedging Relationships |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
Commodity contracts |
| $ | 118.2 |
|
| $ | (139.6 | ) |
| $ | 167.8 |
|
| $ | (178.0 | ) |
| $ | (128.7 | ) |
| $ | 118.2 |
|
| $ | (102.6 | ) |
| $ | 167.8 |
|
|
| Gain (Loss) Reclassified from OCI into Income (Effective Portion) |
|
| Gain (Loss) Reclassified from OCI into Income (Effective Portion) |
| ||||||||||||||||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
Location of Gain (Loss) |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
Revenues |
| $ | 41.5 |
|
| $ | (23.9 | ) |
| $ | 106.1 |
|
| $ | (58.3 | ) |
| $ | 19.2 |
|
| $ | 41.5 |
|
| $ | 139.4 |
|
| $ | 106.1 |
|
Based on valuations as of September 30, 2019,2020, we expect to reclassify commodity hedge-related deferred gainslosses of $182.2$(106.0) million included in accumulated other comprehensive income into earnings before income taxes through the end of 2022,2023, with $126.7$(57.2) million of gainslosses to be reclassified over the next twelve months.
Our consolidated earnings are also affected by the use of the mark-to-market method of accounting for derivative instruments that do not qualify for hedge accounting or that have not been designated as hedges. The changes in fair value of these instruments are recorded on the balance sheet and through earnings rather than being deferred until the anticipated transaction settles. The use of mark-to-market accounting for financial instruments can cause non-cash earnings volatility due to changes in the underlying commodity price indices. For the three and nine months ended September 30, 2019,2020, the unrealized mark-to-market lossesgains are primarily attributable to unfavorablefavorable movements in natural gas forward basis prices.prices, as compared to our hedged positions.
|
| Location of Gain |
| Gain (Loss) Recognized in Income on Derivatives |
|
| Location of Gain |
| Gain (Loss) Recognized in Income on Derivatives |
| ||||||||||||||||||||||||||
Derivatives Not Designated |
| Recognized in Income on |
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Recognized in Income on |
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
as Hedging Instruments |
| Derivatives |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| Derivatives |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
Commodity contracts |
| Revenue |
| $ | (103.3 | ) |
| $ | (1.1 | ) |
| $ | (113.8 | ) |
| $ | (14.1 | ) |
| Revenue |
| $ | 90.0 |
|
| $ | (103.3 | ) |
| $ | 197.9 |
|
| $ | (113.8 | ) |
See Note 1712 – Fair Value Measurements and Note 2218 – Segment Information for additional disclosures related to derivative instruments and hedging activities.
Note 1712 — Fair Value Measurements
Under GAAP, our Consolidated Balance Sheets reflect a mixture of measurement methods for financial assets and liabilities (“financial instruments”). Derivative financial instruments and contingent consideration related to business acquisitions are reported at fair value on our Consolidated Balance Sheets. Other financial instruments are reported at historical cost or amortized cost on our Consolidated Balance Sheets. The following are additional qualitative and quantitative disclosures regarding fair value measurements of financial instruments.
Fair Value of Derivative Financial Instruments
Our derivative instruments consist of financially settled commodity swaps, futures, option contracts and fixed-price forward commodity contracts with certain counterparties. We determine the fair value of our derivative contracts using present value methods or standard option valuation models with assumptions about commodity prices based on those observed in underlying markets. We have consistently applied these valuation techniques in all periods presented and we believe we have obtained the most accurate information available for the types of derivative contracts we hold.
The fair values of our derivative instruments are sensitive to changes in forward pricing on natural gas, NGLs and crude oil. The financial position of these derivatives at September 30, 2019,2020, a net assetliability position of $70.5$15.6 million, reflects the present value, adjusted for counterparty credit risk, of the amount we expect to receive or pay in the future on our derivative contracts. If forward pricing on natural gas, NGLs and crude oil were to increase by 10%, the result would be a fair value reflecting a net liability of $34.0 million, ignoring an adjustment for counterparty credit risk.$(136.8) million. If forward pricing on natural gas, NGLs and crude oil were to decrease by 10%, the result would be a fair value reflecting a net asset of $175.4 million, ignoring an adjustment for counterparty credit risk.$106.1 million.
Fair Value of Other Financial Instruments
Due to their cash or near-cash nature, the carrying value of other financial instruments included in working capital (i.e., cash and cash equivalents, accounts receivable, accounts payable) approximates their fair value. Long-term debt is primarily the other financial instrument for which carrying value could vary significantly from fair value. We determined the supplemental fair value disclosures for our long-term debt as follows:
| • | The TRC Revolver, TRP Revolver, and the Partnership’s |
| • | The Partnership’s senior unsecured notes are based on quoted market prices derived from trades of the debt. |
Contingent consideration liabilities related to business acquisitions are carried at fair value until the end of the related earn-out period.
Fair Value Hierarchy
We categorize the inputs to the fair value measurements of financial assets and liabilities at each balance sheet reporting date using a three-tier fair value hierarchy that prioritizes the significant inputs used in measuring fair value:
| • | Level 1 – observable inputs such as quoted prices in active markets; |
| • | Level 2 – inputs other than quoted prices in active markets that we can directly or indirectly observe to the extent that the markets are liquid for the relevant settlement periods; and |
| • | Level 3 – unobservable inputs in which little or no market data exists, therefore we must develop our own assumptions. |
The following table shows a breakdown by fair value hierarchy category for (1) financial instruments measurements included on our Consolidated Balance Sheets at fair value and (2) supplemental fair value disclosures for other financial instruments:
|
| September 30, 2019 |
|
| September 30, 2020 |
| ||||||||||||||||||||||||||||||||||
|
| Carrying |
|
| Fair Value |
|
| Carrying |
|
| Fair Value |
| ||||||||||||||||||||||||||||
|
| Value |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||||
Financial Instruments Recorded on Our Consolidated Balance Sheets at Fair Value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets from commodity derivative contracts (1) |
| $ | 197.5 |
|
| $ | 197.5 |
|
| $ | — |
|
| $ | 196.4 |
|
| $ | 1.1 |
|
| $ | 168.4 |
|
| $ | 168.4 |
|
| $ | 0 |
|
| $ | 168.4 |
|
| $ | 0 |
|
Liabilities from commodity derivative contracts (1) |
|
| 127.0 |
|
|
| 127.0 |
|
|
| — |
|
|
| 127.0 |
|
|
| — |
|
|
| 184.0 |
|
|
| 184.0 |
|
|
| 0 |
|
|
| 183.7 |
|
|
| 0.3 |
|
TPL contingent consideration (2) |
|
| 2.4 |
|
|
| 2.4 |
|
|
| — |
|
|
| — |
|
|
| 2.4 |
|
|
| 2.3 |
|
|
| 2.3 |
|
|
| 0 |
|
|
| 0 |
|
|
| 2.3 |
|
Financial Instruments Recorded on Our Consolidated Balance Sheets at Carrying Value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
| 326.3 |
|
|
| 326.3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 275.0 |
|
|
| 275.0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
TRC Revolver |
|
| 435.0 |
|
|
| 435.0 |
|
|
| — |
|
|
| 435.0 |
|
|
| — |
|
|
| 435.0 |
|
|
| 435.0 |
|
|
| 0 |
|
|
| 435.0 |
|
|
| 0 |
|
TRP Revolver |
|
| 830.0 |
|
|
| 830.0 |
|
|
| — |
|
|
| 830.0 |
|
|
| — |
|
|
| 100.0 |
|
|
| 100.0 |
|
|
| 0 |
|
|
| 100.0 |
|
|
| 0 |
|
Partnership's Senior unsecured notes |
|
| 6,028.5 |
|
|
| 6,310.6 |
|
|
| — |
|
|
| 6,310.6 |
|
|
| — |
|
|
| 7,145.0 |
|
|
| 7,206.0 |
|
|
| 0 |
|
|
| 7,206.0 |
|
|
| 0 |
|
Partnership's accounts receivable securitization facility |
|
| 246.0 |
|
|
| 246.0 |
|
|
| — |
|
|
| 246.0 |
|
|
| — |
| ||||||||||||||||||||
Partnership's Securitization Facility |
|
| 250.0 |
|
|
| 250.0 |
|
|
| 0 |
|
|
| 250.0 |
|
|
| 0 |
|
|
| December 31, 2018 |
|
| December 31, 2019 |
| ||||||||||||||||||||||||||||||||||
|
| Carrying |
|
| Fair Value |
|
| Carrying |
|
| Fair Value |
| ||||||||||||||||||||||||||||
|
| Value |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||||
Financial Instruments Recorded on Our Consolidated Balance Sheets at Fair Value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets from commodity derivative contracts (1) |
| $ | 144.4 |
|
| $ | 144.4 |
|
| $ | — |
|
| $ | 137.5 |
|
| $ | 6.9 |
|
| $ | 136.5 |
|
| $ | 136.5 |
|
| $ | 0 |
|
| $ | 136.2 |
|
| $ | 0.3 |
|
Liabilities from commodity derivative contracts (1) |
|
| 31.7 |
|
|
| 31.7 |
|
|
| — |
|
|
| 31.3 |
|
|
| 0.4 |
|
|
| 142.6 |
|
|
| 142.6 |
|
|
| 0 |
|
|
| 142.0 |
|
|
| 0.6 |
|
Permian Acquisition contingent consideration |
|
| 308.2 |
|
|
| 308.2 |
|
|
| — |
|
|
| — |
|
|
| 308.2 |
| ||||||||||||||||||||
TPL contingent consideration (2) |
|
| 2.4 |
|
|
| 2.4 |
|
|
| — |
|
|
| — |
|
|
| 2.4 |
|
|
| 2.3 |
|
|
| 2.3 |
|
|
| 0 |
|
|
| 0 |
|
|
| 2.3 |
|
Financial Instruments Recorded on Our Consolidated Balance Sheets at Carrying Value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
| 232.1 |
|
|
| 232.1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 331.1 |
|
|
| 331.1 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
TRC Revolver |
|
| 435.0 |
|
|
| 435.0 |
|
|
| — |
|
|
| 435.0 |
|
|
| — |
|
|
| 435.0 |
|
|
| 435.0 |
|
|
| 0 |
|
|
| 435.0 |
|
|
| 0 |
|
TRP Revolver |
|
| 700.0 |
|
|
| 700.0 |
|
|
| — |
|
|
| 700.0 |
|
|
| — |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Partnership's Senior unsecured notes |
|
| 5,277.9 |
|
|
| 5,088.9 |
|
|
| — |
|
|
| 5,088.9 |
|
|
| — |
|
|
| 7,028.5 |
|
|
| 7,376.9 |
|
|
| 0 |
|
|
| 7,376.9 |
|
|
| 0 |
|
Partnership's accounts receivable securitization facility |
|
| 280.0 |
|
|
| 280.0 |
|
|
| — |
|
|
| 280.0 |
|
|
| — |
| ||||||||||||||||||||
Partnership's Securitization Facility |
|
| 370.0 |
|
|
| 370.0 |
|
|
| 0 |
|
|
| 370.0 |
|
|
| 0 |
|
(1) | The fair value of derivative contracts in this table is presented on a different basis than the Consolidated Balance Sheets presentation as disclosed in Note |
(2) | We have a contingent consideration liability for TPL’s previous acquisition of a gas gathering system and related assets, which is carried at fair value. |
Additional Information Regarding Level 3 Fair Value Measurements Included on Our Consolidated Balance Sheets
We reported certain of our swaps and option contracts at fair value using Level 3 inputs due to such derivatives not having observable market prices or implied volatilities for substantially the full term of the derivative asset or liability. For valuations that include both observable and unobservable inputs, if the unobservable input is determined to be significant to the overall inputs, the entire valuation is categorized in Level 3. This includes derivatives valued using indicative price quotations whose contract length extends into unobservable periods.
The fair value of these swaps is determined using a discounted cash flow valuation technique based on a forward commodity basis curve. For these derivatives, the primary input to the valuation model is the forward commodity basis curve, which is based on observable or public data sources and extrapolated when observable prices are not available.
As of September 30, 2019, we had 10 commodity swap and option contracts categorized as Level 3. The significant unobservable inputs used in the fair value measurements of our Level 3 derivatives arewere (i) the forward natural gas liquids pricing curves, for which a significant portion of the derivative’s term is beyond available forward pricing and (ii) implied volatilities, which are unobservable as a result of inactive natural gas liquids options trading. The change in the fair value of Level 3 derivatives associated with a 10% change in the forward basis curve where prices are not observable iswas immaterial. As of September 30, 2020, we had 3 commodity swap and option contracts categorized as Level 3.
The fair value of the TPL contingent consideration was determined using a probability-based model measuring the likelihood of meeting certain volumetric measures. The inputs are not observable; therefore, the entire valuation of the contingent consideration is categorized in Level 3. The Permian Acquisition contingent consideration earn-out period ended on February 28, 2019 and resulted in a $317.1 million payment in May 2019. See Note 8 – Accounts Payable and Accrued Liabilities for additional discussion of the Permian Acquisition contingent consideration. Changes in the fair value of these liabilities are included in Other income (expense) in our Consolidated Statements of Operations.
The following table summarizes the changes in fair value of our financial instruments classified as Level 3 in the fair value hierarchy:
|
|
| Commodity |
|
|
|
|
| |
|
|
| Derivative Contracts |
|
| Contingent |
| ||
|
|
| Asset/(Liability) |
|
| Consideration |
| ||
Balance, December 31, 2018 |
| $ | 6.5 |
|
| $ | (310.6 | ) | |
| Completion of Permian Acquisition contingent consideration earn-out period |
|
| — |
|
|
| 308.2 |
|
| New Level 3 derivative instruments |
|
| (0.4 | ) |
|
| — |
|
| Transfers out of Level 3 (1) |
|
| (6.5 | ) |
|
| — |
|
| Unrealized gain/(loss) included in OCI |
|
| 1.5 |
|
|
| — |
|
Balance, September 30, 2019 |
| $ | 1.1 |
|
| $ | (2.4 | ) |
|
|
| Commodity |
|
|
|
|
| |
|
|
| Derivative Contracts |
|
| Contingent |
| ||
|
|
| Asset/(Liability) |
|
| Consideration |
| ||
Balance, December 31, 2019 |
| $ | (0.3 | ) |
| $ | (2.3 | ) | |
New Level 3 derivative instruments |
|
| (0.5 | ) |
|
| 0 |
| |
Transfers out of Level 3 (1) |
|
| 0.3 |
|
|
| 0 |
| |
Unrealized gain/(loss) included in OCI |
|
| 0.2 |
|
|
| 0 |
| |
Balance, September 30, 2020 |
| $ | (0.3 | ) |
| $ | (2.3 | ) |
(1) | Transfers relate to long-term over-the-counter swaps for NGL products for which observable market prices became available for substantially their full term. |
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Nonfinancial assets and liabilities, such as long-lived assets, are measured at fair value on a nonrecurring basis upon impairment. In the first quarter of 2020, we recorded non-cash pre-tax impairments of $2,442.8 million. The impairment charge is primarily associated with the partial impairment of gas processing facilities and gathering systems associated with our Mid-Continent operations and full impairment of our Coastal operations. For disclosures related to valuation techniques, see Note 4 – Property, Plant and Equipment and Intangible Assets.
The techniques described above may produce a fair value calculation that may not be indicative or reflective of future fair values. Furthermore, while we believe our valuation techniques are appropriate and consistent with other market participants, the use of different techniques or assumptions to determine fair value of certain financial and nonfinancial assets and liabilities could result in a different fair value measurement at the reporting date.
Note 18 –13 — Contingencies
Legal Proceedings
We and the Partnership are parties to various legal, administrative and regulatory proceedings that have arisen in the ordinary course of our business. We and the Partnership are also parties to various proceedings with governmental environmental agencies, including but not limited to the U.S. Environmental Protection Agency, Texas Commission on Environmental Quality, Oklahoma Department of Environmental Quality, New Mexico Environment Department, Louisiana Department of Environmental Quality and North Dakota Department of Environmental Quality, which assert penaltiesmonetary sanctions for alleged violations of environmental regulations, including air emissions, discharges into the environment and reporting deficiencies, related to events that have arisen at certain of our facilities in the ordinary course of our business. See Part II—Item 1. Legal Proceedings for further details.
Note 19 –14 — Revenue
Fixed consideration allocated to remaining performance obligations
The following table includespresents the estimated minimum revenue expected to be recognized in the future related to unsatisfied performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period, and is comprised of fixed consideration primarily attributable to contracts with minimum volume commitments, and for which a guaranteed amount of revenue can be calculated.calculated. These contracts are comprised primarily of gathering and processing, fractionation, export, terminaling and storage agreements.agreements, with remaining contract terms ranging from 1 to 19 years.
|
| 2019 |
|
| 2020 |
|
| 2021 and after |
| |||
Fixed consideration to be recognized as of September 30, 2019 |
| $ | 130.8 |
|
| $ | 486.3 |
|
| $ | 3,474.4 |
|
| 2020 |
|
| 2021 |
|
| 2022 and after |
| |||
Fixed consideration to be recognized as of September 30, 2020 | $ | 140.7 |
|
| $ | 518.1 |
|
| $ | 2,858.8 |
|
In accordance with
Based on the optional exemptions that we elected to apply, the amounts presented in the table above exclude remaining performance obligations for (i) variable consideration for which the allocation exception is met and consideration associated(ii) contracts with performance obligations of short-term contracts. In addition, consideration from contracts for which we recognize revenue at the amount that we have the right to invoice for services performed is also excluded from the table above, with the exception of any fixed consideration attributable to such contracts. The nature of the performance obligations for which the consideration has been excluded is consistent with the performance obligations described within our revenue recognition accounting policy; the estimated remainingan original expected duration of such contracts primarily ranges from 1 to 19 years. In addition, variability exists in the consideration excluded due to the unknown quantity and composition of volumes to be servicedone year or sold as well as fluctuations in the market price of commodities to be received as consideration or sold over the applicable remaining contract terms. Such variability is resolved at the end of each future month or quarter.less.
For disclosures related to disaggregated revenue, see Note 2218 – Segment Information.
Note 2015 — Income Taxes
The Company records income taxes using an estimated annual effective tax rate (“ETR”) and recognizes specific events discretely as they occur. We have concluded that the annual ETR is a reliable estimate considering recent economic and financial market effects of decreased commodity prices and demand destruction due to the COVID-19 pandemic. We regularly evaluate the realizable tax benefits of deferred tax assets and record a valuation allowance, if required, based on an estimate of the amount of deferred tax assets that we believe does not meet the more-likely-than-not criteria of being realized.
We established a valuation allowance against our deferred tax assets during the nine months ended September 30, 2020, primarily due to the tax consequences of the impairment of long-lived assets. See Note 4 – Property Plant and Equipment and Intangible Assets. The Company recognized the valuation allowance as an ordinary item in its estimated annual ETR. After the valuation allowance, we have a net deferred tax liability of $131.1 million. We will continue to evaluate the sufficiency of the valuation allowance based on current and expected earnings and other factors and adjust accordingly. The valuation allowance decreased by approximately $15.5 million from June 30, 2020.
Note 16 — Other Operating (Income) Expense
Other operating (income) expense is comprised of the following:
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
| 2019 |
| 2018 |
|
| 2019 |
|
| 2018 |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
(Gain) loss on sale or disposition of assets (1) | $ | 0.5 |
| $ | 61.1 |
|
| $ | 3.6 |
|
| $ | 14.3 |
| |||||||||||||||
(Gain) loss on sale of disposition of business and assets (1) | $ | 58.0 |
|
| $ | 0.5 |
|
| $ | 58.0 |
|
| $ | 3.6 |
| ||||||||||||||
Write-down of assets |
| 17.9 |
| — |
|
|
| 17.9 |
|
|
| — |
|
| 13.5 |
|
|
| 17.9 |
|
|
| 13.5 |
|
|
| 17.9 |
| |
Miscellaneous business tax |
| — |
| 0.4 |
|
|
| 0.2 |
|
|
| 1.0 |
| ||||||||||||||||
Other |
| — |
|
| 0.3 |
|
|
| — |
|
|
| 0.4 |
|
| 0.7 |
|
|
| — |
|
|
| 2.3 |
|
|
| 0.2 |
|
| $ | 18.4 |
| $ | 61.8 |
|
| $ | 21.7 |
|
| $ | 15.7 |
| $ | 72.2 |
|
| $ | 18.4 |
|
| $ | 73.8 |
|
| $ | 21.7 |
|
(1) |
|
(2) | Related to the |
Note 21 -17 — Supplemental Cash Flow Information
| Nine Months Ended September 30, |
| |||||||
| 2019 |
|
| 2018 |
| ||||
Cash: |
|
|
|
|
|
|
|
|
|
Interest paid, net of capitalized interest (1) | $ |
| 228.4 |
|
| $ |
| 149.6 |
|
Income taxes paid, net of refunds |
|
| 0.3 |
|
|
|
| (0.5 | ) |
Non-cash investing activities: |
|
|
|
|
|
|
|
|
|
Impact of capital expenditure accruals on property, plant and equipment | $ |
| (150.9 | ) |
| $ |
| 283.9 |
|
Transfers from materials and supplies inventory to property, plant and equipment |
|
| 21.7 |
|
|
|
| 8.9 |
|
Non-cash financing activities: |
|
|
|
|
|
|
|
|
|
Accrued distributions to noncontrolling interests | $ |
| 73.8 |
|
| $ |
| — |
|
Non-cash balance sheet movements related to assets held for sale: |
|
|
|
|
|
|
|
|
|
Working capital | $ |
| — |
|
| $ |
| 12.6 |
|
Property, plant and equipment, net |
|
| — |
|
|
|
| 151.4 |
|
Lease liabilities arising from recognition of right-of-use assets: |
|
|
|
|
|
|
|
|
|
Operating lease | $ |
| 6.7 |
|
| $ |
| — |
|
Finance lease |
|
| 8.0 |
|
|
|
| — |
|
| Nine Months Ended September 30, |
| |||||||
| 2020 |
|
| 2019 |
| ||||
Cash: |
|
|
|
|
|
|
|
|
|
Interest paid, net of capitalized interest (1) | $ |
| 315.9 |
|
| $ |
| 228.4 |
|
Income taxes (received), net of payments |
|
| (44.4 | ) |
|
|
| 0.3 |
|
Non-cash investing activities: |
|
|
|
|
|
|
|
|
|
Impact of capital expenditure accruals on property, plant and equipment, net |
|
| (194.7 | ) |
|
|
| (150.9 | ) |
Transfers from materials and supplies inventory to property, plant and equipment |
|
| 1.9 |
|
|
|
| 21.7 |
|
Non-cash financing activities: |
|
|
|
|
|
|
|
|
|
Changes in accrued distributions to noncontrolling interests |
|
| 3.9 |
|
|
|
| 73.8 |
|
(1) | Interest capitalized on major projects was |
Note 2218 — Segment Information
We operate in 2 primary segments: (i) Gathering and Processing, and (ii) Logistics and MarketingTransportation (also referred to as the Downstream Business). Our reportable segments include operating segments that have been aggregated based on the nature of the products and services provided.
Our Gathering and Processing segment includes assets used in the gathering of natural gas produced from oil and gas wells and processing this raw natural gas into merchantable natural gas by extracting NGLs and removing impurities; and assets used for crude oil purchase and sale, gathering and terminaling. 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;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.
Our Logistics and MarketingTransportation segment includes the activities and assets necessary to convert mixed NGLs into NGL products and also includes other assets and value-added services such as transporting, storing, fractionating, terminaling and marketing of NGLs and NGL products, including services to LPG exporters; storing and terminaling of refined petroleum products and crude oil and certain natural gas supply and marketing activities in support of our other businesses. The Logistics and Transportation segment also includes the Grand Prix NGL pipeline (“Grand Prix”), as well as our equity interest in Gulf Coast Express Pipeline LLC (“GCX”), a natural gas pipeline transporting volumes from West Texas to the Gulf Coast. Grand Prix connects our gathering and processing positions in the Permian Basin, Southern Oklahoma and North Texas with our downstream facilities in Mont Belvieu, Texas. The associated assets are generally connected to and supplied in part by our Gathering and Processing segment and, except for pipelines and smaller terminals, are located predominantly in Mont Belvieu and Galena Park, Texas, and in Lake Charles, Louisiana.
Other contains the results of commodity derivative activities related to Gathering and Processing hedges of equity volumes that are included in operating margin and mark-to-market gains/losses related to derivative contracts that were not designated as cash flow hedges. Elimination of inter-segment transactions are reflected in the corporate and eliminations column.
Reportable segment information is shown in the following tables:
|
| Three Months Ended September 30, 2019 |
|
| Three Months Ended September 30, 2020 |
| ||||||||||||||||||||||||||||||||||
|
| Gathering and Processing |
|
| Logistics and Marketing |
|
| Other |
|
| Corporate and Eliminations |
|
| Total |
|
| Gathering and Processing |
|
| Logistics and Transportation |
|
| Other |
|
| Corporate and Eliminations |
|
| Total |
| ||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of commodities |
| $ | 254.4 |
|
| $ | 1,403.1 |
|
| $ | (63.3 | ) |
| $ | — |
|
| $ | 1,594.2 |
|
| $ | 135.7 |
|
| $ | 1,616.5 |
|
| $ | 88.6 |
|
| $ | — |
|
| $ | 1,840.8 |
|
Fees from midstream services |
|
| 173.0 |
|
|
| 135.3 |
|
|
| — |
|
|
| — |
|
|
| 308.3 |
|
|
| 126.2 |
|
|
| 148.1 |
|
|
| — |
|
|
| — |
|
|
| 274.3 |
|
|
|
| 427.4 |
|
|
| 1,538.4 |
|
|
| (63.3 | ) |
|
| — |
|
|
| 1,902.5 |
|
|
| 261.9 |
|
|
| 1,764.6 |
|
|
| 88.6 |
|
|
| — |
|
|
| 2,115.1 |
|
Intersegment revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of commodities |
|
| 534.0 |
|
|
| 34.9 |
|
|
| — |
|
|
| (568.9 | ) |
|
| — |
|
|
| 611.9 |
|
|
| 37.4 |
|
|
| — |
|
|
| (649.3 | ) |
|
| — |
|
Fees from midstream services |
|
| 1.9 |
|
|
| 7.4 |
|
|
| — |
|
|
| (9.3 | ) |
|
| — |
|
|
| 1.7 |
|
|
| 8.5 |
|
|
| — |
|
|
| (10.2 | ) |
|
| — |
|
|
|
| 535.9 |
|
|
| 42.3 |
|
|
| — |
|
|
| (578.2 | ) |
|
| — |
|
|
| 613.6 |
|
|
| 45.9 |
|
|
| — |
|
|
| (659.5 | ) |
|
| — |
|
Revenues |
| $ | 963.3 |
|
| $ | 1,580.7 |
|
| $ | (63.3 | ) |
| $ | (578.2 | ) |
| $ | 1,902.5 |
|
| $ | 875.5 |
|
| $ | 1,810.5 |
|
| $ | 88.6 |
|
| $ | (659.5 | ) |
| $ | 2,115.1 |
|
Operating margin |
| $ | 208.6 |
|
| $ | 228.9 |
|
| $ | (63.3 | ) |
| $ | — |
|
| $ | 374.2 |
|
| $ | 261.0 |
|
| $ | 280.4 |
|
| $ | 88.6 |
|
| $ | — |
|
| $ | 630.0 |
|
Other financial information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets (1) |
| $ | 12,172.4 |
|
| $ | 6,475.0 |
|
| $ | 157.0 |
|
| $ | 114.1 |
|
| $ | 18,918.5 |
|
| $ | 8,929.4 |
|
| $ | 6,841.2 |
|
| $ | 78.2 |
|
| $ | 203.3 |
|
| $ | 16,052.1 |
|
Goodwill |
| $ | 46.6 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 46.6 |
|
| $ | 45.2 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 45.2 |
|
Capital expenditures |
| $ | 230.3 |
|
| $ | 301.2 |
|
| $ | — |
|
| $ | 10.8 |
|
| $ | 542.3 |
|
| $ | 63.6 |
|
| $ | 69.0 |
|
| $ | — |
|
| $ | 4.0 |
|
| $ | 136.6 |
|
| (1) | Assets in the Corporate and Eliminations column primarily include tax-related assets, cash, prepaids and debt issuance costs for our revolving credit facilities. |
|
| Three Months Ended September 30, 2018 |
|
| Three Months Ended September 30, 2019 |
| ||||||||||||||||||||||||||||||||||
|
| Gathering and Processing |
|
| Logistics and Marketing |
|
| Other |
|
| Corporate and Eliminations |
|
| Total |
|
| Gathering and Processing |
|
| Logistics and Transportation |
|
| Other |
|
| Corporate and Eliminations |
|
| Total |
| ||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of commodities |
| $ | 296.7 |
|
| $ | 2,378.2 |
|
| $ | (20.8 | ) |
| $ | — |
|
| $ | 2,654.1 |
|
| $ | 292.3 |
|
| $ | 1,403.1 |
|
| $ | (101.2 | ) |
| $ | — |
|
| $ | 1,594.2 |
|
Fees from midstream services |
|
| 199.3 |
|
|
| 133.0 |
|
|
| — |
|
|
| — |
|
|
| 332.3 |
|
|
| 173.0 |
|
|
| 135.3 |
|
|
| — |
|
|
| — |
|
|
| 308.3 |
|
|
|
| 496.0 |
|
|
| 2,511.2 |
|
|
| (20.8 | ) |
|
| — |
|
|
| 2,986.4 |
|
|
| 465.3 |
|
|
| 1,538.4 |
|
|
| (101.2 | ) |
|
| — |
|
|
| 1,902.5 |
|
Intersegment revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of commodities |
|
| 1,069.7 |
|
|
| 15.5 |
|
|
| — |
|
|
| (1,085.2 | ) |
|
| — |
|
|
| 534.0 |
|
|
| 34.9 |
|
|
| — |
|
|
| (568.9 | ) |
|
| — |
|
Fees from midstream services |
|
| 1.5 |
|
|
| 8.5 |
|
|
| — |
|
|
| (10.0 | ) |
|
| — |
|
|
| 1.9 |
|
|
| 7.4 |
|
|
| — |
|
|
| (9.3 | ) |
|
| — |
|
|
|
| 1,071.2 |
|
|
| 24.0 |
|
|
| — |
|
|
| (1,095.2 | ) |
|
| — |
|
|
| 535.9 |
|
|
| 42.3 |
|
|
| — |
|
|
| (578.2 | ) |
|
| — |
|
Revenues |
| $ | 1,567.2 |
|
| $ | 2,535.2 |
|
| $ | (20.8 | ) |
| $ | (1,095.2 | ) |
| $ | 2,986.4 |
|
| $ | 1,001.2 |
|
| $ | 1,580.7 |
|
| $ | (101.2 | ) |
| $ | (578.2 | ) |
| $ | 1,902.5 |
|
Operating margin |
| $ | 255.3 |
|
| $ | 173.5 |
|
| $ | (20.8 | ) |
| $ | — |
|
| $ | 408.0 |
|
| $ | 246.5 |
|
| $ | 228.9 |
|
| $ | (101.2 | ) |
| $ | — |
|
| $ | 374.2 |
|
Other financial information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets (1) |
| $ | 11,331.5 |
|
| $ | 5,019.0 |
|
| $ | 64.2 |
|
| $ | 154.4 |
|
| $ | 16,569.1 |
|
| $ | 12,326.5 |
|
| $ | 6,475.0 |
|
| $ | 2.9 |
|
| $ | 114.1 |
|
| $ | 18,918.5 |
|
Goodwill |
| $ | 256.6 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 256.6 |
|
| $ | 46.6 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 46.6 |
|
Capital expenditures |
| $ | 453.0 |
|
| $ | 560.7 |
|
| $ | — |
|
| $ | 4.0 |
|
| $ | 1,017.7 |
|
| $ | 230.3 |
|
| $ | 301.2 |
|
| $ | — |
|
| $ | 10.8 |
|
| $ | 542.3 |
|
(1) | Assets in the Corporate and Eliminations column primarily include tax-related assets, cash, prepaids and debt issuance costs for our revolving credit facilities. |
|
| Nine Months Ended September 30, 2019 |
|
| Nine Months Ended September 30, 2020 |
| ||||||||||||||||||||||||||||||||||
|
| Gathering and Processing |
|
| Logistics and Marketing |
|
| Other |
|
| Corporate and Eliminations |
|
| Total |
|
| Gathering and Processing |
|
| Logistics and Transportation |
|
| Other |
|
| Corporate and Eliminations |
|
| Total |
| ||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of commodities |
| $ | 761.5 |
|
| $ | 4,508.5 |
|
| $ | (15.2 | ) |
| $ | — |
|
| $ | 5,254.8 |
|
| $ | 512.9 |
|
| $ | 4,172.0 |
|
| $ | 215.9 |
|
| $ | — |
|
| $ | 4,900.8 |
|
Fees from midstream services |
|
| 549.1 |
|
|
| 393.3 |
|
|
| — |
|
|
| — |
|
|
| 942.4 |
|
|
| 354.5 |
|
|
| 432.2 |
|
|
| — |
|
|
| — |
|
|
| 786.7 |
|
|
|
| 1,310.6 |
|
|
| 4,901.8 |
|
|
| (15.2 | ) |
|
| — |
|
|
| 6,197.2 |
|
|
| 867.4 |
|
|
| 4,604.2 |
|
|
| 215.9 |
|
|
| — |
|
|
| 5,687.5 |
|
Intersegment revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of commodities |
|
| 1,896.5 |
|
|
| 117.0 |
|
|
| — |
|
|
| (2,013.5 | ) |
|
| — |
|
|
| 1,444.3 |
|
|
| 140.1 |
|
|
| — |
|
|
| (1,584.4 | ) |
|
| — |
|
Fees from midstream services |
|
| 5.3 |
|
|
| 20.1 |
|
|
| — |
|
|
| (25.4 | ) |
|
| — |
|
|
| 4.9 |
|
|
| 23.8 |
|
|
| — |
|
|
| (28.7 | ) |
|
| — |
|
|
|
| 1,901.8 |
|
|
| 137.1 |
|
|
| — |
|
|
| (2,038.9 | ) |
|
| — |
|
|
| 1,449.2 |
|
|
| 163.9 |
|
|
| — |
|
|
| (1,613.1 | ) |
|
| — |
|
Revenues |
| $ | 3,212.4 |
|
| $ | 5,038.9 |
|
| $ | (15.2 | ) |
| $ | (2,038.9 | ) |
| $ | 6,197.2 |
|
| $ | 2,316.6 |
|
| $ | 4,768.1 |
|
| $ | 215.9 |
|
| $ | (1,613.1 | ) |
| $ | 5,687.5 |
|
Operating margin |
| $ | 630.9 |
|
| $ | 565.0 |
|
| $ | (15.2 | ) |
| $ | — |
|
| $ | 1,180.7 |
|
| $ | 753.7 |
|
| $ | 806.0 |
|
| $ | 215.9 |
|
| $ | — |
|
| $ | 1,775.6 |
|
Other financial information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets (1) |
| $ | 12,172.4 |
|
| $ | 6,475.0 |
|
| $ | 157.0 |
|
| $ | 114.1 |
|
| $ | 18,918.5 |
|
| $ | 8,929.4 |
|
| $ | 6,841.2 |
|
| $ | 78.2 |
|
| $ | 203.3 |
|
| $ | 16,052.1 |
|
Goodwill |
| $ | 46.6 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 46.6 |
|
| $ | 45.2 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 45.2 |
|
Capital expenditures |
| $ | 1,068.7 |
|
| $ | 1,197.5 |
|
| $ | — |
|
| $ | 38.7 |
|
| $ | 2,304.9 |
|
| $ | 218.0 |
|
| $ | 375.5 |
|
| $ | — |
|
| $ | 16.8 |
|
| $ | 610.3 |
|
(1) | Assets in the Corporate and Eliminations column primarily include tax-related assets, cash, prepaids and debt issuance costs for our revolving credit facilities. |
|
| Nine Months Ended September 30, 2018 |
|
| Nine Months Ended September 30, 2019 |
| ||||||||||||||||||||||||||||||||||
|
| Gathering and Processing |
|
| Logistics and Marketing |
|
| Other |
|
| Corporate and Eliminations |
|
| Total |
|
| Gathering and Processing |
|
| Logistics and Transportation |
|
| Other |
|
| Corporate and Eliminations |
|
| Total |
| ||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of commodities |
| $ | 835.3 |
|
| $ | 6,188.3 |
|
| $ | (42.2 | ) |
| $ | — |
|
| $ | 6,981.4 |
|
| $ | 847.4 |
|
| $ | 4,508.5 |
|
| $ | (101.1 | ) |
| $ | — |
|
| $ | 5,254.8 |
|
Fees from midstream services |
|
| 536.8 |
|
|
| 368.1 |
|
|
| — |
|
|
| — |
|
|
| 904.9 |
|
|
| 549.1 |
|
|
| 393.3 |
|
|
| — |
|
|
| — |
|
|
| 942.4 |
|
|
|
| 1,372.1 |
|
|
| 6,556.4 |
|
|
| (42.2 | ) |
|
| — |
|
|
| 7,886.3 |
|
|
| 1,396.5 |
|
|
| 4,901.8 |
|
|
| (101.1 | ) |
|
| — |
|
|
| 6,197.2 |
|
Intersegment revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of commodities |
|
| 2,848.9 |
|
|
| 147.0 |
|
|
| — |
|
|
| (2,995.9 | ) |
|
| — |
|
|
| 1,896.5 |
|
|
| 117.0 |
|
|
| — |
|
|
| (2,013.5 | ) |
|
| — |
|
Fees from midstream services |
|
| 5.4 |
|
|
| 24.3 |
|
|
| — |
|
|
| (29.7 | ) |
|
| — |
|
|
| 5.3 |
|
|
| 20.1 |
|
|
| — |
|
|
| (25.4 | ) |
|
| — |
|
|
|
| 2,854.3 |
|
|
| 171.3 |
|
|
| — |
|
|
| (3,025.6 | ) |
|
| — |
|
|
| 1,901.8 |
|
|
| 137.1 |
|
|
| — |
|
|
| (2,038.9 | ) |
|
| — |
|
Revenues |
| $ | 4,226.4 |
|
| $ | 6,727.7 |
|
| $ | (42.2 | ) |
| $ | (3,025.6 | ) |
| $ | 7,886.3 |
|
| $ | 3,298.3 |
|
| $ | 5,038.9 |
|
| $ | (101.1 | ) |
| $ | (2,038.9 | ) |
| $ | 6,197.2 |
|
Operating margin |
| $ | 718.4 |
|
| $ | 441.7 |
|
| $ | (42.2 | ) |
| $ | — |
|
| $ | 1,117.9 |
|
| $ | 716.8 |
|
| $ | 565.0 |
|
| $ | (101.1 | ) |
| $ | — |
|
| $ | 1,180.7 |
|
Other financial information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets (1) |
| $ | 11,331.5 |
|
| $ | 5,019.0 |
|
| $ | 64.2 |
|
| $ | 154.4 |
|
| $ | 16,569.1 |
|
| $ | 12,326.5 |
|
| $ | 6,475.0 |
|
| $ | 2.9 |
|
| $ | 114.1 |
|
| $ | 18,918.5 |
|
Goodwill |
| $ | 256.6 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 256.6 |
|
| $ | 46.6 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 46.6 |
|
Capital expenditures |
| $ | 1,008.2 |
|
| $ | 1,229.9 |
|
| $ | — |
|
| $ | 72.3 |
|
| $ | 2,310.4 |
|
| $ | 1,068.7 |
|
| $ | 1,197.5 |
|
| $ | — |
|
| $ | 38.7 |
|
| $ | 2,304.9 |
|
(1) | Assets in the Corporate and Eliminations column primarily include tax-related assets, cash, prepaids and debt issuance costs for our revolving credit facilities. |
The following table shows our consolidated revenues disaggregated by product and service for the periods presented:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
Sales of commodities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue recognized from contracts with customers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
| $ | 305.3 |
|
| $ | 451.9 |
|
| $ | 934.2 |
|
| $ | 1,338.5 |
|
| $ | 351.1 |
|
| $ | 305.3 |
|
| $ | 893.9 |
|
| $ | 934.2 |
|
NGL |
|
| 1,160.5 |
|
|
| 2,063.2 |
|
|
| 3,752.4 |
|
|
| 5,254.4 |
|
|
| 1,312.9 |
|
|
| 1,160.5 |
|
|
| 3,382.0 |
|
|
| 3,752.4 |
|
Condensate and crude oil |
|
| 178.7 |
|
|
| 95.7 |
|
|
| 488.4 |
|
|
| 286.1 |
|
|
| 54.4 |
|
|
| 178.7 |
|
|
| 217.8 |
|
|
| 488.4 |
|
Petroleum products |
|
| 11.5 |
|
|
| 68.2 |
|
|
| 87.5 |
|
|
| 176.0 |
|
|
| 13.2 |
|
|
| 11.5 |
|
|
| 69.8 |
|
|
| 87.5 |
|
|
|
| 1,656.0 |
|
|
| 2,679.0 |
|
|
| 5,262.5 |
|
|
| 7,055.0 |
|
|
| 1,731.6 |
|
|
| 1,656.0 |
|
|
| 4,563.5 |
|
|
| 5,262.5 |
|
Non-customer revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative activities - Hedge |
|
| 41.5 |
|
|
| (23.8 | ) |
|
| 106.1 |
|
|
| (59.6 | ) |
|
| 19.2 |
|
|
| 41.5 |
|
|
| 139.4 |
|
|
| 106.1 |
|
Derivative activities - Non-hedge (1) |
|
| (103.3 | ) |
|
| (1.1 | ) |
|
| (113.8 | ) |
|
| (14.0 | ) |
|
| 90.0 |
|
|
| (103.3 | ) |
|
| 197.9 |
|
|
| (113.8 | ) |
|
|
| (61.8 | ) |
|
| (24.9 | ) |
|
| (7.7 | ) |
|
| (73.6 | ) |
|
| 109.2 |
|
|
| (61.8 | ) |
|
| 337.3 |
|
|
| (7.7 | ) |
Total sales of commodities |
|
| 1,594.2 |
|
|
| 2,654.1 |
|
|
| 5,254.8 |
|
|
| 6,981.4 |
|
|
| 1,840.8 |
|
|
| 1,594.2 |
|
|
| 4,900.8 |
|
|
| 5,254.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees from midstream services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue recognized from contracts with customers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NGL transportation and services |
|
| 45.8 |
|
|
| 37.5 |
|
|
| 122.0 |
|
|
| 115.8 |
| ||||||||||||||||
Gathering and processing |
|
| 123.7 |
|
|
| 171.6 |
|
|
| 347.1 |
|
|
| 543.7 |
| ||||||||||||||||
NGL transportation, fractionation and services |
|
| 43.8 |
|
|
| 45.8 |
|
|
| 116.7 |
|
|
| 122.0 |
| ||||||||||||||||
Storage, terminaling and export |
|
| 84.6 |
|
|
| 79.6 |
|
|
| 254.7 |
|
|
| 233.1 |
|
|
| 96.6 |
|
|
| 84.6 |
|
|
| 285.5 |
|
|
| 254.7 |
|
Gathering and processing |
|
| 171.6 |
|
|
| 196.5 |
|
|
| 543.7 |
|
|
| 522.3 |
| ||||||||||||||||
Other |
|
| 6.3 |
|
|
| 18.7 |
|
|
| 22.0 |
|
|
| 33.7 |
|
|
| 10.2 |
|
|
| 6.3 |
|
|
| 37.4 |
|
|
| 22.0 |
|
Total fees from midstream services |
|
| 308.3 |
|
|
| 332.3 |
|
|
| 942.4 |
|
| �� | 904.9 |
|
|
| 274.3 |
|
|
| 308.3 |
|
|
| 786.7 |
|
|
| 942.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
| $ | 1,902.5 |
|
| $ | 2,986.4 |
|
| $ | 6,197.2 |
|
| $ | 7,886.3 |
|
| $ | 2,115.1 |
|
| $ | 1,902.5 |
|
| $ | 5,687.5 |
|
| $ | 6,197.2 |
|
(1) | Represents derivative activities that are not designated as hedging instruments under ASC 815. |
The following table shows a reconciliation of reportable segment operating margin to income (loss) before income taxes for the periods presented:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
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| 2019 |
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| 2018 |
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| 2019 |
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| 2018 |
| 2020 |
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| 2019 |
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| 2020 |
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| 2019 |
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Reconciliation of reportable segment operating margin to income (loss) before income taxes: |
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Gathering and Processing operating margin |
| $ |
| 208.6 |
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| $ |
| 255.3 |
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| $ |
| 630.9 |
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| $ |
| 718.4 |
| $ |
| 261.0 |
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| $ |
| 246.5 |
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| $ |
| 753.7 |
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| $ |
| 716.8 |
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Logistics and Marketing operating margin |
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| 228.9 |
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| 173.5 |
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| 565.0 |
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| 441.7 |
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Logistics and Transportation operating margin |
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| 280.4 |
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| 228.9 |
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| 806.0 |
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| 565.0 |
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Other operating margin |
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| (63.3 | ) |
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| (20.8 | ) |
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| (15.2 | ) |
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| (42.2 | ) |
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| 88.6 |
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| (101.2 | ) |
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| 215.9 |
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| (101.1 | ) | |||||||
Depreciation and amortization expense |
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| (244.3 | ) |
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| (206.3 | ) |
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| (718.9 | ) |
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| (607.1 | ) |
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| (203.7 | ) |
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| (244.3 | ) |
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| (647.3 | ) |
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| (718.9 | ) | |||||||
General and administrative expense |
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| (69.9 | ) |
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| (63.2 | ) |
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| (223.5 | ) |
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| (176.9 | ) |
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| (58.6 | ) |
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| (69.9 | ) |
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| (180.6 | ) |
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| (223.5 | ) | |||||||
Impairment of long-lived assets |
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| — |
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| — |
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| (2,442.8 | ) |
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| — |
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Interest expense, net |
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| (89.1 | ) |
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| (78.2 | ) |
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| (241.8 | ) |
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| (124.2 | ) |
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| (97.7 | ) |
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| (89.1 | ) |
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| (292.4 | ) |
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| (241.8 | ) | |||||||
Equity earnings (loss) |
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| 18.6 |
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| 10.0 |
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| 54.1 |
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| 15.9 |
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Gain (loss) on sale or disposition of business and assets |
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| (58.0 | ) |
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| (0.5 | ) |
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| (58.0 | ) |
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| (3.6 | ) | |||||||||||||||||||||||
Write-down of assets |
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| (13.5 | ) |
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| (17.9 | ) |
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| (13.5 | ) |
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| (17.9 | ) | |||||||||||||||||||||||
Gain (loss) from financing activities |
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| (13.7 | ) |
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| — |
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| 47.4 |
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| (1.4 | ) | |||||||||||||||||||||||
Gain (loss) from sale of equity-method investment |
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| 65.8 |
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| — |
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| 65.8 |
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| — |
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| — |
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| 65.8 |
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| — |
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| 65.8 |
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Change in contingent considerations |
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| — |
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| (16.6 | ) |
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| (8.8 | ) |
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| (12.1 | ) |
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| — |
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| — |
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| — |
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| (8.8 | ) | |||||||
Other, net |
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| (8.4 | ) |
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| (58.8 | ) |
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| (7.2 | ) |
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| (11.3 | ) |
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| 0.7 |
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| — |
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| (0.1 | ) |
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| (0.2 | ) |
Income (loss) before income taxes |
| $ |
| 28.3 |
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| $ |
| (15.1 | ) |
| $ |
| 46.3 |
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| $ |
| 186.3 |
| $ |
| 204.1 |
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| $ |
| 28.3 |
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| $ |
| (1,757.6 | ) |
| $ |
| 46.3 |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 20182019 (“Annual Report”), as well as the unaudited consolidated financial statements and notes hereto included in this Quarterly Report on Form 10-Q.
Overview
Targa Resources Corp. (NYSE: TRGP) is a publicly traded Delaware corporation formed in October 2005. Targa is a leading provider of midstream services and is one of the largest independent midstream energyinfrastructure companies in North America. We own, operate, acquire, and develop a diversified portfolio of complementary domestic midstream energyinfrastructure assets.
Our Operations
We are engaged primarily 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. |
To provide these services, we operate in two primary segments: (i) Gathering and Processing, and (ii) Logistics and MarketingTransportation (also referred to as the Downstream Business).
Our Gathering and Processing segment includes assets used in the gathering and purchase and sale of natural gas produced from oil and gas wells and processing this raw natural gas into merchantable natural gas by extracting NGLs and removing impurities; and assets used for crude oil purchase and sale, gathering and terminaling. 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 inThree Forks plays); and the onshore and near offshore regions of the Louisiana Gulf Coast and the Gulf of Mexico.
Our Logistics and MarketingTransportation segment includes the activities and assets necessary to convert mixed NGLs into NGL products and also includes other assets and value-added services such as transporting, storing, fractionating, terminaling, and marketing of NGLs and NGL products, including services to LPG exporters; storing and terminaling of refined petroleum products and crude oilexporters and certain natural gas supply and marketing activities in support of our other businesses. The Logistics and MarketingTransportation segment also includes the Grand Prix NGL Pipelinepipeline (“Grand Prix”), which integratesas well as our equity interest in Gulf Coast Express Pipeline LLC (“GCX”), a natural gas pipeline transporting volumes from West Texas to the Gulf Coast. Grand Prix connects our gathering and processing positions in the Permian Basin, Southern Oklahoma and North Texas with our downstream facilities in Mont Belvieu, Texas. The associated assets, including these pipelines, are generally connected to and supplied in part by our Gathering and Processing segment and, except for the pipelines and smaller terminals, are located predominantly in Mont Belvieu and Galena Park, Texas, and in Lake Charles, Louisiana.
Other contains the results of commodity derivative activities related to Gathering and Processing hedges of equity volumes that are included in operating margin andunrealized mark-to-market gains/losses related to derivative contracts that were not designated as cash flow hedges.
Recent Developments
Response to Current Market Conditions
During the nine months ended September 30, 2020, global commodity prices declined due to factors that significantly impacted both supply and demand. As the COVID-19 pandemic spread and travel and other restrictions were implemented globally, the demand for commodities declined substantially. Additionally, certain major oil producing nations significantly increased their oil and gas production late in the first quarter which further contributed to the surplus production of commodities. Despite these nations subsequently agreeing to reduce global commodity supplies and global economies beginning to re-open, commodity prices remain weak relative to historical levels and continue to remain volatile. Reduced economic activity due to the COVID-19 pandemic, combined with uncertainty around global commodity supply and demand, has contributed to depressed crude oil, condensate, NGL and natural gas prices.
Furthermore, the decline in commodity prices led many exploration and production companies to reduce planned capital expenditures for drilling and production activities and also led to some companies shutting in wells in the first half of 2020. Such price and activity declines negatively impacted our operations by (i) reducing investments by third parties in the development of new oil and gas reserves, therefore reducing volumes coming onto our systems in the future, (ii) decreasing volumes processed in our facilities and transported on our pipelines and (iii) reducing the prices we receive from the sale of commodities. While commodity prices remain low relative to historical levels and uncertainties associated with the impacts of COVID-19 continue, production from wells that were previously shut-in during the first half of 2020 across our operating areas has largely resumed. Though energy demand has begun to recover compared to the first half of 2020, the pace and scope of recovery is uncertain at this time and may extend beyond 2020.
These circumstances have caused significant market volatility and business disruption. In our Gathering and Processing areas of operation, producers have reduced their drilling activity to varying degrees, which may lead to lower volume growth in the near term and reduced demand for our services. Producer activity also generates demand in our Downstream Business for transportation, fractionation, storage and other fee-based services, which may decrease in the near term.
There has been, and we believe will continue to be, significant volatility in commodity prices and in the relationships among NGL, crude oil and natural gas prices. Due to the recent volatility in commodity prices, we are uncertain of what pricing and market demand will be throughout 2020, and, as a result, demand for our services may decrease. Across our operations, particularly in our Downstream Business, we benefit from long-term fee-based arrangements for our services, regardless of the actual volumes processed or delivered. The significant level of margin we derive from fee-based arrangements, combined with our hedging arrangements, helps to mitigate our exposure to commodity price movements. For additional information regarding our hedging activities, see “Item 3. Quantitative and Qualitative Disclosures about Market Risk—Commodity Price Risk.”
Due to the significant decline in commodity prices and the increased volatility in the broader market, the ability of companies in the oil and gas industry to seek financing and access the capital markets on favorable terms or at all has been negatively impacted. In these conditions, investors may be more likely to limit the amounts of their investments as well as seek more restrictive terms and higher costs on any financing. While these effects have increased the costs of debt and equity financing for the Company and others in our industry, we believe we have sufficient access to financial resources and liquidity necessary to meet our requirements for working capital, debt service payments and capital expenditures through the remainder of 2020 and beyond.
In a response to current market conditions, in the first quarter of 2020, we announced that our Board of Directors approved a reduction in the Company’s quarterly common dividend to $0.10 per share for the quarter ended March 31, 2020 from $0.91 per share in the previous quarter. This reduction provided for approximately $755 million of additional annual direct cash flow, resulting in significant free cash flow available to reduce debt. We also reduced our estimated 2020 net growth capital expenditures to about $700 million from our previously disclosed ranges of $700 million to $800 million in the first quarter of 2020 and $1.2 billion to $1.3 billion in the fourth quarter of 2019. The vast majority of spending is for major ongoing growth capital projects where the capital is already predominantly spent. We continue to work through numerous internal initiatives to respond to current market conditions, including identifying and implementing cost reduction measures such as reducing or deferring non-essential operating and general and administrative expenses.
We believe that our long-term strategy, combined with our high-quality asset portfolio, allows us to generate attractive cash flows even in a low commodity price environment. Geographic, business and customer diversity enhances our ability to generate sufficient cash flows to fund our requirements. Our assets are positioned in strategic oil and gas producing areas across multiple basins and provide services under attractive contract terms to a diverse mix of customers across our operational areas. Our contract portfolio has attractive rates and term characteristics, including a significant fee-based component, especially in our Downstream Business. Our Gathering and Processing segment contract mix also has components of fee-based margin, such as fee floors and other fee-based services which mitigate against low commodity prices.
We are currently experiencing no material issues with potential workforce disruptions, and we remain focused on safeguarding employee health and safety and ensuring safe and reliable operations in response to COVID-19. Additionally, we are currently experiencing no material supply chain disruptions as a result of the COVID-19 pandemic, and our relationships with our major customers continues to be strong. However, if any of these circumstances change, our business could be adversely affected. Further, as there is significant uncertainty around the breadth and duration of the disruptions to global markets related to the aforementioned current events, we are unable to determine the extent that these events could materially impact our future financial position, operations and/or cash flows.
Gathering and Processing Segment Expansion
Permian Midland Processing ExpansionsExpansion
In responseNovember 2020, we announced the transfer of an existing cryogenic natural gas processing plant from our North Texas
system to increasing productionour Permian Midland system. The former Longhorn Plant will be relocated to, and to meet the infrastructure needs of producers, we have completed construction of or have begun constructing threeinstalled in Reagan County, Texas, in 2021 as a new 250200 MMcf/d cryogenic natural gas processing plants inplant (the “Heim Plant”). The Heim Plant will process natural gas production from the Midland Basin. The first plant, the Hopson Plant, began operations in the second quarter of 2019. The second plant, the Pembrook Plant, began operations in the third quarter of 2019. In August 2019, we announced commencement of a third plant, the Gateway Plant, whichPermian Basin and is expected to begin operations in the fourth quarter of 2021.
In August 2019, we announced that we began construction of a new 250 MMcf/d cryogenic natural gas processing plant in the Midland Basin, the Gateway Plant, which commenced operations in the third quarter of 2020.
Permian Delaware Processing Expansions
In March 2018, we announced that we entered into long-term fee-based agreements with an investment grade energy company for natural gas gathering and processing services in the Delaware Basin and for downstream transportation, fractionation and other related services. The agreements are underpinned by the customer's dedication of significant acreage within a large, well-defined area in the Delaware Basin. TIn addition tohe approximately 220 miles of 12- to 24-inch high-pressure rich gas gathering pipelines thatand a natural gas processing plant, the Falcon Plant, which were placed into service in 2019, we constructed across the Delaware Basin are operational. We have recently completed constructioncommenced operations of or are currently constructing two newa second 250 MMcf/d cryogenic natural gas processing plants in the Delaware Basin. The first plant, the Falcon Plant, began operations late in the third quarter of 2019. The second plant, the Peregrine Plant, is expected to begin operations in the second quarter of 2020. Total growth capital expenditures related to the plants and high-pressure gas pipeline system are expected to be approximately $600 million.
We will provide NGL transportation services on Grand Prix and fractionation services at our Mont Belvieu complex for a majority of the NGLs from the Falcon and Peregrine Plants.
Badlands
In January 2018, we announced the formation of a 50/50 joint venture with Hess Midstream Partners LP under which Targa would constructLogistics and operate a new 200 MMcf/d natural gas processing plant (“Little Missouri 4”) at Targa’s existing Little Missouri facility. Little Missouri 4 began operations in the third quarter of 2019.
DownstreamTransportation Segment Expansion
Grand Prix NGL Pipeline Extension
In the third quarter of 2019, we began full service into Mont Belvieu on Grand Prix, our new common carrier NGL pipeline. Grand Prix transports NGLs from the Permian Basin, North Texas, and Southern Oklahoma to our fractionation and storage complex in the NGL market hub at Mont Belvieu, Texas. The pipeline is comprised of three primary segments:
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In February 2019, we announced an additional extension:
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Grand Prix NGL pipeline system (the “Central Oklahoma Extension”), which will extend from Southern Oklahoma to the STACK region of Central Oklahoma where it will connect with The Williams Companies, Inc. (“Williams”) Bluestem Pipeline, linking the Conway, Kansas, and Mont Belvieu, Texas, NGL markets. In connection with this project, Williams has committed significant volumes flowingto us that we will transport on Grand Prix and fractionate at our Mont Belvieu facilities. The Central Oklahoma Extension is expected to be operational by the end of the fourth quarter of 2020. Transportation volumes on the pipeline from the Permian BasinCentral Oklahoma Extension accrue solely to Mont Belvieu Targa’s benefit and are not included in Grand Prix Pipeline LLC (“Grand Prix Joint Venture”), a consolidated subsidiary of which Targa owns a 56% interest, while the volumes flowing from North Texas and Oklahoma to Mont Belvieu accrue solely to Targa’s benefit. Total growth capital spending on Grand Prix, including the extensions into Oklahoma, is estimated to be approximately $2.0 billion, with our portion of growth capital spending estimated to be approximately $1.4 billion.
Fractionation Expansioninterest.
In February 2018, we announced plans to construct a new 100 MBbl/d fractionation train in Mont Belvieu, Texas (“Train 6”), which began operations in the second quarter of 2019. The total cost of the fractionation train and related infrastructure was approximately $350 million. Targa Train 6 LLC, a joint venture between Targa and Stonepeak Infrastructure Partners (“Stonepeak”), owns 100% interest in certain assets associated with Train 6. Certain fractionation-related infrastructure for Train 6, such as storage caverns and brine handling, were funded and are owned 100% by Targa.Fractionation Expansion
In November 2018, we announced plans to construct two new 110 MBbl/d fractionation trains in Mont Belvieu, Texas (“Train 7” and “Train 8”). Train 7 and Train 8”), which are expected to begincommenced operations by the end ofin the first quarter of 2020 and the end ofTrain 8 commenced operations in the third quarter of 2020respectively. The total cost of these. In January 2019, Williams committed to Targa significant volumes which Targa will transport on Grand Prix and fractionate at Targa’s Mont Belvieu facilities (including Train 7). Williams was also granted an option to purchase a 20% equity interest in the fractionation trains and related infrastructure is expected to be approximately $825 million. In connection with the Central Oklahoma Extension,train, which was originally wholly owned by Targa. Williams exercised its initial option to acquire a 20% equity interest in Train 7 and executed a joint venture agreement with us with respect to Train 7 in the second quarter of 2019. Certain fractionation-related infrastructure for Train 7, includingsuch as storage caverns and brine handling, will be funded and owned 100% by Targa.
LPG Export Expansion
In February 2019, we announced plans to further expand our LPG export capabilities of propane and butanes at our Galena Park Marine Terminal by increasing refrigeration capacity and associated load rates. Our currentWith the additional infrastructure, we increased our effective export capacity will increase to approximately 11up to 15 MMBbl per month in the third quarter of 2020, depending upon the mix of propane and butane demand, vessel size and availability of supply, among other factors. The total cost of the expansion and related infrastructure is expected to be approximately $120 million and is expected to be completed in the third quarter of 2020.
Gulf Coast Express Pipeline
In December 2017, we entered into definitive joint venture agreements to form Gulf Coast Express Pipeline LLC (“GCX”) with Kinder Morgan Texas Pipeline LLC (“KMTP”) and DCP Midstream Partners, LP (“DCP”) for the purpose of developing the Gulf Coast Express Pipeline (“GCX Pipeline”), a natural gas pipeline from the Waha hub, including direct connections to the tailgate of many of our Midland Basin processing facilities, to Agua Dulce in South Texas. The pipeline provides an outlet for increased natural gas production from the Permian Basin to growing markets along the Texas Gulf Coast. Targa GCX Pipeline LLC, a joint venture between us and Stonepeak, and DCP each own a 25% interest, KMTP owns a 34% interest, and Altus Midstream Company owns the remaining 16% interest in GCX. KMTP serves as the operator of GCX Pipeline. We have committed significant volumes to GCX Pipeline. In addition, Pioneer Natural Resources Company, a joint owner in our WestTX Permian Basin assets, has committed volumes to GCX Pipeline. GCX Pipeline is designed to transport up to 1.98 Bcf/d of natural gas and the total cost of the project is estimated to be approximately $1.75 billion. GCX Pipeline was placed in service late in the third quarter of 2019.
Badlands Interest Sale
In April 2019, we closed on the sale of a 45% interest in Targa Badlands LLC (“Targa Badlands”), the entity that holds substantially all of our assets in North Dakota, to funds managed by GSO Capital Partners and Blackstone Tactical Opportunities (collectively, “Blackstone”) for $1.6 billion in cash. We used the net cash proceeds to repay debt and for general corporate purposes, including funding our growth capital program. We continue to be the operator of Targa Badlands and hold majority governance rights. Future growth capital of Targa Badlands is expected to be funded on a pro rata ownership basis. Targa Badlands pays a minimum quarterly distribution (“MQD”) to Blackstone and Targa, with Blackstone having a priority right on such MQDs. Additionally, Blackstone’s capital contributions would have a liquidation preference upon a sale of Targa Badlands.
Asset Sales
We continueIn October 2020, we executed agreements to evaluate and execute asset sales to reduce leverage and focus onsell our core operations. Duringassets in Channelview, Texas for approximately $58 million (the “October 2020 Sale”). The sale closed in the thirdfourth quarter of 2019, we closed on the sale of an equity-method investment for $70.3 million. 2020.
In November 2019, we executed agreements to sell our crude gathering and storage business in the Permian Delaware for approximately $135$134 million. Subject to customary regulatory approvals and closing conditions, theThe sale is expected to closeclosed in the fourthfirst quarter of 2019.2020.
We have also engaged Jefferies LLC to evaluate the potential divestiture of our crude gathering business in the Permian Midland, which includes crude gathering and storage assets. The potential divestiture is predicated on third party valuations adequately capturing our forward growth expectations for the assets, and no assurance can be made that a sale will be consummated.
Financing Activities
In January 2019,On November 2, 2020, the Partnership issued $750.0redeemed the $559.6 million remaining balance of 6½its 5¼% Senior Notes due July 2027 and $750.0 million2023.
In the third quarter of 6⅞2020, the Partnership issued $1.0 billion of 4⅞% Senior Notes due January 2029,2031, resulting in total net proceeds of $1,486.6$991.0 million. TheA portion of the net proceeds from the issuance were used to redeem in fullfund the concurrent cash tender offer (the “Tender Offer”) and
redemption payments for the Partnership’s 4⅛6¾% Senior Notes due 2019, at par value plus accrued interest through the redemption date,2024 (the “6¾% Notes”), with the remainder used for general partnership purposes, which included repayment of borrowings under the Partnership’s senior secured revolving credit facilities.facility.
Our universal shelf registration statementWe accepted for purchase all the notes that were validly tendered as of the early tender date, which totaled $262.1 million and redeemed the remaining aggregate principal amount of the 6¾% Notes, which totaled $318.0 million. We recorded a loss due to debt extinguishment of $13.7 million comprised of $11.1 million premiums paid and a write-off of $2.6 million of debt issuance costs.
Additionally, during the first half of 2020, the Partnership repurchased a portion of its outstanding senior notes on Form S-3 filedthe open market, paying $239.8 million plus accrued interest to repurchase $303.3 million of the notes. The repurchases resulted in May 2016 expireda $61.1 million net gain, which included the write-off of $2.4 million in May 2019. Accordingly,related debt issuance costs.
We or the Partnership may retire or purchase various series of our outstanding debt through cash purchases and/or exchanges for other debt, in May 2019,open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
In the second quarter of 2020, we filedamended the Partnership’s accounts receivable securitization facility (the “Securitization Facility”) to decrease the facility size from $400.0 million to $250.0 million to more closely align with our expectations for borrowing needs given current commodity prices and to extend the SECfacility termination date to April 21, 2021.
Share Repurchase Program
In October 2020, our Board of Directors approved a universal shelf registration statement on Form S-3 that registersshare repurchase program (the “Share Repurchase Program”) for the issuancerepurchase of up to $500 million of our outstanding common stock. As of November 2, 2020, we have repurchased 4,505,507 shares at a weighted average price of $16.33 for a total net cost of $73.6 million. There is approximately $426 million remaining under the Share Repurchase Program. We may discontinue the Share Repurchase Program at any time and saleare not obligated to repurchase any specific dollar amount or number of certain debt and equity securities from time to time in one or more offerings (the “May 2019 Shelf”). The May 2019 Shelf will expire in May 2022.shares.
Corporation Tax Matters
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law. The CARES Act provides corporate taxpayers an expanded five-year net operating loss carryback period for losses earned in tax years 2018 through 2020. Additionally, the CARES Act allows corporate taxpayers to request an immediate refund of alternative minimum tax credits. We requested a cash refund from the Internal Revenue Service (“IRS”) of approximately $44 million related to the CARES Act provisions and received the refund in the second quarter of 2020.
The IRS notified us on April 3, 2019, that it will examine Targa’s federal income tax returns (Form 1120) for 2014, 2015 and 2016. We are fully cooperating with the IRS in the audit process and do not anticipate material changes in prior year taxable income.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements that will affect us, see “Recent Accounting Pronouncements” included within Note 3 – Significant Accounting Policies in our Consolidated Financial Statements.
How We Evaluate Our Operations
The profitability of our business is a function of the difference between: (i) the revenues we receive from our operations, including fee-based revenues from services and revenues from the natural gas, NGLs, crude oil and condensate we sell, and (ii) the costs associated with conducting our operations, including the costs of wellhead natural gas, crude oil and mixed NGLs that we purchase as well as operating, general and administrative costs and the impact of our commodity hedging activities. Because commodity price movements tend to impact both revenues and costs, increases or decreases in our revenues alone are not necessarily indicative of increases or decreases in our profitability. Our contract portfolio, the prevailing pricing environment for crude oil, natural gas and NGLs, the impact of our commodity hedging program and its ability to mitigate exposure to commodity price movements, and the volumes of crude oil, natural gas and NGL throughput on our systems are important factors in determining our profitability. Our profitability is also affected by the NGL content in gathered wellhead natural gas, supply and demand for our products and services, utilization of our assets and changes in our customer mix.
Our profitability is also impacted by fee-based contracts. contracts. Our growing fee-related capital expenditures for pipelines and gathering and processing assets underpinned by fee-based margin, expansion of our downstream facilities, continued focus on adding fee-based margin to our existing and future gathering and processing contracts, as well as third-party acquisitions of businesses and assets, will continue to increase the number of our contracts that are fee-based. Fixed fees for services such as gathering and processing, transportation, fractionation, storage, terminaling and crude oil gathering are not directly tied to changes in market prices for commodities. Nevertheless, a change in unit fees due to market dynamics such as available commodity throughput does affect profitability.
Management uses a variety of financial measures and operational measurements to analyze our performance. These include: (1) throughput volumes, facility efficiencies and fuel consumption, (2) operating expenses, (3) capital expenditures and (4) the following non-GAAP measures: gross margin, operating margin, Adjusted EBITDA, and distributable cash flow and free cash flow.
Throughput Volumes, Facility Efficiencies and Fuel Consumption
Our profitability is impacted by our ability to add new sources of natural gas supply and crude oil supply to offset the natural decline of existing volumes from oil and natural gas wells that are connected to our gathering and processing systems. This is achieved by connecting new wells and adding new volumes in existing areas of production, as well as by capturing crude oil and natural gas supplies currently gathered by third parties. Similarly, our profitability is impacted by our ability to add new sources of mixed NGL supply, connected by third-party transportation and Grand Prix, to our Downstream Business fractionation facilities and at times to our export facilities. We fractionate NGLs generated by our gathering and processing plants, as well as by contracting for mixed NGL supply from third-party facilities.
In addition, we seek to increase operating margin by limiting volume losses, reducing fuel consumption and by increasing efficiency. With our gathering systems’ extensive use of remote monitoring capabilities, we monitor the volumes received at the wellhead or central delivery points along our gathering systems, the volume of natural gas received at our processing plant inlets and the volumes of NGLs and residue natural gas recovered by our processing plants. We also monitor the volumes of NGLs received, stored, fractionated and delivered across our logistics assets. This information is tracked through our processing plants and Downstream Business facilities to determine customer settlements for sales and volume related fees for service and helps us increase efficiency and reduce fuel consumption.
As part of monitoring the efficiency of our operations, we measure the difference between the volume of natural gas received at the wellhead or central delivery points on our gathering systems and the volume received at the inlet of our processing plants as an indicator of fuel consumption and line loss. We also track the difference between the volume of natural gas received at the inlet of the processing plant and the NGLs and residue gas produced at the outlet of such plant to monitor the fuel consumption and recoveries of our facilities. Similar tracking is performed for our crude oil gathering and logistics assets.assets and our NGL pipelines. These volume, recovery and fuel consumption measurements are an important part of our operational efficiency analysis and safety programs.
Operating Expenses
Operating expenses are costs associated with the operation of specific assets. Labor, contract services, repair and maintenance, utilities and ad valorem taxes comprise the most significant portion of our operating expenses. These expenses, other than fuel and power, remain relatively stable and independent of the volumes through our systems, but may increase with system expansions and will fluctuate depending on the scope of the activities performed during a specific period.
Capital Expenditures
Our capital expenditures are classified as growth capital expenditures, business acquisitions, and maintenance capital expenditures. Growth capital expenditures improve the service capability of the existing assets, extend asset useful lives, increase capacities from existing levels, add capabilities, and reduce costs or enhance revenues. Maintenance capital expenditures are those expenditures that are necessary to maintain the service capability of our existing assets, including the replacement of system components and equipment, which are worn, obsolete or completing their useful life and expenditures to remain in compliance with environmental laws and regulations.
Capital projects associated with growth and maintenance projects are closely monitored. Return on investment is analyzed before a capital project is approved, spending is closely monitored throughout the development of the project, and the subsequent operational performance is compared to the assumptions used in the economic analysis performed for the capital investment approval.
Non-GAAP Measures
We utilize non-GAAP measures to analyze our performance. Gross margin, operating margin, Adjusted EBITDA, distributable cash flow, and free cash flow are non-GAAP measures. The GAAP measure most directly comparable to these non-GAAP measures is net income (loss) attributable to TRC. These non-GAAP measures should not be considered as an alternative to GAAP net income attributable to TRC and have important limitations as analytical tools. Investors should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP. Additionally, because our non-GAAP measures exclude some, but not all, items that affect net income, and are defined differently by different companies within our industry, our definitions may not be comparable with similarly titled measures of other companies, thereby diminishing their utility. Management compensates for the
limitations of our non-GAAP measures as analytical tools by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating these insights into our decision-making processes.
Gross Margin
We define gross margin as revenues less product purchases. It is impacted by volumes and commodity prices as well as by our contract mix and commodity hedging program.
Gathering and Processing segment gross margin consists primarily of:
• | service fees related to natural gas and crude oil gathering, treating and processing; and |
| • | revenues from the sale of natural gas, condensate, crude oil and NGLs less producer payments, |
|
|
Logistics and MarketingTransportation segment gross margin consists primarily of:
| • | service fees (including the pass-through of energy costs included in fee rates); |
| • | system product gains and losses; and |
| • | NGL and natural gas sales, less NGL and natural gas purchases, third-party transportation costs and the net inventory change. |
The gross margin impacts of our equity volumesmark-to-market hedge settlementsunrealized changes in fair value are reported in Other.
Operating Margin
We define operating margin as gross margin less operating expenses. Operating margin is an important performance measure of the core profitability of our operations.
Management reviews business segment gross margin and operating margin monthly as a core internal management process. We believe that investors benefit from having access to the same financial measures that management uses in evaluating our operating results. Gross margin and operating margin provide useful information to investors because they are used as supplemental financial measures by management and by external users of our financial statements, including investors and commercial banks, to assess:
| • | the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; |
| • | our operating performance and return on capital as compared to other companies in the midstream energy sector, without regard to financing or capital structure; and |
| • | the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities. |
Gross margin and operating margin are non-GAAP measures. The GAAP measure most directly comparable to gross margin and operating margin is net income (loss) attributable to TRC. Gross margin and operating margin are not alternatives to GAAP net income and have important limitations as analytical tools. Investors should not consider gross margin and operating margin in isolation or as a substitute for analysis of our results as reported under GAAP. Because gross margin and operating margin exclude some, but not all, items that affect net income and are defined differently by different companies in our industry, our definitions of gross margin and operating margin may not be comparable with similarly titled measures of other companies, thereby diminishing their utility.
Adjusted EBITDAManagement compensates for the limitations of gross margin and operating margin as analytical tools by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating these insights into its decision-making processes.
Adjusted EBITDA
We define Adjusted EBITDA as net income (loss) attributable to TRC before interest, income taxes, depreciation and amortization, and other items that we believe should be adjusted consistent with our core operating performance. The adjusting items are detailed in the Adjusted EBITDA reconciliation table and its footnotes. Adjusted EBITDA is used as a supplemental financial measure by us and by external users of our financial statements such as investors, commercial banks and others. The economic substance behind our use of Adjusted EBITDA isothers to measure the ability of our assets to generate cash sufficient to pay interest costs, support our indebtedness and pay dividends to our investors.
Distributable Cash Flow and Free Cash Flow
We define distributable cash flow as Adjusted EBITDA is aless distributions to TRP preferred limited partners, cash interest expense on debt obligations, cash tax (expense) benefit and maintenance capital expenditures (net of any reimbursements of project costs). We define free cash flow as distributable cash flow less growth capital expenditures, net of contributions from noncontrolling interest and net contributions to investments in unconsolidated affiliates. Distributable cash flow and free cash flow are performance measures used by us and by external users of our financial statements, such as investors, commercial banks and research analysts, to assess our ability to generate cash earnings (after servicing our debt and funding capital expenditures) to be used for corporate purposes, such as payment of dividends or retirement of debt.
Our Non-GAAP Financial Measures
The following tables reconcile the non-GAAP financial measure. The GAAP measuremeasures used by management to the most directly comparable to Adjusted EBITDA is net income (loss) attributable to TRC. Adjusted EBITDA should not be considered as an alternative to GAAP net income. Adjusted EBITDA has important limitations as an analytical tool. Investors should not consider Adjusted EBITDA in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA excludes some, but not all, items that affect net income and is defined differently by different companies in our industry, our definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.
Management compensates for the limitations of Adjusted EBITDA as an analytical tool by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating these insights into its decision-making processes.periods indicated:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
|
| (In millions) |
| |||||||||||||||||
Reconciliation of Net Income (Loss) attributable to TRC to Operating Margin and Gross Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to TRC |
| $ |
| 69.3 |
|
| $ |
| (47.3 | ) |
| $ |
| (1,587.5 | ) |
| $ |
| (96.4 | ) |
Net income (loss) attributable to noncontrolling interests |
|
|
| 102.9 |
|
|
|
| 79.4 |
|
|
|
| 116.5 |
|
|
|
| 152.7 |
|
Net income (loss) |
|
|
| 172.2 |
|
|
|
| 32.1 |
|
|
|
| (1,471.0 | ) |
|
|
| 56.3 |
|
Depreciation and amortization expense |
|
|
| 203.7 |
|
|
|
| 244.3 |
|
|
|
| 647.3 |
|
|
|
| 718.9 |
|
General and administrative expense |
|
|
| 58.6 |
|
|
|
| 69.9 |
|
|
|
| 180.6 |
|
|
|
| 223.5 |
|
Impairment of long-lived assets |
|
|
| — |
|
|
|
| — |
|
|
|
| 2,442.8 |
|
|
|
| — |
|
Interest (income) expense, net |
|
|
| 97.7 |
|
|
|
| 89.1 |
|
|
|
| 292.4 |
|
|
|
| 241.8 |
|
Equity (earnings) loss |
|
|
| (18.6 | ) |
|
|
| (10.0 | ) |
|
|
| (54.1 | ) |
|
|
| (15.9 | ) |
Income tax expense (benefit) |
|
|
| 31.9 |
|
|
|
| (3.8 | ) |
|
|
| (286.6 | ) |
|
|
| (10.0 | ) |
(Gain) loss on sale or disposition of business and assets |
|
|
| 58.0 |
|
|
|
| 0.5 |
|
|
|
| 58.0 |
|
|
|
| 3.6 |
|
Write-down of assets |
|
|
| 13.5 |
|
|
|
| 17.9 |
|
|
|
| 13.5 |
|
|
|
| 17.9 |
|
(Gain) loss from sale of equity-method investment |
|
|
| — |
|
|
|
| (65.8 | ) |
|
|
| — |
|
|
|
| (65.8 | ) |
(Gain) loss from financing activities |
|
|
| 13.7 |
|
|
|
| — |
|
|
|
| (47.4 | ) |
|
|
| 1.4 |
|
Change in contingent considerations |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 8.8 |
|
Other, net |
|
|
| (0.7 | ) |
|
|
| — |
|
|
|
| 0.1 |
|
|
|
| 0.2 |
|
Operating margin |
|
|
| 630.0 |
|
|
|
| 374.2 |
|
|
|
| 1,775.6 |
|
|
|
| 1,180.7 |
|
Operating expenses |
|
|
| 181.9 |
|
|
|
| 200.2 |
|
|
|
| 565.1 |
|
|
|
| 600.8 |
|
Gross margin |
| $ |
| 811.9 |
|
| $ |
| 574.4 |
|
| $ |
| 2,340.7 |
|
| $ |
| 1,781.5 |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
|
| (In millions) |
| |||||||||||||||||
Reconciliation of Net Income (Loss) attributable to TRC to Adjusted EBITDA, Distributable Cash Flow and Free Cash Flow |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to TRC |
| $ |
| 69.3 |
|
| $ |
| (47.3 | ) |
| $ |
| (1,587.5 | ) |
| $ |
| (96.4 | ) |
Income attributable to TRP preferred limited partners |
|
|
| 2.8 |
|
|
|
| 2.8 |
|
|
|
| 8.4 |
|
|
|
| 8.4 |
|
Interest (income) expense, net |
|
|
| 97.7 |
|
|
|
| 89.1 |
|
|
|
| 292.4 |
|
|
|
| 241.8 |
|
Income tax expense (benefit) |
|
|
| 31.9 |
|
|
|
| (3.8 | ) |
|
|
| (286.6 | ) |
|
|
| (10.0 | ) |
Depreciation and amortization expense |
|
|
| 203.7 |
|
|
|
| 244.3 |
|
|
|
| 647.3 |
|
|
|
| 718.9 |
|
Impairment of long-lived assets |
|
|
| — |
|
|
|
| — |
|
|
|
| 2,442.8 |
|
|
|
| — |
|
(Gain) loss on sale or disposition of business and assets |
|
|
| 58.0 |
|
|
|
| 0.5 |
|
|
|
| 58.0 |
|
|
|
| 3.6 |
|
Write-down of assets |
|
|
| 13.5 |
|
|
|
| 17.9 |
|
|
|
| 13.5 |
|
|
|
| 17.9 |
|
(Gain) loss from sale of equity-method investment |
|
|
| — |
|
|
|
| (65.8 | ) |
|
|
| — |
|
|
|
| (65.8 | ) |
(Gain) loss from financing activities (1) |
|
|
| 13.7 |
|
|
|
| — |
|
|
|
| (47.4 | ) |
|
|
| 1.4 |
|
Equity (earnings) loss |
|
|
| (18.6 | ) |
|
|
| (10.0 | ) |
|
|
| (54.1 | ) |
|
|
| (15.9 | ) |
Distributions from unconsolidated affiliates and preferred partner interests, net |
|
|
| 28.2 |
|
|
|
| 14.0 |
|
|
|
| 81.6 |
|
|
|
| 33.4 |
|
Change in contingent considerations |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 8.8 |
|
Compensation on equity grants |
|
|
| 16.4 |
|
|
|
| 16.1 |
|
|
|
| 49.5 |
|
|
|
| 49.0 |
|
Risk management activities |
|
|
| (88.3 | ) |
|
|
| 100.7 |
|
|
|
| (214.2 | ) |
|
|
| 100.8 |
|
Severance and related benefits (2) |
|
|
| — |
|
|
|
| — |
|
|
|
| 6.5 |
|
|
|
| — |
|
Noncontrolling interests adjustments (3) |
|
|
| (9.2 | ) |
|
|
| (8.9 | ) |
|
|
| (211.7 | ) |
|
|
| (25.6 | ) |
TRC Adjusted EBITDA |
| $ |
| 419.1 |
|
| $ |
| 349.6 |
|
| $ |
| 1,198.5 |
|
| $ |
| 970.3 |
|
Distributions to TRP preferred limited partners |
|
|
| (2.8 | ) |
|
|
| (2.8 | ) |
|
|
| (8.4 | ) |
|
|
| (8.4 | ) |
Interest expense on debt obligations (4) |
|
|
| (98.2 | ) |
|
|
| (88.0 | ) |
|
|
| (289.5 | ) |
|
|
| (247.0 | ) |
Cash tax refund |
|
|
| — |
|
|
|
| — |
|
|
|
| 44.4 |
|
|
|
| — |
|
Maintenance capital expenditures |
|
|
| (27.3 | ) |
|
|
| (31.0 | ) |
|
|
| (67.7 | ) |
|
|
| (101.5 | ) |
Noncontrolling interests adjustments of maintenance capital expenditures |
|
|
| 3.9 |
|
|
|
| 2.1 |
|
|
|
| 1.6 |
|
|
|
| 6.0 |
|
Distributable Cash Flow |
| $ | 294.7 | $ | 229.9 | $ | 878.9 | $ | 619.4 | |||||||||||
Growth capital expenditures, net (5) | (105.4 | ) | (448.4 | ) | (518.5 | ) | (1,946.2 | ) | ||||||||||||
Free Cash Flow | $ | 189.3 | $ | (218.5 | ) | $ | 360.4 | $ | (1,326.8 | ) |
(1) | Gains or losses on debt repurchases, amendments, exchanges or early debt extinguishments. |
(2) | Represents one-time severance and related benefit expense related to our cost reduction measures. |
(3) | Noncontrolling interest portion of depreciation and amortization expense (including the effects of the impairment of long-lived assets on non-controlling interests). |
(4) | Excludes amortization of interest expense. |
(5) | Represents growth capital expenditures, net of contributions from noncontrolling interests and net contributions to investments in unconsolidated affiliates. |
The Company has completed a number of announced growth capital projects since early 2019, and this has resulted in lower growth capital expenditures in 2020 and a transition to free cash flow. The following table details construction and project completion timing of our announced major growth capital projects:
Three Months Ended | ||||||||||||||
March 31, 2019 | June 30, 2019 | September 30, 2019 | December 31, 2019 | March 31, 2020 | June 30, 2020 | September 30, 2020 | ||||||||
Major Growth Capital Project (1): | ||||||||||||||
Gathering & Processing: | ||||||||||||||
Hopson Plant (2) | UC | C | ||||||||||||
Falcon Plant (3) | UC | UC | C | |||||||||||
Pembrook Plant (2) | UC | UC | C | |||||||||||
Little Missouri 4 Plant (4) | UC | UC | C | |||||||||||
Peregrine Plant (3) | UC | UC | UC | UC | UC | C | ||||||||
Gateway Plant (2) | UC | UC | UC | UC | C | |||||||||
Logistics & Transportation: | ||||||||||||||
Train 6 | UC | C | ||||||||||||
Grand Prix NGL Pipeline | UC | UC | C | |||||||||||
Gulf Coast Express Pipeline | UC | UC | C | |||||||||||
Train 7 | UC | UC | UC | UC | C | |||||||||
Train 8 | UC | UC | UC | UC | UC | UC | C | |||||||
LPG Export Expansion | UC | UC | UC | UC | UC | UC | C | |||||||
Grand Prix Central OK Extension | UC | UC | UC | UC | UC | UC | UC |
(1) | "UC" and "C" indicates under construction and project completed, respectively, as of the end of the period presented above. |
(2) | Part of our Permian Midland operating area. |
(3) | Part of our Permian Delaware operating area. |
(4) | Part of our Badlands operating area. |
Consolidated Results of Operations
The following table and discussion is a summary of our consolidated results of operations:
| Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
| ||||||||||
| 2020 |
|
| 2019 |
|
| 2020 vs. 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 vs. 2019 |
| ||||||||||||||
| (In millions) |
| |||||||||||||||||||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of commodities | $ | 1,840.8 |
|
| $ | 1,594.2 |
|
| $ | 246.6 |
|
|
| 15 | % |
| $ | 4,900.8 |
|
| $ | 5,254.8 |
|
| $ | (354.0 | ) |
|
| (7 | %) |
Fees from midstream services |
| 274.3 |
|
|
| 308.3 |
|
|
| (34.0 | ) |
|
| (11 | %) |
|
| 786.7 |
|
|
| 942.4 |
|
|
| (155.7 | ) |
|
| (17 | %) |
Total revenues |
| 2,115.1 |
|
|
| 1,902.5 |
|
|
| 212.6 |
|
|
| 11 | % |
|
| 5,687.5 |
|
|
| 6,197.2 |
|
|
| (509.7 | ) |
|
| (8 | %) |
Product purchases |
| 1,303.2 |
|
|
| 1,328.1 |
|
|
| (24.9 | ) |
|
| (2 | %) |
|
| 3,346.8 |
|
|
| 4,415.7 |
|
|
| (1,068.9 | ) |
|
| (24 | %) |
Gross margin (1) |
| 811.9 |
|
|
| 574.4 |
|
|
| 237.5 |
|
|
| 41 | % |
|
| 2,340.7 |
|
|
| 1,781.5 |
|
|
| 559.2 |
|
|
| 31 | % |
Operating expenses |
| 181.9 |
|
|
| 200.2 |
|
|
| (18.3 | ) |
|
| (9 | %) |
|
| 565.1 |
|
|
| 600.8 |
|
|
| (35.7 | ) |
|
| (6 | %) |
Operating margin (1) |
| 630.0 |
|
|
| 374.2 |
|
|
| 255.8 |
|
|
| 68 | % |
|
| 1,775.6 |
|
|
| 1,180.7 |
|
|
| 594.9 |
|
|
| 50 | % |
Depreciation and amortization expense |
| 203.7 |
|
|
| 244.3 |
|
|
| (40.6 | ) |
|
| (17 | %) |
|
| 647.3 |
|
|
| 718.9 |
|
|
| (71.6 | ) |
|
| (10 | %) |
General and administrative expense |
| 58.6 |
|
|
| 69.9 |
|
|
| (11.3 | ) |
|
| (16 | %) |
|
| 180.6 |
|
|
| 223.5 |
|
|
| (42.9 | ) |
|
| (19 | %) |
Impairment of long-lived assets |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,442.8 |
|
|
| — |
|
|
| 2,442.8 |
|
|
| — |
|
Other operating (income) expense |
| 72.2 |
|
|
| 18.4 |
|
|
| 53.8 |
|
|
| 292 | % |
|
| 73.8 |
|
|
| 21.7 |
|
|
| 52.1 |
|
|
| 240 | % |
Income (loss) from operations |
| 295.5 |
|
|
| 41.6 |
|
|
| 253.9 |
|
| NM |
|
|
| (1,568.9 | ) |
|
| 216.6 |
|
|
| (1,785.5 | ) |
| NM |
| ||
Interest expense, net |
| (97.7 | ) |
|
| (89.1 | ) |
|
| (8.6 | ) |
|
| (10 | %) |
|
| (292.4 | ) |
|
| (241.8 | ) |
|
| (50.6 | ) |
|
| (21 | %) |
Equity earnings (loss) |
| 18.6 |
|
|
| 10.0 |
|
|
| 8.6 |
|
|
| 86 | % |
|
| 54.1 |
|
|
| 15.9 |
|
|
| 38.2 |
|
|
| 240 | % |
Gain (loss) from financing activities |
| (13.7 | ) |
|
| — |
|
|
| (13.7 | ) |
|
| — |
|
|
| 47.4 |
|
|
| (1.4 | ) |
|
| 48.8 |
|
| NM |
| |
Gain (loss) from sale of equity-method investment |
| — |
|
|
| 65.8 |
|
|
| (65.8 | ) |
|
| (100 | %) |
|
| — |
|
|
| 65.8 |
|
|
| (65.8 | ) |
|
| (100 | %) |
Change in contingent considerations |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8.8 | ) |
|
| 8.8 |
|
|
| 100 | % |
Other, net |
| 1.4 |
|
|
| — |
|
|
| 1.4 |
|
|
| — |
|
|
| 2.2 |
|
|
| — |
|
|
| 2.2 |
|
|
| — |
|
Income tax (expense) benefit |
| (31.9 | ) |
|
| 3.8 |
|
|
| (35.7 | ) |
| NM |
|
|
| 286.6 |
|
|
| 10.0 |
|
|
| 276.6 |
|
| NM |
| ||
Net income (loss) |
| 172.2 |
|
|
| 32.1 |
|
|
| 140.1 |
|
| NM |
|
|
| (1,471.0 | ) |
|
| 56.3 |
|
|
| (1,527.3 | ) |
| NM |
| ||
Less: Net income (loss) attributable to noncontrolling interests |
| 102.9 |
|
|
| 79.4 |
|
|
| 23.5 |
|
|
| 30 | % |
|
| 116.5 |
|
|
| 152.7 |
|
|
| (36.2 | ) |
|
| (24 | %) |
Net income (loss) attributable to Targa Resources Corp. |
| 69.3 |
|
|
| (47.3 | ) |
|
| 116.6 |
|
|
| 247 | % |
|
| (1,587.5 | ) |
|
| (96.4 | ) |
|
| (1,491.1 | ) |
| NM |
| |
Dividends on Series A Preferred Stock |
| 22.9 |
|
|
| 22.9 |
|
|
| — |
|
|
| — |
|
|
| 68.8 |
|
|
| 68.8 |
|
|
| — |
|
|
| — |
|
Deemed dividends on Series A Preferred Stock |
| 9.5 |
|
|
| 8.4 |
|
|
| 1.1 |
|
|
| 13 | % |
|
| 27.7 |
|
|
| 24.4 |
|
|
| 3.3 |
|
|
| 14 | % |
Net income (loss) attributable to common shareholders | $ | 36.9 |
|
| $ | (78.6 | ) |
| $ | 115.5 |
|
|
| 147 | % |
| $ | (1,684.0 | ) |
| $ | (189.6 | ) |
| $ | (1,494.4 | ) |
| NM |
| |
Financial data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Adjusted EBITDA (1) | $ | 419.1 |
|
| $ | 349.6 |
|
| $ | 69.5 |
|
|
| 20 | % |
| $ | 1,198.5 |
|
| $ | 970.3 |
|
| $ | 228.2 |
|
|
| 24 | % |
Distributable cash flow (1) |
| 294.7 |
|
|
| 229.9 |
|
|
| 64.8 |
|
|
| 28 | % |
|
| 878.9 |
|
|
| 619.4 |
|
|
| 259.5 |
|
|
| 42 | % |
Free cash flow (1) |
| 189.3 |
|
|
| (218.5 | ) |
|
| 407.8 |
|
| NM |
|
|
| 360.4 |
|
|
| (1,326.8 | ) |
|
| 1,687.2 |
|
| NM |
|
(1) | Gross margin, operating margin, Adjusted EBITDA, distributable cash flow
Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019 The increase in commodity sales reflects higher NGL and natural gas prices ($133.5 million), higher NGL, condensate and petroleum products volumes ($100.7 million) and the favorable impact of hedges ($171.0 million), partially offset by lower crude marketing and natural gas volumes ($128.9 million) and lower condensate and petroleum product prices ($29.6 million). The decrease in fees from midstream services is primarily due to new commercial arrangements for volumes effective in January 2020, which resulted in a change from net presentation as fees from midstream services to gross presentation as sales of commodities and product purchases, and lower gas processing volumes, partially offset by increased export and terminaling and storage volumes. The decrease in product purchases reflects lower crude marketing volumes associated with the sale of the Delaware crude system, which was effective December 1, 2019, and lower natural gas volumes, partially offset by higher NGL and natural gas prices.
Higher operating margin and gross margin in 2020 reflect increased segment results for Gathering and Processing and Logistics and Transportation. See “—Results of Operations—By Reportable Segment” for additional information regarding changes in operating margin and gross margin on a segment basis. Depreciation and amortization expense decreased primarily due to a lower depreciable base associated with assets that were impaired during the first quarter of 2020 and the sale of the Delaware crude system, which was effective December 1, 2019. The decrease in depreciation and amortization expense was partially offset by higher depreciation related to major growth capital projects placed in service, including Train 7 and the additional processing plants and associated infrastructure in the Permian Basin. General and administrative expense decreased due to cost reduction measures resulting in lower compensation and benefits and non-labor expenses, partially offset by an increase in insurance costs. Other operating (income) expense in 2020 consisted primarily of a loss associated with the reduction in the carrying value of our assets in Channelview, Texas in connection with the October 2020 Sale and write-down of certain assets to their recoverable amounts. Other operating (income) expense in 2019 consisted primarily of a loss associated with the write-down of certain assets to their recoverable amounts. Interest expense, net, increased due to lower capitalized interest resulting from lower growth capital investments and higher average borrowings. The increase in equity earnings is primarily due to higher earnings from our investments in GCX and Little Missouri 4 LLC (“Little Missouri 4”), partially offset by lower earnings from Gulf Coast Fractionators LP (“GCF”). During the third quarter of 2020, the Partnership redeemed the 6¾% Senior Notes due 2024, resulting in a $13.7 million net loss from financing activities. During the third quarter of 2019, the Partnership closed on the sale of an equity-method investment that resulted in the recognition of a gain of $65.8 million. The increase in income tax expense is primarily due to an increase in pre-tax book income, partially offset by a decrease in valuation allowance. Net income attributable to noncontrolling interests was higher in 2020 primarily due to income allocated to noncontrolling interest holders in the Grand Prix Joint Venture, Targa GCX Pipeline LLC (“GCX DevCo JV”) and the Centrahoma Joint Venture. Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019 The decrease in commodity sales reflects lower NGL, condensate, natural gas and petroleum product prices ($1,112.5 million) and lower crude marketing volumes ($254.7 million), partially offset by higher NGL, condensate, natural gas and petroleum product volumes ($664.3 million), the favorable impact of hedges ($345.1 million) and higher crude marketing prices ($3.8 million). The decrease in fees from midstream services is primarily due to new commercial arrangements for volumes effective in January 2020, which resulted in a change from net presentation as fees from midstream services to gross presentation as sales of commodities and product purchases, and lower gas processing volumes, partially offset by increased export and terminaling and storage volumes. The decrease in product purchases reflects lower NGL, condensate, natural gas and petroleum product prices, as well as lower crude marketing volumes associated with the sale of the Delaware crude system, which was effective December 1, 2019, partially offset by higher NGL, condensate, natural gas and petroleum product volumes. Higher operating margin and gross margin in 2020 reflect increased segment results for Gathering and Processing and Logistics and Transportation. See “—Results of Operations—By Reportable Segment” for additional information regarding changes in operating margin and gross margin on a segment basis. Depreciation and amortization expense decreased primarily due to a lower depreciable base associated with assets that were impaired during the first quarter of 2020 and the sale of the Delaware crude system, which was effective December 1, 2019. The decrease in depreciation and amortization expense was partially offset by higher depreciation related to major growth capital projects placed in service, including Train 7 and the additional processing plants and associated infrastructure in the Permian Basin. General and administrative expense decreased due to cost reduction measures resulting in lower compensation and benefits and non-labor expenses, partially offset by an increase in insurance costs. The impairment charge is primarily associated with the partial impairment of gas processing facilities and gathering systems in the first quarter of 2020 associated with our Mid-Continent operations and full impairment of our Coastal operations - all of which are in our Gathering and Processing segment. Based on then-current market conditions, our first quarter impairment assessment projected further decline in natural gas production across the Mid-Continent and Gulf of Mexico. We did not recognize any impairments of long-lived assets during the nine months ended September 30, 2019. We may identify additional triggering events in the future, which will require additional evaluations of the recoverability of the carrying value of our long-lived assets and may result in future impairments. Other operating (income) expense in 2020 consisted primarily of a loss associated with the reduction in the carrying value of our assets in Channelview, Texas in connection with the October 2020 Sale and write-down of certain assets to their recoverable amounts. Other operating (income) expense in 2019 consisted primarily of a loss associated with the write-down of certain assets to their recoverable amounts. Interest expense, net, increased due to lower capitalized interest resulting from lower growth capital investments and higher average borrowings. The increase in equity earnings is primarily due to higher earnings from our investments in GCX and Little Missouri 4, partially offset by lower earnings from GCF. During the nine months ended September 30, 2020, the Partnership repurchased a portion of its outstanding senior notes on the open market and redeemed the 6¾% Senior Notes due 2024, paying $831.0 million plus accrued interest to repurchase $883.4 million of the notes, resulting in a $47.4 million net gain from financing activities. During the third quarter of 2019, the Partnership closed on the sale of an equity-method investment that resulted in the recognition of a gain of $65.8 million. The increase in income tax benefit is primarily due to a higher pre-tax book loss and benefit of a net operating loss carryback from the CARES Act. Net income attributable to noncontrolling interests was lower in 2020 primarily due to the allocation of impairment losses recognized during the first quarter of 2020 to noncontrolling interest holders, partially offset by higher income allocated to noncontrolling interest holders in Targa Badlands LLC (“Targa Badlands”), the DevCo Joint Ventures and the Grand Prix Joint Venture. Results of Operations—By Reportable Segment Our operating margins by reportable segment are:
Gathering and Processing Segment
|