What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-11-04 · 217 added, 292 removed, 526 unchanged (49% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30, 2021

March 31, 2022

December 31, 2021

2 unchanged sentences

Cash and cash equivalents

Trade receivables, net of allowances of $ 3.6 million and $ 0.1 million at September 30, 2021 and December 31, 2020

Trade receivables, net of allowances of $ 0.1 million and $ 0.1 million at March 31, 2022 and December 31, 2021

Assets from risk management activities

20 unchanged sentences

Contingencies (see Note 15)

Series A Preferred 9.5 % Stock, $ 1,000 per share liquidation preference, ( 1,200,000 shares authorized, 919,300 shares issued and outstanding), net of discount (see Note 7)

Series A Preferred 9.5 % Stock, $ 1,000 per share liquidation preference ( 1,200,000 shares authorized, 919,300 shares issued and outstanding as of March 31, 2022 and December 31, 2021), net of discount (see Note 9)

Owners' equity:

1 unchanged sentence

stockholders' equity:

Common stock ($ 0.001 par value, 450,000,000 shares authorized)

Common stock ($ 0.001 par value, 450,000,000 shares authorized as of March 31, 2022 and December 31, 2021)

Issued Outstanding

September 30, 2021 236,086,963 228,962,972

March 31, 2022 237,199,124 228,180,573

December 31, 2021 236,105,293 228,221,122

4 unchanged sentences

Accumulated other comprehensive income (loss)

Treasury stock, at cost ( 7,123,991 shares as of September 30, 2021 and 6,731,035 shares as of December 31, 2020)

Treasury stock, at cost ( 9,018,551 shares as of March 31, 2022 and 7,884,171 shares as of December 31, 2021)

Total Targa Resources Corp.

6 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In millions, except per share amounts)

7 unchanged sentences

General and administrative expense

Impairment of long-lived assets

Other operating (income) expense

9 unchanged sentences

Net income (loss) attributable to Targa Resources Corp.

Premium on repurchase of noncontrolling interests, net of tax

Dividends on Series A Preferred Stock

Deemed dividends on Series A Preferred Stock

Net income (loss) attributable to common shareholders

6 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended September 30,

Related Income Tax

(In millions)

Net income (loss)

Other comprehensive income (loss):

Commodity hedging contracts:

Change in fair value

Settlements reclassified to revenues

Other comprehensive income (loss)

Comprehensive income (loss)

Comprehensive income (loss) attributable to noncontrolling interests

Comprehensive income (loss) attributable to Targa Resources Corp.

Nine Months Ended September 30,

Three Months Ended March 31,

Related Income Tax

17 unchanged sentences

(In millions, except shares in thousands)

Balance, June 30, 2021

Compensation on equity grants

Distribution equivalent rights

Shares issued under compensation program

Shares and units tendered for tax withholding obligations

Series A Preferred Stock dividends

Dividends - $ 23.75 per share

Dividends in excess of retained earnings

Common stock dividends

Dividends - $ 0.10 per share

Dividends in excess of retained earnings

Distributions to noncontrolling interests

Contributions from noncontrolling interests

Other comprehensive income (loss)

Net income (loss)

Balance, September 30, 2021

See notes to consolidated financial statements.

TARGA RESOURCES CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS' EQUITY AND SERIES A PREFERRED STOCK

Comprehensive

Noncontrolling

Income (Loss)

(In millions, except shares in thousands)

Balance, June 30, 2020

Compensation on equity grants

Distribution equivalent rights

Shares issued under compensation program

Shares and units tendered for tax withholding obligations

Series A Preferred Stock dividends

Dividends - $ 23.75 per share

Dividends in excess of retained earnings

Deemed dividends - accretion of beneficial conversion feature

Common stock dividends

Dividends - $ 0.10 per share

Dividends in excess of retained earnings

Distributions to noncontrolling interests

Contributions from noncontrolling interests

Non-cash allocation to noncontrolling interests

Other comprehensive income (loss)

Net income (loss)

Balance, September 30, 2020

See notes to consolidated financial statements.

TARGA RESOURCES CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS' EQUITY AND SERIES A PREFERRED STOCK

Comprehensive

Noncontrolling

Income (Loss)

(In millions, except shares in thousands)

Balance, December 31, 2021

Impact of accounting standard adoption (see Note 3)

Compensation on equity grants

1 unchanged sentence

Shares issued under compensation program

Shares and units tendered for tax withholding obligations

Shares tendered for tax withholding obligations

Repurchases of common stock

Series A Preferred Stock dividends

6 unchanged sentences

Contributions from noncontrolling interests

Repurchase of noncontrolling interests, net of tax

Other comprehensive income (loss)

Net income (loss)

Balance, September 30, 2021

Balance, March 31, 2022

See notes to consolidated financial statements.

6 unchanged sentences

Balance, December 31, 2020

Impact of accounting standard adoption

Compensation on equity grants

1 unchanged sentence

Shares issued under compensation program

Shares and units tendered for tax withholding obligations

Shares tendered for tax withholding obligations

Series A Preferred Stock dividends

1 unchanged sentence

Dividends in excess of retained earnings

Deemed dividends - accretion of beneficial conversion feature

Common stock dividends

3 unchanged sentences

Contributions from noncontrolling interests

Non-cash allocation to noncontrolling interests

Other comprehensive income (loss)

Net income (loss)

Balance, September 30, 2020

Balance, March 31, 2021

See notes to consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(In millions)

5 unchanged sentences

Depreciation and amortization expense

Impairment of long-lived assets

(Gain) loss on sale or disposition of assets

Write-downs of assets

Accretion of asset retirement obligations

Increase (decrease) in redemption value of mandatorily redeemable preferred interests

Deferred income tax expense (benefit)

2 unchanged sentences

Risk management activities

(Gain) loss on sale or disposition of business and assets

Write-downs of assets

(Gain) loss from financing activities

6 unchanged sentences

Outlays for property, plant and equipment

Proceeds from sale of business and assets

Proceeds from sale of assets

Investments in unconsolidated affiliates

11 unchanged sentences

Costs incurred in connection with financing arrangements

Repurchase of shares and units under compensation plans

Repurchase of shares

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Distributions to Partnership unitholders

Repurchase of noncontrolling interests

Dividends paid to common and Series A Preferred shareholders

10 unchanged sentences

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.” We own, operate, acquire, and develop a diversified portfolio of complementary domestic midstream infrastructure assets.

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.”

We conduct our operations through our direct and indirect subsidiaries in Targa Resources Partners LP (the “Partnership” or “TRP”).

Targa consolidates TRP and its subsidiaries under GAAP.

Our consolidated financial statements do not differ materially from the consolidated financial statements of TRP.

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 infrastructure companies in North America.

We own, operate, acquire, and develop a diversified portfolio of complementary domestic midstream infrastructure assets.

In this Quarterly Report, unless the context requires otherwise, references to “we,” “us,” “our,” “the Company,” “Targa” or “TRGP” are intended to mean our consolidated business and operations.

TRGP 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”.

Targa consolidates the Partnership and its subsidiaries under accounting principles generally accepted in the United States of America (“GAAP”).

Targa’s consolidated financial statements include differences from the consolidated financial statements of the Partnership.

The most noteworthy differences are:

the inclusion of the TRC revolving credit facility (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);

the inclusion of the TRGP revolving credit facility;

the inclusion of Series A Preferred Stock (“Series A Preferred”);

the impacts of TRC’s treatment as a corporation for U.S.

the impacts of TRGP’s treatment as a corporation for U.S.

federal income tax purposes.

10 unchanged sentences

All intercompany balances and transactions have been eliminated in consolidation.

Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Certain amounts in prior periods have been reclassified to conform to the current year presentation.

Beginning in 2021, we reclassified certain fuel and power costs previously included in Operating expenses to Product purchases and fuel within our Consolidated Statements of Operations to better reflect the direct relationship of these costs to our revenue-generating activities and align with our evaluation of the performance of the business.

For the three and nine months ended September 30, 2021, we reclassified $ 14.3 million and $ 49.2 million in fuel and power costs, respectively.

For the three and nine months ended September 30, 2020, we reclassified $ 19.7 million and $ 58.3 million in fuel and power costs, respectively.

Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

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, 2021.

Recent Accounting Pronouncements

Recently adopted accounting pronouncements

Convertible Debt and Equity Instruments

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.

On a modified retrospective basis, we adopted the amendments early, effective January 1, 2021.

The primary effect of the adoption on the Company was attributable to the elimination of the beneficial conversion accounting model, which results in the presentation of the Series A Preferred as a single unit of account, without bifurcation of the beneficial conversion feature and corresponding discount.

Therefore, upon adoption, the carrying value of the Series A Preferred was reflected at $ 749.7 million, which is the allocated amount based on the initial relative fair value allocation of net proceeds of $ 787.1 million, less the carrying value of the portion repurchased in December 2020.

The adoption did not have an impact on retained earnings (deficit), but rather, the adoption impact flowed through additional paid-in capital where the beneficial conversion feature was previously included.

In addition, the adoption also eliminates the corresponding discount attributable to the beneficial conversion feature and therefore, accretion of the discount as a deemed dividend is no longer required.

The other aspects of the ASU did not have a material effect on our consolidated financial statements.

There were no significant updates or revisions to our accounting policies during the three months ended March 31, 2022.

Note 4 – Joint Ventures, Divestitures and Acquisitions

DevCo Joint Ventures

In February 2018, we formed three development joint ventures (“DevCo JVs”) with investment vehicles affiliated with Stonepeak Infrastructure Partners (“Stonepeak”) to fund portions of Grand Prix NGL Pipeline (“Grand Prix”), Gulf Coast Express Pipeline (“GCX”) and an approximately 110 MBbl/d fractionator in Mont Belvieu, Texas (“Train 6”).

For a four-year period beginning on the date that all three projects commenced commercial operations, we had the option to acquire all or part of Stonepeak’s interests in the DevCo JVs (the “DevCo JV Call Right”).

The purchase price payable for such partial or full interests was based on a predetermined fixed return or multiple on invested capital, including distributions received by Stonepeak from the DevCo JVs.

In January 2022, we exercised the DevCo JV Call Right and closed on the purchase of all of Stonepeak’s interests in the DevCo JVs for $ 926.3 million (the “DevCo JV Repurchase”).

Following the DevCo JV Repurchase, we own a 75 % interest in Grand Prix Pipeline LLC, a 100 % interest in Train 6 and owned a 25 % equity interest in GCX, prior to the GCX Sale (as defined below) in February 2022.

The change in our ownership interests was accounted for as an equity transaction representing the acquisition of noncontrolling interests.

The amount of the redemption price in excess of the carrying amount, net of tax was $ 53.1 million, which was accounted for as a premium on repurchase of noncontrolling interests, and resulted in a reduction to Net income (loss) attributable to common shareholders.

In addition, the DevCo JV Repurchase resulted in an $ 857.9 million reduction of Noncontrolling interests on our Consolidated Balance Sheets.

In February 2022, we announced that we executed agreements to sell Targa GCX Pipeline LLC, which held our 25 percent equity interest in GCX, for approximately $ 857 million (the “GCX Sale”).

We expect to receive the full proceeds from the sale in the second quarter of 2022 as the customary call right period has now expired.

In April 2022, we closed on the acquisition of Southcross Energy Operating LLC and its subsidiaries in South Texas for a purchase price of approximately $ 200 million (the “Southcross Acquisition”).

We acquired a portfolio of complementary midstream infrastructure assets and associated contracts that have been integrated into our SouthTX Gathering and Processing operations, including the remaining interests in the two operated joint ventures in South Texas that we previously held as investments in unconsolidated affiliates and which we will prospectively consolidate.

See Note 6 – Investments in Unconsolidated Affiliates .

Note 5 — Property, Plant and Equipment and Intangible Assets

September 30, 2021

March 31, 2022

December 31, 2021

13 unchanged sentences

Intangible assets, net

During the three and nine months ended September 30, 2021, depreciation expense was $ 190.2 million and $ 552.7 million, respectively.

During the three and nine months ended September 30, 2020, depreciation expense was $ 168.5 million and $ 538.5 million, respectively.

During the three months ended March 31, 2022 and 2021, depreciation expense was $ 181.1 million and $ 183.4 million, respectively.

Impairments of Long-Lived Assets

We review and evaluate our long-lived assets, including intangible assets, for impairment when events or changes in circumstances indicate that the related carrying amount of such assets may not be recoverable, including changes to our estimates that could have an impact on our assessment of asset recoverability.

During the first quarter of 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 of 2020 from certain major oil producing nations increasing production also significantly contributed to the sharp drop in 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.

As a result, we determined that indicators of impairment existed for certain asset groups reported primarily within our Gathering and Processing segment, and recorded non-cash pre-tax impairments of $ 2,442.8 million (inclusive of impairments of intangible assets) primarily associated with the partial impairment of certain gas processing facilities and gathering systems associated with our Central operations and full impairment of our Coastal operations.

Our first quarter 2020 impairment assessment forecasted continuing decline in natural gas production across the Mid-Continent and Gulf of Mexico regions.

The carrying value adjustments are included in Impairment of long-lived assets in our Consolidated Statements of Operations.

We determined fair value through the use of discounted estimated cash flows to measure the impairment loss for each asset group for which undiscounted future net cash flows were not sufficient to recover the net book value.

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 terminal value and 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 determination of terminal values.

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 terminal values reflect management’s best estimate of inputs a market participant would utilize.

While commodity prices remain volatile 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.

There were no indicators of impairment identified during the remainder of 2020 or first nine months of 2021.

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.

No impairments of long-lived assets were recorded for the three months ended March 31, 2022 and 2021.

Intangible Assets

2 unchanged sentences

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 of $ 208.6 million 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 $ 112.0 million, $ 106.8 million, $ 103.0 million, $ 99.9 million and $ 97.6 million for each of the years 2022 through 2026, respectively.

The changes in our intangible assets are as follows:

September 30, 2021

March 31, 2022

Balance at December 31, 2021

Balance at September 30, 2021

Balance at March 31, 2022

Note 6 – Investments in Unconsolidated Affiliates

Our investments in unconsolidated affiliates consist of the following:

Gathering and Processing Segment

two operated joint ventures in South Texas:

a 75 % interest (prior to closing on the Southcross Acquisition) in T2 LaSalle Gathering Company L.L.C.

(“T2 LaSalle”) and a 50 % interest (prior to closing on the Southcross Acquisition) in T2 Eagle Ford Gathering Company L.L.C.

(“T2 Eagle Ford” and, together with T2 Lasalle, the “T2 Joint Ventures”) ;

a 50 % operated ownership interest in Little Missouri 4 LLC (“Little Missouri 4”).

Logistics and Transportation Segment

a 25 % non-operated ownership interest in GCX (prior to the GCX Sale) ;

a 38.8 % operated ownership interest in Gulf Coast Fractionators (“GCF”);

a 50 % operated ownership interest in Cayenne Pipeline LLC (“Cayenne”) .

The terms of these joint venture agreements do not afford us the degree of control required for consolidating them in our consolidated financial statements, but do afford us the significant influence required to employ the equity method of accounting.

See Note 4 – Joint Ventures, Divestitures and Acquisitions for further discussion of the T2 Joint Ventures and GCX.

The following table shows the activity related to our investments in unconsolidated affiliates:

Balance at December 31, 2021

Equity Earnings (Loss)

Cash Distributions

Contributions

Balance at March 31, 2022

Little Missouri 4

T2 Eagle Ford (3)

T2 LaSalle (3)

Following the DevCo JV Repurchase in January 2022, we owned a 25 % equity interest in GCX.

In February 2022, we announced the GCX Sale, at which time we ceased the recognition of equity earnings (loss) due to the terms of the sales agreement.

See Note 4 – Joint Ventures, Divestitures and Acquisitions for further discussion.

Targa assumed operatorship of GCF in the first half of 2021.

In April 2022, we closed on the Southcross Acquisition.

Following the closing of the Southcross Acquisition, we own 100 % of the interests in the T2 Joint Ventures.

See Note 4 – Joint Ventures, Divestitures and Acquisitions for further discussion.

Note 7 — Debt Obligations

September 30, 2021

March 31, 2022

December 31, 2021

Obligations of the Partnership:

Accounts receivable securitization facility, due April 2022 (2)

TPL notes, 4¾ % fixed rate, due November 2021 (3)

Partnership accounts receivable securitization facility, due April 2022 (1)

Finance lease liabilities

Current debt obligations

TRC obligations:

TRC Senior secured revolving credit facility, variable rate, due June 2023 (4)

Obligations of the Partnership:

Senior secured revolving credit facility, variable rate, due

June 2023 (5)

Senior unsecured notes:

4¼ % fixed rate, due November 2023 (6)

5⅛ % fixed rate, due February 2025

TRGP senior revolving credit facility, variable rate, due February 2027 (2)

Senior unsecured notes issued by the Partnership:

5.875 % fixed rate, due April 2026 (4)

6 unchanged sentences

4.000 % fixed rate, due January 2032

TPL notes, 5⅞ % fixed rate, due August 2023 (3)

Unamortized premium

Debt issuance costs, net of amortization

3 unchanged sentences

Irrevocable standby letters of credit:

Letters of credit outstanding under the TRC Senior

secured credit facility (4)

Letters of credit outstanding under the TRGP senior revolving credit facility (3)

Letters of credit outstanding under the Partnership senior

secured revolving credit facility (3)

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.

As of September 30, 2021, the Partnership had $ 340.0 million of qualifying receivables under its $ 400.0 million accounts receivable securitization facility (“Securitization Facility”), resulting in $ 60.0 million availability.

During the second quarter of 2021, the Partnership amended the Securitization Facility to increase the facility size from $ 350.0 million to $ 400.0 million to more closely align with our expectation for borrowing needs given current commodity prices and to extend the facility termination date to April 21, 2022 .

“TPL” refers to Targa Pipeline Partners LP.

As of September 30, 2021, availability under TRC’s $ 670.0 million senior secured revolving credit facility (“TRC Revolver”) was $ 670.0 million.

As of September 30, 2021, availability under the Partnership’s $ 2.2 billion senior secured revolving credit facility (“TRP Revolver”) was $ 2,151.2 million.

On May 17, 2021, the Partnership redeemed all of the remaining outstanding 4¼% Senior Notes due 2023.

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, 2021:

As of March 31, 2022, the Partnership had $ 270.0 million of qualifying receivables under its $ 400.0 million accounts receivable securitization facility (“Securitization Facility”), resulting in $ 130.0 million of availability.

In April 2022, the Partnership amended the Securitization Facility to, among other things, extend the facility termination date to April 19, 2023.

In February 2022, we entered into a new $ 2.75 billion TRGP senior revolving credit facility, (the “TRGP Revolver”) which matures in February 2027.

In connection with our entry into the TRGP Revolver, we terminated our previous TRGP senior secured revolving credit facility (the “Previous TRGP Revolver”) and the Partnership’s senior secured revolving credit facility (the “Partnership Revolver”).

As of March 31, 2022, availability under the TRGP Revolver was $ 1.7 billion.

As of December 31, 2021, we had no balance outstanding under the Previous TRGP Revolver or the Partnership Revolver.

As of February 2022, we guarantee all of the Partnership’s outstanding senior unsecured notes.

In April 2022, the Partnership purchased $ 484.3 million aggregate principal amount of its outstanding 5.875 % Senior Notes due 2026 (the “ 5.875 % Notes”) pursuant to an offer to purchase for cash (the “Tender Offer”) any and all outstanding 5.875 % Notes.

Concurrent with the launch of the Tender Offer, the Partnership exercised its right to redeem any of the 5.875 % Notes not validly tendered and purchased in the Tender Offer, and such 5.875 % Notes were redeemed in April 2022.

In March 2022, the Partnership redeemed all of the outstanding 5.375 % Senior Notes due 2027 (the “ 5.375 % Notes”) with the available liquidity under the TRGP Revolver.

In April 2022, we, along with certain of our subsidiaries as guarantors thereto, completed an underwritten public offering of (i) $ 750.0 million aggregate principal amount of our 4.200 % Senior Notes due 2033 (the “ 4.200 % Notes”) and (ii) $ 750.0 million aggregate principal amount of our 4.950 % Senior Notes due 2052 (the “ 4.950 % Notes”), resulting in net proceeds of approximately $ 1.5 billion.

The following table shows the range of interest rates and weighted average interest rate incurred on our variable-rate debt obligations during the three months ended March 31, 2022:

Range of Interest Rates Incurred

Weighted Average Interest Rate Incurred

Partnership's Securitization Facility

TRGP Revolver

Securitization Facility

Compliance with Debt Covenants

As of September 30, 2021, we were in compliance with the covenants contained in our various debt agreements.

Senior Unsecured Notes Issuance and Redemptions

In February 2021, the Partnership issued $ 1.0 billion aggregate principal amount of 4 % Senior Notes due 2032, resulting in net proceeds of approximately $ 991 million.

The 4 % Senior Notes due 2032 have substantially similar terms and covenants 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 “February Tender Offer”) and subsequent redemption payment for the Partnership’s 5⅛ % Senior Notes due 2025 (the “ 5⅛ % Notes”), with the remainder used for repayment of borrowings under the TRP Revolver and TRC Revolver.

As a result of the February Tender Offer and the subsequent redemption of the 5⅛ % Notes , we recorded a loss due to debt extinguishment of $ 14.9 million comprised of $ 12.5 million of premiums paid and a write-off of $ 2.4 million of debt issuance costs.

Additionally, TPL redeemed all of the outstanding TPL 4¾ % Senior Notes due 2021 and TPL 5⅞ % Senior Notes due 2023 (collectively, the “TPL Notes”) on February 22, 2021 with available liquidity under the TRP Revolver.

As a result of the redemptions of the TPL Notes, we recorded a gain due to debt extinguishment of $ 0.2 million.

The Partnership redeemed all of the outstanding 4¼% Senior Notes due 2023 (the “4¼% Senior Notes”) on May 17, 2021 with available liquidity under the TRP Revolver.

As a result of the redemption of the 4¼% Senior Notes, we recorded a loss due to debt extinguishment of $ 1.9 million.

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.

As of March 31, 2022, we were in compliance with the covenants contained in our various debt agreements.

In February 2022, we and certain of our subsidiaries entered into a parent guarantee whereby each party to the agreement unconditionally guarantees, jointly and severally, the payment of all of the obligations of the Partnership and Targa Resources Partners Finance Corporation (together with the Partnership, the “Partnership Issuers”) under the respective indentures governing the Partnership Issuers’ senior unsecured notes.

As of March 31, 2022, $ 6.0 billion of the Partnership Issuers’ senior unsecured notes was outstanding.

Debt Obligations

TRGP Revolver

In February 2022, we entered into the TRGP Revolver with Bank of America, N.A., as the Administrative Agent, Collateral Agent and Swing Line Lender, and the other lenders party thereto.

The TRGP Revolver provides for a revolving credit facility in an initial aggregate principal amount up to $ 2.75 billion (with an option to increase such maximum aggregate principal amount by up to $ 500.0 million in the future, subject to the terms of the TRGP Revolver), including a swing line sub-facility of up to $ 100.0 million.

The TRGP Revolver matures on February 17, 2027 .

In connection with our entry into the TRGP Revolver, we terminated the Previous TRGP Revolver and the Partnership Revolver.

In February 2022, TRGP and the Partnership received a corporate investment grade credit rating from Standard & Poor’s Financial Services LLC (“S&P”) and Fitch Ratings Inc., and in March 2022, the Partnership received a corporate investment grade credit rating from Moody’s Investors Service, Inc.

As a result, in accordance with the TRGP Revolver, the collateral under the TRGP Revolver was released from the liens securing our obligations thereunder.

As a result of the termination of the Previous TRGP Revolver and the Partnership Revolver, we recorded a loss due to debt extinguishment of $ 0.8 million.

Senior Unsecured Notes Redemption

In March 2022 , the Partnership redeemed all of the outstanding 5.375 % Notes at a redemption price equal to $ 1,026.88 for each $ 1,000 principal amount of 5.375 % Notes redeemed, plus accrued and unpaid interest to, but not including, March 30, 2022, or a maximum combined aggregate redemption price (exclusive of accrued and unpaid interest) of $ 480.7 million.

The 5.375 % Notes were redeemed with available liquidity under the TRGP Revolver.

As a result of the redemption of the 5.375 % Notes, we recorded a loss due to debt extinguishment of $ 15.0 million comprised of $ 12.6 million of premiums paid and a write-off of $ 2.4 million of debt issuance costs.

In the future, we or the Partnership may redeem, purchase or exchange certain of our and the Partnership’s outstanding debt through redemption calls, cash purchases and/or exchanges for other debt, in open market purchases, privately negotiated transactions or otherwise.

Such calls, 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 .

Shelf Registration

In March 2022, we filed with the SEC a universal shelf registration statement on Form S-3 that registers the issuance and sale of certain debt and equity securities from time to time in one or more offerings (the “March 2022 Shelf”).

The March 2022 Shelf will expire in March 2025.

See Note 10 – Common Stock and Related Matters.

Contractual Obligations

The following table summarizes payment obligations for debt instruments after giving effect to the debt extinguishments detailed above:

The following table summarizes payment obligations as of March 31, 2022, for debt instruments after giving effect to the debt extinguishments detailed above:

Payments Due By Period

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Represents scheduled future maturities of consolidated debt obligations for the periods indicated.

Represents interest expense on debt obligations based on both fixed debt interest rates and prevailing September 30, 2021 rates for floating debt.

Represents interest expense on debt obligations based on both fixed debt interest rates and prevailing March 31, 2022 rates for floating debt.

Subsequent Events

Senior Unsecured Notes Issuances and Redemptions

In April 2022, we, along with certain of our subsidiaries as guarantors thereto, completed an underwritten public offering of (i) $ 750.0 million aggregate principal amount of our 4.200 % Notes and (ii) $ 750.0 million aggregate principal amount of our 4.950 % Notes, resulting in net proceeds of approximately $ 1.5 billion.

Both of the 4.200 % Notes and the 4.950 % Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by our subsidiaries that guarantee the TRGP Revolver, so long as such subsidiary guarantors satisfy certain conditions.

Both of the 4.200 % Notes and the 4.950 % Notes were issued pursuant to the Indenture, dated as of April 6, 2022, as supplemented by that certain First Supplemental Indenture, dated as of April 6, 2022, among us, such subsidiary guarantors and U.S.

Bank Trust Company, National Association, as trustee.

A portion of the net proceeds from the issuance were used to fund the concurrent cash tender offer (the “March Tender Offer”) and the subsequent redemption payment of the Partnership’s 5.875 % Notes, with the remainder used for repayment of borrowings under the TRGP Revolver.

As a result of the March Tender Offer and the subsequent redemption of the 5.875 % Notes, we will record a loss due to debt extinguishment of $ 33.5 million in the second quarter.

Partnership’s Accounts Receivable Securitization Facility

In April 2022, the Partnership amended the Securitization Facility to, among other things, extend the facility termination date to April 19, 2023 and replace the LIBOR-based interest rate option with SOFR-based interest rate options, including term SOFR and daily simple SOFR.

Note 8 — Other Long-term Liabilities

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The resulting deferred revenue will be recognized once all conditions for revenue recognition have been met.

Deferred revenue as of September 30, 2021 and December 31, 2020, was $ 165.8 million and $ 168.5 million, respectively, which includes $ 129.0 million of payments received from Vitol Americas Corp.

Deferred revenue as of March 31, 2022 and December 31, 2021, was $ 170.6 million and $ 171.8 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.

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Preferred Stock Dividends

As of September 30, 2021, we have accrued cumulative preferred dividends of $ 21.8 million on our Series A Preferred, which will be paid on November 12, 2021 .

During the three and nine months ended September 30, 2021, we paid $ 21.8 million and $ 65.5 million of dividends to preferred shareholders, respectively.

Preferred Stock Redemptions or Repurchases

We may redeem all or a portion of our Series A Preferred in the future pursuant to its terms or repurchase Series A Preferred shares in privately negotiated transactions.

Such redemptions or repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors.

The amounts involved may be material.

As of March 31, 2022, we had accrued cumulative preferred dividends of $ 21.8 million on our Series A Preferred, which were paid on May 2, 2022 .

During the three months ended March 31, 2022, we paid $ 21.8 million of dividends to preferred shareholders.

Subsequent Event

Series A Preferred Redemption

In May 2022, we redeemed in full all of our issued and outstanding shares of Series A Preferred at a redemption price of $ 1,050.00 per share, plus $ 8.87 per share, which is the amount of accrued and unpaid dividends from April 1, 2022 up to, but not including, the redemption date of May 3, 2022 .

The difference between the consideration paid of $ 973.4 million (including unpaid dividends of $ 8.2 million) and the net carrying value of the shares redeemed was $ 223.7 million, which will be recorded as deemed dividends in our Consolidated Statements of Operations in the second quarter of 2022.

Following the redemption, we have no Series A Preferred outstanding and all rights of the holders of shares of Series A Preferred were terminated.

Note 10 — Common Stock and Related Matters

Shelf Registration Statement

In March 2022, we filed the March 2022 Shelf.

The March 2022 Shelf will expire in March 2025.

See Note 7 – Debt Obligations.

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, 2021:

In January 2022, we declared an increase to our common dividend to $ 0.35 per common share or $ 1.40 per common share annualized effective for the fourth quarter of 2021, which was paid in February 2022.

The following table details the dividends declared and/or paid by us to common shareholders for the three months ended March 31, 2022:

Three Months Ended

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(In millions, except per share amounts)

September 30, 2021

November 15, 2021

June 30, 2021

August 16, 2021

March 31, 2022

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We are entitled to receive all Partnership distributions from available cash on the Partnership’s common units each quarter.

The following table details the distributions declared and paid by the Partnership for the nine months ended September 30, 2021:

The following table details the distributions declared and paid by the Partnership for the three months ended March 31, 2022:

Three Months Ended

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Targa Resources Corp.

September 30, 2021

November 11, 2021

June 30, 2021

August 12, 2021

(In millions, except per share amounts)

March 31, 2022

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however, no units will be issued for those contributions.

During the nine months ended September 30, 2021, we made a total of $ 46.0 million in contributions to the Partnership.

During the three months ended March 31, 2022, we made a total of $ 140.0 million in contributions to the Partnership.

Note 12 — Earnings per Common Share

The following table sets forth a reconciliation of net income and weighted average shares outstanding used in computing basic and diluted net income per common share:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In millions, except per share amounts)

Net income (loss) attributable to Targa Resources Corp.

Dividends on Series A Preferred Stock

Deemed dividends on Series A Preferred Stock

Premium on repurchase of noncontrolling interests, net of tax

Dividends on Series A Preferred (1)

Net income (loss) attributable to common shareholders for basic earnings per share

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Dilutive effect of unvested stock awards

Dilutive effect of Series A Preferred Stock (1)

Dilutive effect of Series A Preferred (1)

Weighted average shares outstanding - diluted

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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,

Three Months Ended March 31,

Unvested restricted stock awards

Series A Preferred Stock (1)

The Series A Preferred has no mandatory redemption date, but is redeemable at our election for a 10 % premium to the liquidation preference on or prior to March 16, 2022 and for a 5 % premium to the liquidation preference thereafter.

If the Series A Preferred is not redeemed prior to March 16, 2028, the investors have the right to convert the Series A Preferred into TRC common stock.

Series A Preferred (1)

The Series A Preferred had no mandatory redemption date, but was redeemable at our election for a 5 % premium to the liquidation preference subsequent to March 16, 2022 .

In May 2022, we redeemed all of our issued and outstanding Series A Preferred at a redemption price of $ 1,050.00 per share, plus $ 8.87 per share, which is the amount of accrued and unpaid dividends from April 1, 2022 up to, but not including, the redemption date of May 3, 2022 .

See Note 9 – Preferred Stock for further discussion.

Note 13 — Derivative Instruments and Hedging Activities

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We have not designated these derivatives as hedges and record changes in fair value and cash settlements to revenues as current income.

At September 30, 2021, the notional volumes of our commodity derivative contracts were:

At March 31, 2022, the notional volumes of our commodity derivative contracts were:

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.

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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, 2021

Fair Value as of March 31, 2022

Fair Value as of December 31, 2021

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Pro Forma Net Presentation

September 30, 2021

March 31, 2022

Current Position

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Counterparties without offsetting positions - liabilities

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.

We maintain a margin deposit with the brokers in an amount sufficient to cover the fair value of our open futures positions.

The margin deposit is considered collateral, which is located within Other current assets on our Consolidated Balance Sheets and is not offset against the fair value of our derivative instruments.

Our derivative instruments other than our futures contracts are executed under International Swaps and Derivatives Association (“ISDA”) agreements, which govern the key terms with our counterparties.

Our ISDA agreements contain credit-risk related contingent features.

Pursuant to the terms of the TRGP Revolver, our derivative positions are no longer secured by the collateral securing the TRGP Revolver.

As of March 31, 2022, we have outstanding net derivative positions that contain credit-risk related contingent features that are in a net liability position of approximately ($ 718 ) million.

We have not been required to post any collateral related to these positions due to our credit rating.

If our credit rating was to be downgraded one notch below investment grade by both Moody’s and S&P, as defined in our ISDAs, we estimate that as of March 31, 2022, we would be required to post approximately $ 126 million of collateral to certain counterparties per the terms of our ISDAs.

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 liability of ($ 527.4 ) million as of September 30, 2021.

The estimated fair value of our derivative instruments was a net liability of ($ 737.7 ) million as of March 31, 2022.

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.

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Derivatives in Cash Flow

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Hedging Relationships

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Income (Effective Portion)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Location of Gain (Loss)

Based on valuations as of September 30, 2021, we expect to reclassify commodity hedge-related deferred losses of ($ 581.7 ) million included in accumulated other comprehensive income (loss) into earnings before income taxes through the end of 2025, with ($ 433.7 ) million of losses to be reclassified over the next twelve months.

Based on valuations as of March 31, 2022, we expect to reclassify commodity hedge-related deferred losses of ($ 545.4 ) million included in accumulated other comprehensive income (loss) into earnings before income taxes through the end of 2025, with ($ 423.3 ) million of losses 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.

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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 months ended September 30, 2021, the unrealized mark-to-market gains are primarily attributable to favorable movements in natural gas forward prices, as compared to our positions.

For the nine months ended September 30, 2021, the unrealized mark-to-market losses are primarily attributable to unfavorable movements in natural gas forward prices, as compared to our positions.

For the three months ended March 31, 2022, the unrealized mark-to-market losses are primarily attributable to unfavorable movements in natural gas forward prices, as compared to our positions.

Location of Gain (Loss)

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Recognized in Income on

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

as Hedging Instruments

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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, 2021, a net liability position of ($ 527.4 ) 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.

The financial position of these derivatives at March 31, 2022, a net liability position of ($ 737.7 ) 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 ($ 930.6 ) million.

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We determined the supplemental fair value disclosures for our long-term debt as follows:

The TRC Revolver, TRP Revolver, and the Partnership’s S ecuritization F acility are based on carrying value, which approximates fair value as their interest rates are based on prevailing market rates;

the TRGP Revolver and the Partnership’s Securitization Facility are based on carrying value, which approximates fair value as their interest rates are based on prevailing market rates;

the Partnership’s senior unsecured notes are based on quoted market prices derived from trades of the debt.

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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, 2021

March 31, 2022

Financial Instruments Recorded on Our

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Cash and cash equivalents

TRGP Revolver

Partnership's Senior unsecured notes

Partnership's Securitization Facility

Securitization Facility

December 31, 2021

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Partnership's Senior unsecured notes

Partnership's Securitization Facility

Securitization Facility

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 13 – Derivative Instruments and Hedging Activities.

The above fair values reflect the total value of each derivative contract taken as a whole, whereas the Consolidated Balance Sheets presentation is based on the individual maturity dates of estimated future settlements.

As such, an individual contract could have both an asset and liability position when segregated into its current and long-term portions for Consolidated Balance Sheets classification purposes .

Additional Information Regarding Level 3 Fair Value Measurements Included on Our Consolidated Balance Sheets

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The significant unobservable inputs used in the fair value measurements of our Level 3 derivatives were (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 was immaterial.

As of September 30, 2021, we had one derivative contract categorized as Level 3.

The following table summarizes the changes in fair value of our financial instruments classified as Level 3 in the fair value hierarchy:

Derivative Contracts

Asset (Liability)

Balance, December 31, 2020

New Level 3 derivative instruments

Transfers out of Level 3 (1)

Unrealized gain (loss) included in OCI

Balance, September 30, 2021

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 certain gas processing facilities and gathering systems associated with our Central 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.

As of March 31, 2022, we had no derivative contracts categorized as Level 3.

Note 15 — Contingencies

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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 monetary 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 on contingencies related to litigation matters.

On December 26, 2018, Vitol filed a lawsuit in the 80 th District Court of Harris County (the “District Court”), Texas against Targa Channelview LLC, then a subsidiary of the Company (“Targa Channelview”), seeking recovery of $ 129.0 million in payments made to Targa Channelview, additional monetary damages, attorneys’ fees and costs.

Vitol alleges that Targa Channelview breached the Splitter Agreement, which provided for Targa Channelview to construct a crude oil and condensate splitter (the “Splitter”) adjacent to a barge dock owned by Targa Channelview to provide services contemplated by the Splitter Agreement.

In January 2018, Vitol acquired Noble Americas Corp.

and on December 23, 2018, Vitol voluntarily elected to terminate the Splitter Agreement claiming that Targa Channelview failed to timely achieve start-up of the Splitter.

Vitol’s lawsuit also alleges Targa Channelview made a series of misrepresentations about the capability of the barge dock that would service crude oil and condensate volumes to be processed by the Splitter and Splitter products.

Vitol seeks return of $ 129.0 million in payments made to Targa Channelview prior to the start-up of the Splitter, as well as additional damages.

On the same date that Vitol filed its lawsuit, Targa Channelview filed a lawsuit against Vitol seeking a judicial determination that Vitol’s sole and exclusive remedy was Vitol’s voluntarily termination of the Splitter Agreement and, as a result, Vitol was not entitled to the return of any prior payments under the Splitter Agreement or other damages as alleged.

Targa also seeks recovery of its attorneys’ fees and costs in the lawsuit.

On October 15, 2020, the District Court awarded Vitol $ 129.0 million (plus interest) following a bench trial.

In addition, the District Court awarded Vitol $ 10.5 million in damages for losses and demurrage on crude oil that Vitol purchased for start-up efforts.

The Company has filed an appeal challenging the award, and the appeal is currently pending in the Fourteenth Court of Appeals in Houston, Texas.

In October 2020, we sold Targa Channelview but, under the agreements governing the sale, we retained the liabilities associated with the Vitol proceedings.

Note 16 — Revenue

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2024 and after

Fixed consideration to be recognized as of September 30, 2021

Fixed consideration to be recognized as of March 31, 2022

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 (ii) contracts with an original expected duration of one year or less.

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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.

As of September 30, 2021, our valuation allowance was $ 105.4 million, a decrease of $ 88.8 million from December 31, 2020.

As of March 31, 2022, our valuation allowance was $ 192.8 million, a decrease of $ 17.8 million from December 31, 2021.

After the change in valuation allowance, we have a net deferred tax liability of $ 88.0 million.

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We will continue to evaluate the valuation allowance based on current and expected earnings and other factors and adjust accordingly.

In January 2022, the IRS notified us that it will examine Targa’s net operating loss carryback previously claimed under the Coronavirus Aid, Relief and Economic Security Act.

We are in the process of responding to information requests from the IRS and do not anticipate material changes in prior year taxable income.

Note 18 — Supplemental Cash Flow Information

Nine Months Ended September 30,

Three Months Ended March 31,

Interest paid, net of capitalized interest (1)

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Changes in accrued distributions to noncontrolling interests

Interest capitalized on major projects was $ 2.7 million and $ 31.1 million for the nine months ended September 30, 2021 and 2020.

Interest capitalized on major projects was $ 2.4 million and $ 0.7 million for the three months ended March 31, 2022 and 2021.

Note 19 — Segment Information

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Our Logistics and Transportation 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 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”), which connects our gathering and processing positions in the Permian Basin, Southern Oklahoma and North Texas with our downstream facilities in Mont Belvieu, Texas, as well as our equity interest in Gulf Coast Express Pipeline LLC (“GCX”), a natural gas pipeline connecting the Waha hub in West Texas and other receipt points, including many of our Midland Basin processing facilities, to Agua Dulce in South Texas and other delivery points.

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 mark-to-market gains/losses related to derivative contracts that were not designated as cash flow hedges.

The Logistics and Transportation segment also includes Grand Prix, which 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 the pipelines and smaller terminals, are located predominantly in Mont Belvieu and Galena Park, Texas, and in Lake Charles, Louisiana.

Other contains the unrealized 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, 2021

Gathering and Processing

Logistics and Transportation

Sales of commodities

Fees from midstream services

Intersegment revenues

Sales of commodities

Fees from midstream services

Operating margin (1)

Other financial information:

Total assets (2)

Capital expenditures

Operating margin is calculated by subtracting Product purchases and fuel from Revenues.

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, 2020

Gathering and Processing

Logistics and Transportation

Sales of commodities

Fees from midstream services

Intersegment revenues

Sales of commodities

Fees from midstream services

Operating margin (1)

Other financial information:

Total assets (2)

Capital expenditures

Operating margin is calculated by subtracting Product purchases and fuel from Revenues.

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, 2021

Three Months Ended March 31, 2022

Gathering and Processing

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Capital expenditures

Operating margin is calculated by subtracting Product purchases and fuel from Revenues.

Operating margin is calculated by subtracting Product purchases and fuel and Operating expenses from Revenues.

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, 2020

Three Months Ended March 31, 2021

Gathering and Processing

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Capital expenditures

Operating margin is calculated by subtracting Product purchases and fuel from Revenues.

Operating margin is calculated by subtracting Product purchases and fuel and Operating expenses from Revenues.

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 March 31,

Sales of commodities:

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Condensate and crude oil

Petroleum products

Non-customer revenue:

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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 March 31,

Reconciliation of reportable segment operating

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General and administrative expense

Impairment of long-lived assets

Interest expense, net

Equity earnings (loss)

Gain (loss) on sale or disposition of business and assets

Gain (loss) on sale or disposition of assets

Write-down of assets

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements