What changed in this filing

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Item 1. Financial Statements

2022-08-04 compared with 2022-05-05 · 263 added, 122 removed, 621 unchanged (38% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

March 31, 2022

June 30, 2022

December 31, 2021

2 unchanged sentences

Cash and cash equivalents

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

Trade receivables, net of allowances of $ 0.1 million and $ 0.1 million at June 30, 2022 and December 31, 2021

Assets from risk management activities

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Contingencies (see Note 14)

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)

Series A Preferred 9.5 % Stock, $ 1,000 per share liquidation preference ( 1,200,000 shares authorized, zero and 919,300 shares issued and outstanding as of June 30, 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 as of March 31, 2022 and December 31, 2021)

Common stock ($ 0.001 par value, 450,000,000 shares authorized as of June 30, 2022 and December 31, 2021)

Issued Outstanding

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

June 30, 2022 237,204,119 227,062,130

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

Preferred stock ($ 0.001 par value, after designation of Series A Preferred Stock:

98,800,000 shares authorized, no shares issued and outstanding)

98,800,000 shares authorized, zero shares issued and outstanding)

Additional paid-in capital

1 unchanged sentence

Accumulated other comprehensive income (loss)

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

Treasury stock, at cost ( 10,141,989 shares as of June 30, 2022 and 7,884,171 shares as of December 31, 2021)

Total Targa Resources Corp.

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CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In millions, except per share amounts)

13 unchanged sentences

Gain (loss) from financing activities

Gain (loss) from sale of equity method investment

Income (loss) before income taxes

5 unchanged sentences

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 March 31,

Three Months Ended June 30,

Related Income Tax

10 unchanged sentences

Comprehensive income (loss) attributable to Targa Resources Corp.

Six Months Ended June 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.

See notes to consolidated financial statements.

5 unchanged sentences

(In millions, except shares in thousands)

Balance, March 31, 2022

Compensation on equity grants

Distribution equivalent rights

Shares issued under compensation program

Shares tendered for tax withholding obligations

Repurchases of common stock

Series A Preferred Stock dividends

Dividends - $ 23.75 per share

Dividends in excess of retained earnings

Deemed dividends - repurchase of Series A Preferred Stock

Common stock dividends

Dividends - $ 0.35 per share

Dividends in excess of retained earnings

Repurchase of Series A Preferred Stock

Distributions to noncontrolling interests

Contributions from noncontrolling interests

Other comprehensive income (loss)

Net income (loss)

Balance, June 30, 2022

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, March 31, 2021

Compensation on equity grants

Distribution equivalent rights

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, June 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, December 31, 2021

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Dividends in excess of retained earnings

Deemed dividends - repurchase of Series A Preferred Stock

Common stock dividends

1 unchanged sentence

Dividends in excess of retained earnings

Repurchase of Series A Preferred Stock

Distributions to noncontrolling interests

3 unchanged sentences

Net income (loss)

Balance, March 31, 2022

Balance, June 30, 2022

See notes to consolidated financial statements.

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Net income (loss)

Balance, March 31, 2021

Balance, June 30, 2021

See notes to consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(In millions)

8 unchanged sentences

Accretion of asset retirement obligations

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

Deferred income tax expense (benefit)

3 unchanged sentences

(Gain) loss from financing activities

Changes in operating assets and liabilities:

(Gain) loss from sale of equity method investment

Changes in operating assets and liabilities, net of acquisitions:

Receivables and other assets

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Outlays for property, plant and equipment

Outlays for asset acquisition, net of cash acquired

Proceeds from sale of assets

Investments in unconsolidated affiliates

Proceeds from sale of equity method investment

Return of capital from unconsolidated affiliates

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities

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Repurchase of noncontrolling interests

Repurchase of Series A Preferred Stock

Dividends paid to common and Series A Preferred shareholders

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the inclusion of the TRGP revolving credit facility;

the inclusion of the TRGP senior unsecured notes;

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

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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.

The information furnished herein reflects all adjustments that are, in the opinion of management, of a normal recurring nature and considered necessary for a fair statement of the results of the interim periods reported.

All intercompany balances and transactions have been eliminated in consolidation.

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

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.

Operating results for the three and six months ended June 30, 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.

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

Other than the updates noted below, there were no significant updates or revisions to our accounting policies during the six months ended June 30, 2022.

Recently Adopted Accounting Pronouncements

Revenue Contract Assets and Liabilities Acquired in a Business Combination

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers .

Amendments in this update require application of ASC 606 to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination.

These amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2022, with early adoption permitted.

However, an entity that elects to early adopt must apply the amendments to all business combinations that occurred during the fiscal year that includes the interim period.

We early adopted the amendments on April 1, 2022 and will apply them to business combinations in 2022 and thereafter.

The adoption did not have an effect on our consolidated financial statements during the six months ended June 30, 2022.

Note 4 – Joint Ventures, Acquisitions and Divestitures

DevCo Joint Ventures

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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 .

Southcross Acquisition

In April 2022, we closed on the acquisition of Southcross Energy Operating LLC and its subsidiaries (“Southcross”) for a purchase price of $ 201.9 million (the “Southcross Acquisition”), subject to customary closing adjustments.

We expect to make a final closing adjustment payment of approximately $ 4 million in the third quarter of 2022.

We accounted for the purchase as an asset acquisition and have capitalized $ 1.8 million of acquisition-related costs and assumed liabilities of $ 1.8 million as components of the cost of assets acquired.

We allocated $ 28.1 million to our purchase of Southcross’ interest in the two operated joint ventures for purposes of consolidation.

We allocated $ 169.7 million, $ 6.6 million and $ 5.3 million of the residual cost to property, plant and equipment, current assets and liabilities, net and other non-current assets, respectively.

Subsequent Event

Lucid Acquisition

On July 29, 2022, we closed on the acquisition of all interests in Lucid Energy Delaware, LLC (“Lucid”) from Riverstone Holdings LLC and Goldman Sachs Asset Management for approximately $ 3.55 billion in cash (the “Lucid Acquisition”), subject to customary closing adjustments.

Lucid provides natural gas gathering, treating, and processing services in the Delaware Basin, and owns and operates 1,050 miles of natural gas pipelines and approximately 1.4 billion cubic feet per day (“Bcf/d”) of cryogenic natural gas processing capacity in service or under construction located primarily in Eddy and Lea counties of New Mexico.

Lucid’s Delaware Basin assets are integrated into our Permian Delaware operations.

At the time of this filing, it is impracticable to disclose all the information required by ASC 805, Business Combinations, as we are in the process of evaluating the purchase accounting and pro forma implications of the transaction.

In May 2022, we completed the sale of Targa GCX Pipeline LLC to a third party for $ 857.0 million (the “GCX Sale”).

As a result of the GCX Sale, we recognized a gain of $ 435.9 million in Gain (loss) from sale of equity method investment in our Consolidated Statements of Operations during the three and six months ended June 30, 2022.

See Note 6 – Investments in Unconsolidated Affiliates for further discussion on Southcross Acquisition and GCX Sale.

Note 5 — Property, Plant and Equipment and Intangible Assets

March 31, 2022

June 30, 2022

December 31, 2021

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Intangible assets, net

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

During the three and six months ended June 30, 2022, depreciation expense was $ 241.9 million and $ 423.0 million, respectively.

During the three and six months ended June 30, 2021, depreciation expense was $ 179.1 million and $ 362.5 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.

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

No impairments of long-lived assets were recorded for the first half of 2022 and 2021.

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.

The fair values 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.

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The changes in our intangible assets are as follows:

March 31, 2022

June 30, 2022

Balance at December 31, 2021

Balance at March 31, 2022

Balance at June 30, 2022

Note 6 – Investments in Unconsolidated Affiliates

Our investments in unconsolidated affiliates consist of the following:

As of June 30, 2022, 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”);

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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.

In April 2022, we closed on the Southcross Acquisition for $ 201.9 million , subject to customary closing adjustments.

We expect to make a final closing adjustment payment of approximately $ 4 million in the third quarter of 2022.

Prior to closing the Southcross Acquisition, we had two operated joint ventures in South Texas:

a 75 % interest in T2 LaSalle Gathering Company L.L.C.

(“T2 LaSalle”) and a 50 % interest in T2 Eagle Ford Gathering Company L.L.C.

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

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

In May 2022, we completed the GCX Sale for $ 857.0 million.

Prior to the GCX Sale, we owned a 25 % non-operated ownership interest in GCX.

Following the announcement of the GCX Sale in February 2022, we ceased recognizing equity earnings (loss) due to the terms of the sales agreement.

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

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

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Cash Distributions

Consolidation

Contributions

Balance at March 31, 2022

Balance at June 30, 2022

Little Missouri 4

1 unchanged sentence

T2 LaSalle (2)

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.

Following the closing of the Southcross Acquisition in April 2022, the T2 Joint Ventures are 100 % owned and consolidated by Targa.

Note 7 — Debt Obligations

March 31, 2022

June 30, 2022

December 31, 2021

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

Senior unsecured notes issued by TRGP:

4.200 % fixed rate, due February 2033

Unamortized discount

4.950 % fixed rate, due April 2052

Unamortized discount

Senior unsecured notes issued by the Partnership:

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secured revolving credit facility

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.

As of June 30, 2022, the Partnership had $ 400.0 million of qualifying receivables under its $ 400.0 million accounts receivable securitization facility (“Securitization Facility”), resulting in zero availability.

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 June 30, 2022, availability under the TRGP Revolver was $ 2.2 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 April 2022, the Partnership redeemed all of the outstanding 5.875 % Senior Notes due 2026 (the “ 5.875 % Notes”).

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:

In July 2022, we completed an underwritten public offering of (i) $ 750.0 million aggregate principal amount of our 5.200 % Senior Notes due 2027 (the “ 5.200 % Notes”) and (ii) $ 500.0 million aggregate principal amount of our 6.250 % Senior Notes due 2052 (the “ 6.250 % Notes”), resulting in net proceeds of approximately $ 1.2 billion.

The following table shows the range of interest rates and weighted average interest rate incurred on our variable-rate debt obligations during the six months ended June 30, 2022:

Range of Interest Rates Incurred

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Compliance with Debt Covenants

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

As of June 30, 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.

As of June 30, 2022, $ 5.0 billion of the Partnership Issuers’ senior unsecured notes was outstanding.

Debt Obligations

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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

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.

Senior Unsecured Notes Redemptions and Issuances

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.

1 unchanged sentence

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 April 2022, we 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 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.

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 was 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 of the net proceeds used for repayment of the outstanding borrowings under the TRGP Revolver.

As a result of the March Tender Offer and the subsequent redemption of the 5.875 % Notes, we recorded a loss due to debt extinguishment of $ 33.8 million comprised of $ 29.3 million of premiums paid and a write-off of $ 4.5 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.

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Contractual Obligations

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

The following table summarizes payment obligations as of June 30, 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 March 31, 2022 rates for floating debt.

Represents interest expense on debt obligations based on both fixed debt interest rates and prevailing June 30, 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.

Senior Unsecured Notes Issuances

In July 2022, we completed an underwritten public offering of (i) $ 750.0 million in aggregate principal amount of our 5.200 % Notes and (ii) $ 500.0 million in aggregate principal amount of our 6.250 % Notes, resulting in net proceeds of approximately $ 1.2 billion.

The 5.200 % Notes and the 6.250 % 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.

The 5.200 % Notes and the 6.250 % Notes were issued pursuant to the Indenture, dated as of April 6, 2022, as supplemented by that certain Third Supplemental Indenture, dated as of July 7, 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

We used the net proceeds from the issuance to fund a portion of the Lucid Acquisition .

Term Loan Facility

In July 2022, we entered into the Term Loan Agreement with Mizuho Bank, Ltd.

(“Mizuho”) as the Administrative Agent and a lender, and other lenders party thereto (the “Term Loan Facility”).

The Term Loan Facility provides for a three-year , $ 1.5 billion unsecured term loan facility.

The Term Loan Facility matures in July 2025 .

We used the proceeds from the Term Loan Facility to fund a portion of the Lucid Acquisition.

The Term Loan Facility bears interest at the Company’s option at:

(a) the Base Rate (as defined in the Term Loan Facility ), which is the highest of the (i) federal funds rate plus 0.5 %, (ii) Mizuho’s prime rate, and (iii) the Term SOFR (as defined in the Term Loan Facility ) rate plus 1.0 % (subject in each case to a floor of 0.0 %), plus an applicable margin ranging from 0.125 % to 0.75 % dependent on the Company’s non-credit-enhanced senior unsecured long-term debt ratings (or, if no such debt is outstanding at such time, then the corporate, issuer or similar rating with respect to the Company that has been most recently announced) (the “Debt Rating”), or (b) Term SOFR plus 0.10 % plus an applicable margin ranging from 1.125 % to 1.75 % dependent on the Debt Rating.

Our obligations under the Term Loan Facility are guaranteed by substantially all material wholly-owned domestic restricted subsidiaries of the Company, including the Partnership.

The Term Loan Facility requires the Company to maintain a Consolidated Leverage Ratio (as defined in the Term Loan Facility), determined as of the last day of each quarter for the four-fiscal quarter period ending on the date of determination, of no more than 5.50 to 1.00 .

For any four-fiscal-quarter-period during which a material acquisition or disposition occurs, the total leverage ratio will be determined on a pro forma basis as though such event had occurred as of the first day of such four-fiscal-quarter-period.

The Term Loan Facility limits the Company’s ability to make dividends to stockholders if an event of default (as defined in the Term Loan Facility) exists or would result from such distribution.

In addition, the Term Loan Facility contains various covenants that may limit, among other things, the Company’s ability to incur subsidiary indebtedness, grant liens, make investments, merge or consolidate, and engage in transactions with affiliates.

Commercial Paper Program

In July 2022, we established an unsecured commercial paper note program (the “Commercial Paper Program”).

Under the terms of the Commercial Paper Program, we may issue, from time to time, unsecured commercial paper notes with varying maturities of less than one year.

Amounts available under the Commercial Paper Program may be issued, repaid and re-issued from time to time, with the maximum aggregate face or principal amount outstanding at any one time not to exceed $ 2.75 billion.

The Commercial Paper Program is guaranteed by each subsidiary that guarantees the TRGP Revolver.

We had no amounts outstanding under the Commercial Paper Program as of July 29, 2022.

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 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.

Deferred revenue as of June 30, 2022 and December 31, 2021, was $ 169.4 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.

3 unchanged sentences

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.

See Note 14 – Contingencies.

Note 9 — Preferred Stock

Preferred Stock Dividends

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

During the three and six months ended June 30, 2022, we paid $ 30.0 million and $ 51.8 million of dividends to preferred shareholders.

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.

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, of which $ 215.5 million was 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

Shelf Registration

In March 2022, we filed the March 2022 Shelf.

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Common Stock Dividends

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:

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.

The following table details the dividends declared and/or paid by us to common shareholders for the six months ended June 30, 2022:

Three Months Ended

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(In millions, except per share amounts)

June 30, 2022

August 15, 2022

March 31, 2022

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Represents accrued dividends on restricted stock and restricted stock units that are payable upon vesting.

Note 11 — Partnership Units and Related Matters

Distributions

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 three months ended March 31, 2022:

Three Months Ended

Date Paid or To Be Paid

Total Distributions

Distributions to

Targa Resources Corp.

(In millions, except per share amounts)

March 31, 2022

December 31, 2021

February 11, 2022

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.

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

Note 11 — 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In millions, except per share amounts)

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Dividends on Series A Preferred (1)

Deemed 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 (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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Unvested restricted stock awards

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

At June 30, 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 March 31, 2022

Fair Value as of June 30, 2022

Fair Value as of December 31, 2021

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Pro Forma Net Presentation

March 31, 2022

June 30, 2022

Current Position

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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.

Following the release of the collateral securing our TRGP Revolver, our derivative positions are no longer secured.

As of June 30, 2022, we have outstanding net derivative positions that contain credit-risk related contingent features that are in a net liability position of ($ 555.5 ) 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.

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 June 30, 2022, we would be required to post $ 69.6 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 ($ 737.7 ) million as of March 31, 2022.

The estimated fair value of our derivative instruments was a net liability of ($ 556.5 ) million as of June 30, 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Hedging Relationships

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Income (Effective Portion)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Location of Gain (Loss)

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.

Based on valuations as of June 30, 2022, we expect to reclassify commodity hedge-related deferred losses of ($ 362.6 ) million included in accumulated other comprehensive income (loss) into earnings before income taxes through the end of 2025, with ($ 263.3 ) 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 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.

For the three and six months ended June 30, 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

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 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.

The financial position of these derivatives at June 30, 2022, a net liability position of ($ 556.5 ) 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 ($ 791.3 ) million.

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

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.

t he TR GP Revolver and 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 senior unsecured notes and the Partnership’s senior unsecured notes are based on quoted market prices derived from trades of the debt.

Fair Value Hierarchy

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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:

March 31, 2022

June 30, 2022

Financial Instruments Recorded on Our

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TRGP Revolver

TRGP Senior unsecured notes

Partnership's Senior unsecured notes

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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.

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

As of June 30, 2022 and December 31, 2021, we had no derivative contracts categorized as Level 3.

Note 14 — Contingencies

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2024 and after

Fixed consideration to be recognized as of March 31, 2022

Fixed consideration to be recognized as of June 30, 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 March 31, 2022, our valuation allowance was $ 192.8 million, a decrease of $ 17.8 million from December 31, 2021.

As of June 30, 2022, our valuation allowance was $ 130.8 million, a decrease of $ 79.8 million from December 31, 2021.

After the change in valuation allowance, we have a net deferred tax liability of $ 213.4 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.

In January 2022, the Internal Revenue Service (“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 have responded to information requests from the IRS and do not anticipate material changes in prior year taxable income.

On October 6, 2021 and April 7, 2022, we received notice from the IRS that it intends to audit three direct and indirectly wholly-owned subsidiaries of the Company (Targa Resources Partners LP, Targa Downstream LLC and Targa Midstream Services LLC) treated as partnerships for federal tax purposes for the 2019 and 2020 tax years.

We are responding to the information requests from the IRS on these audits.

The Company is not aware of any potential audit findings that would give rise to adjustments to taxable income and does not anticipate material changes related to these audits.

Note 17 — Supplemental Cash Flow Information

Three Months Ended March 31,

Six Months Ended June 30,

Interest paid, net of capitalized interest (1)

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Changes in accrued distributions to noncontrolling interests

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

Interest capitalized on major projects was $ 5.5 million and $ 1.7 million for the six months ended June 30, 2022 and 2021.

Note 18 — Segment Information

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Reportable segment information is shown in the following tables:

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Gathering and Processing

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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 March 31, 2021

Three Months Ended June 30, 2021

Gathering and Processing

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Assets in the Corporate and Eliminations column primarily include tax-related assets, cash, prepaids and debt issuance costs for our revolving credit facilities.

Six Months Ended June 30, 2022

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 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.

Six Months Ended June 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 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Sales of commodities:

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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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Reconciliation of reportable segment operating

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Gain (loss) from financing activities

Gain (loss) from sale of equity method investment

Income (loss) before income taxes

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