SEC Filing | Targa Resources Corp.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-33303

TARGA RESOURCES PARTNERS LP

(Exact name of registrant as specified in its charter)

Delaware		65-1295427
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

811 Louisiana St, Suite 2100, Houston, Texas		77002
(Address of principal executive offices)		(Zip Code)

(713) 584-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of exchange on which registered
9.0% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units	NGLS/PA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐ No☑

As of November 2, 2020, there were 5,000,000 9.0% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units outstanding.

TABLE OF CONTENTS PART I—FINANCIAL INFORMATION

Item 1. Financial Statements		4

Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019		4

Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019		5

Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2020 and 2019		6

Consolidated Statements of Changes in Owners' Equity for the three and nine months ended September 30, 2020 and 2019		7

Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019		9

Notes to Consolidated Financial Statements		10

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		26

Item 3. Quantitative and Qualitative Disclosures About Market Risk		44

Item 4. Controls and Procedures		46

PART II—OTHER INFORMATION

Item 1. Legal Proceedings		47

Item 1A. Risk Factors		47

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		48

Item 3. Defaults Upon Senior Securities		48

Item 4. Mine Safety Disclosures		49

Item 5. Other Information		49

Item 6. Exhibits		50

SIGNATURES

Signatures		52

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

Targa Resources Partners LP’s (together with its subsidiaries, “we,” “us,” “our,” “TRP” or the “Partnership”) reports, filings and other public announcements may from time to time contain statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements.” You can typically identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, by the use of forward-looking statements, such as “may,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “potential,” “plan,” “forecast” and other similar words.

All statements that are not statements of historical facts, including statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements.

These forward-looking statements reflect our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside our control. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Known risks and uncertainties include, but are not limited to, the following risks and uncertainties:

•

the level and success of crude oil and natural gas drilling around our assets, our success in connecting natural gas supplies to our gathering and processing systems, oil supplies to our gathering systems and natural gas liquid supplies to our logistics and transportation facilities and our success in connecting our facilities to transportation services and markets;

•

the timing and extent of changes in natural gas, natural gas liquids, crude oil and other commodity prices, interest rates and demand for our services;

•

our ability to access the capital markets, which will depend on general market conditions, the credit ratings for our debt obligations and demand for our senior notes;

•

the impact of outbreaks of illnesses, pandemics (like COVID-19) or any other public health crises;

•

the amount of collateral required to be posted from time to time in our transactions;

•

our success in risk management activities, including the use of derivative instruments to hedge commodity price risks;

•

the level of creditworthiness of counterparties to various transactions with us;

•

changes in laws and regulations, particularly with regard to taxes, safety and protection of the environment;

•

weather and other natural phenomena;

•

industry changes, including the impact of consolidations and changes in competition;

•

our ability to timely obtain and maintain necessary licenses, permits and other approvals;

•

our ability to grow through internal growth capital projects or acquisitions and the successful integration and future performance of such assets;

•

general economic, market and business conditions; and

•

the risks described in our Annual Report on Form 10-K for the year ended December 31, 2019 (“Annual Report”) and our reports and registration statements filed from time to time with the United States Securities and Exchange Commission (“SEC”).

Additionally, while we have not been previously materially impacted by prior outbreaks of illnesses, pandemics or other public health crises, there are potential risks to us from the continued impact on global demand for commodities related to the COVID-19 pandemic. The COVID-19 pandemic reduced economic activity and the related demand for energy commodities, which contributed to weakened commodity prices compared to historical levels and price volatility during the nine months ended September 30, 2020 and is expected to continue to impact demand over the short-to-medium term.

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate, and, therefore, we cannot assure you that the forward-looking statements included in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (“Quarterly Report”) will prove to be accurate. Some of these and other risks and uncertainties that could cause actual results to differ materially from such forward-looking statements are more fully described in our Annual Report. Except as may be required by applicable law, we undertake no obligation to publicly update or advise of any change in any forward-looking statement, whether as a result of new information, future events or otherwise.

As generally used in the energy industry and in this Quarterly Report, the identified terms have the following meanings:

Bbl	Barrels (equal to 42 U.S. gallons)
BBtu	Billion British thermal units
Bcf	Billion cubic feet
Btu	British thermal units, a measure of heating value
/d	Per day
GAAP	Accounting principles generally accepted in the United States of America
gal	U.S. gallons
LIBOR	London Interbank Offered Rate
LPG	Liquefied petroleum gas
MBbl	Thousand barrels
MMBbl	Million barrels
MMBtu	Million British thermal units
MMcf	Million cubic feet
MMgal	Million U.S. gallons
NGL(s)	Natural gas liquid(s)
NYMEX	New York Mercantile Exchange
NYSE	New York Stock Exchange
SCOOP	South Central Oklahoma Oil Province
STACK	Sooner Trend, Anadarko, Canadian and Kingfisher

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

TARGA RESOURCES PARTNERS LP

CONSOLIDATED BALANCE SHEETS

					September 30, 2020			December 31, 2019
					(Unaudited)
					(In millions)
ASSETS
Current assets:
Cash and cash equivalents					$	248.0		$	291.1
Trade receivables, net of allowances of $0.1 and $0.0 million at September 30, 2020 and December 31, 2019						609.8			855.2
Inventories						261.7			161.5
Assets from risk management activities						88.9			103.3
Deposits						110.1			35.4
Held for sale assets						62.2			137.7
Other current assets						18.7			18.8
Total current assets						1,399.4			1,603.0
Property, plant and equipment, net						12,292.9			14,549.0
Intangible assets, net						1,417.6			1,735.0
Long-term assets from risk management activities						79.5			35.5
Investments in unconsolidated affiliates						718.8			738.7
Other long-term assets						86.4			83.3
Total assets					$	15,994.6		$	18,744.5

LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable						617.2		$	952.9
Accrued liabilities						40.3			50.7
Dividends payable						96.5			92.7
Interest payable						95.3			125.4
Accrued taxes						85.1			62.0
Accounts payable to Targa Resources Corp.						195.9			193.8
Liabilities from risk management activities						121.1			104.1
Current debt obligations						261.9			382.2
Held for sale liabilities						3.6			6.4
Total current liabilities						1,516.9			1,970.2
Long-term debt						7,217.2			7,005.2
Long-term liabilities from risk management activities						62.9			40.8
Deferred income taxes, net						23.0			23.0
Other long-term liabilities						261.3			260.0
Contingencies (see Note 11)
Owners' equity:
Series A preferred limited partners	Issued		Outstanding			120.6			120.6
September 30, 2020		5,000,000		5,000,000
December 31, 2019		5,000,000		5,000,000
Common limited partners	Issued		Outstanding			2,921.3			5,022.7
September 30, 2020		275,168,410		275,168,410
December 31, 2019		275,168,410		275,168,410
General partner	Issued		Outstanding			735.0			778.0
September 30, 2020		5,629,136		5,629,136
December 31, 2019		5,629,136		5,629,136
Accumulated other comprehensive income (loss)						(119.5	)		122.5
						3,657.4			6,043.8
Noncontrolling interests						3,255.9			3,401.5
Total owners' equity						6,913.3			9,445.3
Total liabilities and owners' equity					$	15,994.6		$	18,744.5

See notes to consolidated financial statements.

TARGA RESOURCES PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
	(Unaudited)
	(In millions)
Revenues:
Sales of commodities	$	1,840.8		$	1,594.2		$	4,900.8		$	5,254.8
Fees from midstream services		274.3			308.3			786.7			942.4
Total revenues		2,115.1			1,902.5			5,687.5			6,197.2
Costs and expenses:
Product purchases		1,303.2			1,328.1			3,346.8			4,415.7
Operating expenses		181.9			200.2			565.1			600.7
Depreciation and amortization expense		203.7			244.3			647.3			718.9
General and administrative expense		56.3			65.6			171.7			212.3
Impairment of long-lived assets		—			—			2,442.8			—
Other operating (income) expense		72.2			18.4			73.8			21.7
Income (loss) from operations		297.8			45.9			(1,560.0	)		227.9
Other income (expense):
Interest expense, net		(94.9	)		(84.2	)		(283.0	)		(229.2	)
Equity earnings (loss)		18.6			10.0			54.1			15.9
Gain (loss) from financing activities		(13.7	)		—			47.4			(1.4	)
Gain (loss) from sale of equity-method investment		—			65.8			—			65.8
Change in contingent considerations		—			—			—			(8.8	)
Other, net		1.3			—			2.0			—
Income (loss) before income taxes		209.1			37.5			(1,739.5	)		70.2
Income tax (expense) benefit		—			—			—			—
Net income (loss)		209.1			37.5			(1,739.5	)		70.2
Less: Net income (loss) attributable to noncontrolling interests		100.1			76.6			108.1			144.3
Net income (loss) attributable to Targa Resources Partners LP	$	109.0		$	(39.1	)	$	(1,847.6	)	$	(74.1	)

Net income attributable to preferred limited partners	$	2.8		$	2.8		$	8.4		$	8.4
Net income (loss) attributable to general partner		2.1			(0.9	)		(37.2	)		(1.7	)
Net income (loss) attributable to common limited partners		104.1			(41.0	)		(1,818.8	)		(80.8	)
Net income (loss) attributable to Targa Resources Partners LP	$	109.0		$	(39.1	)	$	(1,847.6	)	$	(74.1	)

See notes to consolidated financial statements.

TARGA RESOURCES PARTNERS LP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
	(Unaudited)
	(In millions)
Net income (loss)	$	209.1		$	37.5		$	(1,739.5	)	$	70.2
Other comprehensive income (loss):
Commodity hedging contracts:
Change in fair value		(128.7	)		118.2			(102.6	)		167.8
Settlements reclassified to revenues		(19.2	)		(41.5	)		(139.4	)		(106.1	)
Other comprehensive income (loss)		(147.9	)		76.7			(242.0	)		61.7
Comprehensive income (loss)		61.2			114.2			(1,981.5	)		131.9
Less: Comprehensive income (loss) attributable to noncontrolling interests		100.1			76.6			108.1			144.3
Comprehensive income (loss) attributable to Targa Resources Partners LP	$	(38.9	)	$	37.6		$	(2,089.6	)	$	(12.4	)

See notes to consolidated financial statements.

TARGA RESOURCES PARTNERS LP

CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS' EQUITY

Accumulated

Limited

General

Other

Non-

Partner