(Source: PrimeNewswire)
HOUSTON, Aug. 6, 2009 (GLOBE NEWSWIRE) -- Targa Resources, Inc. ("Targa" or the "Company") today reported second quarter 2009 net income attributable to Targa of $13.5 million (which includes a $12.3 million non-cash hedge loss) compared to net income attributable to Targa of $46.2 million for the second quarter of 2008. Targa reported earnings before interest, income taxes, depreciation and amortization and non-cash income or loss related to derivative instruments ("Adjusted EBITDA") of $95.9 million for the second quarter of 2009 as compared to $137.6 million for the second quarter of 2008. Please see the section of this release entitled "Non-GAAP Financial Measures" for a discussion of Adjusted EBITDA and operating margin and reconciliations of such measures to the comparable GAAP measures.
"We are pleased with our operating and financial performance for the quarter. The previously announced agreement to sell Targa's Downstream Business to Targa Resources Partners LP (the "Partnership") is still expected to close in the third quarter. The transaction will enhance the EBITDA profile of the Partnership while significantly reducing leverage at Targa," said Rene Joyce, Chief Executive Officer of Targa Resources, Inc. "With an improved credit profile, strong liquidity and the prospect for significant ongoing free cash flow we believe Targa is well positioned for the future," added Rene Joyce.
Three Months Six Months Ended June 30, Ended June 30, ------------------ ------------------ 2009 2008 2009 2008 -------- -------- -------- -------- (In millions) Revenues $1,003.7 $2,263.2 $2,005.5 $4,465.6 Product purchases 828.8 2,023.1 1,674.8 4,024.5 Operating expenses 54.2 71.2 119.2 134.8 Depreciation and amortization expense 42.1 38.8 83.7 76.9 General and administrative expense 28.1 27.9 51.9 52.0 Other 1.8 -- 1.8 (4.4) -------- -------- -------- -------- Income from operations 48.7 102.2 74.1 181.8 Interest expense, net (22.1) (23.7) (47.8) (49.2) Other -- 18.7 1.0 18.5 Equity in earnings of unconsolidated investments 1.7 7.2 1.8 10.6 Income tax expense (6.5) (28.2) (6.4) (40.3) -------- -------- -------- -------- Net income 21.8 76.2 22.7 121.4 Less: Net income attributable to noncontrolling interest 8.3 30.0 6.6 56.8 -------- -------- -------- -------- Net income attributable to Targa Resources, Inc. $ 13.5 $ 46.2 $ 16.1 $ 64.6 ======== ======== ======== ======== Financial data: Operating margin $ 120.7 $ 168.9 $ 211.5 $ 306.3 Adjusted EBITDA 95.9 137.6 183.0 229.3 Three Months Six Months Ended Ended ---------------- ---------------- 2009 2008 2009 2008 ------- ------- ------- ------- Operating statistics: Gathering throughput, MMcf/d 2,139.4 2,070.1 2,050.5 2,125.7 Plant natural gas inlet, MMcf/d 2,098.0 2,026.3 2,008.0 2,084.7 Gross NGL production, MBbl/d 118.2 104.0 113.8 104.3 Natural gas sales, BBtu/d 588.5 526.6 553.5 529.8 NGL sales, MBbl/d 287.7 285.9 293.2 301.7 Condensate sales, MBbl/d 5.2 3.7 4.8 3.7 Average realized prices: Natural gas, $/MMBtu 3.54 10.11 3.98 9.00 NGLs, $/gal 0.68 1.54 0.67 1.50 Condensate, $/Bbl 54.39 114.15 47.65 103.88
Review of Second Quarter Results
Revenues decreased by $1,259.5 million, or 56%, to $1,003.7 million for 2009 compared to $2,263.2 million for 2008. Income from operations for the three months ended June 30, 2009 was 53% lower at $48.7 million as compared to $102.2 million for the same period in 2008. Similarly, second quarter net income decreased 71% from $46.2 million in 2008 to $13.5 million in 2009. The primary drivers for these decreases were:
(i) decreases in average realized natural gas, NGL and condensate prices of 65%, 56%, and 52% respectively, as compared to same period of 2008; (ii) a gain on insurance claim settlements in 2008; (iii) increase of 9% in depreciation expense; (iv) a favorable $3.7 million casualty loss adjustment; which are offset by, (v) decrease of 77% in income tax expense; (vi) decrease of 24% in operating expense; (vii) decrease of 6% in interest expense.
Gathering throughput and plant natural gas inlet were approximately 2.1 Bcf/d for the three months ended June 30, 2009, 3 and 4% higher than for the 2008 period, respectively. Natural gas sales of 588.5 BBtu/d for the second quarter of 2009 were up 12% from the comparable period in 2008. Second quarter 2009 gross NGL production of 118.2 MBbl/d was 14% higher compared to the 2008 period. Second quarter 2009 NGL sales of 287.7 MBbl/d were 1% higher than the 2008 period. Finally, condensate sales of 5.2 MBbl/d for the second quarter of 2009 were 41% higher than the same period in 2008.
Review of Six Months Results
Revenues decreased by $2,460.1 million, or 55%, to $2,005.5 million for 2009 compared to $4,465.6 million for 2008. Income from operations for the first six months of 2009 was 59% lower at $74.1 million as compared to $181.8 million for the same period in 2008. Similarly, first half net income decreased 75% from $64.8 million in 2008 to $16.1 million in 2009. The primary drivers for these decreases were:
(i) decreases in average realized natural gas, NGL and condensate prices of 56%, 55%, and 54% respectively; (ii) decreased NGL sales volumes of 293.2 MBbl/d, 3% lower than 2008; (iii) a gain on insurance claim settlements in 2008; which are offset by, (iv) decrease of 84% in income tax expense; (v) decrease of 12% in operating expense; (vi) decrease of 3% in interest expense.
Gathering throughput and plant natural gas inlet were approximately 2.1Bcf/d for the first six months of 2009, each 4% lower than for the 2008 period. Natural gas sales of 553.5 BBtu/d for the first six months of 2009 were up 4% from the comparable period in 2008. First half 2009 gross NGL production of 113.8 MBbl/d was 9% higher compared to the 2008 period. First half 2009 NGL sales of 293.2 MBbl/d were 3% lower than for the first half of 2008. Finally, condensate sales of 4.8 MBbl/d for the first six months of 2009 were 30% higher than the same period in 2008.
Review of Segment Performance
The following discussion of segment performance includes inter-segment revenues. The Company views segment operating margin as an important performance measure of the core profitability of its operations. This measure is a key component of internal financial reporting and is reviewed for consistency and trend analysis. The generally accepted accounting principles ("GAAP") measure most directly comparable to segment operating margin is net income. Operating margin is a non-GAAP financial measure that is defined later in this release.
Natural Gas Gathering and Processing Segment
Our Natural Gas Gathering and Processing segment, which includes Targa Resources Partners LP ("Targa Resources Partners" or the "Partnership"), consists of the gathering of natural gas produced from oil and gas wells and processing this raw natural gas into merchantable natural gas by extracting natural gas liquids and removing impurities.
The following table provides summary data regarding results of operations of this segment for the periods indicated:
Three Months Six Months Ended June 30, Ended June 30, ------------------ ------------------ 2009 2008 2009 2008 -------- -------- -------- -------- ($ in millions) Revenues $ 463.6 $1,059.5 $ 901.6 $1,932.7 Product purchases (352.1) (908.2) (691.9) (1,638.6) Operating expenses (26.9) (34.7) (62.0) (64.9) -------- -------- -------- -------- Operating margin $ 84.6 $ 116.6 $ 147.7 $ 229.2 ======== ======== ======== ======== Equity in earnings of VESCO $ -- $ 6.4 $ -- $ 8.8 ======== ======== ======== ======== Operating statistics: Gathering throughput, MMcf/d 2,139.4 2,070.1 2,050.5 2,125.7 Plant natural gas inlet, MMcf/d 2,098.0 2,026.3 2,008.0 2,084.7 Gross NGL production, MBbl/d 118.2 104.0 113.8 104.3 Natural gas sales, BBtu/d 608.0 546.2 571.2 548.2 NGL sales, MBbl/d 92.6 91.5 92.6 90.5 Condensate sales, MBbl/d 5.2 5.0 5.1 5.0 Average realized prices: Natural gas, $/MMBtu 3.54 10.14 3.98 9.02 NGLs, $/gal 0.66 1.42 0.61 1.34 Condensate, $/Bbl 54.39 106.24 46.50 96.14
Review of Second Quarter Results
Revenues decreased by $595.9 million, or 56%, to $463.6 million for 2009 compared to $1,059.5 million for 2008. The decrease was primarily due to lower natural gas, NGL and condensate prices, partially offset by higher natural gas, NGL and condensate sales volumes.
Second quarter 2009 average realized prices for natural gas, NGL and condensate were 65%, 54% and 49% lower than for the 2008 period.
Second quarter 2009 natural gas, NGL and condensate sales volumes were 11%, 1% and 4% higher than for the 2008 quarter. The increase in natural gas sales volumes was primarily due to increased marketing activity under third party contracts.
Product purchases decreased by $556.1 million, or 61%, to $352.1 million for 2009 compared to $908.2 million for 2008. The decrease in product purchase cost corresponds to the decrease in commodity revenue.
Operating expenses decreased by $7.8 million, or 22%, to $26.9 million for 2009 compared to $34.7 million for 2008. The decrease is primarily due to decreases in maintenance, repairs and supplies, and chemical and lubricants expenses, partially offset by environmental and legal expenses.
Review of Six Months Results
Revenues decreased by $1,031.1million, or 53%, to $901.6 million for 2009 compared to $1,932.7 million for 2008. The decrease was primarily due to lower natural gas, NGL and condensate prices.
First half 2009 average realized prices for natural gas, NGL and condensate were 56%, 54% and 50% lower than for the 2008 period.
First half 2009 natural gas, NGL and condensate sales volumes were 4%, 2% and 2% higher than the 2008 period.
Product purchases decreased by $946.7 million, or 58%, to $691.9 million for 2009 compared to $1,638.6 million for 2008. The decrease in product purchase cost reflects lower commodity pricing and purchases of wellhead volumes.
Operating expenses decreased by $2.9 million, or 4%, to $62.0 million for 2009 compared to $64.9 million for 2008. The decrease is primarily due to decreases in compensation and benefit costs, maintenance, repairs and supplies and chemicals and lubricants.
Logistics Assets Segment
Our Logistics Assets segment is involved with gathering and storing mixed NGLs and fractionating, storing, treating and transporting finished NGLs. These assets are generally connected to and supplied, in part, by our Natural Gas Gathering and Processing segment and are predominantly located in Mont Belvieu, and Galena Park, Texas and West Louisiana.
The following table provides summary data regarding results of operations of this segment for the periods indicated:
Three Months Six Months Ended June 30, Ended June 30, ----------------- ----------------- 2009 2008 2009 2008 ------- ------- ------- ------- ($ in millions) Revenues from services $ 53.2 $ 64.6 $ 97.8 $ 115.4 Other revenues 2.0 1.1 1.9 1.5 ------- ------- ------- ------- 55.2 65.7 99.7 116.9 Operating expenses (32.4) (54.1) (67.9) (98.4) ------- ------- ------- ------- Operating margin $ 22.8 $ 11.6 $ 31.8 $ 18.5 ======= ======= ======= ======= Equity in earnings of GCF $ 1.7 $ 0.8 $ 1.8 $ 1.9 ======= ======= ======= ======= Fractionation volumes, MBbl/d 230.0 235.2 210.0 225.6 Treating volumes, MBbl/d 19.5 21.4 14.0 18.2
Review of Second Quarter Results
Revenues from services (fractionation, terminalling and storage, transportation and treating) decreased by $11.4 million, or 18%, to $53.2 million for 2009 compared to $64.6 million for 2008. The decrease is primarily due to a lower fuel component of the fractionation fees, which has an impact on operating expenses. In addition, volumes decreased as a result of damage to certain of our and third party Gulf Coast processing, pipeline and production facilities from Hurricane Ike. Truck and barge volumes were also lower for 2009 due to decreased mixed butanes and wholesale activity.
Operating expenses decreased by $21.7 million, or 40%, to $32.4 million for 2009 compared to $54.1 million for 2008. The decrease was due to the lower fuel component discussed above, utility, equipment rental/maintenance, and barge fees related to lower volumes and decreased fuel and utility rates.
Review of Six Months Results
Revenues from services (fractionation, terminalling and storage, transportation and treating) decreased by $17.6 million, or 15%, to $97.8 million for 2009 compared to $115.4 million for 2008. The decrease is primarily due to decreased fractionation and terminalling and storage volumes as a result of damage to certain of our and third party Gulf Coast processing, pipeline and production facilities from Hurricane Ike as well as a lower fuel component of the fractionation fees. In addition, truck and barge volumes were lower for 2009 due to decreased mixed butanes and wholesale activity.
Operating expenses decreased by $30.5 million, or 31%, to $67.9 million for 2009 compared to $98.4 million for 2008. The decrease was due to lower fuel, utility, equipment rental/maintenance, and barge fees related to lower volumes and decreased fuel and utility rates.
NGL Distribution and Marketing Services Segment
Our NGL Distribution and Marketing Services segment markets our own natural gas liquids production and also purchased natural gas liquids products in selected United States markets.
