Targa Resources Partners LP - FORM 10-Q

Attached files

file	filename
EX-4.7 - EX-4.7 - Targa Resources Partners LP	ngls-ex47_267.htm
EX-32.2 - EX-32.2 - Targa Resources Partners LP	ngls-ex322_9.htm
EX-32.1 - EX-32.1 - Targa Resources Partners LP	ngls-ex321_6.htm
EX-31.2 - EX-31.2 - Targa Resources Partners LP	ngls-ex312_7.htm
EX-31.1 - EX-31.1 - Targa Resources Partners LP	ngls-ex311_8.htm
EX-4.10 - EX-4.10 - Targa Resources Partners LP	ngls-ex410_264.htm
EX-4.9 - EX-4.9 - Targa Resources Partners LP	ngls-ex49_265.htm
EX-4.8 - EX-4.8 - Targa Resources Partners LP	ngls-ex48_266.htm
EX-4.6 - EX-4.6 - Targa Resources Partners LP	ngls-ex46_268.htm
EX-4.5 - EX-4.5 - Targa Resources Partners LP	ngls-ex45_269.htm
EX-4.4 - EX-4.4 - Targa Resources Partners LP	ngls-ex44_270.htm

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 June 30, 2018

☐	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)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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	☑	(Do not check if a smaller reporting company)	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 August 6, 2018, 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 June 30, 2018 and December 31, 2017		4

Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017		5

Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2018 and 2017		6

Consolidated Statements of Changes in Owners' Equity for the six months ended June 30, 2018 and 2017		7

Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017		8

Notes to Consolidated Financial Statements		9

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		35

Item 3. Quantitative and Qualitative Disclosures About Market Risk		56

Item 4. Controls and Procedures		60

PART II—OTHER INFORMATION

Item 1. Legal Proceedings		61

Item 1A. Risk Factors		61

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		61

Item 3. Defaults Upon Senior Securities		61

Item 4. Mine Safety Disclosures		61

Item 5. Other Information		61

Item 6. Exhibits		62

SIGNATURES

Signatures		64

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

•

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 marketing facilities and our success in connecting our facilities to transportation services and markets;

•

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

•

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 obtain necessary licenses, permits and other approvals;

•

our ability to grow through acquisitions or internal growth projects 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, 2017 (“Annual Report”) and our reports and registration statements filed from time to time with the United States Securities and Exchange Commission (“SEC”).

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 June 30, 2018 (“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
GPM	Liquid volume equivalent expressed as gallons per 1000 cu. ft. of natural gas
LACT	Lease Automatic Custody Transfer
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

Price Index Definitions
C2-OPIS-MB	Ethane, Oil Price Information Service, Mont Belvieu, Texas
C3-OPIS-MB	Propane, Oil Price Information Service, Mont Belvieu, Texas
C5-OPIS-MB	Natural Gasoline, Oil Price Information Service, Mont Belvieu, Texas
IC4-OPIS-MB	Iso-Butane, Oil Price Information Service, Mont Belvieu, Texas
IF-PB	Inside FERC Gas Market Report, Permian Basin
IF-PEPL	Inside FERC Gas Market Report, Oklahoma Panhandle, Texas-Oklahoma Midpoint
IF-Waha	Inside FERC Gas Market Report, West Texas WAHA
NC4-OPIS-MB	Normal Butane, Oil Price Information Service, Mont Belvieu, Texas
NG-NYMEX	NYMEX, Natural Gas
WTI-NYMEX	NYMEX, West Texas Intermediate Crude Oil

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

TARGA RESOURCES PARTNERS LP

CONSOLIDATED BALANCE SHEETS

					June 30, 2018			December 31, 2017
					(Unaudited)
					(In millions)
ASSETS
Current assets:
Cash and cash equivalents					$	264.8		$	124.7
Trade receivables, net of allowances of $0.0 and $0.1 million at June 30, 2018 and December 31, 2017						880.0			825.7
Inventories						181.4			204.5
Assets from risk management activities						54.2			37.9
Other current assets						35.2			55.8
Total current assets						1,415.6			1,248.6
Property, plant and equipment						15,444.1			14,198.6
Accumulated depreciation						(4,022.9	)		(3,768.7	)
Property, plant and equipment, net						11,421.2			10,429.9
Intangible assets, net						2,074.3			2,165.8
Goodwill, net						256.6			256.6
Long-term assets from risk management activities						21.7			23.2
Investments in unconsolidated affiliates						363.9			221.6
Other long-term assets						17.4			13.3
Total assets					$	15,570.7		$	14,359.0

LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities					$	1,598.8		$	1,106.6
Accounts payable to Targa Resources Corp.						88.3			76.9
Liabilities from risk management activities						103.2			79.7
Current debt obligations						180.0			350.0
Total current liabilities						1,970.3			1,613.2
Long-term debt						5,242.5			4,268.0
Long-term liabilities from risk management activities						35.5			19.6
Deferred income taxes, net						24.0			24.0
Other long-term liabilities						189.2			576.0
Contingencies (see Note 15)
Owners' equity:
Series A preferred limited partners	Issued		Outstanding			120.6			120.6
June 30, 2018		5,000,000		5,000,000
December 31, 2017		5,000,000		5,000,000
Common limited partners	Issued		Outstanding			6,322.2			6,500.3
June 30, 2018		275,168,410		275,168,410
December 31, 2017		275,168,410		275,168,410
General partner	Issued		Outstanding			804.5			808.2
June 30, 2018		5,629,136		5,629,136
December 31, 2017		5,629,136		5,629,136
Accumulated other comprehensive income (loss)						(49.9	)		(46.0	)
						7,197.4			7,383.1
Noncontrolling interests in subsidiaries						911.8			475.1
Total owners' equity						8,109.2			7,858.2
Total liabilities and owners' equity					$	15,570.7		$	14,359.0

See notes to consolidated financial statements.

TARGA RESOURCES PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(Unaudited)
	(In millions)
Revenues:
Sales of commodities (see Note 3)	$	2,154.1		$	1,623.8		$	4,327.4		$	3,481.7
Fees from midstream services (see Note 3)		290.3			243.9			572.6			498.6
Total revenues		2,444.4			1,867.7			4,900.0			3,980.3
Costs and expenses:
Product purchases (see Note 3)		1,905.3			1,420.6			3,846.2			3,074.8
Operating expenses		170.5			155.2			343.6			307.1
Depreciation and amortization expense		202.6			203.4			400.7			394.6
General and administrative expense		53.2			47.5			106.0			92.9
Other operating (income) expense		(46.4	)		0.3			(46.1	)		16.5
Income (loss) from operations		159.2			40.7			249.6			94.4
Other income (expense):
Interest income (expense), net		(57.8	)		(58.9	)		(37.6	)		(117.5	)
Equity earnings (loss)		1.9			(4.2	)		3.4			(16.8	)
Gain (loss) from financing activities		(1.3	)		(10.7	)		(1.3	)		(10.7	)
Change in contingent considerations		60.6			2.1			4.5			(1.2	)
Other, net		—			2.3			—			(2.8	)
Income (loss) before income taxes		162.6			(28.7	)		218.6			(54.6	)
Income tax (expense) benefit		—			(0.5	)		—			4.2
Net income (loss)		162.6			(29.2	)		218.6			(50.4	)
Less: Net income (loss) attributable to noncontrolling interests		9.2			10.2			22.3			16.2
Net income (loss) attributable to Targa Resources Partners LP	$	153.4		$	(39.4	)	$	196.3		$	(66.6	)

Net income attributable to preferred limited partners	$	2.8		$	2.8		$	5.6		$	5.6
Net income (loss) attributable to general partner		3.0			(0.8	)		3.8			(1.4	)
Net income (loss) attributable to common limited partners		147.6			(41.4	)		186.9			(70.8	)
Net income (loss) attributable to Targa Resources Partners LP	$	153.4		$	(39.4	)	$	196.3		$	(66.6	)

See notes to consolidated financial statements.

TARGA RESOURCES PARTNERS LP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(Unaudited)
	(In millions)
Net income (loss)	$	162.6		$	(29.2	)	$	218.6		$	(50.4	)
Other comprehensive income (loss):
Commodity hedging contracts:
Change in fair value		(103.0	)		29.8			(38.3	)		96.0
Settlements reclassified to revenues		7.8			(5.7	)		34.4			0.4
Other comprehensive income (loss)		(95.2	)		24.1			(3.9	)		96.4
Comprehensive income (loss)		67.4			(5.1	)		214.7			46.0
Less: Comprehensive income (loss) attributable to noncontrolling interests		9.2			10.2			22.3			16.2
Comprehensive income (loss) attributable to Targa Resources Partners LP	$	58.2		$	(15.3	)	$	192.4		$	29.8

See notes to consolidated financial statements.

TARGA RESOURCES PARTNERS LP

CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS' EQUITY

																Accumulated
	Limited					Limited					General					Other			Non-
	Partner					Partner					Partner					Comprehensive			controlling
	Preferred		Amount			Common		Amount			Units		Amount			Income (Loss)			Interests			Total
	(Unaudited)
	(In millions, except units in thousands)
Balance, December 31, 2017		5,000	$	120.6			275,168	$	6,500.3			5,629	$	808.2		$	(46.0	)	$	475.1		$	7,858.2
Contributions from Targa Resources Corp.		—		—			—		78.5			—		1.6			—			—			80.1
Acquisition of related party (see Note 14)		—		—			—		—			—		—			—			1.1			1.1
Distributions to noncontrolling interests		—		—			—		—			—		—			—			(33.8	)		(33.8	)
Contributions from noncontrolling interests		—		—			—		—			—		—			—			447.2			447.2
Purchase of noncontrolling interests in subsidiary		—		—			—		—			—		—			—			(0.1	)		(0.1	)
Other comprehensive income (loss)		—		—			—		—			—		—			(3.9	)		—			(3.9	)
Net income (loss)		—	5.6				—		186.9			—		3.8			—			22.3			218.6
Distributions		—		(5.6	)		—		(443.5	)		—		(9.1	)		—			—			(458.2	)
Balance, June 30, 2018		5,000	$	120.6			275,168	$	6,322.2			5,629	$	804.5		$	(49.9	)	$	911.8		$	8,109.2


																Accumulated
	Limited					Limited					General					Other			Non-
	Partner					Partner					Partner					Comprehensive			controlling
	Preferred		Amount			Common		Amount			Units		Amount			Income (Loss)			Interests			Total
	(Unaudited)
	(In millions, except units in thousands)
Balance, December 31, 2016		5,000	$	120.6			275,168	$	5,939.9			5,629	$	796.7		$	(61.8	)	$	355.2		$	7,150.6
Contributions from Targa Resources Corp.		—		—			—		1,572.8			—		32.2			—			—			1,605.0
Purchase of noncontrolling interests in subsidiary		—		—			—		—			—		—			—			(12.5	)		(12.5	)
Distributions to noncontrolling interests		—		—			—		—			—		—			—			(21.7	)		(21.7	)
Contributions from noncontrolling interests		—		—			—		—			—		—			—			16.5			16.5
Other comprehensive income (loss)		—		—			—		—			—		—			96.4			—			96.4
Net income (loss)		—		5.6			—		(70.8	)		—		(1.4	)		—			16.2			(50.4	)
Distributions		—		(5.6	)		—		(394.0	)		—		(8.1	)		—			—			(407.7	)
Balance, June 30, 2017		5,000	$	120.6			275,168	$	7,047.9			5,629	$	819.4		$	34.6		$	353.7		$	8,376.2

See notes to consolidated financial statements.

TARGA RESOURCES PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Six Months Ended June 30,
		2018			2017

	(Unaudited)
	(In millions)
Cash flows from operating activities
Net income (loss)		$	218.6		$	(50.4	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization in interest expense			4.6			4.7
Depreciation and amortization expense			400.7			394.6
Accretion of asset retirement obligations			1.8			2.2
Increase (decrease) in redemption value of mandatorily redeemable preferred interests			(75.4	)		6.9
Equity (earnings) loss of unconsolidated affiliates			(3.4	)		16.8
Distributions of earnings received from unconsolidated affiliates			9.7			4.0
Risk management activities			10.4			5.2
(Gain) loss on sale or disposition of assets			(46.8	)		16.2
(Gain) loss from financing activities			1.3			10.7
Change in contingent considerations included in Other expense (income)			(4.5	)		1.2
Changes in operating assets and liabilities, net of business acquisitions:
Receivables and other assets			(23.9	)		145.7
Inventories

Targa Resources Partners LP - FORM 10-Q - August 8, 2018

Attached files