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Targa Resources Corp TRGP

Rating as of

Morningstar’s Analysis

Valuation
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Stewardship

PREMIUM

Targa's 2Q Is Better Than Expected; Raising FVE

Stephen Ellis Sector Strategist

Analyst Note

| Stephen Ellis |

Targa was able to navigate a difficult second quarter with better-than-expected volumes and fees. We also think the risk of a liquidity issue has been reduced, given its efforts around reducing capital spending and costs (Targa now expects to materially exceed its $100 million in expense savings target), as well as the earlier dividend cut, resulting in current liquidity of over $2.1 billion. We expect Targa to generate excess cash flow after its capital spending and distribution payouts, and its next maturity is in May 2023. That said, adjusted leverage remains high at 4.1 times versus a covenant level of 5.5 times. Given our improved outlook for volumes, fees, and a lower cost of capital, we've increased our fair value estimate to $19.50 a share. We retain our no-moat rating, as well as our extreme uncertainty rating given the still-highly uncertain outlook.

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Company Profile

Business Description

Targa Resources is a midstream firm that primarily operates gathering and processing assets with substantial positions in the Permian, Stack, Scoop, and Bakken plays. It has over 850 bbl/d of net fractionation capacity and operates an LPG export terminal. The Grand Prix natural gas liquids pipeline also recently entered full service.

Contact
811 Louisiana Street, Suite 2100
Houston, TX, 77002
T +1 713 584-1000
Sector Energy
Industry Oil & Gas Midstream
Most Recent Earnings Jun 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type Hard Assets
Employees 2,680