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Targa Resources Corp TRGP

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Morningstar’s Analysis

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After Boosting Our G&P Volumes to Reflect the 2021 Recovery, We're Raising Our FVE for Targa

Stephen Ellis Sector Strategist

Analyst Note

| Stephen Ellis |

After updating our model to reflect Targa's higher guidance, our fair value estimate increases to $38 per share. Targa’s second-quarter results benefited from higher Permian gas volumes, thanks primarily to higher activity by private operators, in our view. The incremental gas is also being moved using Targa pipes and assets, generating additional fees, as both the Grand Prix pipeline and Targa’s fractionation assets hit record volumes. As a result, Targa increased its 2021 EBITDA guidance to a midpoint of $1.95 billion from its prior midpoint guidance of $1.85 billion last quarter. The incremental cash is being applied smartly toward debt reduction for the time being, as Targa’s 2021 leverage target falls to 3.5 times from 4 times last quarter. However, with the likely Stonepeak transaction, at a cost of around $1 billion, which could be formally announced in early 2022, it’s not clear if this improvement can be maintained. 

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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 813,000 barrels a day of gross fractionation capacity at Mont Belvieu and operates a liquefied petroleum gas export terminal. The Grand Prix natural gas liquids pipeline recently entered full service.

811 Louisiana Street, Suite 2100
Houston, TX, 77002
T +1 713 584-1000
Sector Energy
Industry Oil & Gas Midstream
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Hard Assets
Employees 2,372