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Targa Resources Corp TRGP

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Morningstar’s Analysis

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Targa Pivots to Debt Reduction in First Quarter; We Expect Leverage Will Be an Ongoing Issue

Stephen Ellis Sector Strategist

Analyst Note

| Stephen Ellis |

Targa's focus on debt reduction during the first quarter and freeing up cash to do so will likely be an ongoing focus for the rest of the year. The firm offered a 2020 EBITDA range of $1.4 billion to $1.625 billion, and our estimate sits at the low end of the range at $1.4 billion as we remain concerned about lower levels of drilling activity and stressed producers. Targa's exposure to weaker customers is greater than peers, as it disclosed that about half its revenue by our estimates is from investment-grade or letter of credit backed customers. This is far lower than peers, which tend to be around 75%-85% investment-grade or letter of credit backed. We plan to maintain our $13 fair value estimate and reiterate our extreme uncertainty rating.

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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 670 bbl/d of net fractionation capacity and operates an LPG export terminal. The Grand Prix natural gas liquids pipeline also 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 Mar 31, 2020
Fiscal Year End Dec 31, 2020
Stock Type Hard Assets
Employees 2,680