Targa Resources Corp. Prices $2.0 Billion Offering of Senior Notes

Rhea-AI Summary

Targa Resources Corp. (NYSE: TRGP) has priced an underwritten public offering of $2.0 billion in senior notes, consisting of $1.0 billion of 5.550% Senior Notes due 2035 and $1.0 billion of 6.125% Senior Notes due 2055. The notes are priced at 99.610% and 99.781% of face value, respectively.

The offering is expected to close on February 27, 2025, subject to customary closing conditions. Targa plans to use approximately $1.8 billion of the proceeds to repurchase all outstanding preferred equity in Targa Badlands from its joint venture partner. This transaction, expected to close in Q1 2025 with an effective date of January 1, 2025, will give Targa full ownership of its North Dakota assets.

The remaining proceeds will be used for general corporate purposes, including repaying borrowings under its commercial paper program. If the Badlands Transaction doesn't complete, all proceeds will go toward general corporate purposes, debt repayment, capital expenditures, working capital, and subsidiary investments.

Positive

• Raising $2 billion through senior notes offering
• Acquiring full ownership of North Dakota assets through $1.8 billion Badlands Transaction
• Offering proceeds provide flexibility for debt repayment and capital expenditures

Negative

• Taking on $2 billion in additional long-term debt
• 5.550% and 6.125% interest rates represent significant ongoing interest expense
• Large cash outflow of $1.8 billion for the Badlands Transaction

Insights

Financial Analyst

Targa Resources' $2 billion senior notes offering represents a strategic financial maneuver with significant implications for the midstream operator's growth trajectory and capital structure. By pricing $1 billion of 10-year notes at 5.550% and $1 billion of 30-year notes at 6.125%, Targa has secured long-term capital at relatively favorable rates in the current interest rate environment.

The centerpiece of this financing is Targa's $1.8 billion buyout of its joint venture partner's preferred equity in Targa Badlands , which controls the company's Bakken shale gathering and processing infrastructure in North Dakota. This consolidation play eliminates the preferred equity dividend obligations and gives Targa full operational control and economic rights to these strategically valuable assets.

The transaction's retroactive effective date of January 1, 2025, is particularly noteworthy as it means Targa will recognize all financial benefits from these assets for the entire fiscal year, potentially providing an immediate boost to 2025 earnings and cash flow metrics. This structure suggests management anticipates strong performance from these assets and wanted to capture their full economic benefit as early as possible.

From a balance sheet perspective, while this debt issuance will increase Targa's leverage in the near term, the company appears to be making a calculated decision to optimize its capital structure. The long-dated maturities (2035 and 2055) help extend Targa's debt profile and reduce refinancing risk, while the pricing indicates the market's confidence in Targa's long-term financial stability.

The strategic implications are equally significant. By taking full ownership of its Bakken assets, Targa is signaling confidence in the long-term viability of the basin at a time when some competitors have reduced their exposure to the region. This move streamlines decision-making for future capital allocation and potentially positions Targa for additional bolt-on acquisitions in the area.

For investors, this transaction represents a meaningful shift in Targa's North Dakota strategy from a shared-economics model to full ownership, suggesting management sees untapped value that can be better realized under complete control. The transaction's structure and timing indicate a deliberate, strategic approach to capital deployment that prioritizes long-term asset control over short-term balance sheet metrics.

HOUSTON, Feb. 24, 2025 (GLOBE NEWSWIRE) -- Targa Resources Corp. (“Targa” or the “Company”) (NYSE: TRGP) announced today the pricing of an underwritten public offering (the “Offering”) of $1.0 billion aggregate principal amount of its 5.550% Senior Notes due 2035 and $1.0 billion aggregate principal amount of its 6.125% Senior Notes due 2055 at a price to the public of 99.610% and 99.781% of their face value, respectively. The Offering is expected to close on February 27, 2025, subject to the satisfaction of customary closing conditions.

The Company expects to use a portion of the net proceeds from the Offering to fund the repurchase from the Company's joint venture partner of all of the outstanding preferred equity in Targa Badlands LLC, the entity that holds all of the Company's North Dakota assets, for approximately $1.8 billion in cash (the “Badlands Transaction”). The Company expects the Badlands Transaction to close in the first quarter of 2025, subject to customary closing conditions, with an effective date of January 1, 2025. The closing of the Offering is not contingent on the consummation of the Badlands Transaction. The Company expects to use the remaining net proceeds from the Offering for general corporate purposes, including to repay borrowings under its unsecured commercial paper note program (the “Commercial Paper Program”). If the Company does not complete the Badlands Transaction, the Company expects to use the net proceeds from the Offering for general corporate purposes, including to repay borrowings under the Commercial Paper Program, repay other indebtedness, for capital expenditures, for additions to working capital and for investments in its subsidiaries.

This Offering is being made pursuant to an effective shelf registration statement and prospectus filed by the Company with the U.S. Securities and Exchange Commission (the “SEC”) and may be made only by means of a prospectus and prospectus supplement related to such Offering meeting the requirements of Section 10 of the Securities Act of 1933, as amended (the “Securities Act”). This announcement shall not constitute an offer to sell or a solicitation of an offer to buy any of these securities, except as required by law.

About Targa Resources Corp.

Targa Resources Corp. (NYSE: TRGP) is a leading provider of midstream services and is one of the largest independent infrastructure companies in North America. The Company owns, operates, acquires, and develops a diversified portfolio of complementary domestic infrastructure assets and its operations are critical to the efficient, safe and reliable delivery of energy across the United States and increasingly to the world. The Company’s assets connect natural gas and natural gas liquids (“NGL(s)”) to domestic and international markets with growing demand for cleaner fuels and feedstocks. The Company is primarily engaged in the business of: gathering, compressing, treating, processing, transporting, and purchasing and selling natural gas; transporting, storing, fractionating, treating, and purchasing and selling NGLs and NGL products, including services to liquified petroleum gas exporters; and gathering, storing, terminaling, and purchasing and selling crude oil.

The principal executive offices of Targa Resources Corp. are located at 811 Louisiana, Suite 2100, Houston, TX 77002, and its telephone number is 713-584-1000.

Forward-Looking Statements

Certain statements in this release are “forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future, are forward-looking statements, including the closing of the Badlands Transaction and the expected closing date and use of proceeds from the Offering. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties, factors and risks, many of which are outside the Company’s control, which could cause results to differ materially from those expected by management of the Company. Such risks and uncertainties include, but are not limited to, those described more fully in the Company’s filings with the SEC, including its most recent Annual Report on Form 10-K. The Company does not undertake an obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Targa Investor Relations
InvestorRelations@targaresources.com
(713) 584-1133

FAQ

What is the size and structure of Targa Resources' (TRGP) February 2025 senior notes offering?

Targa Resources priced a $2.0 billion offering of senior notes, split between $1.0 billion of 5.550% notes due 2035 and $1.0 billion of 6.125% notes due 2055, priced at 99.610% and 99.781% of face value respectively.

How will Targa Resources (TRGP) use the proceeds from its $2 billion senior notes offering?

Targa will use approximately $1.8 billion to repurchase all preferred equity in Targa Badlands from its joint venture partner, with remaining funds for general corporate purposes including repaying commercial paper borrowings.

When is Targa Resources (TRGP) expected to close the Badlands Transaction?

The Badlands Transaction is expected to close in the first quarter of 2025, with an effective date of January 1, 2025, subject to customary closing conditions.

What assets will Targa Resources (TRGP) gain full control of through the Badlands Transaction?

Through the Badlands Transaction, Targa will gain full ownership of Targa Badlands , the entity that holds all of the company's North Dakota assets.

What is the closing date for Targa Resources' (TRGP) $2 billion senior notes offering?

The senior notes offering is expected to close on February 27, 2025, subject to the satisfaction of customary closing conditions.