The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in our
Annual Report on Form 10-K for the year ended December 31, 2020 ("Annual
Report"), as well as the unaudited consolidated financial statements and notes
hereto included in this Quarterly Report on Form 10-Q.



Overview



Targa Resources Corp. (NYSE: TRGP) is a publicly traded Delaware corporation
formed in October 2005. Targa is a leading provider of midstream services and is
one of the largest independent midstream infrastructure companies in North
America. We own, operate, acquire, and develop a diversified portfolio of
complementary domestic midstream infrastructure assets.



Our Operations

We are engaged primarily 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 LPG exporters; and


  • gathering, storing, terminaling and purchasing and selling crude oil.

To provide these services, we operate in two primary segments: (i) Gathering and Processing, and (ii) Logistics and Transportation (also referred to as the Downstream Business).



Our Gathering and Processing segment includes assets used in the gathering
and/or purchase and sale of natural gas produced from oil and gas wells,
removing impurities and processing this raw natural gas into merchantable
natural gas by extracting NGLs; and assets used for the gathering and
terminaling and/or purchase and sale of crude oil. The Gathering and Processing
segment's assets are located in the Permian Basin of West Texas and Southeast
New Mexico (including the Midland, Central and Delaware Basins); the Eagle Ford
Shale in South Texas; the Barnett Shale in North Texas; the Anadarko, Ardmore,
and Arkoma Basins in Oklahoma (including the SCOOP and STACK) and South Central
Kansas; the Williston Basin in North Dakota (including the Bakken and Three
Forks plays); and the onshore and near offshore regions of the Louisiana Gulf
Coast and the Gulf of Mexico.



Our Logistics and Transportation segment includes the activities and assets
necessary to convert mixed NGLs into NGL products and also includes other assets
and value-added services such as transporting, storing, fractionating,
terminaling, and marketing of NGLs and NGL products, including services to LPG
exporters and certain natural gas supply and marketing activities in support of
our other businesses. The Logistics and Transportation segment also includes the
Grand Prix NGL Pipeline ("Grand Prix"), which connects our gathering and
processing positions in the Permian Basin, Southern Oklahoma and North Texas
with our downstream facilities in Mont Belvieu, Texas, as well as our equity
interest in Gulf Coast Express Pipeline LLC ("GCX"), a natural gas pipeline
connecting the Waha hub in West Texas and other receipt points, including many
of our Midland Basin processing facilities, to Agua Dulce in South Texas and
other delivery points. The associated assets, including these pipelines, are
generally connected to and supplied in part by our Gathering and Processing
segment and, except for the pipelines and smaller terminals, are located
predominantly in Mont Belvieu and Galena Park, Texas, and in Lake Charles,
Louisiana.

Other contains the unrealized mark-to-market gains/losses related to derivative contracts that were not designated as cash flow hedges.





Recent Developments



COVID-19 Pandemic



The global spread of COVID-19 during 2020 and in the first half of 2021 has
caused significant market volatility. There has been, and likely will continue
to be, volatility in commodity prices and in the relationships among NGL, crude
oil and natural gas prices.



We are currently experiencing no material issues with potential workforce
disruptions and remain focused on safeguarding employee health and safety and
ensuring safe and reliable operations in response to COVID-19 and the pace of
markets reopening. Additionally, we are currently experiencing no material
supply chain disruptions and our relationships with our major customers continue
to be strong. However, if any of these circumstances change, our business could
be adversely affected. Additionally, although significant progress has been made
towards the development, distribution and administration of various COVID-19
vaccines, there is significant

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uncertainty around the breadth and duration of the disruptions to global markets, the pace of markets reopening and other effects related to COVID-19. As a result, we are unable to determine the extent that these events could materially impact our future financial position, operations and/or cash flows.





Impact of Winter Weather



In February 2021, the Central region of the United States experienced
unprecedented cold temperatures during a major winter storm that disrupted
production operations, midstream infrastructure and many other services. This
extreme weather caused wide fluctuations in commodity prices, short-term
disruptions to Targa's operations across Texas, Oklahoma and Louisiana,
including reduced throughput volumes coming into our systems, and adversely
affected the operations and financial condition of some of our counterparties.
Though certain Company facilities experienced temporary outages, all facilities
have since returned to full operations without sustaining any long-term impacts
or significant adverse financial impacts related to the weather event, and
throughput volumes have returned to pre-storm levels. The full financial impact
of the winter storm still remains uncertain as it is subject to recently
proposed regulatory changes and potential customer and counterparty risk. For
further discussion, see "Item 1A. Risk Factors."

Permian Midland Processing Expansion





In November 2020, we announced the transfer of an existing cryogenic natural gas
processing plant from our North Texas system (the "Longhorn Plant"), to our
Permian Midland system. The plant will be relocated to and installed in Reagan
County, Texas, in 2021, as a new 200 MMcf/d cryogenic natural gas processing
plant (the "Heim Plant"). The Heim Plant will process natural gas production
from the Permian Basin and is expected to begin operations in the third quarter
of 2021.



In August 2021, in response to increasing production and to meet the
infrastructure needs of producers, we announced the construction of a new 250
MMcf/d cryogenic natural gas processing plant in the Midland Basin (the "Legacy
Plant"). The Legacy Plant is expected to begin operations in the fourth quarter
of 2022.



Financing Activities



In February 2021, the Partnership issued $1.0 billion of 4% Senior Notes due
2032, resulting in net proceeds of approximately $991 million. A portion of the
net proceeds from the issuance were used to fund the concurrent cash tender
offer (the "February Tender Offer") and subsequent redemption payment for the
Partnership's 5?% Senior Notes due 2025 (the "5?% Notes"), with the remainder
used for repayment of borrowings under the Partnership's senior secured
revolving credit facility (the "TRP Revolver") and our senior secured revolving
credit facility (the "TRC Revolver"). As a result of the February Tender Offer
and the subsequent redemption of the 5?% Notes, we recorded a loss due to debt
extinguishment of $14.9 million comprised of $12.5 million of premiums paid and
a write-off of $2.4 million of debt issuance costs.



Additionally, Targa Pipeline Partners LP ("TPL") issued notices of redemption
for all of the outstanding TPL 4¾% Senior Notes due 2021 and TPL 5?% Senior
Notes due 2023 (collectively, the "TPL Notes"). These notes were redeemed on
February 22, 2021 with available liquidity under the TRP Revolver. As a result
of the redemptions of the TPL Notes, we recorded a gain due to debt
extinguishment of $0.2 million.



In April 2021, the Partnership issued a notice of redemption for all of the
outstanding 4¼% Senior Notes due 2023 (the "4¼% Notes"). The notes were redeemed
on May 17, 2021 with available liquidity under the TRP Revolver. As a result of
the redemption of the 4¼% Notes, we recorded a loss due to debt extinguishment
of $1.9 million.



We or the Partnership may retire or purchase various series of our outstanding
debt through cash purchases and/or exchanges for other debt, in open market
purchases, privately negotiated transactions or otherwise. Such repurchases or
exchanges, if any, will depend on prevailing market conditions, our liquidity
requirements, contractual restrictions and other factors. The amounts involved
may be material.



On April 21, 2021, we amended the Partnership's accounts receivable
securitization facility (the "Securitization Facility") to increase the facility
size from $350.0 million to $400.0 million to more closely align with our
expectations for borrowing needs given current commodity prices and to extend
the facility termination date to April 21, 2022.

For additional information about our debt-related transactions, see Note 5 - Debt Obligations to our consolidated financial statements.


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Corporation Tax Matters



The IRS notified us on April 3, 2019, that it will examine Targa's federal
income tax returns (Form 1120) for 2014, 2015 and 2016. The IRS completed their
examination without proposing any adjustments, and the Joint Committee on
Taxation approved the IRS' findings without any exception. The Joint Committee
on Taxation sent Targa a closing letter dated February 23, 2021. The closing
letter effectively ends the IRS' audit of Targa's federal income tax returns for
2014, 2015 and 2016.

FERC Regulatory Matters

On May 14, 2021, FERC issued a revised oil pricing index factor that used the
Producer Price Index for Finished Goods plus an index level of 0.78%, resulting
in a negative percent change for the index year July 1, 2021, through June 30,
2022. This means that the ceiling level for certain oil pipelines' rates may
decrease and, if the actual transportation rate would be above such ceiling
level, the rate must decrease to be equal to or less than the applicable
ceiling. However, a number of our pipeline rates, including all rates on Grand
Prix Pipeline LLC and Targa Gulf Coast NGL Pipeline LLC, and certain rates on
Targa NGL Pipeline Company LLC had not been adjusted in a number of years, and,
therefore, these pipelines increased their rates to equal the applicable new
ceiling level. Certain rates on the Targa NGL Pipeline Company LLC system were
reduced to equal the ceiling level. FERC's final application of its indexing
rate methodology for the next five-year term of index rates may impact our
revenues associated with any transportation services we may provide pursuant to
rates adjusted by the FERC oil pipeline index.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements that will affect us, see "Recent Accounting Pronouncements" included within Note 3 - Significant Accounting Policies in our Consolidated Financial Statements.

How We Evaluate Our Operations





The profitability of our business is a function of the difference between: (i)
the revenues we receive from our operations, including fee-based revenues from
services and revenues from the natural gas, NGLs, crude oil and condensate we
sell, and (ii) the costs associated with conducting our operations, including
the costs of wellhead natural gas, crude oil and mixed NGLs that we purchase as
well as operating, general and administrative costs and the impact of our
commodity hedging activities. Because commodity price movements tend to impact
both revenues and costs, increases or decreases in our revenues alone are not
necessarily indicative of increases or decreases in our profitability. Our
contract portfolio, the prevailing pricing environment for crude oil, natural
gas and NGLs, the impact of our commodity hedging program and its ability to
mitigate exposure to commodity price movements, and the volumes of crude oil,
natural gas and NGL throughput on our systems are important factors in
determining our profitability. Our profitability is also affected by the NGL
content in gathered wellhead natural gas, supply and demand for our products and
services, utilization of our assets and changes in our customer mix.



Our profitability is also impacted by fee-based contracts. Our growing capital
expenditures for pipelines and gathering and processing assets underpinned by
fee-based margin, expansion of our downstream facilities, continued focus on
adding fee-based margin to our existing and future gathering and processing
contracts, as well as third-party acquisitions of businesses and assets, will
continue to increase the number of our contracts that are fee-based. Fixed fees
for services such as gathering and processing, transportation, fractionation,
storage, terminaling and crude oil gathering are not directly tied to changes in
market prices for commodities. Nevertheless, a change in market dynamics such as
available commodity throughput does affect profitability.



Management uses a variety of financial measures and operational measurements to
analyze our performance. These include: (1) throughput volumes, facility
efficiencies and fuel consumption, (2) operating expenses, (3) capital
expenditures and (4) the following non-GAAP measures: gross margin, operating
margin, Adjusted EBITDA, distributable cash flow and free cash flow.

Throughput Volumes, Facility Efficiencies and Fuel Consumption





Our profitability is impacted by our ability to add new sources of natural gas
supply and crude oil supply to offset the natural decline of existing volumes
from oil and natural gas wells that are connected to our gathering and
processing systems. This is achieved by connecting new wells and adding new
volumes in existing areas of production, as well as by capturing crude oil and
natural gas supplies currently gathered by third parties. Similarly, our
profitability is impacted by our ability to add new sources of mixed NGL supply,
connected by third-party transportation and Grand Prix, to our Downstream
Business fractionation facilities and at times to our export facilities. We
fractionate NGLs generated by our gathering and processing plants, as well as by
contracting for mixed NGL supply from third-party facilities.



In addition, we seek to increase operating margin by limiting volume losses,
reducing fuel consumption and by increasing efficiency. With our gathering
systems' extensive use of remote monitoring capabilities, we monitor the volumes
received at the wellhead or central delivery points along our gathering systems,
the volume of natural gas received at our processing plant inlets and the
volumes

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of NGLs and residue natural gas recovered by our processing plants. We also
monitor the volumes of NGLs received, stored, fractionated and delivered across
our logistics assets. This information is tracked through our processing plants
and Downstream Business facilities to determine customer settlements for sales
and volume related fees for service and helps us increase efficiency and reduce
fuel consumption.



As part of monitoring the efficiency of our operations, we measure the
difference between the volume of natural gas received at the wellhead or central
delivery points on our gathering systems and the volume received at the inlet of
our processing plants as an indicator of fuel consumption and line loss. We also
track the difference between the volume of natural gas received at the inlet of
the processing plant and the NGLs and residue gas produced at the outlet of such
plant to monitor the fuel consumption and recoveries of our facilities. Similar
tracking is performed for our crude oil gathering and logistics assets and our
NGL pipelines. These volume, recovery and fuel consumption measurements are an
important part of our operational efficiency analysis and safety programs.



Operating Expenses



Operating expenses are costs associated with the operation of specific assets.
Labor, contract services, repair and maintenance and ad valorem taxes comprise
the most significant portion of our operating expenses. These expenses remain
relatively stable and independent of the volumes through our systems, but may
increase with system expansions and will fluctuate depending on the scope of the
activities performed during a specific period.



Capital Expenditures



Our capital expenditures are classified as growth capital expenditures and
maintenance capital expenditures. Growth capital expenditures improve the
service capability of the existing assets, extend asset useful lives, increase
capacities from existing levels, add capabilities, and reduce costs or enhance
revenues. Maintenance capital expenditures are those expenditures that are
necessary to maintain the service capability of our existing assets, including
the replacement of system components and equipment, which are worn, obsolete or
completing their useful life and expenditures to remain in compliance with
environmental laws and regulations.

Capital spending associated with growth and maintenance projects is closely monitored. Return on investment is analyzed before a capital project is approved, spending is closely monitored throughout the development of the project, and the subsequent operational performance is compared to the assumptions used in the economic analysis performed for the capital investment approval.





Non-GAAP Measures



We utilize non-GAAP measures to analyze our performance. Gross margin, operating
margin, Adjusted EBITDA, distributable cash flow, and free cash flow are
non-GAAP measures. The GAAP measure most directly comparable to these non-GAAP
measures is net income (loss) attributable to TRC. These non-GAAP measures
should not be considered as an alternative to GAAP net income attributable to
TRC and have important limitations as analytical tools. Investors should not
consider these measures in isolation or as a substitute for analysis of our
results as reported under GAAP. Additionally, because our non-GAAP measures
exclude some, but not all, items that affect net income, and are defined
differently by different companies within our industry, our definitions may not
be comparable with similarly titled measures of other companies, thereby
diminishing their utility. Management compensates for the limitations of our
non-GAAP measures as analytical tools by reviewing the comparable GAAP measures,
understanding the differences between the measures and incorporating these
insights into our decision-making processes.



Gross Margin

We define gross margin as revenues less product purchases and fuel. It is impacted by volumes and commodity prices as well as by our contract mix and commodity hedging program.

Gathering and Processing segment gross margin consists primarily of:

• service fees related to natural gas and crude oil gathering, treating and

processing; and

• revenues from the sale of natural gas, condensate, crude oil and NGLs less


        producer payments, natural gas and crude oil purchases, and our equity
        volume hedge settlements.

Logistics and Transportation segment gross margin consists primarily of:

• service fees (including the pass-through of energy costs included in fee


        rates);


  • system product gains and losses; and


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    •   NGL and natural gas sales, less NGL and natural gas purchases, fuel,

        third-party transportation costs and the net inventory change.

The gross margin impacts of mark-to-market hedge unrealized changes in fair value are reported in Other.





Operating Margin

We define operating margin as gross margin less operating expenses. Operating margin is an important performance measure of the core profitability of our operations.





Management reviews business segment gross margin and operating margin monthly as
a core internal management process. We believe that investors benefit from
having access to the same financial measures that management uses in evaluating
our operating results. Gross margin and operating margin provide useful
information to investors because they are used as supplemental financial
measures by management and by external users of our financial statements,
including investors and commercial banks, to assess:

• the financial performance of our assets without regard to financing

methods, capital structure or historical cost basis;

• our operating performance and return on capital as compared to other

companies in the midstream energy sector, without regard to financing or

capital structure; and

• the viability of capital expenditure projects and acquisitions and the


        overall rates of return on alternative investment opportunities.




Adjusted EBITDA



We define Adjusted EBITDA as net income (loss) attributable to TRC before
interest, income taxes, depreciation and amortization, and other items that we
believe should be adjusted consistent with our core operating performance. The
adjusting items are detailed in the Adjusted EBITDA reconciliation table and its
footnotes. Adjusted EBITDA is used as a supplemental financial measure by us and
by external users of our financial statements such as investors, commercial
banks and others to measure the ability of our assets to generate cash
sufficient to pay interest costs, support our indebtedness and pay dividends to
our investors.

Distributable Cash Flow and Free Cash Flow



We define distributable cash flow as Adjusted EBITDA less distributions to TRP
preferred limited partners, cash interest expense on debt obligations, cash tax
(expense) benefit and maintenance capital expenditures (net of any
reimbursements of project costs). The Preferred Units that were issued by the
Partnership in October 2015 were redeemed in December 2020, and are no longer
outstanding. We define free cash flow as distributable cash flow less growth
capital expenditures, net of contributions from noncontrolling interest, and net
contributions to investments in unconsolidated affiliates. Distributable cash
flow and free cash flow are performance measures used by us and by external
users of our financial statements, such as investors, commercial banks and
research analysts, to assess our ability to generate cash earnings (after
servicing our debt and funding capital expenditures) to be used for corporate
purposes, such as payment of dividends, retirement of debt or redemption of
other financing arrangements.



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Our Non-GAAP Financial Measures

The following tables reconcile the non-GAAP financial measures used by management to the most directly comparable GAAP measures for the periods indicated:





                                               Three Months Ended June 30,             Six Months Ended June 30,
                                               2021                  2020                2021               2020
                                                                        (In

millions)


Reconciliation of Net Income (Loss)
attributable to TRC to Operating Margin
and Gross Margin
Net income (loss) attributable to TRC      $         56.2        $         81.0      $        202.6     $   (1,656.8 )
Net income (loss) attributable to
noncontrolling interests                             99.2                  96.1               180.7             13.6
Net income (loss)                                   155.4                 177.1               383.3         (1,643.2 )
Depreciation and amortization expense               211.9                 204.5               428.0            443.6
General and administrative expense                   63.7                  61.5               125.1            121.9
Impairment of long-lived assets                         -                     -                   -          2,442.8
Interest (income) expense, net                       94.8                  96.7               193.2            194.7
Equity (earnings) loss                              (12.8 )               (14.9 )             (24.6 )          (35.5 )
Income tax expense (benefit)                          6.6                 (23.2 )              21.6           (318.5 )
(Gain) loss on sale or disposition of
business and assets                                  (0.4 )                (0.7 )              (0.2 )              -
Write-down of assets                                  1.1                     -                 4.7                -
(Gain) loss from financing activities                 1.9                 (21.8 )              16.6            (61.1 )
Other, net                                           (0.1 )                 0.3                (0.1 )            0.8
Operating margin                           $        522.1        $        479.5      $      1,147.6     $    1,145.5
Operating expenses                                  184.8                 163.9               355.8            344.7
Gross margin                               $        706.9        $        643.4      $      1,503.4     $    1,490.2




                                         Three Months Ended June 30,             Six Months Ended June 30,
                                         2021                  2020                2021               2020
                                                                  (In

millions)


Reconciliation of Net Income
(Loss) attributable to TRC to
Adjusted EBITDA, Distributable
Cash Flow and Free Cash Flow
Net income (loss) attributable to    $                    $                    $                  $
TRC                                           56.2                   81.0              202.6          (1,656.8 )
Income attributable to TRP
preferred limited partners                       -                    2.8                  -               5.6
Interest (income) expense, net                94.8                   96.7              193.2             194.7
Income tax expense (benefit)                   6.6                  (23.2 )             21.6            (318.5 )
Depreciation and amortization
expense                                      211.9                  204.5              428.0             443.6
Impairment of long-lived assets                  -                      -                  -           2,442.8
(Gain) loss on sale or
disposition of business and
assets                                        (0.4 )                 (0.7 )             (0.2 )               -
Write-down of assets                           1.1                      -                4.7                 -
(Gain) loss from financing
activities (1)                                 1.9                  (21.8 )             16.6             (61.1 )
Equity (earnings) loss                       (12.8 )                (14.9 )            (24.6 )           (35.5 )
Distributions from unconsolidated
affiliates and preferred partner
interests, net                                26.9                   27.7               60.2              53.4
Compensation on equity grants                 15.0                   16.1               29.9              33.1
Risk management activities                    69.7                  (10.4 )             68.2            (125.9 )
Severance and related benefits                   -                    6.5                  -               6.5
Noncontrolling interests
adjustments (2)                              (10.9 )                (13.1 )            (24.5 )          (202.6 )
TRC Adjusted EBITDA                  $       460.0        $         351.2      $       975.7      $      779.3
Distributions to TRP preferred
limited partners                                 -                   (2.8 )                -              (5.6 )
Interest expense on debt
obligations (3)                              (95.5 )                (94.1 )           (194.2 )          (191.2 )
Maintenance capital expenditures             (26.2 )                (26.8 )            (47.2 )           (53.7 )
Noncontrolling interests
adjustments of maintenance
capital expenditures                           2.0                    1.8                4.0               2.3
Cash taxes                                    (0.8 )                 44.4               (1.3 )            44.4
Distributable Cash Flow              $       339.5        $         273.7      $       737.0      $      575.5
Growth capital expenditures, net
(4)                                          (83.4 )               (143.3 )           (144.4 )          (404.5 )
Free Cash Flow                       $       256.1        $         130.4      $       592.6      $      171.0

(1) Gains or losses on debt repurchases or early debt extinguishments.

(2) Noncontrolling interest portion of depreciation and amortization expense


    (including the effects of the impairment of long-lived assets on
    non-controlling interests), net of non-cash accretion of noncontrolling
    interests.

(3) Excludes amortization of interest expense.

(4) Represents growth capital expenditures, net of contributions from


    noncontrolling interests, and net contributions to investments in
    unconsolidated affiliates.




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