Why Targa Resources Stock Rallied Nearly 12% in December
Shares of Targa Resources (NYSE: TRGP) jumped 11.8% in December, according to data provided by S&P Global Market Intelligence. The energy company benefited from higher oil prices as well as the upcoming uptick in its cash flow from recently completed expansion projects.
Crude oil rallied about 11% last month. While oil prices don't typically have much direct impact on the cash flows of most midstream companies, that's not the case with Targa Resources. That's because about 25% of its earnings are supplied by percent-of-proceeds contracts and other similar agreements based on commodity prices. For comparison sake, most peers like to keep their direct exposure to commodity prices to less than 20% of the total. But Targa's higher exposure, which is a headwind when prices fall, benefits it when they improve. As such, crude's rally in December should fuel higher commodity-based earnings for the company.
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Source Fool.com
