NEW YORK (TheStreet) -- Targa Resources Partners (NGLS) stock is rising 4.3% to $31.80 on heavy trading volume on Tuesday afternoon after the partnership agreed to be acquired by Targa Resources Corp. (TRGP).
Targa Resources Corp.'s stock is plunging 8.13% to $53.48 this afternoon, on heavy trading volume.
The natural gas and oil company will pay 0.62 Targa Resources of common shares per each common unit of Targa Resources Partner it does not already own.
"By improving our coverage and credit profile, simplifying our structure, lowering our cost of capital, and increasing our retained cash flow, we will be better positioned to continue to invest in high-return growth projects that will drive dividend growth beyond 2016," Targa Resources Corp. CEO Joe Bob Perkins said in a statement.
Targa Resources Partners was created in October 2006 by Targa Resources Corp. to manage a portfolio of midstream energy assets.
The partnership will no longer be publicly traded following the transaction, which is expected to close in the first quarter of 2016.
So far today, 2.15 million shares of Targa Resources Partners have exchanged hands, compared with its average daily volume of 1.09 million shares.
About 1.88 million shares of Targa Resources Corp. have been traded today, compared with its average daily volume of 900,120.
Separately, TheStreet Ratings team rates TARGA RESOURCES PARTNERS LP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate TARGA RESOURCES PARTNERS LP (NGLS) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and deteriorating net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has increased to $209.80 million or 49.43% when compared to the same quarter last year. In addition, TARGA RESOURCES PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -19.63%.
- Despite the weak revenue results, NGLS has outperformed against the industry average of 33.1%. Since the same quarter one year prior, revenues fell by 15.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 57.9% when compared to the same quarter one year ago, falling from $108.80 million to $45.80 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, TARGA RESOURCES PARTNERS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: NGLS