RBC Initial CommentsFebruary 20, 2024
Gibson Energy Inc.
Quick Take: Solid EBITDA, a 5% dividend increase and Steve Spaulding (CEO) to retire
TSX: GEI | CAD 20.92 | Outperform | Price Target CAD 27.00
Sentiment: Neutral
Our take
• We view the quarterly results as a slight positive with EBITDA coming in modestly ahead of our expectations. Dividend wise, the 5% increase is consistent with our estimates and median consensus.
• With respect to Steve Spaulding's announced retirement, we would not read anything into his decision as he will remain in his current role until a successor is named.
• Looking to the Q4/23 conference call, we believe the market will be most interested in any commentary with respect to potential future contract extensions for the Gateway Terminal.
Details
EBITDA was modestly ahead of our expectations; DCF/share was in line with our forecast due to elevated maintenance capex. In Q4/23, Gibson Energy's adjusted EBITDA was $170 million, which compares to our estimate of $160 million and consensus of $165 million (11 estimates; range of $160-173 million). Gibson Energy's DCF/share was $0.64 in Q4/23 versus our forecast of $0.65 and $0.61 in Q4/22. While EBITDA was ahead of our expectations, we note that DCF/share was in line with our forecast as maintenance capex was roughly $6 million (about $0.04/share) higher than our estimate.
• Infrastructure: The Infrastructure segment delivered EBITDA of $153 million in Q4/23, compared to our forecast of $147 million, and Q4/22 EBITDA of $110 million.
• Marketing: Marketing EBITDA was $28 million for the quarter versus our forecast of $25 million and $37 million in Q4/22.
• Cash G&A: In Q4/23, cash General & Administrative costs were ($11) million relative to our estimate of ($12) million and ($10) million in Q4/22.
Dividend increased by 5%. Consistent with its typical timing, Gibson Energy increased its dividend to a new annualized rate of $1.64/share (up from $1.56/share). The magnitude of the increase matched our expectations.
Financial metrics remain strong. As at December 31, 2023, debt/adjusted EBITDA was 3.7x, which was slightly above the company's 3.0-3.5x target range despite only including five months of contribution from the Gateway Terminal acquisition. The trailing 12- month dividend payout ratio was 61%, which is below the company's 70-80% target range.
Steve Spaulding to retire as CEO. The company announced Steve Spaulding's intention to retire; however, he will continue to serve as President and CEO, along with remaining on the company's Board of Directors, until a successor has been appointed. The company's Board of Directors will engage a search firm to evaluate internal and external candidates.