TPH - Target Price $35 09:39 AM EDT, 05/11/2022 (MT Newswires) -- Tudor, Pickering and Holt on Wednesday reiterated its hold rating on the shares of Keyera (KEY.TO) while raising its target price to C$35.00 from C$34.00 as it reviewed the Western Canadian oil and gas processing and infrastructure's first-quarter results.
"Keyera modestly outperformed the AMNA (+2%) after printing a Q1 beat and significantly raising FY'22 Marketing guidance by ~20% at the mid-point," analyst Matt Taylor noted.
The uptick was likely due to two reasons: 1) Marketing outperformance relieves balance sheet stress reducing the need for external equity to track back within its targeted leverage range by Q3'23, and 2) Volumes in the base business continue to outperform.
We held our FY'23 DCF/sh estimate flat at C$3.44/sh due to the Marketing tailwinds affecting only 2022 with the 2023-2025 run-rate guidance of C$250-280MM remaining unchanged (2023e C$293MM). However, we think positive Marketing news has already been priced in as the stock has outperformed the AMNA by ~7% since the Mar'22 Investor Day where guidance was raised.
Therefore, we see the quarterly headline positives being offset by: 1) Continued G&P operational issues overshadowing improving business fundamentals, 2) No new contracting announcements to offset Pembina's blitz on NEBC volumes, and 3) Downstream growth opportunities remain longer-dated. The key positive is management is now more focused on securing long-term contracting on new projects, although the Key Access Pipeline System (KAPS) needs be in-service in order to have a competitive service offering to Pembina.
We see the sale of the 50% non-ops portion of KAPS by PPL CN/KKR in H2'22 being a potential litmus test for project valuation, while producers need to be more willing to allocate capex to the wellhead to accelerate Keyera's unsanctioned backlog.