Pembina Pipeline Corp T.PPL

BUY RATING MAINTAINED

[Ariahp]

Pembina Pipeline Buy Rating Maintained at TPH, Target Price Raised Ahead of Third-Quarter Results

 

06 Oct 202111:48 ET

 

11:48 AM EDT, 10/06/2021 (MT Newswires) -- Tudor, Pickering & Holt on Wednesday reiterated its buy rating on the shares of Pembina Pipeline (PPL.TO) and raised its target price to C$45.00 from C$43.00 as it previewed the Western Canadian energy processing and infrastructure company's third-quarter results.

"For Q3, we are modeling in-line EBITDA of C$845mm driven by rising volumes and higher Alliance earnings offsetting Ruby contract maturities, while dramatically higher frac spreads should buoy Marketing earnings despite hedges in place," analyst Matt Taylor said in a note. "The PAA fractionator fire should only translate to a modest earnings impact from AEGS downtime. We think the setup for 2021 is limited given the tight EBITDA guidance range of C$3.3-3.4B (TPHe C$3.38B) though see upside to 2022 Street numbers (TPHe +3%) driven by: 1) Improved Alliance outlook, 2) Conventional physical volumes expected to exceed 2021 levels, 3) Modest Ruby interruptible volumes, 4) Elevated LPG terminal utilization due to attractive pricing spreads, and 5) Increased Marketing contributions from unhedged exposure (~75%). The stock has struggled to garner interest with a potential equity overhang from the recently settled, but failed, proposed IPL CN acquisition and muted participation in the dramatic commodity pricing rally due to inopportune hedges. Capital discipline and an improved earnings trajectory are necessary to attract investor interest. C$350mm from the IPL CN break fee plus deferred Ruby distributions should cover any potential Ruby capital requirements leaving an above average 2022e FCF profile (+3% vs CAD peers) to either add brownfield expansions (Peace/LPG), repurchase shares, or reduce indebtedness. Maintain Buy."