Buy Rating at TPH, Price Target Raised to $51 9:47 AM EDT, 04/11/2022 (MT Newswires) -- Tudor, Pickering and Holt on Monday reiterated its buy rating on the shares of Pembina Pipeline (PPL.TO) and raised its price target to C$51.00 from C$47.00 as it expects solid results when the oil and gas infrastructure and processing company reports first-quarter earnings on May 5.
"We are modeling a Q1'22 EBITDA beat of C$934MM (+4% vs Street) driven by rising volumes and strong Marketing contributions offsetting weak Ruby contributions and higher corporate G&A,"
Aanalyst Matt Taylor noted. "The increased corporate costs are the result of higher share-based compensation from an improved share price (+22% q/q) and spending on continuous improvement initiatives. We don't think another beat will necessarily push the stock higher (recall it traded in-line after posting a 9% Q4 beat) but investors will be looking for constructive commentary on three themes for momentum to continue: 1) Resolution of the Blueberry River dispute in NEBC (northeast British Columbia) to alleviate development uncertainty (TPHe months, not years), 2) Producers' willingness to add incremental volumes that exceed contracted levels, and 3) 2022 EBITDA guidance revision to reflect improving volumes, strong Marketing margins, and inclusion of Newco earnings (TPHe C$3.63B vs guidance of C$3.35-3.55B).
Commercial discussions around restarting deferred growth projects (Peace Phase 8, LPG expansion) and further clarity on unsanctioned opportunities (Frac IV, Peace Phases 9-10) will be topical. We see Pembina having the right combination of discounted valuation (~0.5x 2023 EV/EBITDA discount vs NAm peers) and earnings torque translating to excess free cash flow (TPHe 9% FCF yield vs peers of 8%) to supplement shareholder returns should volume growth remain muted. Maintain Buy."