Incitec Pivot Ltd T.IPL

cibc first look Target (12-18 mos.): C$13.50

[perplexed01]

Q2/20 First Look: Stronger Frac Spreads Lead To Earnings Beat The company reported strong results ahead of both the Street and our estimates, with adjusted EBITDA of $232.5MM vs. our estimate of $216.0MM and consensus of $211MM. FFO per share was $0.43 vs. our estimate of $0.38 and consensus of $0.40. The Oil Sands Transportation business was in line with our estimates, with FFO reported of $151.8MM vs. our $150.7MM estimate. Frac spreads for both Cochrane and, to a lesser extent, Redwater were better than expected, which resulted in NGL Extraction FFO reporting $37.1MM vs. our estimate of $20.0MM, contributing to much of the quarter’s better-than-expected results. The Conventional segment saw higher volumes than we expected despite producer curtailments, but results were weaker due to weaker crude oil marketing with FFO of $26.3MM vs. our estimate of $29.8MM. Lastly, the Bulk Liquids Storage business saw high utilization of 98% vs. our 96% forecast; however, it also faced weaker margins that resulted in FFO of $34.2MM vs our estimate of $36.2MM. While construction activities continue to progress and are tracking to the revised plan, there were no material updates for the Heartland Petrochemical Complex (HPC), nor were there any contracting updates provided. In this environment, we would be surprised if a partner for the HPC is found by the end of the year. Total spending on the project to date is $2.7B with an estimated cost to complete of $4B. Two board members, Mr. Richard Shaw and Mr. Brant Sangster, will be retiring from the board effective at the May 2021 annual general meeting. Mr. Shaw has served on the board as chair since 2014 and the company intends to appoint Ms. Margaret McKenzie as chair following the next annual shareholders meeting. No other nominations or appointments to the board were announced. The company will be hosting a conference call on August 7 at 11:00 AM ET, dial-in: 1-[phone], no passcode required.