Scotia UpdatePembina Pipeline Corporation Q4/20 Initial Take: A Strong End to 2020 - Outlook for 2021 Intact
OUR TAKE: Slight Positive. Pembina's Q4/20 results were ahead of expectations on the back of strong Pipelines and Marketing contributions. Adjusted EBITDA of $866m was ahead of our $828m estimate and consensus of $833m (range $771m-$855m). Free cash flow per share of $1.10 was slightly ahead of our $1.07 estimate and well ahead of consensus of $1.03 (range $0.92-$1.16). The company met its 2020 EBITDA guidance range and reiterated its guidance for 2021. At this point we don't see anything to materially change our longer term outlook on the name, and note we are already towards the upper end of the 2021 guidance range. We will update our estimates after the conference call tomorrow at 10 a.m. ET, dial-in: 1-888-231-8191.
KEY POINTS
Pipelines EBITDA of $577m was above our $553m estimate and consensus of $559m and up 24% y/y. Driving the y/y growth was the contribution from the assets acquired in the Kinder Morgan Canada acquisition (i.e., Cochin and Edmonton terminals) and the incremental contribution from the Phase VI Expansion. The beat versus our estimate was due to higher Conventional revenues. This was partially offset by some weakness at Alliance given less favourable differentials. Management noted that volumes were trending upwards to start the year. Many of its systems are operating at or near take-orpay levels.
Facilities EBITDA of $255m was in line with our $257m estimate and slightly below consensus of $262m. Volumes were down 3% y/y due to Younger maintenance and lower drilling activity associated with the Veresen Midstream assets. The segment benefited from the incremental contribution from the Kinder Morgan Canada assets, partially offset by lower cash flow from Resthaven, Cutbank and Younger.
Marketing and New Ventures EBITDA of $75m was ahead of our $57m estimate and consensus of $52m. The segment benefited from the monetization of some storage positions, partially offset by the lower crude pricing and frac spreads during the quarter. There was also weakness at Aux Sable due to the narrower AECO-Chicago differential.
Strong funding position, NCIB in place. In 2021 we see Pembina's capital plan and dividend being funded by its cash flow. The company has put in place an NCIB for up to 5% of its shares. We could see the company use the NCIB if there are some outsized Marketing cash flows and additional growth projects are not restarted.
No material project updates. Pembina continues to evaluate a number of projects it previously deferred plus a number of unsecured opportunities which total over $4b of capital. The company expects to make a decision in H2/21 whether to reactivate its previously deferred: 1) Prince Rupert Terminal Expansion; 2) Phase VIII Expansion; and 3) Phase IX Expansion. The company is also evaluating altering its Prince Rupert plans to allow the use of larger ships. Given that the company restarted some projects in December, we did not expect any material updates with the Q4/20 release.
Writing off Ruby, Jordan Cove and CKPC. Pembina wrote off the full amount of its preferred interest in Ruby (~$1.4b) following an assessment triggered by upcoming