CIBC Analyst- Globe CIBC World Markets analyst Robert Catellier deemed Pembina Pipeline Corp.’s (
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“reasonable,” however he lowered his rating for its shares to “neutral” from “outperformer” on Friday based on their current valuation.
“We see the risks and potential return as roughly balanced at this point,” he said. “Strong commodity price tailwinds are partially mitigated by hedging; however, there are longer-term headwinds from recontracting the Alliance Pipeline and we expect emerging competition from the Keyera KAPS pipeline system under development.”
On Thursday after the bell, Pembina reported adjusted EBITDA of $835-million, narrowly below Mr. Catellier’s $853-million estimate and consensus of $850-million. Adjusted funds from operations per share of $1.06 met his forecast while falling 2 cents below the Street.
“The adjusted EBITDA variance was due to lower marketing results, likely from frac spread hedges, and higher corporate expense. We therefore view these results as operationally in line with our outlook. The company reiterated 2021 guidance, including adjusted EBITDA of $3.2-$3.4-billion,” he said
Mr. Catellier maintained a $39 target for Pembina shares. The average is $38.80.
“The share price has reached our price target, and as a result we are downgrading on valuation,” the analyst said. “Possible positive catalysts include continued strength in frac spreads, improving crude oil marketing margins, increasing producer activity leading to higher volumes on Pembina’s systems possibly leading to expansion opportunities. Potential headwinds include recontracting risk for Alliance Pipeline, the ongoing challenges to Ruby Pipeline, and longer-term recontracting risk on the company’s conventional pipeline systems to the degree competition develops from Keyera’s KAPS pipeline system.”