Pembina Pipeline Buy Rating Reiterated at TPH 09:52 AM EST, 12/08/2021 (MT Newswires) -- Tudor, Pickering and Holt on Wednesday reiterated its buy rating on the shares of Pembina Pipeline (PPL.TO) and its C$45.00 target price after the oil and gas processing and infrastructure company released a 2022 budget featuring lower capital spending and improved shareholder returns.
"Pembina announced 2022 EBITDA guidance of C$3.35-3.55B, in-line versus consensus with TPH at the top end of the guidance range," analyst Matt Taylor said in a note. "Results will be driven by lower commodity-related losses as frac spread exposure has been hedged by 50% using favorable pricing in H2'21, with recovery of interruptible volumes providing operating leverage upside.
A key theme of the release was capital discipline - the 2022 capex budget came in C$145MM below our modelled C$800MM due to continued deferral of Phase VIII and cost savings on Phase VII resulting in TPHe C$350MM of FCF after dividend in 2022. C$200MM has been earmarked for buybacks in H1'22 (~1% of market cap) with the remainder available for growth, debt repayment, or dividend growth.
he deferral of a decision on Phase VIII to H1'22 initially screens negatively due to uncertainty around producer development timing in NEBC, but initial contracts remain in place, a new agreement with a second Montney producer in NEBC including take-or-pay agreements has been signed to support other growth opportunities, and the company is evaluating a deep cut facility at Hythe supported by two key customers.
Alliance pipeline contributions were de-risked further with previous disclosure indicating the 2021/2022 gas year is fully contracted, with the 2022/2023 gas year now 76% contracted at an average term of four years."