IA Capital Adjusts .....G&M IA Capital Markets analyst Matthew Weekes thinks Pembina Pipeline Corp.’s (
) growth options remain “robust,” seeing “tailwinds aplenty.”
However, upon assuming coverage of the Calgary-based company following Wednesday’s release of its 2022 guidance, business updates and additional ESG priorities, he expressed caution as he awaits sanctioning for a group of projects.
“While we believe that the fundamental outlook for PPL’s business is positive, and there are numerous growth opportunities in the pipeline, the Company’s current backlog of sanctioned projects remains sparse resulting in limited visibility for near-term growth as future expected incremental projects will have multi-year build cycles,” he said.
Pembina’s earnings before interest, taxes, depreciation and amortization (EBITDA) guidance of a range of $3.35-$3.55-billion fell in line with iA Capital Markets’ projection of $3.52-billion. Its capital budget of $655-million also largely matched expectations.
“PPL highlighted strong volumes and pricing within its value chain, strong contracting demand on the Alliance Pipeline, agreements executed with northeast B.C. Montney producers, and growing Alberta petrochemical demand for NGLs, as well as the potential for Veresen to construct a new 200 million cubic feet per day NGL extraction facility with FID expected in H1/22,” said Mr. Weekes.
“While the pipeline of potential projects is filling up, there remains little in the Company’s secured growth backlog, with the reactivation decisions for the Peace Phase VIII Expansion and Prince Rupert Expansion expected in H1/22. We believe that these projects are likely to be sanctioned, providing upside to PPL’s current plan. With minimal CAPEX, PPL expects to allocate up to $200-million of excess cash flow to share repurchases in H1/22.”
Though he raised his 2022 adjusted EBITDA projection to reflect the Peace Phase VII expansion coming on-stream in the middle of next year ahead of schedule and budget, Mr. Weekes trimmed the firm’s target for Pembina Pipeline shares to $43 from $45 based on valuation changes The average is currently $44.25.
Elsewhere, TD Securities analyst Linda Ezergailis trimmed her target to $44 from $45 with a “buy” rating