From RBC
May 5, 2022
Pembina Pipeline Corporation
First Glance: Good news all around
Sentiment: positive
Our view: Pembina delivered a number of messages that we expect to
positively impact the share price, including: (1) strong Q1/22 results that
exceeded the high end of consensus; (2) an increase in its 2022 EBITDA
guidance despite removing a contribution from Ruby; (3) a new 20-year
midstream agreement with ConocoPhillips; and (4) the reactivation of the
Phase VIII pipeline expansion.
Solid results that exceed the high end of consensus. In Q1/22, Pembina's
EBITDA was $1.006 billion versus our forecast of $910 million and
consensus of $917 million (13 estimates; range of $871-948 million). AFFO/
share in Q1/22 was $1.27 compared to our forecast of $1.14 and consensus
of $1.12 based on the company-provided survey (15 estimates; range of
$1.02-1.24). Segment-wise, Pipelines EBITDA was $521 million versus our
forecast of $500 million, Facilities EBITDA was $281 million compared to
our estimate of $281 million, and Marketing & New Ventures EBITDA was
$268 million versus our forecast of $176 million. Please see Exhibit 1 on
page 2 for a table further detailing the quarterly results.
Guidance increase is a nice surprise. Despite it still being pretty early in
the year, Pembina increased its 2022 EBITDA guidance to a new range
of $3.45-3.6 billion (up from its prior range of $3.35-3.55 billion), which
it noted is primarily driven by stronger Marketing results. Of note, the
guidance excludes all Ruby EBITDA from April 1 onwards as well as
excluding a contribution from the KKR joint venture transaction (please
click here). Our EBITDA estimate heading into the quarterly release was
$3.608 billion, inclusive of $21 million related to the KKR joint venture as
well as $42 million from Ruby from Q2 to Q4.
Reactivating the Phase VIII Peace Pipeline Expansion; not proceeding
with the Prince Rupert Terminal expansion at this time. With contractual
commitments secured and discussions with its customers, Pembina has
reactivated its previously deferred project that will allow for segregated
pipeline service for C2+ and C3+ NGL mix from Gordondale into the
Edmonton-area in Alberta. Pembina estimates a project cost of $530 million
with an in-service date in H1/24.
New 20-year midstream agreement with ConocoPhillips. Pembina
entered into a 20-year agreement for transportation and fractionation
of liquids from ConocoPhillips Canada's (CPC) Montney development in
northeast B.C. Under the agreement, CPC has dedicated liquids production
from the majority of its acreage in the Montney with any new firm
transportation and fractionation services being supported by long-term
take-or-pay agreements.
Conference call: Friday, May 6, at 10:00 AM (ET). Th