CIBC commentsALTAGAS LTD. Q2/22
First Look: Adj. EBITDA Slightly Ahead Of Our Estimates AltaGas reported Q2/22 results that were slightly ahead our estimates, but broadly in-line with consensus when removing two outliers. Sightly stronger results in the Utilities segment were offset by a slight miss in the Midstream segment due to logistics costs. The company maintained 2022 guidance, including normalized EPS of $1.80-$1.95 and normalized EBITDA at $1.50B- $1.55B. We estimate the company is well positioned to meet guidance. Normalized EBITDA at $246MM was slightly ahead of our estimate of $243MM and below consensus of $252MM, which includes two high outliers.
Normalized diluted EPS for the quarter of $0.08 were slightly below our estimate of $0.10 and consensus of $0.12.
Normalized utility FFO/share was $0.16 vs. our estimate of $0.22 and consensus of $0.25.
Utilities EBITDA slightly outperformed at $116MM compared to our $110MM estimate, and up from $99MM a year ago. This was largely due to ongoing capital investments through ARP programs, the impact of recent rate cases, strong performance from the retail business and favorable foreign exchange. During the quarter, the Virginia State Corporation Commission (SCC) approved the amendment for the Accelerated Replacement Program (ARP) including a new five-year spending cap of US$878MM, providing strong visibility for rate base growth. The company also filed an application with the Virginia regulator to increase rates by an incremental US$48MM.
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Meanwhile, Midstream EBITDA of $133MM was slightly below our $138MM estimate, due to hedge timing and logistics costs. However, record LPG export volumes of 110,845 Bbl/d were above our 107,000 Bbl/d estimate. The company is well-positioned to achieve the 2022 export target of 97,000 Bbl/d given current export demand. The export hedge book also came in stronger than our expectations, with Q3 about 75% hedged at an average price of US$13/bbl, compared with our expectations for a hedge price of US$10.24. The frac spread hedge book is in line with our expectations, including ~75% of the remaining 2022 expected frac exposed volumes hedged.