Pembina Pipeline Buy Rating Reiterated by TPH Ahead of Q3 11:50 AM EDT, 10/13/2022 (MT Newswires) -- Tudor, Pickering, Holt on Thursday reiterated its buy rating on the shares of Pembina Pipeline (PPL.TO) and its C$52.00 price target ahead of the Western Canadian oil and gas infrastructure and processing company's third-quarter results.
"We are modeling a modest Q3 Adj. EBITDA beat of C$895MM (+2% vs Street) driven by higher contributions from the Alliance and Cochin pipelines, closing of the Pembina Gas Infrastructure (PGI) merger, and steady Marketing results," analyst Matthew Taylor said in a note.
"We now sit at C$3.72B (versus guidance of C$3.575-3.675B) incorporating these tailwinds. In Pipelines, rising conventional volumes, a wide AECO-Chicago differential boosting demand for Alliance capacity, and a favorable MB-EDM condensate spread supporting Cochin volumes should drive contributions higher y/y. Stronger volumes and new contributions from PGI should boost Facilities results 9% higher y/y. In Marketing, contributions are expected to be modestly weaker q/q driven by lower Aux Sable contributions (weaker frac spread) and lower crude marketing results, while the EDM frac spread remained steady at TPHe 62c/gal as weaker AECO pricing and stronger FEX were largely offset by lower liquids pricing.
New growth developments not currently included in our estimates that should be topical on the call are a new frac (possible FID in H2'22), Cedar LNG (H2'23), and possible Alliance expansion. Overall, we see Pembina having the right combination of discounted valuation (~0.5x 2023 EV/EBITDA discount vs CAD peers) and earnings torque translating to excess free cash flow (TPHe 10% FCF yield vs CAD peers of 8%) to supplement shareholder returns should volume growth remain muted. Maintain Buy."