cibc analyst: target C$ 34Q4/22 First Look: Mostly In-line Results And Positive Business Developments
AltaGas reported Q4/22 results that were slightly above our estimates (+2%) and mostly in line with consensus. Results included a slightly stronger report in the Utilities segment driven by asset optimization and a strong FX, and a slightly stronger Midstream segment due to strong volumes and propane margins.
Normalized EBITDA at $454MM was slightly above our estimate of $445MM (+2%) and in line with consensus of $457MM. Normalized diluted EPS for the quarter of $0.63 was below our estimate of $0.68 and consensus of $0.67. Normalized FFO/share was $1.32 vs. our estimate of $1.32 and consensus of $1.27.
Utilities EBITDA outperformed at $294MM compared to our $283MM (+3.8%) estimate, and up from $238MM a year ago. This was largely due to rate base growth and ongoing capital investments through ARP programs, asset optimization activities, and a favorable foreign exchange which was a $20MM tailwind. Full-year rate base growth was a very strong 12% in 2022 and EBITDA grew 17%.
Midstream EBITDA of $163MM was slightly above our $160MM (+1.6%) estimate, due to strong volumes and propane margins offset by lower realized Asian-to-Canadian butane spreads and higher rail and logistics costs. Strong LPG export volumes of 97,152 Bbl/d were mostly inline with our 97,100 Bbl/d estimate. This caused 2022 daily export volumes to reach 101,654 Bbl/d compared to 2021 at 89,331 Bbl/d. The export hedge book also came in stronger than our expectations, with 2023 about 62% hedged at an average price of US$12.17/Bbl, compared with our expectations for a hedge price of US$11.25/Bbl. A contract at Ferndale was also extended to 2033 and a new tolling agreement was secured at RIPET.
After quarter end, AltaGas closed the divestiture of its Alaskan Utilities to TriSummit Utilities Inc. for US$800MM (~CAD$1.1B). Sale proceeds will be first used to reduce debt as expected. The company also received positive news from the Mountain Valley Pipeline (MVP) as it has received a favourable biological opinion from the U.S. Fish and Wildlife Service. The company now expects MVP to receive the incremental permits over the coming months and will be positioned to begin construction in the summer of 2023 and in-service by 2023 year-end. Finally, the Blythe facility received an agreement for 2024-2027 from Southern California Edison.
The company maintained 2023 guidance, including EBITDA at $1.5B-$1.6B, EPS guidance of $1.85-$2.05, and a 6% dividend growth to $1.12/share annualized beginning in 2023. Full-year financial results also ended up in the upper-half of the 2022 guidance ranges for both normalized EBITDA and normalized EPS. The company will hold a conference call today at 10 a.m. ET. Dial in: 416 764-8659 or 1-888-664-6392.