cibc analyst: Target (12-18 mos.): C$53.00Q1/23 Results: Solid Beat And 2.3% Dividend Increase
Our Conclusion
Results were strong across the board despite the outage on the Northern Pipeline, buoyed by strong volumes and margins. We believe the stock remains a good alternative to larger-cap peers offering better exposure to natural gas and Montney growth, albeit with a slightly lower yield. We are maintaining our DCF-based price target at $53; however, the return potential to our price target causes us to reiterate our Neutral rating.
Key Points
Dividend Increase — A Quarter Earlier Than Expected: The company increased the common share cash dividend for Q2/23 to $0.6675 ($2.67 annualized) per share or an increase of 2.3%. The increase is a quarter earlier than what we had expected (in Q3), but also lower than our $0.675/share ($2.70 annualized) estimate. We are not inclined to quibble about the variance in light of the growth opportunities in front of Pembina.
Results Beat Across The Board:
Adjusted EBITDA of $947MM beat our estimate of $898MM (+5.5%) and consensus of $905MM (+4.6%). Meanwhile, diluted AFFO/share of $1.15 was in line with our estimate of $1.14 and consensus of $1.16. The beat was across the board in Pipelines, Facilities and Marketing, although Marketing was especially strong. The beat is especially notable given the $54MM impact from the Northern Pipeline system outage (above the $30MM previously expected). Guidance for 2023 (EBITDA of $3.5B-$3.8B) was reiterated.
Segment Results; All Segments Strong:
Marketing EBITDA of $169MM beat our $153MM estimate, but was still down 36% Y/Y due to lower NGL and crude margins as a result of lower commodity prices. Margins have moderated as inventory costs caught up to market prices. Pipeline EBITDA of $525MM also beat our $502MM estimate on higher volumes and revenues on conventional assets. Facilities EBITDA of $298MM also beat our $287MM estimate, due to continued strong results at the PGI assets. Corporate EBITDA underperformed slightly at -$45MM vs. our -$44MM estimate.
Infrastructure Volumes Beat Our Forecast:
Pipeline volumes of 2,467 MBbl/d slightly beat our estimate of 2,437 MBbl/d. It is evident that Pembina did a good job mitigating the impact of the Northern Pipeline system outage by trucking volumes to other systems. PGI also continues to outperform our expectations.