Pembina Pipeline Maintained at Buy at TPH After C$3.1-Billion Enbridge Asset Buy; Price Target Kept at C$51.00
11:19 AM EST, 12/14/2023 (MT Newswires) -- Tudor, Pickering Holt on Thursday reiterated its buy rating on the shares of Pembina Pipeline (PPL.TO) and its C$51.00 price target after the oil and gas infrastructure and processing company agreed to acquire Enbridge's (ENB.TO) stake in the Alberta to Illinois Alliance natural-gas pipeline and the Aux Sable fractionation plant at its terminus, as well as its share of a Saskatchewan cogeneration facility.
"Yesterday, Pembina announced they would acquire the remaining 50% interest in Alliance, Aux Sable Canada, NRGreen and 42.7% of Aux Sable's US assets for $3.1B," analyst Zack Van Everen wrote. Pembina initially entered these assets through the $10 billion acquisition of Veresen Inc. in 2017. The purchase price reflects a combined multiple (excluding synergies) of 9x for 2023 and 2024. In a separate statement, Enbridge revealed individual component multiples of 11x for Alliance and 7x for Aux Sable, based on 2024 estimates. PPL anticipates reducing the acquisition multiple to sub-8x by realizing near-term annual synergies ranging from $40-65 million, with longer-term synergies exceeding $100 million. The company highlighted increased marketing volumes, Bakken growth, and single-operator efficiencies as primary drivers. The deal is slated to close some time in H1'24 and will be financed by a mix of proceeds from $1.1B a bought deal offering, cash on hand, and the remaining portion covered by their credit facility. The 11x multiple on Alliance comes in above recent deals, Columbia Pipelines (10.5x) and NET Mexico (8.6x), although not apples to apples being a wet gas pipeline. From an asset standpoint, the assets are highly contracted and highly utilized, with ARC Resources and Ovintiv as the largest customers on Alliance and total utilization remaining above 90% over the last 3 years. On a macro level, sustained WCSB supply growth resulting from TMX and LNG Canada projects, coupled with higher US demand from upcoming projects in the USGC LNG corridor, Alliance should remain highly utilized in the foreseeable future."
(MT Newswires covers equity, commodity and economic research from major banks and research firms in North America, Asia and Europe. Research providers may contact us here: https://www.mtnewswires.com/contact-us)
Price: 45.04, Change: -0.45, Percent Change: -0.99