Have a $36.00 target. GLTA
ALTAGAS LTD. Q4/23 First Look: In-line Quarter, MVP Nearly Complete
Results In Line: AltaGas reported Q4/23 results that were in line with our
estimates (+0.1%) and consensus (+0.4%). Midstream missed slightly while
Utilities were marginally stronger.
Normalized EBITDA at $502MM was in line with our estimate of $501MM (-
+0.1%) and consensus of $500MM (+0.4%). Normalized diluted EPS for the
quarter of $0.75 was also higher than our estimate of $0.74 and vs.
consensus of $0.76. Normalized FFO/share of $1.33 was also in line with our
estimate of $1.33 and consensus of $1.27.
Midstream EBITDA slightly underperformed at $182MM versus our $190MM
(-4.3%) estimate. Despite this, the segment was still up 11.7% Y/Y on a
strong performance from the global exports business, a strong marketing
performance, and lower operating expenses. The segment still saw solid
export margins, with LPG export volumes of 90,996 Bbl/d just below our
91,790 Bbl/d estimate. The export hedge book also came in stronger than
our expectations, with FY2024 about 90% hedged at an average price of
US$17.88/Bbl, compared with our previous expectations for a hedge price of
US$14.67/Bbl. The company also expects to achieve or exceed 50% tolling
by year-end, an important de-risking event for shareholders. The frac spread
is also well hedged in 2024 at 80% hedged at an average price of
US$27.04/Bbl.
Utilities EBITDA was slightly ahead at $311MM compared to our $305MM
(+1.9%) estimate, and above the $294MM from a year ago. The Y/Y change
was largely due to ongoing investments and modernization programs, higher
revenue from the Virginia rate case, and higher retail margins.
The company met 2023 guidance, including landing in the upper half of the
EBITDA guidance range at $1.5B–$1.6B, and slightly below the midpoint of
the EPS guidance range of $1.85–$2.05, largely due to higher interest costs
weighing on strong operating performance.
Mountain Valley Pipeline: MVP is now 99% complete and is expected to be
placed into service in Q2 2024. ALA has a 10% capped (no capex risk)
interest in the line that it will likely look to sell to aid deleveraging. The equity
stake in MVP, however, is not core to the plan to reach its 4.5x net debt to
EBITDA target.
Other Developments: The company continued to advance the Ridley Island
Energy Export Facility (“REEF”) and FID is now expected during Q2/24.
The company will hold a conference call today at 11 a.m. ET. Dial in: 416-
764-8659 or 1-888-664-6392.