Quick Take: Update on Global Exports contracting, as AltaGas exits 2024 on a "very strong" footing
TSX: ALA | CAD 33.10 | Outperform | Price Target CAD 40.00
Sentiment: Positive
Our view
We believe the year-end update will have a positive impact on the company's share price, with the market likely welcoming: (1) AltaGas' commercial progress in materially de-risking the Global Exports business, with the company positioned to meet its REEF contracting target by early 2025 (earlier than it had initially expected), with base economics of the project remaining intact; (2) the continued advancement of REEF's construction, with indications suggesting the facility remains positioned to be delivered on time (i.e., near the 2026 year-end) and on budget (i.e., $1.35 billion on a gross basis); and (3) the persistently strong customer interest in AltaGas' west coast export capabilities, which we believe should underpin the company's growth runway in the Global Exports business beyond the 55,000 b/d REEF Phase 1 capacity.
Details
• Positioned to achieve long-term REEF contracting targets in early 2025. In December 2024, AltaGas executed several commercial contracts that will provide long-term LPG supply and tolling contracts for its Global Exports platform, including contracts with existing customers and the addition of new customers. Some of these contracts will take effect in 2027 with LPG volumes that will be added to Canadian supply, while others will see near-term export volumes initially flow through RIPET and moving to REEF once the facility comes online. Further, AltaGas continues to advance additional long-term tolling arrangements and believes it will be positioned to achieve its long-term REEF contracting targets in early 2025. Also, AltaGas continues to be in commercial discussions for the more than 100% of REEF Phase I capacity.
• Construction activity at REEF continues to progress. AltaGas noted that piling activities continued through December 2024, with piles being added while uplands work advances as scheduled. Also, storage tank fabrication is progressing offshore with steel cutting more than 75% complete, while rail construction is ongoing.