After better-than-anticipated fourth-quarter financial results, National Bank Financial analyst Patrick Kenny sees Pembina Pipeline Corp. (
) “back on track.”
On Feb. 24 after the bell, the Calgary-based company reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $970-million, above both Mr. Kenny’s $929-million estimate and the consensus projection of $903-million. Driven by “stronger” contributions from its Marketing segment, its full-year 2021 adjusted EBITDA came in at $3.433-billion, topping the high end of its guidance range of $3.3-$3.4-billion.
“PPL’s $530-million growth capital budget for 2022 remains in check, while the company expects to make several final investment decisions in H1/22, including the less than $500-million Peace Pipeline Phase VIII expansion, the 200 mmcf/d Hythe Deep Cut facility and the 20 mbpd Prince Rupert Terminal expansion,” the analyst said. “Meanwhile, PPL continues to progress its energy transition initiatives, including submitting the application for Cedar LNG’s Environmental Assessment Certificate as well as submitting a carbon sequestration proposal with partner, TC Energy, to jointly develop the more than 20 MtCO2pa Alberta Carbon Grid. Elsewhere, management confirmed its strategic interest in the Trans Mountain Pipeline, while acknowledging significant TMX cost overruns as challenging the commercial viability of the ownership opportunity.”
“With commodity price tailwinds supporting throughput upside, coupled with Marketing essentially back to pre-pandemic performance of more than $400-million per year, our 2022 EBITDA of $3.6-billiob comes in above the company’s unchanged guidance range of $3.35-$3.55-billion, while our 2023e AFFO [adjusted funds from operations] per share moves up to $4.35 (was $4.23), with D/EBITDA tapping down to 3.5 times (was 3.7 times).”
Pointing to increased certainty surrounding its strategic direction following the official appointment of Scott Burrows as President & CEO, Mr. Kenny raised his target for Pembina shares to $44 from $42, keeping a “sector perform” recommendation. The average is $44.68.
“After fumbling the CEO transition messaging late last year, we welcome the Board’s prompt decision to officially appoint Scott Burrows as President & CEO, reaffirming the company’s strategic direction,” he said. “Overall, our target moves up $2 to $44, and we maintain our SP rating based on a 12-month total return opportunity of 9.6 per cent, while highlighting approximately 20-per-cent valuation upside related to a more than $5-billion backlog of unsecured growth opportunities.”
Elsewhere, CIBC’s Robert Catellier raised his target to $45 from $44 with a “neutral” rating.