Pembina Pipeline Corp T.PPL

TPH Raises TP & Comments on Deal with KKR

[ace1mccoy]

Pembina Pipeline Buy Rating Kept at TPH Following KKR Joint Venture Agreement 2022-03-15 09:46:51 AM ET (MT Newswires)

 

09:46 AM EDT, 03/15/2022 (MT Newswires) -- Tudor, Pickering and Holt on Tuesday reiterated its buy rating on the shares of Pembina Pipeline (PPL.TO) while raising its target price to C$47.00 from C$45.00 as it detailed an agreement between the oil and gas infrastructure and processing company to merge some Western Canadian gas-processing assets with others owned by KKR. "Pembina has outperformed both the AMNA and Canadian peers by ~4% and ~6%, respectively, since announcing the KKR joint venture to merge Western Canadian processing assets," analyst Matt Taylor said in a note. "High points of the deal included mid-to-high single digit cash flow accretion over the next five years, a commensurate 3.6% dividend bump upon closing, and C$700MM of cash proceeds to accelerate capital allocation initiatives. Closing is expected in Q2/Q3'22 following receipt of regulatory approvals. In the two weeks following the announcement, our most topical inbounds have been on: 1) Deal accretion in the early years is driven by lower cash taxes, share repurchases, and modest G&A savings, while increased leverage to NEBC (northeastern British Columbia) volumes drives longer-term upside, 2) Strategic rationale is a mix of offense and defense with increased drilling activity in NEBC expected as LNG Canada approaches in-service in ~2025, while ownership of ET's assets reduces volume risk when Peace contracts start materially rolling in 2027+, and 3) The strong contractual underpinning of the G&P assets (~80% IG; avg 14-yr tenure) allowed for recapitalization of the private partnership at higher leverage versus publicly-traded peers. Other catalysts to watch should be a Ruby resolution in the next few weeks (TPHe base case is the pipe enters default), the non-ops KAPS sale should generate a net distribution to Pembina of TPHe ~C$115MM, and an expected 2022 EBITDA guidance bump alongside Q2. The right combination of discounted valuation and earnings torque translating to excess free cash flow to supplement shareholder returns has Pembina being our favored pick in Canada." (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)

[stockmarket1]

Seems like these current target prices are mostly around the $48 level. Not too much upside considering where we are currently. Without the current divy yield being added. Ok i guess