Ticker Symbol: PPL-T
PEMBINA PIPELINE CORPORATION
FINANCIAL HIGHLIGHTS
PPL Q1/23 RESULTS & ANALYSIS
Pembina is a transportation and midstream provider that has served customers for 68 years. It has three business segments: Pipelines, Facilities, and Marketing & New Ventures. Revenues fell 24% to $2.3B from $3.0B due to asset sales and a disruption in their northern pipeline system. This is now being repaired and they are working with the regulator to get approval to ramp up once again. This will also impact Q2/23. Earnings fell 23% to $369M ($0.61 per share) down from $481M in Q1/22 ($0.81 per share). Total volumes fell 5% to 3.188Mb/d from 3.369 Mb/d. Pembina has provided guidance of EBITDA between $3.5 – $3.8B in 2023 versus $3.75B in 2022. Capex guidance is for a spend of $730M in 2023.
Balance of Evidence
POSITIVES
- PPL is active in the move to lower carbon provision of energy. It is looking at new opportunities in carbon capture, and hydrogen.
- The company is a 50% partner in the Cedar floating LNG plant with the Haisla First Nation and sees making a final investment decision during 2H/23. They recently got the environmental go ahead from the BC government and a positive Decision Statement from the Federal Minister.
- PPL has sanctioned the fourth expansion of the Redwater fractionation plant with a cost of $460M.
- Pembina raised its dividend this quarter to $0.6675 per quarter, up from $0.63 per quarter at this time last year. This is an increase of 6% over the last year.
- Insiders have been buying shares and CEO, Scott Burrows now owns 431K shares.
ISSUES OF CONCERN
- Pembina could increase its dividend more but sees a lot of growth projects ahead and wants to keep a strong balance sheet to take advantage of these opportunities.
- Some of its infrastructure is over 25 years old and maintenance is now more of an issue. Note the northern pipeline problem of this quarter.
Diversified and Integrated Transportation & Midstream Assets
Source: Pembina Pipeline May 2023 Investor Presentation
Cedar LNG
Source: Pembina Pipeline May 2023 Investor Presentation
Pembina – Weekly
Source: stockcharts May 11, 2023
Pembina – Monthly
Source: stockcharts May 11, 2023
Valuation Comparison
Source: Corporate Reports & SER Forecasts
Conclusion: BUY on weakness
- This Conservative stock trades at 1.51x book value of $28.65 per share, or at $43.15 per share. The stock would be an attractive BUY around 1.4x book value or around $41 per share. On a yield basis, a good BUY target would be an >6.0% yield or around $43.00 per share. Our BUY price range is therefore below $43 per share (range $41-$43 per share). When we got our BUY signals triggered in mid-March we added PPL to our Action BUY List at $42.75 per share.