Pembina’s Fourth-Quarter Results and 2023 Guidance Meet Expectations

Pembina’s PPL fourth-quarter results and its 2023 guidance met our expectations. Full-year EBITDA came in at CAD 3.7 billion, matching our CAD 3.7 billion forecast. In comparison, our 2023 EBITDA forecast of CAD 3.6 billion sits within Pembina’s guided range of CAD 3.5 billion to CAD 3.8 billion. At first glance, we will keep our CAD 37/USD 27 fair value estimates and our no-moat rating intact.

With volumes fairly stable across Pembina’s assets, results continue to be marketing driven. Marketing EBITDA was CAD 171 million for the quarter, up 72% from last year, but down 9% sequentially, due to weaker natural gas liquids margins. We expect weaker margins to push down marketing profits in 2023, which will be somewhat offset by higher fee-based income from its pipeline assets.

While Pembina’s earnings are expected to decline modestly in 2023, we do see a number of healthy developments at its fee-based business. The Pembina Gas Infrastructure transaction is capturing several attractive opportunities across multiple assets (Hythe Gas plant, Dawson, Cutback complex, and the Resthaven facility), boosting volumes, and customers are already looking for debottlenecking expansions at other facilities. Pembina also announced the construction of a CAD 460 million propane-plus fractionator at its Redwater complex underpinned by take-or-pay contracts. We see this as an attractive way to boost fee-based income and keep customers part of the Pembina system.