Pembina Pipeline Corporation’s PBA stock has shown no substantial movement since third-quarter 2021 earnings announcement on Nov 4. Weaker US dollar exchange rate, lower Ruby Pipeline contribution due to tepid contractual volumes, soft Cochin Pipeline revenues due to the impact of a timing difference in the recognition of deferred revenues, and higher general and administrative expenditure displeased investors. In fact, the stock failed to display an uptrend despite a well-maintained adjusted EBITDA guidance for the current year.
Inside Pembina Pipeline’s Earnings
PBA reported third-quarter 2021 earnings per share of 80 cents, beating the Zacks Consensus Estimate by 47 cents and the year-earlier quarter’s earnings of 38 cents. This outperformance was primarily owing to the Greater NGL and crude oil sales margins, the favorable impact of higher marketed NGL volumes and the receipt of a $350-million payment linked with Pembina Pipeline’s cancellation of its proposed acquisition of Inter Pipeline.
Revenues of $1.71 billion improved 45% year over year.
Operating cash flow rose 110.4% to C$913 million. Adjusted EBITDA of C$850 million was C$54 million higher than the figure registered in the third quarter of 2020.
In the third quarter of 2021, Pembina Pipeline saw volumes of 3,411 thousand barrels of oil-equivalent per day (mboe/d), comparing unfavorably with 3,451 mboe/d reported in the prior-year quarter.
Pipelines: Adjusted EBITDA of C$503 million was down 7.02% from the year-ago quarter’s level. This downside resulted from lower Ruby Pipeline contribution due to shrinkage in contractual volumes, depressed revenues from Cochin Pipeline due to a timing difference in the realization of deferred revenues and the impact of a lower US dollar exchange rate. Year-over-year volume marginally fell to 2,563 mboe/d.
Facilities: Adjusted EBITDA of C$273 million improved from the year-ago quarter’s C$251 million. The upside was owing to contribution from Empress Infrastructure, Duvernay III and the Prince Rupert Terminal, coupled with the contribution from the Veresen Midstream Hythe Developments. Volumes of 848 mboe/d dipped 2.7% year over year.
Marketing & New Ventures: Adjusted EBITDA of C$109 million compared favorably with C$34 million in the third quarter of 2020. The upside was attributable to a rise in net sales resulting from higher NGL and crude oil prices during the third quarter of 2021 combined with expanded sold NGL volumes. The Marketing & New Ventures segment recorded volumes worth 177 mboe/d, up 5% from the same-period level in the prior year.
Capital Expenditure & Balance Sheet
Pembina Pipeline spent C$209 million as capital expenditures during the quarter under review compared with C$174 million a year ago. As of Sep 30, 2021, PBA had cash and cash equivalents worth $112 million and $8.12 billion of long-term debt. Debt-to-capitalization was 43.2%.
PBA is still working on Phase VII of the Peace Pipeline Expansion, which involves a new 20-inch pipeline with a length of about 220 kilometers and two new pump stations or terminal modifications. Phase VII will add 160,000 barrels per day of extra capacity upstream of Fox Creek by tapping into capacity on the mainlines downstream of Fox Creek. Construction is underway, and the project is on track to fit into the budget ($775 million) and on time for its planned in-service date in the first half of 2023.
Pembina Pipeline restarted Phase IX of the Peace Pipeline Expansion during the last quarter, which will enhance capacity on the northwest Alberta-to-Gordondale, Alberta, route to manage the growing activity in the northeast British Columbia Montney play. With the inclusion of the Wapiti-to-Kakwa corridor pump station, the project’s cost is anticipated at around $120 million. The in-service date for Phase IX is estimated in the second half of next year.
Pembina Pipeline is still working on the Empress Cogeneration Facility. Natural gas will be used to generate up to 45 megawatts of electricity at the facility. The electricity will be utilized entirely on-site, supplying around 90% of the site’s power needs.
According to PBA, the initiative will help reduce yearly greenhouse gas emissions at the Empress NGL Extraction Facility. The project is riding on a $120-million capital budget and is expected to be completed in the fourth quarter of 2022. Based on the current levels of energy use, Pembina Pipeline estimates a reduction of 90,000 tonnes of carbon dioxide equivalent per year.
Pembina Pipeline reiterates its 2021 adjusted EBITDA projection in the $3.3-$3.4 billion range, based on year-to-date results and the outlook for the rest of the year. The yearly expectation is based on a stronger-than-projected fundamental marketing performance owing to considerably higher NGL pricing and marketed NGL volumes.
Zacks Rank & Key Picks
Pembina Pipeline has a Zacks Rank #3 (Hold), currently. Some better-ranked players in the energy space are EOG Resources EOG, Diamondback Energy FANG and ConocoPhillips COP, each presently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
EOG Resources reported third-quarter 2021 adjusted earnings per share of $2.16, beating the Zacks Consensus Estimate of $2.01. Strong earnings were driven by increased production volumes and a higher realization of commodity prices.
EOG announced a quarterly dividend of 75 cents per share, indicating an 82% increase from the previous level. The dividend will be paid out on Jan 28, 2022, to its shareholders of record as of Jan 14, 2022. EOG Resources also declared a special dividend of $2 per share. Moreover, the board of directors updated its share repurchase authorization to $5 billion.
Diamondback Energy reported third-quarter 2021 adjusted earnings of $2.94 per share, which surpassed the Zacks Consensus Estimate of $2.81 and the year-ago quarter’s earnings of 62 cents. FANG’s bottom line was aided by better-than-expected production.
The board of directors declared a dividend of 50 cents per share for the third quarter, accounting for an 11.1% hike in Diamondback Energy’s quarterly payout from the previous level of 45 cents. The amount will be paid out on Nov 18, 2021, to its shareholders of record as of Nov 11. FANG also generated a free cash flow of $740 million in the third quarter.
ConocoPhillips reported third-quarter 2021 adjusted earnings per share of $1.77, comfortably beating the Zacks Consensus Estimate of $1.53. This outperformance is led by increased production volumes owing to the Concho acquisition and the rising realized commodity prices.
Based in Houston, TX, this one of the world’s largest independent oil and gas producers’ capital expenditures and investments totaled $1.3 billion, and dividend payments grossed $579 million. ConocoPhillips’ net cash provided by operating activities was recorded at $4.8 billion, up from the year-ago figure of $868 million. COP generated a free cash flow of $2.8 billion in the third quarter.
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