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Pembina (PBA) Anticipates CapEx View of C$655M for 2022

·5 min read

Pembina Pipeline Corporation PBA recently provided its capital budget guidance for 2022 and project updates, expecting its adjusted EBITDAto increase next year as it presumes a persistent rise in NGL pricing and improved realized losses on commodity-related derivatives.

Capital Spending View

PBA plans to spend C$655 million as capital expenditure next year.

The majority of Pembina's Pipelines Division capital investments will go toward the building of Phase VII and Phase IX. The remaining funds will be spent on projects that already came online and on smaller expansion ventures, such as additional laterals and terminals.

The Facilities Division's capital budget is reserved for completing the Empress Co-generation Facility.

The cost of line fill for the Phase VII and Phase IX as well as expansion of Pembina's portfolio of unsecured development prospects, such as Alberta Carbon Grid, are among the capital investments made by the Marketing and New Ventures Division.

Pembina projects adjusted EBITDA of C$3.35-C$3.55 billion in 2022.

In 2022, cash flow from operations is forecast to outpace dividends and the capital investment. During the first half of the year, Pembina aims to devote up to $200 million of surplus cash flow to common share repurchases, representing roughly 1% of PBA's common shares.

Project Updates

PBA continues to expand its Peace Pipeline System in a controlled, capital-efficient, cost-effective and methodical manner. The Phase VII Peace pipeline expansion involves a new pipeline system and related facilities in the LaGlace-Valleyview-Fox Creek corridor in Alberta to address increasing customer demand. Phase VII is still on track to be within budget and on time. As a result, the project's capital cost estimate is reduced by $110 million to $665 million owing to excellent project management, ideal weather conditions and high-performing contractors. Phase VII is now expected to be operational by the middle of 2022.

The Peace Pipeline Expansion Phase VIII remains postponed. Meanwhile, the Phase IX of the same project, with an anticipated cost of $120 million and an expected in-service date in the second half of 2022, is on schedule and within budget.

This apart, at the Hythe Gas Plant, Veresen Midstream is evaluating the possibility of building a 200-million cubic feet per day (mmcf/d) deep-cut NGL extraction plant. Veresen Midstream received an option from two significant customers for NGL extraction rights on up to 750 mmcf/d of natural gas, as previously stated. Pembina will transport, fractionate and sell the extracted NGL, thanks to the existing connectivity between the Hythe Gas Plant and the Peace Pipeline. In the first half of 2022, a final investment decision on the Hythe Deep Cut is expected.

Calgary-based Pembina informed that 76% of the complete path capacity on Alliance Pipeline, slated to expire on Oct 31, 2022, was successfully contracted on terms with an average contract period of nearly four years, commencing Nov 1, 2022, as a consequence of the open season and contract renewal activities.

Pembina is also working to lower its environmental footprint, improve employee equality, diversity, inclusion and collaborate with the indigenous people on energy projects in Canada.

Zacks Rank & Key Picks

Pembina currently has a Zack Rank #3 (Hold). Investors interested in the energy  sector might look at the following stocks worth considering with a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Occidental Petroleum Corporation OXY is an integrated oil and gas company with significant exploration and production exposure. OXY is also a producer of various basic chemicals, petrochemicals, polymers and specialty chemicals. As of 2020 end, Occidental Petroleum's preliminary worldwide proved reserves totaled 2.91 billion BOE compared with 3.9 billion BOE at the end of 2019.

In the past year, shares of Occidental Petroleum have surged 99% compared with the industry's growth of 96.6%. OXY's 2021 earnings are expected to soar 151.4% from the year-ago reported figure. Occidental Petroleum has also witnessed eight northward estimate revisions in the past 60 days. In the third quarter, OXY achieved its divestiture target of $10 billion by inking a deal to sell off its interest in two offshore Ghana assets for $750 million.

PDC Energy PDCE is an independent upstream operator dealing in exploration, development and production of natural gas, crude oil and natural gas liquids. PDCE, which reached its present form following the January 2020 combination with SRC Energy, is currently the second-largest producer in the Denver-Julesburg Basin. As of 2020 end, PDC Energy's total estimated proved reserves were 731,073 thousand barrels of oil equivalent.

In the past year, shares of PDC Energy have gained 169% compared with the industry's growth of 108.6%. PDCE's earnings for 2021 are expected to surge 273.4% from the prior-year reported figure. In the past 60 days, the Zacks Consensus Estimate for PDC Energy's 2021 earnings has been raised 26.8%. Earnings of PDCE beat the Zacks Consensus Estimate in all the last four quarters, the average being 51.06%.

Callon Petroleum Company CPE solely focuses on the exploration, and production of oil and gas resources in the Permian Basin. CPE boasts an impressive footprint throughout the core of the Permian Basin, the highest-producing shale play in the United States. Callon Petroleum, currently valued at $2.9 billion, entered the basin in 2009 and has been strengthening its foothold in the region ever since.

In the past year, shares of Callon Petroleum have soared 234.6% compared with Zacks Exploration and Production Industry's growth of 90.7%. CPE's 2021 earnings are expected to skyrocket 222.7% from the prior-year reported figure. CPE currently has a Zacks Style Score of A for both Growth and Momentum. CPE has witnessed six upward revisions in the past 60 days.

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