At the end of January, I wrote about a Canadian company that would be worthy of investor attention once it listed on the New York Stock Exchange. That company is Pembina Pipeline
What's this all about?
Pembina officially closed the deal on its $3.8 billion acquisition of Provident Energy yesterday, making it Canada's third-largest energy infrastructure company after Enbridge and TransCanada. Provident's assets, now Pembina property, are located in Alberta's oil sands, the Bakken shale, and the Marcellus shale. The natural-gas-liquids-focused business of Provident was the driving force behind the acquisition, diversifying Pembina's portfolio of core businesses.
Pembina is a standard midstream company in the sense that its assets are composed of pipelines, natural-gas gathering and processing centers, and terminals and storage. Most of its operating margins are generated from its conventional pipeline business: a network of more than 4,600 miles of pipeline that transports 50% of Alberta's conventional oil. On top of that, the company has nearly 1,000 miles of pipeline dedicated to transporting oil from the Athabasca oil sands.
The company has a respectable history of commitment to shareholders, boasting a 500% return over the past 10 years and paying out a total of $2 billion in dividends since its inception.
The immediate future
Pembina estimates its post-acquisition capital budget will be about $700 million. Big projects include an NGL pipeline expansion and development of both liquids storage and a new fractionator at its Redwater site in Alberta. Most of the projects funded by the 2012 capital project will come online by the end of 2013, with the exception of the fractionator, which is anticipated to come online in 2014.
Pembina surpassed analyst expectations in 2011, reporting earnings per share of $1.25 when analysts expected $1.05. The average estimate for 2012 is $1.18 right now, climbing to $1.26 for 2013.
The company also beat on revenue, reporting $1.7 billion, slightly better than the consensus estimate of $1.6 billion. The consensus estimate for 2012 is much higher because of the merger. Analysts expect annual revenues of $3.2 billion this year and $4.2 billion next year.
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