Does Alliance Pipeline Re-Contracting Shift the Bull Case for Pembina Pipeline (TSX:PPL)?

• Earlier this month, Pembina Pipeline re-contracted the Canadian segment of the Alliance Pipeline, lowering contracted rates and making several concessions that are expected to affect its near-term earnings.
• This adjustment comes as Pembina manages $4 billion in ongoing capital projects, with Cedar LNG in Kitimat, BC scheduled for completion by late 2028 and positioned as a potential new income stream.
• We'll explore how the Alliance Pipeline re-contracting and its impact on near-term earnings may influence Pembina Pipeline's broader investment case.

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Pembina Pipeline Investment Narrative Recap

To be a Pembina Pipeline shareholder, you’d need to believe in the company’s ability to execute on major capital projects like Cedar LNG, maintaining a stable income stream and dividend as it faces industry headwinds. The recent re-contracting of the Alliance Pipeline does impact near-term earnings, but it does not materially change the key catalyst of project execution or the primary risk: margin pressure from pipeline rate resets.

Among recent company announcements, Pembina’s long-term agreement with AltaGas stands out, as it expands market access and export options, reinforcing the company’s efforts to diversify revenue streams beyond traditional pipeline assets. This action is particularly relevant as Pembina manages capital allocation during a period of contracted cash flows and project spending, supporting the case for long-term growth through new export capacity.

Yet, while much attention remains on new projects and export cooperation, investors should also be alert to...

Read the full narrative on Pembina Pipeline (it's free!)

Pembina Pipeline's narrative projects CA$8.1 billion revenue and CA$1.9 billion earnings by 2028. This requires a 0.0% annual revenue growth rate and a CA$0.2 billion earnings increase from the current CA$1.7 billion.

Uncover how Pembina Pipeline's forecasts yield a CA$58.06 fair value, a 7% upside to its current price.

Exploring Other Perspectives

Simply Wall St Community members set fair value estimates for Pembina Pipeline from CA$38.63 to CA$142.90, based on seven independent perspectives. Amid this wide range, the ongoing margin pressure from recent pipeline rate resets stands out as an important factor that could influence earnings outlooks across the board.

Explore 7 other fair value estimates on Pembina Pipeline - why the stock might be worth 29% less than the current price!

Build Your Own Pembina Pipeline Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Pembina Pipeline research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.
• Our free Pembina Pipeline research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Pembina Pipeline's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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