(By Balachander) Pembina Pipeline Corp. (TSE:PPL) shares were initiated with a "Sector Performer" rating by CIBC World Markets Inc. analyst David Noseworthy with a price target of $27.75.
Noseworthy believes Pembina is a low-risk, high-yield way to play growing conventional oil, oil sands, and liquids-rich gas production in the Western Canada Sedimentary Basin (WCSB).
Canada-based Pembina is an energy infrastructure service company with an enterprise value of more than $10 billion.Its crude oil and natural gas liquids pipelines extend across Alberta and British Columbia.
The analyst is of the view that Pembina's highly integrated and substantial legacy asset footprint ideally positions it to capture growth in these areas.
Noseworthy expects Pembina to increase its dividend 3 percent to 5 percent over the next four years. "Dividend growth is supported by higher throughput volume on its conventional pipeline systems and over $1.7B of risked capital growth projects over the next four years," the analyst wrote in a note.
Current and forecast weaker commodity prices are partially offsetting Pembina's otherwise robust growth, Noseworthy said. Near term, the analyst expects below-consensus Q2/2012 results as low NGL prices and high propane inventory costs negatively impact results.
The stock, which has been trading in the 52-week range of $20.64 to $31.15, inched up 0.08 percent to trade at $25.57 on the Toronto Stock Exchange.