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Here's Why it's Wise to Hold Pembina Pipeline Stock for Now
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Key Takeaways
PBA is expanding NGL exports via West Coast access to tap Asia's premium markets and reduce U.S. reliance.
The Alliance and Aux Sable integration is driving C$40-C$65M in synergies and stronger Q1 adjusted EBITDA.
85-90% of PBA's EBITDA is fee-based, but weak NGL prices and low buyback activity weigh on investor sentiment.
Pembina Pipeline Corporation (PBA - Free Report) is a key player in North America’s midstream energy infrastructure sector, specializing in the transportation, storage and processing of oil, natural gas liquids and natural gas. With a robust asset base that spans pipelines, gathering systems and processing facilities, Pembina plays a critical role in ensuring the efficient flow of energy resources from production areas to markets. The company’s strategic footprint and diversified operations position it as a vital intermediary in the energy supply chain, underpinning steady cash flow generation and long-term growth prospects.
For investors considering the stock, it is essential to look beyond short-term price movements and focus on the company’s operational resilience, strategic acquisitions and ability to navigate regulatory and market challenges. Key areas of interest include Pembina’s capital efficiency, cost structure and pipeline capacity, particularly its reliance on major conduits such as the Trans Mountain Expansion (“TMX”) pipeline for transporting heavy oil. While the stock has shown modest performance compared with peers, its fundamentals suggest a stable outlook with potential upside tied to sector recovery and infrastructure demand.
Pembina plays a key role in the oil and energy sector, so it is no surprise that many investors are keeping a close eye on the stock. But what is really behind how the company is performing right now? And what are the biggest risks that could slow things down?
Let us break down the main factors shaping Pembina’s path forward, looking at what could help it grow and what might hold back.
What Makes PBA a Bullish Bet for Now
Expansion Into Global NGL Markets: Pembina is actively diversifying its NGL export strategy by securing West Coast capacity (e.g., Watson Island) to access higher-margin markets in Asia. This reduces reliance on U.S. demand and mitigates risks from potential trade disputes. The company’s focus on premium markets enhances long-term revenue resilience, in contrast to more regionally focused peers like Ultrapar Participacoes and Williams Companies, which are more reliant on domestic demand trends.
Synergies From Alliance/Aux Sable Acquisition: The integration of Alliance and Aux Sable is progressing well, with expected synergies of C$40-C$65 million, primarily from commercial optimization. These cost savings and revenue enhancements contribute to margin expansion and improved cash flow generation. The acquisition has already contributed to higher adjusted EBITDA in first-quarter 2025.
Progress in Alliance Pipeline Negotiations: While future tolls on Canada’s portion of Alliance may decline, Pembina expects to maintain "appropriate risk-adjusted returns" through a negotiated settlement with shippers. The pipeline’s high reliability and access to premium U.S. markets remain key competitive advantages. This stability is critical for long-term cash flow predictability. This is also a hallmark of Williams Companies’ transmission network.
Diversified and Fee-Based Revenue Streams: Approximately 85-90% of Pembina’s EBITDA comes from take-or-pay and cost-of-service contracts, reducing exposure to commodity price volatility. The recent long-term agreement with a leading Montney producer further strengthens revenue visibility, covering transportation, fractionation and marketing services. This stability is a key advantage in uncertain market conditions.
Potential Risks Threatening PBA’s Growth
Commodity Price Sensitivity in Marketing Segment: Although approximately 50% of Pembina’s 2025 frac spreads are hedged, the remaining exposure leaves the marketing segment vulnerable to NGL price declines. PBA’s management acknowledged that weaker commodity prices due to global economic uncertainty could offset the first quarter’s outperformance, keeping full-year EBITDA guidance at C$550 million. Similar challenges recently impacted peers like Ultrapar Participacoes and MPLX LP, which operate with partial commodity-linked revenue streams.
Limited Near-Term Share Buyback Catalysts: Despite low leverage, management has not committed to share repurchases, prioritizing debt reduction instead. This cautious approach may disappoint investors expecting more aggressive capital returns.
Competitive Pressures in Montney Infrastructure: Rival projects, such as third-party expansions in the Taylor-to-Gordondale region, could lead to overcapacity or regulatory challenges. While Pembina supports additional egress solutions, increased competition may dilute long-term pricing power.
Execution Risks for Greenlight Data Center Project: Pembina’s 50% stake in the Greenlight Electricity Centre involves developing power generation for data centers, a non-core venture. Supply-chain delays or cost inflation for gas turbines could derail timelines and returns. MPLX LP and Williams Companies, which have largely stayed within core midstream operations, may be better insulated from such diversification risks.
Recent Stock Performance Concerns: Pembina stock has seen only a small gain of 1.3% over the past six months. This is just below the overall Oil-Energy sector, which rose 1.4%, and well behind the Oil & Gas Production and Pipeline sub-industry, which grew 4%. Pembina also lagged behind major competitors. Ultrapar Participações (UGP - Free Report) , MPLX LP (MPLX - Free Report) and Williams Companies (WMB - Free Report) jumped 23.2%, 8.8% and 4.4%, respectively. Compared with its peers and the broader market, Pembina’s slower growth raises concerns about the recent performance.
6-Month Stock Performance Overview
Image Source: Zacks Investment Research
Final Thoughts for PBA Stock
The Zacks Rank #3 (Hold) company offers compelling long-term growth potential through strategic expansion into global NGL markets and successful integration of Alliance and Aux Sable, which are driving cost synergies and improving EBITDA. Its strong reliance on fee-based contracts provides earnings stability, even in volatile commodity markets.
However, the company faces risks from its exposure to unhedged NGL prices, which could pressure earnings if commodity markets weaken. Additionally, increased competition in Montney infrastructure and uncertainties around non-core ventures like the Greenlight Electricity Centre add execution risk. Recent underperformance in stock price relative to peers also raises investor concerns about near-term momentum.
Given the balance of growth potential and risks, investors should wait for a more favorable opportunity to add this stock to their portfolios.
Image: Bigstock
Here's Why it's Wise to Hold Pembina Pipeline Stock for Now
Key Takeaways
Pembina Pipeline Corporation (PBA - Free Report) is a key player in North America’s midstream energy infrastructure sector, specializing in the transportation, storage and processing of oil, natural gas liquids and natural gas. With a robust asset base that spans pipelines, gathering systems and processing facilities, Pembina plays a critical role in ensuring the efficient flow of energy resources from production areas to markets. The company’s strategic footprint and diversified operations position it as a vital intermediary in the energy supply chain, underpinning steady cash flow generation and long-term growth prospects.
For investors considering the stock, it is essential to look beyond short-term price movements and focus on the company’s operational resilience, strategic acquisitions and ability to navigate regulatory and market challenges. Key areas of interest include Pembina’s capital efficiency, cost structure and pipeline capacity, particularly its reliance on major conduits such as the Trans Mountain Expansion (“TMX”) pipeline for transporting heavy oil. While the stock has shown modest performance compared with peers, its fundamentals suggest a stable outlook with potential upside tied to sector recovery and infrastructure demand.
Pembina plays a key role in the oil and energy sector, so it is no surprise that many investors are keeping a close eye on the stock. But what is really behind how the company is performing right now? And what are the biggest risks that could slow things down?
Let us break down the main factors shaping Pembina’s path forward, looking at what could help it grow and what might hold back.
What Makes PBA a Bullish Bet for Now
Expansion Into Global NGL Markets: Pembina is actively diversifying its NGL export strategy by securing West Coast capacity (e.g., Watson Island) to access higher-margin markets in Asia. This reduces reliance on U.S. demand and mitigates risks from potential trade disputes. The company’s focus on premium markets enhances long-term revenue resilience, in contrast to more regionally focused peers like Ultrapar Participacoes and Williams Companies, which are more reliant on domestic demand trends.
Synergies From Alliance/Aux Sable Acquisition: The integration of Alliance and Aux Sable is progressing well, with expected synergies of C$40-C$65 million, primarily from commercial optimization. These cost savings and revenue enhancements contribute to margin expansion and improved cash flow generation. The acquisition has already contributed to higher adjusted EBITDA in first-quarter 2025.
Progress in Alliance Pipeline Negotiations: While future tolls on Canada’s portion of Alliance may decline, Pembina expects to maintain "appropriate risk-adjusted returns" through a negotiated settlement with shippers. The pipeline’s high reliability and access to premium U.S. markets remain key competitive advantages. This stability is critical for long-term cash flow predictability. This is also a hallmark of Williams Companies’ transmission network.
Diversified and Fee-Based Revenue Streams: Approximately 85-90% of Pembina’s EBITDA comes from take-or-pay and cost-of-service contracts, reducing exposure to commodity price volatility. The recent long-term agreement with a leading Montney producer further strengthens revenue visibility, covering transportation, fractionation and marketing services. This stability is a key advantage in uncertain market conditions.
Potential Risks Threatening PBA’s Growth
Commodity Price Sensitivity in Marketing Segment: Although approximately 50% of Pembina’s 2025 frac spreads are hedged, the remaining exposure leaves the marketing segment vulnerable to NGL price declines. PBA’s management acknowledged that weaker commodity prices due to global economic uncertainty could offset the first quarter’s outperformance, keeping full-year EBITDA guidance at C$550 million. Similar challenges recently impacted peers like Ultrapar Participacoes and MPLX LP, which operate with partial commodity-linked revenue streams.
Limited Near-Term Share Buyback Catalysts: Despite low leverage, management has not committed to share repurchases, prioritizing debt reduction instead. This cautious approach may disappoint investors expecting more aggressive capital returns.
Competitive Pressures in Montney Infrastructure: Rival projects, such as third-party expansions in the Taylor-to-Gordondale region, could lead to overcapacity or regulatory challenges. While Pembina supports additional egress solutions, increased competition may dilute long-term pricing power.
Execution Risks for Greenlight Data Center Project: Pembina’s 50% stake in the Greenlight Electricity Centre involves developing power generation for data centers, a non-core venture. Supply-chain delays or cost inflation for gas turbines could derail timelines and returns. MPLX LP and Williams Companies, which have largely stayed within core midstream operations, may be better insulated from such diversification risks.
Recent Stock Performance Concerns: Pembina stock has seen only a small gain of 1.3% over the past six months. This is just below the overall Oil-Energy sector, which rose 1.4%, and well behind the Oil & Gas Production and Pipeline sub-industry, which grew 4%. Pembina also lagged behind major competitors. Ultrapar Participações (UGP - Free Report) , MPLX LP (MPLX - Free Report) and Williams Companies (WMB - Free Report) jumped 23.2%, 8.8% and 4.4%, respectively. Compared with its peers and the broader market, Pembina’s slower growth raises concerns about the recent performance.
6-Month Stock Performance Overview
Image Source: Zacks Investment Research
Final Thoughts for PBA Stock
The Zacks Rank #3 (Hold) company offers compelling long-term growth potential through strategic expansion into global NGL markets and successful integration of Alliance and Aux Sable, which are driving cost synergies and improving EBITDA. Its strong reliance on fee-based contracts provides earnings stability, even in volatile commodity markets.
However, the company faces risks from its exposure to unhedged NGL prices, which could pressure earnings if commodity markets weaken. Additionally, increased competition in Montney infrastructure and uncertainties around non-core ventures like the Greenlight Electricity Centre add execution risk. Recent underperformance in stock price relative to peers also raises investor concerns about near-term momentum.
Given the balance of growth potential and risks, investors should wait for a more favorable opportunity to add this stock to their portfolios.
You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.