1、North America Equity Research22 March 2019Equity Ratings and Price TargetsMkt CapPriceRatingPrice TargetCompanyTicker($mn)CCYPriceCurPrevCurEnd DatePrevEnd DateCheniere Energy,Inc.LNG US17,820.38USD69.34OWn/c86.00Dec-19n/cn/cCheniere Energy Partners,L.P.CQP US21,092.72USD43.58Nn/c46.00Dec-1944.00n/c
2、Kinder Morgan,Inc.KMI US46,193.43USD20.42NOW22.00Dec-1921.00n/cMacquarie Infrastructure CorporationMIC US3,505.80USD40.86Nn/c43.00Dec-1947.00n/cONEOK,Inc.OKE US28,745.55USD69.85OWn/c79.00Dec-1974.00n/cPlains GP Holdings,L.P.PAGP US6,982.83USD25.02OWn/c32.00Dec-1931.00n/cPlains All American Pipeline,
3、L.P.PAA US18,151.78USD24.99OWn/c32.00Dec-1931.00n/cTarga Resources Corp.TRGP US9,737.52USD42.01OWn/c52.00Dec-1954.00n/cThe Williams Companies,Inc.WMB US28,167.00USD28.93OWn/c34.00Dec-1933.00n/cEnbridge IncENB CN74,618.71CAD49.10Nn/c55.00Dec-1956.00n/cGibson Energy Inc.GEI CN2,559.79CAD23.56Nn/c26.00
4、Dec-1924.00n/cInter Pipeline Ltd.IPL CN6,719.38CAD22.14Nn/c25.00Dec-1926.00n/cPembina Pipeline CorpPPL CN19,099.08CAD50.22OWn/c58.00Dec-1957.00n/cTransCanada CorpTRP CN41,491.32CAD60.60OWn/c70.00Dec-1968.00n/cIEnovaIENOVA*MM6,223.64MXN76.40OWn/c95.00Dec-19102.00n/cSource:Company data,Bloomberg,J.P.M
5、organ estimates.n/c=no change.All prices as of 21 Mar 19.North American Energy Infrastructure C-CorpsPM Handbook:Strong Earnings&Pivot to Capital Discipline Propels Strong YTD Performance,Prefer PPL,WMB,PAGPEnergy MLPsJeremy Tonet,CFA AC(1-212)622-Bloomberg JPMA TONET J.P.Morgan Securities LLCRahul
6、Krotthapalli(1-212)622-J.P.Morgan Securities LLCCharlie W Barber(1-212)622-J.P.Morgan Securities LLCJoseph R Martoglio(1-212)622-J.P.Morgan Securities LLCVinay Chitteti(91-22)6157-J.P.Morgan India Private LimitedSee page 94 for analyst certification and important disclosures,including non-US analyst
7、 disclosures.J.P.Morgan does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in m
8、aking their investment decision.With an earnings season that fared better than MLPs,the AMNA(C-Corp/MLPenergy infra index)continues to gain,aided by a constructive volume outlook,underpinned by communication from the Majors,and higher WTI.In our experience this year,we have found the illusive unicor
9、n generalist investor interest materializinga bit more,hailing from new areas,even as far away as Europe.However,these conversations have solely focused on C-Corps,and more specifically on those in large indices.As such,we believe that broader index inclusion,as well as having conventional corporate
10、 governance,has contributed to C-Corps outperforming MLPs YTD,though new institutional MLP mandates appear to be entering the market as well.Additionally,a continued chorus from the market demanding capital discipline and efficiency has led midstreamers to pivot towards a more efficient,live-within-
11、your-means capex strategy that supports deleveraging and the possibility of share buy-backs.We believe this message resonates strongly with the broader market,and we expect maximizing leverage adjusted free cash flow per share to gain prominance in midstream discussion,with investors revolting again
12、st companies that do not.Overall,we believe that PPL continues to offer the optimal mix of offense and defense,with best-in-class financial flexibility.Even with the move up YTD,we believe WMB possesses the best portfolio management and deleveraging catalyst potential going forward.Finally,we contin
13、ue to advocate Plains given its preeminent Permian positioning.WMB:walking the walk with another capital efficient JV.We believe thatWMB as a single security,IG-rated energy infrastructure C-Corp with several of the most attractive FERC regulated natgas pipes and mid to upper single digit EBITDAgrow
14、th represents an attractive investment opportunity.We see the recent string of capital efficient transactions/agreements(Appalachian JV,Bluestem project,Brazos JV,Four Corners sale)as overcoming historical investor concerns over capital discipline and a slow pace of incremental de-leveraging.These a
15、ctions continue to build investor confidence in WMBs dedication to efficiently create per share value,Above54%In-line31%Below15%Note:+/-2%threshold,JPM coverage4Q18 EBITDA vs Street2North America Equity Research22 March 2019Jeremy Tonet,CFA(1-212)622-as we noted in our NDR note late last year.Import
16、antly,WMB has highlighted the ability to optimize its existing asset base and enhance full value chain integration with strategic JVs.With$600mm of proceeds from the Appalachian deal ticking down leverage and avoiding$100mm of 2019 growth capex,we believe incremental portfolio pruning will continue,
17、such as possibly with Jackalope,which should build momentum for WMB through leverage reduction acceleration.Moreover,with investor doubt lingering on capturing Northeast G&P growth and Transcos rate case upside,we see any modest positives here as key catalysts.KMI:34%YTD total return reduces upside
18、expectations;D/G to N.Since the difficult decision to reduce the dividend in 2015,KMI has done a tremendous job repositioning the B/S through increased self-funding and divestitures,culminating in materially lower leverage and recent credit ratings upgrades.KMI now embodies the equity self-funding m
19、antra demanded by the market.However,KMI possesses one of the lower EBITDA growth profiles among peers,as we see the 501-G impact,FERC pipe contract rolls,Jones Act contract rolls,and declines in certain G&P assets as presenting headwinds that will somewhat weigh on near term EBITDA growth.After out
20、performing the AMNA by 11%since the start of 2019,KMI has finally tightened the valuation gap versus peers.While acknowledging that a KML transaction could yield incremental share buy-backs and benefit KMI,we see a more balanced risk reward profile given less upside to our PT when compared to other
21、names in our coverage universe.PPL/PBA:leveraging value chain integration and premier footprint to capture attractive growth;reiterate OW.We have long advocated for midstreamers with the 4Fs,premier franchise,footprint,financial flexibility and full-integration,and Pembina delivers these attributes
22、in spades.First off,while many have tried,no competitor has successfully replicated Pembinas prized Montney franchise as PPL continues to capture incremental Peace expansions that leverage solid condensate and NGL production growth.While the$950mm Phase VII and$500mm Phase VIII expansions mark notab
23、le additions,PPL sees“potential for further expansions”with Phase IX,which would result in four segregated product pipelines between the Gordondale and Edmonton areas.The most recent addition,a JV PDH/PP,further extends PPLs full value chain integration,increasing Pembina and producer customer netba
24、cks with higher value polypropylene,thereby enhancing the value of PPLs franchise.Finally,with 4x leverage and 1.7x dividend coverage,Pembina exhibits best in class financial flexibility and plenty of capacity to self-equity fund its robust$5.5bn secured growth backlog.PAGP/PAA:Permian propulsion an
25、d transformed financial position drives favorable proposition;reiterate OW.Following another beat,we continue to favor Plains as a top pick given the advantaged Permian leverage complemented by an improved financial position($50,reaffirmed by the JPM OFS Teams resilient outlook for 10%production gro
26、wth in 2019,with growth slightly decelerating to an exit-rate of+8.5%.While this backdrop remains constructive,location clearly matters and we continue to focus on names with the strongest operating leverage to the most advantaged basins,such as PAGP in the Permian and OKE in the Bakken.only to be o
27、ffset by the Majors super-sizing growth plans.CVX and XOManalyst days provided a notable upbeat view for Permian production,in our view.XOM plans to allocate more capex to the Permian and now anticipates production reaching 1mmbbls/d by 2024 versus 600mbbls/d previously.CVX forecasts 4North America
28、Equity Research22 March 2019Jeremy Tonet,CFA(1-212)622-stronger production due to performance improvements,guiding to 600mbbls/d by 2020 and 900mbbls/d by 2023.Possessing the premier Permian gathering and intra-basin network,PAGP should benefit the most on the crude oil side.Moreover,we believe the
29、Majors stepping up investment in US shale relative to other parts of their global portfolios validates the value creation potential of shale,especially the Permian.Condensate shortfall underpins positive Montney outlook.Given that Canada imports almost 50%of the condensate needed for oil sands dilue
30、nt,Canadian condensate prices have tended to exhibit tighter differentials to WTI when compared to WCS.This resiliency has contributed to favorable drilling economics and steady Montney production growth.Moreover,with ENB potentially repurposing Southern Lights from condensate import to 150mbpd of o
31、il export by 2023,we see an extended runway of support for condensate prices with less imports and eventualincreasing oil sands needs.As such,Montney growth remains a bright spot in Canada,not facing the same type of basin takeaway constraints that has weighed on the oil sands outlook.although oil s
32、ands takeaway projects continue to face hurdles.While we view ENBs L3R as best positioned given its advanced stage,the project timeline was recently delayed to 2H20.Even with this delay,MN permitting process and legal challenge risks remain for L3R,with multiple lawsuits progressing through the cour
33、ts.An eventual in-service will bring notable relief to Canadian producers,as well as the potential for an incremental 300mbpd of takeaway through optimizations(i.e.idling,optimizing,and restoring existing pipelines).In the same vein,KXL continues to face legal challenges bringing delays as well,alth
34、ough with$30bn ofsecured capex opportunities,we believe TRP possesses a more than ample growth outlook.Finally,the Canadian federal government continues to face resistance from British Columbia and Vancouver,fueling notable uncertainty on the future of the TransMountain expansion.Alberta prod limit
35、set to ease as diffs improve.Since the Alberta production cuts were announced on 12/2,the WTI-WCS spread tightened to as low as$7 in early January,and have remained in the low teens since.Following the drastic improvement in WCS pricing,the Government of Alberta eased the production restriction by 7
36、5mbpd in February,and with further easements of 25mbpd expected in April,May,and June.ENBs announced L3R timeline delay has led to speculation that the production curtailments may continue past year-end,when the restrictions were expected to roll off.According to the NEBs recently published Advice t
37、o the Minister of Natural Resources,average utilization on ENBs Mainline,TRPs Keystone,and Trans Mountain Pipeline was at 98%in 4Q18.With the only long-haul options out of Canada running near full capacity,we see the possibility of forced curtailments extending until relief materializes in 2020,if W
38、CS basis widens out again.5North America Equity Research22 March 2019Jeremy Tonet,CFA(1-212)622-Permian Logistics Snapshot NGL bottlenecks to clear in mid-2019,but frac tightness ripe to re-emerge and persist well into 2020.Shin Oak and Grand Prix will bring more than 800mbpd of Permian NGL takeaway
39、 capacity online by 2Q and 3Q,respectively,likely introducing a notable level of ethane into Mont Belvieu as Permian producers seek to ramp up ethane recovery to free up natgas pipeline capacity and reduce flaring.While ETs recently placed in service Frac VI and TRGPs upcoming Frac VI bring 250mbpd
40、of capacity online,we see a mismatch in new NGL supply relative to new frac capacity,likely leading to fractionation tightness resurfacing,similar to 3Q18.The JPM chemicals team continues to eye 10bn lbs of additional ethylene capacity by 2H19,which represents 265mbpd of incremental ethane demand at
41、 90%operating rates.Assuming a 50%y-grade mix,the aforementioned new fractionators could add 125mbpd of purity ethane,while debottlenecking could potentially add 40mbpd,depending upon pipeline connectivity.With incremental ethane demand from light-end crackers likely outpacing incremental fractionat
42、or supply in 2019,we see a positive skew in NGL midstream service pricing power,as well as ethane pricing risk and optimization opportunities,as evidenced by the industry dynamics last September.ET and EPD remain our favored names for cross hydrocarbon Permian logistics needs,with TRGP and OKE benef
43、itting as well among C-Corps.Table 1:North America Key Ethylene ProjectsSource:Bloomberg,JPM Chemicals Team.Table 2:USGC Greenfield Fractionation Facilities AnnouncedSource:Company reports Oil and natgas takeaway:Midland-MEH widens a little,Waha a lot.Permian production continues to steam ahead,incr
44、easing 3%YTD.After reaching an$18 discount in August,Midland crude oil now trades close to even with Cushing.However,more importantly for many midstreamers,Midland to Houston still provides an attractive spread of$7.00.As for gas,Waha futures widened notably since last September,likely reflecting Me
45、xican takeaway delays,such as Wahalajaras(Fermacas three pipes)recent delay from 1Q19 to later this year.As CompanyProjectEthylene Capacity(billion lbs/year)Ethane Consumption(MBPD)*LocationStart-upDow ChemicalGreenfield3.3184Freeport,TexasJan-18Chevron Phillips Chemical Greenfield3.3184Cedar Bayou,
46、TexasMar-18ExxonMobilGreenfield3.3184Baytown,TexasJul-18Incremental Pull in 2018252IndoramaRestart0.9324Lake Charles,La.Start-upDupontExpansion0.205Orange,TX1Q19ShintechGreenfield1.1028Plaquemine,La.2Q19SasolGreenfield3.3184Lake Charles,La.2Q19Formosa PlasticsGreenfield2.6568Point Comfort,Texas2Q-3Q
47、19Axiall&Lotte ChemicalGreenfield2.2156Lake Charles,La.2H19Incremental Pull in 2019265Dow ChemicalExpansion1.1028Freeport,Texas2020+Total/Borealis/NovaGreenfield2.2156Port Arthur,Texas2021+Chevron Phillips Chemical Expansion1.1028Cedar Bayou,Texas2022+ShellGreenfield3.3184Monaca,PA2022+Nova ChemExpa
48、nsion0.9524Sarnia,Canada2022+Exxon/SABICGreenfield3.97101San Patricio County,TX2022+Formosa PlasticsGreenfield2.6568St.James Parish,LA2022+ExxonMobil ChemicalExpansion1.1028Baytown,TX2023+PTT/DaelimGreenfield3.3184OH2023+Formosa Plastics(Phase II)Expansion2.6568St.James Parish,LA2023+Incremental Pul
49、l in 2020+569Total42.71,086*90%Utilization RateCompanyLocationFacilityCapacity In-ServiceETMont BelvieuFrac VI1501Q19TRGPMont BelvieuFrac VI1002Q19OKEMont BelvieuMB41251Q20EPDMont BelvieuFrac X1501Q20ETMont BelvieuFrac VII1501Q20TRGPMont BelvieuFrac VII1101Q20EPICCorpus ChristiEPIC-I1101Q20TRGPMont
50、BelvieuFrac VIII1102Q20EPDMont BelvieuFrac XI1502Q20PSXSweeneyFrac II/III3004Q20PermicoCorpus ChristiEl Centro3004Q20OKEMont BelvieuMB51251Q21TRGPMont BelvieuFrac IXTBDmid-20211.9mmbbls/dCompanyLocationFacilityCapacity In-ServiceEPDAscensionTebone Restart301Q19ENLKEuniceExpansion102Q19ENLKPlaquemine
