Oil last closed over $100 a barrel on July 30, 2014. Since then, the S&P Energy Index has dropped by one-third and the Alerian MLP Midstream Index by 60 percent, recalls Roger Conrad, editor of Conrad's Utility Investor.

US-listed shares of Conservative Holding Pembina Pipeline (PBA), however, are well in the black. And the owner of pipelines and related infrastructure has increased its monthly dividend by 50 percent, while maintaining a solid BBB credit rating.

That performance testifies to Pembina’s discipline on asset quality and expenses, even while quadrupling EBITDA to become Canada’s third largest midstream company.

The company’s natural gas Alliance Pipeline, for example, is fully contracted this winter after receiving nearly three times more bids for space from producers than was available. And management has already renewed 76 percent of contracts expiring next year on favorable terms.

Pembina shares produced a solid 36.7 percent return in 2021. The next step up should be a return to the 2014 high near $50 a share. Upside driver one is a return to dividend growth this year, following CAD $200 million in first half share buybacks. That’s amply funded by what appears to be very conservative projected 2022 EBITDA guidance of CAD $3.35 to CAD $3.55 billion.

The company also managed to cut CAD $110 million off the cost of its Peace Pipeline expansion project, accelerating completion from first half 2023 to mid-2022. That superior level of execution as rivals experience supply chain pressures and regulatory hurdles deserves a premium valuation.

And I expect a bigger one as strong energy pricing and expanding access for Canadian exports to Asia spurs rising producer activity this year.

Driver three is the rapidly improving ESG profile, key for investment by large institutions. The company has partnered with TC Energy (TRP) in the Alberta Carbon Grid. And it’s cutting both emissions and costs with greater use of renewable energy to power assets and by reducing combustion and flaring natural gas.

With consolidation of North American midstream picking up, Pembina will also attract interest as a potential takeover target with a market capitalization of less than $18 billion. Buy at $38 or lower.

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