Integrated Oil and Midstream: Crude Draw Continues, Gasoline Cracks Rise, CVX-MSFT Agreement, ENB and DTM Meetings

Research evidence excerpt

Integrated Oil and Midstream: Crude Draw Continues, Gasoline Cracks Rise, CVX-MSFT Agreement, ENB and DTM Meetings

Valuation Method and Risk Statement

Risks - Economic recession could impact demand for refined products, which in-turn will lead

to lower margins. Higher D6 (ethanol RIN) prices would impact refining margin capture.

Weaker ethylene chain margins would be headwind to Chemical earnings. Higher feedstock

prices (animal tallow, used cooking oil) driving lower renewable diesel margins. Higher RD

feedstock prices (animal tallow, used cooking oil) would drive lower renewable diesel

margins.

DT Midstream Inc:

Our Price Target is based based on EV/EBITDA of 12.2x applied to 2027 EBITDA of

$1,275MM, less net debt, which equals $115 per share. The multiple is an average of peer

group.

Downside Risks: Project execution delays and cost escalation. Both utility scale power

generation opportunities as well as behind the meter solutions markets are capital intensive

with larger names also competing for the same opportunities.

Enbridge Inc:

Our price target is derived using the average of DDM and sum-of-the-parts EV/EBITDA

multiples. Risks to ENB include, but are not limited to, changes in supply and demand for

natural gas and oil in North America, which could drive re-contracting risk once current

pipeline contracts expire; commodity price risk; environmental risks may delay project in-

service dates; regulatory risks in North America could extend the permitting process; use of

hedging; interest rate movement could impact the cost of capital; acquisition integration cost

overruns or delays on new large projects; foreign exchange risk as U.S. operations are

reported in USD and Canadian operations report in CAD; financing risk due to high leverage;

and operational risk.