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Gibson Energy Inc. Q2-2021 Earnings, Price Target Update

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Gibson Energy Inc. (GEI) operates in the oil infrastructure sector with growth plans focused on crude oil storage. Headquartered in Calgary, approximately 80% of the $3.3B in assets is focused on storage and related facilities primarily located at Hardisty and Edmonton, Alberta. The balance includes the Moose Jaw Facility and injection stations in Texas and Oklahoma. Their key strategy has been to refocus on the oil storage business in western Canada financed with proceeds from the sale of their propane distribution business to Superior Plus (SPB) and profits from operations. The Hardisty Terminal connects to the Enbridge Line 3 Mainline and Edmonton Terminal connects to Kinder Morgan's TransMountain Pipeline. The Hardisty Terminal is connected to the TransCanada Keystone pipeline.

Storage service will remain vital to facilitating the flow of crude oil out of the WCSB and towards refining markets, with several factors that may lead customers to secure additional storage with Gibson, including the Government of Canada's TMX pipeline entering service, the ability to access value added services within Gibson's terminals, the importance of storage during periods of limited egress such as during pipeline upsets or to facilitate the transportation of crude oil by rail. To the extent that egress is not viewed as constrained by market participants, it will decrease demand for crude by rail capacity at the HURC Facility. In instances where egress out of the WCSB is constrained, differentials typically widen, which improves margins at the Moose Jaw Facility, and, in conjunction with increased price volatility, typically provides increased opportunities within the Crude Marketing business.

Based on the location of the end user, approximately 30% of revenues are from US customers. By assets, approximately 70% are located in Canada. The storage business contributes approximately 80% of profits with the balance from marketing. Capital spending for 2019 was $268M of which $229M was growth capital and $21M for acquisitions. Capital spending forecast at $325M for 2020 was $309M, the 2021 forecast is $200M They also have exclusive access to the only unit train rail terminal at Hardisty through joint venture with USD(NYSE-USDP) with a capacity of 120,000 bbl/d (2 unit trains per day), with potential to expand.

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