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Gibson Energy Inc. Q1-2022 Earnings, Price Target Update

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Gibson Energy Inc. (GEI) operates in the oil infrastructure sector. Headquartered in Calgary, approximately 80% of the $3.6B in assets is focused on storage and related facilities primarily located at Hardisty and Edmonton, a Moose Jaw Facility and injection stations in Texas and Oklahoma that in total comprise the Infrastructure segment. The Infrastructure segment contributes approximately 20% of revenues and 80% of profits. The Marketing segment contributes 80% of revenues and 20% of profits. The 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 TC Energy's Keystone pipeline. The Edmonton Terminal connects to Kinder Morgan's TransMountain Pipeline.

Storage service remains a vital link to facilitating the flow of crude oil out of the WCSB to refining markets with several factors that may lead customers to secure additional storage with Gibson. These include 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 their HURC Rail Loading 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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