Pembina Pipeline Corporation PBA is an essential player in the energy infrastructure landscape of North America. Based in Calgary, Alberta, PBA operates a vast network of pipelines, storage and processing facilities that span the entire hydrocarbon value chain. From conventional oil pipelines to gas processing plants, the company’s diverse infrastructure serves some of North America’s most productive basins, moving millions of barrels of oil and gas every day.

As a dual-listed company on both the New York and Toronto stock exchanges, PBA is a prominent figure in the energy sector, with a massive capacity to transport hydrocarbons and process natural gas.

With its key role in the oil and gas sector, it is no wonder investors are paying close attention to this oil and gas storage and transportation company. But, what are the driving forces behind its growth and what risks could potentially threaten the momentum? Let us explore the factors shaping PBA stock’s performance.

What's Favoring the PBA Stock?

Strong Financial Performance and Record EBITDA: PBA delivered record financial results in 2024, with full-year adjusted EBITDA reaching $4.41 billion, up 15% year over year. The company's ability to generate consistent cash flow, with more than 80% fee-based revenues, enhances earnings stability and dividend security. Additionally, Pembina’s leverage remains low, with a debt-to-adjusted EBITDA ratio of 3.5x, supporting its financial discipline and capacity for growth.

Highly Contracted and Resilient Revenue Model: Approximately 70% of PBA’s earnings come from long-term take-or-pay or cost-of-service contracts, ensuring revenue predictability even in volatile market conditions.

Image Source: Pembina Pipeline Corporation

This minimizes exposure to commodity price fluctuations and enhances cash flow stability. With ongoing pipeline expansions and asset acquisitions, PBA continues to strengthen contract base, which provides investors with confidence in its earnings durability.

Expanding Market Access via LNG and NGL Exports: PBA's strategic investments in LNG and NGL infrastructure, such as the Cedar LNG project and Redwater Fractionation expansions, position it to benefit from growing global demand. The Cedar LNG project, expected in late 2028, is underpinned by long-term take-or-pay contracts, reducing market risk. Additionally, LPG and propane exports to Asia and other international markets support volume growth and margin expansion.

Growth Catalysts From Western Canada’s Energy Boom: With Western Canadian Sedimentary Basin production expanding, PBA is well-positioned to capture growth in natural gas, NGLs and condensate. The Peace Pipeline expansion, Nipisi reactivation, and the Taylor-to-Gordondale project will accommodate increasing supply. Pembina's extensive midstream infrastructure ensures it remains a critical service provider in the region, supporting long-term throughput growth.

Strong Market Position With Integrated Infrastructure: PBA’s extensive pipeline network, processing facilities and storage terminals create an integrated value chain that enhances operational flexibility. The company’s ability to move hydrocarbons seamlessly from production sites to export markets provides it with a competitive advantage. Its diversified asset base reduces single-point dependency and ensures continued revenue generation across multiple energy segments.

Potential Risks for the PBA Stock

Execution Risks on Large-Scale Projects: While PBA has successfully completed several projects, ongoing capital investments such as Cedar LNG ($4 billion) and the RFS IV fractionation expansion pose execution risks. Cost overruns, construction delays and operational challenges could impact cash flows and return expectations. Even though the company has a strong track record, managing large-scale projects adds uncertainty to future financial performance.

Commodity Price Exposure and Market Volatility: Although PBA operates primarily under fee-based contracts, a portion of its business remains exposed to commodity price fluctuations. The marketing segment, which contributed to earnings growth in 2024, is vulnerable to NGL frac spreads, propane pricing and global energy market dynamics. A decline in commodity prices or reduced demand for exported NGLs could weigh on profitability.

Competition From Other Midstream Players: PBA operates in a competitive midstream environment, facing pressure from other pipeline operators like TC Energy Corporation TRP, Williams Companies, Inc. WMB and Enbridge Inc. ENB. Competing projects, including alternative export routes and fractionation facilities, could limit Pembina’s ability to secure new contracts or expand market share. If competitors undercut pricing or introduce more efficient infrastructure, PBA’s growth trajectory could be challenged.

Vulnerability to Supply-Chain Disruptions: PBA relies on a network of suppliers for pipeline materials, construction labor and processing equipment. Any disruptions in global supply chains, such as material shortages or shipping delays, could increase costs and delay project timelines. This risk is heightened in large-scale projects like Cedar LNG and the Alberta Carbon Grid, where timely execution is crucial for achieving targeted returns.

Recent Stock Performance Concerns: PBA's share price has decreased 5.8% in the past six months. In comparison, its Production and Pipelines sub-industry has posted a rise of 15.4%. PBA’s underperformance may indicate investors’ concerns and could potentially impact its valuation in the near term.

6-Month Price Performance Comparison

Image Source: Zacks Investment Research

Final Thoughts for PBA Stock

PBA Pipeline boasts strong financial performance, with a record EBITDA and stable cash flow driven by its fee-based revenue model, which provides stability and dividend security. Strategic investments in LNG and NGL infrastructure, along with its dominant position in Western Canada’s energy sector, position Pembina for long-term growth.

However, risks include execution challenges in large-scale projects like Cedar LNG, exposure to commodity price volatility, competition from other midstream operators and potential supply-chain disruptions. Additionally, PBA has underperformed recently, with its stock price dropping 5.8% in the past six months. Given the balance of growth potential and risks, investors should wait for a more favorable opportunity to add this Zacks Rank #3 (Hold) stock to their portfolios.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Williams Companies, Inc. (The) (WMB) : Free Stock Analysis Report

Enbridge Inc (ENB) : Free Stock Analysis Report

TC Energy Corporation (TRP) : Free Stock Analysis Report

Pembina Pipeline Corp. (PBA) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research