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Analyst Actions: Credit Suisse Analyzes Pacific Northern Gas Q2

Credit Suisse has kept a Neutral rating and $30 target price, but lowered its 2011 estimates on Pacific Northern Gas Ltd. (PNG.TO).

Earnings results: "Pacific Northern Gas ( PNG ) reported Q2 2011 loss of C$0.22, below our -C$0.026, below that of the Street's -C$0.062, lower than the -C$0.11 to -C$0.026 range. The difference to our estimate was largely due to lower revenues and higher cost of gas. PNG also announced that LNG Partners extended its exclusive option for 80 mmcfd of capacity on the Western System until 31 December 2011. Given weather related impacts from PNG's natural gas distribution utility, the earnings dispersion among the quarters can often be considerable. Yet, that dispersion does not generally impact allowed returns and full year earnings. Moreover, the long-cycle nature of most of our coverage universe, we do not place undue emphasis on quarterly results."

Selected highlights: Notable items include: (a) LNG Partners has one remaining option to extend exclusivity on the Western System to 30 June 2012; (b) PNG will transition to US GAAP rather than IFRS starting 1 January 2012; and, (c) the company has invested roughly C$0.9m up until 30 June 2011 on the Narrows Inlet renewable energy project.

Investment thesis: "We believe PNG provides low-growth infrastructure exposure with some growth opportunities involving: (a) further expansion of natural gas exports from Western Canada to Asian markets and (b) development and acquisition within the renewable energy sector."

Valuation: "After the quarter we adjust our financial model and reduce our 2011 earnings forecast to C$1.90 from C$2.08. Our Neutral rating and target price of C$30 is obtained from multiple valuation methods, including: a P/B multiple of 1.1x; a 14.5x P/E multiple; a 7.5x EV/EBITDA multiple on 2012 estimates; and, a DCF. We reiterate our Neutral rating."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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