Terminal Expansions Will Open New North American Export Opportunities

Key Takeaways

• New infrastructure projects and strategic supply connections are boosting terminal capacity, enhancing revenue growth and increasing business visibility through stronger customer commitments.
  
• Long-term contracts and rising North American energy and export demand provide stable cash flows, while efficiency efforts support margin expansion and greater shareholder returns.
  
• Heavy dependence on North American oil demand, geographic concentration, customer consolidation, and industry cost pressures threaten Gibson's revenue stability, profitability, and long-term earnings growth.

Catalysts

Engages in the gathering, storing, optimizing, and processing of liquids and refined products in Canada and the United States.

• Newly completed capital projects (Gateway dredging, Cactus II connection, Duvernay partnership with Baytex) are materially increasing terminal capacity, crude supply optionality, and throughput; these infrastructure expansions are expected to drive sustained high-margin, fee-based revenue growth and EBITDA as customer volumes ramp over the next several years.
  
• The Gateway terminal's advantaged position as the lowest-cost deepwater export location in Corpus Christi, enhanced by increased vessel draft capacity and new supply connections, is supporting growing market share, with management anticipating further customer recontracting at higher minimum volume commitments (MVCs) that should improve long-term revenue visibility and operating margins.
  
• Anchored by long-term, take-or-pay contracts with investment-grade customers at major terminals (e.g., Edmonton, Hardisty, Gateway), Gibson is positioned to benefit from structural increases in North American energy demand and growing export needs-two drivers expected to underpin stable cash flows and support dividend growth even as the sector transitions to lower-carbon fuels.
  
• Ongoing industry trends-such as rising Canadian oil sands production and continuing U.S. Gulf Coast export demand-should boost crude flows through Gibson's midstream network, leading to increased facility utilization and potential future expansions, thereby enhancing revenue and distributable cash flow over the medium to long term.
  
• Management's strong focus on operational efficiency, including a company-wide cost savings initiative targeting over $25 million in recurring annual run-rate savings, is supporting margin expansion and providing additional flexibility to direct future cash flows toward debt reduction or shareholder returns, amplifying the impact of revenue growth on bottom-line earnings.

Gibson Energy Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Gibson Energy's revenue will decrease by 4.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.5% today to 3.2% in 3 years time.
• Analysts expect earnings to reach CA$301.2 million (and earnings per share of CA$1.57) by about September 2028, up from CA$159.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 17.8x on those 2028 earnings, down from 26.9x today. This future PE is greater than the current PE for the CA Oil and Gas industry at 12.2x.
• Analysts expect the number of shares outstanding to grow by 0.49% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.83%, as per the Simply Wall St company report.

Gibson Energy Future Earnings Per Share Growth

Risks

• The company's long-term growth and revenue are heavily dependent on North American crude oil demand and export volumes. Accelerated adoption of net-zero policies, energy transition, and growing global investment in renewables and electrification could structurally reduce oil demand and utilization rates for Gibson's storage, terminal, and transportation assets, pressuring both throughput volumes and facility utilization over time, which would negatively impact infrastructure revenue and long-term earnings.
  
• Gibson's core operations remain concentrated in Western Canada and the U.S. Gulf Coast, exposing it to significant geographic concentration risk. Regional market disruptions, new local regulations, or competitive overbuild (such as increased egress options away from Hardisty/Edmonton or alternative export terminals in Corpus Christi) could materially affect contract renewals, market share, and pricing power, posing risks to both revenue stability and net margin improvement.
  
• High reliance on a limited number of large customers, especially in the oil sands and newly acquired customers at Gateway, increases counterparty and contract renewal risk. Should key customers reduce production, fail to renew contracts, or be acquired by players with different logistics strategies, Gibson could face sudden revenue volatility and lower long-term cash flow visibility, threatening dividend growth and earnings predictability.
  
• Although the company highlights recent cost savings and high-margin growth projects, ongoing industry-wide cost pressures-such as those from heightened regulatory/environmental compliance, rising climate-related insurance/maintenance costs, and potential asset impairments from policy changes-could erode net margins and require increased capital allocation for maintenance rather than growth, negatively impacting future profitability and free cash flow.
  
• The current muted marketing environment, with heavily compressed differentials, limited storage contango, and reduced drilling activity, has already resulted in lower marketing EBITDA and distributable cash flow. If inventory levels and market dynamics do not revert to historical norms, or if structural changes in crude markets persist, the marketing segment may underperform relative to long-term targets, hindering overall earnings growth and delaying deleveraging or shareholder return initiatives (like share buybacks).

Valuation

• The analysts have a consensus price target of CA$26.423 for Gibson Energy based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$30.5, and the most bearish reporting a price target of just CA$24.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CA$9.3 billion, earnings will come to CA$301.2 million, and it would be trading on a PE ratio of 17.8x, assuming you use a discount rate of 6.8%.
• Given the current share price of CA$26.12, the analyst price target of CA$26.42 is 1.1% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.