AltaGas (TSE:ALA) reported record second-quarter results, supported by stronger performance in its Midstream and Utilities businesses, and raised its full-year 2026 financial guidance.
President and Chief Executive Officer Vern Yu said normalized EBITDA totaled CAD 391 million in the second quarter, up 14% from a year earlier, while normalized earnings per share rose 15% to CAD 0.31. The company said its Midstream results benefited from historically high global export spreads and physical-sale premiums.
The company ended the quarter with adjusted net debt to normalized EBITDA of 4.4 times, below its stated target range of 4.5 times to 5.0 times. Brown said leverage is expected to move toward the midpoint of that range as the company advances its capital program through the year.
Export Volumes Drive Midstream Growth
AltaGas’s Midstream segment generated CAD 285 million of normalized EBITDA, an increase of 33% from the prior-year quarter. The business exported a record 144,000 barrels per day of liquefied petroleum gas across 23 very large gas carriers from its Ferndale and RIPET terminals, up 13% year over year.
Ferndale exports approached 60,000 barrels per day, aided by improved rail-switching efficiency and higher rail, refinery and truck-in volumes. RIPET exported about 84,000 barrels per day of propane and continued operating near capacity.
Montney volumes also increased, with throughput excluding the impact of planned maintenance at Harmattan up 9% year over year. North Pine throughput in northeast British Columbia rose 23% from a year earlier and remained near its 25,000-barrel-per-day capacity, while the Pipestone II complex averaged roughly 90% utilization.
Brown said approximately 91% of AltaGas’s expected remaining 2026 global export volumes are either tolled or financially hedged. Non-tolled volumes are hedged at an average Far East Index-to-North America spread of approximately US$21.81 per barrel, while 9% of volumes remain exposed to market pricing. The company also said all of its 2026 Baltic freight exposure is hedged through time charters, financial instruments and tolling arrangements.
Yu said disruptions to LPG exports through the Strait of Hormuz have tightened global markets, with exports through the waterway more than 70% below pre-conflict levels. AltaGas said more than 160 million barrels of LPG have been displaced from global trade since the disruption began, supporting demand for Canadian supply in markets including Japan, South Korea, China and other Asian countries.
REEF Cost Estimate Rises, Startup Moves to 2027
AltaGas said construction of its Ridley Island Energy Export Facility, or REEF, is 85% complete. However, the company pushed the expected startup date to before the end of the first quarter of 2027 and increased the project’s estimated capital cost by 12% to approximately CAD 1.5 billion.
Yu said onshore work has progressed ahead of plan, with all major equipment installed and uplands commissioning expected to begin in late August. But in-water work has been affected by extreme weather, ocean swells and marine mammal activity. Since work began in fall 2024, AltaGas has lost more than 450 rig days, exceeding normal contingency expectations.
The company said the jetty and loading platform are about 80% complete, with most remaining in-water work expected to be completed within six weeks. All 48 piles for the jetty piers have been completed, while five piles remain for the loading platform. The rail loop and utility corridor are 70% complete and expected to be finished by mid-November.
REEF Optimization I remains on track for service in the second half of 2027 and is expected to add 30,000 barrels per day of propane export capacity. AltaGas is also progressing REEF Optimization II, with key permits secured and a final Class 3 cost estimate expected before year-end. Yu said the company expects to conclude commercial negotiations for incremental tolling arrangements within the next several months.
Management reiterated its target of having 60% of long-term export capacity covered by tolling agreements. Yu said AltaGas sees potential demand for additional REEF phases every two to three years as Western Canadian gas production and export capacity expand.
Utilities Investment and Regulatory Progress
The Utilities segment reported normalized EBITDA of CAD 142 million, up 6% year over year, driven by modernization investments, new rates in Washington, D.C., interim rates in Virginia and stronger retail performance. Higher general and administrative expenses and lower asset-optimization activity at Washington Gas partly offset those gains.
AltaGas deployed approximately CAD 240 million in utility capital during the quarter, including CAD 130 million toward modernization programs. The company has replaced more than 20 miles of vulnerable pipe year to date and said it has more than 5,000 miles of pre-1970s pipe requiring replacement across its jurisdictions.
The company said regulators have approved CAD 1.5 billion of modernization programs, while modernization spending, system expansion and customer additions are expected to support 10% rate-base growth in 2026. AltaGas expects utility investments to drive 8% long-term rate-base growth through 2030.
In Maryland, the company received a final order approving CAD 38 million in new revenue, including certain costs currently recovered through a surcharge, based on a 9.4% allowed return on equity. Active proceedings continue in Virginia and Michigan, with final orders expected by the end of the third quarter and before year-end, respectively.
Capital Plan Expands
AltaGas increased its 2026 capital budget to CAD 1.8 billion from CAD 1.7 billion. The increase reflects higher expected REEF spending as well as capital for the Northeast British Columbia liquids expansion project and the Groundbirch Rail Terminal partnership with Tourmaline Oil Corp.
Brown said 61% of the 2026 capital program is expected to be allocated to Utilities and 36% to Midstream. The company also reached a positive final investment decision on a Townsend debottlenecking project expected to add 6,000 barrels per day of fractionation capacity.
At Groundbirch, AltaGas said its investment is less than CAD 20 million. Randy Toone, president of Midstream, said the project is expected to reduce rail, storage and other operating costs, while also supporting export tolling volumes. The initial phase is dedicated to Tourmaline, though AltaGas has rights to participate in third-party volumes if capacity becomes available and in potential expansions.
About AltaGas (TSE:ALA)
AltaGas Ltd owns and operates a diversified basket of energy infrastructure businesses. Business is conducted through four segments: Midstream, power, utilities and corporate. Utility business owns and operates rate-regulated natural gas distribution assets across North America. Midstream business subsequent to the sale of non-core midstream assets in Canada and also engaged in the natural gas liquid processing and extraction, transportation, and storage. Natural gas is sold and purchased for both commercial and industrial users.
