AltaGas: Riding the Middle East LPG Disruption While Digging Into REEF
Record exports and a second guidance raise mask a 12% REEF cost overrun; the company sets its sights on ethane exports and utility data-centre demand.
ALA.TO · Earnings Call · 2026-07-30
A Record Quarter, Masked by a REEF Setback
AltaGas delivered a record Q2 and raised its 2026 guidance, but the headline improvement was partially shaded by a 12% cost increase and a schedule slip on the REEF LPG export project. “We delivered record financial results in Q2, reflecting strong performance from both Midstream and Utilities,” “said CEO Vern Yu” — Dai-Chung Yu, President and Chief Executive Officer · 2026-07-30, with normalized EBITDA up 14% and normalized EPS up 15% year-over-year. The company raised its EBITDA guidance to $2.0–$2.1 billion (up 4% from the midpoint) and EPS to $2.35–$2.60, a 6% increase. “We have raised our EBITDA guidance to a range of $2 billion to $2.1 billion, representing a 4% increase over the original guidance midpoint and 10% growth year-over-year,” “CFO Sean Brown stated” — Sean Brown, Executive · 2026-07-30.
Yet the engineering reality at REEF was less rosy: in-water construction has been plagued by weather and marine mammal delays, pushing the in-service date to early 2027 and the cost estimate up to ~$1.5 billion. “We now expect REEF to come online before the end of Q1 2027 and have increased REEF's capital cost estimate by 12% to approximately $1.5 billion,” “Vern noted” — Dai-Chung Yu, President and Chief Executive Officer · 2026-07-30. The company was quick to frame this as manageable, noting that most of the difficult work is behind them. “We view the revised schedule and cost as highly achievable,”
remarked Vern in prepared remarks
.
The Geopolitical Tailwind for Canadian LPG
The more exciting driver is the global LPG market. Iran-related disruptions at the Strait of Hormuz have cut exports by more than 70%, displacing over 160 million barrels of LPG. This has tightened global balances and “reinforced the value of stable Canadian LPG supply,” as Vern put it. The result: a record 144,000 bbl/d of LPG exports, up 13% year-over-year, across 23 VLGCs. “Operationally, we exported a record 144,000 barrels per day of LPG, a 13% increase over Q2 2025,” “Vern said” — Dai-Chung Yu, President and Chief Executive Officer · 2026-07-30. The company is 91% hedged/tolled for the remainder of 2026, with an average FEI–North America spread of $21.81/bbl, giving strong cash flow visibility. This is exactly the scenario that management had earlier flagged: “We are benefiting a little bit from supply differentials. And then on our open merchant volumes, we are seeing strong demand for those barrels with obviously the supply outages coming out of the Middle East,” “Vern had said on the Q1 2026 call” — Dai-Chung Yu, President and Chief Executive Officer · 2026-03-06. The Middle East conflict has effectively become a natural hedge for Northeast B.C.-sourced volumes, reinforcing the strategic value of the company's export platform.
Growth Beyond LPG: Ethane and Utilities
Beyond core LPG, AltaGas is advancing a new growth leg: ethane exports. Roughly 500,000 bbl/d of ethane remains in Western Canada’s gas stream, and China, seeking to diversify away from U.S. supply, is eager to secure Canadian ethane. “Today, roughly 500,000 barrels a day of ethane is left in the natural gas stream in Western Canada, while Asian demand keeps growing,” “Vern highlighted” — Dai-Chung Yu, President and Chief Executive Officer · 2026-07-30. The company has already obtained Transport Canada approval for pressurized rail cars, and it is targeting a high tolling percentage for this business. This sits alongside ongoing Opti II expansion at REEF and the recently announced tolling partnerships with Tourmaline and Keyera, which position the company to capture further Montney growth.
Meanwhile, the utility segment continues to compound growth through modernization programs and data-center connections. Utilities EBITDA rose 6% in the quarter, and the company is advancing multiple rate cases, including a constructive Maryland order that approved USD 38 million in new revenue at a 9.4% ROE. Management sees data centers as a near-term driver, with PJM load expected to quadruple over eight years. “The mid-Atlantic sits in the center of this expansion,” Vern observed, while utility President Corine Bushfield reiterated, “We’re going to continue to close our ROE gap.”
The market is already voting favorably: AltaGas shares are trading near 52-week highs, and the tape shows a broad advance in energy and infrastructure names. The company’s 7% five-year EBITDA CAGR target (revised upward from 6%) underscores confidence.
All told, AltaGas’s story is a mix of a disciplined capital program, a geopolitical tailwind, and a pipeline of new projects. The REEF cost creep is a reminder that big construction carries risk, but the underlying cash-flow momentum — driven by record LPG exports, a favorable spread environment, and a rising utility rate base — keeps the company on track.