AltaGas (TSE:ALA) reported what management called a record first quarter to start 2026, driven by strong performance in both its Midstream and Utilities businesses amid supportive energy fundamentals and a tight global LPG market.
Record quarter and improved leverage
President and CEO Vern Yu said the company delivered “record financial results in Q1,” with normalized EBITDA of CAD 818 million and normalized EPS of CAD 1.33. Yu said results exceeded internal expectations and “put us in a very strong position for the balance of the year.”
Utilities results supported by rate outcomes and cold weather
Brown said the Utilities segment delivered normalized EBITDA of CAD 555 million, up 11% year-over-year. He attributed the increase to incremental revenue from “positive rate case outcomes in D.C. and new interim rates in Virginia,” as well as modernization investments and stronger asset optimization, “the benefits of which we share with our customers.”
Utilities results also included a CAD 35 million gain tied to a partial settlement of WGL’s post-retirement pension plan. Brown said results were partially offset by lower retail performance and higher G&A expenses related to employee incentive plans linked to the company’s share price.
Yu said colder-than-normal weather supported utility demand, with heating degree days “5% above normal in D.C. and 10% above last year’s levels.”
During the quarter, AltaGas deployed CAD 146 million of utility capital, including CAD 56 million for modernization and CAD 23 million for new growth initiatives, according to Brown. He said spending was partially curtailed by cold weather, and the company expects activity “will catch up as the year progresses.”
On growth initiatives, Brown said AltaGas signed a second data center connection agreement in Virginia to provide natural gas for backup power generation to an existing 15 MW data center. Utilities President Blue Jenkins told analysts the company is in discussions across Virginia and Maryland on projects ranging from 15–20 MW up to 50 MW, and reiterated management’s view that data centers represent “a 1% upside” opportunity.
On regulation, Brown said AltaGas has active rate cases in Maryland, Virginia, and Michigan. He added that the company filed a Michigan rate case seeking CAD 61 million in incremental revenue, a 10.75% allowed ROE, and a weather normalization adjustment mechanism. AltaGas also filed a five-year, CAD 284 million modernization program extension in Michigan.
Midstream outperformance driven by exports and Montney growth
Brown said Midstream delivered normalized EBITDA of CAD 273 million, up 39% year-over-year and above management’s expectations. He attributed outperformance primarily to the exports platform, citing higher volumes and strong merchant margins.
AltaGas exported nearly 125,000 barrels per day of LPGs during the quarter across 20 very large gas carriers (VLGCs) from its RIPET and Ferndale terminals, with volumes up 5% year-over-year, Brown said. He highlighted a new RIPET record: “we exported over 88,000 barrels per day from RIPET during the quarter.”
In Q&A, Midstream President Randy Toone emphasized that throughput is governed by AltaGas’ service agreement with the terminal operator and said the company’s capacity objective is “85,000 barrels a day on average through the year.” Yu added that first-quarter performance exceeded that level partly because one vessel scheduled for late 2025 loaded in early 2026.
Beyond exports, Brown said utilization across gas processing, fractionation, and extraction assets was strong, with throughput up 9% year-over-year. Yu also said Montney infrastructure volumes increased 14% year-over-year, including a full quarter from Pipestone II. Brown said Pipestone II “continues to perform well and is adding critical gas processing and liquids handling capacity in the Alberta Montney.”
Asked about the Montney outlook, Toone said activity remains strong and pointed to Shell’s acquisition of ARC as further evidence of confidence in the basin. He also said he believes “LNG 2, phase II is likely to go ahead by the end of the year,” which he said would support incremental drilling and LPG supply.
REEF construction progress and expansion plans
Yu said construction at the company’s REEF export project continues to advance, with REEF Phase I roughly 75% complete and “all major modules on-site.” He said more than 1.4 million hours have been worked without serious injury, and that about 90% of total capital costs are incurred or committed, with 80% under fixed-price EPC contracts.
Yu said REEF Optimization 1 is in early construction and is expected to be completed in the second half of 2027, adding 30,000 barrels per day of propane export capacity under long-term commercial agreements. He also said the company is advancing engineering and costing for REEF Optimization 2, a 60,000 barrels-per-day brownfield expansion, and that AltaGas has received all permits required to start construction.
In response to an analyst question, Yu characterized the capital efficiency of the phases, noting Phase I includes pre-building significant infrastructure, making it “the highest build multiple” at REEF at roughly 7–8x. He said Optimization 2 should fall between Phase I and the “extremely capital efficient” Optimization 1.
Yu also outlined longer-term capacity potential at the site, saying, “REEF ultimately will be able to export 500,000 barrels a day of LPG.” He described Phase I at just under 60,000 barrels per day, Optimization 1 at 30,000 barrels per day of propane, and Optimization 2 at 60,000 barrels per day of propane and butane.
Yu said the pace of further phases will depend on Western Canadian basin egress and broader natural gas and crude oil infrastructure. He also said AltaGas is evaluating the potential to export ethane from REEF, citing an ethane surplus in Alberta and reinjection into the natural gas stream.
Global LPG market disruption and 2026 outlook
Yu said disruption to Middle East supply is expected to have lasting impacts. He stated that at the peak of the closure of the Strait of Hormuz, 1.3 million barrels per day of LPG supply was offline, and the disruption “has double spot propane spreads from pre-conflict levels.” Yu also said that as of the call, “you’re not seeing any LPG move through the straits.”
Management said the dislocation is shifting Asian buying patterns and elevating the value of secure supply. Yu said Canada’s share of China’s total propane imports has increased “from zero to over 11% in the past year,” initially driven by U.S. tariffs and later accelerated by Middle East supply disruptions. He also said AltaGas recently delivered its first cargo into Indonesia and is advancing discussions in South Asia.
In Q&A, Yu said physical LPG pricing has diverged from screen prices, with physical sales trading at a “significant premium to FEI” in the first quarter versus historical small premiums or discounts. He said the forward curve has moved higher but remains “highly backwardated,” while AltaGas expects backwardation to continue even as prices remain elevated.
Brown said the company is “well hedged” and provided detail on export exposure: about 82% of expected remaining 2026 global export volumes are tolled or financially hedged, while 18% remain open to market pricing. He added that AltaGas’ 2026 Baltic trade exposure is hedged via time charters, financial instruments, and tolling arrangements. Yu said the company plans to follow its “normal course hedging strategy,” with hedge percentages expected to rise through the year.
Reflecting the strong start, Brown said AltaGas now expects to be “towards the top end of our 2026 guidance range,” with potential to exceed the upper end if LPG export market strength continues. He said the company adjusted its expected EBITDA mix, with Midstream expected to contribute 44%–48% of normalized EBITDA versus 42%–46% previously, and that the company expects to update the market with second-quarter results in late July.
Brown also said AltaGas increased its 2026 capital budget to CAD 1.7 billion from CAD 1.6 billion, driven primarily by the sanctioning of Dimsdale Phase II and improved visibility into vendor milestone payments. Under the updated plan, the company expects to allocate 65% of capital to Utilities, 31% to Midstream, and the remainder to the corporate segment.
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.
