The Western Canadian sedimentary basin has the potential to explode: Pembina (PBA.US) is the main beneficiary of the growth dividend, and Wells Fargo & Company has been upgraded to "Buy" with a "double jump".

Wells Fargo & Company has upgraded Pembina Pipeline (PBA.US) from "underperform" to "outperform" and raised the target price from 55 Canadian dollars to 76 Canadian dollars. The company believes that with the increase in outbound capacity in the Western Canada Sedimentary Basin (WCSB), diluent demand is rising, making Pembina the main beneficiary and providing decades-long growth opportunities for its condensate business. Pembina Pipeline is a company responsible for transporting oil and gas to and from certain areas in Western Canada. Analyst Pranis Satish believes that with a more constructive Canadian government, increasing focus on energy security, and potential support for a new West Coast export pipeline, production in the WCSB could increase by up to approximately 2 million barrels per day by 2040. Such production growth will drive a significant increase in diluent demand, potentially rising by about 800,000 barrels per day. Assuming Pembina can capture around 70% of the additional sales above the baseline and earn bundling fees from gathering and processing (G&P), transportation, and fractionation, Satish estimates that after providing funding for infrastructure at a construction multiple of 6 times, the annual compound growth rate of its EBITDA could accelerate from the current 5% to 6% to about 7% by 2035, with an estimated potential upside of around 14 USD per share. The analyst states that comments from WCSB producers indicate ample additional growth potential in the oil sands business, including plans to increase production by approximately 3.5 million barrels per day in the near term, and long-term plans to increase production by about 7 million barrels per day with sufficient export capacity. He adds that it is now clear that oil sands production will achieve incremental growth of over 1 million barrels per day, with even greater potential for growth if some proposed export solutions are completed.