Long-term agreements underpin new major expansions
(All financial figures are approximate and in Canadian
dollars unless otherwise noted.)
CALGARY, Dec. 16, 2013 /PRNewswire/ - Pembina Pipeline
Corporation ("Pembina" or the "Company") (TSX: PPL; NYSE: PBA)
announced today that it has reached binding commercial agreements
to proceed with constructing approximately $2 billion in pipeline expansions (the "Phase III
Expansion"). The Phase III Expansion is underpinned by long-term
take-or-pay transportation services agreements with 30 customers in
Pembina's operating areas and is expected to be in service between
late 2016 and mid 2017, subject to environmental and regulatory
approvals. The 540 kilometre ("km") Phase III Expansion will follow
and expand upon certain segments of the Company's existing pipeline
systems from Taylor, British
Columbia southeast to Edmonton,
Alberta to fulfill capacity needs for Pembina's customers,
with priority being placed on areas where debottlenecking is
essential.
The core of the Phase III Expansion will entail constructing a
new 270 km 24 inch diameter pipeline from Fox Creek, Alberta, to the Edmonton area, which is expected to have an
initial capacity of 320,000 barrels per day ("bpd") and an ultimate
capacity of over 500,000 bpd with the addition of midpoint pump
stations. Once complete, Pembina will have three distinct pipelines
in the Fox Creek to Edmonton, Alberta corridor. With the Company's
existing pipelines and current expansions, these three pipelines
are expected to have the designed capacity to transport up to
885,000 bpd if fully expanded. The Phase III Expansion also
contemplates increasing pipeline interconnectivity between
Edmonton and Fort Saskatchewan including Pembina's
Redwater and Heartland Hub sites
as well as third-party delivery points in these areas. This
interconnectivity will provide the option for customers to access a
broad variety of delivery points including fractionators,
refineries, and storage hubs and increased access to pipeline and
rail take-away capacity.
"We initiated our previously announced Open Season in March to
identify producers' pipeline capacity requirements beyond our
expansions that are already underway," said Mick Dilger, Pembina's President and Chief
Operating Officer. "The Phase III Expansion, which is the largest
expansion of Pembina's systems in the Company's history, is the
result of that process. The project provides customers an inclusive
solution, as it will increase crude oil, condensate and NGL
take-away capacity from northwestern Alberta and northeastern British Columbia to markets in the
Edmonton and Fort Saskatchewan areas. When complete, it
will also create operational efficiencies and improved customer
service by reducing the need for us to batch products throughout
our systems."
The contracts underpinning the Phase III Expansion are ten-year
transportation services agreements for volumes that average over
230,000 bpd, or approximately 75 percent of the initial capacity,
and that provide a steady, long-term EBITDA stream which is
expected to be, on average, in the range of approximately
$270 million to $300 million per year
(see Non-GAAP measures below). The Company anticipates securing
further pipeline transportation commitments over the next six to
nine months while it refines the project scope. Any additional
commitments made before the Company begins to order long-lead
equipment would support increasing the design capacity of the Phase
III Expansion.
The Phase III Expansion follows a series of growth projects on
Pembina's conventional pipeline infrastructure resulting from the
ongoing successful development by oil and gas producers of
resources plays in the Montney,
Duvernay and Deep Basin Cretaceous
formations.
With the addition of the Phase III Expansion, Pembina's
previously announced 2014 capital spending plan will increase from
$1.5 billion to $1.7 billion. Pembina expects the majority of
spending associated with this project will occur during the main
construction periods from 2015 through 2016.
"This is a watershed event for Pembina," said Bob Michaleski, Chief Executive Officer. "We are
about to embark on the largest expansion the Company has ever
undertaken - a project which will form the foundation for our
Company's growth for years to come. I have always maintained that
if we could build our assets again, we would build them in the same
location they are today, except we would build them larger. The
Phase III Expansion supports this sentiment and demonstrates
Pembina's continuing ability to leverage its existing asset
footprint to satisfy customer needs and drive long-term shareholder
value."
Pembina is committed to achieving excellence in every aspect of
its business, from how it designs, constructs and operates its
pipelines and facilities to how it interacts with community
neighbours, customers and employees. For the Phase III Expansion,
Pembina will consult with applicable regulatory authorities, First
Nations, landowners and other stakeholders on the project plans.
Activities related to obtaining regulatory approvals are underway
and Pembina will commence First Nation consultation and its public
involvement program for the Phase III Expansion in early 2014.
For further information, please visit Pembina's website at
www.pembina.com.
About Pembina
Calgary-based Pembina Pipeline
Corporation is a leading transportation and midstream service
provider that has been serving North
America's energy industry for nearly 60 years. Pembina owns
and operates: pipelines that transport conventional and synthetic
crude oil, condensate and natural gas liquids produced in western
Canada; oil sands, heavy oil and
diluent pipelines; gas gathering and processing facilities; and, an
oil and natural gas liquids infrastructure and logistics business.
With facilities strategically located in western Canada and in natural gas liquids markets in
eastern Canada and the U.S.,
Pembina also offers a full spectrum of midstream and marketing
services that span across its operations. Pembina's integrated
assets and commercial operations enable it to offer services needed
by the energy sector along the hydrocarbon value chain.
Pembina is a trusted member of the communities in which it
operates and is committed to generating value for its investors by
running its businesses in a safe, environmentally responsible
manner that is respectful of community stakeholders.
Non-GAAP Measures
In this news release, Pembina has used the term EBITDA, meaning
"Earnings before interest, taxes, depreciation and amortization".
EBITDA does not have a standardized meaning prescribed by GAAP and
is therefore unlikely to be comparable to similar measures
presented by other companies. EBITDA is commonly used by
management, investors and creditors in the calculation of ratios
for assessing leverage and financial performance and is calculated
as results from operating activities plus share of profit from
equity accounted investees (before tax) plus depreciation and
amortization (included in operations and general and administrative
expense) and unrealized gains or losses on commodity-related
derivative financial instruments.
Forward-Looking Statements & Information
This document contains certain forward-looking statements and
information (collectively, "forward-looking statements") within the
meaning of the "safe harbor" provisions of applicable securities
legislation that are based on Pembina's current expectations,
estimates, projections and assumptions in light of its experience
and its perception of historical trends. Forward-looking statements
are typically identified by terminology such as "expects",
"projects", "will", "anticipates", "would", "could", "potential"
and similar expressions suggesting future events or future
performance.
By their nature, such forward-looking statements involve
known and unknown risks, uncertainties and other factors that may
cause actual results or events to differ materially from those
anticipated in such forward-looking statements. Pembina believes
the expectations reflected in those forward-looking statements are
reasonable but no assurance can be given that these expectations
will prove to be correct and such forward-looking statements
included in this MD&A should not be unduly relied upon. These
statements speak only as of the date of this document. In
particular, this document contains forward-looking statements,
including certain financial outlook, pertaining to, without
limitation, the following: Pembina's corporate strategy; planning,
construction, capital expenditure estimates, schedules, expected
capacity, incremental volumes, in service dates, and operations
with respect to the Phase III Expansion; expectations regarding
future demand for transportation services; expectations regarding
supply and demand factors; potential revenue and cash flow
enhancement; and future cash flows.
Various factors or assumptions are typically applied by
Pembina in drawing conclusions or making the forecasts,
projections, predictions or estimations set out in forward-looking
statements based on information currently available to Pembina.
These factors and assumptions include, but are not limited to: that
counterparties will comply with contracts in a timely manner; that
there are no unforeseen events preventing the performance of
contracts or the completion of the Phase III Expansion; that
Pembina will obtain required regulatory approvals on a timely
basis; maintenance of operating margins; anticipated changes in
interest rates, foreign currency exchange, inflation rates and
commodity prices; ongoing utilization and future expansion,
development, growth and performance of Pembina's business and asset
base; future demand for transportation services; future levels of
oil and natural gas development in proximity to Pembina's pipelines
and other assets (which could be affected by, among other things,
possible changes to applicable royalty and tax regimes); the amount
of future liabilities related to environmental incidents; the
availability of coverage under Pembina's insurance policies
(including in respect of Pembina's business interruption insurance
policy); future acquisitions, growth and growth potential in
Pembina's operations; additional throughput potential on additional
connections and other initiatives on the Conventional Pipelines
systems; expected Phase III Expansion start-up and construction
dates; future dividends and taxation of dividends; future financing
capability and sources; and negative credit rating
adjustments.
The actual results of Pembina could differ materially from
those anticipated in these forward-looking statements as a result
of material risk factors including, but not limited to: the
regulatory environment and decisions, and the inability to obtain
required regulatory approvals; the impact of competitive entities
and pricing; reliance on key relationships and agreements; the
strength and operations of the oil and natural gas production
industry and related commodity prices; the continuation or
completion of third- party projects; non-performance or default by
counterparties to agreements which Pembina or one or more of its
affiliates has entered into in respect of its business; actions by
governmental or regulatory authorities including changes in tax
laws and treatment, changes in royalty rates or increased
environmental regulation; fluctuations in operating results;
unexpected increases in capital costs for the Phase III expansion;
adverse general economic and market conditions in Canada, North
America and elsewhere, including changes in interest rates,
foreign currency exchange rates, inflation rates and commodity
prices; lower than anticipated results of operations and accretion
from Pembina's business initiatives; and the ability of Pembina to
raise sufficient capital (or to raise capital on favourable terms)
to complete future projects and satisfy future commitments.
These factors should not be construed as exhaustive. Unless
required by law, Pembina does not undertake any obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. Any
forward-looking statements contained herein are expressly qualified
by this cautionary statement. Readers are cautioned that management
of Pembina approved the financial outlook contained herein as of
the date of this press release. The purpose of the financial
outlook contained herein is to give the reader an indication of the
value to Pembina of the Phase III Expansion. Readers should be
aware that the information contained in the financial outlook
contained herein may not be appropriate for other purposes.
SOURCE Pembina Pipeline Corporation