(All financial figures are approximate and in Canadian
dollars unless otherwise noted. This news release refers to
adjusted earnings before interest, taxes, depreciation and
amortization ("Adjusted EBITDA") which is a financial measure that
is not defined by Generally Accepted Accounting Principles
("GAAP"). For more information about Adjusted EBITDA, see "Non-GAAP
Measures" herein.)
CALGARY, Alberta, Nov. 1, 2018 /PRNewswire/ -- Pembina Pipeline
Corporation ("Pembina" or the "Company") (TSX: PPL; NYSE: PBA) is
pleased to announce that it has entered (directly and through its
joint venture affiliates) into long-term, take-or-pay agreements to
backstop development of new pipeline and processing infrastructure
totaling approximately $1.3 billion.
These agreements include related service for liquids transportation
on Peace Pipeline, natural gas transmission service and
fractionation services at Pembina's Redwater Facility.
The agreements announced today include a significant milestone
for Pembina - the first integrated deal utilizing Pembina's full
value chain including natural gas gathering, processing and
transmission; propane-plus and condensate transportation; and
propane-plus fractionation, including assets acquired through the
acquisition of Veresen Inc. in October
2017.
"These new projects demonstrate Pembina's continuing ability to
leverage its existing asset footprint to respond to customers'
current and future needs in a cost-effective and timely
manner. This new infrastructure is indicative of the
substantial portfolio of potential growth projects we have before
us," stated Mick Dilger, Pembina's
President and Chief Executive Officer. "These investments are
directly aligned with our goals of providing sustainable, industry
leading total returns to our shareholders and reliable, value added
services to our customers, and once again highlight the growth
potential in the liquids-rich Montney and Duvernay plays," added Dilger.
Collectively, these new projects extend Pembina's current
portfolio of secured projects from $1.9
billion to $3.1 billion. In
aggregate, the $3.1 billion of
secured projects are expected to generate run rate Adjusted EBITDA
of approximately $300 to $450 million per year.
Peace Pipeline Expansions
Pembina continues to experience growing customer demand for
transportation services to support development of the Montney resource play, particularly within the
liquids-rich LaGlace to Kakwa corridor. Based on the need for
additional capacity on the Company's Peace Pipeline system and
having secured the necessary commitments under long-term,
take-or-pay contracts, Pembina is proceeding with its next staged
expansion of the Peace system ("Phase VII").
Phase VII includes a new 20-inch, approximately 220-kilometer
pipeline in the LaGlace-Valleyview-Fox Creek corridor, as well as
six new pump stations, between LaGlace and Edmonton, Alberta. Phase VII will add
approximately 240,000 barrels per day ("bpd") of incremental
capacity upstream of Fox Creek,
accessing capacity available on the mainlines downstream of
Fox Creek.
Phase VII is aimed at meeting transportation needs arising from
the rapid growth of condensate supply in the Western Canadian
Sedimentary Basin. Once the new condensate pipeline is placed into
service, it will also divert condensate off of the existing
LaGlace-Kakwa-Fox Creek corridor, creating additional firm capacity
for Pembina's customers.
Phase VII has an estimated capital cost of approximately
$950 million and is supported by
long-term contracts with significant take-or-pay commitments.
Phase VII is anticipated to be in service in the first half of
2021, subject to environmental and regulatory approvals.
Once Phase VII is complete, Pembina will have 1.1 million bpd of
Edmonton area market delivery
capacity across the Company's Peace and Northern Pipeline
systems.
"The Phase VII expansion is a very exciting development as it
caters directly to the growing demand for condensate transportation
and is another step towards our ultimate goal of creating a
pipeline system with full product segregation from Gordondale to
the Edmonton area for market
delivery," said Jason Wiun,
Pembina's Senior Vice President and Chief Operating Officer,
Pipelines. "We strive to be the service provider of choice for our
customers who benefit greatly from the many operational
efficiencies gained through product segregation, as well as
Pembina's ability to leverage our existing asset base to provide
reliable, timely and cost-effective solutions," concluded Mr.
Wiun.
Pembina's Canadian Diluent Hub ("CDH") is capable of delivering
approximately 400,000 bpd of condensate to five regional,
third-party diluent pipelines and has 500,000 barrels of above
ground storage. In late 2018, the Company began expanding
condensate delivery capacity to two existing connections, which
will increase delivery capacity at CDH by an incremental 75,000 bpd
to a total of approximately 475,000 bpd. Condensate deliveries to
CDH will continue to increase as volumes from the Phase VII
expansion grow and Pembina will continue to develop new and
expanded markets through CDH.
In addition to Phase VII, Pembina is engaged in ongoing
discussions with customers and undertaking early engineering for an
additional expansion of the Peace system ("Phase VIII"), which
would enable segregated pipeline service for ethane-plus and
propane-plus from the central Montney area at Gordondale, Alberta, into the Edmonton area for market delivery. Phase
VIII would include a new 10 and 16-inch pipeline in the Gordondale
to LaGlace corridor as well as a series of pump stations located
between Gordondale and Fox Creek,
Alberta.
Based on preliminary engineering, Phase VIII has an estimated
capital cost of approximately $500
million. Sanctioning of Phase VIII remains subject to
securing sufficient long-term, take-or-pay commitments and would
have an in-service date in the first half of 2022, subject to
environmental and regulatory approvals, as well as approval by
Pembina's executive and board of directors.
Pembina's ultimate vision is to have at least four segregated
product pipelines in the corridors between Gordondale, Alberta and the Edmonton area, maximizing Pembina's fully
powered-up capacity of 1.3 million bpd on the Peace and Northern
Pipelines, which would likely require a Phase IX expansion.
Hythe Developments
Pembina, and its 46 percent owned joint venture, Veresen
Midstream Limited Partnership ("Veresen Midstream"), have executed
binding agreements (the "NuVista Agreements") with NuVista Energy
Limited ("NuVista"). The NuVista Agreements provide that
Veresen Midstream will construct natural gas gathering and
processing infrastructure in the Pipestone Montney region with
Pembina also constructing various laterals connecting to the
Company's Peace Pipeline system. The agreements further
include liquids transportation on Peace Pipeline, natural gas
transmission service and fractionation services at Pembina's
Redwater facility.
The infrastructure (the "Hythe Developments") consists of
several separate projects:
- an expansion (the "Hythe Gas Plant Expansion") of up to 125
million cubic feet per day ("mmcf/d") (57 mmcf/d net to Pembina),
of sour gas processing at Veresen Midstream's existing Hythe facility (the "Hythe Gas Plant");
- the construction, by Veresen Midstream, of a new, approximately
60 km, 12-inch sour gas pipeline (the "Hythe Extension Pipeline")
to transport natural gas from a NuVista compressor station to the
Hythe Gas Plant; and
- the construction, by Pembina, of various laterals to connect
NuVista liquids volumes to Pembina's Peace Pipeline system.
Versesen Midstream will provide natural gas gathering and
processing for up to 100 mmcf/d (46 mmcf/d net to Pembina), under a
15-year, 80 percent take-or-pay agreement. This capacity will be
provided in two equal increments, commencing in late 2020 and late
2021, respectively, with an option for NuVista to delay the timing
of half of the second increment to 2022.
Veresen Midstream expects to capture additional volumes as these
projects are strategically located to service other area customers
and are being constructed with additional available
capacity.
Collectively, the Hythe Developments have an estimated total
capital cost of approximately $380
million (approximately $185 million net to Pembina) and
are underpinned by long-term contracts with significant take-or-pay
commitments. The Hythe Developments have an anticipated
in-service date in late 2020, subject to regulatory and
environmental approvals.
Additionally, the NuVista Agreements include the following
provisions:
- transportation of propane-plus and condensate for delivery into
the Edmonton, Alberta area. These
volumes include those associated with the Hythe Developments as
well as additional volumes being transported from other NuVista,
and third-party facilities to Pembina's Peace Pipeline system.
Transportation service is supported by 10 or 15-year agreements
with significant take-or-pay commitments;
- processing of propane-plus volumes at Pembina's Redwater facilities. Fractionation service is
supported by a 15-year agreement with significant take-or-pay
commitments;
- transmission service, from a third-party shipper, on Alliance,
for 40 mmcf/d of the natural gas processed at the Hythe Gas Plant;
and
- NuVista will be constructing and operating a 100 mmcf/d
compression and dehydration facility on their Pipestone North
lands. NuVista has the option, to be exercised on or before
November 15, 2019, to have Veresen
Midstream acquire the proposed compressor station.
"Pembina is uniquely positioned to provide a full-service,
integrated solution to our customer. Our ability to respond
quickly with a near-term infrastructure plus transportation
solution was a critical factor which enabled NuVista to advance
their development by one year compared to other alternatives,"
highlighted Jaret Sprott, Senior
Vice President & Chief Operating Officer, Facilities.
Duvernay III
Pembina has executed further agreements ("Services
Agreements") whereby the Company will construct and operate the
second tranche of infrastructure development under its previously
announced 20-year infrastructure development and service agreement
(the "Agreement") with Chevron Canada Limited ("Chevron"). The
Agreement includes over 230,000 acres of land dedication by Chevron
in the liquids-rich Kaybob region of the Duvernay resource
play near Fox Creek, Alberta.
Under the Services Agreements, Pembina will be developing and
constructing:
- a 100 mmcf/d sweet gas, shallow cut processing facility with
approximately 5,000 bpd of propane-plus liquids capacity (the
"Duvernay III Gas Plant", a replica of Pembina's Duvernay I and II
gas plants);
- a condensate stabilization facility with approximately 20,000
bpd of raw inlet condensate handling capacity; and
- water handling infrastructure.
The Duvernay III Gas Plant and the related infrastructure
(collectively "Duvernay III") will be located at the Company's
existing Duvernay complex (the "Duvernay Complex").
Pembina expects the total capital cost to be approximately
$165 million with an anticipated
in-service date of mid- to late 2020, subject to regulatory and
environmental approvals. As per the terms of the Service
Agreements, the facilities will have a 20-year contractual life and
would be back-stopped by a combination of fee-for-service and
fixed-return arrangements. Additionally, the Service Agreements
include natural gas liquids and condensate transportation on
Pembina's Peace Pipeline system and NGL fractionation at the
Company's Redwater Fractionation complex.
"We are excited to further support the growth of the
world-class Duvernay resource play for Chevron. These
agreements are a great example demonstrating our ability to align
with our customer to deliver value-added, cost effective and
integrated solutions," said Jaret Sprott. In total, the
addition of Duvernay III will increase the Duvernay Complex's gross
capacity to approximately 300 mmcf/d of sweet gas, shallow cut
processing, 15,000 bpd of propane-plus liquids capacity and 50,000
bpd of raw inlet condensate stabilization. The Company's
expectations for the Duvernay area
remain unchanged, namely continued growth based on improving
economics. "Our expanded Duvernay platform will allow Pembina to
provide low cost, integrated solutions to our customers for many
years to come," added Sprott.
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 over 60 years. Pembina owns an
integrated system of pipelines that transport various hydrocarbon
liquids and natural gas products produced primarily in western
Canada. The Company also owns gas
gathering and processing facilities and an oil and natural gas
liquids infrastructure and logistics business. Pembina's integrated
assets and commercial operations along the majority of the
hydrocarbon value chain allow it to offer a full spectrum of
midstream and marketing services to the energy sector. Pembina is
committed to identifying additional opportunities to connect
hydrocarbon production to new demand locations through the
development of infrastructure that would extend Pembina's service
offering even further along the hydrocarbon value chain. These new
developments will contribute to ensuring that hydrocarbons produced
in the Western Canada Sedimentary Basin and the other basins where
Pembina operates can reach the highest value markets throughout the
world.
Pembina strives to provide sustainable, industry-leading total
returns for our investors; reliable and value-added services for
our customers; a net positive impact to communities; and a safe,
respectful, collaborative and fair work culture for our
employees.
Pembina's strategy is to:
- Preserve value by providing safe, environmentally
conscious, cost-effective and reliable services;
- Diversify by providing integrated solutions which
enhance profitability and customer service;
- Implement Growth by pursuing projects or assets that are
expected to generate cash flow per share accretion and capture
long-life, economic hydrocarbon reserves; and
- Secure Global Markets by understanding what the world
needs, where they need it, and delivering it.
Pembina is structured into three Divisions: Pipelines Division,
Facilities Division and Marketing & New Ventures Division.
Pembina's common shares trade on the Toronto and New
York stock exchanges under PPL and PBA, respectively. For
more information, visit www.pembina.com.
Forward-Looking Information and Statements
This news release contains certain forward-looking
information and statements (collectively, "forward-looking
statements") that are based on Pembina's current expectations,
estimates, projections and assumptions in light of its experience
and its perception of historical trends. In this news release, such
forward-looking information and statements can be identified by
terminology such as "plans", "will", "would", "expects",
"continue", "anticipate", "potential", "may", and similar
expressions.
In particular, this news release contains forward-looking
statements, including certain financial outlooks, pertaining to,
without limitation, the following: planning, construction,
capital expenditure estimates, schedules, incremental volumes,
in-service dates, contractual and fee arrangements, rights,
activities and operations with respect to planned new construction
of, or expansions in relation to Pembina's and its affiliates'
pipeline and infrastructure expansions; expectations around
continuing producer activity and development and growth of product
supply; the ongoing utilization and expansions of and additions to
Pembina's business and asset base, growth and growth potential;
expectations regarding future demand for transportation and
processing services; Pembina's and its affiliates' corporate
strategy; anticipated future adjusted EBITDA from growth projects;
ongoing negotiations and discussions with customers for additional
services; and expectations regarding synergies, operational
efficiencies, and integration of growth and development projects
with Pembina's existing business and asset base. These
forward-looking statements are being made by Pembina based on
certain assumptions that Pembina has made in respect thereof as at
the date of this news release, regarding, among other
things: the ability of Pembina to successfully negotiate and
complete final commercial agreements; that counterparties to
material agreements will continue to perform in a timely manner;
that Pembina's joint venture partners will continue to provide
support joint venture projects; the ability of Pembina and any
required third parties to effectively engage with
stakeholders; oil and gas industry exploration and development
activity levels; the success of Pembina's operations and growth
projects; prevailing commodity prices, margins, volumes and
exchange rates; that Pembina's future results of operations will be
consistent with past performance and management expectations in
relation thereto; the continued availability of capital at
attractive prices to fund future capital requirements relating to
existing assets and projects, including but not limited to future
capital expenditures relating to expansion, upgrades and
maintenance shutdowns; that any third party projects relating to
Pembina's growth projects will be sanctioned and completed as
expected; that any required commercial agreements can be reached;
that all required regulatory and environmental approvals can be
obtained on the necessary terms in a timely manner; that there are
no unforeseen events preventing the performance of contracts; that
there are no unforeseen material construction, integrity or other
costs related to current growth projects or current operations; and
prevailing interest and tax rates.
Although Pembina believes the expectations and material
factors and assumptions reflected in these forward-looking
statements are reasonable as of the date hereof, there can be no
assurance that these expectations, factors and assumptions will
prove to be correct. Readers are cautioned that events or
circumstances could cause results to differ materially from those
predicted, forecasted or projected. By their nature,
forward-looking statements involve numerous assumptions, known and
unknown risks and uncertainties that contribute to the possibility
that the predictions, forecasts, projections and other
forward-looking statements will not occur, which may cause actual
performance and financial results in future periods to differ
materially from any projections of future performance or results
expressed or implied by such forward-looking statements and
information. These known and unknown risks and uncertainties,
include, but are not limited to: the regulatory environment
and decisions; the ability of Pembina or its joint venture
partners or customers to raise sufficient capital (or to raise
sufficient capital on favourable terms) to fund future expansions
and growth projects and satisfy future commitments; failure to
negotiate and conclude any required commercial agreements or
failure to obtain project sanctioning; increased construction
costs, or construction delays, on Pembina's expansion and growth
projects; labour and material shortages; non-performance of
agreements in accordance with their terms; the impact of
competitive entities and pricing; reliance on key industry
partners, alliances 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;
actions by governmental or regulatory authorities including changes
in tax laws and treatment, changes in royalty rates or increased
environmental regulation; adverse general economic and market
conditions in Canada, North America and elsewhere;
construction delays; labour and material shortages; and certain
other risks detailed from time to time in Pembina's public
disclosure documents including, among other things, those detailed
under the heading "Risk Factors" in Pembina's management's
discussion and analysis and annual information form for the year
ended December 31,
2017, which can be found
at www.sedar.com.
The forward-looking statements are expressly qualified by the
above statements and speak only as of the date of this document.
Pembina does not undertake any obligation to publicly update or
revise any forward-looking statements or information contained
herein, except as required by applicable laws. The forward-looking
statements contained in this document 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 planned capital projects and ongoing operations.
Readers should be aware that the information contained in the
financial outlook contained herein may not be appropriate for other
purposes.
Non-GAAP Measures
In this news release, Pembina has used the term adjusted
earnings before interest, taxes, depreciation and amortization
(Adjusted EBITDA), which does not have any standardized meaning
under IFRS ("Non-GAAP Measures"). Since Non-GAAP financial measures
do not have a standardized meaning prescribed by GAAP and are
therefore unlikely to be comparable to similar measures presented
by other companies, securities regulations require that Non-GAAP
financial measures are clearly defined, qualified and reconciled to
their nearest GAAP measure. These Non-GAAP measures are calculated
and disclosed on a consistent basis from period to period. Specific
adjusting items may only be relevant in certain periods. The intent
of Non-GAAP measures is to provide additional useful information
respecting Pembina's financial and operational performance to
investors and analysts and the measures do not have any
standardized meaning under IFRS. The measures should not,
therefore, be considered in isolation or used in substitute for
measures of performance prepared in accordance with IFRS.
Non-GAAP Proportionate Consolidation of Investments in Equity
Accounted Investees Results
In accordance with IFRS, Pembina's jointly controlled
investments are accounted for using equity accounting. Under
equity accounting, the assets and liabilities of the investment are
net into a single line item in the Consolidated Statement of
Financial Position, Investments in Equity Accounted Investees. Net
earnings from Investments in Equity Accounted Investees are
recognized in a single line item in the Consolidated Statement of
Earnings and Comprehensive Earnings, share of profit from equity
accounted investees. Cash contributions and distributions from
Investments in Equity Accounted Investees represent Pembina's
proportionate share paid and received in the period to and from the
equity accounted investment.
To assist the readers' understanding and evaluation of the
performance of these investments, Pembina is supplementing the IFRS
disclosure with Non-GAAP disclosure of Pembina's proportionately
consolidated interest in the Investments in Equity Accounted
Investees. Pembina's proportionate interest in Investments in
Equity Accounted Investees has been included in operating margin,
Adjusted EBITDA and other reconciling line items to IFRS. A
reconciliation of operating margin and Adjusted EBITDA to share of
profit from equity accounted investees can be found under the
heading "Proportionately Consolidated Results by Investments in
Equity Accounted Investees".
Other issuers may calculate these Non-GAAP measures
differently. Investors should be cautioned that these measures
should not be construed as alternatives to revenue, earnings, cash
flow from operating activities, gross profit or other measures of
financial results determined in accordance with GAAP as an
indicator of Pembina's performance. For additional information
regarding Non-GAAP measures, including reconciliations to measures
recognized by GAAP, please refer to Pembina's management's
discussion and analysis for the period ended September 30,
2018, which is available online at www.sedar.com, www.sec.gov and
through Pembina's website at www.pembina.com.
For further information:
Investor Relations
Scott Arnold
(403) 231-3156
1-855-880-7404
e-mail: investor-relations@pembina.com
www.pembina.com