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 see "Non-GAAP Measures" herein.
CALGARY, AB, Dec. 14, 2020 /CNW/ - Pembina Pipeline
Corporation ("Pembina" or the
"Company") (TSX: PPL) (NYSE: PBA) is pleased to provide its 2021
financial guidance, announce the reactivation of two previously
deferred growth projects, and deliver an end-of-year business
update. The Company is also providing an update on its joint
venture petrochemical facility.
Summary
- Pembina expects 2021 adjusted
EBITDA of $3.2 to $3.4 billion and a 2021 capital investment
program of $785 million.
- The Company is re-activating the Phase VII Peace Pipeline
Expansion and Empress Co-generation Facility growth projects.
- Pembina and its partner
continue to evaluate their joint venture petrochemical facility,
however the significant risks arising from the ongoing COVID-19
pandemic, most notably with respect to project costs, require the
joint venture to suspend execution of the project
indefinitely.
- The Company's 2021 capital investment program is fully funded
by cash flow from operating activities after dividends at the low
end of the adjusted EBITDA guidance range. Progressing towards the
higher end of the guidance range will see Pembina generate incremental discretionary
cash, which will be available for debt reduction, or opportunistic
common share repurchases.
- Pembina intends to make an
application for a normal course issuer bid, which would enable the
repurchase of up to five percent of its outstanding common shares
over a 12-month period.
Executive Comment
Pembina is proud of the results
we have delivered throughout 2020 in the face of unprecedented
challenges arising from the COVID-19 pandemic. Operationally, our
staff, and the front-line workers in particular, have delivered
safe, reliable and uninterrupted service for our customers despite
a difficult and uncertain environment. Financially, the resilience
and predictability of Pembina's
business has once again been proven, as it was during the 2009
financial crisis and 2015 commodity price downturn, further
validating our long-term strategy, recent diversification efforts
and steadfast commitment to the Company's financial guardrails.
Finally, everyone at Pembina has
demonstrated great personal leadership and fortitude in adapting to
new ways of working and supporting each other and our communities
during this difficult year.
For more
information on Pembina's significant assets, including as such
relate to definitions for capitalized terms used herein and not
otherwise defined, refer to Pembina's Annual Information Form (the
"AIF") filed at www.sedar.com (filed with the
U.S. Securities and Exchange Commission at
www.sec.gov under Form 40-F) and at
www.pembina.com.
|
As we close out 2020, our attention is firmly on the future and
the role Pembina will continue to
play in providing essential transportation and midstream services
to our customers and end users. These services ultimately ensure
that our society has the essential energy needed to power
businesses and hospitals, fuel cars, heat homes, cook food and
support overall quality of life.
While the topic of energy transition has become more prominent
over the past few months, Pembina
believes that significant structural changes to the world's energy
systems will have to evolve over many decades. Most credible
third-party forecasts highlight the continued importance of oil and
natural gas in powering the global economy. Even by 2050, it is
estimated that total energy demand will continue to be met
primarily by hydrocarbon energy, alongside a growing contribution
from renewable energy. It remains our view that population growth
and rising global living standards will continue to drive
energy demand higher, and without affordable, reliable and clean
energy, social progress may be significantly delayed or entirely at
risk. That is why Pembina remains
a proud provider of the services that get energy to where the world
needs it. We are well positioned to support the growing use of
natural gas to reduce global emissions and our proximity to
Asia, and its growing energy
demand, represents another strategic opportunity. Further,
Pembina has many of the core
competencies to adjust to a changing energy mix and is positioned
to provide infrastructure services for new forms of energy,
including energy produced from hydrogen, and carbon sequestration.
Moreover, we stand shoulder-to-shoulder with our customers in
ensuring Canadian energy is developed and delivered with leading
environmental, social and governance ("ESG") standards and
practices in place, making it the most ethically produced energy in
the world. Pembina was proud to
recently release our second full-length sustainability report,
which highlights our strong track record as well as priorities for
improvement going forward.
Looking more closely at the North American energy industry, for
the first time in a while, Pembina
views the opportunities in Canada
more favorably than the U.S. in the near term owing to relatively
lower decline rates, and producers, particularly in the mid-cap
space, having comparably stronger balance sheets and a proven
ability to live within their own cash flow.
The resilience that Pembina has
demonstrated this year is due, in part, to the producing customers
that have taken steps to protect their balance sheets and continue
generating positive free cash flow despite the decline in commodity
prices. While in most cases producers will need to see higher oil
prices to grow production, their long-term development plans have
been re-affirmed, as has the opportunity for Pembina to grow to meet their infrastructure
needs. Overall industry activity levels have stabilized and are
increasing, with a particularly promising growth outlook for the
northeast British Columbia Montney and Duvernay areas. Pembina views the recent consolidation of oil
and gas producers positively and expects more in the coming year.
In our view, this consolidation will improve Pembina's overall counterparty credit profile
and the combined entities will be generally better positioned to
allocate capital to growth opportunities.
Pembina's positive outlook for
the energy sector supports the re-start of two important growth
projects, which is reflected in our 2021 guidance and capital
budget, as discussed in detail below. After a challenging 2020,
there is a renewed sense of focus and optimism at Pembina. In responding decisively to the
COVID-19 pandemic, we effectively 'hit the pause button' and there
is a sense of being able to 'hit play' again in early 2021 given
progress on numerous vaccines and an expectation of a return to
some economic normalcy.
Business Update
Conventional Pipelines
Pembina has seen activity in
its conventional pipelines business steadily improve since the
second quarter of 2020, following the rapid decline in commodity
prices. Physical throughput in November and December remains stable
and trending upward. Since the production lows experienced in late
April and early May, Pembina has
seen a recovery of approximately 100,000 barrels per day ("bpd")
across its conventional pipeline systems, with 2020 exit rates
equaling rates seen at the beginning of 2020. With the conventional
systems currently operating at, or near, take-or-pay levels, there
is tremendous operational leverage as incremental volumes will
contribute directly to the Company's financial results.
Pembina has continued to secure
firm service commitments on the Peace Pipeline system while
extending many existing contracts in the process. Firm volume
commitments will reach approximately one million bpd in 2023 and
currently, the weighted average term of Peace and Northern pipeline
contracts is approximately eight years.
Further, Pembina has minimal
contracts expiring on Peace Pipeline in 2021 and continues to
progress the renewal of the legacy Phase I and II contracts, which
have staggered expiries through to 2027. Pembina has successfully renewed or replaced
the Phase I and II contracts that expired in 2019 and 2020 and
remains highly confident that the majority of the remaining
contracts nearing maturity will be renewed, or their firm capacity
resold, thus preserving the current earnings profile. This
expectation is based on a variety of compelling factors
including:
- the renewal rates on existing contracts are highly
competitive;
- Pembina has the ability to
transport the full spectrum of liquids, including crude oil,
condensate, ethane-plus natural gas liquids ("NGL") mix and
propane-plus NGL mix. Further, given the breadth and connectivity
of its asset base, Pembina has the
unmatched ability to manage off spec or 'grey-zone' condensate for
its customers;
- Pembina's Peace, Northern and
NEBC pipelines have been developed over decades including more than
150 laterals connecting remote production; storage for all
commodity types; connectivity to all major fractionators and LVP
delivery points; and integration with the Canadian Diluent Hub and
storage terminals, providing unmatched flexibility and certainty,
for all key resource plays in Alberta and British
Columbia; and
- the Peace and Northern systems can facilitate transfers of
capacity for customers with contracts across the system. Receipt
point flexibility materially de-risks customer production
decisions, allowing them to respond to market forces and changes to
their drilling plans.
New Integrated Service Offering
Pembina is pleased to announce
that it has entered, directly and through its joint venture
affiliates, into long-term, take-or-pay agreements with Pipestone
Energy Corp. ("Pipestone Energy") for a fully integrated service
offering, including natural gas gathering and processing by Veresen
Midstream and liquids transportation and fractionation services by
Pembina. Pipestone Energy has also
committed to acquire, subject to availability and compliance with
regulatory and tariff requirements, long-term natural gas
transportation on Alliance Pipeline. This arrangement will utilize
available firm capacity at Veresen Midstream's Hythe expansion project and is underpinned by
approximately 10-year take-or-pay contracts commencing in the
fourth quarter of 2022. Volumes are expected to flow in advance of
the commencement of the contracts, beginning in the fourth quarter
of 2021. With this arrangement, the Hythe expansion project is now fully
committed.
Acquisition of Empress Interest
Pembina has acquired an
additional 11.25 percent interest in the Pembina Empress Extraction
Plant, of which Pembina currently
is the majority owner and operator. The acquisition provides
Pembina with 135 million cubic
feet per day ("mmcf/d") of incremental ethane-plus extraction
capacity at the Empress NGL Extraction Facility.
Ruby Pipeline
Pembina owns a 50 percent
convertible, cumulative preferred interest in the Ruby Pipeline
("Ruby"), which provides for distributions of US$91 million annually in priority to
distributions on common equity. Ruby has approximately one billion
cubic feet per day of capacity under firm contracts, which expire
in 2021 and 2026. Ruby has served as a reliable source of natural
gas supply for the California
market, with throughput averaging nearly 700 mmcf/d since the
beginning of 2018. Furthermore, Ruby is a carbon-neutral pipeline
and responsible source of natural gas supply to the Pacific
Northwest region, providing optimism for its future
value.
At the same time, the existing tariff rate on firm contracts
that expire in mid-2021 are well in excess of the current spot
rates. As such, based on the upcoming expiries and prevailing
interruptible tariff rates, along with Rockies basin fundamentals,
and the ongoing uncertainty with respect to the timing of the
ultimate approval of the Jordan Cove LNG Project, which would
ultimately be expected to utilize capacity on Ruby, Pembina expects to take a material impairment
on its investment in Ruby in the fourth quarter of 2020. As of
September 30, 2020, the carrying
value of Pembina's investment in
Ruby was $1.3 billion.
Project Updates
Peace Pipeline Expansions
Pembina is reactivating the
Phase VII Peace Pipeline Expansion ("Phase VII"). Phase VII
includes a new 20-inch, pipeline and associated infrastructure in
the LaGlace-Valleyview-Fox Creek corridor and is aimed at meeting
transportation needs arising from the growth of condensate supply
in the Western Canadian Sedimentary Basin ("WCSB").
Pembina's decision to
re-commence construction of Phase VII was based on extensive
discussions with its producing customers, validating long-term
development plans and leading to a clear understanding and
consensus regarding their need for future intra-basin
transportation. These discussions confirmed both the need for, and
the timing of, Phase VII. Additionally, these discussions confirmed
that beyond 2021, there is growing customer demand for
transportation services to support development of the Montney resource play, particularly within the
liquids-rich LaGlace to Kakwa corridor and northeast British Columbia.
As part of the discussions undertaken with customers, the
Company has renegotiated terms with certain customers to align
long-term objectives and ultimately secure an additional nearly
600,000 net acres through area-of-dedication agreements ("AODs") or
similar instruments, resulting in production from more than two
million acres of total land now dedicated to the Peace Pipeline
system. Much of the production in respect of land recently
dedicated is behind third-party midstream processing plants, the
volumes from which, absent these AODs, may have otherwise been
available to flow on proposed competing projects.
In addition, Pembina's
joint-venture entity, Veresen Midstream, has secured an option from
two key customers for NGL extraction rights on up to 750 mmcf/d of
natural gas. If the option is exercised by Veresen Midstream, the
15-year agreement would allow for incremental ethane-plus mix of
approximately 50,000 bpd.
The capital cost estimate for Phase VII has been revised lower,
by approximately $175 million, to
$775 million, reflecting a
reimagining of the project to optimize the scope with customers'
current development plans and transportation requirements. The
initial capacity of Phase VII has been reduced from the previous
240,000 bpd, to 160,000 bpd. However, the ability to quickly and
efficiently return the project to its original capacity has been
retained. The lower capital cost reflects fewer pump stations, as
well as additional savings achieved through value engineering and
an optimized construction and procurement strategy. Approximately
$300 million, or 40 percent, had been
invested in the project as of September 30,
2020. Phase VII is now anticipated to be in service in the
first half of 2023.
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.
Through the re-scoping of Phase VII, Pembina has maintained the ability to reach
the previously envisioned ultimate capacity of the Peace system,
and will pursue this through a more measured, capital efficient,
economic and orderly expansion program focused on higher
utilization rates, making the entire system even more
competitive.
The previously announced Phase VIII and IX Peace Pipeline
expansions were designed to accommodate further customer demand in
the Montney area by
debottlenecking constraints, accessing downstream capacity, and
further enhancing product segregation on the Peace Pipeline system.
While these two projects remain deferred, the initial contracts
supporting the project are still in place and there remain strong
indications of interest for incremental capacity. Value engineering
work is ongoing and given strong customer interest, Pembina expects to make a decision in 2021 to
re-activate these projects. As of September
30, 2020, Pembina had
invested a combined $40 million in
these two projects. Reactivation of these projects would have
minimal impact on Pembina's 2021
capital program.
Phase VIII and Phase IX would complete the segregation of LVP
and HVP products across the system supporting further optimization
opportunities. As well, Pembina
continues to have the ability to add approximately 200,000 bpd of
capacity to its market delivery pipelines from Fox Creek, Alberta to Namao, Alberta through the relatively low-cost
addition of pump stations on these mainlines, bringing the total
capacity of the Peace and Northern pipelines to 1.3 million bpd.
Full segregation of commodities on Peace Pipeline would allow
system optimization opportunities due to the reduction of batching
and quality management issues. This optimization, previously
referred to as Phase X, could create up to an incremental 100,000
bpd of capacity with minimal capital spending.
Empress Co-generation Facility
Pembina is also pleased to
announce it is proceeding with the restart of the co-generation
facility at the Empress NGL Extraction Facility ("Empress
Co-generation Facility"). This is the Company's second
co-generation project following the very successful development of
a co-generation facility at the Redwater Complex. The Empress
Co-generation Facility will use natural gas to generate up to 45
megawatts of electrical power, thereby reducing overall operating
costs by providing power and heat to the existing Empress NGL
Extraction Facility. All the power will be consumed on site,
thereby supplying approximately 90 percent of the site's power
requirements. Further, this project will contribute to annual
greenhouse gas emission reductions at the Empress NGL Extraction
Facility through the utilization of the co-generation waste heat
and the low-emission power generated. Pembina anticipates a reduction of
approximately 88,000 tonnes of carbon dioxide equivalent per year
based on the current energy demand of the Empress NGL Extraction
Facility.
The expected capital cost of the project is $120 million, of which approximately 10 percent
had been invested as of September 30,
2020. While this project was deferred, Pembina maintained the necessary level of
investment to ensure the project remained 'shovel ready', with
turbine fabrication now complete and delivery scheduled to occur in
the fourth quarter of 2020. The project is trending under budget,
having similarly gone through a value engineering exercise during
the project deferral period. The revised expected in-service date
of this project is now the first quarter of 2023, subject to
regulatory and environmental approvals.
Pembina is evaluating two
additional opportunities for co-generation facilities at other
locations, which would allow the Company to predictably reduce
operating costs as well as continue to reduce emissions intensity
within the Facilities Division.
CKPC's PDH/PP Facility
Pembina and its partner,
Petrochemical Industries Company K.S.C. ("PIC"), continue to
evaluate the integrated propane dehydration ("PDH") plant and
polypropylene upgrading facility ("PDH/PP Facility") through their
joint venture, Canada Kuwait Petrochemical Limited Partnership
("CKPC").
While Pembina continues to
believe in the strategic rationale of this project, the significant
risks arising from the ongoing COVID-19 pandemic, most notably with
respect to costs under the lump sum contract for construction of
the PDH plant, which remains under force majeure condition, require
CKPC to suspend execution of the project indefinitely. CKPC is
working through a process to manage, defer or cancel existing
agreements with, among others, the lump-sum consortium, lenders,
and technology licensers, in order to minimize the need for
additional capital contributions. CKPC will continue to take action
to safeguard its existing investment associated with long-lead
equipment and intellectual property.
As a result of the uncertainty, in the fourth quarter of 2020
Pembina will be recognizing a material impairment on its investment
in CKPC.
Pembina remains committed to
its global market access strategy and helping to ensure that
hydrocarbons produced in the WCSB, and the other basins where the
Company operates, can reach the highest value markets throughout
the world.
Prince Rupert Terminal Expansion
Construction of the Prince Rupert Terminal is ongoing and is
expected to be completed in the first quarter of 2021. Pembina continues to engineer an expansion of
the Prince Rupert Terminal and the ongoing evaluation of this
project now contemplates incremental volumes of 25,000 bpd, as well
as the use of mid-size gas carriers, which would increase the
vessel capacity from 150,000 barrels, to 250,000 barrels, thereby
improving economies of scale and competitiveness of the facility by
lowering per unit lifting and vessel transport costs to premium
markets. In addition, the mid-size gas carriers are fully
refrigerated, opening up additional opportunities to serve markets
with fully refrigerated terminals, as well as continuing to service
other niche markets with smaller, semi-refrigerated handy-size
ships. Pembina's rail yard in Redwater, Alberta, is built for unit train
capability that provides unique transportation, logistics and cost
advantages to Pembina, and will
cost-effectively supply the anticipated growth of the terminal.
Engineering of the expansion is well advanced, and Pembina expects to make a final investment
decision in the first half of 2021.
2021 Guidance
Based on the Company's expectations and outlook for 2021,
Pembina is anticipating adjusted
EBITDA of $3.2 to $3.4 billion. Relative to 2020, adjusted EBITDA
next year will be positively impacted by approximately $1 billion of new assets that will have entered
service in 2020 and during the first quarter of 2021, including the
Phase VI Peace Pipeline Expansion, Duvernay III, fractionation and
terminalling facilities at the Empress NGL Extraction Facility, the
Hythe Developments project and the Prince Rupert Terminal. The
contribution from new assets will be partially offset by a lower
contribution from Ruby Pipeline and the Edmonton South Rail
Terminal, and the currently prevailing outlook for a stronger
Canadian dollar, relative to the U.S. dollar, in 2021. The Company
has hedged approximately 50 percent of its 2021 frac spread
exposure, excluding Aux Sable, with
these hedges having been systematically entered into throughout
2019 and 2020.
The outlook for 2021 also reflects $100
million of sustained cost savings achieved in 2020.
Extending and enhancing 2020 cost savings and efficiencies into
2021 and beyond will be a major focus in 2021. The Company
continuously evaluates and implements initiatives to drive
efficiency, aiming to create sustainable long-term value for
customers, employees, communities and investors. Pembina has engaged a third-party to support
the continuation of work underway to consider, configure, and
implement high-impact initiatives to create sustainable value
through optimization. Pembina
expects to further leverage digital technology and predictive
analytics to optimize system capacity, increase asset utilization
and performance, optimize power requirements, improve margins and
create more efficient workflows. Ultimately, these efforts will
result in reduced costs and improved organizational
productivity.
In addition to the drivers mentioned above, the following
factors could contribute to actual results within the 2021 guidance
range:
2021 Adjusted
EBITDA
|
Key Contributing
Factors
|
Low End:
$3.2
billion
|
- Marketing & New Ventures Division results
at 2020 levels
- Crude, condensate and NGL volumes sustained
at 2020 average levels
- Limited or no re-contracting of the Ruby
Pipeline firm volume contracts expiring mid-2021
- Limited interruptible revenue on Alliance
Pipeline, consistent with 2020
|
High End:
$3.4
billion
|
- Recovery of Marketing & New Ventures
Division results to more normalized levels in the historical
context of 2018-2020
- Modest growth in crude, condensate and NGL
volumes beyond 2020 average levels
- Ruby Pipeline firm volume contract expiries
in mid-2021 are re-contracted or otherwise replaced with
interruptible volumes in excess of current spot rates
- Interruptible revenue on Alliance Pipeline in
excess of 2020, but below 2019, levels
- Interruptible volumes in the gas services
business in excess of 2020, but below 2019, levels
- Weakening of the Canadian dollar, relative to
the U.S. dollar
|
Current income tax expense in 2021 is anticipated to be
$180 to $220
million as Pembina will
continue to benefit from the availability of tax pools from assets
recently placed into service. This outlook represents a slight
decrease compared to the expected expense for 2020, reflecting
primarily the reduction of the corporate tax rates in the Province
of Alberta, new rules for
accelerated capital cost allowances, and a reduction in taxable
earnings in certain deferred partnerships.
2021 Capital Expenditures
Pembina's 2021 capital program
is expected to be allocated as follows:
($
millions)
|
2021
Budget (1)
|
Pipelines
Division
|
$540
|
Facilities
Division
|
$140
|
Marketing & New
Ventures Division
|
$25
|
Corporate
|
$25
|
Capital
Expenditures
|
$730
|
Contributions to
Equity Accounted Investees & Advances to Related
Parties
|
$55
|
Capital
Expenditures and Contributions to Equity Accounted Investees &
Advances to Related Parties
|
$785
|
|
(1)
Capital budget shown in Canadian dollars based on a forecasted
average USD/CAD exchange rate of 1.33.
|
Pembina's Pipelines Division
capital investments will be primarily related to the construction
of Phase VII, in addition to remaining capital to be spent on
projects previously placed into service and smaller growth projects
including various new laterals and terminals.
Capital investments in the Facilities Division will be focused
on completion of the Prince Rupert Terminal, the Empress
Co-generation Facility and the Vancouver Wharves diesel handling
expansion project.
Marketing and New Ventures Division capital investments will be
focused on ongoing regulatory and permitting requirements related
to the Jordan Cove LNG project and advancing Pembina's remaining portfolio of unsecured
development opportunities.
Spending within the Corporate segment is primarily targeted at
information technology enhancements to further the Company's
optimization initiatives.
Contributions to Equity Accounted Investees & Advances to
Related Parties primarily relate to various projects at Veresen
Midstream.
The Company's 2021 capital program includes:
- $110 million of non-recoverable
sustaining capital to support safe and reliable operations;
- $25 million related to the Jordan
Cove LNG project;
- $40 million for digital
transformation, technology and commercial systems investments;
and
- $65 million of flow-through
capital that is recoverable from customers.
2021 Capital Allocation and Funding
Pembina has a strong track
record of value creation through disciplined capital allocation and
the creation of long-term annuities. Over the past 10 years,
Pembina has generated 9 and 11
percent compound annual per share growth in earnings and adjusted
cash flow from operating activities, respectively. Capital
investments have not only grown the Company, but also diversified
and de-risked the business.
As a result, Pembina has
confidence in its ability to generate long-term shareholder value
through capital investment and will continue to first prioritize
allocating capital to growth projects with attractive risk-adjusted
returns. Unlike other options for capital allocation, investing in
growth projects will further enhance Pembina's capabilities, improve customer
service and extend the longevity of its long-term, stable cash flow
streams.
In 2021, at the low end of the Company's adjusted EBITDA
guidance range, the 2021 capital investment program is fully funded
by cash flow after dividends. Towards the middle and upper end of
the 2021 adjusted EBITDA guidance range, Pembina will generate excess discretionary
cash flow, which will be available for debt reduction, or
opportunistic common share repurchases, based on the relative
risk-adjusted returns of each option. Pembina expects to remain within its financial
guardrails with ample liquidity. Leverage metrics are expected to
remain within the ranges for a strong 'BBB' credit rating.
Pembina has received board
approval, and intends to make an application to the TSX, to
establish a normal course issuer bid which, subject to TSX
approval, would enable the Company to repurchase up to five percent
of its outstanding common shares over a 12-month period.
Pembina's commitment to its
dividend can be evidenced by examining history. Throughout past
commodity and financial cycles, as well as the conversion from a
non-taxable to taxable entity, Pembina has maintained and grown its dividend.
Dividend increases are typically approved by the Board of Directors
in May of each year. Pembina will
continue to evaluate the merits of dividend growth relative to
other opportunities for capital allocation as 2021 evolves,
particularly in consideration of the yield on the dividend.
Earlier this year, prior to the onset of the COVID-19 pandemic
and based on unsolicited expressions of interest, Pembina began to explore the potential
monetization of certain assets, in the range of $200 to $500
million, which had lower strategic fit or integration
potential. These asset sales processes were independent of
Pembina's efforts to bolster its
financial strength in response to the COVID-19 pandemic. The
COVID-19 pandemic, including most notably the resulting physical
distancing protocols, as well as the impact to financial markets,
were not conducive to full value maximization. As such,
Pembina is unlikely to proceed
with the sale of material non-core assets in the immediate future.
The Company remains open to monetizing assets where a third-party
view of intrinsic value exceeds its own.
Advancing Pembina's
Portfolio of Other Growth Opportunities
Pembina continues to find
opportunities to grow its business and improve customer netbacks by
capitalizing on the competitive advantages provided by its diverse
and integrated value chain. The Company remains uniquely positioned
to drive synergies from previous acquisitions and benefit from new
third-party infrastructure set to provide enhanced access to global
markets for WCSB-based hydrocarbons. The Canadian energy industry
is not egress constrained for the first time in many years and
additional third-party egress in the form of Trans Mountain
Pipeline expansion, LNG Canada, and Enbridge's Line 3 Replacement
should improve relative pricing for Canadian hydrocarbons, support
future growth in the WCSB and provide new opportunities for
Pembina. Notably, the various oil
pipeline projects represent approximately one million bpd of
incremental WCSB egress capacity.
The scale, breadth and diversification of Pembina's business inherently provides a
strong suite of greenfield, brownfield, optimization and new market
development opportunities. These opportunities range in size from a
hundred million dollars to several billion dollars and have
risk-adjusted rates of return consistent with Pembina's track record. While the timeline is
not certain, the Company is diligently advancing several
opportunities.
Cochin expansion and
reactivation
Pembina has evaluated the
capacity of the Cochin Pipeline system and identified opportunities
to increase the capacity of the system by up to 50 percent,
including 25,000 bpd with little to no capital requirements and an
additional 25,000 bpd by investing modest capital in integrity and
other upgrades of the system. Pembina also has been approached about several
opportunities to reactivate the idle east leg of the Cochin
Pipeline system with various service offerings.
The Company is advancing commercial discussions for this
incremental Cochin Pipeline capacity, including potential open
seasons, all subject to customary regulatory and other approvals,
as required.
In combination with these capacity increases, Pembina is evaluating new connections near
Chicago, Illinois; Bakken,
North Dakota; Hardisty, Alberta; and Empress, Alberta to add high quality
condensate and diversify receipt locations on the system. The
combination of Peace, Cochin,
Drayton Valley and Redwater condensate, all connected to
Pembina's Canadian diluent hub,
provides superior flexibility, flow assurance and enhanced value to
Pembina customers across
North America.
Positioned to capitalize on new third-party egress
Pembina's Edmonton Terminals
are positioned to be the landing spot for heavy crude oil destined
for overseas markets via the Trans Mountain Pipeline expansion,
which is currently under construction and has an expected
in-service date at the end of 2022. Given close operational ties
with Trans Mountain, the largest
number of inbound connections in the Edmonton area (12 inlets), and premium
in-place assets, including pumps and manifolds, Pembina's terminals will be uniquely valuable
to current and future customers as the Company supports
Trans Mountain in maximizing
operational efficiency and enhancing customers' netbacks. Current
opportunities for customers to secure tank positions, as well as
the flexibility to build out incremental storage in 2023, further
solidify Pembina's footprint in
the Edmonton market.
Further, as LNG Canada is expected to come on stream in 2025,
providing liquefied natural gas export capability off Canada's West Coast, the incremental gas
required to fill that capacity will generate incremental condensate
and NGL that will require transportation from northeast
British Columbia and NGL
processing in Fort Saskatchewan,
Alberta. Pembina is well
situated to accommodate demand for these services through existing
or new infrastructure, being the primary conduit to bring
hydrocarbons from the field to the export pipelines.
"Pembina has a proven track
record of disciplined and strategic capital allocation and this
remains one of the Company's top priorities. Our history is one of
developing strong franchises that are advantaged by their
integration with the existing value chain, and ensuring new
projects are supported by significant contractual underpinnings,
strong counterparties, and robust underlying geology. Further, we
have been, and will continue to be, unwavering in executing our
strategy within Pembina's
financial guardrails," concluded Mick
Dilger, President and Chief Executive Officer." Mr. Dilger
added, "Prudent financial stewardship through 2020 set the
groundwork for 2021 and a return to growth, commencing with the
reactivation of the Phase VII Peace Pipeline Expansion and Empress
Co-generation Facility. These projects highlight the economic
growth opportunities afforded by Pembina's industry-leading footprint, even
during a period of overall slower industry growth."
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 more than 65 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; an oil and natural gas liquids
infrastructure and logistics business; is growing an export
terminals business; and is currently evaluating a petrochemical
facility to convert propane into polypropylene. 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 Canadian
Sedimentary Basin and the other basins where Pembina operates can reach the highest value
markets throughout the world.
Purpose of Pembina:
To be the leader in delivering integrated infrastructure
solutions connecting global markets:
- Customers choose us first for reliable and value-added
services;
- Investors receive sustainable industry-leading total
returns;
- Employees say we are the 'employer of choice' and value
our safe, respectful, collaborative and fair work culture; and
- Communities welcome us and recognize the net positive
impact of our social and environmental commitment.
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 statements can be identified by terminology such as
"should", "may", "will", "continue", "if", "to be", "expects", and
similar expressions suggesting future events or future
performance.
In particular, this document contains forward-looking
statements, including certain financial outlooks, pertaining to,
without limitation, the following: expectations regarding adjusted
EBITDA; 2021 guidance and the capital budget; Pembina's capital allocation plans,
Pembina's corporate strategy and
the development and expected timing of new business initiatives and
growth opportunities and the expected timing thereof; expectations
regarding global energy demand; expectations about industry
activities and development opportunities; expectations about future
growth opportunities and the demand for our services; expectations
regarding new corporate developments and their impact on access to
markets; planning, construction, capital expenditure and cost
estimates, schedules, locations, regulatory and environmental
applications and approvals, expected capacity, incremental volumes,
power output, completion and in-service dates, rights, activities
and operations with respect to planned construction of, or
expansions on, deferred projects, existing pipelines systems, gas
services facilities, processing and fractionation facilities,
terminalling, storage and hub facilities, facility and system
operations and throughput levels; plans and activities related to
deferred projects and estimated project costs; expected volumes and
exit rates across Pembina's
conventional pipelines business; levels and types of contracted
volumes; expected contract expiries and renewals; greenhouse gas
emissions reductions; the recognition of an impairment of
Pembina's investments in CKPC and
the Ruby Pipeline; the impact of current market conditions on
Pembina; Pembina's hedging strategy and expected
results therefrom; expected cost savings and efficiencies;
Pembina's options for allocating
capital, including any potential common share repurchases;
Pembina's credit ratings;
Pembina's ability to maintain its
financial guardrails; Pembina's
commitment to and the future level and sustainability and potential
growth of cash dividends that Pembina intends to pay its shareholders,
including the expected future cash flows, the sufficiency and
expected uses thereof; and plans regarding the monetization of
assets.
The forward-looking statements are based on certain
assumptions that Pembina has made
in respect thereof as at the date of this news release regarding,
among other things: oil and gas industry exploration and
development activity levels and the geographic region of such
activity; the success of Pembina's
operations and growth projects; that impacts from the COVID-19
pandemic on Pembina's business and
growth projects are not materially greater than expected; the
approval and availability of one or more vaccines for COVID-19 and
the efficient distribution thereof and the resultant lessening of
the impact of the COVID-19 pandemic into 2021; prevailing commodity
prices, interest rates and exchange rates and the ability of
Pembina to maintain current credit
ratings; the availability of capital to fund future capital
requirements relating to existing assets and projects; future
operating costs; geotechnical and integrity costs; that the TSX
will approve Pembina's normal
course issuer bid as expected; 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 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 relevant facilities; the technology will be sufficient to
obtain greenhouse gas emissions reductions and targets; that there
are no unforeseen material costs relating to the facilities which
are not recoverable from customers; prevailing interest and tax
rates; prevailing regulatory, tax and environmental laws and
regulations; maintenance of operating margins; the amount of future
liabilities relating to lawsuits and environmental incidents; and
the availability of coverage under Pembina's insurance policies (including in
respect of Pembina's business
interruption insurance policy).
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 actual 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. These
known and unknown risks and uncertainties, include, but are not
limited to: the regulatory environment and decisions;
the ability of Pembina 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 or
default by counterparties to agreements which Pembina or one or more of its affiliates has
entered into in respect of its business; the failure to realize the
anticipated benefits or synergies of completed acquisitions,
integration issues or otherwise; 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, climate change initiatives or policies or
increased environmental regulation; adverse general economic and
market conditions in Canada,
North America and worldwide,
including changes, or prolonged weaknesses, as applicable, in
interest rates, foreign currency exchange rates, commodity prices,
supply/demand trends and overall industry activity levels; risks
relating to widespread epidemics or pandemic outbreaks, including
risks relating to the ongoing COVID-19 pandemic; changes in credit
ratings; counterparty credit risk; technology and cyber security
risks; 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 AIF for the year ended December 31,
2019, and in Pembina's
management's discussion and analysis dated November 5, 2020 for the three and nine month
period ended September 30, 2020, all
of which can be found under Pembina's profile on the System for Electronic
Document Analysis and Retrieval (SEDAR) at www.sedar.com, filed
with the U.S. Securities and Exchange Commission at www.sec.gov and
are available on Pembina's website
at www.pembina.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 contained herein, except as required by applicable
laws.
Non-GAAP Measures
In this news release, Pembina has used the terms adjusted EBITDA and
adjusted cash flow from operating activities, which do not have any
standardized meaning under GAAP. 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 be clearly defined, qualified and reconciled to
their most directly comparable 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 GAAP. The measures should not be
considered in isolation or used in substitute for measures of
performance prepared in accordance with GAAP.
Other issuers may calculate this non-GAAP measure
differently. Investors should be cautioned that this measure should
not be construed as an alternative to earnings 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, the most directly
comparable measure recognized by GAAP, please refer to Pembina's management's discussion and analysis
for the year ended December 31, 2019, 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