- All financial figures are approximate and in Canadian
dollars unless otherwise noted. This news release refers to
earnings before interest, taxes, depreciation and amortization
("EBITDA") which is a financial measure that is not defined by
Generally Accepted Accounting Principles ("GAAP"). For more
information about EBITDA, see "Non-GAAP Measures" herein.
CALGARY, Alberta, Dec. 1, 2014 /PRNewswire/ -- Pembina Pipeline
Corporation ("Pembina" or the
"Company") (TSX: PPL; NYSE: PBA) announced that its Board of
Directors has approved a capital program of approximately
$1.9 billion in 2015. This is the
largest capital budget in the Company's history and is an increase
of approximately 36 percent from our expected spending plan of
$1.4 billion in 2014.
"Our 2015 capital program is mainly directed towards progressing
our various multi-year execution projects, which are, for the most
part, underpinned by long-term, fee-for-service contracts with our
customers," said Mick Dilger,
Pembina's President and Chief
Executive Officer. "In addition to advancing several multi-year
builds in 2015, we will be placing approximately $1.5 billion of fee-for-service assets into
service during the year ahead."
"The 2015 capital program is driven by Pembina's success over the past several years
in securing an enviable suite of long-term, fee-for-service growth
projects," added Mr. Dilger. "Our current roster of committed
capital projects totals approximately $6
billion. The majority of these projects, which are in
various stages of development, have in-service dates ranging
between the end of 2014 and mid-2017. These secured projects, in
aggregate, have the potential to add an incremental $700 million to $1 billion of EBITDA per year on
a run-rate basis once they are all in-service, with the upper end
of the range depending on utilization above take-or-pay levels.
This represents an increase of 70 to 100 percent over Pembina's 12-month trailing EBITDA."
"We are backed by a strong balance sheet and have the right
people and processes in place to bring our growth plans to
fruition," said Mr. Dilger. "As we execute our 2015 capital
spending plan and move towards bringing these projects on-stream,
I'm confident in our ability to continue growing cash flow per
share and delivering meaningful and sustainable returns for our
investors over the long-term."
2015 Capital Program Highlights
Pembina's 2015 capital spending
plan is expected to be allocated as follows:
|
|
|
|
|
|
|
($
millions)
|
|
|
|
|
|
2015
Budget
|
Conventional
Pipelines
|
|
|
|
|
|
1,120
|
Midstream
|
|
|
|
|
|
510
|
Gas
Services
|
|
|
|
|
|
240
|
Other
|
|
|
|
|
|
65
|
Total
|
|
|
|
|
|
1,935
|
Conventional Pipelines
Pembina plans to spend
approximately $1,120 million in its
Conventional Pipelines business, 58 percent of its overall 2015
capital spending plan. The spending will be primarily directed to
major projects, as follows:
- Pembina expects to spend
$25 million in 2015 to complete its
previously announced Phase II Low Vapour Pressure Expansion, which
will increase crude oil and condensate capacity on the Company's
Peace Pipeline by 55,000 barrels per day ("bpd"). Completion is
expected by early 2015, at which time the Peace Pipeline will have
a capacity of 250,000 bpd. This expansion will accommodate
increasing crude oil and condensate volumes resulting from
continued producer activity in the crude oil and condensate-rich
areas of the Montney resource play
in the Dawson Creek, Grande Prairie and Kaybob/Fox Creek areas, as well as development of the
condensate-rich Duvernay resource
play in the Kaybob area.
- The Company expects to spend $225
million in 2015 to complete its previously announced Phase
II NGL Expansion on its Peace and Northern natural gas liquids
("NGL") Pipelines (the "Peace/Northern NGL System") to add an
additional 53,000 bpd. Completion is expected in the third quarter
of 2015, at which time the Peace/Northern NGL System will have a
capacity of 220,000 bpd. This expansion will provide increased
transportation capacity for producer activity focused on NGL
development, which continues to be strong in the Deep Basin
Cretaceous, Montney and
Duvernay resource plays.
- Pembina expects to spend
$550 million on its Phase III
Expansion. During the year ahead, Pembina will work to complete construction of
the 16 inch Kakwa to Simonette pipeline (currently under
construction) and order long-lead equipment (including pipe) for
the 24 inch and 16 inch pipelines from Fox Creek to Namao,
Alberta.
- The Company expects to spend an additional $240 million on pipeline laterals to aggregate
product for its mainline expansions.
The remaining capital in Conventional Pipelines will be spent on
upgrades and other business development activities aimed at
ensuring maximum integration and optimization of the Company's
value chain opportunities.
Midstream
Pembina continues to allocate
its capital spending in Midstream on initiatives that increase its
fee-for-service business. For 2015, capital of $510 million, or 26 percent of the overall
budget, is projected to be spent in Midstream.
In crude oil Midstream, Pembina
expects to spend $75 million to
expand its current service offerings and enhance the
interconnectivity of the infrastructure it accesses. Specific
projects include:
- $40 million is expected to be
spent in 2015 to expand above ground storage capacity from 310,000
barrels to 850,000 barrels at Pembina's Edmonton terminal, which is expected to be
in-service in the second quarter of 2016;
- $15 million is to be spent on
additional connections and inceasing delivery capacity within
Pembina's Nexus Terminal,
including commencement of activitiy at the Canadian Diluent Hub;
and
- The remaining capital will be spent to upgrade several of
Pembina's truck and full-service
terminals and for other business development activities.
In Pembina's NGL Midstream
business, the Company expects to spend $435
million in 2015, which will largely be directed towards the
construction of Pembina's
previously announced two new fractionators at its Redwater site:
- $150 million is projected to be
spent to complete Pembina's second
fractionator (RFS II – expected to be in service in the fourth
quarter of 2015) and $50 million is
estimated to be spent on the Company's third fractionator (RFS III
– expected to be in service in the third quarter of 2017);
- $70 million is to be spent at the
Company's Redwater site developing
infrastructure to facilitate the receipt, handling and loading of
petrolum products produced from the adjacent Northwest
Refinery;
- $40 million will be directed
towards the Company's Corunna,
Ontario facilities to increase product handling capacity at
the facility (including optimizing rail infrastructure, new truck
loading facilities and a new brine pond); and
- $35 million is anticipated to be
spent on the development and completion of several underground
storage caverns at Redwater West.
The remaining capital in NGL Midstream will be allocated to
various upgrades across the Redwater West and Empress East systems
and to progressing Pembina's
proposed west coast propane export terminal (the "West Coast
Terminal").
Gas Services
Pembina plans to allocate
approximately $240 million, or 12
percent, of its 2015 capital budget to several new facilities
within Gas Services:
- Resthaven Expansion – $100
million is planned to be spent to progress the 100 million
cubic feet per day ("MMcf/d") (gross) expansion at the Company's
Resthaven facility, which, subject to regulatory and environmental
approvals, is expected to bring total capacity to 300 MMcf/d
(gross) by mid-2016;
- Musreau III Facility – $55
million is planned to be spent to progress the 100 MMcf/d
expansion, which, subject to regulatory and environmental
approvals, is expected to be in-service in the second quarter of
2016;
- Musreau II Facility – $5 million
is planned to be directed towards final site clean-up activities
related to the 100 MMcf/d shallow cut gas plant and associated
infrastructure, which is expected to be in-service in December 2014;
- Saturn II Facility – $45 million
is planned to be directed towards the 200 MMcf/d 'twin' of the
Company's Saturn I Facility, which is expected to be in-service by
late-2015; and
- Saskatchewan Ethane Extraction Plant ("SEEP") – $30 million is allocated to complete SEEP, a 60
MMcf/d gas plant, which is expected to be in-service in the third
quarter of 2015.
Including Musreau II, Pembina
will be placing 360 MMcf/d of new processing plants into service by
the end of 2015, a 50 percent increase over its existing capacity.
The remaining capital in Gas Services will be spent on upgrades and
other business development activities.
Capital Spending Summary
During the year ahead, Pembina
will continue to concentrate its efforts on expanding, diversifying
and integrating its assets along the hydrocarbon value chain to
better provide services for its customers and enhance long-term
shareholder returns. To support these efforts, Pembina plans to spend approximately
$65 million on other upgrades and
corporate-related items, including various information services
infrastructure improvements.
Key Accomplishments in 2014
2014 was a particularly successful year for Pembina in terms of securing customer support
for announced projects, acquiring assets to expand the Company's
operations into new areas and progressing longer-term growth
opportunities.
During the year, Pembina
remained focused on expanding its integrated service offerings. In
May, the Company announced that it had reached binding commercial
agreements to proceed with RFS III, a new 55,000 bpd propane-plus
fractionator at its existing Redwater fractionation and storage complex.
With the addition of RFS III, which is subject to regulatory and
environmental approvals, Pembina's
fractionation capacity will total approximately 210,000 bpd, making
the Company's Redwater complex the
largest NGL fractionation facility in Canada.
In September, the Company communicated its plans to proceed with
developing its proposed West Coast Terminal under an agreement with
the Port of Portland, Oregon (the
"Port") that sets forth the terminal site, which includes an
existing marine berth, located within the city of Portland for the development of the project.
Since the announcement, Pembina
has created a dedicated internal team to progress the 37,000 bpd
facility, which is anticipated to be brought into service in
early-2018 (subject to required permits and approvals). The Company
expects that the West Coast Terminal will provide growing Canadian
propane supply (that is derived from natural gas produced in
western Canada) with access to
large, international markets while complementing Pembina's expanding integrated service
offering for products that are derived from natural gas.
October 2014 marked Pembina's strategic and low-risk entry into
one of the most promising hydrocarbon plays in North America: the North Dakota and Saskatchewan Bakken.
Pembina acquired the Vantage
pipeline system ("Vantage") and SEEP for total consideration of
approximately US$650 million. Vantage
is a recently constructed high vapour pressure pipeline with a
capacity of approximately 40,000 bpd that originates in
Tioga, North Dakota and terminates
near Empress, Alberta. Vantage
provides long-term, fee-for-service cash flow and access to the
prolific and growing North Dakota Bakken play for future NGL
opportunities. SEEP, an under construction, 60 MMcf/d deep cut gas
processing facility that is centrally located to service the
southeast Saskatchewan Bakken region is underpinned by both a
long-term ethane sales agreement and a long-term, fee-for-service
processing agreement. SEEP is expected to produce approximately
4,500 bpd of ethane and will connect into Vantage through a
pipeline lateral that is also currently under construction.
Pembina expects SEEP and the
associated pipeline lateral to be in-service in mid-2015. With
these assets, Pembina now has a
meaningful footprint in the Bakken and will be able to explore
integration and growth opportunities in this new area.
In the Company's Gas Services business, Pembina placed its recently constructed 200
MMcf/d (134 MMcf/d net) Resthaven Facility into service on
October 6, 2014 and on October 10, 2014, Pembina announced that it entered into
commercial agreements to proceed with a $170
million expansion of the facility. Pembina plans to build, own and operate a new
gas gathering pipeline that will deliver gas into the plant and
increase capacity of the existing Resthaven Facility by an
additional 100 MMcf/d (gross), bringing total capacity to 300
MMcf/d (gross) (collectively, the "Resthaven Expansion"). The
Resthaven Expansion is underpinned by a long-term, fee-for-service
contract and, subject to regulatory and environmental approvals,
the gathering system portion of the Resthaven Expansion is expected
to be in-service by the second quarter of 2015, followed by the gas
processing expansion in mid-2016.
With the additional volumes anticipated at the Resthaven
Facility, Pembina has also signed
a long-term contract for Phase III pipeline capacity and
fractionation capacity at the Company's Redwater fractionation and storage
facility.
Pembina is commissioning its
Musreau II Facility, a 100 MMcf/d shallow cut gas plant, which is
under budget and scheduled to come into service in December 2014, ahead of its previously
anticipated in-service date of the first quarter 2015.
The Company also recently announced that it entered into
agreements to construct a new facility – "Musreau III" – for an
estimated cost of $105 million.
Musreau III will leverage the engineering and design work for
Pembina's Musreau I and Musreau II
facilities and will use the same pipeline lateral to access the
Company's Peace Pipeline System. Musreau III, which is underpinned
by long-term agreements with several area producers, involves the
construction of a 100 MMcf/d shallow cut facility which will be
built adjacent to Pembina's
existing Musreau facility and its nearly complete Musreau II
Facility. Pembina expects Musreau
III to have liquids extraction capacity of approximately 3,000 bpd,
subject to gas compositions. Similar to the Company's other gas
processing facilities, the agreements for Musreau III are
take-or-pay in nature and provide flow through of operating
expenses. Subject to regulatory and environmental approvals,
Pembina anticipates bringing
Musreau III on-stream in mid-2016.
The Company's Conventional Pipelines business realized record
throughput thus far in 2014, largely resulting from expansions
implemented in December of last year. During 2014, Pembina was successful in its recontracting
efforts to secure the majority of its existing crude and condensate
volumes under long-term, firm-service contracts. In aggregate,
Pembina has now contracted
approximately 650,000 bpd of crude oil, condensate and NGL through
its recontracting efforts, and through its Phase I, II and III
conventional pipeline expansions. Once the Phase III Expansion is
brought into service, virtually all of the throughput on
Pembina's Peace and Northern
systems will be under long-term, take-or-pay contracts.
Growing volume forecasts and customer support throughout the
year also saw Pembina increase its
Phase III Expansion program. Pembina now plans to construct two pipelines
between Fox Creek and Namao, Alberta (one 16 inch diametre and one
24 inch diametre) with an initial combined capacity of 420,000 bpd
and an ultimate capacity of over 680,000 bpd with the addition of
midpoint pump stations. Another segment was also added to the
project between Wapiti and Kakwa, Alberta. These additions are expected to
increase capital spending for the project from $2 billion to $2.44
billion. Subject to regulatory and environmental approvals,
Pembina expects the 16 inch and 24
inch diameter pipelines to be in-service between late-2016 and
mid-2017. Pembina submitted its
regulatory application for both pipelines from Fox Creek to Namao on September 2,
2014.
Feeding into the Company's Phase III Expansion downstream of
Taylor, British Columbia ("B.C.")
will be Pembina's recently
announced $210 million, 75,000 bpd
expansion to its pipeline infrastructure in northeast B.C. (the
"NEBC Expansion"). The NEBC Expansion will transport condensate and
NGL for various producers in the liquids-rich Montney resource play and is underpinned by a
long-term, cost-of-service agreement with an anchor tenant. Subject
to regulatory and environmental approvals, Pembina anticipates bringing the NEBC
Expansion on-stream in the second quarter to fourth quarter of 2017
timeframe.
Pembina also announced plans to
develop the Canadian Diluent Hub ("CDH") – a large-scale condensate
and diluent terminal at its Heartland Terminal site near
Fort Saskatchewan, Alberta. The
proposed facilities are designed to accommodate contracted diluent
supply volumes from the Company's previously announced field gas
plant, pipeline and NGL fractionator expansions. The Company
expects CDH to become a new market hub for condensate and other
diluents by offering its customers a variety of value-added
services.
The Company's growth plan going into 2015 is backed by a strong
financial position. In 2013 and 2014, Pembina raised $900
million in preferred shares and issued two tranches of
30-year notes: $200 million at 4.75
percent in April 2013 and
$600 million at 4.81 percent in
April 2014. Pembina also continues to have robust
participation in its Premium Dividend™ and Dividend Reinvestment
Plan, which should raise approximately $355
million for 2014 and access to its $1.5 billion credit facility.
"2014 has been a very positive year for Pembina, marked by strong operational,
financial and safety performance, successful project execution, and
securing excellent business development opportunities," added Mr.
Dilger. "As we head into 2015 and undertake the largest capital
program in the history of our Company, we will be focused on
ensuring our projects are executed safely and on time and on
budget. We'll also strive to continue delivering strong operational
performance and safe, responsible and reliable services from our
existing assets."
2015 Investor Day Information
Pembina plans to host its 2015
investor and analyst day in Toronto,
Ontario, on March 10, 2015.
Further details, including webcast information will be provided
closer to the date.
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 60 years. Pembina owns and operates pipelines that
transport various hydrocarbon liquids including conventional and
synthetic crude oil, heavy oil and oil sands products, condensate
(diluent) and natural gas liquids produced in western Canada. The Company also owns and operates 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 spans 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.
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. In some cases, forward-looking
statements can be identified by terminology such as "plans",
"expects", "proposed", "will", "anticipates", "develop",
"continue", and similar expressions suggesting future events or
future performance.
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, rights, activities
and operations with respect to planned new construction of, or
expansions in relation to Pembina's 2015 capital spending plan for each
of its business units; anticipated EBITDA and financial performance
resulting from Pembina's capital
expenditures; Pembina's West Coast
propane terminal project; Pembina's plans in respect of, and the impact
of, recent acquisitions; expectations around continuing producer
activity and development; 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 services; expectations
regarding synergies and integration of growth and development
projects with Pembina's existing
business and asset base; expectations regarding domestic and
international supply and demand factors and pricing for oil,
natural gas and NGLs; and expectations regarding participation in
Pembina's DRIP. These
forward-looking statements and information are being made by
Pembina based on certain
assumptions that Pembina has made
in respect thereof as at the date of this document including those
discussed below.
With respect to forward-looking statements contained in this
document, Pembina has made
assumptions regarding, among other things: the ability of
Pembina and any required third
parties to effectively engage with stakeholders; oil and gas
industry exploration and development activity levels, and domestic
and international supply and demand levels; the success of
Pembina's operations; prevailing
commodity prices 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; expectations regarding
participation in Pembina's
dividend reinvestment plan; future operating costs; geotechnical
and integrity costs; in respect of current developments,
expansions, planned capital expenditures, completion dates and
capacity expectations: that third parties will provide any
necessary support, 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, and that there are no unforeseen material costs
relating to the facilities which are not recoverable from
customers; interest and tax rates; prevailing regulatory, tax and
environmental laws and regulations; maintenance of operating
margins; the amount of future liabilities relating to 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 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
to raise sufficient capital (or to raise sufficient capital on
favourable terms) to fund future expansions and growth projects and
satisfy future commitments; the continuation of completion of
third-party projects; the failure to realize anticipated benefits
of growth projects and acquisitions following completion due to
integration issues or otherwise; failure to negotiate and conclude
any required commercial agreements or failure to obtain project
sanctioning; unforeseen events preventing the completion of growth
projects or rendering them uneconomical to Pembina; reduced amounts of cash available for
dividends to shareholders; increased construction costs, or
construction delays, on Pembina's
expansion and growth projects; the impact of competitive entities
and pricing; labour and material shortages; reliance on key
relationships and agreements; the strength and operations of the
oil and natural gas production industry and related commodity
prices; 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;
adverse general economic and market conditions in Canada, North
America and elsewhere, including changes in interest rates,
foreign currency exchange rates and commodity prices; and certain
other risks detailed from time to time in Pembina's public disclosure documents
available at www.sedar.com. Readers are cautioned that this list of
risk factors should not be construed as exhaustive.
The forward-looking statements contained in this document
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 the planned capital projects. 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 earnings before
interest, taxes, depreciation and amortization ("EBITDA"), which is
a non-GAAP measure. Management believes that EBITDA provides useful
information to investors as it is an important indicator of the
issuer's ability to generate liquidity through cash flow from
operating activities, and is also used by investor and analysts for
assessing financial performance and for the purpose of valuing an
issuer, including calculating financial and leverage ratios. EBITDA
does not have any standardized meaning under International
Financial Reporting Standards ("IFRS") and should not, therefore,
be considered in isolation or used in substitute for measures of
performance prepared in accordance with IFRS. Other issuers may
calculate this non-GAAP measure differently. Investors should be
cautioned that this measure should not be construed as alternatives
to net earnings, cash flow from operating activities 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
financial reports, which are available on SEDAR at
www.sedar.com and at www.pembina.com.
Investor Inquiries: Scott Burrows,
Vice President, Capital Markets, (403) 231-3156, 1-855-880-7404,
e-mail: investor-relations@pembina.com; Media Inquiries:
Laura Lunt, Senior Manager,
Regulatory, Environment & External Relations, (403)
231-7500