(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, Dec. 10, 2018 /CNW/ - Pembina Pipeline
Corporation ("Pembina" or the "Company") (TSX: PPL; NYSE: PBA) is
pleased to announce a capital program of $1.6 billion and an Adjusted EBITDA guidance
range of $2.8 to $3.0 billion for 2019.
"We are pleased to announce our capital program for 2019 and
look forward to another year of significant growth in our
underlying business and further development of our value chain
extension projects. Pembina's 2019 capital program will advance a
significant portfolio of secured growth projects while executing
the Company's strategy to secure global markets for Western
Canadian produced hydrocarbons," said Mick
Dilger, Pembina's President and Chief Executive Officer.
"Throughout 2017 and 2018, a total of $5.5
billion of new projects will have been placed into
service. For 2019, we are excited to continue building on the
strong track record of growth that we have demonstrated in recent
years," added Mr. Dilger.
2019 Capital Expenditures
Pembina's capital program is expected to be allocated as
follows:
|
|
($
millions)
|
2019
Budget (1)
|
Pipelines
Division
|
$900
|
Facilities
Division
|
$425
|
Marketing & New
Ventures Division
|
$105
|
Corporate
|
$50
|
Joint Venture Working
Interest Capital
|
$205
|
Total Capital
Expenditures
|
$1,685
|
Less: Joint
Venture Working Interest Capital
|
($205)
|
Add: Equity
Contributions to Joint Venture Partnerships & Advances to
Related Parties
|
$160
|
Total Capital
Expenditures, Equity Contributions & Advances to Related
Parties
|
$1,640
|
|
|
(1)
|
Capital budget
shown in Canadian dollars based on an forecasted average U.S.
foreign exchange rate of 0.76.
|
Pipelines Division
Pembina plans to invest $900
million, or 53 percent, of its 2019 capital budget in its
Pipelines Division.
The 2019 capital budget for the Pipelines Division includes
spending associated with the Phase VI and Phase VII expansions of
the Peace Pipeline System, both of which are currently underway and
anticipated to be in-service in the second half of 2019 and the
first half of 2021, respectively.
The capital budget for the Pipelines Division also includes
funds directed to completion of the NEBC Montney Infrastructure and
the Wapiti Condensate Lateral both of which are expected to be
in-service in the second half of 2019.
Additional capital will be spent relating to previously known
and anticipated final cleanup costs along the Peace Pipeline
right-of-way, as well as communication and SCADA infrastructure
upgrades.
Facilities Division
Pembina expects to invest $425
million, or 25 percent, of its 2019 capital budget in its
Facilities Division.
The Company plans to spend $210
million on the development of Duvernay II & III which
includes gas processing, condensate stabilization and related
infrastructure under the previously announced 20-year
infrastructure development and service agreement with Chevron
Canada Limited. Duvernay II & III are expected to be in-service
in mid- to late 2019 and mid- to late 2020, respectively.
Additional spending will be directed towards progressing the
Prince Rupert LPG Export Terminal, the Empress Expansion and the
recently announced Hythe Developments project.
Marketing & New Ventures Division
Pembina expects to invest $105
million, or 6 percent, of its 2019 capital budget within the
Marketing & New Ventures Division.
The Company plans to spend $100
million towards progressing its proposed Jordan Cove liquified natural gas ("LNG")
project ("Jordan Cove"). This budget represents a prudent approach
that allows Pembina to focus on several priority areas: securing
binding agreements for the long-term sale of natural gas
liquification capacity at the LNG terminal; advancing pipeline
engineering; acquiring right-of-way; and obtaining the regulatory
and environmental permits for both the terminal and the associated
Pacific Connector Gas Pipeline.
The Company has received a Notice of Schedule that indicates
FERC will provide a decision no later than November
2019. Pembina continues to anticipate first gas in 2024,
pending the receipt of the necessary regulatory approvals, a
positive final investment decision and other requirements. Pembina
also continues to work with various state and other agencies with
an objective to progress the project on a similar time line.
In addition, the Company has executed non-binding off-take
agreements, which include the substantive commercial terms for a
total of 11 million tonnes per annum ("Mtpa") which exceeds the
planned design capacity of 7.5 Mtpa. These non-binding agreements
include 20-year, 100 percent take-or-pay tolling commitments with
investment grade counterparties. The Company is working diligently
to conclude binding off-take agreements in the first quarter of
2019, including the nominated capacity of Rockies basin
producers.
Consistent with previous disclosures, and given the size of this
project, the Company intends to seek partners for both the pipeline
and liquification facility thereby reducing its 100 percent
ownership interest to a net ownership interest of between 40 and 60
percent. This process to find partners is expected to commence upon
securing binding off-take agreements, with a completion objective
in the third quarter of 2019 and is intended to reduce the capital,
operating, and other project risks.
The 2019 capital budget for this division also includes
additional spending to advance Pembina's remaining portfolio of
unsecured development opportunities.
Corporate
Pembina expects to invest $50
million, or 3 percent, of its 2019 capital budget within its
Corporate segment. This spending is primarily targeted at meeting
the organizational needs of Pembina's ongoing growth including
field and head office facilities, as well as improving information
technology and security initiatives.
Joint Venture Working Interest Capital
Pembina's 2019 capital budget includes $205 million (net to
Pembina), or 12 percent, to be invested in projects within the
Company's joint venture partnerships including primarily Veresen
Midstream Limited Partnership ("Veresen Midstream") and Canada
Kuwait Petrochemical Corporation ("CKPC"). Of the
$205 million of expected capital, Pembina plans to make equity
contributions to the joint ventures and advances to related parties
totaling $160 million, with the
remaining capital to be funded within the joint venture
entities.
Pembina plans to spend $110
million in 2019 to further advance development of CKPC's
integrated propane dehydrogenation ("PDH") plant and polypropylene
("PP") upgrading facility ("PDH/PP Facility"), including
progressing engineering to secure lump sum construction contracts
on both the PDH and PP plants. Pembina is committed to developing
this project within its financial guardrails and continues to
engage in commercial discussions to secure approximately 50 percent
of Pembina's expected cash flows from the PDH/PP Facility on a
long-term, fixed-return basis. While progress has been made,
Pembina has not yet reached the contractual threshold required to
make a final investment decision. Pembina continues to work with an
objective to achieve the required threshold to make a positive
final investment decision by early 2019.
2019 Guidance
Pembina is currently in the process of commissioning over
$750 million of new projects,
including the Phase IV and Phase V Peace Pipeline expansions, the
Burstall Storage facility and the Redwater cogeneration facility, which will
come into service in the next several weeks. Based on contributions
from these projects and Pembina's expectations and outlook for
2019, the Company is anticipating annual Adjusted EBITDA of
$2.8 to $3.0
billion.
The Pipelines Division will benefit from increased revenue
volumes across the Peace Pipeline system following the completion
of the Phase IV and Phase V expansions. Additional contributions
are expected from the Alberta Ethane Gathering System based on the
re-contracting of approximately 95 percent of the existing
capacity, effective January 1,
2019.
The Facilities Division is expected to benefit from a full year
of run-rate operations at Veresen Midstream's Dawson facilities as
well as the Burstall Storage facility and the start-up of Duvernay
II.
The outlook for the Marketing & New Ventures Division is
based on an expectation of narrower NGL frac spreads driven by
lower NGL prices compared to 2018. Pembina has currently hedged
approximately 10 percent of its 2019 frac spread exposure,
excluding Aux Sable.
Pembina's 2019 Guidance may be directly impacted by certain
commodity prices and foreign exchange rates as follows:
|
|
Key
Variable
|
Impact on Adjusted
EBITDA
($
millions)
|
|
|
AECO ± $0.50
CAD/GJ
|
± 30
|
Propane ± $0.10
USD/usg
|
± 40
|
FX ± $0.05
USD/CAD
|
± 40
|
Income Tax
In 2019, Pembina will continue to benefit from the availability
of tax pools from assets recently placed into service. Current
income tax expense in 2019 is anticipated to be $180 to $210
million, an increase over 2018 reflecting primarily higher
earnings and the accelerated utilization in 2017 and 2018 of the
tax pools obtained from the acquisition of Veresen Inc.
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 Statements & Information
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;
estimated current income tax expense; 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: those specifically noted in
this news release, 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 for 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 Adjusted EBITDA
guidance contained herein is to give the reader an indication of
the value to Pembina of planned capital projects and ongoing
operations on expected financial results. 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 is a non-GAAP measure. Management believes
that Adjusted EBITDA provides useful information to investors as it
is an important indicator of Pembina's ability to generate
liquidity through cash flow from operating activities and is also
used by investors and analysts for assessing financial performance
and for the purpose of valuing the Company, including calculating
financial and leverage ratios. Adjusted 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. 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. 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.
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SOURCE Pembina Pipeline Corporation