(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, Dec. 5, 2016 /CNW/ - 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 for 2017
that primarily focuses on the completion of the Company's
multi-year growth projects and long-term value creation.
"2017 will be transformational for Pembina, as our capital
program is largely directed towards completing approximately
$4 billion in capital projects, the
majority of which will be coming into service and contributing to
cash flow by the middle of the year," said Mick Dilger, Pembina's President and Chief
Executive Officer. "All in, the completion of these capital
projects will further support our target of 80 percent
fee-for-service contribution to EBITDA in 2018. A substantial
portion of these fee-for-service arrangements are very low-risk,
being either take-or-pay or cost-of-service, which will further
confidence in our long-term dividend growth outlook."
Based on the approximately $1.3
billion of major assets placed into service in 2016 and the
approximately $4 billion of projects
to be completed in 2017, Pembina expects to generate an incremental
$600 million to $950 million of
EBITDA in 2018. This range is dependent upon utilization rates and
commodity prices, with the lower ends representative of take-or-pay
EBITDA.
"We expect our 2017 results to benefit from the hard work our
teams put into safely completing such a large capital program
during the year," continued Mr. Dilger. "2017 will be another busy
year for us, especially the first six months, as we focus on
on-time and on-budget delivery of essentially all of our remaining
secured capital. We are better prepared than ever to not only
operate these new assets, but also pursue new growth opportunities
as a result of the in-house expertise and process enhancements we
have developed over the past several years."
The Company expects 2016 capital expenditures to be $1.9 billion in 2016, lower than the
original budget of $2.1 billion as a
result of capital moving into 2017 due to revised project
construction timelines for Pembina's multi-year projects and cost
savings, offset by the addition of new multi-year projects that the
Company secured during 2016.
Pembina's 2017 capital spending plan is expected to be allocated
as follows:
|
|
($
millions)
|
2017
Budget
|
Conventional
Pipelines
|
$1,140
|
Midstream
|
$540
|
Gas
Services
|
$165
|
Oil Sands and Heavy
Oil
|
$25
|
Other
|
$10
|
Total
|
$1,880
|
Conventional Pipelines
Pembina plans to spend approximately $1,140 million in its Conventional Pipelines
business next year, 61 percent of its overall 2017 capital spending
plan.
Pembina will allocate the majority of capital spending within
its Conventional Pipelines business to completing the Phase III
expansion of the Company's Peace and Northern Pipeline systems
("Phase III Expansion"). In 2016, Pembina began construction on the
new 24-inch and 16-inch pipelines in the Fox Creek to Namao,
Alberta, corridor and completed other segments of the
overall expansion program. Pembina expects to place the Phase III
Expansion into service in mid-2017, which will bring capacity
between Fox Creek and Namao to approximately 1.2 million barrels per
day ("bpd"), and be readily expandable to 1.5 million bpd (through
the addition of pump stations).
Pembina is also developing numerous pipeline laterals and
associated infrastructure to support the Phase III Expansion,
including a large-scale pipeline expansion in northeast
British Columbia ("B.C.") (the
"NEBC Expansion") and a lateral in the Altares area of B.C. (the
"Altares Lateral") which will feed into the NEBC Expansion. These
projects will connect the growing Montney resource play into the Phase III
Expansion and have expected in service dates of late 2017, subject
to regulatory approval.
Overall, with in its Conventional Pipelines business, Pembina
has secured 777,000 bpd of long-term, firm-service contracts for
the transportation of crude oil, condensate and natural gas liquids
("NGL"), once it places the expansions noted above into
service.
Midstream
Pembina continues to direct the majority of capital spending in
Midstream towards initiatives that are supported by long-term,
fee-for-service contracts. For 2017, Pembina expects to spend
capital of $540 million, or 29
percent of the overall budget, in its Midstream business.
In Pembina's NGL Midstream business, the Company expects to
spend $260 million in 2017, which
will largely be directed towards a number of initiatives at its
Redwater site. Pembina expects to
commission its third fractionator, a 55,000 bpd facility ("RFS
III") in the third quarter of 2017 and continues to develop
terminalling infrastructure for the North West Redwater
Partnership, which it expects to place into service throughout the
coming year.
With the completion of RFS III, Pembina will have nearly tripled
its fractionation capacity in the Redwater area since 2012 and will become the
largest fractionation facility in Canada.
Additional capital will be spent in the NGL Midstream segment on
various upgrades across Redwater West, including the proposed
cogeneration facility, incremental caverns and an expansion to the
rail yard which will support the growing operations of Pembina's
Redwater complex, and Empress East
systems.
In Crude Oil Midstream, Pembina expects to spend $280 million to expand its current service
offerings and enhance the interconnectivity of its infrastructure.
This includes plans to complete the Canadian Diluent Hub ("CDH") in
mid-2017 to handle growing diluent supply and align with the
in-service date of the Phase III Expansion and cost-effectively
connect it to local third-party diluent infrastructure. Pembina is
also pursuing several new initiatives to further support operations
at the Company's Edmonton North Terminal ("ENT"). The focus
of the various projects at the site will be to handle increased
volumes from the Phase III Expansion, better leverage existing
underutilized infrastructure, increase delivery points and enhance
the connectivity of ENT. The program will be developed in a number
of different phases and will be placed into service throughout
2017.
Gas Services
Pembina plans to allocate approximately $165 million, or 9 percent, of its 2017 capital
budget to new facilities within Gas Services. This includes the 100
million cubic feet per day ("MMcf/d") (gross) Duvernay I gas plant
and supporting infrastructure (the "Field Hub"). Pembina
anticipates bringing Duvernay I and the Field Hub into service late
in the fourth quarter of 2017, subject to regulatory approval.
Once Duvernay I is in service, Pembina expects Gas Services'
processing capacity to reach approximately 1.8 billion cubic feet
per day ("bcf/d"), including deep cut capacity of approximately 1.1
bcf/d, and total capacity across the Company to reach approximately
4.2 bcf/d. The volumes from Pembina's existing Gas Services assets
and those under development will be processed largely on a
contracted, fee-for-service basis and result in condensate and NGL
to be transported for additional toll revenue on Pembina's
Conventional Pipelines.
Oil Sands and Heavy Oil
Pembina plans to allocate approximately $25 million, or approximately 1 percent, of its
2017 capital budget to Oil Sands and Heavy Oil, the majority of
which will be directed towards system enhancements which will be
added into the rate base of the associated pipeline system.
Capital Summary
During 2016, Pembina continued the strong momentum of executing
its growth plans, bringing approximately $1.3 billion of assets into service, including
its second fractionator at its Redwater site, an expansion to the Horizon
Pipeline, two new gas services facilities (Musreau III and the
Resthaven Expansion), as well as additional value-add
infrastructure. The Company also completed an acquisition of new
gas services infrastructure in one of its core areas and began
pursuing longer-term growth opportunities.
The Company's growth plan going into 2017 is underpinned by a
strong financial position. Pembina was particularly successful over
the past year in accessing both the debt and equity markets, having
raised $420 million in preferred
shares, $345 million in common
equity, $450 million in proceeds from
the Dividend Reinvestment Plan ("DRIP"), and $500 million of senior unsecured medium-term
notes during 2016. This track record of successful financings,
along with the Company's $2.5 billion
credit facility, provides confidence there will be ample liquidity
to fund the 2017 capital spending plan.
"As we work towards completing the approximately $4 billion of capital projects we have underway
and embark on our 2017 capital spending plan, I have a high degree
of confidence given our track record of delivering projects on time
and on budget," added Mr. Dilger. "Further, I'm encouraged by the
strong operational, financial, commercial and safety performance we
experienced this past year, during a particularly trying time in
our industry. We are nearing the end of the most capital-intensive
period of Pembina's history and are looking forward to beginning to
operate these assets and realizing the associated incremental cash
flows, which will ultimately contribute to growing shareholder
value."
New Developments
Pembina and its partner are very pleased to announce that they
have been selected as the recipient of $300
million in royalty credits under the Government of
Alberta's Petrochemicals
Diversification Program for its previously announced proposed
propane dehydrogenation ("PDH") and polypropylene ("PP") upgrading
facility in Alberta (the "PDH and
PP Facility" or the "Project"). The Petrochemicals Diversification
Program received 16 applications locally and from across the globe,
representing more than $20 billion in
potential new investment interest in Alberta's petrochemicals industry. Each
application was evaluated as part of a competitive process to
ensure the proposed project is economically viable, meets
Alberta's strict environmental
performance conditions, and demonstrates the best overall benefits
to Alberta. The award is designed
to help create jobs, attract investment and diversify Alberta's economy by providing royalty credits
once approved projects are completed and feedstock consumption
begins.
Pembina expects to construct the PDH and PP Facility on lands
already owned by Pembina in Sturgeon County in Alberta's Industrial Heartland, in close
proximity to the Company's Redwater Fractionation complex. The land
is currently zoned for industrial development and is well-connected
via rail. The project is expected to consume approximately 22,000
barrels per day of propane, and is expected to cost
$3.8 to $4.2 billion (gross). The PDH
and PP Facility, which could be in-service by 2021, remains subject
to Pembina and its partner making a positive final investment
decision, as well as regulatory, environmental and Pembina's and
its partner's Board approval.
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
and operates an integrated system of pipelines that transport
various products derived from natural gas and hydrocarbon liquids
produced primarily 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. Pembina's integrated
assets and commercial operations along the hydrocarbon value chain
allow it to offer a full spectrum of midstream and marketing
services to the energy sector. Pembina is committed to working with
its community and aboriginal neighbours, while providing value for
investors in a safe, environmentally responsible manner. This
balanced approach to operating ensures the trust Pembina builds
among all of its stakeholders is sustainable over the long term.
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 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 2017 capital spending
plan for each of its business units; anticipated EBITDA and
financial performance resulting from Pembina's capital
expenditures; 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; and expectations regarding domestic and
international supply and demand factors and pricing for oil,
natural gas and NGLs. 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; 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.
SOURCE Pembina Pipeline Corporation