Long-term agreements underpin new major expansions
(All financial figures are approximate and in Canadian dollars unless
otherwise noted.)
CALGARY, Dec. 16, 2013 /CNW/ - Pembina Pipeline Corporation ("Pembina"
or the "Company") (TSX: PPL; NYSE: PBA) announced today that it has
reached binding commercial agreements to proceed with constructing
approximately $2 billion in pipeline expansions (the "Phase III
Expansion"). The Phase III Expansion is underpinned by long-term
take-or-pay transportation services agreements with 30 customers in
Pembina's operating areas and is expected to be in service between late
2016 and mid 2017, subject to environmental and regulatory approvals.
The 540 kilometre ("km") Phase III Expansion will follow and expand
upon certain segments of the Company's existing pipeline systems from
Taylor, British Columbia southeast to Edmonton, Alberta to fulfill capacity needs for Pembina's
customers, with priority being placed on areas where debottlenecking is
essential.
The core of the Phase III Expansion will entail constructing a new 270
km 24 inch diameter pipeline from Fox Creek, Alberta, to the Edmonton
area, which is expected to have an initial capacity of 320,000 barrels
per day ("bpd") and an ultimate capacity of over 500,000 bpd with the
addition of midpoint pump stations. Once complete, Pembina will have
three distinct pipelines in the Fox Creek to Edmonton, Alberta
corridor. With the Company's existing pipelines and current expansions,
these three pipelines are expected to have the designed capacity to
transport up to 885,000 bpd if fully expanded. The Phase III Expansion
also contemplates increasing pipeline interconnectivity between
Edmonton and Fort Saskatchewan including Pembina's Redwater and
Heartland Hub sites as well as third-party delivery points in these
areas. This interconnectivity will provide the option for customers to
access a broad variety of delivery points including fractionators,
refineries, and storage hubs and increased access to pipeline and rail
take-away capacity.
"We initiated our previously announced Open Season in March to identify
producers' pipeline capacity requirements beyond our expansions that
are already underway," said Mick Dilger, Pembina's President and Chief
Operating Officer. "The Phase III Expansion, which is the largest
expansion of Pembina's systems in the Company's history, is the result
of that process. The project provides customers an inclusive solution,
as it will increase crude oil, condensate and NGL take-away capacity
from northwestern Alberta and northeastern British Columbia to markets
in the Edmonton and Fort Saskatchewan areas. When complete, it will
also create operational efficiencies and improved customer service by
reducing the need for us to batch products throughout our systems."
The contracts underpinning the Phase III Expansion are ten-year
transportation services agreements for volumes that average over
230,000 bpd, or approximately 75 percent of the initial capacity, and
that provide a steady, long-term EBITDA stream which is expected to be,
on average, in the range of approximately $270 million to $300 million
per year (see Non-GAAP measures below). The Company anticipates
securing further pipeline transportation commitments over the next six
to nine months while it refines the project scope. Any additional
commitments made before the Company begins to order long-lead equipment
would support increasing the design capacity of the Phase III
Expansion.
The Phase III Expansion follows a series of growth projects on Pembina's
conventional pipeline infrastructure resulting from the ongoing
successful development by oil and gas producers of resources plays in
the Montney, Duvernay and Deep Basin Cretaceous formations.
With the addition of the Phase III Expansion, Pembina's previously
announced 2014 capital spending plan will increase from $1.5 billion to
$1.7 billion. Pembina expects the majority of spending associated with
this project will occur during the main construction periods from 2015
through 2016.
"This is a watershed event for Pembina," said Bob Michaleski, Chief
Executive Officer. "We are about to embark on the largest expansion the
Company has ever undertaken - a project which will form the foundation
for our Company's growth for years to come. I have always maintained
that if we could build our assets again, we would build them in the
same location they are today, except we would build them larger. The
Phase III Expansion supports this sentiment and demonstrates Pembina's
continuing ability to leverage its existing asset footprint to satisfy
customer needs and drive long-term shareholder value."
Pembina is committed to achieving excellence in every aspect of its
business, from how it designs, constructs and operates its pipelines
and facilities to how it interacts with community neighbours, customers
and employees. For the Phase III Expansion, Pembina will consult with
applicable regulatory authorities, First Nations, landowners and other
stakeholders on the project plans. Activities related to obtaining
regulatory approvals are underway and Pembina will commence First
Nation consultation and its public involvement program for the Phase
III Expansion in early 2014.
For further information, please visit Pembina's website at www.pembina.com.
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 nearly 60 years. Pembina owns and operates:
pipelines that transport conventional and synthetic crude oil,
condensate and natural gas liquids produced in western Canada; oil
sands, heavy oil and diluent pipelines; 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 span 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.
Non-GAAP Measures
In this news release, Pembina has used the term EBITDA, meaning
"Earnings before interest, taxes, depreciation and amortization".
EBITDA does not have a standardized meaning prescribed by GAAP and is
therefore unlikely to be comparable to similar measures presented by
other companies. EBITDA is commonly used by management, investors and
creditors in the calculation of ratios for assessing leverage and
financial performance and is calculated as results from operating
activities plus share of profit from equity accounted investees (before
tax) plus depreciation and amortization (included in operations and
general and administrative expense) and unrealized gains or losses on
commodity-related derivative financial instruments.
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. Forward-looking statements are
typically identified by terminology such as "expects", "projects",
"will", "anticipates", "would", "could", "potential" and similar
expressions suggesting future events or future performance.
By their nature, such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause actual
results or events to differ materially from those anticipated in such
forward-looking statements. Pembina believes the expectations reflected
in those forward-looking statements are reasonable but no assurance can
be given that these expectations will prove to be correct and such
forward-looking statements included in this MD&A should not be unduly
relied upon. These statements speak only as of the date of this
document. 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, and operations with
respect to the Phase III Expansion; expectations regarding future
demand for transportation services; expectations regarding supply and
demand factors; potential revenue and cash flow enhancement; and future
cash flows.
Various factors or assumptions are typically applied by Pembina in
drawing conclusions or making the forecasts, projections, predictions
or estimations set out in forward-looking statements based on
information currently available to Pembina. These factors and
assumptions include, but are not limited to: 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
Phase III Expansion; that Pembina will obtain required regulatory
approvals on a timely basis; maintenance of operating margins;
anticipated changes in interest rates, foreign currency exchange,
inflation rates and commodity prices; ongoing utilization and future
expansion, development, growth and performance of Pembina's business
and asset base; future demand for transportation services; future
levels of oil and natural gas development in proximity to Pembina's
pipelines and other assets (which could be affected by, among other
things, possible changes to applicable royalty and tax regimes); the
amount of future liabilities related to environmental incidents; the
availability of coverage under Pembina's insurance policies (including
in respect of Pembina's business interruption insurance policy); future
acquisitions, growth and growth potential in Pembina's operations;
additional throughput potential on additional connections and other
initiatives on the Conventional Pipelines systems; expected Phase III
Expansion start-up and construction dates; future dividends and
taxation of dividends; future financing capability and sources; and
negative credit rating adjustments.
The actual results of Pembina could differ materially from those
anticipated in these forward-looking statements as a result of material
risk factors including, but not limited to: the regulatory environment
and decisions, and the inability to obtain required regulatory
approvals; the impact of competitive entities and pricing; reliance on
key relationships 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;
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; unexpected increases in capital costs for the Phase III
expansion; adverse general economic and market conditions in Canada,
North America and elsewhere, including changes in interest rates,
foreign currency exchange rates, inflation rates and commodity prices;
lower than anticipated results of operations and accretion from
Pembina's business initiatives; and the ability of Pembina to raise
sufficient capital (or to raise capital on favourable terms) to
complete future projects and satisfy future commitments.
These factors should not be construed as exhaustive. Unless required by
law, Pembina does not undertake any obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise. Any forward-looking statements
contained herein 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 Phase III Expansion.
Readers should be aware that the information contained in the financial
outlook contained herein may not be appropriate for other purposes.
SOURCE Pembina Pipeline Corporation
