Pembina increases guidance, provides update on operations

Pembina Pipeline Corporation has announced an increase to its 2018 Adjusted EBITDA guidance range to $2.75 to $2.85 billion.  The Company is also pleased to announce that in conjunction with incremental volume commitments from customers on the Peace pipeline, Pembina will be developing additional pipeline and terminalling infrastructure in the Wapiti region near Grande Prairie, Alberta and in northeast B.C.  The new infrastructure will have a combined aggregate capital cost of approximately $120 million and will be underpinned by long-term, take-or-pay commitments.  

Pembina announced today that based on strong year-to-date results and the outlook for the remainder of the year, the Company has updated its 2018 Adjusted EBITDA guidance range to $2.75 to $2.85 billion, up from $2.65 to $2.75 billion. "Pembina's base business is performing well. We are seeing increased throughput on our conventional pipelines and fractionators, strong results from the assets acquired previously from Veresen and higher marketing revenues due to widening frac spreads," said Scott Burrows, Senior Vice President and Chief Financial Officer. 

Pembina continues to experience strong demand for transportation services across the liquids-rich areas of the Western Canada Sedimentary Basin.  Since sanctioning the Phase VI expansion ("Phase VI") earlier this year, Pembina has continued to add long-term firm service commitments on the Peace and Northern Pipeline systems. Since Phase VI was originally announced in May 2018, Pembina has secured a total of 50,000 barrels per day ("bpd") of additional firm service commitments.  As a result, peak firm volume commitments will reach approximately 885,000 bpd in 2019. 

"Our strategic position in the liquids-rich areas of the Alberta and BC Montney continues to provide opportunities for us to expand," stated John de la Mare, Vice President, Conventional Pipelines.  "Pembina's staged approach to the expansion of the Peace pipeline provides timely and reliable transportation service to meet our customers' specific needs.  As a result, we have continued to increase long-term volumes under commitment since the Phase III expansion of Peace went into service last year," added Mr. de la Mare. 

The Wapiti Condensate Lateral represents a new 12-inch, 30 kilometre pipeline which will connect growing condensate volumes from a third-party owned facility in the Pipestone Montney region into Pembina's Peace pipeline.  The project is underpinned by a 15 year take-or-pay agreement with an anchor customer and includes firm transportation service on the Peace pipeline. Installation of the 12-inch line will enable Pembina to capture additional condensate volumes, as it is strategically located to service other area customers.  The Company is currently progressing negotiations with various customers for incremental volumes. The Wapiti Condensate Lateral will be constructed in tandem with Pembina's Phase VI expansion, affording considerable efficiencies and minimizing incremental land disturbance.  Subject to regulatory and environmental approvals, the project is expected to be in-service in the second half of 2019, aligning with the in-service timing of Phase VI. 

Pembina's northeast B.C. pipeline (the "NEBC Expansion") was placed into service in October 2017 and serves to connect liquids volumes from the northeast B.C. Montney for transportation into the Edmonton area via Pembina's downstream systems (namely Plateau, Pouce Coupe and Peace pipelines).  The NEBC Expansion has a capacity of 75,000 bpd and operates under a long-term cost-of-service arrangement.  To support additional volumes on the NEBC Expansion and ultimately Pembina's downstream pipelines, Pembina has entered into agreements with an anchor customer to construct new infrastructure (the "NEBC Montney Infrastructure") at, and in proximity to, Pembina's Birch Terminal.  The new infrastructure will include an area production connection to Pembina's Birch Terminal as well as upgrades to the terminal including additional storage and pumps, along with minor site modifications. 

The NEBC Montney Infrastructure is supported by long-term fee-for-service and cost-of-service arrangements. In conjunction with the NEBC Montney Infrastructure, the same customer has also entered into long-term, firm service agreements containing take-or-pay commitments, on downstream pipelines. 

The Montney infrastructure projects described above follow a series of growth projects within Pembina's conventional pipeline system, including: 
  • The Phase III expansion, previously placed into service in July 2017, expanded capacity between Fox Creek and Namao, Alberta, the Company's corridor that transports crude oil, condensate and natural gas liquids into the Edmonton area market; 
  • The Phase IV expansion ("Phase IV"), currently underway, is adding capacity between Fox Creek and Namao, and its Phase V expansion ("Phase V"), also currently in construction, is debottlenecking upstream of Fox Creek. Both projects are nearing completion and are anticipated to be placed into service in late 2018; and 
  • The recently announced Phase VI expansion which includes upgrades at Gordondale, Alberta; a 16-inch pipeline from LaGlace to Wapiti, Alberta and associated pump station upgrades; and a 20-inch pipeline from Kakwa to Lator, Alberta. Phase VI is anticipated to be in service in the second half of 2019, subject to environmental and regulatory approval.

Ongoing customer demand, as evidenced by new projects and new volumes, highlights the need for even further development of the Peace pipeline system.  

"The utility of the Phase III expansion has allowed Pembina to systematically increase capacity quickly and efficiently as evidenced by the Phase IV, V and VI expansions. While these expansions will provide additional capacity, the Company is engaged in ongoing discussions with its customers regarding how Pembina can best support the need for more capacity through additional pipeline infrastructure.  We see great potential for a near term expansion beyond these phases and it is something we are working actively towards in light of strong customer demand. Ultimately, Pembina expects to have at least four segregated product pipelines in the corridors between Gordondale, Alberta and the Edmonton area, which will significantly improve operating efficiencies and capital requirements.  Pembina's staged expansion strategy is significantly less complex and time consuming than building an entirely new pipeline system," stated Mr. Wiun. 

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