Oil & Gas Product News Logo

Pembina Pipeline Corporation announces 2019 Capital Program and Guidance

0151/37615_en_d71d8_39575_pembina.jpg

Company info

4000, 585 - 8th Avenue S.W.
Calgary, AB
CA, T2P 1G1

Website:
pembina.com

Read more

Pembina Pipeline Corporationis 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:

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 and Canada Kuwait Petrochemical Corporation.  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 plant and polypropylene upgrading 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:


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.

More from Industry News

$2 billion TransAlta energy investment move to include natural gas over coal

TransAlta Corporation has introduced its Clean Energy Investment Plan, which includes converting its existing Alberta coal assets to natural gas and advancing its leadership position in renewable energy. The total cost of the plan is expected to be approximately $2 billion which includes approximately $800 million of renewable energy projects already under construction.

Oversupply of natural gas to push U.S. prices sharply down: IHS Markit

A persistent oversupply of natural gas will drive the 2020 average price at the Henry Hub down (in real terms) to a level not seen in decades, according to new report from IHS Markit. The oversupply—to be reinforced by a new surge in associated gas production from the Permian basin—will push the average price down below $2/MMBtu for the year, IHS Markit said. That is the lowest prices have averaged in real terms since the 1970s. In nominal terms, the last time that prices fell below $2 was 1995.

Subscribe to our free newsletter

Get our newsletter

Learn more

Oil and gas PPE landscape shows positive outlook, says Frost & Sullivan

The outlook for the uptake of personal and protective equipment (PPE) in the oil & gas (O&G) industry looks promising with the expansion of O&G activities through new global projects, improved stability and the presence of many occupational hazards. Vendors should focus on developing a global presence, multiproduct offerings, and close customer interactions to harness current growth opportunities. Frost & Sullivan expects the mature O&G PPE market to grow at a compound annual growth rate (CAGR) of 3.7% to reach $7.59 billion by 2023.

$1.4 billion power cogen plant planned for Suncor's oil sands base plant

Suncor is replacing its coke-fired boilers with two cogeneration units at its Oil Sands Base Plant. The cogeneration units will provide reliable steam generation required for Suncor's extraction and upgrading operations and generate 800 megawatts (MW) of power. The power will be transmitted to Alberta's grid, providing reliable, baseload, low-carbon power, equivalent to approximately 8% of Alberta's current electricity demand. This project will increase demand for clean natural gas from Western Canada.

August shows slight yearly increase in Canadian rig count

Baker Hughes, a GE company announced that the Baker Hughes international rig count for August 2019 was 1,138, down 24 from the 1,162 counted in July 2019, and up 130 from the 1,008 counted in August 2018. The international offshore rig count for August 2019 was 244, down 11 from the 255 counted in July 2019, and up 32 from the 212 counted in August 2018.

Clariant marks opening of new high throughput experimentation lab

Clariant has opened its next High Throughput Experimentation (HTE) Laboratory in Houston, Texas - the energy capital of the United States. The location is key as the new facility will be the first of its kind supporting the Oil & Gas industry, offering new and sophisticated solutions for customers. This lab is part of a global Clariant initiative to expand HTE capabilities to all Clariant Business Units, including direct support for Oil Services in North America, the Asia Pacific region, Latin America, Africa and the North Sea.

Subscribe to our free magazine

Get Our Magazine

Paper or Digital delivered monthly to you

Subscribe or Renew Learn more

Orbital Gas Systems secures GasPTi orders from leading U.S. energy producer and transporter

Orbital Gas Systems has received orders to supply GasPTi systems for deployment across multiple natural gas plants by one of the largest U.S.-based producers and transporters of energy. These orders, part of a nascent, ongoing roll-out of GasPTi across the customer's extensive natural gas assets, will be utilized to deliver operating and environmental improvements and practically eliminate ongoing costs associated with maintenance and natural gas consumption at certain customer facilities. 

Enbridge reaches agreement with shippers to put Line 3 replacement into service

Enbridge Inc. has reached a commercial agreement with shippers to place the Canadian portion of the Line 3 replacement pipeline into service by the end of this year. This agreement reflects the importance of this safety-driven maintenance project to protecting our environment and ensuring the continued safe and reliable operation of the pipeline well into the future.

Quebec universities get $8.2 million to research oil spill response

Canada has the world's longest coastline and is surrounded by three oceans and the health of our oceans matters to all of us. The Government of Canada is dedicated to protecting oceans and waterways and to keeping them clean, secure and productive for the benefit of all Canadians, now and into the future. It is of vital importance that protection is given to the marine ecosystems that are home to an abundance of ocean life, support more than 350,000 jobs and sustain hundreds of coastal and Indigenous communities. The government also recognizes that scientific research is fundamental to evidence-based decision-making when planning and carrying out marine conservation efforts.

Subscribe to our free newsletter

Get our newsletter

Learn more

Bakken shale production growth will be constrained by flaring restrictions and infrastructure bottlenecks

There is considerable potential to raise crude oil production in the Bakken shale play from the current level of approximately 1.44 million barrels of oil per day (mmbd) to at least 2 mmbd. However, flaring regulations and infrastructure bottlenecks in North Dakota are limiting production growth, according to GlobalData.

Rival downhole tools secures five year collaborative supply agreement for drilling motors

Rival Downhole Tools (Rival), a portfolio company of EV Private Equity, has secured a five-year collaborative supply agreement for drilling motors for US Land from a major oilfield services provider. Rival will utilize its market-leading engineering and operational capabilities to support the customer's substantial and growing directional drilling business. Rival will also accelerate the growth of its operational footprint into multiple basins to optimize its proximity to drilling activity. 

Hand protection maker Mechanix Wear a good fit to Gryphon investors

Gryphon Investors, a San Francisco-based middle-market private equity firm, has signed a definitive agreement to make a significant investment in Mechanix Wear, a leading designer and manufacturer of high-performance work gloves. Working alongside current owner and CEO Michael Hale, who will retain an ownership stake in the Company, Gryphon intends to build a leading platform in the Personal Protective Equipment (PPE) sector. The transaction, which is expected to close in the fourth quarter, is subject to customary closing conditions. Terms of the deal were not disclosed.

Husky to resume full production at White Rose

Following an extensive investigation, flow line repairs, integrity testing and approval of the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB), Husky Energy will resume production from the remaining two drill centres shut in following the November 2018 oil spill offshore Newfoundland and Labrador. Husky will now begin an orderly restart and expects to reach full rates by early next week.

Subscribe to our free magazine

Get Our Magazine

Paper or Digital delivered monthly to you

Subscribe or Renew Learn more