Q4 2023 Pembina Pipeline Corp Earnings Call

Operator: Good morning, ladies and gentlemen, and welcome to the Pembina Pipeline Corporation Q4 2023 Results Conference Call. At this time, all lines are in a listen-only mode.

Good morning, ladies and gentlemen, and welcome to Pembina Pipeline Corporation Q4, 2000, Twenty's results conference call.

At this time all lines are in a listen only mode. Following the presentation. We will conduct a question and answer session. If at any time during the call you require immediate assistance. Please press star zero for the operator.

Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Friday, February 23, 2024. I would now like to turn the conference over to Cameron Goldeit, Chief Financial Officer of Pembina Pipeline. Please go ahead.

Speaker Change: Call is being recorded on Friday February 23, 2024, I would now like to turn the conference over to Kim Van Gaal D Chief Financial Officer of Pembina pipeline. Please go ahead.

Cameron Goldeit: Thank you, Ludi, and good morning, everyone. Welcome to Pembina's conference call and webcast to review highlights from the fourth quarter and full year of 2023. On the call today, we also have Scott Burroughs, President and Chief Executive Officer, along with other members of Pembina's leadership team, including Jared Sprott, Janet Leduca, Stu Taylor, and Chris Sherman. I would like to remind you that some of the comments made today may be forward-looking in nature and are based on Pembina's current expectations, estimates, judgments, and projections. Forward-looking statements may express or imply today are subject to risks and uncertainties, which could cause actual results to differ materially from expectations. Further, some of the information provided refers to non-GAAP measures.

Speaker Change: Thank you Larry and good morning, everyone welcome to Penn minutes Conference call and webcast to review highlights from the fourth quarter and full year of 2023 on the call. Today. We also have Scott Burrows, President and Chief Executive Officer, along with other members of <unk> leadership team, including chair at Sprouts, Jonathan the Dukas Detailer and Chris Sherman.

Speaker Change: I would like to remind you that some of the comments made today may be forward looking in nature and are based on <unk> current expectations estimates judgments and projections forward looking statements May express or imply today are subject to risks and uncertainties, which could cause actual results to differ materially from expectations. Further some of the information provided refers to non-GAAP measures.

Cameron Goldeit: To learn more about these forward-looking statements and non-GAAP measures, please see the company's Management Discussion and Analysis, dated February 22, 2024, for the period ended December 31, 2023, as well as the press release Pembina issued yesterday, which is available online at Pembina.com and on both CDAR and EDGAR. I will now turn things over to Scott to make some opening remarks. Thanks, Cam.

Speaker Change: To learn more about these forward looking statements and non-GAAP measures. Please see the company's management discussion and analysis dated February 22nd 2024 for the period ended December 31, 2023, as well as the press release issued yesterday, which are available online at <unk> com and on both SEDAR and Edgar.

Speaker Change: I will now turn things over to Scott to make some opening remarks.

Scott Burroughs: We were pleased yesterday to report our fourth-quarter results, which included quarterly earnings of $698 million and record quarterly adjusted EBITDA of just over $1 billion. We also delivered record annual adjusted EBITDA of $3.82 billion, which exceeded the high end of the original 2023 guidance range and reflects the strength, predictability, and resilience of Pembina's business. In 2023, we saw growing volumes across many systems, supplemented by the value enhancement from another strong year from Pembina's marketing business. Positive momentum in the Western Canadian Sedimentary Basin could be seen by more than 4% year-over-year increase in second-half volumes in the conventional pipeline business. In 2023, Pembina will progress its strategy by sustaining and enhancing our business through various accomplishments we shared throughout the past year, including signing new contracts on the Peace Pipeline System, signing new and or extending existing contracts to the Redwater Complex, reactivating the Nipissi Pipeline, and approving new projects such as the 55,000 barrels per day RFS4 expansion, the expansion of the Northeast BC Pipeline, and Pembina's business is built around integrated, difficult-to-replicate assets that provide an enduring competitive advantage and unequaled market access for customers.

Scott Burrows: We were pleased yesterday to report our fourth quarter results, which included quarterly earnings of $698 million.

Scott Burrows: <unk> quarterly adjusted EBITDA of just over $1 billion. We also delivered record annual adjusted EBITDA of $3 $82 billion, which exceeded the high end of the original 2023 guidance range and reflects the strength predictability and resilience of <unk> business in.

Scott Burrows: In 2023, we saw growing volumes across many system supplemented by the value enhancement from another strong year from permanent marketing business positive momentum in the western Canadian sedimentary basin could be seen by more than 4% year over year increase in second half volumes in the conventional pipeline business.

Scott Burrows: 2023 permanent progressive strategy by sustaining and enhancing our business through various accomplishments, we shared throughout the past year, including signing new contracts on the peace pipeline system, signing new or extending existing contracts of the red water complex really activating and empathy pipeline and approving new projects such as the 55000 barrel per day RFS.

Scott Burrows: For expansion the expansion of the northeast BC pipeline and our cogeneration facility at Pgi's K Bobb III plant in the fourth quarter positive developments continued including the announcement of a $3 $1 billion acquisition of Enbridge is interest in alliance and ox Abel.

Jimenez Pembina businesses built around integrated difficult to replicate assets that provide an enduring competitive advantage and unequaled market access for customers.

Scott Burroughs: Alliance Pipeline and Oxable are world-class energy infrastructure assets, and increasing our existing ownership of them will further enhance our growing franchise. We continue to expect the acquisition to close in the first half of 2024, subject to the satisfaction or waiver of customary closing conditions. On the commercial front, we announced yesterday that in support of Dow's Path to Zero project, Pembina has entered into long-term agreements to supply up to 50,000 barrels per day of ethane and for the associated transportation on the Alberta ethane gathering system. The Path to Zero project is an important development for WCSB, representing a significant increase to the current ethane market in Alberta. Given Pembina's existing leading ethane supply and transportation business and integrated value chain, there are multiple opportunities for the company to benefit from this new development through both the existing asset base and new investment opportunities.

Scott Burrows: Lyons pipeline out Sable are world class energy infrastructure assets and increasing our existing ownership in them will further enhance our growing franchise. We continue to expect the acquisition to close in the first half of 2024 subject to the satisfaction or waiver of customary closing conditions.

On the commercial front, we announced yesterday that in support of Dallas path to Zero project Pembina has entered into long term agreements to supply up to 50000 barrels per day of ethane and for the associated transportation on the Alberta ethane gathering system. The passenger Euro project is an important development for the WCS.

Scott Burrows: Representing a significant increase to the current ethane market in Alberta, given Pam and as existing leading ethane supply and transportation business and integrated value chain. There are multiple opportunities for the company to benefit from this new development through both the existing asset base and new investment opportunities.

Scott Burroughs: During the fourth quarter, we also closed open seasons on the Koshan Pipeline for a total of 90,000 barrels per day and signed an incremental contract with an anchor customer for service on the Nipissi Pipeline, which is now contracted for more than half the capacity on a long-term basis, with line of sight to the asset being fully contracted by the end of 2024. On the major project front, we continue to progress our Phase 8 piece pipeline expansion and our RFS4 expansion of the Redwater Complex. On the Phase 8 project, the capital budget has been further revised down to $430 million, which is $100 million under the original budget.

Scott Burrows: During the fourth quarter. We also closed the open season on our Cochin pipeline for a total of 90000 barrels per day and sign an incremental contract with an anchor customer for service on empathy pipeline, which is now contracted for more than half the capacity on a long term basis with line of sight to the assets being fully contracted by the end of 2024.

Scott Burrows: On the major project front, we continued to progress our phase a peace pipeline expansion and our RFS for expansion of the Red water complex on the phase eight project. The capital budget has been further revised lower to $430 million, which is a $100 million under the original budget. The contraction is expected to be completed in the first quarter of 2024 with.

Scott Burroughs: The construction is expected to be completed in the first quarter of 2024, with pipeline and facility commissioning and startup expected in the second quarter of 2024. Our experience with Phase 8 is another example of supporting Pembina's track record of strong project execution. Additionally, Pembina Gas Infrastructure has approved an expansion at the Wapiti Plant that will increase natural gas processing capacity by 115 million cubic feet per day and is expected to be in service in the first half of 2026. The Wapiti expansion is being driven by strong customer demand, supported by growing Montigny production, and will be fully underpinned by long-term take-or-pay contracts. Finally, yesterday we provided an update on the Cedar LNG project. Cedar LNG has statutorily completed several key project deliverables, including obtaining material regulatory approvals, advancing inter-project agreements with Coastal GasLink and LNG Canada, signing a heads-up agreement with Samsung Heavy Industries in Black and Beach, and executing a lump-sum engineering procurement and construction agreement to provide Cedar LNG with the necessary services to construct the project. While a lot has been accomplished, there remain a number of schedule-driven, interconnected elements that require resolution prior to making a final investment decision. These include binding commercial offtake, obtaining third-party consent, and project financing.

Scott Burrows: Pipeline and facility commissioning and startup expected in the second quarter of 2024.

Scott Burrows: Our experience with <unk> is another example, supporting 10 minutes track record of strong project execution.

Scott Burrows: Additionally, having a gas infrastructure has provided as approved an expansion at the wapiti plant that will increase natural gas processing capacity by 115 million cubic feet per day and is expected to be in service in the first half of 2026. The wapiti expansion is being driven by strong customer demand supported by growing montney production it won't be fully.

Scott Burrows: Underpinned by long term take or pay contracts. Finally yesterday, we provided an update on the Cedar LNG project heater LNG is substantially completed several key project deliverables, including obtaining material regulatory approvals advancing enter project agreements with coastal gas link in LNG, Canada, signing a heads of agreement with Samsung heavy industries, and black and veatch.

Scott Burrows: Each and executing a lump sum engineering procurement and construction agreement to provide cedar LNG with the necessary services to construct the project. While a lot has been accomplished there remain a number of scheduled driven interconnected elements require resolution prior to making a final investment decision.

Scott Burrows: <unk> binding commercial offtake, obtaining third party consents and project financing on this basis. Our final investment decision is now expected in the middle of 2024, I will now turn things over to Kam to discuss in more detail financial highlights.

Kam: For the 2023 fourth quarter and full year.

Kam: Thanks, Scott as Scott noted him in our recorded fourth quarter adjusted EBITDA of one point or $3 billion. This represents a 12% increase over the same period in the prior year.

Kam: In pipelines factors impacting the quarter, primarily included higher volumes on the peace pipeline system Drayton Valley pipeline and on the recently reactivated Nipissing pipeline.

Cameron Goldeit: On this basis, a final investment decision is now expected in the middle of 2024. I will now turn things over to Cam to discuss in more detail financial highlights for the 2023 fourth quarter and full year. Thanks, Scott. As Scott noted, Pembina recorded fourth quarter adjusted EBITDA of $1.03 billion.

Hired pools, primarily on the Cochin pipeline in peace pipeline systems, largely related to contractual inflation adjustments and lower contribution from the alliance pipeline, primarily due to lower interruptible tolls and volumes.

Kam: These facilities factors impacting the quarter included higher contribution from the Pgi assets, primarily from the former energy transfer Canada plants, the highest plant and the Dawson assets due to higher volumes.

Cameron Goldeit: This represents a 12% increase over the same period in the prior year. In pipelines, factors impacting the corridor primarily included higher volumes on the Peace Pipeline System, Drayton Valley Pipeline, and on the recently reactivated Nipissi Pipeline. Higher polls, primarily on the Cochin Pipeline and Peace Pipeline systems, largely related to contractual inflation adjustments, and lower contributions in the Alliance Pipeline, primarily due to lower interruptible polls and volumes.

Kam: Higher revenue at Vancouver works.

Kam: In marketing and new ventures fourth quarter results reflect the net impact of higher contribution from Ark Sable, lower natural gas and crude oil marketing margins largely offset by higher NGL margins.

Kam: And realized losses on commodity related derivatives in the fourth quarter of 2023 compared to realized gains in the fourth quarter of 2022.

Kam: Finally in our corporate segment fourth quarter results were largely consistent with the same period in the prior year.

Earnings in the fourth quarter were $698 million. This represents a 187% increase over the same period in the prior year.

Kam: In addition to the factors impacting adjusted EBITDA the increase in earnings in the fourth quarter was primarily due to the net impact of the impairment reversal related to the pipeline.

Cameron Goldeit: In facilities, factors impacting the quarter included higher contribution from the PGI assets, primarily from the former Energy Transfer Canada plants, the Heiss plant, and the Dawson assets due to higher volumes, and higher revenue at Vancouver Works. In marketing and new ventures, fourth quarter results reflect the net impact of higher contribution from Oxfable, lower natural gas and crude oil marketing margins, largely offset by higher NGL margins, and realized losses on commodity-related derivatives in the fourth quarter of 2023 compared to realized gains in the fourth quarter of 2022. Finally, in the corporate segment, fourth quarter results were largely consistent with the same period in the prior year. Earnings in the fourth quarter were $698 million.

Kam: The Ruby settlement provision and associated legal fees incurred in the fourth quarter of 2022.

Kam: Project write offs higher depreciation and unrealized gain on commodity related derivatives compared to a loss in the fourth quarter of 2022.

Kam: Lower net finance costs.

Kam: And higher income tax expense and the recognition of a previously unrecognized deferred tax asset.

Kam: Total volumes were 345 million barrels per day in the fourth quarter.

This represents an increase of 2% over the same period in the prior year, reflecting the net impact of the reactivation of the NIM to see pipeline higher volumes on the peace in Drayton Valley pipelines higher volumes from Pgi and lower volumes at the Red water complex.

Kam: The fourth quarter contributed to full year results that included earnings of $1.776 billion record adjusted EBITDA of three $8 billion to $4 billion, which was 2% higher than in 2022 and exceeded the high end of the company's original guidance range.

Cameron Goldeit: This represents a 187% increase over the same period in the prior year. In addition to the factors impacting adjusted EBITDA, the increase in earnings in the fourth quarter was primarily due to the net impact of the impairment reversal related to the Nipissippi pipeline. The RUBI settlement provision and associated legal fees incurred in the fourth quarter of 2022. Lower project write-offs, higher depreciation, an unrealized gain on commodity-related derivatives compared to a loss in the fourth quarter of 2022, lower net finance costs, and higher income tax expense and the recognition of a previously unrecognized deferred tax asset. Total volumes were 3.45 million barrels per day in the fourth quarter.

Kam: Cash flow from operating activities of $2 635 billion and adjusted cash flow from operating activities of $2 $646 billion.

Kam: Thanks to strong results permanent generated meaningful free cash flow, which was allocated to strengthening the balance sheet and returning capital to shareholders. In 2023, we raised our common share dividend by two 3%.

Kam: We purchased $50 million common shares and continued to reduce its leverage below the low end of the target range.

Cameron Goldeit: This represents an increase of 2% over the same period in the prior year, reflecting the net impact of the reactivation of the Nipissi Pipeline, higher volumes on the Peace and Drayton Valley Pipelines, higher volumes from PGI, and lower volumes at the Redwater Complex. The fourth quarter contributed to four-year results that included earnings of $1.776 billion, record adjusted EBITDA of $3.824 billion, which was 2% higher than in 2022 and exceeded the high end of the company's original guidance range, cash flow from operating activities of $2.635 billion, and adjusted cash flow from operating activities of $2.646 billion. Thanks to strong results, Pembina generated meaningful free cash flow, which was allocated to strengthening the balance sheet and returning capital to shareholders.

Kam: At December 31st 2023 based on the trailing 12 months the ratio of proportionally consolidated debt to adjusted EBITDA was three three times reflective of our strong balance sheet and supporting a strong triple B credit rating.

I'll now turn things back to Scott.

Scott Burrows: Thanks, Ken in closing we are enthusiastic about the future given the current momentum in the WCS B and expected continued volume growth through 2024 and beyond our broader outlook remains unchanged as we see the potential for mid single digit growth driven by tangible near term catalysts, including up to approximately $2 8 billion or $2 8 billion.

Scott Burrows: Cubic feet per day of match, new natural gas export capacity.

Scott Burrows: From the new West Coast LNG projects 590000 barrels per day of new crude oil export capacity from the expected completion of the Trans mountain pipeline expansion and potential new developments in the Alberta petrochemical industry, including significant incremental ethane demand associated with dow's path to zero project.

Scott Burroughs: In 2023, we raised the common share dividend by 2.3 percent, repurchased $50 million of common shares, and continue to reduce leverage below the low end of the target range. At December 31st, 2023, based on the trailing 12 months, the ratio of proportionally consolidated debt to adjusted EBITDA was 3.3 times, reflective of our strong balance sheet and supporting a strong BBB credit rating. I'll now turn things back to Scott. Thanks, Cam.

Scott Burrows: Given the scope and reach of our business permanent is uniquely positioned to benefit from these catalysts. Our investors have come to expect strong and consistent financial leadership from us demonstrated by a secure and growing dividend and unwavering commitment to our financial guardrails are low risk and primarily fee based business with high take or pay or cost of service contributions and a strong <unk>.

Speaker Change: Alan sheet you.

Speaker Change: You can expect us to continue to execute our strategy with the same financial discipline that has made us successful to date.

Scott Burroughs: In closing, we are enthusiastic about the future given the current momentum in the WCSB and expected continued volume growth through 2024 and beyond. Our broader outlook remains unchanged as we see the potential for mid-single digit growth driven by tangible near-term catalysts, including up to approximately 2.8 billion cubic feet per day of new natural gas export capacity. From the new West Coast LNG projects, 590,000 barrels per day of new crude oil export capacity from the expected completion of the Trans Mountain Pipeline expansion and potential new developments in the Alberta petrochemical industry, including significant incremental ethane demand associated with Dow's Path to Zero project. Given the scope and reach of our business, Pembina is uniquely positioned to benefit from these capital investments.

In closing I believe the next five years will be an exciting time in the Canadian energy industry with exceptional resources greater access to global markets, and leading environmental and social performance standards. Canada's energy industry has an opportunity for greatness I am extremely proud what permanent in the rest of our industry due to ensure responsibly produced energy is available to meet growing global demand.

Speaker Change: Thank you for joining us. This morning, operator. Please go ahead and open up the line for questions.

Speaker Change: Yeah.

Speaker Change: Thank you and ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your telephone keypad, you will hear updates from acknowledging your request and Youre question is will be pulled into <unk>.

Speaker Change: Should you wish to decline from the polling process. Please press the star followed by the number two and if you are using a speaker phone.

Speaker Change: A handset before Rafi Amit.

Rafi Amit: Please for your first question.

Rafi Amit: And your first question comes from the line of Jeremy Tonet from Jpmorgan. Your line is open.

Operator: Our investors have come to expect strong and consistent financial leadership from us, demonstrated by a secure and growing dividend, an unwavering commitment to our financial guardrails, a low-risk and primarily fee-based business with high take-or-pay or cost-of-service contributions, and a strong balance sheet. You can expect us to continue to execute our strategy with the same financial discipline that has made us successful to date. In closing, I believe the next five years will be an exciting time in the Canadian energy industry. With exceptional resources, greater access to global markets, and leading environmental and social performance standards, Canada's energy industry has an opportunity for greatness. I am extremely proud of what Pembina and the rest of our industry do to ensure responsibly produced energy is available to meet growing global demand. Thank you for joining us this morning.

Rafi Amit: Okay.

Jeremy Bryan Tonet: Hi, good morning.

Jeremy Bryan Tonet: And Jeremy.

Jeremy Bryan Tonet: Just wanted to go into the DAU.

Jeremy Bryan Tonet: And now it's been a little bit more as far as ethane supply agreements concern and wondering if you could frame up I guess is this all incremental ethane extraction kind of upside new to the system is there any redirection.

And also how much of this would you characterize as brownfield versus Greenfield investments here, just trying to get a sense for what the <unk>.

Jeremy Bryan Tonet: Project Economics could look like here.

Jaret: Good morning, Jeremy Jaret here, Yeah, Great question, So Super excited to obviously announce our our contribution to Dow's net zero cracker here in Alberta with respect to our supply it is going to be a material increase to permanent overall supply it.

Operator: Operator, please go ahead and open up the line for questions. Thank you. And ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the number 1 on your telephone keypad. You will hear a three-tone prompt acknowledging your request, and your questions will be polled in the order they originate. Should you wish to decline from the polling process, please press the star followed by the number 2.

Jeremy Bryan Tonet: It will require us to spend incremental capital with respect to getting that supply.

Jeremy Bryan Tonet: You know we've.

Jeremy Bryan Tonet: Spoken previously about RFS III that was originally designed as a C three plus fraction.

Jeremy Bryan Tonet: Fractionator, but has the optionality for us to put DFS on it so that would be a brownfield expansion. There are other opportunities at Empress and through Pgi <unk> Pembina wholly owned extraction assets that we see opportunities.

Jeremy Bryan Tonet: Also obviously see.

Jeremy Bryan Tonet: And if you are using a speakerphone, please keep the handset before pressing any button. One moment, please, for your first question. And your first question comes from the line at Jeremy Tonet from TP Morgan. Your line. Hi, good morning.

Jeremy Bryan Tonet: So.

Jeremy Bryan Tonet: Positive with respect to utilization across our asset base and with 50000 barrels of ethane, obviously, a bunch of C. Three plus comes along with that so it is going to be a mix of brownfield and greenfield.

Jeremy Bryan Tonet: Opportunities for Pembina, and higher utilization across the board and then on the <unk> pipeline.

Jeremy Bryan Tonet: Morning, Jeremy, just wanted to go into the Dow announcement a little bit more as far as this ethane supply agreement is concerned, and wondering if you could frame up, I guess, is this all incremental ethane extraction kind of upside new to the system? Is there any redirection? And also, how much of this would you characterize as brownfield versus greenfield investments here? Just trying to get a sense for what the... Project Economics. Good morning, Jeremy. Jared here.

Jeremy Bryan Tonet: I'm Gonna has announced that we're going to be 50000 barrels.

We fully expect that we're not the only contributor to to Dallas supply portfolio, We don't know where the other portions of that supply portfolio are coming from so once we understand where that's coming from will be in a better position to update.

Jeremy Bryan Tonet: All on on eggs expense since.

Speaker Change: Got it that's very helpful. There and is there any way to frame, what the potential capital deployment sizing or timeframe or so.

Jared Sprott: Yeah, great question. So, super excited to obviously announce our contribution to Dow's net zero cracker here in Alberta. With respect to our supply, it is going to be a material increase to Pembina's overall supply, and it will require us to spend incremental capital with respect to getting that supply. You know, we've spoken previously about RFS3 that was originally designed as a C3 plus fractionator but has the optionality for us to put DF on it.

Speaker Change: <unk> really could be for this.

Speaker Change: Yeah, Jeremy it's Scott here, we've been progressing as Derek pointed out multiple options.

Scott Burrows: We're working the engineering and the AR and the economics of all of those so I would say you know probably by mid year, we'll be in a better position to update the market and kind of which projects, we predict will be going forward, but suffice to say no material capex in 2024.

Jared Sprott: So that would be a Brownfield expansion. There are other opportunities at Empress and through PGI and Pembina wholly owned extraction assets that we see opportunities for. We also obviously see a massive positive with respect to utilization across our asset base. And with 50,000 barrels of ethane, obviously, a bunch of C3 plus comes along with that.

Got it understood and just one last one if I could.

Scott Burrows: Pipe and reactivation here just wondering if you could speak a bit more on the market drivers to this and I guess <unk>.

Scott Burrows: Momentum here, what you're seeing in the market is there potential to you know.

Scott Burrows: Could this be you know fully filled up what type of timeframe could that Mitch.

Jared Sprott: So it is going to be a mix of Brownfield and Greenfield opportunities for Pembina and higher utilization across the board. And then on the eggs pipeline, Pembina has announced that we're going to be 50,000 barrels. We fully expect that we're not the only contributor to Dallas' supply portfolio. We don't know where the other portions of that supply portfolio are coming from. So once we understand where that's coming from, we'll be in a better position to update you all on the egg expenses. Got it.

Scott Burrows: Materialize over and what are the drivers here.

Speaker Change: I'll take that again, Jeremy so the drivers are of that Clearwater formation. So.

Speaker Change:

Speaker Change: Lot of activity in that neighborhood.

Jeremy: And we expect the pipeline honestly be fully fully contracted by the end of 2024.

Jeremy: We put it back into service.

Jeremy: Last year.

Jeremy: We're seeing very strong utilization physical utilization today, we've signed up incremental contracts, which I believe we announced at the end of last year.

Scott Burroughs: That's very helpful there. And is there any way to frame what the potential capital deployment sizing or time frame or sizing really could be for this? Yeah, Jeremy, it's Scott here.

Jeremy: And yes, we see line of sight to having that 100% contracted by year end.

Got it that's helpful I'll leave it there thanks.

Jeremy: Thank you and your next question comes from the line of Rob Hope from Scotiabank. Your line is open.

Scott Burroughs: We've been progressing, as Jarrett pointed out, on multiple options. You know, we're working on the engineering and the and the economics of all of those. So I would say, you know, probably by mid year, we'll be in a better position to update the market and kind of which projects we predict will be going forward. But suffice to say, no material capex in 2024, got it, understood, and just one last one if I could, and Reactivation here. Just wondering if you could speak a bit more on the market drivers for this in, I guess, you know, commercial momentum here, or what you see in the market. Is there potential? Could this be, you know, fully filled up? What type of timeframe could that have? Thank you for joining us. We're going to take a short break. We'll be right back. I'll take that again, Jeremy.

Robert Hope: Hi, good morning, everyone.

Robert Hope: On the DAU announcement entity.

Robert Hope: Okay.

When you look at the options do you expect that the incremental ethane supply sources will all be western Canadian or could you be pushing some incremental barrels on vantage I just want to get a sense of whether or not you are expecting this all to be western Canada or some of the Bakken.

Robert Hope: Yeah.

Robert Hope: Rob.

Robert Hope: Again. This is this this ethane is going to be supplied from the mix of the existing portfolio as well as new and and the new the new.

Robert Hope: The new ethane will come from some of the various projects that we're currently evaluating as we discussed there definitely is an option to move incremental barrels on vantage out out of the Bakken is that is a very real possibility.

Apply.

Speaker Change: Okay I appreciate that.

Speaker Change: And then maybe just moving over to kind of the volume outlook for 2020 for a number of moving parts, including we'll call it rather strong economy pricing offset by weak <unk> pricing.

Jared Sprott: So the drivers are the Clearwater Formation. So, you know, a lot of activity in that neighborhood. And we expect the pipeline to be fully, fully contracted by the end of 2024. We put it back into service last year.

Speaker Change: When you're talking to your producer customers. How do you think volumes progressed through the year can we just hear a little bit of softness in the front part.

Jared Sprott: We're seeing very strong utilization, physical utilization today. We've signed up incremental contracts, which I believe we announced at the end of last year. And, yeah, I fully see the line of sight to having that 100% contracted by year end. Got it.

Speaker Change: And then ramping up into LNG, Canada in 2025.

Speaker Change: Yeah, Rob I think we continue to believe in that mid single digit growth that we talked about.

Speaker Change: But we are monitoring.

Speaker Change: Producer Capex budgets pretty closely and have ongoing discussions and so certainly it's on the back.

Jeremy Bryan Tonet: That's helpful. I'll leave it there. Thanks.

Robert Hope: Thank you. And your next question comes from the line of Rob Hope from Scotiabank. Your line. Good morning, everyone.

Speaker Change: It's on its top of mind in terms of what producers are doing.

Robert Hope: I want to stick on the Dow announcement, Andy, in Western Canada. When you look at the options, do you expect that the incremental ethane supply sources will all be Western Canadian, or could you be pushing some incremental barrels on vantage? I just want to get a sense of whether or not you're expecting this all to be Western Canada or some other boxes. Yeah, Rob, like, you know, again, this ethane is going to be supplied from a mix of the existing portfolio as well as new, and the new ethane will come from some of the various projects that we're currently evaluating, as we discussed. There definitely is an option to move incremental barrels on vantage out of the Balkans. That is a very real possibility for supply. I appreciate that.

Do throughout the rest of this year, but but to your point you.

Speaker Change: You know, obviously, we'd like to be a little bit higher for our producing community, but with oil at $77. You know condensate premium in Canadian dollar, earning over $100 for your condensate carries the day a lot a lot of the time and so we still believe that our producers' economics are very robust just given where condensate price.

Speaker Change: Thing is but we are certainly watching producer budgets given the weakness in April.

Speaker Change: I'd just add to that Rob on top of that the liquids market of the condensate market. Obviously, the NGL market has bounced around a little bit, but certainly December January and into February here, we've seen some strength there and obviously.

Scott Burroughs: And then maybe just moving over to kind of the volume outlook for 2024, you know, a number of moving parts, including, you know, we'll call it, you know, rather strong condi pricing offset by week eco pricing. When you're talking to your producer customers, how do you think volumes will progress through the year? Could we see a little bit of softness in the front part and then ramping up into, you know, LNG Canada in 2025? Yeah, you know, Rob. I think we continue to believe in that mid single-digit growth that we talked about. But we are monitoring producer capex budgets pretty closely and have ongoing discussions. And so certainly it's on the back, you know; it's on its top of mind in terms of what producers are going to do throughout the rest of this year.

Speaker Change: The arb into the far east markets continues to be open and supportive for that as well. So we do see that that buffering, the weaker gas prices as well.

Speaker Change: Thank you.

Speaker Change: And your next question comes from the line of Linda is a gearless from TD Cowen Your line is open.

Thank you recognizing we'll likely get an update on Cedar LNG midyear.

Wondering how we might think about the bookends of cost estimate for the project recognizing that a few things have moved around including foreign exchange since you first announced the project.

Speaker Change: Yes, thanks lineage Cam here.

Speaker Change: Guess will continue to for being very specific about that question.

Scott Burroughs: But to your point, you know, obviously, we'd like ACO to be a little bit higher for our producing community. But with oil at $77, you know, condensate premium and the Canadian dollar earning over $100 for your condensate carries the day a lot, a lot of the time. And so we still believe that our producers' economics are very robust, just given where condensate pricing is.

Speaker Change: Until we we can really tell the whole story around the opportunity I mean, obviously when.

Cam: When we when we bought into that project.

Speaker Change: We announced the capital cost of of in the mid <unk> mid 2 billion range U S dollars.

Speaker Change: You know obviously the world has changed since then and I think we all recognize that it's going to be higher than that that said Ah.

Speaker Change: When we look at Cedar from our global competitiveness standpoint.

Linda Ezergailis: But we are certainly watching producer budgets given the weakness in ACO. I would just add to that, Rob, on top of the liquids market, the condensate market, obviously, the NGL market has bounced around a little bit, but certainly December, January, and into February here, we've seen some strength there. And obviously, you know, the ARB into the Far East markets continues to be open and supportive of that as well. So, you know, we do see that that buffering the weaker gas prices as well. Thank you. And your next question comes from the line of Linda Ezergailis from TD Calendar. Thank you.

Speaker Change: We see that it continues to stack up very well from a cost per ton basis.

Speaker Change: Against the you know the North American alternatives into the global markets, reflecting both the capital intensity, but also you know the west coast advantages in terms of shipping that debt cedar enjoy so.

You know recognizing that theres a desire for more more specificity, we'll probably leave it at that until we can tell the full story.

Speaker Change: And maybe as a follow up if you can help us understand given all of what you just shared in terms of that that compelling advantage has anything changed about your return expectations for the project.

Cameron Goldeit: Recognizing we'll likely get an update on Cedar LNG mid-year, just wondering how we might think about the bookends of cost estimates for the project, recognizing that a few things have moved around, including foreign exchange, since you first announced the project. Yeah, thanks, Linda. It's Cam here.

Speaker Change: Would you expect kind of similar returns, even with a higher capital cost or potentially higher given the compelling locational.

Speaker Change: Advantages or maybe.

Speaker Change: Where your initial returns higher and they've come down a bit is there anything that you can point towards directionally.

Cameron Goldeit: You know, I guess we'll continue to defer being very specific about that question until we can really tell the whole story around the opportunity. I mean, obviously, when we bought into that project, you know, we announced the capital cost of in the mid $2 billion range US dollars. You know, obviously, the world has changed since then, and I think we all recognize that it's going to be higher than that.

Speaker Change: Yeah, I would say from where we look at this project.

This point in the.

Element cycle, the economics of Cedar continue to reflect what we would have seen historically in terms of Greenfield type returns.

For projects of this work.

Speaker Change: They are clearly not where you know the brownfield opportunities are and obviously, we've got a number of those as well but.

Speaker Change: They would continue to be in that in that same sort of historical range.

Cameron Goldeit: That said, you know, when we look at Cedar from a global competitiveness standpoint, we see that it continues to stack up very well from a cost per ton basis against the, you know, North American alternatives in global markets, reflecting, you know, both the capital intensity but also, you know, the West Coast advantages in terms of shipping that Cedar enjoys. So, you know, recognizing that there's a desire for more specificity, we'll probably leave it at that until we can tell the full story. And maybe as a follow-up, if you can help us understand, given all of what you just shared in terms of that compelling advantage, has anything changed about your return expectations for the project? Would you expect kind of similar returns, even with a higher capital cost, or potentially higher given the compelling locational advantages, or maybe your initial returns were higher, and they've come down a bit? Is there anything that you can point towards directionally?

Speaker Change: That.

Speaker Change: Mid to high single digit kind of range.

Speaker Change: Thank you and just maybe commercially as well recognizing that there is a few moving parts can you talk about what the potential sticking points are about getting to firm off take agreements and what sort of mix of take or pay versus fee for service or other attributes would you be looking for in any.

Our off take agreements.

Linda It's Scott here.

Linda: I think really it's time.

Linda: There's just a lot of different agreements that have to be put in place and so we're continuing to progress our detailed negotiations, but a lot of it is just is just due to time and the inter dependency of so many different agreements on this project and in terms of our structure recall that that this.

Linda: <unk> will be project financed.

Linda: And so just by the nature of that.

Cameron Goldeit: Yeah, I would say from where we look at this project, you know, from this point in the development cycle, the economics of Cedar continue to reflect what we would have seen historically in terms of greenfield type returns for projects of this sort. But they're clearly not where, you know, the brownfield opportunities are. And obviously, we've got a number of those as well. But, you know, they would continue to be in that same sort of historical range, that mid to high single-digit kind of range.

Linda: This project will need to have significant underpinning in order to.

Proceed on that basis.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you and your next question comes from the line of Robert <unk> from CIBC capital markets. Your line is open.

Robert Hope: Hey, good morning, everyone follow up here on the ethane supply agreement.

Robert Hope: Wondering if you could.

Robert Hope: Explain the exposure that.

Robert Hope: That you have on that agreement to commodity prices and volumes.

Robert Hope: Oh.

Yeah, Robert I think you know that if you think about the way that ethane is contracted in western Canada is obviously different than than other parts of North America and so generally speaking you know.

Scott Burroughs: And just maybe commercially as well, recognizing that there are a few moving parts. Can you talk about what the potential sticking points are about getting to firm off-take agreements and what sort of mix of, you know, take or pay versus fee for service or other attributes would you be looking for in any off-take agreement? Hi Scott.

Robert Hope: The way that works is that it's ultimately for folks like us a fee based structure.

Robert Hope: But.

Robert Hope: The way that the Perm and it really makes money is on this is through transportation and provision of of the volumes through the rest of the asset base. So as we sit today through the conventional business through the transmission business through the deep cuts and other gas plants in the fractionator.

Scott Burroughs: You know, I think it's really time. You know, there's just a lot of different agreements that have to be put in place. And so we're continuing to progress detailed negotiations, but a lot of it is just due to time and the interdependency of so many different agreements on this project. And in terms of, you know, our structure, recall that this project will be project financed. And so, just by the nature of that, this project will need to have significant underpinning in order to proceed on that basis. Thank you, and your next question comes from the line of Robert Catellier from TIBC Capital Markets in Germany. Hey, good morning.

Robert Hope: It's really sort of a tolling model that is the value driver for the ethane molecule along with the associated C. III plus that comes with those molecules are when.

Robert Hope: When you extract it.

Robert Hope: Alright, so to the extent the market sure or tight in the.

Robert Hope: Maybe maybe a short volumes or are the prices up.

Robert Hope: But that ultimately is borne by the counterparty.

Speaker Change: That's correct.

Speaker Change: Alright.

Robert Catellier: I'm going to follow up here on the ethane supply agreement. I'm wondering if you could explain the exposure that you have on that agreement to commodity prices and volume. Yeah, Rob, I mean, I think, you know, that if you think about the way that ethane is contracted in Western Canada, it's obviously different than other parts of North America. And so, generally speaking, the way that works is that, you know, it's ultimately for folks like us, a fee-based structure. But, you know, the way that Pembina really makes money on this is through transportation and provision of volumes through the rest of the asset base. So, you know, as we sit today, through the conventional business, through the transmission business, through the, you know, the deep cuts and the gas plants and the fractionators, it's really the tolling model that is the value driver for the ethane molecule, along with the associated C3 plus that comes with those molecules when you extract.

Speaker Change: And then.

Speaker Change: I wondered if you could just talk a little bit about the agree of additional costs for some of the emerging regulations and amended methane regulation for example, clean fuel regulation et cetera et cetera.

Speaker Change: Yeah.

Speaker Change: Typically we would expect any change of law or tightening of these.

Speaker Change: Regulations.

Speaker Change: Have some cost sharing with your customers, but you know as.

Speaker Change: As it seems like a pretty.

Speaker Change: Yes.

Speaker Change: I guess, a continually evolving landscape and as far as environmental regulation goes, but as you look over the horizon in the next three to five years.

Speaker Change: Is there any substantial change to your cost structure, that's not otherwise shared with.

Speaker Change: With shippers or producers.

Speaker Change: No not at this stage, Rob I mean, I think we're continuing to assess.

Speaker Change: All the existing and pending regulations, we continue to work on decarbonization of all the assets and really understanding.

Speaker Change: There, where we can get you know.

Speaker Change: The best emission reductions for the best dollar value as it relates to contracting as you pointed out many of the assets have cost sharing arrangements, which protects us a little bit, but we also have assets like Empress where we're fully exposed and we're working on what the implications are that but at this stage, there's no what I would call material.

Cameron Goldeit: Right, so to the extent the market's short or tight, and, you know, maybe short volumes or the price is up, that ultimately is borne by the counterparty. That's right, and then, I wondered if you could just talk a little bit about the degree of additional costs for some of the emerging regulations and amended methane regulations, for example, clean fuel regulations, etc., etc. You know, typically, we would expect any change of law or tightening of these regulations to have some cost sharing with your customers. But you know, as it seems like a pretty penny.

Speaker Change: And the cost structure.

Speaker Change: Okay.

Speaker Change: Last question for me is just.

Speaker Change: You know are there any significant implications for chevron selling there.

Duvernay assets in terms of your business development.

Speaker Change: No no major implications Rob actually.

Speaker Change: We're excited we're going to support chevron through the transaction.

Chevron I would say it has taken a modest approach to the development in the area.

Scott Burroughs: I guess a continually evolving landscape as far as environmental regulation goes, but, as you look, on the rise in the next three to five years. Is there any substantial change to your cost structure that's not otherwise shared with shippers or producers? Not at this stage, Rob.

We believe that.

Speaker Change: Upon divestment of those assets.

Speaker Change: Choir may take a more advanced or aggressive approach on developing the.

Of course, which will benefit pgi and the rest of the permanent infrastructure, yes, Rob if you look back at say over the last 18 months, there's been a fair bit of M&A activity in Canada on the asset on the asset side and I think what what we've seen historically has been new acquirers tend to deploy more capital.

Scott Burroughs: I mean, I think we're continuing to assess all the existing and pending regulations. We continue to work on decarbonizing all the assets and really understanding where we can get the best emission reductions for the best dollar value. As it relates to contracting, as you pointed out, many of the assets have cost-sharing arrangements, which protects us a little bit. But we also have assets like Empress where we're fully exposed, and we're working on, you know, what the implications are of that. But at this stage, there's no what I'd call material change in the cost structure. Okay, last question for me is just, you know, are there any significant implications for Chevron selling their DuVernay Offsets in terms of your business development? No major implications, Rob. Actually, we're excited.

Speaker Change: The previous owners.

Speaker Change: Whether that's to make their transactions go round or that's obviously, what they believe and at the time of the transaction and so we have found.

Speaker Change: M&A over the last 18 months to actually be an acceleration you've seen that in the increased utilization across the pgi asset so.

Chevron is a great counterparty, but we would expect potentially higher volumes over there you know over the relatively near future through through an acquisition of a third party.

Speaker Change: Okay. Thank you and congratulations on all your business momentum.

Speaker Change: Thank you.

Jared Sprott: We're going to support Chevron through the transaction. Chevron, I would say, has taken a modest approach to the development in the area, and we believe that upon divestment of those assets, the acquirer may take a more advanced or aggressive approach to developing those resources, which will benefit PGI and the rest of Pembina's infrastructure. Yeah, Rob, if you look back at, say, the last 18 months, there's been a fair bit of M&A activity in Canada on the asset side, and I think what we've seen historically has been new acquirers tend to deploy more capital than previous owners, whether that's to make their transactions go around, or that's obviously what they believe in at the time of the transaction.

Wells Fargo: And your next question comes from the line of <unk> cities from Wells Fargo. Your line is open.

Wells Fargo: Thanks, I guess two more questions here on the DAU agreement.

Wells Fargo: So the supply agreement at 50000 barrels as you mentioned I mean, that's not the full ethane supply I think it's only about half of the crackers needs.

Wells Fargo: I guess I'm, just struggling to think about who could satisfy the balance of the ethane just given your position but.

Wells Fargo: But I guess, even if there is another 50000 barrels of ethane coming from other plants in the region.

Wells Fargo: Can you still pick up a benefit by moving some of that third party supply through your pipelines.

Speaker Change: Yeah, and you know again, we don't have line of sight to where the rest of the ethane is coming from and in what phase and what timeline so potentially.

Jared Sprott: So we have found M&A over the last 18 months to actually be an acceleration, and you've seen that in the increased utilization across the PGI assets. So Chevron is a great counterparty, but we would expect potentially higher volumes in the relatively near future through the acquisition of a third party. Okay, thank you, and congratulations on all your business momentum. Thank you. And your next question comes from the line of Praneet Satish from Wells Fargo. Your line is open.

Speaker Change: Potentially a question for others, but depending on where that ethane comes from we would have an opportunity to move it on our pipelines are you know again, we don't we have the only ctrip plus pipeline in operations today gathering lines and so when we have a pretty big frac footprint.

Speaker Change: So there is the potential but at this stage, we were not aware of where the next or where the rest of the ethane is coming from.

Praneet Satish: Thanks. I guess I have two more questions on the DAO agreement. So, min, other plants in the region, can you still pick up a benefit by moving some of that third-party supply through your pipeline? Yeah, you know, again, we don't have line of sight to where the rest of the ethane is coming from, and in what phase and what timeline.

Got it and then kind of second question on this project I mean, you talked about the potential to produce more propane and butane from increasing the NGL cut on your plans for the project I guess, how are you thinking about the end markets for this incremental supply of C. III pluses there may be enough to.

Jared Sprott: So, you know, potentially a question for others. But depending on where that ethane comes from, we would have an opportunity to move it through our pipelines. You know, again, we have the only C2 plus pipeline in operation today, gathering lines. And so we have a pretty big frac footprint. So there is the potential. But at this stage, we're not aware of where the next one or where the rest of the ethane is coming from. I got it.

Speaker Change: Consider an LPG export dock expansion or.

Speaker Change: Will it get railed into the U S.

Speaker Change: It is.

Chris Sherman: Chris here.

Chris Sherman: Yes.

Chris Sherman: Certainly are tracking that closely and recognize that with the ethane will come.

Chris Sherman: More propane and butane.

It's likely that it's going to find.

Chris Sherman: Our path to the West coast. So so we're back revisiting what we can do at our facility. We're looking at what others are doing and watching that closely and I think it will inevitably.

Chris Sherman: There are some things on the west coast.

Got it thank you.

Chris Sherman: And your next question comes from the line of Robert Kwan from RBC capital markets. Your line is open.

Chris Sherman: And then, kind of, a second question on this project. You talked about the potential to produce more propane and butane from increasing the NGL cut on your plants for the project. I guess, how are you thinking about the end markets for this incremental supply of C3 plus? Is there maybe enough to consider an LPG export dock expansion or will it get railed into the U.S.? It's Chris here.

Good morning.

Robert Kwan: Stop starting at the top end of the day without so you talked about.

Robert Kwan: <unk> on the front of our S. Three.

Robert Kwan: What other capital should you see going into the system, whether it's compression or deep heads out in the field and just under the agreement with Dow.

Chris Sherman: Yeah, you know, we certainly are tracking that closely and recognize that with the ethane will come more propane and busane. It's likely that it's going to find a path to the West Coast. So we're back, you know, revisiting what we can do at our facility. We're looking at what others are doing and watching that closely. And I think it will inevitably spur something on the West Coast.

Robert Kwan: Given you're still working through the cost of everything.

Robert Kwan: Does the agreement specify return on the capital or are you taking the risk on how all of this capital needs to come together with.

Robert Kwan: Within whatever.

Robert Kwan: You have agreed with with Dow.

Speaker Change: Yes, Robert.

Robert: I have to be careful what I say, because we have obviously confidential arrangements, but we are obligated. It has a supply arrangements, we're obligated to provide the ethane.

Robert Kwan: Thank you. And your next question comes from the line of Robert Kwan from RBC Capital Markets. Your line is open. Good morning.

Robert: We are again going back to the initial comments, we have a mix here, where a significant portion will come from <unk>.

Robert Kwan: I can stop and start with the topic of the day without saying, So you talked about the potential to put a DF on the front of RFS-3. What other capital should you see going into the system, whether it's compression or deep cuts out in the field? And just under the agreement then with Dow, given you're still working through the costs of everything. Does the agreement specify a return on the capital, or are you taking the risk on how all of this capital needs to come together, you know, within whatever fee you've agreed with DAO? Yeah, Raava.

Existing assets or a very light capital tied to existing assets and then in terms of the new supply. We do have a mix and so you pointed out potentially as an example incremental deep cuts RFS three D at Theres other.

Robert: Opportunities that we just can't talk about at this stage that we're exploring and so for us it'll be about how to get the most ethane for the least amount of cost and that's something that we're currently assessing right now and I know theres a lot of questions on it but we're just not at the stage, where we can provide that detail and we will look to do that once we make some of these decisions on a on a go forward.

Jared Sprott: I have to be careful what I say because we have, obviously, confidential arrangements, but we are obligated, it is a supply arrangement, so we're obligated to provide the ethane. We are, again, going back to the initial comments, we have a mix here where a significant portion will come from existing assets or very light capital touches on existing assets. And then in terms of the new supply, we do have a mix. As you pointed out, potentially, as an example, incremental deep cuts, RFS3, DF, there are other opportunities that we just can't talk about at this stage that we're exploring.

Robert: But it will be an overall mix of existing asset light touch brownfield and then some incremental greenfield investments.

Speaker Change: Got it.

Speaker Change: Scott can I just square your comments here, though up with an answer earlier that if the market is caught short and there is a need to go out and attract ethane supply at a high price I know that most of ethane is cost of service in the province.

Speaker Change: You have to do that there wasn't a statement that is going to be borne by Dow. So how does that square up just in terms of your obligations to supply.

Jared Sprott: For us, it'll be about how to get the most ethane for the least amount of cost, and that's something that we're currently assessing right now. I know there are a lot of questions about it, but we're just not at the stage where we can provide that detail, and we'll look to do that once we make some of these decisions on a go-forward basis. But it will be an overall mix of existing assets, light touch, brownfield, and then some incremental greenfield investment. Got it.

Scott Burrows: Yeah, sorry, Rob I'll clarify my comments, what I meant was that the.

Scott Burrows: B.

Scott Burrows: The cost.

Robert Hope: The pass through to ultimately the producer who is who is providing the ethane.

Robert Hope: There's a there's an arrangement there.

Robert Hope: But it's a supply agreement and we have the obligation to supply so.

Robert Kwan: And Scott, can I just square your comments here though with an answer earlier, that if the market is caught short, and there is a need to go out and attract that vein supply at a high price? I know that most of ethane is cost of service in the province, but if you have to do that, there was a statement that that is going to be borne by Dow. So how does that square up just in terms of your obligations to supply? Yeah, sorry, Rob.

Robert Hope: We have the capital cost element to that but there is that the price is fixed.

Robert Hope: Okay.

Robert Hope: If I could just shift to cedar.

Speaker Change: You listed a number of things that you got to work through one of them that you didnt less so is just around cost so coming out of the feed study comfortable.

Speaker Change: With where those costs are how you are going to manage the risk and it really is now how do you deal with the commercial on the other side I guess specifically on costs.

Scott Burroughs: I'll clarify my comments. What I meant was that the cost and the pass-through to ultimately the producer who is providing the ethane, there's an arrangement there, but it's a supply agreement, and we have the obligation to supply, so we have a capital cost element to that, but the price is fixed. If I could just shift to CDER, you listed a number of things that you've got to work through.

Speaker Change: Can you just talk about how you are planning on managing.

Cost overrun risk and specifically.

Speaker Change: You've talked about fixed price EPC, but how are you planning on protecting yourself against the.

Speaker Change: The material type of overruns that we've seen in other projects that have led to contractor bankruptcies.

Scott Burroughs: One of them that you didn't list, though, is just around cost. So coming out of the seed study, are you comfortable with where those costs are, how you're going to manage the risk, and it really is now how do you deal with the commercial on the other side, I guess, specifically on cost. Can you just talk about how you are planning on managing, um, you know, cost overrun risk and specifically, you've talked about fixed price EPCs, but how are you planning on protecting yourself against, um, you know, the material type of overruns that we've seen in other projects that have led to contractor bankruptcy? Yeah, Rob, I'll start there, and Stu, feel free to jump in. But again, part of the timing around this project was ensuring that we had a very robust EPC contract, lump sum turnkey. Again, this is a ship being built in Korea at Samsung's shipyard under a controlled environment with LNG modules being placed on top of it.

Speaker Change: Yeah, Rob.

I'll start there and do feel free to jump in but again.

Speaker Change:

Part of the timing around this project was ensuring that we had a very robust EPC contract lump sum turnkey again. This is a ship being built in Korea in Samsung shipyard under a controlled environment with LNG modules.

Speaker Change: Being placed on top of it and that is all under our lump sum turnkey arrangement, which is you know the vast majority of the costs, which again, we'll lay this all out.

Speaker Change: If you are fortunate enough to make an FID decision.

So I'm not trying to be coy theres, just a lot of moving pieces, but on that piece, we feel very very comfortable given the robustness of the contract that we negotiated debt.

Scott Burroughs: And that is all under a lump sum turnkey arrangement, which is, you know, the vast majority of the cost, which, again, we'll lay this all out if you are fortunate enough to make an FID decision. So I'm not trying to be coy; there's just a lot of moving pieces. But on that piece, you know, we feel very, very comfortable given the robustness of the contract that we negotiated that the vast majority of that price has been pushed off onto our EPC contract. The remaining price that's at risk for Pembina is the pipeline and transmission lines. And, you know, it's a nine-kilometer pipeline, a 10 kilometer pipeline. You know, I think given our track record, I would hope that the market has some confidence around our ability to deliver on that. I mean, you just saw phase 8 come in materially under budget.

Speaker Change: The vast majority of that price has been pushed off onto our EPC contract. The remaining client price. That's on on risk for Pembina is is pipeline and transmission lines and you know it's a nine kilometer pipeline 10 kilometer pipeline I think given our track record I would.

Speaker Change: Hope that market has some confidence around our ability to deliver on that I mean, you just saw fee come in materially under budget. So we feel confident around doing our core business on this asset and then of course on top of that we have.

Speaker Change: Typical project contingency and Petite and protection. So overall, we feel good mainly because of you know we went with a lump sum engineering contract and there is always cost a little bit more.

Scott Burroughs: So we feel confident about doing our core business on this asset. And then, of course, on top of that, we have, you know, typical project contingency and protection. So overall, we feel good mainly because we went with a lump sum engineering contract, which always costs a little bit more.

Speaker Change: But from a risk reward basis, we like that approach to major projects.

Speaker Change: Tom Incentivize essentially a quick one here just on the alliance Akshay both deal.

Speaker Change: You've got a HSR, but can you just comment on where you are in the Canadian competition Bureau.

Scott Burroughs: But from a risk-reward basis, we like that approach to major projects. I just have a quick one here on the Alliance-Oxable deal, you've got AHSR, but can you just comment on where you are on the Canadian Competition Bureau approval? Yeah, Rob, I would say that, timing-wise, you can see that we reiterated our second half, our first half of 2024 timeframe. You're correct.

Speaker Change: Approval.

Tom: Yes, Rob I would say that timing wise.

You can see that we reiterated.

Tom: Our second half our first half.

Tom: 2024 timeframe, you're correct, we've got the waiting period expired on HSR and transport for Canada.

I would say, we don't have any better information at this point on the competition Bureau process to refine that view any more things are are progressing as expected as planned but no sort of further visibility at this point to try and narrow that date.

Cameron Goldeit: We've got the waiting period expiry on HSR and Transport Canada, but I would say we don't have any better information at this point on the Competition Bureau process to refine that view anymore. Things are progressing as expected, as planned, but there is no sort of further visibility at this point to try and narrow that date. Okay, thank you. Thank you. And your next question comes from the line of Zach Van Everen from PPHE. Your line is open.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you and your next question comes from the line of Zack <unk> from <unk>. Your line is open.

Zack: Hey, guys. Thanks for taking the question just going to the SaaS frac market. So it seems like a lot of those facilities are running close to full I was just curious if you guys had any incremental room to capture spot rates moved up and then as you talk to producers are frac constraints, becoming more and more of a.

Zach Van Everen: Hey guys, thanks for taking the question. Just going to the Fort Sask frac markets, it seems like a lot of those facilities are running close to full. I was just curious if you guys had any incremental room to capture if spot rates moved up and, then, as you talk to producers, are frac constraints becoming more and more of an issue? Good morning, Jared here. The answer to your question is yes. But we, it is becoming a concern for our customers. But it's also, we don't have a lot of opportunity, unfortunately, because we're fully contracted for the most part. We don't have a lot of opportunity to get a lot of spot rates, but the NGL season does start on April 1st.

Zack: Sure.

Zack: Yes, good morning Jaret here.

Jaret: The answer to your question is yes, but we it is becoming a concern for our customers, but it's also we don't have a lot of opportunity. Unfortunately, because we're fully contracted for the most part.

Jaret: We don't have a lot of opportunity to get a lot of spot rates.

Jaret: PL season does start on April 1st so the teams are or obviously in deep negotiations with respect to annual deals, but the majority of our contracts at our fractionation complex or long term in nature.

Jared Sprott: So the teams are obviously in deep negotiations with respect to annual deals, but the majority of our contracts at our fractionation complex are long-term in nature, you know, five, ten plus years. So unfortunately, where we can grab those opportunities, we do. But it is long-term in nature.

Jaret: 510 plus years.

Jaret: So unfortunately.

Jaret: Where we can grab those opportunities we do but it is long term in nature.

Jaret: But certainly frac future Frac negotiations continue to progress.

Jared Sprott: But certainly, future FRAC negotiations continue to progress, and with RFS being the next FRAC in service, RFS4 being the next FRAC in service, you know, we have the option. We have the option to continue to progress those negotiations and sign up incremental barrels. That's predicted to come online in the first half of 2026 and is really the next material FRAC expansion that we're aware of. And so those discussions continue. Okay, perfect. That's super helpful.

Jaret: And with RFS being the next Frac in service RFS for being the next Frac in service.

We have the option we have the option to continue to progress those negotiations and sign up incremental barrels that's predicted to come online in the first half of 2026 and is really the next material frac expansion that we're aware of them and so those discussions continue.

Speaker Change: Okay perfect that's super helpful and then.

Speaker Change: One on coach and it seems like.

Speaker Change: No coach band competing pilots oversubscribed shipper interest I was curious if you could squeeze any more capacity out of that system with <unk>.

Zach Van Everen: And then, on coaching, it seems like, you know, coaching and competing probably saw oversubscribed shipper interest. I was curious if you could squeeze any more capacity out of that system with, you know, smaller capital efficient solutions, or maybe there's a bigger project you guys could do as well.

Speaker Change: Smaller capital efficient solutions, or maybe Theres, a bigger project you guys can do as well.

Speaker Change: Oh I'll take that again, so <unk> since we've acquired that asset in December of 2019, we've increased the throughput by roughly.

Jared Sprott: So, Kotion, since we acquired that asset in December of 2019, we've increased the throughput by roughly 25-30% and safely. So, I would say that we're meeting all of customer demand today. Our availability is extremely high, but I don't think there's without a major expansion, there's not a lot of room, unfortunately, left on that asset. Okay, perfect. Super helpful as well. And that's all I have for

I think 25% 30%.

Speaker Change: And safely so I would say that where.

Speaker Change: We're meeting all customer demand today, our availability is extremely high.

Speaker Change: But I don't think there is without a major expansion theres not a lot not a lot of room. Unfortunately left on that asset.

Speaker Change: Okay, perfect zero close well, that's all I had thanks guys.

Speaker Change: Thank you and your next question comes from the line of Patrick Kenny from National Bank Financial Your line is open.

Patrick Kenny: Thanks, guys. Thank you, and your next question comes from the line of Patrick Kenny from National Bank Financial. Yeah, good morning guys, um, just on the WAPITI expan... Nice to see the commercial support there. I'm wondering if you could just update us on what other GNP expansion opportunities might be in the queue across your portfolio, you know, based on the customer activity levels that you're seeing in the field. I can't speak to specifics, Pat, but I think a couple of quarters ago I mentioned that we had line of sight to a substantial amount of capital to be deployed on a gross and a net basis through PGI. But obviously, with the K3 CoGen, which is going to obviously increase the reliability of that asset, lower the carbon intensity, and the WAPITI expansion that'll utilize the acid gas transmission line that we acquired through the Energy Transfer Canada acquisition.

Patrick Kenny: Yeah, Good morning, guys.

Patrick Kenny: Just on the Wapiti expansion.

Patrick Kenny: Nice to see the commercial support there I'm wondering if you could just update us on what other G&P expansion opportunities.

Patrick Kenny: Might be in the queue across your portfolio.

Patrick Kenny: Based on the customer activity levels that you're seeing in the field. These days.

Speaker Change: I can't speak to specifics, but.

Speaker Change: I think a couple of quarters ago, I mentioned that we had line of sight to a substantial amount of capital to be deployed on a on a gross and a net basis through pgi.

Speaker Change: But obviously with the K three co gen.

Speaker Change: Which is going to obviously increase the reliability of that asset lower the carbon intensity the wapiti expansion that will.

Speaker Change: Utilize the acid gas transmission line that that we we acquired through the energy.

Speaker Change: Transfer Canada acquisition, we have other opportunities to do I would call it what field based processing, but incrementally through pgi with the with the partnership with Dow and our incremental CTO supply agreement, we have opportunities to deploy more capital on the field based extraction as well so can't get into this spin.

Patrick Kenny: We have other opportunities to do, I would call it, field-based processing, but gradually through PGI, with the partnership with Dow and our incremental C2 supply agreement, we have opportunities to deploy more capital on field-based extraction as well. So I can't get into the specifics, but there are lots of opportunities for sure. And then maybe from a tuck-in or M&A perspective. Curious, Jared, if you're seeing any shift in producer appetite for third-party gas processing services, just given the outlook for gas prices through the summer and, you know, maybe their need to secure downstream access, maximize the value of their liquids production within their overall net back. Yeah, I would say no material change in the market. It continues to be very producer-specific in terms of, you know, certain producers want to own and operate and that's core to their business, and others, you know, look at, you know, what opportunities there are for midstreamers to enhance their capital allocation decisions. And so I would say those discussions are ongoing and always have been, and it's really, really producer-specific, but I wouldn't say there's any kind of material step change given gas prices or anything like that. It would be a normal course.

Speaker Change: <unk>, but.

Speaker Change: Lots of opportunities for sure.

Speaker Change: And then maybe from a.

Speaker Change: Tuck in or M&A perspective.

Speaker Change: Im curious if youre seeing any shift in producer appetite for third party gas processing services just given the.

Speaker Change: Outlook for gas prices at least through the summer.

Speaker Change: And maybe their their need to secure downstream access and maximize the value of their liquids production within their overall net backs.

Speaker Change: Yeah, I would say no material change in the market. There continues to be it's very producer specific in terms of certain producers want to own and operate in that quarter, there their business and others look at at.

Speaker Change: What opportunities there are for mid streamers to enhance their capital allocation decisions and so I would say it's.

Speaker Change: Those discussions are ongoing in and always have been and it's really really producer specific but I wouldn't say, there's any kind of material step change given gas prices or anything like that it would be normal course.

Jared Sprott: I would say, Pat, that any acquisitions we do through PGI, obviously, we have to be on the side of our partner. But we really want to make sure that we're focused on the geology, that we're buying processing assets that, you know, have long reserve life indexes, and then obviously contribute to the rest of Pembina's value chain. Okay, that's great. Thanks, guys. Thank you. Thank you. And ladies and gentlemen, we have reached the end of our Q&A session. I would like to turn it back to Pembina's President and Chief Executive Officer, Scott Rose, for a closer. Well, thank you, everyone. Thanks to our staff who are listening in to our customers. You know, we really appreciate all the hard work, and thank you to all the investors and analysts on the call. 2023 was an exceptional year for our company, and we're pretty excited about what we can deliver in 2024.

Speaker Change: I would say, though Pat that any acquisitions, we do through Pgi, obviously, we have to be on side with our partner, but we really wanted to make sure that we're focused on the geology, there were buying processing assets that.

Speaker Change: Long Reserve life Index is.

Speaker Change: And then obviously contribute to the rest of permanent value chain.

Speaker Change: Okay. That's great. Thanks, guys.

Speaker Change: Thanks Pat.

Speaker Change: Thank you and ladies and gentlemen, we have reached the end of our Q&A session I would like to turn it back to <unk>, President and Chief Executive Officer, Scott Burrows for closing remarks.

Scott Burrows: Well, thank you everyone.

Scott Burrows: Thanks to our staff that are listening in to our customers. We really appreciate all the hard work and thank you to all the investors and analysts on the call 2023 was an exceptional year for our company and we're pretty excited about what we can deliver in 2024. So thank you everyone.

Speaker Change: Thank you presenters and ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

Scott Burroughs: So thank you, everyone. Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

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