Q1 2024 Pembina Pipeline Corp Earnings Call
Good morning, ladies and gentlemen, and welcome to the Pembina pipeline Corporation first quarter 2024 results conference call.
This time all lines are in listen only mode.
Following the presentation, we will conduct a question and answer session.
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Please press star zero for the operator.
This call is being recorded on Friday May 10 2024.
I would now like to turn the conference over to Dave and took it all vice President of capital markets. Please go ahead.
Thank you Alan Good morning, everyone welcome to <unk> Conference call and webcast to review highlights for the first quarter of 2024 on the call today, we have Scott Burrows, President and Chief Executive Officer, and Cameron Goldade Senior Vice President and Chief Financial Officer, along with other members of <unk> leadership team, including Jared Sprouts, John Lee.
Luca 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 <unk> current expectations estimates judgments and projections forward looking statements. We 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.
<unk> measures to learn more about these forward looking statements and non-GAAP measures. Please see the company's management's discussion and analysis dated may nine 2024 for the period ended March 31, 2024, as well as the press release permanent issued yesterday, which are all available online at <unk> com and on both SEDAR and Edgar I will now turn things over to Scott.
Scott: Got to make some opening remarks.
Dan a strong first quarter was highlighted by record adjusted EBITDA of 1.044 billion.
Scott: Which provided a great start to 2024 and built upon our great momentum from the second half of 2023 and.
In addition, recent industry developments and company successes have further bolstered our enthusiasm for the future of Pembina.
Scott: On April one 2024, we announced the completion of the alliance and a stable acquisition. We are excited to further enhance our business by increasing our ownership in these unique and world class assets. You line is not stable acquisition aligns with permanent strategy by growing and strengthening our existing franchise and providing greater exposure to resilient end use markets and lighter hydrocarbons.
We executed this transaction with discipline and Accretively to our financial Guardrails in conjunction with the acquisition closing comment on updated its 2024 adjusted EBITDA guidance range to $4 5 billion to $4 3 billion, which at the midpoint represents a $300 million increase over the previous range the revised up.
For 2024, primarily reflects the incremental contribution from increased ownership of the lines not stable as well as stronger outlook in the marketing business due to wider frac spreads.
Scott: As previously announced during the first quarter permanent entered into a long term agreement with Dow chemical to supply and transport up to 50000 barrels per day of ethane to support the recently announced construction of a new integrated ethylene cracker and derivatives facility in Fort Saskatchewan Dallas passes Euro project is an important development for the industry Street, representing a significant.
You can increase the current ethane demand in Alberta, given pembina is existing leading ethane supply and transportation business and extensive integrated value chain. There are multiple opportunities for the company to benefit from this new development through both existing asset base and new investment opportunities.
Finally kind of the recently announced significant achievements in the development of the proposed Cedar LNG project, including securing long term commercial agreements and issuing a notice to proceed to its engineering procurement and construction contractors. Following these critical milestones cedar LNG and permanent partner the hydro nation have commenced irrespective financing processes.
In advance of the final investment decision, which is expected by June 2024 on.
On the major project front the phase a peace pipeline expansion has entered the commissioning stage and startup is expected this month as well the RFS for expansion at the Red water complex in the North East BC midpoint pump station expansion are proceeding as planned and during the first quarter permanent gas infrastructure approved an expansion of the wapiti gas plant that will increase <unk>.
Gas processing capacity by 115 million cubic feet per day.
Additionally, <unk> continues to evaluate further expansion to support volume growth in north East BC, including new pipelines and terminal upgrades on the northeast BC pipeline and downstream systems between Taylor, British Columbia, and Gordon Dale Alberta on April 23, 2020 for permanent file this project applications with the Canadian energy regulator.
And finally, we are pleased to have raised our quarterly common share dividend by two and a quarter cents per share or three 4% beginning with the dividend to be paid in June. The increase reflects the continued growth of Pembina is fee based business, which is benefiting from rising volumes and increasing utilization across many of its assets, we recognize the importance of our sustainable.
A reliable and growing dividend to our shareholders. We are proud of our long track record in this regard it has been a very strong start to 2020 forward and we look forward to continuing the momentum I will now turn things over to Kam to discuss in more detail the financial highlights for the first quarter.
Thanks, Scott as Scott noted Pembina recorded record first quarter adjusted EBITDA of one point <unk> four 4 billion.
This represents a 10% increase over the same period in the prior year and pipelines factors impacting the first quarter, primarily included higher revenues and volumes on the peace pipeline system. The northern pipeline system outage in the first quarter of 2023, which had an impact of $40 million with no similar impacts for the first quarter of 2024.
For the.
The reactivation of the <unk> pipeline and higher contribution from alliance pipeline related to higher tolls on seasonal contracts.
In facilities factors impacting the first quarter included higher volumes at the Red water complex and younger compared to the first quarter of 2023 as the prior period was impacted by $14 million due to the northern pipeline system outage and higher operating expenses.
In marketing and new ventures first quarter results reflected the net impact of higher contribution from our stable due to wider fracs spreads and the new third party marketing arrangement.
And the provision related to financial assurances for Cedar LNG and realized losses on NGL based derivatives in the first quarter of 2024 and realized gains in the first quarter of 2023.
Finally, the corporate segment was impacted by higher general and administrative costs net of lower long term incentive costs.
Earnings in the fourth quarter were $438 million. This represents a 19% increase over the same period in the prior year.
In addition to the factors impacting adjusted EBITDA earnings in the first quarter were impacted by unrealized losses on renewable power purchase agreements and on crude oil based derivatives compared to unrealized gains in the first quarter of 2023 and lower income tax expense.
Pipeline volumes of $2 6 million barrels per day in the first quarter represent a 5% increase compared to the same period in the prior year. The increase was primarily due to higher volumes on the peace pipeline system, resulting from earlier recognition of take or pay deferred revenue and the impact of the northern pipeline system outage in the first quarter of 2023 combined with the reactivation.
Of the <unk> pipeline.
Facility's volumes of 0.8 million barrels per day in the first quarter of 'twenty 'twenty four represented 12% increase compared to the same period in the prior year.
The increase was primarily due to higher volumes at the Red water complex and younger is the first quarter of 2023 was impacted by the northern pipeline system outage combined with higher interruptible volumes on certain pgi assets.
Scott: And it continues to generate significant cash flow after dividends and maintain a strong balance sheet.
At March 31, 2024 based on the trailing 12 months the ratio of proportionally consolidated debt to <unk>.
Adjusted EBITDA was 334 times below the low end of its target range.
I'll now turn things back to Scott.
Thanks Cam.
Scott: Few years now Pembina has been highlighting key developments within the western Canadian energy industry that we believe will catalyze a wave of growth that will benefit Pamela its customers and all Canadians. These developments include LNG projects on Canada's West coast, the growth of Alberta petrochemical industry in the Trans Mountain pipeline expansion all of us at <unk> wish to join the rest.
The industry and many others across Canada and celebrating the first of these to reach the finish line. The recent completion and shipment of first oil on the Trans Mountain pipeline expansion. This project brings much needed new egress capacity for oil producers, providing greater access to global markets and full value for Canada's energy resources, while helping to ensure <unk>.
Possibly produce energy is available to meet growing global demand in closing I want to remind you that pembina will hold its annual meeting of common shareholders. Today at two P. M Mountain time four P. M. Eastern it will be a virtual only meeting conducted via live audio webcast participants are recommended to register for the virtual webcast at least 10 minutes before the presentation start time.
Pembina will hold our 2024 Investor day in Toronto on May 16th beginning at 830 Eastern time.
Our team is excited to provide an overview of the business and discuss in greater detail our strategy and the outlook for the company I mean, it's truly transformational changes underway in the western Canadian energy industry. A live webcast. The event will be available on <unk> website and participants are encouraged to register well in advance for further information on both the annual meeting and Investor Day. Please visit.
Scott: At the Investor tab at Www Dot permanent dotcom, we would once again like to thank all our stakeholders for their support operator. Please go ahead and open up the line for questions.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session.
If you have a question. Please press star one on your Touchtone phone.
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Scott: And the questions will be pulled in the order they are received.
If you would like to withdraw from the question queue. Please press star two.
If you're using a speaker phone please lift the handset before pressing any keys one moment. Please for your first question.
Your first question comes from Jeremy Toney of J P. M. J P. Morgan Your line is already open.
Hi, good morning.
Morning, Jeremy.
Thanks for all the detail. This morning, I just wanted to dive in a little bit more fundamental fundamentals as we see them before you and just if you could walk through I guess that you know producer customer conversation at this point and how you see kind of activity unfolding over the balance of this year the cadence of growth.
How you see that I guess that that trajectory at this point.
Yeah, I'll start Jeremy and I'll write any of my colleagues to jump in I mean, I think what we're seeing is continued strong results across the board I mean, just previewing some of the risk.
The results this week and last week, we're seeing many of our producers come in above expectations.
Especially driven by strong condensate pricing strong oil pricing and again in anticipation of some of these transformational events that we that we've.
So we've been talking about for a while now so the conversations with producers have had been great. The results are showing through and we're seeing a lot of momentum in the business.
Cam: Jeremy its cam here, maybe I'll just add that I think.
One of the one of the things that we think makes <unk> unique is obviously our exposure to all the commodities.
In the industry here in the hydrocarbon value chain and I think.
As you've seen.
<unk> come out that Scott referenced.
Some folks who have the optionality to allocate capital between dry gas and more liquids rich gas or our intent or indeed shifting towards the liquids rich gas and obviously.
Both of those work for M&A given your exposure in our portfolio. So we see that as a real unique element for us and continue to see.
Good runway in 2024.
Got it thanks for that and a little bit more time, having passed the Dow announcement, just wondering if there's any incremental details or thoughts you can provide as far as the scope of the opportunity set what it could mean for that matter, particularly operating leverage versus brownfield versus greenfield opportunities.
Jeremy I think we will dive into that a little bit more next week at our at our Investor day. So.
I will answer your question, but we will do it next week.
Fair enough fair enough and.
I think I might get the same answer for this one but I'll try nonetheless with leverage having fallen below I guess your targeted range just any updated thoughts on capital allocation between growth Capex bolt on dividend growth buybacks what have you.
Speaker Change: Yeah, It's a fair comment Jeremy I think as we look out at 'twenty 'twenty four.
In 2025, potentially even even the year after that 2026, if we if we look at where we are today with some of the capital the investment in Cedar through too.
The middle of this year, we're sort of.
Depending on where you choose your point in the range, where we're relatively on point with sort of funding all that capital with cash flow after dividends.
And if you sort of take forward that that proxy and assume that we make are positive about Friday on on Cedar later this year 2025.
Probably not that different and so we continue to think that.
The most accretive and best use of that capital right now.
Are those are those opportunities, which are in strategy and provide long term annuities with strong counterparties and downside protection that said.
If something changes there we'll do the same thing as we've always done and look at the opportunity set.
Between repayment of debt.
We are at the low end of the range right now.
Incremental buybacks if it makes sense.
From a capital allocation perspective, or other opportunities obviously, we continue to have <unk>.
Backlog beyond the things, we're talking about and continue to advance those so.
Speaker Change: Probably not much different what you heard from us in the past.
Got it makes sense. Thank you for that.
Your next question comes from Rob Hope.
Of Scotiabank your line is already open.
Good morning, everyone I wanted to just ask on the Lifelock stable. So it's been in your hands for a little while now.
Robert Hope: Obviously, an asset well, but how are you progressing on thinking about commercial synergies there.
What is the timeline that we can potentially look to.
Robert Hope: Hello, Rob Jaret here. So yes April 2nd we brought over 161 employees over to over to Pamela So.
Step one is obviously business continuity.
Just working with Enbridge through the transition service agreement and everything is going extremely well, we're just over a month into that commercial opportunities I don't I think it's a little bit early there right now, but this short term synergies that we had talked about when when we announced the deal those are going extremely well and then the longer term kind of the mid.
Robert Hope: Term to longer term synergies.
Spansion is different commercial opportunities just continuing to be worked on like you said, we know the asset well we were the commercial operator of of Alliance previously and just continuing to work that and hopefully provide more color in the near future.
And Rob maybe I'll, just I'll just jump in it's Kim.
Maybe to say it a different way so far nothing we've seen is deviating us from what we saw at the time of the announcement.
We're tracking with the near term synergies that were sort of immediately executable and continued to progress through the ones that would obviously take a little bit more time.
But we're not seeing anything at the moment that is necessarily derailing us from what we saw everything seems to be on track and I would just pile on in terms of operations not not not a synergy, but certainly with what's going on with Chicago gas price being a little bit lower than than historical we've seen.
A short term tailwind at ox Sable, just with where Frac spreads are so currently for 2024 at Sable was tracking above our acquisition model.
Alright, I appreciate that and then actually maybe sticking with marketing.
A nice tailwind for the quarter.
Robert Hope: Are the spreads looking moving forward and then can you add a little bit of color on the new marketing arrangement that was highlighted in the MD&A as a driver in your performance.
Okay.
Hey, Ross Chris Sherman.
Chris Scherman: I think we do.
Definitely saw in Q1.
As as others referenced really positive frac spreads.
Gas in particular ended up being being the tailwind there as.
As well as obviously, some some positive momentum on the crude side, which pulled up Ngls, we're still seeing some of that same tailwind, although a little bit muted.
Over the last couple of weeks as I say in Keno U S gas prices come up a little bit, but in particular NGL prices being a little bit of pressure with some with some bigger inventory numbers that said we remain fairly positive.
On Frac spreads for the remainder of the year.
And optimistic on that.
And Rob just on your second question. So the reference to the new marketing agreement is the same reference that we made at the time that we announced the acquisition of aligns somewhat stable.
This would obviously be the first quarter, where its been in place.
We'll go into specific details on it as sort of customary for us with commercial agreements, but what I would say is that this agreement is is simpler than the former one and obviously.
Chris Scherman: It does create.
Does create some opportunities.
For us in certain environments and down the line, so a simplification and obviously some different participation at different pricing thresholds.
Thank you.
Your next question comes from Linda as our dailies.
P D Collins Youre line is already open.
Thank you all are try to high grade my my high level questions, knowing that youre going to be sharing a lot with us at Investor day, So maybe more in the near term.
We're hearing of low water levels in Western Canada.
We are hearing it's dry theres concerns about wildfire risk.
How are you preparing for that maybe in your marketing business in your operations.
Chris Scherman: What is embedded into your guidance already.
Chris Scherman: First is that maybe an emerging headwind for that and can you talk us through kind of what youre seeing on the ground and what your expectations are in terms of bookends of what the.
The impact might be even on on volumes on your system says.
Facilities might even be preemptively shut down are in advance of a certain certain wildfires are in the areas you operate et cetera.
Good morning, Linda Jaret here with respect to the first question water levels and its being drive that is a 100% accurate.
The conversations we have with our customer customers to date is.
The majority of our customers have.
<unk> retained the the water thats required in their in their pants <unk> their storage facilities.
A lot of our customers have recycling operations et cetera.
That's what we're hearing from them to date is that.
Chris Scherman: Their ability to stimulate the wells go forward.
They don't have a lot of concerns with that now your second portion of the of the question was around wildfires. So we are actively.
I would say, we're in a significantly better place.
As an industry, but definitely as an organization here at Pembina, we monitor wildfire activity on a 24 seven basis.
And then.
There is nothing active.
To date near our assets that would give us any concern.
There was no anticipation right now to be preemptively shutting in assets and just to note last year any assets that we did shut in and they were primarily due to our ability to to get our employees safely.
Harm's way so the actual assets themselves were never in physical danger. It was the egress component is why we would have had to shut down last year, but I would say, we're well prepared monitoring it.
And hopefully we will proceed through the summer we just did get some pretty good rain here in the last few days, but definitely.
Hoping for wetter weather.
Got it thank you for that update and maybe just a follow on question.
Again in discussions with your customers.
How are they evolving commercially in terms of.
Full path solutions versus discrete services.
And what is the tilt in terms of.
Where are the offerings that you are leading with in those discussions.
And I would say no no real change most of the discussions that we're continuing to have our our integrated services, mainly pipe frack or or gas plant pipe Frac I think the nice thing about having sanctioned RFS for when we did was that we have that capacity coming on.
Mine in 2026 in.
In what is a relatively tight frac market. So we think we're well positioned to continue our integrated value chain service offering.
Thank you.
Your next question comes from Robert <unk> of CIBC capital markets. Your line is already open.
Hey, good morning.
As you are aware there were some media reports over the last couple of weeks about a potential offtake agreement and.
Moving to potential sale of an equity stake in our Cedar LNG.
Robert Hope: I don't expect you to comment on any specific transaction, but.
Robert Hope: Can you maybe describe in more detail your appetite saw an equity stake consider LNG at all.
It sounded like from <unk> comments on the funding plan that.
Permanent doesn't need any external equity or an equity partner for that project.
Stuart V. Taylor: Rob It's Stu Taylor.
We're continuing to progress our commercial conversations with a number of parties just on the <unk>.
Our intention pardon me two two.
Assign our capacity the permanent capacity to an off taker with respect to the equity there is no no plans at this point in time for any equity structure change on the Cedar pipeline I'm. The CEO of project story and at this point in time.
All of those conversations would require approval from our partner as well. So there is no equity changed at this point in time.
Okay and just on the.
Signing that capacity to a third party.
I'm just curious have you see any benefit is.
Waiting till closer to the commercial operating date.
In an effort to maximize value once the project is derisked.
We've we're looking at that Rob.
It's one of those things that.
We're looking at the timing nothing will take place until post FY <unk>.
Stuart V. Taylor: We've been in conversations with a number of parties for a fair period of time.
We've we continue to have ongoing conversations.
At the end of the day, where we will look at that timing.
We think we have the opportunity to do the right deal for us and so we'll evaluate that timing in that.
If the right deal comes in for Us to execute we will move on it.
If it means taking a bit more time, we'll do that as well but.
We're actively engaged in conversations with people and making good progress on that.
Okay and finally, it sounds like this might have to wait until next week, but I'm curious if there's any update on how you plan to source and supply of ethane for the.
Transportation agreement with Doe.
Speaker Change: Yeah, I think that's right Rob I think I think we'll probably punt that until next week.
To give everyone the benefit of.
Of rolling that out.
Okay. Thank you.
Your next question comes from Ben Pham of BMO. Your line is already open.
Hi, Thanks, good morning.
You mentioned that the N B C project, Cedar LNG and it sounds like there's.
Something on an ethane DAU as well in terms of Capex.
When you think about all of those projects and maybe better projects ahead.
Where do you see your annual Capex spending.
The next three or four or five years.
Speaker Change: But what point do you have to start to consider sources of funding beyond.
The debt markets.
Hey, Ben it's Jim.
I think picking up on my earlier comments I would say that if we look forward right now.
Let's play out a couple of scenarios.
If we proceed and make a positive.
Final investment decision on Cedar, we're probably running.
Right around cash flow after dividends in terms of capital levels.
For the next couple of years.
Speaker Change: And then the.
Heavy piece of the Cedar spend starts to trail off then.
If we think about longer term I mean, obviously, that's that's a little bit.
Speaker Change: Harder to gauge, but obviously, we continue to advance a backlog of what I would say is we're very conscious of.
Of not only the nature of the projects, but how they fit together as a program in terms of our our strategy and also the funding piece. So it is it is certainly an important input excuse me capital allocation process.
If we look at a scenario, where we didn't in fact proceed with Cedar just to play that out for a moment, obviously, we would have substantially more free cash flow to work with them. Obviously per my earlier comments, we look at the same alternatives that we've discussed already but ultimately.
We've got some pretty attractive opportunities in front of us and I think provided those continue on the Paas and Ron will be running probably pretty close to free cash flow at those levels for.
For the next next couple of years at least.
Okay got it.
And then I apologize I may have missed this on your facilities segment you reference.
Operating expense pressure.
Pressure I think that the very rich could you unpack that a bit and then can you also comment is there.
Is there anything you are.
Seeing on maybe some of your producers curtailing.
Production because of low eight coal prices.
Morning, Ben.
Like we've said before I'll take your second part of your question. The majority of our assets are if not all of our assets are pretty much in the liquids rich liquids rich window.
So we haven't seen any curtailment and if we have it's been it's been so immaterial that we haven't noticed it.
Our customers have great condensate yields and great NGL yields, which ultimately even in a low ego natural gas price, we're still seeing strong volumes through pgi et cetera.
No we're not seeing anything in with respect to cost pressures not seeing anything like out of the ordinary.
Speaker Change: Just a little bit more work in certain areas that that wasn't totally contemplated at the time, but no just your normal.
Supply chain and inflation pressures, but nothing out of the ordinary that is keeping us up that's for sure.
Speaker Change: And then just to tag onto that I mean, the one thing that we saw it ended in <unk>.
Part of that variance this quarter was just youll.
You'll remember that.
Union The Union agreement that was renegotiated in the port of Vancouver last year.
Speaker Change: That's showing up in the variance quarter over quarter in Q1, it's.
Just a few million dollars, but.
That's part of the variance.
Okay. Thank you very much.
Your next question comes from Zach than ever in of T. P H and company.
Zach: Your line is already open.
Perfect. Good morning, guys. Just a question on the new pipeline you mentioned between Taylor and Gordon Dale would there be any additional infrastructure downstream needed to support that if you guys sanction that project and then.
Is there enough space on peace and the fracs to accommodate incremental liquids there.
Good morning.
Yes, so once we once we cross the border from Taylor to Gordon Dale There's no incremental no material incremental like pipelining work, that's required from Gordon Dale into the Edmonton and or the Fort Saskatchewan markets, we will require.
Some pump stations on certain segments of the line and that's primarily from Fox Creek into into the market Edmonton and Fort Saskatchewan that has always been contemplated.
Great way back from the time of the phase III expansion.
Zach: To grow those volumes and so that's so we're extremely well positioned to capture those volumes without having to deploy a whole bunch of mainline capital.
Okay.
Got you that makes sense and then maybe one on LPG exports. It's been very topical here in the states and was just curious if you had any updates around Prince Rupert expanding.
Do you need any additional facilities there that would be sanctioned.
Exactly it's Chris Sherman.
We continue to see obviously this ramp up in western Canadian production.
Increased propane.
Banks in Western Canada, as well, we see you do see the ramp up in the lower 48 and that dynamic really pushes us towards the west coast. So we continue to continue to look at our options there.
We've got some really really effective optimization options at our Prince Rupert facility, and we're looking to get more exposure to that market.
We continue to look at it and remain interested.
Perfect. That's all I had thanks guys.
Your next question comes from coal Pereira of Stifel. Your line is already open.
Hi, Good morning, all so acknowledging just completed an acquisition and you have a number of other large projects and opportunities in front of you.
With <unk> now in service, there's obviously still some uncertainty until within other factors, but.
Can you just refresh us on your thinking about how you see that fitting with your asset base in your strategy.
Hey, Paul its Cam here, Yeah, you know what I would say is I think obviously.
Cam: We've been quite clear that global exports.
A critical pillar in our strategy.
Obviously, you can see just in the last question would a focus it is for us on the on the NGL.
NGL side, obviously on LNG as well with Cedar.
Cam: That said as I think we've been pretty consistent for some time.
There exists a great deal of uncertainty still on T. M X, obviously, one very important milestone.
Passed with the pipeline coming into service, but.
But I you know I.
I understand that the toll resolution process.
Is ongoing and is likely to take some time to see resolution.
And from our perspective, there's still exists a tremendous amount of uncertainty around that asset and so frankly nothing.
No nothing has changed from our prior messaging in terms of.
As an investment opportunity, it's not something we're spending a great deal of time on right now but.
But obviously global exports are always important in our strategy.
Okay.
Okay, Great. That's all for me, Thanks, I'll turn it back.
Okay.
Your next question comes from Robert Kwan of RBC capital markets.
Line is already open.
Thank you good morning.
You've got a bunch of large projects as you noted that LNG and <unk> and then your own kind of Cedar just wondering since you are talking with customers.
What's the nature of the discussions at this point with respect to new projects.
Cam: Kind of following on those developments upstream infrastructure do you see a lot of potential there.
I think for us.
A lot of that was captured over the last call. It 12 to 24 months with some of our big North EPC arrangement that we entered into.
We're starting to see those projects come to fruition in the next 12 to 24 months, which should provide some incremental volume growth and 25 in <unk> and into 'twenty six.
I think a lot of people are continuing to.
As Jared said drill in the liquids rich areas, especially in the condensate rich areas that with with the outlook for increased oil demand and ergo incremental condensate need we're seeing a lot of activity in the condensate window. So we are starting to see it Rob show up but not just.
Short term, but as people are sanctioning some of these projects into 'twenty five 'twenty six.
Scott just so I'm clear you talked about the next 12 to 24 months you are talking about projects that you've already announced or that you expect that we will see additional projects sanctioned over the next 12 to 24 to drive volumes.
Scott: I'm seeing a lot of both we're seeing some of the volumes that we <unk>.
<unk> call. It a year ago were start we're gonna start to see those volumes materialize on the system in the next 12 to 24 months and then we're also CA and talking to producers about some of their developments that they could potentially sanctioned over the next 12 to 24 months, which would then drive volume further on in the plan and that's always been.
What has given us confidence from changing from from talking about volume growth in that 5% range, we almost talked about it annually because that's the line of sight, we had but now for the last 12 months, we've been saying that we have a view that that could continue on for a couple of years here at least because we have much more visibility into that.
Got it.
If you just look at the lower take or pay deferrals in the quarter.
A function of a more bullish outlook or is that more so that you are just so deep into the fee based components of the contracts that deferring is just overly conservative and unnecessary.
Rob what it really comes down to is us having a number of years under our belt now in terms of observing.
History, how how producers trends through out throughout the year.
Their history in terms of accessing those makeup rights.
And now we have a statistical body of information, which we can look at too.
To create a higher degree of certainty, where we can be comfortable recognizing those volumes early in the year than we have previously.
Got it and if I can just finish with a clarification just theres been a lot of talk around especially SEDAR specific way, but just capex and where you would be free cash flow positive or neutral when youre looking at Cedar are you specifically looking at that as the equity contribution are you.
Looking at it as your proportional.
Capex.
We're looking at is our equity contribution.
Okay. That's great. Thank you.
Your next question comes from Patrick Kenny of National Bank.
Your line is already open.
Thank you good morning, guys.
I'm wondering if you had any thoughts on the.
How the destination of Tms volumes plays out here Asia versus California and.
How this dynamic might create opportunities for your tankage footprint or perhaps blending operations.
Whether it north 40 baseline EMEA Oh, you name it.
Scott: Just your general thoughts on.
Opportunities across your system.
Hey, it's Chris.
Very difficult at this point for us to.
Opine on.
Are those where those volumes are going to ended up so we'll probably stay away from that one but undoubtedly there is some there is some positive flow back into our business from from that commerce going West and I think it shows up to sub mitigating tanks as customers are trying to optimize flows east and west as well as theyre trying to manage.
<unk>, so we definitely see a bit of a bit of a tailwind there and are optimistic about what it means for for the base and more broadly, but certainly for our tankage and our business.
Obviously pad the.
The number one.
Significant impact to permanent long term and I'm going to talk about this a little bit more next week is.
The increased egress it will raise the price of the.
The heavier oils here in Western Canada that should spur on incremental supply that will require condensate. Obviously pembina has a fairly large condensate business with respect to peace and <unk>, so higher utilization and incremental expansions to get more condensate into the Edmonton market, which ultimately will.
Head up into the.
The new supply that's coming on so that's really where pembina significantly benefits.
Got it okay, that's great I appreciate that.
And then maybe just on your your hydrogen ammonia opportunity at Red water.
If I recall I believe the feed study was expected to be completed by now so maybe just.
The status update there and then.
I'm curious too if you believe.
The sequestration economics for your customers can be.
Underwritten solely by the proposed Itc's or.
Perhaps these economics are also contingent on <unk>.
Mitigating the price of carbon through cft's or otherwise.
Todd It's Steve I'll start.
We continue as you mentioned, we progressed our ammonia project, we're wrapping up the work.
We've had.
<unk> has been a great partner to work with.
We progressed that that study it is it is.
It is a large amount of work.
We have to look at the partnership the capital structure to capital for that project look at the markets the market timing.
Scott: Canadian government timing as well on things and so we're continuing to progress.
That study in and looking at all of the integration of all the pieces there.
We're going to go and have further conversations with our partner.
In the coming weeks.
And see where we go with this project.
It still is early days and we're learning a lot as we go and we're anticipating further information coming out from.
Asian governments as well as Canadian governments in the near future that will shed some light on the feasibility of the project itself.
With respect to carbon pricing.
The.
<unk> done a lot of work on our ACG project, we're pretty pleased where were sitting we've completed our appraisal well.
There are still some works in downhole subsurface work that is going to be completed and we're looking we've got the infrastructure plan in the preliminary capital cost estimate for that.
But theres no question on the carbon sequestration side it comes down to.
<unk> cost for the.
The sequestration or customers have a captured cost as well and trying to find that balance and.
What can be afforded in what are the government policies on a go forward basis from a pricing perspective, and what's needed to support that project.
It's it's it's challenging at this point in time, where I think many customers as the costs are not getting cheaper.
For carbon sequestration capture in particular, and so we're working through that.
Again, our partner Tc energy and our various customers that we're having conversations with.
Okay, that's great Steve Thanks, I appreciate your comments.
There are no further questions at this time I would hand over the call to Scott Burrows, President and CEO for closing comments. Please go ahead.
Thanks, everyone and thanks for taking the time to listen to us today.
Again, just a friendly reminder of our AGM. This afternoon in our Investor Day next next week and we look forward to seeing many of you there have a great weekend.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.