Q1 2024 Pembina Pipeline Corp Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to the Pembina Pipeline Corporation first quarter 2024 results conference call. At this time, all lines are in listen only mode.
Good morning, ladies and gentlemen, and welcome to the Pembina pipeline Corporation first quarter 2024 results conference call.
At this time all lines are in listen only mode.
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, May 10th, 2021. I would now like to turn the conference over to Dan Toucanal, Vice President of Capital Markets. Please go ahead.
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 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.
Dan Toucanal: Thank you, Alan. Good morning, everyone.
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, Jonathan Lu.
Stu Taylor and Chris Sherman.
Dan Toucanal: Welcome to Pembina's 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 Pembina's leadership team, including Jaret Sprott, Janet Leduca, Stuart 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.
I would like to remind you that some of the comments made today maybe 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-GAAP measure.
Dan Toucanal: 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. In addition, some of the information provided refers to non-GAAP 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 9, 2024, for the period ended March 31, 2024, as well as the press release Pembina issued yesterday, which are all available online at pembina.com and on both CDAR and EDGAR. I will now turn things over to Scott to make some opening remarks.
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 Pembina issued yesterday, which are all available online at <unk> com and on both SEDAR and Edgar I will now turn things over to Scott to make.
Scott: Some opening remarks.
Scott Burrows: Thanks Dan. A strong first quarter was highlighted by record adjusted EBITDA of $1.044 billion, which provided a great start to 2024 and built upon our great momentum from the second half of 2023. In addition, recent industry developments and company successes have further bolstered our enthusiasm for the future of Pembina. On April 1st, 2024, we announced the completion of the Alliance and Auxable Acquisition. We are excited to further enhance our business by increasing our ownership in these unique and world-class assets.
Scott: Thanks, Dan.
Scott: Our strong first quarter was highlighted by record adjusted EBITDA of 1.0 for $4 billion, which provided a great start to 2024 and built upon our great momentum from the second half of 2023. 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 aux Sable acquisition. We are excited to further enhance our business by increasing our ownership in these unique and world class assets, The alliance and aux Sable acquisition aligns with permanent strategy by growing and strengthening our existing franchise and providing greater exposure to resilient end use markets and lighter hydrocarbons.
Scott Burrows: The Alliance and Auxable Acquisition aligns with Pembina's strategy for 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 according to our financial guardrails.
Scott: We executed this transaction with discipline and Accretively to our financial Guardrails in.
Scott Burrows: In conjunction with the acquisition closing, Pembina updated its 2024 adjusted EBITDA guidance range to $4.05 billion to $4.3 billion, which at the midpoint represents a $300 million increase over the previous range. The revised outlook for 2024 primarily reflects the incremental contribution from increased ownership of Alliance and AXABLE, as well as a stronger outlook in the marketing business due to wider frac spread. As previously announced during the first quarter, Pembina entered into a long-term agreement with Dow Chemical to supply and transport up to 50,000 barrels per day of ethane to support the recently announced construction of a new integrated ethylene cracker and derivatives facility in Fort Saskatchewan. Dow's Path to Zero project is an important development for the industry, representing a significant increase in the current ethane demand in Alberta.
Scott: 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 outlook for 2024, primarily reflects the incremental contribution from increased ownership of alliance and aux Sable as.
Scott: Well as stronger outlook in the marketing business due to wider frac spreads.
Scott: As previously announced during the first quarter <unk> 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 English Street, representing a significant.
Scott: You can increase the current ethane demand in Alberta, given <unk> 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 the existing asset base and new investment opportunities.
Scott Burrows: Given Pembina's 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 its existing asset base and new investment opportunities. Finally, Pembina 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 Pembina's partner, the Haisla Nation, have commenced their respective financing processes in advance of the final investment decision, which is expected by June 2024.
Scott: Finally come into 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 in 10 minutes partner the hydro nation have commenced irrespective financing processes.
In advance of the final investment decision, which is expected by June 2024 on.
Scott Burrows: On the major project front, the Phase 8 Peace Pipeline expansion has entered the commissioning stage, and start-up is expected this month. As well, the RFS4 expansion at the Redwater Complex and the Northeast BC Midpoint Pump Station expansion are proceeding as planned, and during the first quarter, Pembina Gas Infrastructure approved an expansion at the Wapiti Gas Plant that will increase natural gas processing capacity by 115 million cubic feet per day. Additionally, Pembina continues to evaluate further expansions to support volume growth in northeast BC, including new pipelines and terminal upgrades on the Northeast BC pipeline and downstream systems between Taylor, British Columbia, and Gordondale, Alberta.
Scott: 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 NAV.
Scott: Gas processing capacity by 115 million cubic feet per day.
Scott: 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, but the Canadian energy regulator.
Scott Burrows: On April 23, 2024, Pembina filed its project application with the Canadian Energy Regulator. And finally, we are pleased to have raised our quarterly common share dividend by 2.25 cents per share, or 3.4%, beginning with the dividend to be paid in June. The increase reflects the continued growth of Pembina's fee-based business, which is benefiting from rising volumes and increasing utilization across many of its assets. We recognize the importance of our sustainable, reliable, and growing dividend to our shareholders, and we are proud of our long track record in this regard. It has been a very strong start to 2020, and we look forward to continuing the momentum. I will now turn things over to Cam to discuss some more detailed financial highlights for the first quarter.
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 permanence fee based business, which is benefiting from rising volumes and increasing utilization across many of its assets, we recognize the importance of our sustainable.
Scott: A reliable and growing dividend to our shareholders and 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.
Cameron J. Goldade: Thanks, Scott. As Scott noted, Pembina recorded a record first quarter adjusted EBITDA of $1.044 billion. This represents a 10% increase over the same period in the prior year. In 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, the reactivation of the Nipissi Pipeline, and higher contribution from Alliance Pipeline related to higher tolls on seasonal contracts.
Kam: Thanks, Scott as Scott noted Hemmeter recorded record first quarter adjusted EBITDA of one point to <unk> four 4 billion.
Kam: This represents a 10% increase over the same period in the prior year and.
Kam: In 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.
Kam: Reactivation of the Nipper Sea pipeline and higher contribution from alliance pipeline related to higher tolls on seasonal contracts.
Cameron J. Goldade: In facilities, factors impacting the first quarter included higher volumes at the Redwater complex and lower 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 Auxable due to wider FRAX spreads and the new third-party marketing arrangement, a change in the provision related to financial assurances for CDER LNG and realized losses on NGL-based derivatives in the first quarter of 2024 compared to realized gains in the first quarter of 2023.
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.
Kam: 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.
Kam: <unk> in the provision related to financial assurances for Cedar LNG and realized losses on NGL based derivatives in the first quarter of 2024.
Kam: Realized gains in the first quarter of 2023.
Cameron J. Goldade: Finally, the corporate segment was impacted by higher general 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.
Kam: Finally, the corporate segment was impacted by higher general and administrative costs net of lower long term incentive costs.
Kam: Earnings in the fourth quarter were $438 million. This represents a 19% increase over the same period in the prior year.
Kam: 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.
Cameron J. Goldade: 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 Nipissi Pipeline. Facility volumes of 0.8 million barrels per day in the first quarter of 2024 represent a 12% increase compared to the same period in the prior year.
Kam: 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.
Kam: <unk> of the <unk> pipeline.
Kam: Facility's volumes of 0.8 million barrels per day in the first quarter of 'twenty.
Kam: Four represented 12% increase compared to the same period in the prior year.
Cameron J. Goldade: The increase was primarily due to higher volumes at the Redwater Complex and Younger, as the first quarter of 2023 was impacted by the Northern Pipeline system outage, combined with higher interruptible volumes on certain PGI assets. Pembina continues to generate significant cash flow after dividends and maintain its strong balance sheet. At March 31st, 2024, based on the trailing 12 months, the ratio of proportionally consolidated debt to adjusted EBITDA was 3.4 times below the low end of its target range. I'll now turn things back to Scott.
Kam: The increase was primarily due to higher volumes at the Red water complex and younger as the first quarter of 2023 was impacted by the northern pipeline system outage combined with higher interruptible volumes on certain pgi assets.
Kam: And it continues to generate significant cash flow after dividends and maintain a strong balance sheet.
Kam: At March 31, 2024 based on the trailing 12 months the ratio of proportionally consolidated debt to adjusted EBITDA was 334 times below the low end of its target range.
I'll now turn things back to Scott.
Scott Burrows: Thanks, Cam. For a 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 Pembina, its customers, and all Canadians. These developments include LNG projects on Canada's West Coast, the growth of Alberta's petrochemical industry, and the Trans Mountain Pipeline expansion. All of us at Pembina wish to join the rest of industry and many others across Canada in celebrating the first of these to reach the finish line.
Scott: Thanks Cam.
Cam: 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 pembina 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.
Cam: All of us at <unk> wish to join the rest of 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 resource.
Scott Burrows: The recent completion and shipment of the 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 responsibly produced energy is available to meet growing global demands.
Cam: While helping to ensure responsibly produce energy is available to meet growing global demand.
Scott Burrows: In closing, I want to remind you that Pembina will hold its annual meeting of common shareholders today at 2pm Mountain Time, 4pm 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. Additionally, Pembina will hold its 2024 Investor Day in Toronto on May 16th, beginning at 8.30pm 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 amidst truly transformational changes underway in the Western Canadian energy industry.
Cam: 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.
Cam: Further pembina will hold our 2024 Investor day in Toronto on May 16th beginning at 830 eastern time or.
Cam: Our team is excited to provide an overview of the business and discuss in greater detail our strategy and the outlook for the company. It's true a transformational changes underway in the Western Canadian energy industry. A live webcast 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.
Scott Burrows: A live webcast event will be available on Pembina's website, and participants are encouraged to register well in advance. For further information on both the annual meeting and investor day, please visit the investor tab at www.pembina.com. 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.
Cam: Please visit the Investor tab at Www Dot permanent Dot Com, we would once again like to thank all our stakeholders for their support operator. Please go ahead and open up the line for questions.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press the R1 on your touchtone. You will hear a three-tone prompt acknowledging your request, 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 2. If you are using a speakerphone, please lift the handset before pressing any key. One moment, please, for your first question. The first question comes from Jeremy Tonet of JP Morgan. Your line is already open.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: If you have a question. Please press star one on your Touchtone phone.
You will hear a three ton prompt acknowledging your request and.
Speaker Change: And the questions will be pulled in the order they are received.
Speaker Change: If you would like to withdraw from the question queue. Please press star two.
Speaker Change: If you're using a speaker phone please lift the handset before pressing any.
Speaker Change: One moment. Please for your first question.
Speaker Change: Your first question comes from Jeremy Toney of J P. J P. Morgan Your line is already open.
Jeremy Bryan Tonet: Hi, good morning.
Jeremy Bryan Tonet: Morning, Jeremy.
Jeremy Bryan Tonet: Thanks for all the detail this morning. I just want to dive in a little bit more on the fundamentals as you see them before you and, if you could, I guess, you know, producer customer conversations at this point and how you see kind of activity unfolding over the balance of this year, the cadence of growth, and you know, how you see that, I guess, that trajectory at this point.
Jeremy Bryan Tonet: Thanks for all the detail. This morning, I just wanted to dive into what is it more of a 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.
Do you see that I guess that that trajectory at this point.
Scott Burrows: Yeah, I'll start with Jeremy, and I'll invite 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 viewing some of the results this week and last week, we're seeing, you know, 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've been talking about for a while now. So the conversations with producers have been great, the results are showing through, and we're seeing a lot of momentum in the business.
Speaker Change: 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.
Speaker Change: Results this week and last week, we're seeing many of our producers come in above expectations.
Speaker Change: Especially driven by strong condensate pricing strong oil pricing and again in anticipation of some of these transformational events that we that we've that.
We've been talking about for a while now so the conversations with producers have been great. The results are showing through and we're seeing a lot of momentum in the business.
Cameron J. Goldade: Jeremy, it's Cam here. Maybe I'll just add that one of the things that we think makes Pembina unique is obviously our exposure to all the commodities in the industry here in the hydrocarbon value chain. And I think, you know, as you've seen results come out that Scott referenced, some folks who have the optionality to allocate capital between drier gas and more liquids, rich gas are indeed shifting towards the liquids, rich gas, and obviously, both of those work for Pembina given the exposure in our portfolio. So, you know, we see that as a real unique element for us and continue to see good runway in 2024.
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.
Jeremy Bryan Tonet: In the industry and the hydrocarbon value chain and I think as.
Jeremy Bryan Tonet: As you've seen.
Jeremy Bryan Tonet: <unk> come out that Scott referenced.
Jeremy Bryan Tonet: Some folks who have the optionality to allocate capital between dry gas and more liquids rich gas or intent or indeed shifting towards the liquids rich gas and obviously.
Jeremy Bryan Tonet: Both of those work for permanent given the exposure in our portfolio. So we see that as a real unique element for us and continue to see.
Jeremy Bryan Tonet: Good runway in 2024.
Jeremy Bryan Tonet: Got it. Thanks for that. And with a little bit more time having passed since the Dow announcement, just wondering if there's any additional details or thoughts you could provide as far as the scope of the opportunity set and what it could mean for Pembina, particularly operating leverage versus Brownfield versus Greenfield opportunities.
Speaker Change: Got it thanks for that and a little bit more time, having passed the Dow announcement, just wondering if there's any incremental details of thoughts you can provide as far as the scope of the opportunity set what it could mean for <unk>.
Speaker Change: Particularly you know operating leverage versus brownfield versus greenfield opportunities.
Scott Burrows: Jeremy, I think we'll dive into that a little bit more next week at our Investor Day. So I'm not, we'll answer your question, but we'll do it next week.
Speaker Change: Jeremy I think we will dive into that a little bit more next week at our at our Investor day. So.
Jeremy Bryan Tonet: I will answer your question, but we'll do it next week.
Jeremy Bryan Tonet: 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, you know, dividend growth, buybacks, what have you?
Speaker Change: Fair enough fair enough.
Speaker Change: I think I might get the same answer for this one but I'll try nonetheless with leverage having fallen below I guess.
Jeremy Bryan Tonet: I got a range just any updated thoughts on capital allocation between growth Capex bolt on dividend growth buybacks what have you.
Cameron J. Goldade: Yeah, you know, it's a fair comment, Jeremy. And I think as we look out at 2024 and 2025, you know, potentially even even the year after that 2026, you know, if we, if we look at where we are today, you know, with some of the capital, the investment in Cedar, through to the middle of this year, you know, we're sort of, depending on where you choose your point in the range, we're relatively on point with sort of funding all that capital with cash flow after dividends.
Speaker Change: Yeah, It's a fair comment Jeremy and I think as we look out at 2024.
Speaker Change: 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 investment in Cedar through to the.
Speaker Change: The middle of this year.
Speaker Change: We're sort of.
Speaker Change: 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.
Cameron J. Goldade: And if you sort of take forward that proxy and assume that, you know, we make a positive FID on Cedar later this year, you know, 2025, probably not that different. And so, you know, we continue to think that, obviously, the most accretive and best use of that capital right now are those opportunities which are in strategy and provide long-term annuities with strong counterparties and downside protection.
Speaker Change: And if you sort of take forward that proxy and assume that you know we make a positive FID on on Cedar later this year 2025.
Speaker Change: <unk> not that different and so we continue to think that.
Speaker Change: The most accretive and best use of that capital right now.
Speaker Change: Obviously are those are those opportunities, which are in strategy and provide long term annuities with strong counterparties and downside protection.
Cameron J. Goldade: That said, you know, 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, obviously, we are at the low end of the range right now, incremental buybacks, if they make sense, you know, from a capital allocation perspective, or, you know, other opportunities. Obviously, we continue to have a backlog beyond the things we're talking about and continue So probably not much different from what you have heard from us in the past.
Speaker Change: That said.
Speaker Change: If something changes there.
Speaker Change: I'll do the same thing as we've always done and look at the opportunity set.
Speaker Change: Between repayment of debt obviously, we are at the low end of the range right now.
Speaker Change: Incremental buybacks if it makes sense.
Speaker Change: From a capital allocation perspective, or other opportunities obviously, we continue to have <unk>.
Speaker Change: 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.
Jeremy Bryan Tonet: Got it. It makes sense. Thank you for that.
Speaker Change: Got it makes sense. Thank you for that.
Robert Hope: Your next question comes from Rob Hope of Scotiabank. Your line is already open.
Speaker Change: Your next question comes from Rob Hope.
Robert Hope: Of Scotiabank your line is already open.
Robert Hope: Morning, everyone. I want to just ask on the Alliance Knocktable.
Robert Hope: Good morning, everyone wanted to just ask on the Lifelock stable. So it's been in your hands for a little while now.
Jaret A. Sprott: So it's been in your hands for a little while now. You know, obviously an asset that you know well, but how are you progressing with thinking about commercial synergies there? And, you know, what is the timeline that we could potentially look to?
Robert Hope: Obviously, an asset well, but how are you progressing on thinking about commercial synergies there and.
Robert Hope: What is the timeline that we can potentially look to.
Jaret A. Sprott: Rob Jaret here. So yeah, April 2nd, we brought over 161 employees over to Pembina. So, you know, 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 this commercial opportunity. I don't I think it's a little bit early there right now, but the short-term synergies that we talked about when we announced the deal are going extremely well.
Robert Hope: Hello, Rob Jaret here. So yes April 2nd we brought over 161 employees over to over to Pamela.
Jaret A. Sprott: Step one is obviously business continuity.
Jaret A. Sprott: 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.
Jaret A. Sprott: And then the longer term, kind of that midterm to longer term synergies, expansions, different commercial opportunities, just continuing to be worked on. Like you said, we know the asset well; we were the commercial operator of Alliance previously, and, you know, just continuing to work on that and hopefully provide more color in the near future.
Jaret A. Sprott: Term to longer term synergies.
Jaret A. Sprott: 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.
Cameron J. Goldade: And Rob, maybe I'll just jump in. It's Cam.
Jaret A. Sprott: And Rob maybe I'll, just I'll just jump in it's Kim.
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.
Cameron J. Goldade: You know, I think maybe to say it another way, you know, 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 continuing to progress the ones that, you know, 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.
Kim: 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.
Kim: 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.
Jaret A. Sprott: And I just pile on in terms of operations, you know, not synergy, but certainly with what's going on with Chicago gas prices being a little bit lower than historical, we've seen, you know, a short-term tailwind at AuxAble just with where frack spreads are. So, you know, currently for 2024, AuxAble was tracking above our acquisition model. All right, appreciate it.
Kim: 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.
Robert Hope: All right, appreciate that. And then actually, maybe sticking with marketing, a nice tailwind for the quarter, how 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 of the year performance?
Speaker Change: Alright, I appreciate that and then actually maybe sticking with marketing.
Speaker Change: A nice tailwind for the quarter.
Speaker Change: 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 of their performance.
Speaker Change: Okay.
Chris Scherman: Hey Rob, Chris Sherman, you know I think we definitely saw in Q1, as others referenced, really positive frack spreads. Gas in particular ended up being the tailwind there, as well as, you know, obviously 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 here over the last couple weeks, as I think US gas prices have come up a little bit, but in particular, NGL prices are seeing a little bit of pressure with some bigger inventory numbers. That said, we remain fairly positive on frack spreads for the remainder of the year and optimistic about that. And Rob, just on your second question.
Chris Scherman: Hey, Rob Chris Sherman.
Chris Scherman: I think we do.
Chris Scherman: Definitely saw in Q1.
As as others referenced really positive frac spreads.
Chris Scherman: 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.
Chris Scherman: 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.
Chris Scherman: On Frac spreads for the remainder of the year.
Chris Scherman: And optimistic on that.
Cameron J. Goldade: Rob, just on your second question, the reference to the new marketing agreement is the same reference that we made at the time that we announced the acquisition of Alliance and Uxable. You know, this would obviously be the first quarter where it's been in place. We won't go into specific details on it, as it is sort of customary for us with commercial agreements, but what I would say is that this agreement is simpler than the former one and, obviously, you know, 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.
Speaker Change: 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.
Speaker Change: This would obviously be the first quarter, where its been in place.
Speaker Change: 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 simpler than the former one and obviously.
Speaker Change: It does create.
Speaker Change: Does create some opportunities.
Speaker Change: For us in certain environments and down the line, so a simplification and obviously some different participation at different pricing thresholds.
Speaker Change: Thank you.
Linda Ezergailis: Your next question comes from Linda Ezergailis of TD Collins. Your line is already open. Thanks.
Speaker Change: Your next question comes from Linda as our dailies.
Linda: P D Collins Youre line is already open.
Linda Ezergailis: Thank you. I'll try to keep my high-level questions high-grade, knowing that you're 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're hearing it's dry.
Linda: 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.
Linda: We're hearing of low water levels in Western Canada.
Linda: We are hearing it's dry theres concerns about wildfire risk.
Jaret A. Sprott: There are concerns about wildfire risk. You know, how are you preparing for that, maybe in your marketing business and your operations? What is embedded into your guidance already versus maybe an emerging headwind for that? And can you talk us through kind of what you're seeing on the ground and what your expectations are in terms of bookends of what the impact might be even on volumes on your systems as, you know, facilities might even be preemptively shut down in advance of certain wildfires in the areas you operate, et cetera?
Linda:
Linda: How are you preparing for that maybe in your marketing business in your operations.
Linda: What is embedded into your guidance already.
Linda: 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.
Linda: The impact might be even on on volumes on your system says.
Linda: Facilities might even be preemptively shut down are in advance of a certain certain wildfires in the areas you operate et cetera.
Jaret A. Sprott: Good morning Linda, Jaret here. With respect to the 1st question, the water levels and it being dry, that is 100% accurate. The conversations we have had with our customers to date have been that the majority of our customers have retained the water that's required in their pits and or their storage facilities. A lot of our customers have recycling operations, etc. So, that's what we're hearing from them to date about their ability to stimulate the wells go forward.
Linda: Good morning, Linda Jaret here with.
Linda Ezergailis: With respect to the first question water levels and its being drive that is a 100% accurate.
Linda Ezergailis: The conversations we have with our customer customers to date is the majority.
Any of our customers have.
Linda Ezergailis: <unk> retained the the water thats required in their in their pants <unk> their storage facilities.
Linda Ezergailis: A lot of our customers have recycling operations et cetera.
Jaret A. Sprott: They don't have a lot of concerns with that. Now, your 2nd portion of the question was about wildfires. So, we're 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-hour basis. And then, you know, there's nothing active to date near our assets that would give us any concern. There was no anticipation right now to be preemptively shutting down assets.
That's what we're hearing from them to date is that.
Linda Ezergailis: Their ability to stimulate the wells go forward.
Linda Ezergailis: 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.
Linda Ezergailis: I would say, we're in a significantly better place.
Linda Ezergailis: As an industry, but definitely as an organization here at Pembina, we monitor wildfire activity on a 24 seven basis.
Linda Ezergailis: And then.
Linda Ezergailis: There is nothing active.
Linda Ezergailis: To date near our assets that would give us any concern.
Jaret A. Sprott: And just to note last year, any assets that we did shut down, it was primarily due to our ability to get our employees safely out of harm's way. So, the actual assets themselves were never in physical danger.
Linda Ezergailis: 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.
Linda Ezergailis: It was the egress component that was why we would have had to shut down last year. But I would say we're well prepared, monitoring it, and hopefully, we can proceed through the summer. We just did get some pretty good rain here in the last few days, but definitely hoping for wetter weather.
Linda Ezergailis: 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.
Linda Ezergailis: And hopefully we we proceed through the summer we just did get some pretty good rain here in the last few days, but definitely.
Jaret A. Sprott: Good. Thank you for that update.
Linda Ezergailis: Hoping for wetter weather.
Linda Ezergailis: 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 the offerings that you are leading with in those discussions? And I would say, "no real."
Speaker Change: Got it thank you for that update and maybe just a follow on question.
Speaker Change: Again in discussions with your customers.
How are they evolving commercially in terms of.
Speaker Change: Full path solutions versus discrete services.
Speaker Change: And what is the tilt in terms of.
Speaker Change: Where are the offerings that you are leading with on those discussions.
Jaret A. Sprott: Linda, I would say no real change. Most of the discussions that we're continuing to have are about our integrated services, mainly pipe frack or gas plant pipe frack. You know, I think the nice thing about having sanctioned RFS4 when we did was that we have that capacity coming online in 2026 in what is a relatively tight frack market. So we think we're well positioned to continue our integrated value chain service offering.
Speaker Change: 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.
Speaker Change: Mine in 2026 in.
Speaker Change: In what is a relatively tight frac market. So we think we're well positioned to continue our integrated value chain service offering.
Speaker Change: Thank you.
Robert Catellier: Your next question comes from Robert Catellier of CIBC Capital Markets. Your line is already open.
Speaker Change: Your next question comes from Robert <unk> of CIBC capital markets. Your line is already open.
Stuart V. Taylor: Hey, good morning. As you're aware, there were some media reports over the last couple weeks about a potential offtake agreement and alluding to the potential sale of an equity stake in Cedar LNG. I don't expect you to comment on any specific transaction, but can you maybe describe in more detail your appetite to sell an equity stake in Cedar LNG at all? It sounded from Cam's comments on the funding plan that Pembina doesn't need any external equity or an equity partner for that project.
Robert Hope: Hey, good morning.
Robert Hope: As you are aware there were some media reports over the last couple of weeks about a potential offtake agreement and.
Robert Hope: Moving to potential sale of an equity stake in the 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.
Robert Hope: It sounded like from <unk> comments on the funding plan.
Robert Hope: Permanent doesn't need any external equity or an equity partner for that project.
Stuart V. Taylor: Hey, Rob, it's, pardon me, it's Stu Taylor. You know, we're continuing to progress our commercial conversations with a number of parties just on the, you know, our intention, pardon me, to, you know, assign our capacity, the Pembina capacity, to an offtaker. With respect to equity, there are no plans at this point in time for any equity structure change on the Cedar pipeline or on the Cedar project, sorry. And at this point in time, all of those conversations would require approval from our partner as well. So, there is no equity change at this point in time.
Robert Hope: Hey, Rob It's pardon me, it's due Taylor.
Taylor: We're continuing to progress our commercial conversations with a number of parties just on the <unk>.
Taylor: Our intention pardon me two two.
Taylor: Assign our capacity the permanent capacity to an off taker with respect to the equity Theres No no plans at this point in time for any equity structure change on the Cedar pipeline, obviously, you're a product story and at this point in time.
Taylor: All of those conversations would require approval from our partner as well. So there is no equity changed at this point in time.
Robert Catellier: Okay, and just on the assigning that capacity to a third party, I'm just curious if you see any benefit in waiting till closer to the commercial operating date in an effort to maximize value once the project is de-risked.
Taylor: Okay and just on the.
Taylor: Signing that capacity to a third party.
I'm just curious have you see any benefit.
Taylor: Waiting till closer to the commercial operating date.
Taylor: In an effort to maximize value once the project is derisked.
Stuart V. Taylor: We've, you know, 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 FID. We've been in conversations with a number of parties for a fair period of time. We continue to have ongoing conversations.
Speaker Change: We've we're looking at that Rob.
Rob: It's one of those things that.
Rob: We're looking at the timing nothing will take place until post FY <unk>.
Rob: We've been in conversations with a number of parties for a fair period of time.
Rob: We've we continue to have ongoing conversations.
Stuart V. Taylor: And, you know, at the end of the day, we'll look at that timing. We think we have the opportunity to do the right deal for us. And so we'll evaluate that timing. And if, you know, 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, you know, we're actively engaged in conversations with people and making good progress on that.
Rob: At the end of the day, where we will look at that timing.
Rob: We think we have the opportunity to do the right deal for us and so we'll evaluate that timing in that.
Rob: The right deal comes in for Us to execute we will move on it.
Rob: It means taking a bit more time, we'll do that as well but.
Rob: We're actively engaged in conversations with people and making good progress on that.
Cameron J. Goldade: 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 the supply of that thing for the transportation agreement with Dow.
Speaker Change: Okay, and finally translate groups might have to wait until next week, but I'm curious if there's any update on how you plan to source of supply of that paying for the <unk>.
Speaker Change: Transportation agreement with Doe.
Robert Catellier: Yeah, I think that's right, Rob. I think we'll probably punt that till next week and sort of give everyone the benefit of the doubt. I'm rolling that out.
Speaker Change: Yeah, I think that's right Rob I think I think we'll probably punt that until next week.
Speaker Change: To give everyone the benefit of.
Of rolling that out.
Cameron J. Goldade: Okay, thank you.
Speaker Change: Okay. Thank you.
Benjamin Pham: Your next question comes from Ben Pham of BMO. Your line is already open. Hi, thanks.
Speaker Change: Your next question comes from Ben Pham of BMO. Your line is already open.
Benjamin Pham: Hi Amory. You mentioned the NEBC project, you have Cedar LNG, and it sounds like there's Something on FAA and Dow as well in terms of Cappex. So, think about all those projects and maybe other projects ahead. Where do you see annual CAPEX spending? The next three or four or five years, and at what point do you have to start to consider other sources of funding beyond?
Benjamin Pham: Hi, Thanks, good morning.
Benjamin Pham: You mentioned that the <unk> project.
Benjamin Pham: LNG and it sounds like there's.
Benjamin Pham: Something on an ethane DAU as well in terms of Capex.
Benjamin Pham: When you think about all of those projects and maybe better projects ahead.
Benjamin Pham: Where do you see your annual Capex spending.
Benjamin Pham: The next three or four or five years.
Benjamin Pham: But what point do you have to start to consider sources of funding beyond.
Benjamin Pham: The debt markets.
Cameron J. Goldade: Hey, Ben, it's Cam. You know, picking up on my earlier comments, I would say that, you know, if we look forward right now, let's play out a couple scenarios. If we proceed and make a positive final investment decision on Cedar, you know, we're probably running right around cash flow after dividends in terms of capital levels for the next couple years. And then, you know, the heavy piece of the Cedar spend starts to trail off then.
Jim: Hey, Ben it's Jim.
Benjamin Pham: I think picking up on my earlier comments I would say that if we look forward right now.
Jim: Let's play out a couple of scenarios.
Jim: If we proceed and make a positive.
Jim: Final investment decision on Cedar, we're probably running.
Jim: Right around cash flow after dividends in terms of capital levels.
Jim: For the next couple of years.
Jim: And then the.
Jim: Heavy piece of the Cedar spend starts to trail off then.
Cameron J. Goldade: If we think about the longer term, I mean, obviously, that's a little bit harder to gauge, but obviously, you know, we continue to advance a backlog. But what I would say is, you know, we're very conscious of not only the nature of the projects but how they fit together as a program in terms of, you know, our strategy and also, you know, the funding piece. So it is certainly an important input to the capital allocation process.
Jim:
Jim: If we think about longer term I mean, obviously, that's that's a little bit.
Jim: Harder to gauge, but obviously, we continue to advance a backlog of what I would say is.
Jim: We're very conscious of.
Jim: 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 to the capital allocation process.
Cameron J. Goldade: If we look at a scenario where, you know, we didn't in fact proceed with CDER, just to play that out for a moment, obviously, you know, we would have substantially more free cash flow to work with. And obviously, as per my earlier comments, we'd look at the same alternatives that we've discussed already. But ultimately, you know, we've got some pretty attractive opportunities in front of us, and I think, provided those continue on the path they're on, we'll probably be running pretty close to free cash flow at those levels for the next couple of years, at least. Okay.
Jim: 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.
Jim: 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 path and Ron will be running probably pretty close to free cash flow at those levels for.
Jim: For the next next couple of years at least.
Benjamin Pham: Okay, got it. And I apologize if I missed this on the facility segment you referenced. Operating Expense Pressure. I think that's the verbiage. Could you unpack that?
Speaker Change: Okay got it.
Speaker Change: And I apologize I may have missed this on your facilities segment you reference.
Speaker Change: Operating expense at crush.
Speaker Change: Pressure I think that the very rich could you unpack that a bit and then can you also comment is there.
Jaret A. Sprott: that have been, and can you also comment, is there... Is there anything you're seeing with maybe some of your producers curtailing production because of low eco prices?
Speaker Change: Is there anything you are.
Speaker Change: Seeing on maybe some of your producers curtailing.
Speaker Change: Production because of low a coal prices.
Jaret A. Sprott: Morning, Ben. No, you know, like we've said before, I'll take the second part of your question. The majority of our assets, if not all of our assets, are pretty much in the liquids-rich window. So we haven't seen any curtailment. And if we have, it's been so immaterial that we haven't noticed it. Our customers have great condensate yields and great NGL yields, which, ultimately, even at a low eco natural gas price, we're still seeing strong volumes through PGI, etc.
Speaker Change: Morning, Ben.
Speaker Change: Like we've said before I'll take your second part of your question. The majority of our assets if not all of our assets are pretty much in the liquids rich liquids rich window.
Speaker Change: So we haven't seen any curtailment and if we have it has been it's been so immaterial that we haven't noticed it.
Speaker Change: 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.
Jaret A. Sprott: No, we're not seeing anything with respect to cost pressures, not seeing anything like out of the ordinary, just a little bit more work in certain areas that weren'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. And then just to add to that, I mean, the one thing that we saw.
Speaker Change: No we're not seeing anything in with respect to cost pressures not seeing anything 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.
Speaker Change: Supply chain and inflation pressures, but nothing out of the ordinary that is keeping us up that's for sure.
Cameron J. Goldade: And Ben, just to tag on to that, I mean, the one thing that we saw and did, you know, inform part of that variance this quarter was just, you'll remember the, you know, the union agreement that was renegotiated at the Port of Vancouver last year, you know, that's showing up in the variance quarter over quarter in Q1. It's just a few million dollars, but it's part of the variance.
Speaker Change: Then just to tag onto that I mean, the one thing that we saw it ended in.
Speaker Change: Informed part of that variance this quarter was just.
Speaker Change: Youll remember that you're.
Speaker Change: 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 it's.
Speaker Change: That's part of the variance.
Speaker Change: Okay. Thank you very much.
Zackery Lee Van Everen: Your next question comes from Zack Van Everen of TPH & Company. Your line is already open.
Speaker Change: Your next question comes from Zach than ever N of Tpa <unk> Company. Your line is already open.
Zackery Lee Van Everen: Perfect. Good morning, guys. Just a question on the new pipeline you mentioned between Taylor and Gordondale, would there be any additional infrastructure downstream needed to support that if you guys sanction that project? And then is there enough space on the piece in the fracs to accommodate the incremental liquids there?
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.
Jaret A. Sprott: Good morning. Yeah, so once we cross the border from Taylor to Gordondale, there's no incremental, no material incremental, like, pipelining work that's required from Gordondale into the Edmonton and Fort Saskatchewan markets. We will require some pump stations on certain segments of the line, and that's primarily from Fox Creek into the market, Edmonton, and Fort Saskatchewan. That has always been contemplated right back from the time of the phase 3 expansion. Grow those volumes, and so that's why we're extremely well positioned to capture those volumes without having to deploy a whole bunch of mainline capital.
Speaker Change: Good morning.
Speaker Change: 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 market, 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 right.
Speaker Change: Back from the time of the phase III expansion.
Speaker Change: 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.
Chris Scherman: Gotcha, that makes sense. And then maybe one on LPG exports. It's been very topical here in the States, and I was just curious if you had any updates on Prince Rupert expanding and, you know, do you need any additional facilities there that would be sanctioned?
Speaker Change: 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 in.
Speaker Change: Do you need any additional facilities there that would be sanctioned.
Chris Scherman: It's Chris Sherman. You know, we continue to see, obviously, this ramp up in Western Canadian production, increased propane length in Western Canada, as well as the lower 48, and that dynamic really pushes you towards the West Coast. So, we continue to look at our options there. You know, we think 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. So, we continue to look at it and remain interested. Perfect.
Chris Scherman: It's Chris Sherman.
Chris Scherman: We continue to see obviously this ramp up in western Canadian production.
Chris Scherman: Increased propane.
Chris Scherman: Blanks 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.
Chris Scherman: 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.
Speaker Change: Perfect. That's all I had thanks guys.
Zackery Lee Van Everen: Perfect. That's all I had. Thanks, guys. Your next question comes from Cole Pereira of Stiefel. Your line is already open. Hi, good morning all.
Cole Pereira: Your next question comes from Cole Pereira of Stiefel. Your line is already open. Hi, good morning all. So, acknowledging.
Coal Pereira: Your next question comes from coal Pereira of Stifel. Your line is already open.
Coal Pereira: 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.
Cole Pereira: With <unk> now in service, there's obviously still some uncertainty on towards another factors, but.
Cole Pereira: Can you just refresh us on your thinking about how you see that fitting with your asset base in your strategy.
Cameron J. Goldade: It's Cam here. Yeah, you know, what I would say is that, obviously, we've been quite clear that global exports are, you know, a critical pillar in our strategy. You know, obviously, you can see, you know, just in the last question, what a focus it is for us on the NGL side, obviously, on LNG, as well as Cedar. But that said, as I think we've been pretty consistent for some time, there exists a great deal of uncertainty still on TMX.
Cole Pereira: Hey call its cam here.
Cam: What I would say is I think obviously.
Cam: We've been quite clear that global exports.
Cam: A critical pillar in our strategy.
Cam: Obviously, you can see just in the last question would a focus it is for us on the <unk>.
Cam: NGL side, obviously on LNG as well with Cedar.
Cam: That said as I think we've been pretty consistent for some time.
Cam: There exists.
Cam: Right deal of uncertainty still on T. M X, obviously, one very important milestone.
Cameron J. Goldade: Obviously, you know, one very important milestone has passed with the pipeline coming into service. But I, you know, I understand that the toll resolution process is ongoing and is likely to take some time to resolve. And, you know, from our perspective, there still exists a tremendous amount of uncertainty around that asset. And so, frankly, nothing has changed from our prior messaging in terms of, you know, that as an investment opportunity. It's not something we're spending a great deal of time on right now, but obviously, global exports are always important in our strategy.
Passed with the pipeline coming into service.
Cam: But I you know I understand that the toll resolution process.
Cam: Is ongoing and is likely to take some time to see resolution.
Cam: And from our perspective, there's still exists a tremendous amount of uncertainty around that asset and so frankly nothing.
Cam: Nothing has changed from our prior messaging in terms of that as an investment opportunity. It's not something we're spending a great deal of time on right now but.
Cam: Obviously global exports are always important in our strategy.
Cam: Okay.
Speaker Change: Okay, Great. That's all from me, Thanks, I'll turn it back.
Speaker Change: Okay.
Robert Michael Kwan: Your next question comes from Robert Kwan of RBC Capital Markets.
Speaker Change: Your next question comes from Robert Kwan of RBC capital markets. Your line is already open.
Scott Burrows: Thank you, good morning. You've got a bunch of large projects, if you notice, LNG, Canda, TMX, and then your own kind of Cedar. Just wondering, since you're talking with customers, What's the nature of the discussions at this point with respect to new projects? kind of following on those developments upstream. You see a lot of potential there. You know, I think, you know, for us, a lot of that was captured over the last call it 12 to 24 months with some of our big Northeast BC arrangements 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 in 25 and into 26.
Robert Michael Kwan: Thank you good morning.
Robert Michael Kwan: You've got a bunch of large projects as you noted.
Robert Michael Kwan: <unk> and Tim accident in your own kind of Cedar just wondering since you are talking with customers.
Robert Michael Kwan: <unk>.
Robert Michael Kwan: What's the nature of the discussions at this point with respect to new projects.
Robert Michael Kwan: Kind of following on those developments upstream infrastructure.
Robert Michael Kwan: Do you see a lot of potential there.
Robert Michael Kwan: I think for us.
Robert Michael Kwan: 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 west.
Robert Michael Kwan: 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.
Scott Burrows: You know, I think a lot of people are continuing to, as Jaret said, drill in the liquids-rich areas, especially in the condensate-rich areas that, with the outlook for increased oil demand and ergo incremental condensate need, we're seeing a lot of activity in the condensate windows.
Robert Michael Kwan: I think a lot of people are continuing to.
Robert Michael Kwan: As Jared said drill in the liquids rich areas, especially in the condensate rich areas that would.
Robert Michael Kwan: 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.
Scott Burrows: So we are starting to see it, Rob, show up, but not just, you know, in the short term, but as people are sanctioning some of these projects into 25 and 26. Okay, Scott, just so I'm clear, when you talked about the next 12 to 24 months, were you talking about projects that you've already announced, or do you expect that we will see additional projects kind of sanctioned over that next 12 to 24 months to drive the volume?
Robert Michael Kwan: Rob show up but not just short term, but as people are sanctioning some of these projects into 'twenty five 'twenty six.
Rob: Okay. 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 the volumes.
Scott Burrows: I'm saying a lot of both. We're seeing some of the volumes that we locked up, call it a year ago. We're going to start to see those volumes materialize on the system in the next 12 to 24 months, and then we're also seeing and talking to producers about some of their developments that they could potentially sanction over the next 12 to 24 months which would then drive volume further on in the plan and that's always been you know what's given us confidence from changing you know from from talking about volume growth in that five percent range you know we almost talked about it annually because that's the line of sight we had but now you know for the last 12 months we've been saying that that we have a view that that could continue on for for a couple years here at least because we have much more visibility into that.
Scott: I'm seeing a lot of both we're seeing some of the volumes that we.
Locked up call. It a year ago were start we're going to 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 other 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.
Scott: Whats given us confidence from changing.
Scott: 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 have 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.
Scott Burrows: Got it. If you just look at the lower take or pay deferrals in the quarter, is that a function of a more bullish outlook, or is that more so that you're just so deep into the fee-based components of the contract that deferring is just overly conservative and unnecessary.
Speaker Change: Got it.
Speaker Change: If you just look at the lower take or pay deferrals in the quarter is that a function.
Speaker Change: 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.
Cameron J. Goldade: You know, Rob, what it really comes down to is us having a number of years under our belts now, in terms of observing history, how producers trend throughout the year, their history in terms of accessing those makeup rights, and now we have a statistical body of information that we can look at to create a higher degree of certainty where we can be comfortable recognizing those volumes early in the year than we have previously.
Speaker Change: Rob what it really comes down to is us having a number of years under our belt now in terms of observing.
Speaker Change: History.
Speaker Change: Now how producers trends through out throughout the year.
Speaker Change: Their history in terms of accessing those makeup rights.
Speaker Change: And now we have a statistical body of information, which we can look at.
Speaker Change: To create a higher degree of certainty, where we can be comfortable recognizing those volumes early in the year than we have previously.
Cameron J. Goldade: Got it. And if I can just finish with a clarification, just there's been a lot of talk about, especially Cedar specifically, but just CapEx and where you would be, you know, pre-taxable, positive, or neutral. When you're looking at Cedar, are you specifically looking at that as the equity contribution, or are you looking at it as your proportional CapEx? We're looking at it as our equity.
Speaker Change: 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.
Speaker Change: Looking at it as your proportional.
Speaker Change: Capex.
Cameron J. Goldade: We're looking at it as our equity contribution. Okay, that's great. Thank you.
Speaker Change: We're looking at it as our equity contribution.
Speaker Change: Okay. That's great. Thank you.
Patrick Kenny: Your next question comes from Patrick Kenny of National Bank. Your line is already open.
Speaker Change: Your next question comes from Patrick Kenny of National Bank.
Patrick Kenny: Your line is already open.
Patrick Kenny: Thank you, good morning guys. Wondering if you had any thoughts on the... You know how the destination of TMX volumes plays out here, Asia versus California, and you know how this dynamic might create opportunities for your tankage footprint or perhaps blending operations whether at North 40, you know, baseline, the Mayo, you name it, just your general thoughts on opportunities across your system.
Patrick Kenny: Thank you good morning, guys.
Patrick Kenny: I'm wondering if you had any thoughts on the.
Patrick Kenny: How the destination of Tms volumes plays out here Asia versus California and.
Patrick Kenny: How this dynamic might create opportunities for your tankage footprint or perhaps blending operations.
Patrick Kenny: Whether it north 40 baseline EMEA Oh, you name it.
Speaker Change: Just <unk>.
Speaker Change: General thoughts on.
Speaker Change: Opportunities across your system.
Chris Scherman: Hey, it's Chris. You know, I think it's very difficult at this point for us to speculate on where those volumes are going to end up. So we'll probably stay away from that one. But undoubtedly, there's some positive flow back into our business from that commerce going west. And I think it shows up to some degree in tanks, as customers are trying to optimize flows east and west, as well as they're trying to manage quality. So we definitely see a bit of a bit of a tailwind there and are optimistic about what it means for the basin more broadly, but certainly for our tankage in our business.
Chris: Hey, it's Chris.
Chris: Very difficult at this point for us to have.
Chris: Pine on where those where those volumes are going to add it 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 some degree in tanks as customers are trying to optimize flows east.
As well as Theyre trying to manage quality. 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.
Scott Burrows: And obviously, Pat, the number one significant impact on Pembina long term, and I'm going to talk about this a little bit more next week, is... increased egress, you know, it'll raise the price of, you know, the heavier oils here in Western Canada, and that should spur on incremental supply that will require condensate. Obviously, Pembina has a fairly large condensate business with respect to peace So higher utilization and incremental, you know, expansions to get more condensate into the Edmonton market, which will ultimately head up into the new supply that's coming on. So that's really where Pembina benefits significantly.
Chris: Obviously the number one.
Chris: Significant impact to permanent long term and I'm going to talk about this a little bit more next week is.
Chris: Increased egress it'll raise the price of the heavier oils here in Western Canada that should spur on incremental supply that will require condensate, obviously pembina has a fairly large condensate.
Chris: 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.
Chris: The new supply that's coming on so that's really where pembina significantly benefits.
Patrick Kenny: Got it. Okay, that's great. I appreciate that.
Speaker Change: Got it okay, that's great I appreciate that.
Speaker Change: And then maybe just on your your hydrogen ammonia opportunity at Red water.
Speaker Change: If I recall I believe the feed study was expected to be completed by now so maybe just.
Speaker Change: As a status update there and then.
Patrick Kenny: And then maybe just on your hydrogen ammonia opportunity at Redwater. If I recall, I believe that the feed study was expected to be completed by now. So maybe just there's a status update there, and then I'm curious, too, if you believe... You know, the sequestration economics for your customers can be underwritten solely by the proposed ITCs or, if perhaps, you know, these economics are also contingent on mitigating the price of carbon through CFDs or otherwise.
Speaker Change: I'm curious too if you believe.
Speaker Change: The sequestration economics for your customers can be.
Speaker Change: Underwritten solely by the proposed Itc's or.
Speaker Change: Perhaps these economics are also contingent on me.
Speaker Change: Mitigating the price of carbon through cft's or otherwise.
Stuart V. Taylor: Pat, it's Stu. I'll start, you know, we continue to progress with our ammonia project. We're wrapping up the pre-fueling work. You know, we've had, Mayor Benny has been a great partner to work with.
Speaker Change: Todd it's too I'll start.
Speaker Change: We continue as you mentioned, we progressed our ammonia project, we're wrapping up the <unk>.
Speaker Change: And work.
No we've had.
Speaker Change: <unk> been a great partner to work with.
Stuart V. Taylor: We've, you know, progressed that study. It is, you know, a large amount of work. We have to look at, you know, the partnership, the capital structure, the capital for that project, look at the markets, the market timing, you know, the Canadian government timing as well on things. And so we're continuing to progress that study and looking at all the integration of all the pieces there. And, you know, we're going to have further conversations with our partner in the coming weeks and see where we go with this project.
Speaker Change: Progress that that study it is it is.
Speaker Change: It's a large amount of work.
Speaker Change: We have to look at the partnership the capital structure to capital for that project look at the markets the market timing.
Speaker Change: Canadian government timing as well on things and so we're continuing to progress.
Speaker Change: That study in and looking at all the integration of all the pieces there.
Speaker Change: We're going to go and have further conversations with our partner.
Speaker Change: The coming weeks.
Speaker Change: And see where we go with this project.
Speaker Change: Still is early days and we're learning a lot as we go and we're anticipating further information coming out from.
Stuart V. Taylor: It is still early days, and, you know, 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, you know, we've done a lot of work on our ACG project. We're pretty pleased where we're sitting. We've completed our appraisal well.
Speaker Change: Asian governments as well as Canadian governments in the near future that will shed some light on the feasibility of the project itself.
Speaker Change: With respect to carbon pricing.
Speaker Change: We've.
Speaker Change: <unk> done a lot of work on our ACG project, we're pretty pleased where were sitting we've completed our appraisal well there.
Stuart V. Taylor: There's still some work in downhole subsurface work that's going to be completed. We're looking, you know; we've got an infrastructure plan and a preliminary capital cost estimate for that. But there's no question on the carbon sequestration side, it comes down to, you know, we have a cost for this, and the sequestration or customers have a capture cost as well. And trying to find that balance and what can be afforded and, you know, what are the government policies on a go-forward basis from a pricing perspective and what's needed to support that project.
Speaker Change: Still some works in downhole subsurface work that is going to be completed and we are.
Speaker Change: Looking we've got an infrastructure plan in the preliminary capital cost estimate for that.
Speaker Change: But theres no question on the carbon sequestration side it comes down to.
Speaker Change: We have a cost for.
Speaker Change: The sequestration or customers have a captured cost as well and trying to find that balance and.
Speaker Change: 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.
Speaker Change: It's it's it's challenging at this point in time, where I think many customers as the costs are not getting cheaper.
Stuart V. Taylor: And it's challenging at this point in time for many customers, as the costs are not getting cheaper for carbon sequestration capture in particular. And so we're working through that, you know, with our partner TC Energy and our various customers that we're having conversations with.
Speaker Change: For carbon sequestration capture in particular, and so we're working through that.
Speaker Change: With again, our partner Tc energy and our various customers that we're having conversations with.
Patrick Kenny: Okay, that's great, Stu, thanks, I appreciate your comments.
Speaker Change: Okay, that's great Steve Thanks, I appreciate your comments.
Scott Burrows: There are no further questions at this time. I would hand over the call to Scott Burroughs, President and CEO, for closing comments. Please go ahead.
Speaker Change: 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.
Scott Burrows: Thanks, everyone, and thanks for taking the time to listen to us today. Again, just a friendly reminder of our AGM this afternoon and our Investor Day next week. And we look forward to seeing many of you there. Have a great weekend.
Scott Burrows: Thanks, everyone and thanks for taking the time to listen to us today.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.
Scott Burrows: 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.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.