Q2 2024 Pembina Pipeline Corp Earnings Call

Speaker Change: Good morning, ladies and gentlemen. Thank you, Joanna.

Operator: Good morning, and welcome to the Pembina Pipeline Corporation Q2 2024 Results Conference Call. At this time, all lines are in a listen-only mode.

Operator: Good morning and welcome to the Pembina Pipeline Corporation, Q2 2024 results conference call. At this time, our lines are in illicit-only mode.

Speaker Change: Thank you. Good morning and welcome to the Pembina Pipeline Corporation Q2 2024 Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct the question and answer session.

Operator: Following the presentation, we will conduct the question and answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Friday, August 9th, 2024. I would now like to turn the conference over to Dan Tucunel, VP of Capital Markets. Please go ahead.

Operator: Following the presentation, we will conduct a question-and-answer session. If at any time during this call, you need assistance, please press star zero for the operator.

Speaker Change: If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Friday, August 9th, 2024. I would now like to turn the conference over to Dan Tucunel, VP of Capital Markets. Please go ahead.

Operator: This call is being recorded on Friday, August 9, 2024.

Dan Tucunel: I would now extend the conference over to Dan Tucunel, VP of Capital Markets.

Dan Tucunel: Thank you, Joanna. Good morning, everyone.

Scott Burrows: Please welcome to Pembina's conference call and webcast to review highlights from the second quarter of 2024. On the call today, we have Scott Burrows, President and Chief Executive Officer, Cameron Goldade, Senior Vice President and Chief Financial Officer, along with other members of Pemina's leadership team, including Jaret Sprott, Janet Luduca, Stuart Taylor, and Chris Scherman. I would like to remind you that some of the comments made today may be forward-looking in nature and are based on Pemina's current expectations, estimates, judgments, and projections. For looking statements, we may express or imply today; our subject to risks and uncertainties, which could cause actual results to differ materially from expectations.

Dan Tucunel: Thank you, Joanna. Good morning, everyone.

Dan Tucunel: Welcome to Pembina's conference call and webcast to review highlights from the second quarter of 2024. On the call today, we have Scott Burrows, President and Chief Executive Officer, 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. 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.

Speaker Change: Welcome to Pembina's conference call and webcast to review highlights from the second quarter of 2024.

Speaker Change: On the call today, we have Scott Burrows, President and Chief Executive Officer, 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.

Speaker Change: I would like to remind you that some of the comments made today may be forward-looking in nature and are based on Pembina's current expectations, estimates, judgments, and projections.

Speaker Change: The 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.

Scott Burrows: Further, 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 MD&A, dated August 8, 2024, for the period ended June 30, 2024, as well as the press release Pembina issued yesterday. All of these documents are available online at Pemina.com and on both Cedar and Edgar.

Speaker Change: Further, some of the information provided refers to non-GAAP measures.

Speaker Change: to learn more about these forward-looking statements.

Speaker Change: and non- GAAP measures , please see the company's MD&A dated August 8, 2024, for the period ended June 30, 2024, as well as the press release Pembina issued yesterday. All of these documents are available online at pembina.com and on both CDAR and EDGAR.

Scott Burrows: I will now turn things over to Scott to make some opening remarks. Thanks, Dan. Another strong quarter was highlighted by record adjusted EBITDA of $1.091 billion. Record adjusted cashflow from operating activities of $837 million and record adjusted cashflow per share of $1.44. Record results were driven in part by the closing of the Alliance Augsable Acquisition, effective April 1st, as Pemina benefited from increased ownership in those assets. Both Augsable and Alliance have been performing well, and we are excited to welcome new employees to the Pemina team. With the release of our second quarter results yesterday, we were also pleased to announce that we have acquired the remaining 14.6% interest in Augsable U.S.

Dan Tucunel: 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 MD&A, dated August 8, 2024, for the period ended June 30, 2024, as well as the press release Pembina issued yesterday. All of these documents are available online at pembina.com and on both CDAR and EDGAR. I will now turn things over to Scott to make some opening remarks.

Scott Burrows: Thanks, Dan. Another strong quarter was highlighted by record-adjusted EBITDA of $1.091 billion, record-adjusted cash flow from operating activities of $837 million, and record-adjusted cash flow per share of $1.44. Record results were driven in part by the closing of the Alliance Huxable acquisition, effective April 1st, as Pembina benefited from increased ownership in those assets. Both Huxable and Alliance have been performing well, and we are excited to welcome new employees to the Pembina team. With the release of our second quarter results yesterday, we were also pleased to announce that we have acquired the remaining 14.6% interest in Auxable U.S. operations from Williams, effective August 1st.

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

Scott Burroughs: Thanks, Dan. Another strong quarter was highlighted by record-adjusted EBITDA of $1.091 billion.

Scott Burroughs: Record Adjusted Cash Flow from Operating Activities of $837 Million and Record Adjusted Cash Flow per Share of $1.44

Scott Burroughs: Record results were driven in part by the closing of the Alliance Huxable acquisition, effective April 1st, as Pembina benefited from increased ownership in those assets. Both Huxable and Alliance have been performing well, and we are excited to welcome new employees to the Pembina team.

Scott Burroughs: With the release of our second quarter results yesterday, we were also pleased to announce that we have acquired the remaining 14.6% interest in Auxable U.S. operations from Williams, effective August 1st.

Scott Burrows: operations from Williams, effective August 1st. Since the Williams Augsable Acquisition and the Augsable assets have been outperforming Pembina's expectations, we are pleased to now have fully consolidated ownership of all Augsable assets, thereby further simplifying corporate reporting and enhancing the ability to pursue long-term opportunities. Pemina's business continues to deliver exceptional results. Volume growth across the Canadian energy industry is leading to higher volumes in our pipelines, gas plants, and fractionators, and while we would prefer to see higher natural gas prices for our producing customers, the current weakness, along with robust NGL pricing and strong oil prices, is leading to continued strength in Pembina's marketing business.

Scott Burrows: Since the Williams Auxable acquisition and the Auxable assets have been outperforming Pembina's expectations, and we are pleased to now have fully consolidated ownership of all Auxable assets, thereby further simplifying corporate reporting and enhancing the ability to pursue long-term opportunities. Pembina's business continues to deliver exceptional results. Volume growth across the Canadian energy industry is leading to higher volumes in our pipelines, gas plants, and fractionators. And while we would prefer to see higher natural gas prices for our producing customers, the current weakness, along with robust NGL pricing and strong oil prices, is leading to continued strength in Pembina's marketing business.

Speaker Change: Since the Williams Oxable acquisition and the Oxable assets have been outperforming Pembina's expectations And we are pleased to now have fully consolidated ownership of all Oxable assets Thereby further simplifying corporate reporting and enhancing the ability to pursue long-term opportunities

Speaker Change: Pembina's business continues to deliver

Speaker Change: Volume growth across the Canadian energy industry is leading to higher volumes in our pipelines, gas plants, and fractionators. And while we would prefer to see higher natural gas prices for our producing customers, the current weakness, along with robust NGL pricing and strong oil prices, is leading to continued strength in Pembina's marketing business.

Scott Burrows: Given the strong year-to-date results, the incremental benefit of the latest Augsable Acquisition, and our outlook for the remainder of the year, Pemina has raised its 2024 adjusted EBITDA guidance range to 4.2 billion to 4.35 billion, which at the midpoint represents a $100 million increase over the previous range.

Scott Burrows: Given the strong year-to-date results, the incremental benefit of the latest stable acquisition, and our outlook for the remainder of the year, Pembina has raised its 2024 Adjusted EBITDA guidance range to $4.2 billion to $4.35 billion, which at the midpoint represents a $100 million increase over the previous range. Finally, the second quarter was further highlighted by three other exciting developments.

Speaker Change: Given the strong year-to-date results, the incremental benefit of the latest stable acquisition, and our outlook for the remainder of the year, Pembina has raised its 2024 adjusted EBITDA guidance range to $4.2 billion to $4.35 billion, which at the midpoint represents a hundred million dollar increase over the previous range.

Scott Burrows: Finally, the second quarter was further highlighted by three other exciting developments. The first was a positive final investment decision on the Cedar LNG project. We are excited to be moving forward with a project that will deliver industry-leading, low-carbon, cost-competitive Canadian LNG to overseas markets and contribute to global energy security while delivering jobs and economic prosperity to the local region. The Cedar LNG project aligns squarely with Pemina's strategy, offers attractive economics, and is supported by contracting strategy that prudently mitigates cost risks. The second was PGI's transaction with White Cap Resources, which included the acquisition of a 50% interest in White Cap's K-Bob complex, and an obligation to fund further Latour area infrastructure developed.

Speaker Change: Finally, the second quarter was further highlighted by three other exciting developments.

Scott Burrows: The first was the positive final investment decision on the CEDAR LNG project. We are excited to be moving forward with a project that will deliver industry-leading, low-carbon, cost-competitive Canadian LNG to overseas markets and contribute to global energy security while delivering jobs and economic prosperity to the local region. The CEDAR LNG project aligns squarely with Pembina's strategy, offers attractive economics, and is supported by a contracting strategy that prudently mitigates cost risk. The second was PGI's transaction with Whitecap Resources, which included the acquisition of a 50% interest in Whitecap's K-BOB complex and an obligation to fund further Latour area infrastructure development.

Speaker Change: The first was the positive final investment decision on the Cedar LNG project.

Speaker Change: We are excited to be moving forward with a project that will deliver industry leading, low-carbon, cost-competitive Canadian LNG to overseas markets and contribute to global energy security, while delivering jobs and economic prosperity to the local region.

Speaker Change: The Cedar LNG project aligns squarely with Pembina's strategy, offers attractive economics, and is supported by a contracting strategy that prudently mitigates cost risk.

Speaker Change: The second was PGI's transaction with Whitecap Resources, which included the acquisition of a 50% interest in Whitecap's K-BOB complex and an obligation to fund further Latour area infrastructure development.

Scott Burrows: We also signed long term taker pay agreements on Pembina's pipelines and fractionators. The deal is another example of PGI and Pemina's ability to provide unique and value-added solutions to support the growth demands of our customers.

Scott Burrows: We also signed long-term take or pay agreements on Pembina's pipelines and fractionators. The deal is another example of PGI and Pembina's ability to provide unique and value-added solutions to support the growth demands of our customers. And a third was bringing the Phase 8 Peace Pipeline expansion into service, marking the culmination of more than 10 years and more than $4 billion in an expansion program that was driven by growing customer demand for transportation services to support development in the WCSB, including the Montney, DuVernay, and other resource plays.

Speaker Change: We also signed long-term take-or-pay agreements on Pembina's pipelines and fractionators. The deal is another example of PGI and Pembina's ability to provide unique and value-added solutions to support the growth demands of our customers.

Scott Burrows: And a third was bringing the phase A peace pipeline expansion into service, marking the culmination of more than 10% years and more than $4 billion expansion program that was driven by growing customer demand for transportation services to support development in the WCSB, including the Montany, Duvernet, and other resource plays. The peace pipeline system plays an important role within Pembina's integrated value chain. And I would like to thank our many customers, employees, and communities that have supported Pembina to deliver this major infrastructure build-out. As a result of the expansions and ongoing optimization efforts, Pemina is confident that its extensive pipeline network is best positioned to capture future volumes and allow the company to continue to offer customers unparalleled advantages through safe, reliable, flexible, and cost-competitive services together with differentiated market access.

Speaker Change: And a third was bringing the Phase 8 Peace Pipeline expansion into service, marking the culmination of more than 10 years and more than $4 billion expansion program that was driven by growing customer demand for transportation services to support development in the WCSB, including the Montney, Gouvernet, and other resource plays.

Scott Burrows: The Peace Pipeline system plays an important role within Pembina's integrated value chain, and I would like to thank our many customers, employees, and communities that have supported Pembina to deliver this major infrastructure build-out. As a result of the expansions and ongoing optimization efforts, Pembina is confident that its extensive pipeline network is best positioned to capture future volume growth and allow the company to continue to offer customers unparalleled advantages through safe, reliable, flexible, and cost-competitive services, together with differentiated market access. I will now turn the call over to Cam to discuss the highlights from our second quarter.

Speaker Change: The Peace Pipeline system plays an important role within Pembina's integrated value chain, and I would like to thank our many customers, employees, and communities that have supported Pembina to deliver this major infrastructure build-out.

Speaker Change: As a result of the expansions and ongoing optimization efforts, Pembina is confident that its extensive pipeline network is best positioned to capture future volume growth and allow the company to continue to offer customers unparalleled advantages through safe, reliable, flexible, and cost-competitive services, together with differentiated market access.

Cameron Goldade: I will now turn the call over to Cam to discuss highlights from our second quarter. Thanks, Scott. Scott noted Pemina reported a record second quarter adjusted EBITDA of $1.091 billion. This represents a 33% increase over the same period in the prior year, and remaining a 21% increase adjusting for the alliance Oxable ownership. In pipelines, factors impacting the second quarter primarily included higher adjusted EBITDA from alliance due to stronger asset performance combined with increased ownership following the alliance Oxable acquisition.

Cameron Goldade: As Scott noted, Pembina reported a record second quarter adjusted EBITDA of $1.091 billion. This represents a 33% increase over the same period in the prior year and remains a 21% increase after adjusting for Alliance Oxable ownership. In pipelines, factors impacting the second quarter are primarily included. For example, higher adjusted EBITDA from Alliance due to stronger asset performance combined with increased ownership following the Alliance Auxable acquisition. The Northern Pipeline System outage and wildfires in the second quarter of 2023, which had an impact of $29 million, with no similar impact in the second quarter of 2024. Contractual inflation adjustments on tolls and the earlier recognition of take or pay deferred revenue on the Peace Pipeline System and the reactivation of the Nipissi Pipeline in the third quarter of 2023.

Speaker Change: I will now turn the call over to Cam to discuss highlights from our second quarter.

Cam: As Scott noted, Pembina reported a record second quarter adjusted EBITDA of $1.091 billion. This represents a 33% increase over the same period in the prior year and remaining a 21% increase adjusting for the Allianz Auxable ownership.

Cam: In pipelines, factors impacting the second quarter are primarily included.

Cam: Higher adjusted EBITDA from Allianz due to stronger asset performance, combined with increased ownership following the Allianz Auxable acquisition

Cameron Goldade: The northern pipeline system outage and wildfires in the second quarter of 2023, which had an impact of $29 million, with no similar impact in the second quarter of 2024. Contractual inflation adjustments on tolls and the earlier recognition of takeer pay deferred revenue on the Peace Pipeline system, and the reactivation of the Nipacy Pipeline in the third quarter of 2023. In facilities, factors impacting the second quarter included the inclusion within facilities of adjust EBITDA from Oxable following the alliance Oxable acquisition.

Cam: The Northern Pipeline System outage and wildfires in the second quarter of 2023, which had an impact of $29 million, with no similar impact in the second quarter of 2024.

Cam: Contractual inflation adjustments on tolls and the earlier recognition of take-or-pay deferred revenue on the Peace Pipeline system and the reactivation of the Nipissi Pipeline in the third quarter of 2023.

Cam: In Facilities, factors impacting the second quarter included the inclusion within facilities of adjusted EBITDA from Oxable following the Alliance Oxable acquisition.

Cameron Goldade: The northern pipeline system outage and wildfires in the second quarter of 2023, which had an impact of $18 million with no similar impacts in the second quarter of 2024, and higher interoperable volumes on certain PGI assets. In marketing and new ventures, second quarter results reflect the net impact of increased ownership interest in Oxable following the alliance Oxable acquisition, as well as higher NGL margins at Oxable. Higher margins from the western Canadian NGL marketing business due to higher marketed volumes, lower natural gas prices, and higher propane, butane, and condensate prices. Realized losses on NGL-based derivatives compared to gains in the second quarter of 2023, partially offset by higher realized gains on crude oil-based commodity-related derivatives, as well as higher general and administrative expense.

Cameron Goldade: In facilities, factors impacting the second quarter included the inclusion within facilities of adjusted EBITDA from OXABLE following the Alliance OXABLE acquisition, the Northern Pipeline system outage and wildfires in the second quarter of 2023, which had an impact of $18 million, with no similar impacts in the second quarter of 2024, and higher interruptible volumes on certain PGIS. In marketing and new ventures, second quarter results reflect the net impact of increased ownership interest in Auxable following the Alliance Auxable acquisition, as well as higher NGL margins at Auxable.

Cam: The Northern Pipeline system outage and wildfires in the second quarter of 2023, which had an impact of $18 million, with no similar impacts in the second quarter of 2024, and higher interruptible volumes on certain PGI assets.

Cam: In marketing and new ventures, second quarter results reflect the net impact of increased ownership interest in Auxable following the Alliance Auxable acquisition, as well as higher NGL margins at Auxable.

Cameron Goldade: Higher margins from the Western Canadian NGL marketing business due to higher marketed volumes, lower natural gas prices, and higher propane, butane, and condensate prices; realized losses on NGL-based derivatives compared to gains in the second quarter of 2023, partially offset by higher realized gains on crude oil-based commodity-related derivatives, as well as higher general and administrative expense. Finally, the corporate segment was largely unchanged.

Cam: Higher margins from the Western Canadian NGL marketing business due to higher marketed volumes, lower natural gas prices, and higher propane, butane, and condensate prices.

Cam: Realized losses on NGL based derivatives compared to gains in the second quarter of 2023, partially offset by higher realized gains on crude oil based commodity related derivatives, as well as higher general and administrative expense.

Cameron Goldade: Finally, the corporate segment was largely unchanged. Earnings in the second quarter were $479 million. This represents a 32% increase over the same period in the prior year. In addition to the factors impacting adjusted EBITDA, earnings in the second quarter were impacted by unrealized losses recognized by PGI on interest rate derivative financial instruments compared to gains in the second quarter of 2023. Gains associated with the de-recognition of the provisions related to the financial assurance is provided by Pamina, which were transferred to Cedar LNG following the positive FID in June. Larger unrealized losses on renewable power participants, and unrealized loss on NGL-based derivatives compared to an unrealized game in the second quarter of 2023.

Cam: Finally, the corporate segment was largely unchanged.

Cameron Goldade: Earnings in the second quarter were $479 million, which represents a 32% increase over the same period in the prior year. In addition to the factors impacting adjusted EBITDA, earnings in the second quarter were impacted by unrealized losses recognized by PGI on interest rate derivative financial instruments compared to gains in the second quarter of 2023. Gains associated with the derecognition of the provisions related to the financial assurances provided by Pembina, which were transferred to Cedar LNG following the positive FID in June, and larger unrealized losses on renewable power purchase agreements. An unrealized loss on NGL-based derivatives compared to an unrealized gain in the second quarter of 2023. Higher Depreciation and Amortization, Net Finance Costs, and Acquisition and Integration Fees.

Cam: Earnings in the second quarter were $479 million. This represents a 32% increase over the same period in the prior year.

Cam: In addition to the factors impacting adjusted EBITDA, earnings in the second quarter were impacted by unrealized losses recognized by PGI on interest rate derivative financial instruments compared to gains in the second quarter of 2023.

Cam: Gains associated with the derecognition of the provisions related to the financial assurances provided by Pembina, which were transferred to Cedar LNG following the positive FID in June . Larger unrealized losses on renewable power purchase agreements.

Cam: An unrealized loss on NGL-based derivatives compared to an unrealized gain in the second quarter of 2023.

Cameron Goldade: Higher depreciation and amortization, net finance costs, and acquisition and integration fees. Pipeline volumes of 2.7 million barrels per day in the second quarter represent an 11% increase compared to the same period in the prior year. The increase was primarily due to the increase in ownership interest in Alliance, higher volumes on the Peace pipeline system resulting from earlier recognition of take or paid deferred revenue, and the impact of the Northern pipeline system outage and the wildfires in the second quarter of 2023 combined with the reactivation of the Nipacy pipeline. Facilities volumes of approximately 0.9 million barrels per day in the second quarter represent a 14% increase compared to the same period in the prior year.

Cam: Higher depreciation and amortization, net finance costs, and acquisition and integration fees.

Cameron Goldade: Pipeline volumes of 2.7 million barrels per day in the second quarter represent an 11% increase compared to the same period in the prior year. The increase was primarily due to the increase in ownership interests in Alliance, 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 and the wildfires in the second quarter of 2023, combined with the reactivation of the Nipissi Pipeline.

Speaker Change: Thank you. Take care.

Speaker Change: Pipeline volumes of 2.7 million barrels per day in the second quarter represent an 11% increase compared to the same period in the prior year.

Cam: The increase was primarily due to the increase in ownership interests in Alliance, 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 and the wildfires in the second quarter of 2023, combined with the reactivation of the Nipissi Pipeline.

Cameron Goldade: Facility volumes of approximately 0.9 million barrels per day in the second quarter represent a 14% increase compared to the same period in the prior year. The increase was primarily due to Auxable volume recognition following the Alliance Auxable acquisition. Higher volumes at Younger as the second quarter of 2023 was impacted by the Northern Pipeline System outage and the wildfires, combined with higher interruptible volumes on certain PGIS. Turning to our outlook for 20

Cam: Facilities volumes of approximately 0.9 million barrels per day in the second quarter represent a 14% increase compared to the same period in the prior year.

Cameron Goldade: The increase was primarily due to aksable volume recognition following the alliance, aksable acquisition higher volumes at younger as the second quarter of 2023 was impacted by the northern pipeline system outage and the wildfires combined with higher interruptible volumes on certain PGI assets.

Speaker Change: The increase was primarily due to Auxable volume recognition following the Alliance Auxable acquisition. Higher volumes at Younger, as the second quarter of 2023 was impacted by the Northern Pipeline System outage and the wildfires, combined with higher interruptible volumes on certain PGI assets.

Cameron Goldade: 2022 I was lucky for 2024. In addition to raising our 2024 adjust the data guidance, as Scott mentioned previously, Tim and has also revised its 2024 capital investment program to $1.3 billion. The revised outlook reflects an approximate 140 million dollar net increase when compared to our original 2024 budget of $1.16 billion, inclusive of then unsanctioned additional growth capital. Drivers of the increase primarily include the sanctioning of PGI's WAPID expansion and K-3 code generation facility, other increases in revenue-generating capital within pipelines, and additional non-recoverable sustaining capital. The revised capital investment program reflects approximately $300 million for contributions to equity accounted in besties, including $240 million of equity contributions to Cedar LNG incurred in the first half of 2024, with no further contributions to Cedar expected in 2024.

Cameron Goldade: In addition to raising our 2024 adjusted EBITDA guidance, as Scott mentioned previously, Pembina has also revised its 2024 capital investment program to $1.3 billion. The revised outlook reflects an approximate $140 million net increase when compared to our original 2024 budget of $1.16 billion, inclusive of then unsanctioned additional growth capital. Drivers of the increase primarily include the sanctioning of PGI's WAPITI expansion and K3 co-generation facility, other increases in revenue-generating capital within pipelines, and additional non-recoverable sustaining capital.

Speaker Change: Turning to our outlook for 2024, in addition to raising our 2024 Adjusted EBITDA guidance as Scott mentioned previously, Pembina has also revised its 2024 Capital Investment Program to $1.3 billion.

Scott Burroughs: The revised outlook reflects an approximate $140 million net increase when compared to our original 2024 budget of $1.16 billion, inclusive of then-unsanctioned additional growth capital.

Speaker Change: Drivers of the increase primarily include the sanctioning of PGI's WAPITI expansion and K3 cogeneration facility, other increases in revenue generating capital within pipelines, and additional non-recoverable sustaining capital.

Cameron Goldade: The revised capital investment program reflects approximately $300 million for contributions to equity-accounted investees, including $240 million of equity contributions to CDER LNG incurred in the first half of 2024, with no further contributions to CDER expected in 2024. Pembina continues to expect the capital program to be funded with cash flow from operating activities net of dividends, maintaining its strong balance sheet.

Speaker Change: The revised capital investment program reflects approximately $300 million for contributions to equity-accounted investees, including $240 million of equity contributions to CDER LNG incurred in the first half of 2024, with no further contributions to CDER expected in 2024.

Cameron Goldade: Tim and it continues to expect the capital program to be funded with cash flow from operating activities and out of dividends, maintaining its strong balance sheet. At June 30, based on the trailing 12 months, the ratio of proportionally consolidated senior debt to adjusted EBITDA was 3.6 times, which is at the low end of our target range. It's important to note, however, that given the April 1st closing date of the Alliance Oxable acquisition, the ratio includes all the debt associated with the transaction, but is currently only capturing one quarter of EBITDA contribution. On a normalized basis, this ratio will be approximately 3.3 times.

Speaker Change: Pembina continues to expect the capital program to be funded with cash flow from operating activities net of dividends, maintaining its strong balance sheet.

Cameron Goldade: At June 30th, based on the trailing 12 months, the ratio of proportionally consolidated senior debt to adjusted EBITDA was 3.6 times, which is at the low end of our target range. It's important to note, however, that given the April 1st closing date of the Alliance Auxable acquisition, the ratio includes all the debt associated with the transaction, but is currently only capturing one quarter of EBITDA contributions. On a normalized basis, this ratio would be approximately 3.3 times. I'll now turn things back to Scott. Thanks, Cam.

Speaker Change: At June 30th, based on the trailing 12 months, the ratio of proportionally consolidated senior debt to adjusted EBITDA was 3.6 times, which is at the low end of our target range.

Speaker Change: It's important to note, however, that given the April 1st closing date of the Alliance Auxable acquisition, the ratio includes all the debt associated with the transaction, but is currently only capturing one quarter of EBITDA contribution. On a normalized basis, this ratio would be approximately 3.3 times.

Scott Burrows: I'll now turn things back to Scott. Thanks, Cam. In closing, I'd like to reiterate that for all of us at Pemina, it has been a strong first half of 2024. And we are looking forward to continued strength throughout the remainder of the year. Amidst the backdrop of industry momentum and an expectation of robust volume growth, we continue to see increased utilization across our systems, pursue many opportunities to incredibly invest capital, and execute our strategy within our financial guardrails.

Scott Burrows: Thanks, Cam. In closing, I'd like to reiterate that for all of us at Pembina, it has been a strong first half of 2024, and we are looking forward to continued strength throughout the remainder of the year. Amidst the backdrop of industry momentum and an expectation of robust volume growth, we continue to see increased utilization across our systems, and pursue many opportunities to creatively invest capital and execute our strategy within our financial guardrails. Thank you for joining us this morning and for your continued support. Operator, please open the line up for questions. Thank you.

Speaker Change: I'll now turn things back to Scott.

Scott Burroughs: Thanks, Cam. In closing, I'd like to reiterate that for all of us at Pembina, it has been a strong first half of 2024, and we are looking forward to continued strength throughout the remainder of the year. Amidst the backdrop of industry momentum and an expectation of robust volume growth, we continue to see increased utilization across our systems, pursue many opportunities to creatively invest capital and execute our strategy within our financial guardrails.

Scott Burrows: Thank you for joining us this morning and for your continued support.

Operator: Operator, please open the line up for questions. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. If you are using a speaker phone, please lift the handset before pressing any keys.

Speaker Change: Thank you for joining us this morning and for your continued support. Operator, please open the line up for questions.

Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number on your touchtone phone. You will hear a prompt that your hand has been raised. If you are using a speakerphone, please lift the handset before pressing any key.

Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. If you are using a speakerphone, please lift the handset before pressing any keys.

Jeremy Tonet: Your first question comes from Jeremy Tonet at JP Morgan Chase. Please go ahead.

Operator: Your first question comes from Jeremy Tonet at J.P. Morgan Chase. Please go ahead.

Speaker Change: Your first question comes from Jeremy Tonet at JPMorgan Chase. Please go ahead.

Jeremy Tonet: Hi, good morning.

Scott Burrows: Morning, Jeremy. I just want to dial in on the acquisitions a little bit more. Our stable alliance here seems like they're outperforming our expectations, and just wondering if you could talk a bit more, I guess, about the outperformance in, you know, really curious about looking forward. I guess it seems like full ownership would bring new opportunities to Pembina and how that kind of impacts, I guess, the marketing opportunities as well. Just any more color on how we should think about what's. What are possible they are going forward and Jeremy, a lot of the strength really was driven at the octable level.

Jeremy Tonette: Hi, good morning.

Unknown Speaker: Unknown Speaker Just want to dial in on the acquisitions a little bit more. AuxAble Alliance, here, seems like they're outperforming our expectations. And just wondering if you could talk a bit more, I guess, about the outperformance in, you know, really curious about looking forward, I guess. It seems like full ownership would bring new opportunities to Pembina and how that kind of impacts, I guess, the marketing opportunities as well. Just any more color on how we should think about what's possible there going forward.

Speaker Change: Morning, Jeremy.

Jeremy Tonette: I just want to dial in on the acquisitions a little bit more, AuxAble Alliance here seems like they're outperforming our expectations and just wondering if you could talk a bit more I guess about the outperformance in, you know, really curious about looking forward I guess. It seems like...

Jeremy Tonette: Full ownership would bring new opportunities to Pembina and how that kind of impacts, I guess, the marketing opportunities as well. Just any more color on how we should think about what's possible there going forward.

Unknown Executive: Jeremy, a lot of the strength really was driven at the auxable level. Obviously, the low gas price and high NGL prices had a strong impact on that business. As we pointed out in our comments, we'd obviously like a little higher gas price for all of our producing community and, hopefully, that will add to increased drilling. But in the short term, here, that low gas price has really led to strong frac spreads across the business, especially at Auxable.

Speaker Change: Jeremy, a lot of the strength really was driven at the Oxable level. Obviously, the low gas price and high NGL prices had a strong impact on that business. As we pointed out in our comments, we'd obviously like a little higher gas price for all of our producing community and hopefully add to increased drilling. But in the short term here, that low gas price has really led to strong frack spreads across the business, especially at Oxable.

Scott Burrows: Obviously, the low gas price and high NGL prices had had a strong impact on that business, as we pointed out in our comments. We'd obviously like a little higher gas price for all of our producing community and hopefully add to increase drilling, but in the short term here, that low gas price has really led to strong exports across the business. Especially at at octable.

Scott Burrows: You know, when you go back to our acquisition presentation and thesis, we talked about some of the longer term synergies, you know, more towards the end of the decade, and we think having full control of a Boxable will allow us to continue to capture those and give us a leg up in terms of capturing those. It's a little too early to just are talking about what exactly those are in terms of where we're headed, but we're actively working and planning on. Those today. Got it fair enough.

Unknown Executive: When you go back to our acquisition presentation and thesis, we talked about some of the longer-term synergies more towards the end of the decade. We think having full control of Auxable will allow us to continue to capture those and give us a leg up in terms of capturing those. It's a little too early to start talking about what exactly those are in terms of where we're headed, but we're actively working and planning on them today.

Speaker Change: You know when you go back to our acquisition presentation and thesis

Speaker Change: We talked about some of the longer-term synergies, you know, more towards the end of the decade, and we think having full control of Oxfable will allow us to continue to capture those and give us a leg up in terms of capturing those. It's a little too early to to start talking about what exactly those are in terms of

Speaker Change: where we're headed, but we're actively working and planning on those today.

Unknown Speaker: Got it. Fair enough. Thank you for that.

Jeremy Tonet: Thank you for that. And in the release, I think this language that highlights the expectations for 6% and 4% conventional gas processing volume growth respectively in 24 and just wondering, is this a similar trajectory you kind of see in the near term post 24 in general at a high level. And I guess my question is if you're expecting kind of the mid single digit growth, is this filling latent capacity on the system or is this more capital intensity effectively? How much capital investment will be required to attain that kind of mid single digit growth mid cycle as it could be possible.

Judd: Got it. Fair enough. Thank you for that. And in the release, I think there's language that highlights the expectations for 6% and 4% conventional and gas processing volume growth, respectively, in 24. I'm just wondering, is this...

Unknown Speaker: And in the release, I think there's language that highlights the expectations for 6% and 4% conventional and gas processing volume growth, respectively, in 24. And just wondering, is this a similar trajectory you kind of see in the near-term post-24, in general, at a high level? And I guess my question is, if you're expecting kind of mid-single digit growth, is this filling latent capacity in the system, or is this more capital intensity effectively? How much capital investment will be required to attain that kind of mid-single digit growth during the mid-cycle as possible?

Speaker Change: A similar trajectory you kind of see in the near-term post-24 in general at a high level.

Speaker Change: And I guess my question is, if you're expecting kind of a mid-single-digit growth, is this

Speaker Change: Going latent capacity on the system or is this more capital intensity effectively? How much capital investment will be required to attain that kind of mid single digit growth mid cycle as you as could be possible.

Jaret Sprott: Oh, hey, Jeremy, it's Jaret here. So first, I'll talk a little bit about what we're seeing kind of in 2024 with respect to our conventional volume growth, and then I'll touch on PGI just for a second. So you saw in our, I think in our press release, we dropped it from roughly nine to 6%. You know, that really equates to approximately, it's not that much of a material amount of volume, it's roughly 30,000 barrels.

Jaret Sprott: Hey Jeremy, it's Jared here. So first, I'll talk a little bit about what we're seeing kind of in 2024 with respect to our conventional volume growth, and then I'll touch on PGI just for a second. So you saw in our, I think in our press release, we dropped it from roughly 9% to 6%. You know, that really equates to approximately; it's not that much material amount of volume is roughly 30,000 barrels. And what we did see in the first half of the year, which you'll probably recall from the previous quarters, was we saw a significant reduction in volumes in January here in Western Canada with some extreme weather.

Speaker Change: Hey Jeremy, it's Jaret here. So first I'll talk a little bit about what we're seeing kind of in 2024 with respect to our conventional volume growth and then I'll touch on PGI just for a second.

Speaker Change: So you saw in our, I think in our press release, we dropped it from roughly nine to six percent. You know, that really equates to approximately, it's not that much material amount of volume, it's roughly 30,000 barrels.

Jaret Sprott: And what we did see in the first half of the year, which you'll probably recall from the previous quarters, was we saw a significant reduction in volumes in January here in Western Canada with some extreme weather. That obviously set a lot of our customers back, and they really didn't make that up. We saw a larger turnaround season kind of in that May, June than we expected from some of our third parties. All of the PGI turnarounds went as expected, and the phase eight went, that commissioning went extremely well.

Speaker Change: And what we did see in the first half of the year, which you'll probably recall from the previous quarters, was we saw a significant reduction in volumes in January here in Western Canada with some

Jaret Sprott: That obviously set a lot of our customers back, and they really didn't really didn't make that up. We saw a larger turnaround season, kind of in that May, June, and then we expected from some of our third parties. All of the PGI turnarounds went as expected in the phase eight went, documenting when extremely well. And then we had a short unplanned outage at our flat complex, specifically RFS one, that restricted some C2 plus volume. So that's, that's a big portion of the overall reduction. And then the latter half of the year, you know, across a couple of hundred receipt points in the conventional system.

Speaker Change: Extreme weather that obviously set a lot of our customers back and they really didn't really didn't make that up

Speaker Change: We saw a larger turnaround season kind of in that May-June than we expected from some of our third parties. All of the PGI turnarounds went as expected and the Phase 8 went, that commissioning went extremely well.

Jaret Sprott: And then we had a short unplanned outage at our frack complex, specifically RFS1, that restricted some C2 plus volumes. So that's a big portion of the overall reduction. And then the latter half of the year, you know, across a couple of hundred receipt points in the conventional system, it's really just timing of development.

Speaker Change: And then we had a short unplanned outage at our frack complex, specifically RFS1, that restricted some C2 plus volumes. So that's a big portion of the overall reduction.

Speaker Change: And then the latter half of the year, you know, across a couple of hundred receipt points in the conventional system, it's really just timing of development. It, you know, that we're seeing from our customers, it's not that they're not drilling in these liquid rich areas. It's just, you know, that, that forecasting of when the volumes are coming on.

Jaret Sprott: It's really just timing of development. It, you know, that that we're seeing from our customers. It's not that they're not drilling in these liquid-rich areas. It's just, you know, that forecasting of when the volumes are coming on. That kind of leads into, you know, there's been some public disclosure recently around some drier gas, either being shut in or not completed. We're not really seeing effects of that. As you know, like the majority of our PGI assets, all of our PGI assets, they produce significantly liquid-rich gas. And you're actually seeing that in the overall revenue volume increase in PGI.

Jaret Sprott: What we're seeing from our customers, it's not that they're not drilling in these liquid-rich areas. It's just, you know, the forecasting of when the volumes are coming on. That kind of leads into, you know, there's been some public disclosure recently around some drier gas being shut in or not completed. But we're not really seeing the effects of that. As you know, like the majority of our PGI assets, all of our PGI assets, they produce significantly liquid-rich gas. And you're actually seeing that in the overall revenue volume increase for PGI. I think we talked from three to four, four to 5%.

Speaker Change: That kind of leads into, you know, there's been some public disclosure recently around some dryer gas either being shut in or not completed.

Speaker Change: We're not really seeing the effects of that, as you know, like the majority of our PGI assets, all of our PGI assets

Speaker Change: They produce significantly liquids rich gas.

Speaker Change: And you're actually seeing that in the overall revenue volume increase in PGI, I think we talked from 3% to 4%, 4% to 5%. We haven't brought on any new gas plants, so we're seeing really strong gas growth.

Jaret Sprott: I think we talked from three to four, or four to five percent. You know, we're seeing, and that we haven't brought on any new gas plants. We're seeing really strong gas growth where we have lots of condensate and lots of NGLs, which is extremely positive. And I think one of the features of our footprint is that we don't process a lot of the drier gas. With all that said, you know, our overall thesis for Western Canadian, you know, liquid growth hasn't really changed in that mid digit. And as we think about latent capacity versus expanded capacity, when you're in Alberta, kind of now that phase eight's in service, kind of Gordon Dale, follow the map all the way down to Fox Creek and Edmonton.

Jaret Sprott: You know, we're seeing, and we haven't brought on any new gas plants. So we're seeing really strong gas growth where we have lots of condensate and lots of NGLs, which is extremely positive. And I think one of the features of our footprint is that we don't process a lot of drier gas.

Speaker Change: where we have the lots of condensate and lots of NGLs, which is extremely positive. And I think one of the features of our footprint.

Jaret Sprott: With all that said, you know, our overall thesis for Western Canadian, you know, liquids growth hasn't really changed in that mid-digit. And as we think about latent capacity versus expanded capacity, when you're in Alberta, kind of now that phase eight's in service, kind of Gordondale, follow the map all the way down to Fox Creek and Edmonton, that's gonna be kind of latent capacity use and or pump station. No more linear assets are required to get those volumes into the Edmonton market.

Speaker Change: is that we don't process a lot of the drier gas.

Speaker Change: With all that said, our overall thesis for Western Canadian liquids growth hasn't really changed in that mid-digit.

Speaker Change: and

Speaker Change: And as we think about latent capacity versus expanded capacity, when you're in Alberta, kind of now that Phase 8's in service, kind of Gordondale...

Jaret Sprott: That's going to be kind of latent capacity use and/or pump station, no more linear assets required to get those volumes into the Edmonton market. And then, as you go west of Gordon Dale into Northeast BC, that's where we'll require some incremental pipelines, et cetera. So that's kind of the distinction, and that's kind of all been built into our, you know, three-year capital forecast and all part of our three-year cash flow for share guidance that we gave at investor day.

Speaker Change: Follow the map all the way down to Fox Creek and Edmonton, that's going to be kind of

Speaker Change: latent capacity use and or pump station, no more linear assets required to get those volumes into the Edmonton market. And then as you go west of Gordondale into Northeast BC, that's where we'll require some incremental pipelines, etc. So that's kind of the distinction. And that's kind of all been built into our, you know,

Jaret Sprott: And then as you go west of Gordondale into Northeast BC, that's where we'll require some incremental pipelines, et cetera. So that's kind of the distinction, and that's kind of all been built into our, you know, three-year capital forecast and all part of our three-year cash flow per share guidance that we gave at Investor Day. Anything else to add, Cameron?

Speaker Change: Three-year capital forecast and all part of our three-year cash flow per share guidance that we gave at investor day

Jaret Sprott: Anything else to ask you out there? So maybe just I guess mid-cycle cat-backs or near-term cat-backs run-right levels, any high-level thoughts there is the more processing cat-backs that's required to kind of hit that mid-single-digit growth. Jeremy, I think I'd sort of go back to our message from Investor Day, which was if you sort of look at this year next year, we're probably running right around that free cash flow neutral level. So the levels that you're seeing in 2024, 2025, it's somewhere in between that billion to billion in a quarter range is probably the run rate for the next couple of years.

Cameron Goldade: Anything else to add, Cameron?

Cameron Goldade: So maybe just, I guess, mid-cycle CapEx or near-term CapEx run rate levels, any high-level thoughts there? Is there more processing CapEx that's required to kind of hit that mid-single digit growth?

Speaker Change: So, maybe just, I guess, mid-cycle CapEx or near-term CapEx run rate levels, any high-level thoughts there? Is there more processing CapEx that's required to kind of hit that mid-single-digit growth?

Cameron Goldade: Jeremy, I think I'd sort of go back to our message from investor day, which was, you know, if you sort of look at this year, next year, you know, we're probably running right around that free cash flow neutral level, you know, so the levels that you're seeing in 2024, you know, 2025, you know, it's somewhere in between that billion to billion and a quarter range is probably the run rate for And the projects that Jaret outlined, as Jaret mentioned, obviously, a big part of that is obviously completing RFS four, which comes into service in the first half of 2026.

Speaker Change: Jeremy, I think I'd sort of go back to our message from investor day, which was, you know, if you sort of look at this year, next year, you know, we're probably running right around that free cash flow neutral level, you know, so that the levels that you're seeing in

Speaker Change: In 2024, 2025, it's somewhere in between that billion to billion and a quarter range is probably the run rate for the next couple of years.

Scott Burrows: Assuming we continue to execute on the plan and the projects that Jared outlined. As Jared mentioned, obviously a big part of that is obviously completing RFS 4, which comes into service in the first half of 2026. And likewise, as we continue to move forward and build out that North East B.C. Capital, North East B.C. transportation capital that Jared referred to, that'll be in that same time frame as well, providing that all sort of goes ahead with that. And then once you get to sort of the 2026 timeframe outward, obviously the base core business capital starts to trail off as some of those assets come into service.

Speaker Change: Assuming we continue to execute on the plan and the projects that Jaret outlined, as Jaret mentioned, you know, obviously, a big part of that is, is obviously completing RFS 4, which comes into service in the first half of 2026.

Cameron Goldade: And likewise, as we continue to move forward and and build out that Northeast BC capital, Northeast BC transportation capital that Jaret referred to, that'll be in that same timeframe as well, provided that, you know, everything sort of goes ahead with that. So and then once you get to sort of the 2026 timeframe, outward, obviously, base core business capital starts to trail off as some of those assets come into service. Our BT and BD teams are obviously very hard at work, and we continue to see opportunities. But for the next couple years, I think that's probably the way we're thinking about it.

Speaker Change: And likewise, as we continue to move forward and

Speaker Change: and build out that Northeast BC capital, Northeast BC transportation capital that Jaret referred to, you know, that'll be in that same time frame as well, providing that, you know, all sort of goes ahead with that. So, and then once you get to sort of the 2026 timeframe, outward, obviously, you know, the the base

Speaker Change: core business capital starts to trail off as some of those assets come into service. Our BD teams are obviously very hard at work, and we continue to see opportunities. But for the next couple of years, I think that's probably the way we're thinking about it.

Jeremy Tonet: Our BD teams are obviously very hard to work, and we continue to see opportunities. But for the next couple of years, I think that's probably the way we're thinking about it. Got it.

Unknown Speaker: Got it. That's very helpful. Thank you.

Jeremy Tonet: That's very helpful. Thank you.

Speaker Change: Got it. That's very helpful. Thank you.

Operator: Thank you. The next question comes from Praneeth Satish at Wells Fargo. Please go ahead.

Praneeth Satish: The next question comes from Prince Satish at Wells Fargo. Please go ahead.

Speaker Change: Thank you. The next question comes from Praneeth Satish at Wells Fargo. Please go ahead.

Unknown Speaker: Hi all, thanks. Good morning.

Praneeth Satish: Hi all. Thanks. Good morning.

Scott Burrows: Maybe just on Cedar if you can give us an update here in terms of reassigning the capacity that you hold with third parties. Are you seeing strong interest from customers there? What's the timeline to announce that contract? And also, how committed are you to kind of reassigning that entire 1.5 mtpa, and could you keep more of it and end up marketing more than 0.3 mtpa with your marketing group? I insist too.

Praneeth Satish: Hi all, thanks, good morning. Maybe just on CDER, if you can give us an update here in terms of reassigning the capacity that you hold with third parties. Are you seeing

Praneeth Satish: your strong interest from customers there. What's the timeline to announce that contract? And also, how committed are you to reassigning that entire 1.5 MTPA and could you keep

Stuart Taylor: Maybe just on CDER, if you can give us an update here in terms of reassigning the capacity that you hold with third parties. Are you seeing strong interest from customers there? What's the timeline to announce that contract? And also, how committed are you to kind of reassigning the entire 1.5 MTPA, and could you keep more of it and end up marketing more than 0.3 MTPA with your marketing group?

Speaker Change: More of it and end up marketing more than 0.3 MTPA with your marketing group.

Stuart Taylor: Hi, it's Stu. So we're now following the FID announcement and progress. We are ramping up our marketing efforts. Looking at the remaining capacity of CDER, I will say that as our project became more real with the FID announcement, our interest is high. We've been working with a number of potential offtakers with whom we've had conversations for a long period of time, but we do have some renewed and new interest coming in as well. So, we're excited and optimistic about progressing those conversations to completion with a target to have as much of that completed in 2024. So, we're optimistic and excited and continue to make progress with potential offtakers.

Scott Burrows: So we're now following the FID announcement and progress. We are ramping up our marketing efforts, looking at the remaining capacity of Cedar. I will say that, as our project became more real with the FID announcement, our interest is high. We've been working with a number of potential off-takers that we've had conversations for a long period of time, but we do have some renewed and new interest coming in as well. So we're excited and optimistic of progressing those conversations to completion with a target to have as much of that completed in 2024. So we're optimistic and excited and continue to make progress with potential off-takers.

Speaker Change: Hi, it's Stu. So we're now following the FID announcement and progress. We are ramping up our marketing efforts.

Speaker Change: looking at the remaining capacity of Cedar. I will say that as our project became more real with the FID announcement, our interest is high.

Speaker Change: We've been working with...

Speaker Change: You know, a number of potential off takers that we've had conversations for a long period of time, but we do have some renewed and new interests coming in as well. So we're excited and optimistic of progressing those conversations to completion.

Speaker Change: with a target to have, you know, as much of that, you know, completed in 2024. So we're optimistic and excited and continue to make progress with potential offtakers.

Praneeth Satish: First. Got it.

Unknown Speaker: Got it. And maybe just switching gears and moving over to the Bakken, I have two questions on the Vantage pipeline. First, if you can kind of remind us what the utilization is on the pipe and whether Vantage can be expanded any further with pumps. And then, secondly, to the extent that there is excess capacity, and it can be expanded at a low cost, can you satisfy all of your Dow ethane contract with Vantage? I guess, What would the cost be of moving ethane on Vantage versus some of the other options that you're considering?

Scott Burrows: And maybe just switching gears and moving over to the back in, I have two questions here on the the vantage pipeline. First, if you can kind of remind us what the utilization is on the pipe and whether Vantage can be expanded any further with pumps. And then secondly, to the extent that there is access capacity and it can be expanded at a low cost.

Speaker Change: Got it. And maybe just switching gears and moving over to the Bakken, I have two questions here on the Vantage pipeline. First, if you can kind of remind us what the utilization is on the pipe and whether Vantage can be expanded any further with pumps.

Speaker Change: And then secondly, to the extent that there is excess capacity and it can be expanded at a low cost, can you satisfy all of your Dow ethane contract with Vantage?

Scott Burrows: Can you can you can you satisfy all of your Dow at things? I mean, contract with Vantage, I guess, what would the cost be of moving ethane on Vantage versus some of the other options that you're considering.

Speaker Change: I guess, what would the cost be of moving ethane on Vantage versus some of the other options that you're considering?

Scott Burrows: Good morning.

Unknown Speaker: Good morning.

Unknown Speaker: Good morning. Thanks for the question. So yeah, we currently do have some white space on the vantage pipeline that is capable, obviously, of bringing more ethane up into the egg system and then into the petrochemical feedstock takers there in Western Canada. With respect to our portfolio, with respect to Dow, we're kind of taking a more diversified approach to this. So we think of it as ethane that comes out of our RFS complex, which is C2 plus being extracted in Western Canada and then broken into its parts and fed into the crackers here.

Scott Burrows: Thanks for the question. So yeah, we currently do have some white space on the vantage pipeline. That is capable, obviously, of bringing more ethane up into the big system and then into the petrochemical. Feet stock takers there in Western Canada. With respect to our portfolio with respect to Dow, we're kind of taking a more diversified approach to this. So if we think of it as ethane that comes out of our RFS complex, that is C2 plus being extracted in Western Canada and then broken into its parts and fed into the crackers here in Alberta. There is the C2 extraction component that's more like mainline extraction like our Empress or younger facilities that feed straight ethane into the system into the crackers, and then you have the Vantage system that can bring product up from North Dakota.

Speaker Change: Good morning. Thanks for the question. So, yeah, we currently do have some white space on the vantage pipeline that is capable, obviously, of bringing more ethane up into the egg system and then into the petrochemical.

Speaker Change: Peachtalk

Speaker Change: speakers there in Western Canada. With respect to our portfolio with respect to Dow, we're kind of taking a more diversified approach to this. So we think of it as ethane that comes out of our RFS complex.

Unknown Speaker: In Alberta, there is the C2 extraction component. That's more like mainline extraction, like our Empress or younger facilities that feed straight ethane into the system, into the crackers, and then you have the vantage system that can bring product up from North Dakota.

Speaker Change: That is C2 plus being extracted in Western Canada and then broken into its parts and fed into the crackers here.

Speaker Change: In Alberta, there is the C2 extraction component.

Speaker Change: That's more like mainline extraction, like our Empress or younger facilities that feed straight ethane into the system, into the crackers, and then you have the Vantage system that can bring product up from North Dakota.

Scott Burrows: So across those kind of three portfolios right now, we're just evaluating what's the best use of capital to basically fulfill our entire Dow commitment. So we won't really specifically talk to, you know, where the majority of that capital is going to go right now. I think in that industry we talked about here in the next couple of quarters will will be able to provide some more insight on where that capital would be going, but Vantage is definitely a part of the overall portfolio consideration to meet that contract.

Unknown Speaker: So across those three portfolios, right now, we're just evaluating what's the best use of capital to basically fulfill our entire Dow commitment. So we won't really specifically talk to you about where the majority of that capital is going to go right now. I think in that industry we talked about here, in the next couple of quarters, we'll be able to provide some more insight on where that capital will be going. But Vantage is definitely a part of the overall portfolio consideration to meet that contract.

Speaker Change: So across those kind of three portfolios, right now we're just evaluating what's the best use of capital to the two.

Speaker Change: Basically fulfill our entire Dow commitment. So we won't really specifically talk to, you know, where the majority of that capital is going to go right now. I think in that industry, we talked about here in the next couple of quarters, we'll be able to provide some more insight on where that capital will be going. But Vantage is definitely a part of the overall portfolio consideration to meet that contract.

Patrick Kenny: Thank you.

Speaker Change: Thank you.

Operator: Thank you. The next question comes from Patrick Kenny at National Bank Financial. Please go ahead.

Patrick Kenny: Next question comes from Patrick Kenny at National Bank Financial.

Speaker Change: Thank you. Next question comes from Patrick Kenny at National Bank Financial. Please go ahead.

Patrick Kenny: Please go ahead.

Unknown Speaker: Hey, good morning guys. Just maybe quickly on the Auxable or Alliance and Auxable consolidation. I know there's some accounting noise in there, but maybe you can just walk through the headline, you know, $600 million loss on disposal of your equity interest and maybe what that means for your corporate effective tax rate going forward.

Cameron Goldade: Hey, good morning, guys. Just maybe quickly on the ox able or Alliance and ox able consolidation. There's some accounting noise in there, but maybe you can just walk through the headline, you know, $600 or $1 loss on disposal of your equity interest and maybe what that means for your corporate effective tax rate going forward.

Patrick Kenny: Hey, good morning guys. Just maybe quickly on the Auxable or Alliance and Auxable consolidation. I know there's some accounting noise in there, but maybe you can just

Patrick Kenny: Walking through the headline, you know, $600 million loss on disposal of your equity interest and maybe what that means for your corporate effective tax rate going forward.

Cameron Goldade: If that is, it's came here, you've just made our accounting team's day with the question. You know, it's not a really straightforward explanation, other than to say that the accounting standards are pretty clear about how you have to treat a step acquisition. You basically have to act as if you've disposed what you've got as the equity accounted investment and then realize the, you know, the entire fair value acquisition, like you would any other acquisition. So obviously, you do the fair value on the existing interest and mark that to market. Obviously, I think what's important in recognizing that accounting is that there's an offsetting deferred tax recovery.

Cameron Goldade: about it. It's Cam here.

Cameron Goldade: You've just made our accounting team's day with the question. You know, it's not a really straightforward explanation, other than to say that the accounting standards are pretty clear about how you have to treat a step acquisition. You basically have to act as if you've disposed of what you've got as the equity accounted investment and then realize the, you know, the entire fair value acquisition, like you would any other acquisition. You do the fair value of the existing interest and mark that to market. Obviously, I think what's important in recognizing that accounting is that there's an offsetting deferred tax recovery on the Diet, the back end.

Speaker Change: You know, it's not a really straightforward explanation other than to say that the accounting standards are pretty clear about how you have to treat a step acquisition. You basically have to act as if you've disposed what you've got as the equity-accounted investment and then realize...

Cameron Goldade: Great, and then I guess going forward, just any impact positively or negatively on the Effective Tax Rate.

Speaker Change: The entire Fair Value Acquisition like you would any other acquisition, so obviously...

Speaker Change: You do the fair value on the existing interest and mark that to market. Obviously, I think what's important in recognizing that accounting is that there's an offsetting deferred tax recovery

Cameron Goldade: on that de-recognition, which effectively nets you to about zero or so. It's about a $9 million gain when you net those two out. And then, obviously, then you go forward and you consolidate. And then with the consolidation, now obviously we own 100% of Alliance, and now 100% of Oxalibal, but in Q2, obviously there was a small non-consolidated interest on Oxalibal, which just gets netted out of the back end.

Speaker Change: on that de-recognition, which effectively nets you to about zero or so, it's about a $9 million gain when you net those two out. And then obviously, then you go forward and you can solidate. And then with the consolidation, now obviously, we own 100% of the alliance.

Speaker Change: And now 100% of Oxable, but in Q2, obviously there was a small non-consolidated interest on Oxable, which just gets netted out on the back end.

Cameron Goldade: Great.

Cameron Goldade: And then I guess going forward just any impact positively or negatively on the effect of tax rate. Yeah, I think there will be some positive effect on the effect of tax rate. You know, as you've seen, there is some benefit to the acquisition. Potentially, the larger acquisition as a result of some opportunities in the US. And so we do get a benefit there. And I think that shows up in terms of the updated tax guy. So, you know, you'll see it come down ever so slightly.

Speaker Change: Great, and I guess going forward, any impact positively or negatively on the effective tax rate?

Cameron Goldade: Yeah, I think there will be some positive effects on the effective tax rate. You know, as you've seen, there is some benefit to the acquisition, potentially, the larger acquisition as a result of some opportunities in the US. And so we do get a benefit there, and I think that shows up in terms of the updated tax guide. So, you know, you'll see it come down ever so slightly.

Speaker Change: [inaudible]

Speaker Change: Yeah, I think there will be some positive effect on the on the on the effect of tax rate. You know, as you've seen, there is some benefit to the acquisition, potentially the larger acquisition as a result of some opportunities in the US. And so we do we do get a benefit there. And I think that shows up in terms of the updated tax guide. So you know, you'll see it come down ever so slightly.

Patrick Kenny: Okay, great. Thanks for that. And then maybe just on the cost pressures here, you're experiencing on RFS4.

Unknown Speaker: – Thanks for that. And then maybe just on the cost pressures you're experiencing on RFS-4, maybe you can just walk us through some of the scope changes that might be embedded in that new budget? And then also, you know, given construction activity is really picking up here for large-scale projects in the Heartland area, just how we should be thinking about your ability to lock in costs from a labor productivity standpoint.

Speaker Change: Okay, great. Thanks for that. And then maybe just on the cost pressures here you're experiencing on RFS-4, maybe you can just walk us through some of the scope changes that might be embedded in that new budget.

Patrick Kenny: Maybe you can just walk us through some of the scope changes that might be embedded in that new budget. And then also, you know, just given instruction activity really picking up here for large scale projects in the Heartland area. Just how we should be thinking about your ability to lock in costs from a labor productivity standpoint. Great question, Pat.

Speaker Change: And then also, you know, just given construction activity, really picking up here for large scale projects in the Heartland area, just how we should be thinking about your ability to lock in costs from a labor productivity standpoint.

Jaret Sprott: Great question, Pat. So think of the project increase in kind of terms of the following three buckets, the first bucket being project scope changes and design modifications. This is really to enhance the overall operability of RFS4 specifically, and the overall complex, as you know, like we can spread molecules to any one of the fracs. And it's specifically to accommodate a wider range of C3 plus feedstock composition. So depending on where your customer is, if your customer is extracting NGLs from a deep basin well versus a very, you know, oily Montany well, you get a wide range of NGL composition.

Patrick Kenny: So think of the project increase kind of in the following three. The first bucket being projects changes in design modifications. This is really to enhance the overall operability of RFS4 specifically and the overall complex. As you know, that we can spread molecules to any one of the fracks. And it's specifically to accommodate a wider range of C3 plus beats dot composition. So depending on where your customer of your customers is extracting NGLs from, from a deep basin well versus a very, you know, oily, Montenewell, you get a wide range of NGL composition. So this we made a decision just to enhance the overall operability to have a wider range to take that product composition.

Pat: Great question, Pat.

Speaker Change: Think of the project increase kind of in the following three points.

Speaker Change: The first bucket being project scope changes and design modifications.

Speaker Change: This is really to enhance the overall operability of RFS4 specifically, and the overall complex. As you know, we can spread molecules to any one of the fracs. And it's specifically to accommodate a wider range of C3 plus feedstock composition.

Jaret Sprott: So this, we made a decision just to enhance the overall operability to have a wider range to take that product composition. The second bucket is, we saw some incremental inflation over and above what we expected in the latter half of 2023 when, obviously, there was a very large project sanctioned in Alberta here. So that was unexpected and caused some of the increase.

Speaker Change: So, depending on where your customer is, if your customer is extracting NGLs from a deep basin well versus a very oily Montigny well, you get a wide range of NGL composition. We made a decision just to enhance the overall operability to have a wider range to take that product composition.

Thank you.

Patrick Kenny: The second bucket is we saw some incremental inflation over and above what we expected in a latter half of 23 when, when obviously there was a very large project sanctioned in Alberta here. So that was unexpected and caused some of the increase. And then the third bucket is our decision when we sanctioned this project in February of 2023. It was going to be a typical permanent project where we do all of the oversight in the execution. And as we saw these labor concerns, as you identify the heartland area getting busy. We decided to move to a lump sum to make sure that we could procure a tier one contractor.

Speaker Change: The second bucket is, we saw some incremental inflation over and above what we expected in the latter half of 2023 when obviously there was a very large project sanctioned in Alberta here, so that was unexpected and caused some of the increase.

Operator: Good morning and welcome to the Pembina Pipe Lane Corporation, Q2 2024 Results Conference call. At this time, our lines are in illicit only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call, you need assistance, please press star zero for the operator.

Jaret Sprott: And then the third bucket is our decision: when we sanctioned this project in February of 2023, it was going to be a typical Pembina project where we do all of the oversight and the execution. And as we saw these labor concerns, as you identified, the Heartland area getting busy, we decided to move to a lump sum to make sure that we could procure a tier one contractor that we were confident could get the fabrication shop space, make sure they had access to high quality labor, make sure that they were going to execute with respect to our safety expectations and values and Indigenous content and deliver a high quality project on time.

Dan Tucunel: This call is being recorded on Friday, August 9, 2024. I would now extend the conference over to Dan Tucunel, VP of Capital Markets. Please welcome to Pemina's conference call and webcast to review highlights from the second quarter of 2024. On the call today, we have Scott Burrows, President and Chief Executive Officer, Cameron Goldade, Senior Vice President and Chief Financial Officer, along with other members of Pemina's leadership team, including Jaret Sprott, Janet Luduca, Stuart Taylor, and Chris Scherman.

Speaker Change: And then the third bucket is, our decision, when we sanctioned this project in February of 2023,

Speaker Change: It was going to be a typical Pembina project where we do all of the oversight and the execution.

Speaker Change: And as we saw these labor concerns, as you identified, the Heartland area getting busy.

Speaker Change: We decided to move to a lump sum to make sure that we could procure a tier one contractor. You know, that we were confident could get the fabrication shop space.

Patrick Kenny: You know that we were confident could get the fabrication shop space. Make sure they had access to high-quality labor. Make sure that they were going to execute with respect to our safety expectations and values and indigenous content and deliver high quality project on time. So we've shifted roughly 70% of that total project, as we stated, to a lump sum. We'll execute kind of more of that outside the lease boundary outside the frack area. We'll do a lot of that execution, but we have made that shift, and we did see, you know, with shifting that risk from yourself to a third party who's going to deliver that high quality labor and safety expectation.

Speaker Change: Make sure they had access to high-quality labour, make sure that they were going to execute with respect to our safety expectations and values and Indigenous content, and deliver a high-quality project on time.

Dan Tucunel: I would like to remind you that some of the comments made today, may be forward looking in nature and are based on Pemina's current expectations, estimates, judgments, and projections. For looking statements, we may express or imply today, our subject to risks and uncertainties, which could cause actual results to differ materially from expectations. Further, some of the information provided refers to non-GAP measures. To learn more about these forward looking statements and non-GAP measures, please see the company's MDNA, dated August 8, 2024, for the period ended June 30, 2024, as well as the press release Pemina issued yesterday. All of these documents are available online at Pemina.com and on both Cedar and Edgar.

Jaret Sprott: So we've shifted roughly 70% of that total project, as we stated, to a lump sum. We'll execute kind of more of that outside the lease boundary, outside the frack area. We'll do a lot of that execution. But we have made that shift. And we did see, you know, with shifting that risk from yourself to a third party who's going to deliver that high quality labor and safety expectations, there's a little bit of a cost with that.

Speaker Change: So, we've shifted roughly 70% of that total project, as we stated, to a lump sum.

Speaker Change: We'll execute kind of more of that outside the lease boundary, outside the frack area. We'll do a lot of that execution. But we have made that shift and we did see, you know, with shifting that risk from yourself to a third party, who's going to deliver that high quality labour and safety expectations, there is a little bit of a cost with that.

Patrick Kenny: There's a little bit of a cost with that.

Patrick Kenny: So that's kind of how we break up those three buckets, and overall the project, like we said, is still planned on being delivered on time, which is great. And then, with respect to the commercial side, you know, with this project coming out of the ground, as we speak, we've been able to secure incremental contracts at the overall base complex, RFS 1, 2, and 3, which is obviously great for business. And then we've secured a lot of new contracts over and above our original base case when we sanction this with the board in February of 2023.

Jaret Sprott: So that's kind of how we break up those three buckets. And overall, the project, like we said, is still planned to be delivered on time, which is great. And then, with respect to the commercial side, you know, with this project coming out of the ground, as we

Speaker Change: So that's kind of how we break up those three buckets, and overall the project, like we said, is still planned on being delivered on time.

Scott Burrows: I will now turn things over to Scott to make some opening remarks. Thanks Dan. Another strong quarter was highlighted by record adjusted EBITDA of $1.091 billion. Record adjusted cashflow from operating activities of $837 million and record adjusted cashflow per share of $1.44. Record results were driven in part by the closing of the Alliance Augsable Acquisition, effective April 1st, as Pemina benefited from increased ownership in those assets. Both Augsable and Alliance have been performing well and we are excited to welcome new employees to the Pemina team.

Speaker Change: which is great.

Speaker Change: And then with respect to the commercial side, you know, with this project coming out of the ground as we speak, we've been able to secure incremental contracts at the overall base complex, RFS 1, 2 and 3, which is obviously great for business. And then we've secured a lot of new contracts over and above.

Jaret Sprott: We've been able to secure incremental contracts at the overall base complex, RFS 1, 2, and 3, which is obviously great for business. And then we've secured a lot of new contracts over and above our original base case when we sanctioned this with the board in February of 2023. And with the incremental cost, we have seen that the overall sanction metrics have actually gone up.

Patrick Kenny: And with the incremental cost, we have seen that the overall sanction metrics have actually gone up. And then with respect to the overall portfolio, just talk like the hard line is seem a little bit of the increase, but overall our portfolio is still a project is still industry leading.

Speaker Change: Our original base case, when we sanctioned this with the board in February of 2023, and with the incremental cost, we have seen that the overall sanction metrics have actually gone up.

Jaret Sprott: And then with respect to the overall portfolio, I'll just talk about Heartland seeing a little bit of an increase. But overall, our portfolio of projects is still industry leading, and we have full confidence in our team to continue with the current projects to deliver on time and on budget and future ones.

Speaker Change: And then with respect to the overall portfolio, I'll just talk, like, the Heartland is seeing a little bit of increase, but overall, our portfolio is still, of projects, is still industry leading, and we have the full confidence in our team to continue with the current projects to deliver on time, on budget, and the future ones.

Scott Burrows: With the release of our second quarter results yesterday, we were also pleased to announce that we have acquired the remaining 14.6% interest in Augsable U.S, operations from Williams, effective August 1st. Since the Williams Augsable Acquisition and the Augsable assets have been outperforming Pemina's expectations and we are pleased to now have fully consolidated ownership of all Augsable assets thereby further simplifying corporate reporting and enhancing the ability to pursue long-term opportunities. Pemina's business continues to deliver exceptional results.

Patrick Kenny: And we have the full confidence in our team to continue with the current projects to deliver on time, on budget, and the future ones.

Unknown Speaker: Okay, that's great color, Jaret. Appreciate that. And maybe just real quick, were the incremental costs here considered when with the PGI white cap transaction as well, in other words, Unknown Speaker, The All-In Economics of the deal. I know some of it has some downstream benefits embedded in the returns. Just wondering if those returns are still in line with your expectations with the new costs on RFS 4.

Patrick Kenny: Okay, that's great color. Appreciate that.

Patrick Kenny: And maybe just real quick, were the incremental costs here contemplated when with the PGI, like kept transaction as well. In other words, like the oil and economics of the deal, I know some of it has some downstream benefits embedded in the returns; just wondering if those returns are still in line with your expectations with the new costs. And RFS 4. Absolutely. Yeah.

Speaker Change: Okay, that's great color, Jaret, appreciate that. And maybe just real quick, where the incremental costs here.

Speaker Change: contemplated when with the PGI white cap transaction as well in other words

Scott Burrows: Volume growth across the Canadian energy industry is leading to higher volumes in our pipelines, gas plants, and fractionators and while we would prefer to see higher natural gas prices for our producing customers, the current weakness along with robust NGL pricing and strong oil prices is leading to continued strength in Pemina's marketing business.

Speaker Change: The all-in economics of the deal. I know some of it has some downstream benefits Embedded in the returns. Just wondering if if those returns are still in line with your expectations with the new costs on RFS 4

Unknown Speaker: Absolutely. Okay, I'll leave it there. Thank you.

Patrick Kenny: Okay, I'll leave it there. Thank you.

Speaker Change: Absolutely.

Scott Burrows: Given the strong year-to-day results, the incremental benefit of the latest Augsable Acquisition and our outlook for the remainder of the year, Pemina has raised its 2024 adjusted EBITDA guidance range to 4.2 billion to 4.35 billion, which at the midpoint represents a $100 million increase over the previous range.

Rob Holt: Thanks, but. Thank you.

Speaker Change: Okay, I'll leave it there. Thank you.

Operator: Thank you. The next question comes from Rob Hope at Scotiabank. Please go ahead.

Rob Holt: Next question comes from Rob Holt at Skillshare Bank. Please go ahead.

Pat: Thanks, Pat.

Speaker Change: Thank you. Next question comes from Rob Hope at Scotiabank. Please go ahead.

Scott Burrows: Morning, everyone. I want to follow up on the fracked discussion. I guess two parts there. First one is: Are the incremental contracts that you signed on for the entire RFS complex reflective of the incremental capital for RFS 4? And then how much white space do you have at RFS and kind of when could you need some incremental capacity beyond what you're building? There's limited white space Rob at the complex and even with RFS 4 coming into service. So right now very focused on project execution of step one with respect to the execution teams, but obviously the commercial teams are in constant conversations with our other customers.

Unknown Speaker: Morning, everyone. I want to follow up on the FRAC discussion. You know, I guess there are two parts to it. First one is, are the incremental contracts that you signed on for the entire RFS complex reflective of the incremental capital for RFS 4? And then how much white space do you have at RFS? And kind of when could you need some incremental capacity beyond what you're building?

Rob Holt: Morning everyone. I want to follow up on the on the FRAC discussion. You know, I guess two parts there. First one is

Scott Burrows: Finally, the second quarter was further highlighted by three other exciting developments. The first was a positive final investment decision on the Cedar LNG project. We are excited to be moving forward with a project that will deliver industry leading, low-carbon cost-competitive Canadian LNG to overseas markets and contribute to global energy security while delivering jobs and economic prosperity to the local region. The Cedar LNG project aligns squarely with Pemina's strategy offers attractive economics and is supported by contracting strategy that prudently mitigates cost risks.

Rob Holt: Are the incremental contracts that you signed on for the entire RFS complex reflective of the incremental capital for RFS 4? And then how much white space do you have at RFS? And kind of when could you need some incremental capacity beyond what you're building?

Unknown Speaker: Um, there's limited white space, Rob, at the complex and even with RFS4 coming into service. So right now, we are very focused on project execution of step one with respect to the execution teams. But obviously, the commercial teams are in constant conversations with our other customers.

Rob Holt: There's…

Rob Holt: There's limited white space, Rob.

Speaker Change: at the complex and even with RFS4 coming into service. So right now, very focused on project execution of step one with respect to the execution teams. But obviously, the commercial teams are in constant conversations with our other customers. And you know, it's a balancing act between ensuring that we have the base load of the first three fracts,

Scott Burrows: The second was PGI's transaction with white cap resources, which included the acquisition of a 50% interest in white caps, K-bob, complex, and an obligation to fund further Latour area infrastructure developed. We also signed long term takeer pay agreements on Pemina's pipelines and fractionators. The deal is another example of PGI and Pemina's ability to provide unique and value added solutions to support the growth demands of our customers. And a third was bringing the phase A peace pipeline expansion into service, marking the culmination of more than 10% years and more than $4 billion expansion program that was driven by growing customer demand for transportation services to support development in the WCSB, including the Montany, Duvernet, and other resource plays.

Scott Burrows: And you know, it's a balancing act between ensuring that we have the base load of the first three facts long-term contract extensions. Fill four under long term deals and then, you know, you know, been get focused on sanctioning number five, but right now it's really focused on number four and getting that customer interaction for five going. I'd say that's a little bit further out. So, with respect to your first question, I think you were asking about incremental contracts, like has anything changed specific due to the cost increase? Is that accurate? Yeah, like are the incremental, you know, were fees adjusted up for the new capital cost and that's how returns were put back on site.

Unknown Speaker: And you know, it's a balancing act between ensuring that we have the base load of the first three frogs, long-term contract extensions, fill four under long-term deals, and then get focused on sanctioning number five. But right now, it's really focused on number four and getting that customer interaction for five going. I'd say that's a little bit further out. With respect to your first question... I think you were asking about incremental contracts. Like, has anything changed specifically due to the cost increase? Is that accurate? Yeah,

Speaker Change: Long-term contract extensions.

Speaker Change: Fill four under long-term deals and then you know you know then get focused on sanctioning number five but but right now it's really focused on number four and and getting that customer interaction for five going I'd say that's a little bit further out

Speaker Change: With respect to your first question,

Speaker Change: I think you were asking about incremental contracts, like has anything changed specific due to the cost increase, is that accurate? Yeah, like are the incremental, you know, were fees adjusted up for the new capital costs and that's how returns were put back on side.

Scott Burrows: The peace pipeline system plays an important role within Pemina's integrated value chain. And I would like to thank our many customers, employees, and communities that have supported Pemina to deliver this major infrastructure build out. As a result of the expansions and ongoing optimization efforts, Pemina is confident that its extensive pipeline network is best positioned to capture future volumes and allow the company to continue to offer customers unparalleled advantages through safe, reliable, flexible, and cost competitive services together with differentiated market access.

Unknown Speaker: Yeah, like the incrementals, you know, were fees adjusted up for the new capital costs, and that's how returns were put back on the side.

Rob Holt: Yeah, it's a combination of, it's specifically it's combination of volume, fees, and then you also have the downstream auxiliary fees, such as rail loading and terminaling, etc. And then obviously the marketing business as well. Some customers, you know, choose a permanent to do their full suite of marketing, and some customers obviously, you know, do their own marketing. But we are, you know, advancing a lot of that business and, you know, and then you're obviously seeing the upside through the marketing arm as well. All right, thanks for that.

Unknown Speaker: Yeah, it's a combination of it's specifically that combination of volume fees. And then you also have the downstream auxiliary fees, such as rail loading and terminaling, etc.

Speaker Change: Yeah, it's a combination of.

Speaker Change: Thanks.

Speaker Change: Specifically, it's a combination of volume, fees...

Speaker Change: And then you also have the downstream auxiliary fees, such as rail loading and terminaling, etc. And then, obviously, the marketing business as well. Some customers, you know, choose Pembina to do their full suite of marketing, and some customers, obviously,

Cameron Goldade: I will now turn the call over to Cam to discuss highlights from our second quarter. Thanks, Scott. Scott noted Pemina reported a record second quarter adjusted EBITDA of $1.091 billion. This represents a 33% increase over the same period in the prior year, and remaining a 21% increase adjusting for the alliance oxable ownership. In pipelines, factors impacting the second quarter primarily included higher adjusted EBITDA from alliance due to stronger asset performance combined with increased ownership following the alliance oxable acquisition.

Unknown Speaker: And then obviously, the marketing business as well. Some customers, you know, choose Pembina to do their full suite of marketing. And some customers, obviously, do their own marketing. But we are, you know, advancing a lot of that business. And, you know, and then you're obviously seeing the upside through the marketing arm as well.

Speaker Change: do their own marketing, but we are advancing a lot of that business. And you know, and then you're obviously seeing the upside through the marketing arm as well.

Unknown Speaker: Thanks for that. And then maybe just switching over to the ethane opportunities that were highlighted at the investor day, how are those progressing? And then, given the, we'll call it, tightening labor market in the heartland, could this de-emphasize an RFS 3DS and kind of focus more out in the field?

Scott Burrows: And then maybe just switching over to the same opportunity that we're highlighted at the investor day, how are those progressing? And then just given the, you know, we'll call it a tightening labor market in the heartland, you know, could this deemphasize an RFS 3DS and kind of focus more on the field. You know, I would say no right now, Rob, because, you know, that's a fairly, that's a fairly small project. You know, as we've stated before, RFS 3, and you just really need the tower. So it's not an extensive like, you know, it's not 500 people on site and it's, you know, it's building a few pieces of equipment and some select bad shops.

Speaker Change: Alright, thanks for that. And then maybe just switching over to the ethane opportunities that were highlighted at the investor day, how are those progressing? And then just given the

Cameron Goldade: The northern pipeline system outage and wildfires in the second quarter of 2023, which had an impact of $29 million with no similar impact in the second quarter of 2024. Contractual inflation adjustments on tolls and the earlier recognition of takeer pay deferred revenue on the peace pipeline system, and the reactivation of the nipacy pipeline in the third quarter of 2023. In facilities, factors impacting the second quarter included the inclusion within facilities of adjust EBITDA from oxable following the alliance oxable acquisition.

Speaker Change: Yeah, we'll call it a tightening labor market in the heartland, you know, could this de-emphasize an RFS 3DS and kind of focus more out in the field?

Unknown Speaker: Um, you know, I would say no right now, Rob, because, you know, that's a fairly small project, you know, as we've stated before, RFS3, and you just really need the tower. So it's not an extensive project, like, you know, it's not 500 people on site. And it's, you know, building a few pieces of equipment and some select fab shops. So, you might see a little bit of cost pressure there.

Speaker Change: You know.

Speaker Change: I would say no right now, Rob, because, you know, that's a fairly...

Speaker Change: That's a fairly small project, you know, as we've stated before, RFS3, and we just really need the tower.

Speaker Change: So it's not an extensive like, you know, it's not 500 people on site. And it's, you know, it's building a few pieces of equipment and some select fab shops. So

Scott Burrows: So, you know, you might see a little bit of cost fraction there, but I don't think that would be enough to deter us away from looking at that project.

Cameron Goldade: The northern pipeline system outage and wildfires in the second quarter of 2023, which had an impact of $18 million with no similar impacts in the second quarter of 2024, and higher interoperable volumes on certain PGI assets. In marketing and new ventures, second quarter results reflect the net impact of increased ownership interest in oxable following the alliance oxable acquisition, as well as higher NGL margins at oxable. Higher margins from the western Canadian NGL marketing business due to higher marketed volumes, lower natural gas prices, and higher propane butane and condensate prices. Realized losses on NGL based derivatives compared to gains in the second quarter of 2023, partially offset by higher realized gains on crude oil based commodity related derivatives, as well as higher general and administrative expense.

Speaker Change: You know, you might see a little bit of cost pressure in there, but I don't think that would be enough to deter us away from...

Unknown Speaker: But I don't think that would be enough to deter us from looking at that project. But since Investor Day, we have accelerated a handful of projects through gate one funding. So that's, you know, small dollar amounts to get pre-feed kicked off.

Scott Burrows: But since Investor Day, we have accelerated a handful of projects through gate one funding. So that's, you know, small dollar amounts to get pre-feed kicked off. And then we'll be evaluating that near and then upcoming, you know, a couple quarters and making a decision on which projects go through gate two and ultimately gate three and which ones won't be. Yeah, I think we're all will be able to understand kind of what the, what current labor costs and what current costs are, which will help guide us in terms of which decision we make, which is, as Jared pointed out previously.

Speaker Change: from looking at that project, but.

Speaker Change: Since Investor Day, we have accelerated

Speaker Change: a handful of projects through gate one funding. So that's, you know, small dollar amounts to get pre-feed kicked off. And then we'll be evaluating that near in the upcoming, you know, couple of quarters and making a decision on.

Unknown Speaker: And then we'll be evaluating that in the near future, you know, a couple of quarters and making a decision on which projects go through gate two and ultimately gate three and which ones won't. Yeah, I think Rob, we'll be able to understand kind of what the current labor costs and what the current costs are, which will help guide us in terms of which decision we make. Which is, as Jared pointed out previously, one of the advantages we have is that we do have, you know, numerous sources that we can source the ethane from. And so any updated capital costs will go into that mix in our decision making.

Speaker Change: Rob, we'll be able to understand kind of what the what current labor costs and what current costs are, which will help guide us in terms of which decision we make, which is, as Jaret pointed out previously, one of the advantages we have is we do have the ability to do a lot of the work that we do in the lab.

Scott Burrows: One of the advantages we have is we do have, you know, numerous sources that we can source the ethane from. And so any updated capital cost will go into that mix, and our decisions you can.

Speaker Change: You know numerous sources that we can source the ethane from and so any updated capital cost will go into that mix in our decision making.

Rob Holt: Thank you.

Cameron Goldade: Finally, the corporate segment was largely unchanged. Earnings in the second quarter were $479 million. This represents a 32% increase over the same period in the prior year. In addition to the factors impacting adjusted EBITDA, earnings in the second quarter were impacted by unrealized losses recognized by PGI on interest rate derivative financial instruments compared to gains in the second quarter of 2023. Gains associated with the de-recognition of the provisions related to the financial assurance is provided by Pamina, which were transferred to Cedar LNG following the positive FID in June.

Rob Holt: Thank you.

Operator: Thank you. The next question comes from Robert Catellier from CIBC Capital Markets. Please go ahead.

Robert Kwan: The next question comes from Robert Katalia from C IBC Capital Markets.

Rob Holt: Thank you. The next question comes from Robert Catellier from CIBC Capital Markets. Please go ahead.

Robert Kwan: Please go ahead. They've answered most of the questions about this point, but I just wondered, given the massive development of the peace system over the last several years, what's your vision for developing it from here? What, what further optimizations are possible from this point?

Unknown Speaker: You've answered most of my questions by this point, but I just wondered, given the massive development of the peace system over the last several years, what's your vision for developing it from here? What further optimizations are possible from this point?

Robert Coutelier: You've answered most of my questions by this point, but I just wondered, given the massive development of the peace system over the last several years, what's your vision for developing it from here? What further optimizations are possible from this point?

Scott Burrows: So Rob, I think there's a few different things. And again, this question, given the breadth of the system, really depends on where the volumes show up. And so, you know, when you're in, when you're in Alberta, for the most part, we will focus on optimization now that we have segregated lines. And where can we use pump optimization product optimization to increase throughput? You know, we've already found some wins across the system to unlock some incremental volumes. We do have other areas where we can add low-cost pumps like from Fox Creek in to increase volumes there.

Unknown Speaker: So Rob, I think there are a few different things. And again, this question, given the breadth of the system, really depends on where the volumes show up. And so, you know, when you're in Alberta, for the most part, we will focus on optimization now that we have segregated lines and where can we use pumped optimization, product optimization to increase throughput. You know, we've already found some wins across the system to unlock some incremental volumes.

Robert Coutelier: So, Rob, I think there's a few different things, and again, this question, given the breadth of the system, really depends on where the volumes show up.

Cameron Goldade: Larger unrealized losses on renewable power participants, and unrealized loss on NGL based derivatives compared to an unrealized game in the second quarter of 2023. Higher depreciation and amortization net finance costs and acquisition and integration fees. Pipeline volumes of 2.7 million barrels per day in the second quarter represent an 11% increase compared to the same period in the prior year. The increase was primarily due to the increase in ownership interest in alliance, higher volumes on the peace pipeline system resulting from earlier recognition of take or paid deferred revenue, and the impact of the northern pipeline system outage and the wildfires in the second quarter of 2023 combined with the reactivation of the nipacy pipeline.

Rob Holt: And so, you know, when you're in, when you're in Alberta.

Speaker Change: For the most part, we will focus on optimization now that we have segregated lines. And where can we use pump optimization, product optimization to increase throughput? You know, we've already found some wins across the system to unlock some incremental volumes. We do have other areas where we can add low cost pumps like from Fox Creek in to increase volumes there. And then we'll continue to look at opportunities in Northeast BC as LNG comes on, LNG phase one and other opportunities come online and we see incremental growth there. So it's a tough question to answer. There's certain areas that are tight where we'll have to expand and there's certain areas where we have utilization. What are your thoughts on the future of LNG in Northeast BC?

Unknown Speaker: We do have other areas where we can add low-cost pumps, like from Fox Creek, to increase volumes there. And then we'll continue to look at opportunities in Northeast BC as LNG comes on, LNG Phase 1 and other opportunities come online, and we see incremental growth there. So it's a tough question to answer. There are certain areas that are tight where we'll have to expand, and there are certain areas where we have utilization opportunities.

Scott Burrows: And then we'll continue to look at opportunities in Northeast BC as LNG comes on, LNG phase one, and other opportunities come online, and we see incremental incremental growth there. So it's a tough question to answer. There's certain, there's certain areas that are tight where we'll have to expand, and there's certain areas where we have utilization opportunities.

Cameron Goldade: Facilities volumes of approximately 0.9 million barrels per day in the second quarter represent a 14% increase compared to the same period in the prior year. The increase was primarily due to aksable volume recognition following the alliance, aksable acquisition higher volumes at younger as the second quarter of 2023 was impacted by the northern pipeline system outage and the wildfires combined with higher interruptible volumes on certain PGI assets.

Rob Kwan: Okay, I'm just wondering what the thought is on the Frax bread hedging in light of both the current prices and your increased exposure now that you've consolidated OX.

Unknown Speaker: Okay, understood. And I'm just wondering what the thought is on frack spread hedging in light of both the current prices and your increased exposure now that you've consolidated.

Speaker Change: Opportunities.

Speaker Change: I'm just wondering what the thought is on frack spread hedging in light of both the current prices and your increased exposure now that you've consolidated AUX.

Scott Burrows: So, so Rob, we have a pretty, you know, programmatic hedging program based on where Frax breads are in terms of, you know, from a statistical basis. P10 to P90 with very limited discretion as it relates to the hedging program. You know, one of the benefits we did talk about on the original OX, able acquisition, as well as with the new contract was it made it a lot simpler to hedge. And so, you know, as we stand today, we're about 50% hedged in Canada, and we actually have about just under 50% of OX, able hedged for 2024 as well.

Unknown Speaker: So, Rob, we have a pretty, you know, programmatic hedging program based on where the track spreads are in terms of, you know, from a statistical basis, P10 to P90 with very limited discretion as it relates to the hedging program. You know, one of the benefits we did talk about on the original Auxable acquisition as well as with the new contract was that it made it a lot simpler to hedge. And so, you know, as we stand today, we're about 50% hedged in Canada, and we actually have about just under 50% of Auxable hedged for 2024 as well.

Speaker Change: So Rob we have a pretty

Cameron Goldade: 2022 I was lucky for 2024 in addition to raising our 2024 adjust the data guidance as Scott mentioned previously, Tim and has also revised its 2024 capital investment program to $1.3 billion. The revised outlook reflects an approximate 140 million dollar net increase when compared to our original 2024 budget of $1.16 billion inclusive of then unsanctioned additional growth capital. Drivers of the increase primarily include the sanctioning of PGI's WAPID expansion and K-3 code generation facility, other increases in revenue generating capital within pipelines and additional non-recoverable sustaining capital.

Rob Holt: you know, programmatic hedging program based on on where track spreads are in terms of, you know, from a statistical basis.

Speaker Change: P10 to P90 with very limited discretion as it relates to the hedging program.

Speaker Change: You know, one of the benefits we did talk about on the original Oxable acquisition, as well as with the new contract, was it made it a lot simpler to hedge. And so, you know, as we stand today, we're about 50% hedged in Canada, and we actually have about just under 50% of Oxable hedged for 2024 as well, you know, based on how

Scott Burrows: You know, based on how Frax breads have trended the forward curve, we're somewhere in the neighborhood of 10 to 15% hedge for 2025.

Unknown Speaker: You know, based on how track spreads have trended on the forward curve, we're somewhere in the neighborhood of 10 to 15% hedged for 2025. But we'll likely be locking in incremental hedges, just given where forward frac spreads are compared to, I'll call it the 5 to 10 year historical average. Okay. And last question.

Speaker Change: frack spreads have trended the forward curve.

Cameron Goldade: The revised capital investment program reflects approximately $300 million for contributions to equity accounted in besties, including $240 million of equity contributions to Cedar LNG incurred in the first half of 2024 with no further contributions to Cedar expected in 2024. Tim and it continues to expect the capital program to be funded with cash flow from operating activities and out of dividends, maintaining its strong balance sheet. At June 30, based on the trailing 12 months, the ratio of proportionally consolidated senior debt to adjust the EBITDA was 3.6 times, which is at the low end of our target range.

Speaker Change: We're somewhere in the neighborhood of 10-15% hedge for 2025, but we'll likely be locking in incremental hedges, just given where forward frac spreads are compared to, I'll call it the 5-10 year historical average.

Scott Burrows: But we'll likely be locking in incremental hedge is just given where forward Frax breads are compared to I'll call it the 5 to 10 year historical average.

Robert Kwan: Understood in that last question, just a clarification from Cam. I think I understood from your previous discussion of tax was that the 24 current tax is not materially changed, despite the increased marketing guidance. Is that correct? That's correct, Robert. Yeah, thanks.

Unknown Speaker: And last question, just a clarification from Cam. I think I understood from your previous discussion of taxes that the current 24 current tax is not materially changed despite the increased marketing guidance. Is that correct? Yes, it is.

Speaker Change: Understood. And last question, just a clarification from Cam. I think I understood from your previous discussion of taxes that the 24 current tax is not materially changed despite the increased marketing guidance. Is that correct?

Speaker Change: That's correct, Robert. Yeah, thanks.

Benjamin Pham: Thank you. The next question comes from Ben Fam at Bimo, please go ahead.

Unknown Speaker: Thank you. The next question comes from Ben Pham at BMO. Please go ahead.

Cameron Goldade: It's important to note, however, that given the April 1st closing date of the Alliance Oxable acquisition, the ratio includes all the debt associated with the transaction, but is currently only capturing one quarter of EBITDA contribution. On a normalized basis, this ratio will be approximately 3.3 times.

Speaker Change: Thank you. The next question comes from Ben Pham at BMO. Please go ahead.

Benjamin Pham: All right, thanks.

Scott Burrows: Good morning. Can you just talk about the MNA opportunities in Western Canada to expect more of the white cap. JV sort of structure is do you think key firms we're looking to monetize or even strategic looking to dispose of assets?

Operator: Morning. Can you guys talk about the M&A opportunities in Western Canada? Do you expect more of the white cap, JV sort of structure? Do you think TE firms will be looking to monetize or even strategics looking to dispose of assets?

Ben Pham: Can you guys talk about the M&A opportunities in Western Canada? Do you expect more of the white cap?

Scott Burrows: I'll now turn things back to Scott. Thanks, Cam.

Speaker Change: JV sort of structure is do you think TE firms could be looking to monetize or even strategics looking to dispose of assets?

Scott Burrows: In closing, I'd like to reiterate that for all of us at Pemina, it has been a strong first half of 2024. And we are looking forward to continued strength throughout the remainder of the year, amidst the backdrop of industry momentum and an expectation of robust volume growth, we continue to see increased utilization across our systems, pursue many opportunities to incredibly invest capital and execute our strategy within our financial guardrails. Thank you for joining us this morning and for your continued support.

Unknown Speaker: Hey, Ben, it's really, it's a really hard thing to predict. I mean, we couldn't have predicted that the white cap transaction was going to happen, you know, six, seven months ago.

Scott Burrows: Hey, Ben, you know, it's really a really hard thing to predict. I mean, we couldn't have predicted that the white cap transaction was going to happen, you know, six, seven months ago. So, you know, I don't know, you know, we're not seeing necessarily a lot right now. You know, and there's still a fair number of producers that want to own that infrastructure. So it's very producer-specific. But we're certainly, you know, we don't have line of sight to a large MNA pipeline. And then, as it relates to PE firms again, I can't really speculate. Still feels like a lot of the assets are relatively in their kind of early fund life.

Unknown Speaker: So, you know, I don't I don't know, you know, we're not necessarily seeing a lot right now. You know, and there's still a fair number of producers that want to own that infrastructure. So it's very producer-specific.

Speaker Change: Hey Ben, you know I

Speaker Change: It's a really hard thing to predict. I mean, we couldn't have predicted.

Ben Pham: that the white cab transaction was going to happen, you know, six, seven months ago, so

Ben Pham: I don't know, we're not seeing necessarily a lot right now, and there's still a fair number of producers that want to own that infrastructure, so it's very producer-specific.

Operator: Operator, please open the line up for questions. Thank you.

Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. If you are using a speaker phone, please lift the hand set before pressing any keys.

Ben Pham: but we're certainly you know we don't have line of sight to to a large M&A pipeline and then as it relates to

Unknown Speaker: But we're certainly, you know, we don't have line of sight to a large, you know, large M&A pipeline. And then as it relates to PE firms, again, I can't really speculate, but it still feels like a lot of the assets are relatively in their kind of early fund life. So, you know, we don't see anything that's kind of being driven by fund life. So I don't have a good insight now as to what PE firms may or may not be doing.

Ben Pham: to PE firms. Again, I can't really speculate.

Jeremy Tonet: Your first question comes from Jeremy Tonet at JP Morgan Chase. Please go ahead. Hi, good morning. Morning, Jeremy. I just want to dial in on the acquisitions a little bit more. Our stable alliance here seems like they're outperforming our expectations and just wondering if you could talk a bit more, I guess, about the outperformance in, you know, really curious about looking forward, I guess, it seems like full ownership would bring new opportunities to Pembina and how that kind of impacts, I guess, the marketing opportunities as well. Just any more color on how we should think about what's.

Ben Pham: still feels like a lot of the assets are relatively in their kind of early fund life. So, you know, we don't see anything that's kind of being driven by fund life. So, I don't have a good insight now as to what PE firms may or may not be doing.

Scott Burrows: So, you know, we don't see anything that's kind of being driven by fun life. So I don't have a I don't have a good insight now is so to what PE firms may or may not be doing.

Unknown Speaker: Okay, understood. And I know there's also some comments on Alliance, AUX, exceeding expectations, and then the tuck-in of AUX too, maybe solidifying the synergies a bit. Is that comment more suggesting that you might beat that, that eight times multiple that you've commented on? And then what about that acceleration of marketing volumes? Does that change now? Yeah.

Scott Burrows: Okay, understood.

Scott Burrows: And I know there's also some comments on Alliance ox exceeding expectations and then the talking of a box to maybe solidifying the synergies of that.

Speaker Change: Okay, understood. And I know there's also some comments on Alliance Ox exceeding expectations and then the talking of Ox to maybe solidifying the synergies a bit.

Scott Burrows: Is that comment more suggesting that you might beat that, that a times multiple that you've commented about, and then what about that? That's a ratio of the marketing volumes. Is that that change now? Yeah, Ben, I guess I would just say that I think, obviously, as Scott mentioned earlier, we've been fortunate in the sense that, obviously, the commodity complex has strengthened since we made the original acquisition and continues to show strength in this year and even outlooking next year. In terms of the synergies, I think it does. I mean, you know, anytime you've got sort of full control of an asset, it obviously does, you know, put the wheel squarely in your hands to execute on the synergies, so I think it does support us in that regard.

Speaker Change: Is that comment more suggesting that you might beat that eight times multiple that you've commented about? And then what about that acceleration of the marketing volumes, does that change now?

Scott Burrows: What are possible they are going forward and Jeremy, a lot of the strength really was driven at the octable level. Obviously, the low gas price and high NGL prices had had a strong impact on on that business as we pointed out in our in our comments, we'd obviously like a little higher gas price for all of our producing community and hopefully add to increase drilling, but in the short term here, that low gas price is really led to strong for experts across the business.

Unknown Speaker: I, Ben, I guess I would just say that, as Scott mentioned earlier, we've been fortunate in the sense that, obviously, the commodity complex has strengthened since we made the original acquisition and continues to show strength this year and, you know, even in terms of the synergies. I mean, you know, anytime you've got sort of full control of an asset, it obviously does put the wheel squarely in your hands to execute on those synergies.

Speaker Change: Ben, I guess I would just say that I think...

Speaker Change: Obviously, as Scott mentioned earlier.

Speaker Change: You know, we've been fortunate in the sense that, obviously,

Speaker Change: The commodity complex has strengthened since we made the original acquisition.

Speaker Change: and continues to show strength, you know, in this year and, you know, even outlooking next year.

Scott Burrows: Especially at at octable. You know, when you go back to our acquisition presentation and thesis, we talked about some of the longer term synergies, you know, more towards the end of the decade, and we think having full control of a boxable will allow us to continue to capture those and give us a leg up in terms of capturing those it's a little too early to just are talking about what exactly those are in terms of where we're headed, but we're actively working and planning on. Those today. Got it fair enough. Thank you for that.

Speaker Change: In terms of the synergies, I think it does. I mean, you know, anytime you've got sort of full control of an asset, it obviously does, you know, put the wheel squarely in your hands to execute on those synergies. So I think it does.

Unknown Speaker: So I think it does support us in that regard, and I do believe that, you know, we will see additional opportunities as we, you know, sort of get our arms wrapped around and sort of keep moving things forward, as we've done with other assets. You know, are we at a point yet where we're ready to put our hand in the fire and start to quantify these things? Not yet. But I think, you know, we're definitely seeing things evolve positively, and so far, I'm very pleased with the acquisition, the timing, and the returns that it's generating.

Scott Burrows: And I do believe that, you know, we will see additional opportunities as we, you know, sort of get our arms wrapped around and sort of keep moving things forward as we've done with other assets.

Speaker Change: support us in that regard.

Speaker Change: And I do believe that, you know, we will see additional opportunities as we, you know, sort of get our arms wrapped around and sort of keep moving things forward as we've done with other assets.

Scott Burrows: You know, we had a point yet where we're ready to put our hand in the fire and start to quantify those, not yet, but I think, you know, we're definitely seeing things evolve positively, and so far, you know, very pleased with the acquisition of the timing and the returns that it's generating. Okay.

Speaker Change: Are we at a point yet where we're ready to put our hand in the fire and start to quantify those? Not yet, but I think we're definitely seeing things evolve positively, and so far very pleased with the acquisition, the timing, and the returns that it's generating.

Jeremy Tonet: And in the release, I think this language that highlights the expectations for 6% and 4% conventional gas processing volume growth respectively in 24 and just wondering, is this a similar trajectory you kind of see in the near term post 24 in general at a high level. And I guess my question is if you're expecting kind of the mid single digit growth, is this filling latent capacity on the system or is this more capital intensity effectively, how much capital investment will be required to attain that kind of mid single digit growth mid cycle as it could be possible.

Speaker Change: Okay, thank you.

Operator: Thank you. The next question comes from Robert Kwan at RBC Capital Markets. Please go ahead.

Robert Kwan: Next question comes from Robert Kwan at RBC Capital Markets. Please go ahead.

Speaker Change: Thank you. Next question comes from Robert Kwan at RBC Capital Markets. Please go ahead.

Unknown Speaker: Thanks, good morning. I can start with guidance and just kind of some of the thinking around the asymmetric. And just, you know, is that just more conservatism on the high end, whether it's around some of the volumes of charity? I talked about earlier, or maybe potentially anything you see on the rail side of things versus the low end coming up and just the confidence you've got with some of the changes as well as just the mechanical changes with the Auxable acquisition and the like.

Robert Kwan: Thanks. Good morning.

Robert Kwan: I can start with guidance and just kind of some of it thinking around the asymmetric increase and just, you know, is that just more of conservatism on the high end, whether it's around some of the volumes that Jared talked about earlier or maybe potentially anything you see on the rail side of things versus the low end coming up in just the confidence you've got with some of the, some as well, just mechanical changes with the out-sable acquisition in the way. Yeah, I think that's a fair comment, Robin. And, as you suggest, I mean, there's a number of things that go into it.

Robert Kwan: Thanks, good morning. If I can start with guidance and just kind of some of the thinking around the asymmetric.

Robert Kwan: increase? And just, you know, is that just more of conservatism on the high end, whether it's around some of the volumes that Jared talked about earlier, or maybe potentially anything you see on the rail?

Jaret Sprott: Hey Jeremy, it's Jared here. So first, I'll talk a little bit about what we're seeing kind of in 2024 with respect to our conventional volume growth and then I'll touch on PGI just for a second. So you saw in our, I think in our press release, we dropped it from roughly 9 to 6%. You know, that really equates to approximately, it's not that much material amount of volume is roughly 30,000 barrels.

Speaker Change: side of things versus the low end coming up and just the confidence you've got with some of the some as well just mechanical changes with the Auxable acquisition and the like.

Unknown Speaker: Yeah, I think that's a fair comment, Rob. And as you suggest, I mean, there's a number of things that go into it. I think we obviously had confidence to bring the low end up meaningfully from where it was last time, just based on, you know, such a strong first half. When we look at the second half of the year, I mean, there's a couple things that are obviously coming into effect, which, you know, some with certainty, some with less certainty.

Speaker Change: Yeah, I think that's a fair comment, Rob. And as you suggest, I mean, there's a number of things that go into it. I think we obviously had had confidence to bring the low end up meaningfully from where it was last time, just based on on, you know, such a strong first half.

Scott Burrows: I think we obviously had had confidence to bring the low end up, meaningfully from where it was last time, just based on, on, you know, such a strong first half. When we look at the second half of the year, I mean, there's a couple of things obviously that are coming into a fact which, you know, some with certainty, some with less certainty. And so obviously, as we look forward to the second half of 2024, we've got, you know, the quotient firm tolls are now under the revised tolling structure. You know, that the, well, we continue to see strength, you know, at the moment. Obviously, you know, when you sort of look out in terms of interruptible flows through, through Q3, on alliance, you know, some, some uncertainty there could, could exceed our expectations. But obviously taking, you know, taking sort of what we know at the moment.

Jaret Sprott: And what we did see in the first half of the year, which you'll probably recall from the previous quarters was we saw a significant reduction in volumes in January here in Western Canada with some extreme weather. That obviously set a lot of our customers back and they really didn't really didn't make that up. We saw a larger turnaround season kind of in that May, June, and then we expected from some of our third parties.

Speaker Change: When we look at the second half of the year, I mean, there's a couple things obviously that are coming into effect, which, you know, some, some with certainty, some with less certainty. And so obviously, as we look forward to the second half of 2024, we've got, you know, the quotient firm tolls are now under the revised tolling structure.

Unknown Speaker: And so obviously, as we look forward to the second half of 2024, we've got, you know, the quotient firm tolls are now under the revised tolling structure. You know, the the, while we continue to see strength, you know, at the moment, obviously, you know, when you sort of look out, in terms of interruptible flows through through Q3, on Alliance, you know, some some uncertainty there, could out could exceed our expectations, but obviously, taking, you know, taking sort of what we know at the moment.

Jaret Sprott: All of the PGI turnarounds went as expected in the phase eight went, documenting when extremely well. And then we had a short unplanned outage at our flat complex, specifically RFS one that restricted some C2 plus volume. So that's, that's a big portion of the overall reduction. And then the latter half of the year, you know, across a couple of hundred receipt points in the conventional system. It's really just timing of development.

Speaker Change: you know that the while we continue to see strength

Speaker Change: you know, at the moment, obviously, you know, when you sort of look out in terms of interruptible flows through through Q3.

Speaker Change: on Alliance, you know, some uncertainty there, could out, could exceed our expectations, but obviously taking, you know, taking sort of what we know at the moment.

Jaret Sprott: It, you know, that that we're seeing from our customers. It's not that they're not drilling in these liquid rich areas. It's just, you know, that forecasting of when the volumes are coming on. That kind of leads into, you know, there's been some public disclosure recently around some drier gas, either being shut in or not completed. We're not really seeing effects of that. As you know, like the majority of our PGI assets, all of our PGI assets, they produce significantly liquid rich gas.

Scott Burrows: And then lastly, clearly the big outstanding item or range is obviously the marketing book and how that shapes up. Obviously, you know, some, some backwardation in the crude market here, you know, the Ford strip currently shows some strength in the gas market as we close out the year, but those are all uncertain. And so as we look at that, and then on top of it, as you point out, a couple of things which are outside of our control, you know, you've got a rail issue. You know, we're hopefully coming towards the tail end of wildfires in Alberta and western Canada for the year, but, you know, that, that obviously always remains a risk to the summer here.

Unknown Speaker: And then lastly, clearly, the big outstanding item or range is obviously the marketing book can and how that shapes up. Obviously, you know, some backwardation in the crude market here, but this forward strip currently shows some strength in the gas market as we close out the year. But those are all uncertain. And so as we look at that, and then on top of it, as you point out a couple things which are outside of our control, you know, you've got a rail issue, you know, we're hopefully coming towards the tail end of wildfires in Alberta and Western Canada for the year.

Speaker Change: And then lastly, clearly the big outstanding item or range is obviously the marketing book and how that shapes up. Obviously, some backwardation in the crude market here. The forward strip currently shows some strength in the gas market as we close out the year, but those are all uncertain. And so, as we look at that.

Jaret Sprott: And you're actually seeing that in the, in the overall revenue volume increase in PGI. I think we talked from three to four or four to five percent. You know, we're seeing and that we haven't brought on any new gas plants. We're seeing really strong gas growth where we have lots of condensate and lots of NGLs, which is extremely positive. And I think one of the features of our footprint is that we don't process a lot of the drier gas with all that said, you know, our overall thesis for Western Canadian, you know, liquid growth hasn't really changed in that mid digit.

Speaker Change: And then on top of it, as you point out, a couple of things which are outside of our control. You know, you've got a rail issue, you know, we're hopefully coming towards the tail end of...

Unknown Speaker: But, you know, that obviously always remains a risk in the summer here. So a few things on our mind that we bake in there, and obviously wanted to show strength by bringing up the bottom end and, obviously, you know, bringing up the top end as well. But recognizing the uncertainty in the back end of the year.

Speaker Change: of wildfires in Alberta and Western Canada for the year, but, you know, that obviously always remains a risk through the summer here.

Scott Burrows: So a few things on our mind that we bake in there and obviously wanted to show strength by bringing up the bottom end and obviously, you know, bring up the top end as well, but recognizing the uncertainty in the back end of the year.

Speaker Change: A few things on our mind that we bake in there, and obviously we wanted to show strength by bringing up the bottom end, and obviously bringing up the top end as well, but recognizing the uncertainty in the back end of the year.

Unknown Speaker: Yeah, the only thing I'd add, Rob, too, is just given that, given, you know, we don't control the closing of Whitecap, none of that transaction is in that outlook. Yeah, got it.

Robert Kwan: Yeah, the only thing I'd add, Rob, too, is just given the, given, you know, we don't control the closing of White Cap, none of that transaction is in, is in that outlook. Okay, got it, thanks.

Rob Holt: Yeah, the only thing I'd add, Rob, too, is just given the, given, you know, we don't control the closing of Whitecap, none of that transaction is in that outlook.

Jaret Sprott: And as we think about latent capacity versus expanded capacity, when you're in Alberta, kind of now that phase eights in service, kind of Gordon Dale, follow the map all the way down to Fox Creek and Edmonton. That's going to be kind of latent capacity use and or pump station, no more linear assets required to get those volumes into the Edmonton market. And then as you go west of Gordon Dale into Northeast BC, that's where we'll require some incremental pipelines, et cetera.

Robert Kwan: If I can just turn to the RFS for costs, and really just, how do you think about the parallels, if any, or lack of parallels, I guess, with that versus what you're seeing from Cedar? And one thing just to touch on is, I think Cedar had some off-site fabrication. And so, is that going to put pressure on that component at a minimum on non project, none, none, Rob and what Cedar, we had the lump sum at the time we press release, so that's all reflected in the cost and all the fabrications being done in overseas, not really anything in the fort, so we see zero parallels between the two.

Unknown Speaker: Thanks, if I can just turn to the RFS for costs and really just how do you think about the parallels, if any, or lack of parallels, I guess with that, versus what you're seeing from Cedar. And one thing just to touch on is, I think Cedar did some off-site fabrication. And so is that going to put pressure on that component at a minimum on non-project?

Rob Holt: Yeah, got it, thanks.

Speaker Change: If I can just turn to the RFS for costs, and really just how do you think about the parallels?

Speaker Change: If any, or lack of parallels, I guess, with that, versus what you're seeing from CDER. And one thing just to touch on is, I think CDER had some off-site...

Jaret Sprott: So that's kind of the distinction and that's kind of all been built into our, you know, three year capital forecast and all part of our three year cash flow for share guidance that we gave it to investor day.

Speaker Change: Fabrication. And so is that going to put pressure on that component at a minimum on projects? None.

Unknown Speaker: None. None, Rob. Cedar, we had the lump sum at the time we released it, so that's all reflected in the cost and all the fabrications being done overseas, not really anything in the fort. So we see zero parallels between the two. Okay, perfect.

Scott Burrows: Anything else to ask you out there? So maybe just I guess mid-cycle cat-backs or near-term cat-backs run-right levels, any high-level thoughts there is the more processing cat-backs that's required to kind of hit that mid-single-digit growth. Jeremy, I think I'd sort of go back to our message from investor day, which was if you sort of look at this year next year, we're probably running right around that free cash flow neutral level. So the levels that you're seeing in 2024, 2025, it's somewhere in between that billion to billion in a quarter range is probably the run rate for the next couple of years.

Speaker Change: None, Rob. Cedar, we had the lump sum at the time we press-released so that's all reflected in the cost and all the fabrications being done in overseas not really anything in the fort so we see zero parallels between the two.

Scott Burrows: Okay, perfect, and then it's just the last just on the white cap deal, you know, can you just talk about, you know, within PGI, you've got kind of the return that makes sense for the joint venture.

Unknown Speaker: And then just the last on the white cap deal. You know, can you just talk about, you know, within PGI, you've got kind of a return that makes sense for the joint venture. How do you think about the upside you can get from all of the other pieces? I don't know if you want to quantify it, but just what are the different pieces that give you that upside? And specifically, do you just comment on the Muzro F-8 angle under the Dow contract?

Speaker Change: Okay, perfect. And then just the last, just on the White Cat deal, you know, can you just talk about...

Speaker Change: You know, within PGI, you've got kind of the return that makes sense for the joint venture.

Scott Burrows: How do you think about the upside, you can get from all of the, the other pieces, I don't know if you want to quantify it, but just what are the different pieces, I did do that upside and specifically, you just comment on the muds row at an angle under the doubt contract. Good morning, Robert. Yeah, so downstream, so obviously there's the basic acquisition of the cave of facility through PGI, and then there's the capitalization of the Latour battery, that white cap will be will be executing that and then we'll be executing the pipeline to tie into muzzle of so really filling white space.

Speaker Change: How do you think about the upsides you can get from all of the other pieces? I don't know if you want to quantify it, but just what are the different pieces that give you that upside? And specifically, can you just comment on the Musro F-8 angle under the Dow contract?

Unknown Speaker: Good morning, Robert. Yeah, so downstream, so obviously, there's the base acquisition of the KBOB facility through PGI. And then there's the capitalization of the Latorre battery, that Whitecap will be executing that, and then we'll be executing the pipeline to tie into Muzero. So really, filling white space through our K3 facility as we connect that to the KBOB facility down into the southeast. And then when you go west, right, maximizing the utilization of our original cut bank complex or Muzero complex, as we call it, you know, and then ultimately, we have the opportunity to take more of that gas through the deep cut at Muzero. So, obviously, that, I think, can be part of our overall diversification portfolio to satisfy a Dow contract.

Robert: Good morning, Robert.

Speaker Change: Yeah, so downstream, so obviously, there's the base acquisition of the KBOG facility through PGI.

Scott Burrows: Assuming we continue to execute on the plan and the projects that Jared outlined. As Jared mentioned, obviously big part of that is obviously completing RFS 4, which comes into service in the first half of 2026. And likewise, as we continue to move forward and build out that North East B.C, capital, North East B.C, transportation capital that Jared referred to, that'll be in that same time frame as well, providing that all sort of goes ahead with that.

Speaker Change #100: And then there's the capitalization of the Latour battery, that WhiteCat will be executing that, and then we'll be executing the pipeline to tie into Masro. So really, filling white space.

Scott Burrows: Through our K three facility, as we connect that to the cave of facility down into the southeast, and then when you go west, right, maximizing the utilization of our original cut bank complex or muzzle complex, as we call it, you know, and then ultimately we have the opportunity to take more of that more gas through the deep cut at muzzle. So obviously that, I think, can be part of our overall diversification portfolio to satisfy a doubt contract. And then obviously, you know, you have current liquids that are extracted at K3 and the K Bob facility.

Speaker Change #100: through our K3 facility as we connect that to the KBOB facility down into the into the southeast and then when you go west

Speaker Change #101: Right, maximizing the utilization of our original cut bank complex or Muzro complex as we call it, you know, and then ultimately we have the opportunity to take more of that more gas through the deep cut at Muzro.

Scott Burrows: And then once you get to sort of the 2026 timeframe outward, obviously the base core business capital starts to trail off as some of those assets come into service. Our BD teams are obviously very hard to work and we continue to see opportunities. But for the next couple of years, I think that's probably the way we're thinking about it.

Speaker Change #101: So obviously that I think can be part of our overall diversification portfolio to satisfy a Dow contract.

Unknown Speaker: And then obviously, you know, you have current liquids that are extracted at K3 and the KBOB facility. And then with incremental gas going through the KBOB facility, obviously, there's incremental contracts required on through the piece and through the fractionator. And then ultimately, through the back end of the frac, like terminaling and rail, etc. And then when you shift over to Latour, all of the incremental condensate will flow through the piece system, the incremental C3 plus, that'll be extracted from the gas, and the C2 plus will obviously flow down the piece system, and all of those barrels, the condensate will be guided to various condensate outlets in Edmonton, So that's kind of in totality how the deal, the entire deal works, based on extensions of contracts and then new incremental volumes through the value chain.

Jeremy Tonet: Got it. That's very helpful.

Speaker Change #101: And then obviously, you know, you have current liquids that are extracted at K3 and the KBOB facility. And then with incremental gas going through the KBOB facility, obviously, there's incremental contracts required on through piece and through the fractionator. And then ultimately through the back end of the frac, like tourmaline and rail, etc.

Operator: Thank you.

Scott Burrows: And then, with incremental gas going through the K Bob facility, obviously there's incremental contracts required on through peace and through the fractionator. And then ultimately through the back end of the frack, like termiling and rail, etc. And then when you shift over to Latour, all of the incremental condensate will flow on the peace system, the incremental C three plus that will be extracted from the gas and the C two plus will obviously flow down the peace system and all of those barrels. The condensate will be guided to various condensate outlets, and Edmonton, and the NGLs will go through the RFS complex.

Praneeth Satish: The next question comes from Prince Satish at Wells Fargo. Please go ahead. Hi all. Thanks. Good morning.

Praneeth Satish: Maybe just on on Cedar if you can give us an update here in terms of reassigning the capacity that you hold with third parties. Are you seeing strong interest from customers there? What's the timeline to announce that contract? And also how committed are you to kind of reassigning that entire 1.5 mtpa and could you keep more of it and end up marketing more than 0.3 mtpa with your marketing group? I insist too.

Speaker Change #101: and then when you shift over to LaTorre.

Speaker Change #101: All of the incremental condensate will flow on the P system, the incremental C3+, that will be extracted from the gas, and the C2+, will obviously flow down the P system, and all of those barrels, the condensate will be guided to various condensate outlets in Edmonton, and the NGLs will go through the RFS complex.

Scott Burrows: So that's kind of in totality how the deal the entire deal works: based extensions on contracts and then new incremental volumes through the value chain. Kind of thanks to that. That's helpful.

Speaker Change #101: So that's kind of in totality how the deal, the entire deal works, base extensions on contracts and then new incremental volumes through the value chain.

Unknown Speaker: of things too, that's helpful. Could you see the magnitude of the stuff outside of then TGI?

Scott Burrows: Could you see the magnitude of the staff outside of then KDI. of approaching the magnitude in terms of contribution of the acquired assets or Rob. Sorry, I'm just not sure what the how to ask like what can you rephrase the question maybe I think was a little. Yeah, you've talked about I don't maybe we put it kind of in the build multiple or acquisition multiple contacts presumably what you did within. And the joint venture has to stand alone.

Praneeth Satish: So we're now following the FID announcement and progress. We are ramping up our marketing efforts looking at the remaining capacity of Cedar. I will say that as our project became more real with the FID announcement, our interest is high. We've been working with a number of potential off-takers that we've had conversations for a long period of time, but we do have some renewed and new interest coming in as well. So we're excited and optimistic of progressing those conversations to completion with a target to have as much of that completed in 2024. So we're optimistic and excited and continue to make progress with potential off-takers. First. Got it.

Unknown Speaker: Approaching the magnitude in terms of the contribution of the required assets or Rob, sorry, it's Scott. I'm just not sure how to ask, like, what, can you rephrase the question? Maybe I think we're a little, Yeah, you've talked about, I don't know, maybe we should put it kind of in the build multiple or acquisition multiple context, presumably what you did within the joint venture has to stand alone. So, you know, how much more of a kicker are you going to get from all the stuff that you would get downstream?

Speaker Change #101: approaching the magnitude in terms of contribution of the

Speaker Change #101: required assets or

Speaker Change #101: Rob, sorry, it's Scott. I'm just not sure what the, how to, like, what, can you rephrase the question? Maybe I think we're just a little...

Speaker Change #102: Yeah, you've talked about, I don't know, maybe we put it kind of in the build multiple or acquisition multiple context, presumably what you did within the joint venture has to stand alone. So, you know, how much more of a kicker are you going to get from all the stuff that you would get downstream?

Scott Burrows: So, you know, how much more of a ticker are you going to get from all the stuff that you would get downstream? Yeah, I mean, that's obviously what would disclose confidential information that I just don't think we can disclose at this stage. I mean, I think suffice to say, Jaret, Jaret tried to highlight the fact that in addition to the standalone PGI returns, you know, we secured incremental utilization of our facilities through existing and expanded contracts. So, you know, I think we've said what we needed to say on the actual acquisition release, and then upon close, you know, we'll update 2025. But overall, you know, we found the consolidated multiple in line with previous acquisitions, if not slightly better.

Unknown Speaker: Yeah, I mean, that obviously would disclose confidential information that I just don't think we can disclose at this stage. I think it suffices to say Jaret tried to highlight the fact that, in addition to the standalone PGI returns, we secured incremental utilization of our facilities through existing and expanded contracts. So, you know, I think we've said what we needed to say on the actual acquisition release. And then, upon close, we'll update 2025. But overall, you know, we found the consolidated multiple in line with previous acquisitions, if not slightly better. That's great, thank you.

Praneeth Satish: And maybe just switching gears and moving over to the back in, I have two questions here on the the vantage pipeline. First, if you can kind of remind us what the utilization is on the pipe and whether vantage can be expanded any further with pumps. And then secondly, to the extent that there is access capacity and it can be expanded at a low cost. Can you can you can you satisfy all of your Dow at things? I mean, contract with with vantage, I guess, what would the cost be of moving ethane on vantage versus some of the other options that you're considering.

Speaker Change #103: Yeah, I mean, that's obviously.

Speaker Change #104: would disclose confidential information that I just don't think we can disclose at this stage. I mean, I think suffice to say Jaret tried to highlight the fact that in addition to the standalone PGI returns,

Speaker Change #105: you know, we secured incremental utilization of our facilities through existing and expanded contracts. So, you know, I think we've said what we needed to say on the on the

Speaker Change #105: on the actual acquisition release. And then upon close, you know, we'll update 2025. But overall, you know, we've we found the consolidated multiple in line with previous acquisitions, if not slightly better. Unknown Speaker

Unknown Executive: Good morning. Thanks for the question. So yeah, we currently do have some some white space on the vantage pipeline. That is capable, obviously, of bringing more ethane up into the big system and then into the petrochemical. Feet stock takers there in Western Canada. With respect to our portfolio with respect to Dow, we're kind of taking a more diversified approach to this. So if we think of it as ethane that comes out of our RFS complex, that is C2 plus being extracted in Western Canada and then broken into its parts and fed into the crackers here in Alberta.

Scott Burrows: Okay, that's great.

Speaker Change #106: Okay, that's great. Thank you.

Operator: Thank you. We have no further questions. I will turn the call back over to Scott Burroughs for closing comments.

Scott Burrows: We have no further questions.

Scott Burrows: I will try to call back over to Scott Burrows for closing comments. Well, thank you, and especially thanks to the analysts who I know have had a busy two weeks, and we're at the tail end here. So appreciate all the questions and the quality notes last night, and to any of our employees, or to all of our employees listening to the call. Thanks for all the hard work. It was a really good quarter. Thanks, everyone.

Speaker Change #107: Thank you. We have no further questions. I will turn the call back over to Scott Burroughs for closing comments.

Scott Burrows: Well, thank you. And especially thanks to the analysts, who I know have had a busy two weeks, and we're at the tail end here. So, appreciate all the questions and the quality notes last night. And to any of our employees, or to all of our employees listening to the call, thanks for all the hard work. It was a really good quarter. Thanks, everyone. We'll see you again in November.

Scott Burroughs: Well, thank you. And especially thanks to the analysts who I know have had a busy two weeks, and we're at the tail end here. So appreciate all the questions and the quality notes last night. And to any of our employees or to all of our employees listening to the call, thanks for all the hard work. It was a really good quarter. Thanks, everyone. We'll see you again in November .

Scott Burrows: We'll see you again in November.

Operator: Ladies and gentlemen, this concludes your conference for today. We thank you for participating, and we ask that you please disconnect your lines. Thank you.

Operator: Ladies and gentlemen, this concludes your conference for today. We thank you for participating, and we ask that you please disconnect your lines.

Unknown Executive: There is the C2 extraction component that's more like mainline extraction like our Empress or younger facilities that feed straight ethane into into the system into the crackers and then you have the the vantage system that can bring product up from North Dakota. So across those kind of three portfolios right now, we're just evaluating what's the best use of capital to basically fulfill our entire Dow commitment. So we won't really specifically talk to, you know, where the majority of that capital is going to go right now.

Scott Burroughs: Thanks.

Speaker Change #108: Ladies and gentlemen, this concludes your conference for today. We thank you for participating and we ask that you please disconnect your lines.

Operator: is away. Thank you all for joining us. Stick around for rhythm and rhythm drunk computer. We'll be right back.

Unknown Executive: I think in that industry we talked about here in the next couple of quarters will will be able to provide some more insight on where that capital would be going, but Vantage is definitely a part of the overall portfolio consideration to meet that contract.

Unknown Executive: Thank you.

Patrick Kenny: Next question comes from Patrick Kenny at National Bank Financial. Please go ahead. Hey, good morning, guys.

Patrick Kenny: Just maybe quickly on the ox able or Alliance and ox able consolidation. There's some accounting noise in there, but maybe you can just walk through the headline, you know, $600 or $1 loss on disposal of your equity interest and maybe what that means for your corporate effective tax rate going forward. If that is, it's came here, you've just made our accounting teams day with the question. You know, it's, it's not a really straightforward explanation, other than to say that the accounting standards are pretty clear about how you have to treat a step acquisition.

Patrick Kenny: You basically have to act as if you've disposed what you've got as the equity accounted investment and then realize the, you know, the entire fair value acquisition, like you would any other acquisition. So obviously, you do the fair value on the existing interest and mark that to market. Obviously, I think what's important in recognizing that accounting is that there's an offsetting deferred tax recovery, on that de-recognition, which effectively nets you to about zero or so.

Patrick Kenny: It's about a $9 million gain when you net those two out. And then obviously, then you go forward and you consolidate. And then with the consolidation, now obviously we own 100% of alliance, and now 100% of oxalibal, but in Q2, obviously there was a small non-consolidated interest on oxalibal, which just gets netted out of the back end.

Patrick Kenny: Great.

Cameron Goldade: And then I guess going forward just any impact positively or negatively on the effect of tax rate. Yeah, I think there will be some positive effect on the effect of tax rate. You know, as you've seen, there is some benefit to the acquisition. Potentially, the larger acquisition as a result of some opportunities in the US. And so we do get a benefit there. And I think that shows up in terms of the updated tax guy. So, you know, you'll see it come down ever so slightly.

Patrick Kenny: Okay, great. Thanks for that.

Patrick Kenny: And then maybe just on the cost pressures here, you're experiencing on RFS4. Maybe you can just walk us through some of the scope changes that might be embedded in that new budget. And then also, you know, just given instruction activity really picking up here for large scale projects in the heartland area. Just how we should be thinking about your ability to lock in costs from a labor productivity standpoint. Great question, Pat.

Patrick Kenny: So think of the project increase kind of in the following three. The first bucket being projects changes in design modifications. This is really to enhance the overall operability of RFS4 specifically and the overall complex as you know that we can spread molecules to any one of the fracks. And it's specifically to accommodate a wider range of C3 plus beats dot composition. So depending on where your customer of your customers is extracting NGLs from from a deep basin well versus a very, you know, oily, Montenewell, you get a wide range of NGL composition.

Patrick Kenny: So this we made a decision just to enhance the overall operability to have a wider range to take that product composition. The second bucket is we saw some incremental inflation over and above what we expected in a latter half of 23 when when obviously there was a very large project sanctioned in Alberta here. So that was unexpected and and caused some of the increase. And then the third bucket is our decision when we sanctioned this project in February of 2023.

Patrick Kenny: It was going to be a typical permanent project where we do all of the oversight in the execution. And as we saw these these labor concerns as you identify the heartland area getting busy. We decided to move to a lump sum to make sure that we could procure a tier one contractor. You know that we were confident could get the fabrication shop space. Make sure they had access to high quality labor.

Patrick Kenny: Make sure that they were going to execute with respect to our safety expectations and values and indigenous content and deliver high quality project on time. So we've shifted roughly 70% of that total project as as we stated to a lump sum. We'll execute kind of more of that outside the lease boundary outside the frack area. We'll do a lot of that execution, but we have made that shift and we did see, you know, with shifting that risk from yourself to a third party who's going to deliver that high quality labor and safety expectation. There's a little bit of a cost with that.

Patrick Kenny: So that's kind of how we break up those three buckets and overall the project, like we said, is still planned on being delivered on time, which is great. And then with respect to the commercial side, you know, with this project coming out of the ground, as we speak, we've been able to secure incremental contracts at the overall base complex, RFS 1, 2 and 3, which is obviously great for business. And then we've secured a lot of new contracts over and above our original base case when we sanction this with the board in February of 2023.

Patrick Kenny: And with the incremental cost, we have seen that the overall sanction metrics have actually gone up. And then with respect to the overall portfolio, just talk like the hard line is seem a little bit of the increase, but overall our portfolio is still a project is still industry leading. And we have the full confidence in our team to continue with the current projects to deliver on time on budget and the future ones.

Patrick Kenny: Okay, that's great color. Appreciate that.

Patrick Kenny: And maybe just real quick, we're the incremental costs here contemplated when with the PGI, like kept transaction as well. In other words, like the oil and economics of the deal, I know some of it has some downstream benefits embedded in the returns, just wondering if those returns are still in line with your expectations with the new costs. And RFS 4.

Patrick Kenny: Absolutely. Yeah.

Unknown Executive: Okay, I'll leave it there. Thank you. Thanks, but.

Rob Holt: Thank you. Next question comes from Rob Holt at Skillshare Bank. Please go ahead.

Rob Holt: Morning, everyone. I want to follow up on the on the fracked discussion. I guess two parts there. First one is are the incremental contracts that you signed on for the entire RFS complex reflective of the incremental capital for RFS 4. And then how much white space do you have at RFS and kind of when could you need some incremental capacity beyond what you're building? There's there's limited white space Rob at the complex and even with RFS 4 coming into service.

Rob Holt: So right now very focused on project execution of step one with respect to the execution teams, but obviously the commercial teams are in constant conversations with with our other customers. And you know, it's a balancing act between ensuring that we have the base load of the first three facts long term contract extensions. Fill four under long term deals and then, you know, you know, been get focused on sanctioning number five, but right now it's really focused on number four and getting that customer interaction for five going.

Rob Holt: I'd say that's a little bit further out. So with respect to your first question, I think you were asking about incremental contracts, like has anything changed specific due to the cost increase? Is that accurate? Yeah, like are the incremental, you know, were fees adjusted up for the new capital cost and that's how returns were put back on site. Yeah, it's a combination of, it's specifically it's combination of volume, fees, and then you also have the the downstream auxiliary fees, such as rail loading and terminaling, etc.

Rob Holt: And then obviously the marketing business as well, some customers, you know, choose a permanent to do their full suite of marketing and some customers obviously, you know, do their own marketing, but we are, you know, advancing a lot of that business and, you know, and then you're obviously seeing the upside through through the marketing arm as well, all right, thanks for that.

Rob Holt: And then maybe just switching over to the same opportunity that we're highlighted at the investor day, how are those progressing and then just given the, you know, we'll call it a tightening labor market in the heartland, you know, could this deemphasize an RFS 3DS and kind of focus more on the field. You know, I would say no right now, Rob, because, you know, that's a fairly, that's a fairly small project, you know, as we've stated before RFS 3, and you just really need the tower.

Rob Holt: So it's not an extensive like, you know, it's not 500 people on site and it's, you know, it's building a few pieces of equipment and some select bad shops. So, you know, you might see a little bit of cost fraction there, but I don't think that would be enough to deter us away from, from looking at that project. But since investor day, we have accelerated a handful of projects through gate one funding.

Rob Holt: So that's, you know, small dollar amounts to get pre-feed kicked off. And then we'll be evaluating that near and then upcoming, you know, a couple quarters and making an decision on which projects go through gate two and ultimately gate three and which ones won't be. Yeah, I think we're all will be able to understand kind of what the, what current labor costs and what current costs are, which will help guide us in terms of which decision we make, which is, is Jared pointed out previously.

Rob Holt: One of the advantages we have is we do have, you know, numerous sources that we can source the ethane from. And so any updated capital cost will go into that mix and our decisions you can. Thank you.

Robert Kwan: The next question comes from Robert Katalia from C IBC capital markets. Please go ahead.

Robert Kwan: They've answered most of the questions about this point, but I just wondered, given the massive development of the peace system over the last several years, what's your vision for developing it from here? What, what further optimizations are possible from this point? So Rob, I think there's a few different things. And again, this question given the breadth of the system really depends on where the volumes show up. And so, you know, when you're in, when you're in Alberta, for the most part, we will focus on optimization now that we have segregated lines.

Robert Kwan: And where can we use pump optimization product optimization to increase throughput? You know, we've already found some wins across the system to unlock some incremental volumes. We do have other areas where we can add low cost pumps like from Fox Creek in to increase volumes there. And then we'll continue to look at opportunities in Northeast BC as LNG comes on LNG phase one and other opportunities come online and we see incremental incremental growth there.

Scott Burrows: So it's a tough question to answer. There's certain, there's certain areas that are tight where we'll have to expand and there's certain areas where we have utilization opportunities.

Scott Burrows: Okay, I'm just wondering what the thought is on the Frax bread hedging in light of both the current prices and your increase exposure now that you've consolidated OX. So so Rob, we have a pretty, you know, programmatic hedging program based on on where Frax breads are in terms of, you know, from a statistical basis. P10 to P90 with very limited discretion as it relates to the hedging program, you know, one of the benefits we did talk about on the original OX, able acquisition, as well as with the new contract was it made it a lot simpler to hedge.

Scott Burrows: And so, you know, as we stand today, we're about 50% hedged in Canada, and we actually have about just under 50% of OX, able hedged for 2024 as well. You know, based on on how Frax breads have trended the forward curve, we're somewhere in the neighborhood of 10 to 15% hedge for 2025. But we'll likely be locking in incremental hedge is just given given where forward Frax breads are compared to I'll call it the 5 to 10 year historical average.

Cameron Goldade: Understood in that last question, just a clarification from Cam. I think I understood from your previous discussion of tax was that the 24 current tax is not materially changed, despite the increased marketing guidance. Is that correct? That's correct, Robert. Yeah, thanks. Thank you.

Benjamin Pham: The next question comes from Ben fam at Bimo, please go ahead. All right, thanks.

Benjamin Pham: Good morning. Can you just talk about the MNA opportunities in Western Canada to expect more of the white cap. JV sort of structure is do you think key firms we're looking to to monetize or even strategic looking to dispose of assets? Hey, Ben, you know, it's really it's a really hard thing to predict. I mean, we couldn't have predicted that the white cap transaction was going to happen, you know, six, seven months ago.

Benjamin Pham: So, you know, I don't know, you know, we're not seeing necessarily a lot right now. You know, and there's still a fair number of producers that want to own that infrastructure. So it's very producer specific. But we're certainly, you know, we don't have line of sight to to a large MNA pipeline. And then as it relates to to PE firms again, I can't really speculate still feels like a lot of the assets are relatively in their kind of early fund life.

Benjamin Pham: So, you know, we don't see anything that's kind of being driven by fun life. So I don't have a I don't have a good insight now is so to what PE firms may or may not be doing.

Scott Burrows: Okay, understood. And I know there's also some comments on Alliance ox exceeding expectations and then the talking of a box to maybe solidifying the synergies of that. Is that comment more suggesting that you might beat that that a times multiple that you've commented about and then what about that? That's a ration of the marketing volumes. Is that that change now? Yeah, Ben, I guess I would just say that I think, obviously, as Scott mentioned earlier, we've been fortunate in the sense that obviously the commodity complex has strengthened since we made the original acquisition and continues to show strength in this year and even outlooking next year.

Scott Burrows: In terms of the synergies, I think it does, I mean, you know, anytime you've got sort of full control of an asset, it obviously does, you know, put the wheel squarely in your hands to execute on the synergies, so I think it does support us in that regard. And I do believe that, you know, we will see additional opportunities as we, you know, sort of get our arms wrapped around and sort of keep moving things forward as we've done with other assets.

Scott Burrows: You know, we had a point yet where we're ready to put our hand in the fire and start to quantify those, not yet, but I think, you know, we're definitely seeing things evolve positively and so far, you know, very pleased with the acquisition of the timing and the returns that it's generating.

Scott Burrows: Okay.

Unknown Executive: Thank you.

Robert Kwan: Next question comes from Robert Kwan at RBC Capital Markets. Please go ahead. Thanks.

Robert Kwan: Good morning. I can start with guidance and just kind of some of it thinking around the asymmetric increase and just, you know, is that just more of conservatism on the high end, whether it's around some of the volumes that Jared talked about earlier or maybe potentially anything you see on the rail side of things versus the low end coming up in just the confidence you've got with some of the, some as well, just mechanical changes with the out-sable acquisition in the way.

Robert Kwan: Yeah, I think that's a fair comment, Robin. And as you suggest, I mean, there's a number of things that go into it. I think we obviously had had confidence to bring the low end up, meaningfully from where it was last time, just based on, on, you know, such a strong first half. When we look at the second half of the year, I mean, there's a couple of things obviously that are coming into a fact which, you know, some with certainty, some with less certainty.

Robert Kwan: And so obviously, as we look forward to the second half of 2024, we've got, you know, the quotient firm tolls are now under the revised tolling structure. You know, that the, well, we continue to see strength, you know, at the moment, obviously, you know, when you sort of look out in terms of interruptible flows through, through Q3, on alliance, you know, some, some uncertainty there could, could exceed our expectations, but obviously taking, you know, taking sort of what we know at the moment.

Robert Kwan: And then lastly, clearly the big outstanding item or range is obviously the marketing book and how that shapes up. Obviously, you know, some, some backwardation in the crude market here, you know, the Ford strip currently shows some strength in the gas market as we, as we close out the year, but those are all uncertain. And so as we look at that, and then on top of it, as you point out, a couple things which are outside of our control, you know, you've got a rail issue, you know, we're hopefully coming towards the tail end of wildfires in Alberta and western Canada for the year, but, you know, that, that obviously always remains a risk to the summer here.

Robert Kwan: So a few things on our mind that we bake in there and obviously wanted to show strength by bringing up the bottom end and obviously, you know, bring up the top end as well, but recognizing the uncertainty in the back end of the year. Yeah, the only thing I'd add, Rob, too, is just given the, given, you know, we don't control the closing of white cap, none of that transaction is in, is in that outlook.

Scott Burrows: Okay, got it, thanks. If I can just turn to the RFS for costs, and really just, how do you think about the parallels, if any, or lack of parallels, I guess, with that versus what you're seeing from Cedar and one thing just to touch on is, I think Cedar had some off site fabrication. And so, is that going to put pressure on that component at a minimum on non project, none, none, Rob and what Cedar, we had the lump sum at the time we press release, so that's all reflected in the cost and all the fabrications being done in, overseas, not really anything in the fort, so we see zero parallels between the two.

Scott Burrows: Okay, perfect, and then it's just the last just on the white cap deal, you know, can you just talk about, you know, within PGI, you've got kind of the return that makes sense for the joint venture. How do you think about the upside, you can get from all of the, the other pieces, I don't know if you want to quantify it, but just what are the different pieces, I did do that upside and specifically, you just comment on the muds row at an angle under the doubt contract.

Scott Burrows: Good morning, Robert. Yeah, so downstream, so obviously there's the basic acquisition of the cave of facility through PGI, and then there's the capitalization of the Latour battery, that white cap will be will be executing that and then we'll be executing the pipeline to tie into muzzle of so really filling white space. Through our K three facility, as we connect that to the cave of facility down into the into the southeast and then when you go west, right, maximizing the utilization of of our original cut bank complex or muzzle complex as we call it, you know, and then ultimately we have the opportunity to take more of that more gas through the deep cut at muzzle, so obviously that I think can be part of our overall diversification portfolio to satisfy a doubt contract.

Scott Burrows: And then obviously, you know, you have current liquids that are extracted at K three and the K bob facility. And then with incremental gas going through the K bob facility, obviously there's incremental contracts required on through peace and through the fractionator. And then ultimately through the back end of the frack, like termiling and rail, etc. And then when you shift over to Latour, all of the incremental condensate will flow on the peace system, the incremental C three plus that will be extracted from from the gas and the C two plus will obviously flow down the peace system and all of those barrels.

Scott Burrows: The condensate will be guided to various condensate outlets and Edmonton and the the NGLs will go through the RFS complex. So that's kind of in totality how how the deal the entire deal works based extensions on contracts and then new incremental volumes through the value chain. Kind of thanks to that. That's helpful.

Scott Burrows: Could you see the magnitude of the staff outside of then KDI, of approaching the magnitude in terms of contribution of the acquired assets or Rob Sorry, I'm just not sure what the how to ask like what can you rephrase the question maybe I think was a little Yeah, you you've talked about I don't maybe we put it kind of in the build multiple or acquisition multiple contacts presumably what you did within. And the joint venture has to stand alone.

Scott Burrows: So, you know, how much more of a ticker are you going to get from all the stuff that you would get downstream Yeah, I mean, that's obviously what would disclose confidential information that I just don't think we can disclose at this stage. I mean, I think suffice to say, Jaret, Jaret tried to highlight the fact that in addition to the standalone PGI returns, you know, we secured incremental utilization of our facilities through existing and expanded contracts.

Scott Burrows: So, you know, I think we've said what we needed to say on the on the on the actual acquisition release, and then upon close, you know, we'll update 2025, but overall, you know, we we found the consolidated multiple in line with previous acquisitions if not slightly better.

Scott Burrows: Okay, that's great.

Operator: Thank you.

Operator: We have no further questions.

Scott Burrows: I will try to call back over to Scott Burrows for closing comments. Well, thank you and especially thanks the analysts who I know have had a busy two weeks and we're at the tail end here. So appreciate all the questions and the quality notes last night and to any of our employees or to all of our employees listening to the call. Thanks for all the hard work. It was a really good quarter. Thanks, everyone. We'll see you again in November.

Operator: Ladies and gentlemen, this concludes your conference for today. We thank you for participating and we ask that you please disconnect your lines.

Thank you.