Q1 2025 Pembina Pipeline Corp Earnings Call
Good morning, ladies and gentlemen, and welcome to the Pembina Pipeline Corporation Q1, 2025 results conference call. At this time all lines are in listen only mode. Following the presentation. We will conduct a question and answer session. If at any time. During this call you required immediate assistance. Please press star zero for the operator.
Dan: This call is being reported on Friday may nine 2025, I would now like to turn the conference over to Dan <unk> VP capital markets. Please go ahead.
Speaker Change: Thank you joelle good morning, everyone.
Speaker Change: Welcome to Penn minutes Conference call and webcast to review highlights from the first quarter of 2025.
Speaker Change: On the call today, we have Scott Burrows, President and Chief Executive Officer, and camera angles, Senior Vice President and Chief Financial Officer, along with other members of Permanence officer team.
Speaker Change: I would like to remind you that some of the comments made today maybe forward looking in nature and are based on <unk> current expectations estimates judgments and projections.
Speaker Change: 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: Are there some of the information provided refers to non-GAAP measures.
Speaker Change: To learn more about these forward looking statements and non-GAAP measures. Please see the company's management's discussion and analysis dated may eight 2025 for the period ended March 31st 2025, as well as the press release permanent issued yesterday, which are all available online at <unk> com and on both SEDAR plus and that card I will.
Scott: I'll turn things over to Scott.
Scott: Thanks, Dan yesterday, we reported our first quarter results, which were highlighted by quarterly adjusted EBITDA of 1.1 $67 billion. This is a very strong start to the year and builds on the momentum from a record year in 2020 for providing confidence in our full year outlook.
Scott: As Ken will discuss in more detail. We are currently trending towards the midpoint of our 2025 adjusted EBITDA guidance range for two to $4 $5 billion.
Scott: Given the growth across Hammond as low risk fee based business and confidence in the outlook for 2025 and beyond we are pleased to yesterday announced at two cents per share or 3% increase in our quarterly common share dividend beginning with the dividend to be paid in June we recognize the importance of our sustainable reliable and growing dividend to our shareholders.
Scott: And we are proud of our long track record in this regard.
Scott: On the commercial front <unk> has entered into commercial agreements with the leading montney producer covering 10 minutes full value chain, including transportation fractionation and marketing services. The agreements include significant new and extended long term take or pay volume commitments on permanent peace pipeline pick a pay system in northeast B C pipeline.
Scott: The new and extended fractionation agreements are expected to support higher utilization 10 minutes Red water complex, including RFS sport currently under construction and the proposed RFS III D S and either if sanctioned additionally, the process to re market 10 minutes capacity on the Cedar LNG project third parties continues to progress well, we have now shortlisted that.
Scott: First counterparties and entered definitive agreement negotiations.
Scott: Pembina continues to advance several in flight construction projects to capitalize on growing WCS D volumes diversified end market exposure and serve our customers better.
Scott: <unk> has built a strong competitive advantage by effectively delivering projects safely on time and on budget. Further we believe that recent and current expansions have been and continue to be executed with superior capital efficiency compared to others in the industry.
Scott: Addition, 10 minutes progressing development of more than $4 billion portfolio of potential projects that includes conventional pipeline expansions such as the tailored Gordon Dale project and expansion of the peace pipeline system to add capacity to the market delivery pipelines from Fox Creek to the mail and further expansions to support volume growth in northeast D C, including new pipelines into.
Scott: Metal upgrades.
Scott: Well I reiterating your commitment to their path to zero project, Dow recently announced the delay in construction of the project to manage capital allocation in light of current market conditions and economic uncertainty at this time other than changing the in service date of Dallas project. The announcement delay has no impact on 10 minutes ethane supply agreement and the development of potential infrastructure to meet its commitment.
Scott: To date haven't has not spent material capital to support the ethane supply agreement will continue to progress. These projects, but may now have more time available to execute them.
Scott: It is evaluating the various options available to meet its ethane supply commitment under the agreement without including the addition of a D. S. Nidation tower RFS III within the Red water complex.
Scott: Regarding alliance pipeline and ongoing Canadian energy regulator review process. Our life is working collaboratively with its stakeholders and remains focused on delivering the highest standards of service the customers have come to expect.
Based on discussions to date, Pembina expects lower future tolls on the Canadian portion of alliance, reflecting a negotiated solution that continues to benefit both permanent and the alliance shippers do an equitable sharing a value and risk. We expect M&A will continue to earn appropriate risk adjusted returns while shippers will continue to benefit from alliances firm capacity high reliability.
Scott: And cost effective access to premium U S. Natural gas markets I will now turn things over to Kam to discuss in more detail the financial highlights for the first quarter.
Kam: Thanks, Scott as Scott noted Perm in our reported first quarter adjusted EBITDA of 1.1 $67 billion.
Kam: Represents a 12% increase over the same period in the prior year.
Scott: Pipelines factors impacting the quarter primarily included.
Scott: Contribution from alliance due to increased ownership following the alliance on staple acquisition.
Scott: Favorable U S foreign exchange rate higher.
Scott: Higher tools, mainly related to contractual inflation adjustments.
Scott: Higher contracted volumes on the Liberty pipeline and peace pipeline system.
Scott: Higher contribution from alliance due to higher higher demand on seasonal contracts.
Scott: And lower firm tolls on the Cochin pipeline due to the re contracting that occurred in July of 2020.
Scott: In facilities factors impacting the quarter included the inclusion of Ark stable. Following the alliance ox able acquisition and higher contribution for Pgi, primarily related to the white cap and varian transactions, largely offset by lower interruptible volumes at Dawson due to third party sales gas restrictions.
Scott: In marketing and new ventures first quarter results reflected the net impact of higher net revenue from contracts with customers due to increased ownership interest in our stable.
Scott: Tired ws WCS be NGL margins and volumes.
Scott: Lower realized gains on commodity related derivatives.
Akshay: Akshay will NGL margins and no similar gain to that recognized in the first quarter of 2024 from a change in the provision related to permanent financial assurances for Cedar LNG.
Akshay: Finally in the corporate segment first quarter results were lower than the prior period due higher incentive costs driven by the change in the share price and relative performance to peers in the period compared to the first quarter 2024.
Akshay: Earnings in the first quarter were $502 million. This represents a 15% increase over the same period in the prior year in.
Akshay: In addition to the factors impacting adjusted EBITDA increase in earnings in the first quarter was primarily due to the net impact of higher depreciation and amortization expense largely due to the alliance on Sable acquisition.
Akshay: Realized losses recognized by P. G I on interest rate derivative financial interesting instruments compared to gains in the first quarter of 2024.
Akshay: Okay.
Speaker Change: Higher unrealized gains on commodity based derivative financial instruments recognized by T. G I.
Akshay: Lower unrealized losses on our renewable power purchase agreements and crude oil based derivatives.
Speaker Change: Unrealized gains on a G L based derivatives.
Speaker Change: Unrealized losses on interest rate derivative financial instruments recognized by Cedar LNG.
Speaker Change: Higher income tax expense higher net finance costs and lower interest income.
Speaker Change: Total volumes in the pipelines and facilities divisions were $3 7 million barrels of oil equivalent per day in the first quarter. This represents an increase of 9% over the same period in the prior year, reflecting the net impact of the alliance like stable acquisition.
Speaker Change: Your contracted volumes on the Nipissing pipeline in the peace pipeline system higher volumes at P. G I related to the white cap it very transactions and lower interruptible volumes of Dawson due to third party restrictions.
Speaker Change: Thanks to strong results in the first quarter of 2025, Pembina generated meaningful free cash flow in the quarter, which was allocated to strengthening the balance sheet.
Speaker Change: Turning to the full year as Scott mentioned, we are confident in our outlook and currently trending towards the midpoint of our 2025 adjusted EBITDA guidance range of $4 2 billion to $4 $5 billion.
Speaker Change: Notably the guidance range reflects the following full year and quarterly or seasonal assumptions.
Speaker Change: M&A continues to see rising utilization on our conventional pipeline systems and at Pgi that aligns with volume growth across the western Canadian sedimentary basin. However, in 2025 10 minutes revenue volume growth within our conventional pipelines and gas processing assets is expected to be slightly lower than physical ball.
Speaker Change: Gross as certain customers expand into their contractual take or pay commitments.
Speaker Change: We expect a higher contribution from alliance in the first and fourth quarters due to the ability to transport higher volumes during colder periods.
Speaker Change: Further the current guidance assumes the existing alliance tool is in effect for the full year.
Speaker Change: For the second quarter, our outlook assumes planned maintenance at our stable and alliance certain pgi facilities and the red water complex as well as restrictions on third party natural gas egress within the basin.
Speaker Change: We expect the third and fourth quarters will have higher integrity and geotechnical costs across the conventional pipeline assets.
Speaker Change: And we expect stronger first and fourth quarter results and the NGL marketing business due to typical seasonality. Additionally.
Speaker Change: Additionally, while marketing results in the first quarter exceeded pivot as original guidance expectations.
Speaker Change: This has been offset.
Speaker Change: The outlook for the remainder of the year, which reflects lower commodity prices due to global economic uncertainty as a result, 10 minutes full year adjusted EBITDA outlook for the marketing and New ventures division of $550 million remains unchanged.
Speaker Change: [laughter] permanent does not expect any material impact to its guidance from tariffs on U S energy imports.
Speaker Change: At March 31, 2025 based on the trailing 12 months the ratio of proportionally consolidated debt to adjusted EBITDA was three four times and we expect to exit 2025 at three four to three seven times, our leverage remains well below.
Speaker Change: The low end of our targeted range reflective of our strong balance sheet and supporting a strong triple B credit rating I'll now turn things back to Scott.
Scott: Thanks, Tim in closing I want to remind you that pembina will hold its annual meeting of shareholders. Today at two P. M Mountain time four P. M. Eastern time, it will be a virtual only meeting conducted via live audio webcast participants are recommended to register for the virtual webcast at least 10 minutes before the presentation start time for further information.
Scott: On the annual meeting please visit the investor's tab at Www dot payment of Dot com. Thank you for joining US. This morning. Please go ahead and open up the line for questions.
Scott: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone you'll hear properly. Your hand has been raised should you wish to decline from the polling process. Please press star followed by the Q. If you are using a speaker phone. Please lift fan Stifel pressing any keys. Your first question comes from.
Scott: Jeremy Tonet with J P. Morgan Your line is now open.
Jeremy Tonet: Hi, good morning.
Speaker Change: Good morning, Jeremy.
Speaker Change: Thanks for the color today, just wanted to kind of start off with maybe a bit more color on your producer customer conversations at this point and how you see I guess drilling activity shaping up and should W. P. IV going below 60, staying there for some period of time and a corresponding move.
Speaker Change: And in Condi prices, how do you think that impacts montney production and your your outwork here you know granted Pembina has a material contractual protections are but just wondering any thoughts you could share there.
Speaker Change: Yeah, Jeremy it's Scott I'll start off and make some comments and Jerry I might chime in as well, but I would say to date, we haven't seen any material changes to drilling plans I would say we have seen you know in the last couple of days a couple producers start discussing about moving completions into into Q3 and.
Q4, so I would say we are starting to see some some timing of completions, but but overall reductions of capex to date, we really we really havent havent seen that.
Speaker Change: Okay.
Speaker Change: Got it thank you for that and then.
Speaker Change: Maybe shifting over to Oh winds, if I could and recognize that you're in a place where you can only say so much at this juncture, but is it fair to kind of carry.
Speaker Change: Characterize I guess the range of outcomes at this point is relatively minor are within the Grand scheme of Pembina as far as what unfolds in the Canadian process here and do you see I guess on the U S side, similar things materializing or any other color would be helpful. Thanks.
Speaker Change: Good morning, Jeremy Jaret here and Yeah. I. Appreciate you are mentioning that we are obviously limited in what we can say, but what I. What I can reassure you Jeremy is that our customers continue to reiterate they enjoyed a high reliability availability of the alliance asset they enjoy the high value end market delivering into the Chicago area.
Speaker Change: And they they really value the risk sharing aspect you know obviously permanent takes a material amount of operating cost risk. We believe we're a good safe reliable operator, and they do appreciate that with respect to that asset on the Canadian side. That's unlike any other of the major gas transmission pipelines in Canada.
Speaker Change: Additionally, we heard from our customers that they do not want us.
Speaker Change: As part of the negotiated settlement to move to the next.
Speaker Change: Our cost of service model like a true traditional.
Speaker Change: Cost of service models, so with all that said.
Speaker Change: We continue to work with them expeditiously to.
Speaker Change: Get to a negotiated settlement that we can get into the Canadian energy regulator as quickly as possible.
Speaker Change: You know that ultimately will will provide pembina with that risk based return.
Speaker Change: And that's unfortunately, that's all we can really say right now due to the active aspect of those negotiations.
Speaker Change: Got it and as far as the U S side nothing too.
Speaker Change: Think about there at this point.
Speaker Change: You bet and then on the U S. Sorry, Jeremy So I believe its December one of this year, we'll be submitting its roughly its every five years, we have to submit our our information to the FERC and that's coming up I believe December December one of 2025.
Speaker Change: That's helpful. Thanks, and last one if I could just real quick Pembina has done a great job getting the balance sheet and a very strong position and just wondering you know if there's the opportunity to go from defense to offense, it's a different opportunities that shake loose as far as potential smaller bolt ons or what have you.
Jeremy Tonet: Yeah Jeremy.
Jeremy Tonet: I would say that a couple of things one is that.
Jeremy Tonet: You've certainly seen us do that over the course of uptime on a on a targeted basis.
Jeremy Tonet: Obviously, we're very I think successfully leveraged the pgi a relationship.
Jeremy Tonet: To add some really exciting opportunities there over the past year or so.
Jeremy Tonet: Would say that in terms of capital allocation, obviously, you know where it's a pretty dynamic environment right now in.
Jeremy Tonet: Obviously monitoring things kind of in real time, but at the same time, we always stand ready to to make our business better as opportunities present, I would say that you know that the debt.
Jeremy Tonet: Prospect for for Big game hunting is not something we're focused on but certainly.
Jeremy Tonet: You know the smaller value add opportunities if they come about you know, we're certainly going to be in a position to talk to them.
Jeremy Tonet: Got it that's helpful I'll leave it there thanks.
Speaker Change: Your next question comes from Spiro <unk> with <unk> your.
Speaker Change: Your line is now open.
Speaker Change: Thanks, operator, good morning team I wanted to start with the.
Speaker Change: Tower and the Dow contracts.
Speaker Change: It sounds like your plan right now is still to develop it at some point, maybe even without Dow announcing that facility timeline. Once again just want to confirm one that's correct.
Speaker Change: Just curious if there's a point in that agreement with Dow where they would need to pay for the supply regardless of that cracker being online and then lastly, sorry for the multipart multi part question here, but in the interim this does seem to free up some capital if you're not developing this tower imminently. So I'm just curious how you're thinking about redeploying some of that capital.
Jared: Good morning, Jared here.
Jared: Let's take a step back so we announced it was probably may of 2024, actually we announced a supply agreement with Dow.
Jared: And I think we've been saying quarter over quarter, we've been evaluating pembina has the luxury of having multiple supply sources across its entire portfolio and we've just been taking a prudent approach to evaluating what's the most cost effective.
Jared: Approach to to that supply.
Jared: And we have been signaling that RFS, III, which was a clone of RFS two does make a lot of logical sense to build the D. F side of that that asset as part of our overall portfolio and we continue to believe that that that's still makes a lot of sense.
Jared: There was minimal capital being spent on the portfolio of assets in the calendar year of 2025.
Jared: So even with the most recent re profiling our delay that Dow has mentioned there isn't a material change to our overall capital in 2020 in 2025, and we still believe.
Jared: Not knowing exactly when the new Onstream date might be be announced we believe that it's kind of that it's just normal routine execution doing the D. F tower now my team is probably cringing that I'm, saying that but it's not like a three or four year build for what we're doing so we absolutely believe.
Jared: When we do get a little bit more line of sight, we will be able to act quickly and have that outside on to to meet our supply portfolio commitments.
Speaker Change: Got it that's that's good color thanks for that.
Speaker Change: Question going back to your lines quickly I don't think this was addressed in the prior question, but I know at one point you've been talking about with these same customers discussion around expanding that pipeline.
Speaker Change: Just sort of curious where those stand right now if we're looking at maybe a singular integrated solution here when you announced the resolution here and how youre thinking about the timing.
Speaker Change: I won't get into the specifics of the negotiation, but I can say that obviously demand for incremental gas egress is extremely strong and we have a couple of opportunities. We obviously alliance was built for a full path expansion all the way down into the into the Chicago market and there's also opportunities to do shorter haul.
Speaker Change: Expansions with.
Speaker Change: Less compressor stations here on the Canadian side into.
Speaker Change: The Alberta Heartland, So were just continuing.
Speaker Change: To evaluate those and kind of in the pre feed engineering stages of that.
Speaker Change: But lots of demand for incremental liquids rich gas egress.
Speaker Change: Understood No that's great to hear I'll leave it there for today, Thank you gentlemen.
Speaker Change: Yes.
Speaker Change: Your next question comes from Theresa Chen with Barclays. Your line is now open.
Theresa Chen: Good morning.
Theresa Chen: Wanted to go back to the comments about risk sharing within the alliance and tier comment about your customers appreciating that.
Theresa Chen: Taking the risk.
Theresa Chen: Does that mean, the risk sharing incremental risk shifts.
Theresa Chen: The net to customers is off the table or is that still a point of negotiation.
Theresa Chen: So on.
Theresa Chen: The brisk switching move what would that illustrative play even look like.
Theresa Chen: I don't think I can get into too many of the details, but maybe I'll just provide some color that that unlike some of the other pipelines in Canada, we do take operating cost risk and the reason.
Theresa Chen: At the time and the joint venture previously was open to that is that we do believe that.
Theresa Chen: We're extremely good at providing safe reliable and cost effective operations.
Theresa Chen: But with that said as where the back and forth goes with the customers there could be changes to that overall risk sharing profile as different inputs into it.
Theresa Chen: Until the economic model change, so it's pretty live and dynamic right now, but and that's all I can say about that.
Theresa Chen: Okay fair enough.
Theresa Chen: And you see the earlier color about the bifurcation between volumes and revenue and EBITDA contribution can keep a gap.
Theresa Chen: Customers ramp into the Nbc's when do you expect that to true up.
Theresa Chen: So when you say its cam here.
Theresa Chen: I would say that that's a pretty consistent.
Theresa Chen: That's pretty consistent phenomenon are pretty consistent.
Theresa Chen: Spirits that we've seen and the reason being is that you know as.
Theresa Chen: As you've seen from US and continues to be the case, we continue to sign up new contracts on a regular basis. So as we continue to sign up new contracts and obviously you know the contracts are the leading indicator against the physical volumes. They typically come first of all he comes back I think we've continued to see that lag over time.
Theresa Chen: Not sure that we will expect those to true up.
Theresa Chen: We continue to sign contracts as evidenced by this quarter and so we will continue to see a gap between those revenue in physical volumes as a result of that.
Theresa Chen: And maybe I'll just add to that.
Theresa Chen: Yeah.
Theresa Chen: You do have to Delaminate the difference between what we call our high vapor pressure products. So that's you see three pluses and Youll see two buses versus your LDP are low vapor pressure here.
Theresa Chen: See our crude and condensate.
Theresa Chen: It is customer dependent and it is commodity dependent obviously pembina has a suite of our pipelines in our conventional system Cte plus the three plus condensate and crude so there is different dynamics happening some customers are over on certain aspects of their contracts.
Theresa Chen: But overall you will see that true up but it's not it's not a blanket statement that all of our customers are below their their firm or their take or pay and they're all drilling into it it is dynamic between offset commodity and customer and region.
Theresa Chen: Yeah.
Theresa Chen: Thank you for that detail.
Theresa Chen: Your next question comes from Aaron Macneil with TD Cowen. Your line is now open.
Aaron MacNeil: Good morning, all thanks for taking my questions, obviously, great to see the Montney contract with the quarter. Just wondering if you could provide any more detail beyond what's in the release I can obviously I appreciate that the disclosure is intentionally vague, but we're fielding the obvious questions from investors on Maggie.
Theresa Chen: Magnitude of the contract volumetric lease duration.
Theresa Chen: The level of contracting at both Taylor Gordon Dale and RFS for earnings and maybe just confirmation that it is a b C montney customer given the contracting on specific pipeline thing.
Theresa Chen: You noted so just <unk>.
Theresa Chen: And if anything you'd be comfortable sharing.
Theresa Chen: Just give me the opportunity to do that.
Theresa Chen: Yeah, you bet I appreciate the question. So it is one of our I can say it is one of our largest customers. It is the northeast BC customer and I think what I'd like to leave the group with US that this announcement I think it just provides confidence that.
Theresa Chen: We recognized our customers do have a choice.
Theresa Chen: To flow on other service providers and they continually to choose us for a safe reliable and cost effective options, specifically around the conventional pipeline and it's not only the safe reliable operations and cost effect of it is that suite of different assets that I just referred to the different pipelines connected to all of the fractionator is in and the <unk>.
Theresa Chen: Fort Saskatchewan area connected to all of the egress outlets et cetera. So we do recognize they have choices and we do appreciate them choosing us to be their service provider I will say that this is somewhat.
Theresa Chen: I'll use the word material volume.
Theresa Chen: Its existing volumes across the enterprise so the pipelines the fracs and in our marketing business, but it is also new and it's there's kind of two fold here is one is that it shows the resiliency and the requirement for high utilization across the base assets, but also reinforces the need and necessity for new <unk>.
Theresa Chen: Expansions.
Theresa Chen: Albeit they tailor to Gordon Dale area New.
Theresa Chen: New pump stations within Alberta et cetera.
Theresa Chen: References pumps.
Theresa Chen: Pump station expansions between Fox and the Mayo. These are all incrementally.
Theresa Chen: Required us as customers reaffirmed their base volumes and sign up with new revenue barrels throughout our system.
Theresa Chen: Erin I'll, just maybe add a couple of data points.
Theresa Chen: The renewal piece is obviously I talked about it it's a very meaningful piece of our peace contract structure, you know, it's not quite 10%, but it's pretty close.
Theresa Chen: And obviously the commitments beyond that flow through both the frac.
Theresa Chen: As well as other pieces and so.
Theresa Chen: When we talk about it being a fair fairly material contract. That's the renewal piece, obviously that the new piece of it. It's obviously quite material not quite to that magnitude, obviously, but but very meaningful in its own.
Theresa Chen: Wow, Okay that was more than I expected to get thanks, thanks for that.
Speaker Change: I'm really sorry to go back to alliance, but you did mention the risk sharing earlier and then youre not a cost of service pipeline I, just guess I bring that up because.
Theresa Chen: The original CER complaint essentially compared alliance to rate regulated pipelines.
Theresa Chen:
Theresa Chen: So the question is.
Theresa Chen: How do you define an appropriate risk adjusted return and is.
Theresa Chen: Obviously, it's not a rate regulated return by it.
Theresa Chen: He is the right way to think about it in.
Theresa Chen: In the context of prevailing industry build multiples or is there anything you can share there.
Theresa Chen: Maybe I'll just touch quickly on that it's that's.
Theresa Chen: So that's one of the biggest challenges for this negotiation is exactly what you just you just touched on.
Theresa Chen: And you know it.
Theresa Chen: We are different than any other asset and we're just working through that what does that.
Theresa Chen: The risk premium will look like.
Theresa Chen: For Pembina.
Theresa Chen: Yes.
Theresa Chen: The tough one to answer.
Theresa Chen: Yeah, Eric the only thing I'd say is I mean, obviously.
The filings are the filings are public you can look at all the other pipelines, which are effectively a no risk utility type structure and see that the ROE is there have climbed into the into the mid teens in some cases and so that's a that's a no risk scenarios. So if you sort of look at alliance.
It's obviously, taking on the kind of risk that it does today.
Theresa Chen: We believe that it's appropriate to earn a premium to that and perhaps that's what we're getting out with an appropriate risk adjusted premium on it.
Theresa Chen: As far as I can go there, but I would just make those data points clear.
Speaker Change: That's super helpful. Thanks, everyone for the for the answers I'll turn it back.
Speaker Change: Your next question comes from <unk>.
Speaker Change: <unk> Satish with Wells Fargo. Your line is now open.
Satish: Thanks, Good morning, maybe let me get my Alliance question out of the way here It just kind of.
Speaker Change: Recognizing you're limited in what you can say, but can you clarify the timeline for when the tools would take effect as it relates to EBITDA I know, sometimes that the timing of the actual settlement it.
Speaker Change: It can be different than when you accrue it in EBITDA and then second.
Speaker Change: Yes.
Speaker Change: Without giving a specific number are you able to confirm that any potential impact would be.
Speaker Change: <unk> within the guidance range that you've provided within the midpoint to low end of the range.
Speaker Change: Okay.
Speaker Change: So on the timing piece.
Speaker Change: I'd say, that's still it's still part of the negotiation. So it's I know update and with that in mind.
Speaker Change: Really can't comment on 2025 guidance and giving that clarity will just is another angle to try to figure out kind of where we're at our negotiations and it's just too confidential and sensitive. So we're just not going to answer that question I apologize as soon as we can say more we will.
Speaker Change: Understood that's fine.
Speaker Change: And then switching gears, maybe if we could get an update on the Greenlight datacenter project and I guess, specifically what I wanted to know is any more color on.
Speaker Change: Whether the JV has entered the queue for gas turbines because.
Speaker Change: We're seeing the lead times elongate the prices go up have you as the JV secured.
Speaker Change: Rising on the turbines and other critical equipment costs and just any broader update you can provide.
Speaker Change: Sure, It's Chris Scherman, Thanks for the question.
Speaker Change: The projects are progressing nicely, we're really focused on our interconnection applications.
Speaker Change: At the minute at the moment and we Havent, we havent made any turbine long lead.
Speaker Change: Purchases, but we are actively engaged with with equipment suppliers, we're very alive to the cost and timing.
Speaker Change: Dynamics that are unfolding out there and we're going to be prudent with our.
Speaker Change: With our order placement and frankly, the timing still aligns with our expectations.
Speaker Change: So everything's going well and on track both commercially and on the project side.
Speaker Change: Got it thank you.
Speaker Change: Your next question comes from Rob Hope with Scotiabank. Your line is now open.
Speaker Change: Sorry, Ron.
Rob Hope: First question's on the yellow had straddle. So <unk> continues to pursue that project even about the Dow delay how do you think about the potential to straddle that asset.
Rob Hope: In the context of a doubt delay or could incremental ethane and see three plus.
Rob Hope: Allow that project to stand on its own.
Rob Hope: I think from a timing perspective, Rob.
Rob Hope: Nothing really changes on on our end in terms of of that project that was always a late 2028 2029 project. So you know without knowing the specifics around the extent of doubt delay I really can't comment on that but as of right now we're continuing to progress that pipeline just due to you know.
Rob Hope: When the in service date was so no no change from that on our end.
Rob Hope: Rob I would just add that obviously you know the.
Rob Hope: The announcement from Dow and the assessment on our part and everything that comes with that is it's kind of happening in REIT and real time here.
Rob Hope: That was obviously, a big customer of ours and a big partner.
Rob Hope: We were not spending material dollars on that in 2025, obviously it is all absorbed or early works and so we're obviously going to get more information as the weeks and the next two three months tick by here and.
Rob Hope: Obviously, you make judgments at that point, but just wanted to make clear that we werent spending material dollars on that in 2025, obviously, just some early works and engineering work.
Rob Hope: Well you didn't let Rob.
Rob Hope: Oh, sorry that there is there is accretive ctrip plus that can be extracted from the gas. If this did go into service in the ethane component on the sales side was a little bit delayed.
Rob Hope: There is NOI associated with that so that would be accretive to the project.
Rob Hope: Alright, I appreciate that and then maybe diving deeper into the Dow agreement. So it appears that the <unk>.
Rob Hope: Momentary today is that it's a delay not a cancel.
But if the delay from Dow is substantial do you have a sunset date or any recourse.
Speaker Change: I appreciate the question Robert I think out of respect for our partner, we're going to refrain from sort of getting into the nitty gritty of the agreement I guess, what I would say is that we feel very comfortable that we have capital protection for capital, which we would spend in outside of that I don't think we.
Rob Hope: Wanted to sort of go much much deeper than that.
Understandable. Thank you I'll hop back in the queue.
Rob Hope: Your next question comes from Patrick Kenny with National Bank Financial Your line is now.
Rob Hope: Okay.
Patrick Kenny: Hey, good morning, guys.
Rob Hope: I'll try not to ask anything too commercially sensitive here, but.
Patrick Kenny: Just on the strategy to diversify your NGL markets I, just wanted to get a better sense as to where you're at today relative to say, where you want to land in terms of exposure to various markets and.
Patrick Kenny: Yes, we had a bit more color on you know what kinds of opportunities Youre looking at.
Patrick Kenny: In order to access non U S markets.
Patrick Kenny: Both on a proprietary basis as well as.
Patrick Kenny: Utilizing third party infrastructure that'd be great.
Patrick Kenny: Sure.
Patrick Kenny: It's Chris Sherman.
Speaker Change: I think we've been I think we've been fairly clear about our aspirations.
Speaker Change: Around propane and some of the optimism in Bull case, we have for the West coast of Canada.
Speaker Change: I think the positions we have today, both to our own facilities and others are serving us well.
Speaker Change: We like that that ratio as far as how it fits into our portfolio.
Speaker Change: Folio, but we've also talked about a desire to optimize prince Rupert to increase some of the margins there and honestly if there if the price is right. We'll we'll look at more off the west coast for propane.
Speaker Change: As well, we're keenly watching butane were.
Speaker Change: Looking at a number of different projects to try to figure out where butane is going to fit best into North American markets either.
Product markets as well as.
Speaker Change: Potentially off the coast in the future I can't get too much into that but we're putting a lot of effort and time into it into all of those.
Speaker Change: Okay, that's great and then I guess.
Speaker Change: Just on the remarketing of the capacity.
Speaker Change: Capacity at Cedar.
Would you say your patience is paying off here in terms of you know.
Speaker Change: Geopolitical trends supporting higher demand.
Speaker Change: Perhaps stronger economics.
Speaker Change: For this capacity versus the first one and a half million tons and.
Speaker Change: Just curious as well if you can comment on the level of interest in the potential expansion.
Speaker Change: That theater just wondering if.
Speaker Change: Counterparties are considering dovetailing it an option for the expanded phase as well.
Scott: Yeah, Yeah, it's Scott here.
Speaker Change: It's more than just the.
Scott: The geopolitical changes I think it's also the fact that we continue to see growing gas out of northeast BC that needs an egret solution.
Scott: We're continuing to see strong arbs between Canadian gas and Asian gas prices.
Scott: So.
Scott: That's a that's driving pretty significant interest and in the Cedar capacity. So we're pleased with where that's going also the fact that obviously, we're <unk> and we're a year into construction a year closer in service dates I think all of those factors are meeting to decent interest in this in this project and we're pretty pleased with where we're going so I would say at a pace.
Scott: <unk> has has paid off I mean at this stage, we are working very hard to turn that in definitive into final executable agreement, but they.
Scott: They're big complicated agreements and as we've said for the last several months that will do the right deal for permanent not the fastest deal for Pembina and we continue we will continue to progress that I would say as it relates to a potential cedar to certainly the gas demand is there we saw that from our re contracting efforts.
Scott: Based on an early stages negotiations on Cedar capacity.
We believe there is demand for our seed or two but until we have line of sight to that the gas on coastal gas link or other solutions, that's kind of the gating item and that that's something that we continue to work on.
Speaker Change: Okay, that's great color.
Scott: I appreciate it guys I'll leave it there.
Speaker Change: Your next question comes from Maurice Chow with RBC capital markets. Your line is now open.
Maurice Chow: Thank you and good morning, everyone. Just wanted to take a broader picture about the long term <unk> outlook and hone in on that.
Scott: Taylor Dakota NGL pipeline project clearly there is a competing third party project out there.
Scott: Obviously against your projects in the CCAR process. So.
Scott: Just your thoughts.
Scott: As to how you think this year will resolve these issues and taking one step further.
Scott: Any reason why you would think there would it be sufficient contracted volumes for both project to proceed in the coming quarters.
Speaker Change: Good morning.
Speaker Change: Jaret here. So yeah, we recognize that there is there is currently two two projects moving forward and where actually you may be surprised to hear this but I think I mentioned it before we're very supportive of both projects moving forward, removing egress constraints for our western Canadian.
Speaker Change: Sedimentary basin customers upstream customers is critical that's what mid streamers due we've removed constraints. So they can get to higher value markets and overall between LNG, Canada phase one Hamlin is highly confident LNG, Canada phase two happens for all the reasons Scott just mentioned.
Speaker Change: World scale resource and low commodities you.
Speaker Change: You've got your Cedar you got other projects in the works and or in construction, we believe that the overall NGL and condensate demand in Canada, we still import.
Speaker Change: 250000, plus barrels a day.
Speaker Change: Asian, and the Ngls that are going to come with that incremental gas egress need.
Speaker Change: We need to get to need to get to a market need to get to a fractionator need to get to a pet chem facilities. So.
Speaker Change: We're very bullish that both projects are required and will continue to work with our customers and work with the regulator to start it in the communities to satisfy the requirements to get ours across the finish line.
Speaker Change: Okay understood.
Speaker Change: Great just finish up with a cleanup question here.
Speaker Change: Kevin I think in your prepared remarks, you mentioned you expect to exit 2025 at 3427 times debt to EBITDA.
Speaker Change: And I think that's shifted a touch by bulk wine from what you mentioned in last conference call. So.
Speaker Change: Clearly still well below the low end of your target range, but just wondering what assumptions have changed especially given that the guidance for EBITDA.
Speaker Change: Perhaps some growth spending as since you just pause there.
Speaker Change: Yeah, a little bit of timing of spend Maurice and also just assumptions on timing of cash flow.
Speaker Change: It really sort of speaks to.
Speaker Change: Timing of cash flow in the calendar year versus subsequent year that has to do with changes in noncash working capital as well as the timing of our cash tax payments. So it's really more timing than any sort of structural change.
Speaker Change: I'm, sorry, and just to reconfirm the guidance that you have right now.
Speaker Change: And trim aligned towards that right.
Speaker Change: Correct.
Speaker Change: Perfect. Thank you.
Speaker Change: Your next question comes from Robert <unk> with CIBC capital markets. Your line is now open.
Speaker Change: Hey, just a follow up on on.
The situation with Dow I Wonder if.
Speaker Change: Do you have any sense on what they need to see the resume this project, though it was delayed because of it.
Speaker Change: Trade related issue for example.
Speaker Change: Maybe their products less competitive because of tariffs or is it something about the economy or anything related to Canadian policies.
Scott: And Rob it's Scott here.
Speaker Change: That's a better question for Dow I just out of respect for our partner I can't comment on that.
Scott: Okay.
Scott: Understand that and then just moving onto.
Scott: Tariffs in general.
Scott: What is the tariff uncertainty done to activity levels for Watson Island in the export outlook in general.
Chris Scherman: It's Chris.
Scott: Well.
Scott: First of all tariffs driven lots of lots of volatility which.
Scott: Which we've all seen and undoubtedly some some trip shifting.
Scott: Trade patterns.
Scott: You know I think in the short term.
Scott: We've seen strong volumes are off the west coast, which is really in line with increased demand for frankly Canadian propane as a result of.
Scott: Some of the dynamics going on in the Gulf Coast and some of the.
Scott: Curtailed.
Scott: Supply from China, but I think in the long term.
Scott: And really it really positions Watson and it really positions the west coast of Canada.
Scott: Really really well we've got.
Scott: Tremendous resource in Western Canada, We've got a really proven pathway to get product to the west coast.
Scott: And we've got supply security concerns for a good part of the world that's going to.
Scott: I'd be looking for alternate sources of Canada's a great a great piece of that and so we'll be looking to leverage that as much as possible.
Scott: Okay. Thanks, everyone.
Speaker Change: Your next question comes from Sumatra Banner G with UBS. Your line is now open.
Speaker Change: Alright. Thank you for taking the question just to go back to capital allocation and leverage its great to see that you increased the dividend and also.
Speaker Change: On the leverage target range went down.
Speaker Change: Wanted to get any high level thoughts on capital allocation priorities going forward.
Cam: Yes, good morning, it's Cam.
Speaker Change: As I mentioned earlier I think it's something we've clearly been a.
Speaker Change: Watching in real time as the markets evolved through the.
Speaker Change: The greater macro volatility in the last.
Speaker Change: In the last couple of months here clearly in our guidance, we indicated a preference for it.
Speaker Change: Sort of a base case disposition towards debt reduction in <unk>.
Speaker Change: 2025, as we had free cash flow, which we expect it to do to have and continue to expect that.
Speaker Change: I think as as we've seen things ebb and flow throughout the course of the year. We've obviously.
Speaker Change: Taking that information and we obviously havent changed that leading up to the Q1 printer. We were in blackout through April. So we wouldn't have been in a position to execute any any share buybacks, even if that would have made sense at the time.
Speaker Change: And so we are sort of looking at all of the signals here and are looking at things on the back of the first quarter release and as we come out of blackout in and obviously are reconsidering, whether we shift some of that free cash flow towards share buybacks.
Speaker Change: I wouldn't put a pin in it at the moment, but certainly something with lots of active debate and.
Speaker Change: We will ultimately be ultimately be market condition dependent.
Speaker Change: Got it. Thank you that's very helpful. And then just a more general one on guidance.
Speaker Change: You mentioned that youre tracking towards the midpoint currently and of course, there's a lot of.
Speaker Change: Let's talk about volatility in the macro.
Speaker Change: Are there any projects or other factors that could push you more towards the top end of the guidance.
Speaker Change: I would say that the biggest one would obviously be just.
Speaker Change:
Speaker Change: In the near term is frankly, probably going to be where we see the commodity business. I mean, I think it's no secret that that is the bigger driver biggest driver of variability in our business obviously.
Speaker Change: We do have some.
Speaker Change: Some interruptible volume exposure in our business and certainly were.
Speaker Change: There are there are dislocations on competing pipelines or alternatively, egress constraints elsewhere, and we stand to benefit from that that that's another driver of variability.
Speaker Change: Obviously, we do see we.
Speaker Change: We do see.
Speaker Change: Seasonality in our business as as we highlighted in the release and certainly Q2 and Q3.
We do expect to be sequentially.
Speaker Change: Sequentially lower compared to Q1, which is normal and that's a function of all the elements we saw.
Speaker Change: The cost picture on that side is is largely well understood, but really it's the revenue opportunities that could come on top of that so.
Speaker Change: If I if I summarize that would continue to say that.
Speaker Change: Market price variability will be the biggest single driver and then lastly, yes.
Speaker Change: The interruptible volume situation is as egress.
Speaker Change: On our own or on third party pipelines.
Speaker Change: It becomes available or constraint.
Yeah.
Speaker Change: Great. Thank you so much.
Speaker Change: Your next question comes from Ben Pham with BMO capital markets. Your line is now open.
Ben Pham: Hi, Thanks, Good morning, a couple questions on the marketing and the guidance yes.
Ben Pham: And for the year, if Q1, you've pretty much hit almost half half of it so far.
Ben Pham: Can you share details on hedging on that segment and.
Ben Pham: Also just a trend around propane barrels as a trend over time.
Ben Pham: Vantage to move more barrels to the Canadian West coast, how how and if that could impact.
Ben Pham: The long term outlook and marketing EBITDA.
Chris Scherman: Sure it's Chris.
Ben Pham: So on the.
Ben Pham: On the hedging side, our frac spread businesses.
Ben Pham: In and around 50% hedged here.
Ben Pham: Across the full year 'twenty.
Ben Pham: 25, and so we've got a degree of protection from the volatility that Cam.
Ben Pham: They can was mentioning on the on the Frac spread side.
Ben Pham: And then as is.
Ben Pham: As to how we're thinking about.
Ben Pham: The market long term.
Ben Pham: We've been.
Ben Pham: I think fairly consistent for a while that we think the long term resilient markets for the Canadian.
Ben Pham: Wave of growth.
Ben Pham: And it will continue to come.
Ben Pham: Is is global.
Ben Pham: U S demand.
Ben Pham: It has been strong and theres lots, there's lots of different narratives out there about how that might unfold over the next while but I think in the long term. The most resilient markets are going to be going to be global and so we.
Ben Pham: We will be striving to get as much growth as possible access to those to those markets.
Ben Pham: We remain constructive on.
Ben Pham: Our portfolio and think we've got a nice balance at the moment between.
Ben Pham: Some north American markets and global markets, but as we look forward, we truly think the most resilient markets youre going to be.
Ben Pham: Going to be global.
Speaker Change: And I would just add to that Ben in terms of the hedging Chris mentioned there were about 50% hedged we are hedged at levels, which are in excess of the current sort of outlook for the balance of the year.
Ben Pham: To the tune of.
Speaker Change: 10% to 15% above current levels.
Okay got it.
Speaker Change: And.
Speaker Change: Just on alliance, but I'm not going to ask Paul is I just wanted to go back when you when you underwrote that asked that yet so synergy expectation just wondering where you are.
Speaker Change: You tracked to that and then also just wasn't there something about the Sable marketing.
Speaker Change: That's asked in terms of our volumes in the late decade timeframe, that's where you have that.
Ben Pham: Yeah, Hey, Ben good good call out first thing I would say is that.
Ben Pham: If you remember back to our announcement, there I would say thats the lions share of dis synergies.
Ben Pham: The material amount of them are actually coming from the stable business.
Ben Pham: There's a significant amount of commercial opportunities in the cable business.
Ben Pham: Some some small opportunities on the cost side across both assets, but more so on the commercial side and those are largely on the <unk> side.
Ben Pham: I would say that so far our perspective is we're tracking very well to our plans timing I think we communicated at the time a range of $40 million to $65 million.
Ben Pham: Obviously, you had a ramp to it you know some of those come very quickly some of those take a little bit of time and certainly for 2025, you know we're tracking towards.
Ben Pham: Our intention there which is probably at the at the at the lower end of the range is as we expected in.
Ben Pham: And continue to see the integration opportunities and we'll continue to look for more but so far tracking okay.
Ben Pham: The plan.
Ben Pham: Okay got it and just one last quick clean up and I don't think the supplies to anything else in your asset base, but if anything.
Ben Pham: Outside of the alliance.
Ben Pham: And yet our assets through 2026, I guess that your current guidance timeframe that's.
Ben Pham: Our portal.
Ben Pham: Lenders are radios and an excellent debt.
Ben Pham: Those are the two assets you know obviously the two assets here that are sort of federally regulated wood, we have been posting an alliance.
Ben Pham: Obviously, we've dealt with both of those so.
Ben Pham: Okay. Okay.
Ben Pham: Okay got it thank you.
Ben Pham: Yeah.
Ben Pham: There are no further questions at this time I will now turn the call over to Scott for closing remarks.
Ben Pham: Alright, well. Thank you everybody for joining us today, and we look forward to speaking this afternoon at our AGM. Thank you.
Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating in <unk>. Thank you. Please disconnect your lines.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.
[music].
Speaker Change: Okay.