Pembina Pipeline Corporation announces dividend increase, US$325 million pipeline expansion and provides updated 2018 outlook
Tuesday, Apr 04, 2017
Pembina Pipeline Corporation ("Pembina" or the "Company") (TSX: PPL; NYSE: PBA) announced today that its Board of Directors approved a 6.25 percent increase in its monthly common share dividend rate (from $0.16 per common share to $0.17 per common share), the Company's sixth consecutive annual increase. Pembina also announced a $325 million expansion of its pipeline infrastructure between Lator, Alberta and Namao, Alberta, related to its Phase III Expansion project and provided an updated outlook for 2018 adjusted EBITDA and cost savings on capital projects.

"We are very excited about the dividend increase and these new pipeline expansion projects, and share our updated outlook for 2018," said Mick Dilger, Pembina's President and Chief Executive Officer. "These developments build on our already strong start to 2017. We are encouraged by the level of volumes and business development activity we've seen in the early months of the year and our confidence in the outlook for Pembina continues to grow with the near-term completion of large-scale capital projects."

Phase IV & V Peace Pipeline Expansion

Pembina's 420,000 barrels per day ("bpd") Phase III Expansion is nearing completion and continues to trend slightly under budget, with an expected on-time in-service date of July, 2017. Given ongoing customer demand for capacity, Pembina is proceeding with two projects for a total estimated capital cost of $325 million: (i) the Fox Creek and Namao Pump Stations ("Phase IV Expansion"), which is comprised of two pump stations on the newly installed 24" pipeline from Fox Creek to Namao, Alberta and (ii) the Lator to Fox Creek Expansion ("Phase V Expansion"), which is a new, approximately 95 kilometre, 20" pipeline from Lator to Fox Creek, Alberta. Both of these projects are underpinned by long-term, take-or-pay contracts.

  • The Phase IV Expansion is expected to increase capacity between Fox Creek and Namao by approximately 180,000 bpd. The estimated capital costs for the two pump stations is approximately $75 million. Subject to regulatory and environmental approvals, Pembina expects to place this expansion into service in late 2018. Pembina has the ability to further expand capacity between Fox Creek and Namao by adding additional pump stations.
  • The Phase V Expansion is aimed at addressing the current capacity constraints between Lator and Fox Creek and supporting future growth in the prolific Montney and Deep Basin resource plays. This $250 million project is expected to provide approximately 260,000 bpd of additional capacity in this corridor and access to Pembina's downstream capacity at Fox Creek. Pembina has received regulatory and environmental approvals for the Phase V Expansion and clearing of the right-of-way is approximately 50 percent complete. The Company expects to bring this pipeline into service in late 2018.
Updated Outlook

In late 2015, Pembina's secured capital program was comprised of $5.3 billion of new assets which were scheduled to come into service through 2016 and 2017. Based on this capital program, the Company provided EBITDA guidance indicating that, once in-service, these projects could generate an incremental run-rate annual EBITDA ranging from $600 million to $950 million in 2018, with the upper end of the range depending on utilization above take-or-pay levels and commodity prices. At the time of these disclosures, the outlook for commodity prices remained uncertain, as did levels of activity in the Western Canadian Sedimentary Basin. Despite this uncertainty, Pembina also discussed its goal of achieving capital cost savings, which it estimated at the end of 2015 to be approximately $225 million on the overall capital program. With the majority of the remaining projects substantially complete and nearing on-time in-service by mid-year, Pembina is revising its estimated capital cost savings and scope optimizations to approximately $275 million.

Based on the current commodity price environment and volume estimates, Pembina expects 2018 adjusted EBITDA to range from $1.8 billion to $1.9 billion. This range is consistent with Pembina's prior commitment of delivering $600 million to $950 million of incremental fee-for-service EBITDA from the secured capital projects which enter service in 2016 and 2017, in addition to the Kakwa River acquisition in 2016 and higher volumes/pricing across the base business. Based on the above, Pembina expects to deliver on its projection of nearly doubling 2015 adjusted EBITDA by 2018.

"By mid-year, we expect to bring into service the remaining projects that made up the largest capital program in Pembina's history," said Mr. Dilger. "Overall, we have successfully brought these assets into service on-time, on-budget, and most importantly, safely and I believe these remaining projects will be no different. I'm very proud of what our organization has been able to achieve over the past several years and am pleased to share our outlook for 2018 and our expected consolidated capital cost savings."

Dividend Increase & Declaration

With the dividend increase announced today, on April 3, 2017, Pembina's Board of Directors has declared a monthly dividend of $0.17 payable, subject to applicable law, on May 15, 2017 to shareholders of record on April 25th, 2017. For shareholders receiving their common share dividends in U.S. funds, the April 2017 cash dividend is expected to be approximately U.S. $0.1278 per share (before deduction of any applicable Canadian withholding tax) based on a currency exchange rate of 0.7519. The actual U.S. dollar dividend will depend on the Canadian/U.S. dollar exchange rate on the payment date and will be subject to applicable withholding taxes.

"With anticipated cash flows from the $4 billion of major projects we expect to bring into service in mid-2017, along with growing activity in the basin as evidenced by the pipeline expansions we also announced today and the numerous additional growth opportunities under development, we are confident in our solid foundation for longer-term dividend growth potential and our ability to grow shareholder value over the coming years," said Scott Burrows, Pembina's Vice President Finance and Chief Financial Officer.

This dividend is designated an "eligible dividend" for Canadian income tax purposes. For non-resident shareholders, Pembina's common share dividends should be considered "qualified dividends" and are subject to Canadian withholding tax.

Pembina's Board of Directors also declared quarterly dividends for the Company's preferred shares, Series 1, 3, 5, 7, 9, 11 and 13. All preferred share dividends are payable on June 1, 2017 to shareholders of record on April 28, 2017.

Confirmation of Record and Payment Date Policy

Pembina pays cash dividends on its common shares in Canadian dollars on a monthly basis to shareholders of record on the 25th calendar day of each month (except for the December record date, which is December 31st), if, as and when determined by the Board of Directors. Should the record date fall on a weekend or a statutory holiday, the effective record date will be the previous business day. The dividend payment date is the 15th of the month following the record date. Should the payment date fall on a weekend or on a holiday the business day prior to the weekend or holiday becomes the payment date. Dividends on the preferred shares are payable on the 1st day of March, June, September and December in each year, if, as and when declared by the Board of Directors. Should the record date or payment date fall on a weekend or holiday, the business day prior to the weekend or holiday becomes the record or payment date, as applicable.

About Pembina

Calgary-based Pembina Pipeline Corporation is a leading transportation and midstream service provider that has been serving North America's energy industry for over 60 years. Pembina owns and operates an integrated system of pipelines that transport various products derived from natural gas and hydrocarbon liquids produced primarily in western Canada. The Company also owns and operates gas gathering and processing facilities and an oil and natural gas liquids infrastructure and logistics business. Pembina's integrated assets and commercial operations along the majority of the hydrocarbon value chain allow it to offer a full spectrum of midstream and marketing services to the energy sector. Pembina is committed to working with its community and aboriginal neighbours, while providing value for investors in a safe, environmentally responsible manner. This balanced approach to operating ensures the trust Pembina builds among all of its stakeholders is sustainable over the long term. Pembina's common shares trade on the Toronto and New York stock exchanges under PPL and PBA, respectively. Pembina's preferred shares also trade on the Toronto stock exchange.

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