Energia
Pembina Pipeline Takes Action to Protect Stakeholders and Significantly Reduces 2020 Capital Spending in Response to the Recent Decline in Global Energy Prices
"In these challenging times, Pembina's priorities include protecting the health and safety of our staff and communities, ensuring critical infrastructure continues to operate safely and reliably, and maintaining our strong financial position. We are confident we are taking the necessary steps to allow us to successfully achieve these objectives," stated Mick Dilger , Pembina's President and Chief Executive Officer.
Mr. Dilger added, "Over the past many years, Pembina has been making its business better, not just bigger, through focused diversification efforts. The acquisition of high-quality assets such as the Alliance and Cochin pipelines and the Edmonton Terminal storage assets, combined with the development of highly contracted assets such as the Peace Pipeline system and the Duvernay Complex, has diversified Pembina across commodities and credit-worthy counterparties, while also substantially growing our basin and currency diversification. These actions, combined with our self-funding model, strong balance sheet and high contract quality all result in a high-quality, resilient cash flow stream, which allows us to protect our dividend, as we have always done through past downturns.
We have many levers at our disposal. We entered 2020 expecting a more tempered contribution from our commodity business relative to the past two years, as reflected in our guidance range. Based on the resilience of the business and the decisive actions we are announcing today, we remain within our projected guidance range, while still maintaining significant future upside given our suite of high-quality growth projects and strong financial position."
"I want to thank our amazing employees who have successfully transitioned to a 'work-from-home' environment in such a short time. Despite recent events, we are executing well and are confident that we can meet the expectations of all of Pembina's stakeholders," concluded Mr. Dilger.
Safety is our first priority at Pembina and we continue to take steps to protect the health of our staff and the public in response to the COVID-19 pandemic.
COVID-19 is a global public health challenge and we are doing our part in support of government and community efforts to slow down the spread of the virus. In line with recommendations from health authorities, we have restricted business travel, cancelled large group meetings and are requiring non-essential employees and contractors who can work from home to do so.
Pembina has taken steps to determine the essential staff and critical infrastructure required to ensure uninterrupted service to our customers while maintaining the safety of our assets, employees and other stakeholders. We are focused on processing and transporting the maximum amount of product for our customers, thus supporting their cashflow.
In light of the rapid and significant decline in global energy prices and uncertainty as to the duration of this downturn, Pembina has made the prudent decision to defer some of its previously announced expansion projects to reflect the current market reality. The following projects will be deferred:
In addition to deferring capital spending on these major projects, additional discretionary capital spending has been removed from Pembina's 2020 capital budget.
The impact of these measures results in a reduction of $900 million to $1.1 billion , or approximately 40 to 50 percent, to the Company's previously announced 2020 capital budget of $2.3 billion . Pembina now expects its revised 2020 capital budget to be $1.2 billion to $1.4 billion . These spending reductions will be directed towards reducing Pembina's leverage and enhancing its financial position. Importantly, these measures will have no impact on Pembina's existing base business or its ability to continue to operate safely and reliably.
Pembina will advance its focus on optimization activities, which we believe can create additional incremental pipeline capacity with minimal capital spending and support producers' near-term production growth. Additionally, we intend to focus our remaining capital spending on key constrained segments of the pipelines to ensure maximum flexibility to meet customers' needs and fulfill existing producer volume commitments.
Planning, engineering and regulatory work done to date on the deferred projects will allow Pembina to quickly resume these projects to meet our customers' needs when global energy prices and the broader economic environment support such action. Until then, we will continue to work with our producing customers to evaluate their midstream service needs in light of the current commodity price environment.
Given their advanced stage of construction, Pembina still expects to place approximately $1.3 billion , net to Pembina, of new projects into service during 2020, including the Peace Pipeline Phase VI Expansion, Duvernay III, Empress Fractionation, Hythe Developments and the initial phase of the Prince Rupert Terminal, among others, to support Pembina's growth in 2020 and beyond.
The deferred projects were expected to come into service largely in 2021 through 2023 and therefore will not materially impact Pembina's 2020 adjusted EBITDA. At this time, Pembina believes it has taken action, which will enable the Company to remain within the previously disclosed guidance range, albeit forecasted to be near the lower end thereof.
"Pembina's business is resilient and remains strong in the face of these current challenges. An unwavering commitment to our financial guardrails has been a guiding principle for many years and, as a result, Pembina is well positioned. These guardrails, in addition to actions recently taken, highlight our ability to preserve our already strong balance sheet while funding our ongoing business, including the reduced 2020 capital program," said Scott Burrows , Pembina's Senior Vice President and Chief Financial Officer.
Pembina's greatest assets are our people and the relationships we have with our customers, investors and the communities in which we have a presence. We will continue to keep our stakeholders top of mind and supported as we navigate through these events. We stand by prepared to adjust our response as needed and will continue to base our decisions on recommendations from public health experts, our ongoing evaluation of global energy prices and the impact on Pembina's and our customers' businesses.
Calgary -based Pembina Pipeline Corporation is a leading transportation and midstream service provider that has been serving North America's energy industry for 65 years. Pembina owns an integrated system of pipelines that transport various hydrocarbon liquids and natural gas products produced primarily in western Canada . The Company also owns gas gathering and processing facilities; an oil and natural gas liquids infrastructure and logistics business; is growing an export terminals business; and is currently developing a petrochemical facility to convert propane into polypropylene. 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 identifying additional opportunities to connect hydrocarbon production to new demand locations through the development of infrastructure that would extend Pembina's service offering even further along the hydrocarbon value chain. These new developments will contribute to ensuring that hydrocarbons produced in the Western Canadian Sedimentary Basin and the other basins where Pembina operates can reach the highest value markets throughout the world.
Purpose of Pembina:
To be the leader in delivering integrated infrastructure solutions connecting global markets;
Pembina is structured into three Divisions: Pipelines Division, Facilities Division and Marketing & New Ventures Division.
Pembina's common shares trade on the Toronto and New York stock exchanges under PPL and PBA, respectively. For more information, visit www.pembina.com.
For media inquiries, please contact 403-691-7601 or media@pembina.com. Investor Relations: Scott Arnold , (403) 231-3156, 1-855-880-7404, e-mail: investor-relations@pembina.com, www.pembina.com