Pembina Pipeline Q1 2025 Earnings Report

Pembina Pipeline EPS Results

• Actual EPS: $0.80
• Consensus EPS: $0.57
• Beat/Miss: Beat by +$0.23
• One Year Ago EPS: $0.73

Pembina Pipeline Revenue Results

• Actual Revenue: $1.14 billion
• Expected Revenue: $1.47 billion
• Beat/Miss: Missed by -$330.15 million
• YoY Revenue Growth: +48.20%

Pembina Pipeline Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: After Market Closes
• Conference Call Date: Friday, May 9, 2025
• Conference Call Time: 10:00AM ET

Pembina Pipeline (NYSE:PBA) provides energy transportation and midstream services. It operates through three segments: Pipelines, Facilities, and Marketing & New Ventures. The Pipelines segment operates conventional, oil sands and heavy oil, and transmission assets with a transportation capacity of 2.9 millions of barrels of oil equivalent per day, the ground storage capacity of 10 millions of barrels, and rail terminalling capacity of approximately 105 thousands of barrels of oil equivalent per day serving markets and basins across North America. The Facilities segment offers infrastructure that provides customers with natural gas, condensate, and natural gas liquids (NGLs), including ethane, propane, butane, and condensate; and includes 354 thousands of barrels per day of NGL fractionation capacity, 21 millions of barrels of cavern storage capacity, and associated pipeline, and rail terminalling facilities and a liquefied propane export facility. The Marketing & New Ventures segment buys and sells hydrocarbon liquids and natural gas originating in the Western Canadian sedimentary basin and other basins. Pembina Pipeline Corporation was incorporated in 1954 and is headquartered in Calgary, Canada.

Pembina Pipeline Q1 2025 Earnings Call Transcript

Presentation

[Operator]

morning, ladies and gentlemen, and welcome to the PEMEA Pipeline Corporation Q1 twenty twenty five Results Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Friday, 05/09/2025. I would now like to turn the conference over to Dan Tucano, VP, Capital Markets.

[Operator]

Please go ahead.

[Dan Tucunel, Vice President - Capital Markets at Pembina Pipeline]

Thank you, Joelle. Good morning, everyone. Welcome to Pembina's conference call and webcast to review highlights from the first quarter of twenty twenty five. On the call today, we have Scott Burrows, President and Chief Executive Officer and Cameron Goldade, Senior Vice President and Chief Financial Officer, along with other members of Pembina's officer team. 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.

[Dan Tucunel, Vice President - Capital Markets at Pembina Pipeline]

Forward looking statements we may express or imply today are subject to risks and uncertainties, which could cause actual results to differ materially from expectations. Further, some of the information provided refers to non GAAP measures. To learn more about these forward looking statements and non GAAP measures, please see the company's management's discussion and analysis dated 05/08/2025, for the period ended 03/31/2025, as well as the press release Pembina issued yesterday, which are all available online at pembina.com and on both SEDAR plus and EDGAR. I will now turn things over to Scott.

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

Thanks, Dan. Yesterday, we reported our first quarter results, which were highlighted by quarterly adjusted EBITDA of $1,167,000,000 This is a very strong start to the year and builds on the momentum from a record year in 2024, providing confidence in our full year outlook. As Cam will discuss in more detail, we are currently trending towards the midpoint of our 2025 adjusted EBITDA guidance range, dollars 4,200,000,000.0 to $4,500,000,000 Given the growth across Pembina's low risk fee based business and confidence in the outlook for 2025 and beyond, we were pleased to yesterday announce a $02 per share or 3% increase in the 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, and we are proud of our long track record in this regard. On the commercial front, Pembina has entered into commercial agreements with a leading Montney producer covering Pembina's full value chain, including transportation, fractionation and marketing services.

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

The agreements include significant new and extended long term take or pay volume commitments on Pembina's Peace Pipeline, Frutz Kopay Systems and Northeast BC Pipeline. The new and extended fractionation agreements are expected to support higher utilization of Pembina's Redwater complex, including RFS-four, currently under construction, and the proposed RFS-three deethanizer, if sanctioned. Additionally, the process to remarket Pembina's capacity on the Cedar LNG project third parties continues to progress well. We have now shortlisted the preferred counterparties and entered definitive agreement negotiations. Pembina continues to advance several in flight construction projects to capitalize on growing WCSD volumes, diversify end market exposure and serve our customers better.

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

Pembina 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. In addition, Pembina is progressing development of more than $4,000,000,000 portfolio of potential projects that includes conventional pipeline expansions such as the Taylor to Gordondale project an expansion of the Peace Pipeline system to add capacity to the market delivery pipelines from Fox Creek to Namayo, and further expansions to support volume growth in Northeast BC, including new pipelines and terminal upgrades. While reiterating their 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 Dow's project, the announcement delay has no impact on Pembina's ethane supply agreement and the development of potential infrastructure to meet its commitments.

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

To date, Pembina has not spent material capital to support the ethane supply agreement and will continue to progress these projects but may now have more time available to execute them. Pembina is evaluating the various options available to meet its ethane supply commitment under the agreement with Dow, including the addition of a deethanization tower at RFS 3 within the Redwater Complex. Regarding Alliance pipeline and ongoing Canadian energy regulator review process, Alliance is working collaboratively with its stakeholders and remains focused on delivering the highest standards of service that 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 Pembina and the Alliance shippers through an equitable sharing of value and risk. We expect Pembina will continue to earn appropriate risk adjusted returns while shippers will continue to benefit from Alliance's firm capacity, high reliability and cost effective access to premium U.

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

S. Natural gas markets. I will now turn things over to Cam to discuss in more detail the financial highlights for the first quarter.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

Thanks, Scott. As Scott noted, Pembina reported first quarter adjusted EBITDA of $1,167,000,000 This represents a 12% increase over the same period in the prior year. In pipelines, factors impacting the quarter primarily included a higher contribution from Alliance due to increased ownership following the Alliance LuxSable acquisition, favorable U. S. Foreign exchange rate, higher tolls mainly related to contractual inflation adjustments, higher contracted volumes on the Nipsey pipeline and the Peace pipeline system, higher contribution from Alliance due to higher demand on seasonal contracts and lower firm tolls on the Cochin pipeline due to the recontracting that occurred in July of twenty twenty four.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

In Facilities, factors impacting the quarter included the inclusion of Aux Sable following the Alliance Aux Sable acquisition and higher contribution from PGI, primarily related to the Whitecap and Verint transactions, largely offset by lower interruptible volumes at Dawson due to third party sales gas restrictions. 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 Aux Sable, higher WCSB NGL margins and volumes, lower realized gains on commodity related derivatives, lower Aux Sable NGL margins and no similar gain to that recognized in the first quarter of twenty twenty four from a change in the provision related to Pembina's financial assurances for Cedar LNG. Finally, in the Corporate segment, first quarter results were lower than the prior period due to higher incentive costs driven by the change in Pembina's share price and relative performance to peers in the period compared to the first quarter of twenty twenty four. Earnings in the first quarter were $5.00 $2,000,000 This represents a 15% increase over the same period in the prior year. In addition to the factors impacting adjusted EBITDA, the 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 Aux Sable acquisition unrealized losses recognized by PGI on interest rate derivative financial instruments compared to gains in the first quarter of twenty twenty four higher unrealized gains on commodity based derivative financial instruments recognized by PGI lower unrealized losses on renewable power purchase agreements and crude oil based derivatives unrealized gains on NGL based derivatives unrealized losses on interest rate derivative financial instruments recognized by Cedar LNG higher income tax expense, higher net finance costs and lower interest income.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

Total volumes in the Pipelines and Facilities divisions were 3,700,000 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 Ox Sable acquisition, higher contracted volumes on the Nipissy pipeline and the Peace Pipeline system, higher volumes at PGI related to the Whitecap and Verint transactions and lower interruptible volumes at Dawson due to third party restrictions. Thanks to strong results in the first quarter of twenty twenty five, Pembina generated meaningful free cash flow in the quarter, which was allocated to strengthening the balance sheet. 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 $4,200,000,000 to $4,500,000,000 Notably, the guidance range reflects the following full year and quarterly or seasonal assumptions.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

Eminent continues to see rising utilization on its conventional pipeline systems and at PGI that aligns with volume growth across the Western Canadian sedimentary basin. However, in 2025, Pembina's revenue volume growth within the conventional pipelines and gas processing assets is expected to be slightly lower than physical volume growth as certain customers expand into their contractual take or pay commitments. We expect a higher contribution from Alliance in the first and fourth quarters due to the ability to transfer higher volumes during colder periods. Further, the current guidance assumes the existing Alliance toll is in effect for the full year. For the second quarter, our outlook assumes planned maintenance at Aux Sable and Alliance, certain PGI facilities and the Redwater Complex as well as restrictions on third party natural gas egress within the basin.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

We expect the third and fourth quarters will have higher integrity and geotechnical costs across the conventional pipeline assets, and we expect stronger first and fourth quarter results in the NGL Marketing business due to typical seasonality. Additionally, while Marketing results in the first quarter exceeded Pembina's original guidance expectations, this has been offset by the outlook for the remainder of the year, which reflects lower commodity prices due to global economic uncertainty. As a result, Pembina's full year adjusted EBITDA outlook for the Marketing and New Ventures division of $550,000,000 remains unchanged. Pembina does not expect any material impact to its guidance from tariffs on U. S.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

Energy imports. At 03/31/2025, based on the trailing twelve months, the ratio of proportionally consolidated debt to adjusted EBITDA was 3.4 times and we expect to exit 2025 at 3.4 times to 3.7 times. Our leverage remains well below the low end of our targeted range, reflective of our strong balance sheet and supporting a strong BBB credit rating. I'll now turn things back to Scott.

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

Thanks, Cam. 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.

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

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 ten minutes before the presentation start time. For further information on the annual meeting, please visit the Investors tab @www.pemina.com. Thank you for joining us this morning.

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

Please go ahead and open up the line for questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer Your first question comes from Jeremy Tonet with JPMorgan. Your line is now open.

[Jeremy Tonet, Analyst at JPMorgan Chase]

Hi, good morning.

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

Good morning, Jeremy.

[Jeremy Tonet, Analyst at JPMorgan Chase]

Thanks for the color today. Just want 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 WTI be going below 60%, staying there for some period of time, how in corresponding moves in Condi prices, how you think that impacts Montney production and your outlook here? Granted Pembina has the material contractual protections, but just wondering any thoughts you could share there?

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

Yes. Jeremy, it's Scott. I'll start off and make some comments, and Jarrett 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, in the last couple of days, a couple of producers start discussing about moving completions into Q3 and Q4.

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

So I would say we are starting to see some timing of completions. But overall reductions of CapEx to date, we really haven't seen that.

[Jeremy Tonet, Analyst at JPMorgan Chase]

Got it. Thank you for that. And then maybe shifting over to Alliance, 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 characterize, I guess, the range of outcomes at this point is relatively minor, within the grand scheme of Pembina as far as what unfolds in the Canadian process here? And do you see, I guess, The U.

[Jeremy Tonet, Analyst at JPMorgan Chase]

S. Side, similar things materializing? Or any other color would be helpful. Thanks.

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

Good morning, Jeremy. Jared here. And, yes, I appreciate you mentioning that we are obviously limited in what we can say. But what I can reassure you, Jeremy, is that our customers continue to reiterate they enjoy the high reliability availability of the Alliance asset. They enjoy the high value end market delivering into the Chicago area, and they really value the risk sharing aspect.

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

Obviously, Pembina 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. Additionally, we heard from our customers that they do not want us, as part of the negotiated settlement to move to a cost of service model, like a true traditional, cost of service model.

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

So with all that said, you know, we continue to work with them expeditiously to, you know, get to a negotiated settlement that we can get into the Canadian energy regulator, as quickly as possible, you know, that ultimately will will provide Pembina with that risk based return. That's unfortunately, that's all we can really say right now due to the active aspect of those negotiations.

[Jeremy Tonet, Analyst at JPMorgan Chase]

Got it. And as far as The US side, nothing to think about there at this point?

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

You bet. And then on The US side, Jeremy, so, I believe it's December first of this year, we'll be submitting. It's roughly every five years we have to submit our our information to the FERC, and that's coming up I believe December one of twenty twenty five.

[Jeremy Tonet, Analyst at JPMorgan Chase]

That's helpful. Thanks. And last one if I could just real quick. Pembina has done a great job getting the balance sheet a very strong position And just wondering if there's the opportunity to go from defense to offense if different opportunities shake loose as far as potential smaller bolt ons or what have you?

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

Yes, Jeremy. I would say that a couple of things. One is that you've certainly seen us do that over the course of time on a targeted basis. Obviously, we very, I think, successfully leveraged the PGI relationship to add some really exciting opportunities there over the past year or so. Would say that in terms of capital allocation, obviously, we're it's a pretty dynamic environment right now, we're obviously monitoring things kind of in real time.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

But at the same time, we always stand ready to make our business better as opportunities present. I would say that the prospect for big game hunting is not something we're focused on. But certainly, smaller value add opportunities, if they come about, we're certainly going to be in a position to act on.

[Jeremy Tonet, Analyst at JPMorgan Chase]

Got it. That's helpful. I'll leave it there. Thanks.

[Operator]

Your next question comes from Spiro Dounis with Citi. Your line is now open.

[Spiro Dounis, Analyst at Citigroup]

Thanks, operator. Good morning, team. Wanted to start with the DS tower and the Dow contract. It sounds like your plan right now is still to develop it at some point, maybe even without Dow announcing, their facility, you know, timeline once again. I just want to confirm, one, that's correct.

[Spiro Dounis, Analyst at Citigroup]

Two, 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 question here, but in the interim, this does seem to free up some capital if you're not developing this tower imminently. So just curious how you're thinking about redeploying some of that capital.

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

Morning. Jared here. Yes, maybe I'll just take a step back. So we announced it was probably May of twenty twenty four actually, we announced the supply agreement with Dow. 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 approach to that supply.

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

And we have been signaling that RFS three, which was a clone of RFS two, does make a lot of logical sense to, build the DF side of that that asset as part of our overall portfolio. And we continue to believe that that still makes a lot of sense. There was minimal capital being spent on the portfolio of assets in the calendar year of 2025. So even with the most recent reprofiling or delay that Dow has mentioned, there isn't a material change to our overall capital in 2020 in 2025. And we still believe, you know, not knowing exactly when, the new onstream date might be, be announced, We believe that it's it's kind of that it's just normal routine execution, doing the DF tower.

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

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 that when we do get a little bit more line of sight, we'll be able to act quickly and have that asset on to to meet our supply portfolio commitments.

[Spiro Dounis, Analyst at Citigroup]

Got it. That's that's good color. Thanks for that. Second question, going back to Alliance quickly, I don't think this was addressed in the prior question, but I know at one point you've been talking about with the same customers discussion around expanding that pipeline. 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 you're thinking about the timing?

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

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 Chicago market. And there's also opportunities to do shorter haul expansions with you know, less compressor stations here on the Canadian side into, the Alberta heartland. So we're just continuing to evaluate those and kind of in the pre FEED engineering, stages of that.

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

But lots of demand for incremental liquids rich gas egress.

[Spiro Dounis, Analyst at Citigroup]

Understood. No, it's great to hear. I'll leave it there for today. Thank you, gentlemen. Thanks.

[Operator]

Your next question comes from Theresa Chan with Barclays. Your line is now open.

[Theresa Chen, Senior Analyst at Barclays]

Good morning. I wanted to go back to the comments about, risk sharing within Alliance. To your comment about your customers appreciating that Pembina is taking the risk, does that mean the risk sharing or incremental risk shift, from Pembina to customers is off the table or is that still a point of negotiation? And if so, if the Brisk were to move, what would that illustratively even look like?

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

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. The reason Pembina at the time and the joint venture previously was open to that is that we do believe that we're extremely good at at providing safe, reliable, and cost effective operations. But with that said, as we're the back and forth goes with the customers, there could be changes to that overall risk sharing profile as different inputs into into, you know, into the economic model change. So it's it's pretty live and dynamic right now, but and that's all I I can say about that.

[Theresa Chen, Senior Analyst at Barclays]

Okay. Fair enough. And to the earlier color about the bifurcation between volumes and revenue and EBITDA contribution due to the gap as customers ramp into the MVCs, when do you expect that to true up?

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

Theresa, it's Cam here. I would say that that's a pretty consistent phenomenon or pretty consistent experience that we've seen. And the reason being is that, 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 the contracts are the leading indicator against the fiscal volumes, typically come first, the volumes come second, We've continued to see that lag over time. I'm not sure that we will expect those to true up.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

I think we continue to sign contracts as evidenced by this quarter. And so we will continue to see a gap between those revenue and physical volumes as a result of that.

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

Maybe I'll just add to that, that you do have to delaminate the difference between so what we call our high vapor pressure products, so that's your C3 plus and your C2 plus versus your LVP, your low vapor pressure, so your crude and your condensate. It is customer dependent, and it is commodity dependent. Obviously, Pembina has a suite of pipelines in our conventional system, C2 plus C3 plus condensate and crude. So there is different dynamics happening. Some customers are over on certain aspects of their contracts.

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

But overall, 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 asset, commodity, and customer and region.

[Theresa Chen, Senior Analyst at Barclays]

Thank you for that detailed answer.

[Operator]

Your next question comes from Aaron MacNeil with TD Cowen. Your line is now open.

[Aaron MacNeil, Director, Equity Research Analyst at TD Securities]

Good morning, all. Thanks for taking my questions. Obviously, 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 appreciate that the disclosure is intentionally vague, but we're fielding the obvious questions from investors on magnitude of the contract volumetrically, duration, new level of contracting at both Taylor to Gordondale and RFS four, and and maybe just confirmation that it is a BC Montney customer given the contracting on on specific pipelines that that you noted.

[Aaron MacNeil, Director, Equity Research Analyst at TD Securities]

So just, you know, open ended, anything you'd be comfortable sharing. Just giving you the opportunity to do that.

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

No. Yeah. You bet. Appreciate the question. So it is one of our, I can't say it is one of our largest customers.

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

It is a Northeast BC customer. And I think what I'd like to leave the group with is that this announcement, I think it just provides confidence that our we recognize our customers do have a choice, 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 effective, it is that suite of different assets that I just referred to, the different pipelines connected to all of the fractionators in the Fort Saskatchewan area, connected to all of the egress outlets, etcetera. So, you know, we do recognize they have choices, and we do appreciate them choosing us to be their service provider. I will say that this is a, like, I'll use the word material volume.

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

You know, it's existing volumes across the enterprise, so the the pipelines, the fracs, and in our marketing business. But it is also new, and it's, there's kind of twofold here. 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 expansions, albeit the Taylor to Gordondale area, you know, move new pump stations within Alberta, etcetera. We've referenced a pump station expansions between Fox and the Mayo. These are all, incrementally required as as customers reaffirm their base volumes and sign up with new revenue barrels throughout our system.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

Aaron, I'll just maybe add a couple of data points. The renewal piece is obviously we've talked about it. It's a very meaningful piece of our Peace contract structure. It's not quite 10%, but it's pretty close. And obviously, commitments beyond that flow through both the frac as well as other pieces.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

And when we talk about it being a fairly material contract, that's the renewal piece. Obviously, the new piece of it is obviously quite material, not quite to that magnitude, obviously, but very meaningful on its own.

[Aaron MacNeil, Director, Equity Research Analyst at TD Securities]

Wow. Okay. That was more than I expected to get. Thanks for that. I'm really sorry to go back to Alliance, but you did mention the risk sharing earlier and that you're not a cost of service pipeline.

[Aaron MacNeil, Director, Equity Research Analyst at TD Securities]

I just guess I bring that up because the original CER complaint essentially compared Alliance to rate regulated pipelines. So the question is, how do you define an appropriate risk adjusted return? And is obviously, it's not a rate regulated return, but like is the right way to think about it in the context of prevailing industry built multiples? Or is there anything you can share there?

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

Maybe I'll just I'll touch quickly on that. It's that's that's one of the the the biggest challenges for this negotiation is exactly what you just you just touched on. And, you know, it we are different than any other asset, and we're just working through that. What does that, risk premium look like, for Bemina?

[Aaron MacNeil, Director, Equity Research Analyst at TD Securities]

Yeah. I appreciate that's a tough one to answer. Thanks.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

Yeah. Aaron, the only thing I'd say is, I mean, obviously, you know, the the the filings are the filings are public. You can look at all the other pipelines, which are, you know, effectively no risk utility type structure and see that the ROEs there have climbed, you know, into the into the mid teens in some cases. And so that's a that's a no risk scenario. So if if you sort of look at Alliance, obviously, taking on the kind of risk that it does today, you know, we believe that it's appropriate to to earn a premium to that, and and perhaps that's what we're getting at with an appropriate risk adjusted premium.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

Probably as far as I can go there, but I just make those data points clear.

[Aaron MacNeil, Director, Equity Research Analyst at TD Securities]

That's super helpful. Thanks, everyone, for the answers. We'll turn it back.

[Operator]

Your next question comes from Praneeth Satish with Wells Fargo. Your line is now open.

[Praneeth Satish, Analyst at Wells Fargo]

Thanks. Good morning. Maybe let me get my Alliance question out of the way here. It just kind of recognizing you're limited in what you can say, but can you clarify the timeline for when the tolls would take effect as it relates to EBITDA? I know sometimes that the timing of the actual settlement, it can be different than when you accrue it in EBITDA.

[Praneeth Satish, Analyst at Wells Fargo]

And then second, without giving a specific number, are you able to confirm that any potential impact would be contained within the guidance range that you've provided within the midpoint to low end of the range?

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

So on the timing piece, I'd say that's still part of the negotiations, so no update. And with that in mind, you know, we really can't comment on 2025 guidance. And and giving that clarity will just is another angle to try to figure out, kinda where we're at in our negotiations, and it's just too confidential and sensitive. So we're just not going to answer that question. I apologize.

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

As soon as we can say more, we will.

[Praneeth Satish, Analyst at Wells Fargo]

Understood. That's fine. And then switching gears, maybe if we could get an update on the, Greenlight data center project. And I guess specifically what I wanted to know is any more color on whether the JV has entered the queue for gas turbines because we're seeing the lead times elongate, the prices go up. Have you has the JV secured pricing on the turbines and other critical equipment costs?

[Praneeth Satish, Analyst at Wells Fargo]

And just any broader update you can provide.

[Chris Scherman, Senior VP of Marketing & Strategy Officer at Pembina Pipeline]

Sure. It's Chris Sherman. Thanks for the question. The project's progressing nicely. We're really focused on our interconnection applications at the minute at the moment.

[Chris Scherman, Senior VP of Marketing & Strategy Officer at Pembina Pipeline]

And we haven't made any turbine long lead purchases, but we are actively engaged with equipment suppliers. We're very alive to the cost and timing dynamics that are unfolding out there. And we're going to be prudent with our order placement and frankly the timing still aligns with our expectations. So everything's going well and on track both commercially and on the project side.

[Praneeth Satish, Analyst at Wells Fargo]

Got it.

[Praneeth Satish, Analyst at Wells Fargo]

Thank you.

[Operator]

Your next question comes from Rob Hope with Scotiabank. Your line is now open.

[Robert Hope, MD - Equity Research at Scotiabank]

Hello, everyone. First question is on the Yellowhead straddle. So ACCO continues to pursue that project even with the Dow delay. How do you think about the potential to straddle that asset in the context of a Dow delay? Or could incremental ethane and C3 plus allow that project to stand on its own?

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

I think from a timing perspective, Rob, nothing really changes on our end in terms of that project. That was always a late twenty twenty eight, twenty twenty nine project. So 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 when the in service date was. So no change from that on our end.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

And Rob, I would just add that, obviously, announcement from Dow and the assessment on our part and everything that comes with that kind of happening in real time here. Dow is obviously a big customer of ours and a big partner. We were not spending material dollars on that in 2025, obviously. Was obviously 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 we'll obviously make judgments at that point.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

But just want to make clear that we weren't spending material dollars on that in 2025. Obviously, just some early works and engineering work.

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

But you did nail it, Rob. Oh, sorry. That there is accretive C3 plus that can be extracted from the gas. If this did go into service and the ethane component on the sales side was a little bit delayed, there is NOI associated with this. That would be accretive to the project.

[Robert Hope, MD - Equity Research at Scotiabank]

All right. Appreciate that. And then maybe diving deeper into the Dow agreement. It appears that the commentary 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?

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

I appreciate the question, Rob. 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. Outside of that, don't think we want to sort of go much deeper than that.

[Robert Hope, MD - Equity Research at Scotiabank]

Understandable. Thank you. I'll hop back in the queue.

[Operator]

Your next question comes from Patrick Kenny with National Bank Financial. Your line is now open.

[Patrick Kenny, Managing Director, Research Analyst at National Bank Financial]

Hey, good morning, guys. I'll try not to ask anything too commercially sensitive here. But 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 I guess if you had a bit more color on what kinds of opportunities you're looking at in order to access non US markets, both on a proprietary basis as well as utilizing third party infrastructure, that'd be great.

[Chris Scherman, Senior VP of Marketing & Strategy Officer at Pembina Pipeline]

Sure, Pat. It's Chris Sherman. I think been fairly clear about our aspirations around propane and some of the optimism and bull case we have for the West Coast Of Canada. I think the positions we have today, both through our own facilities and others, are serving us well. We like that ratio as far as how it fits into our portfolio, we've also talked about a desire to optimize Prince Rupert to increase some of the margins there.

[Chris Scherman, Senior VP of Marketing & Strategy Officer at Pembina Pipeline]

Honestly, the price is right, we'll look at more off the West Coast for propane. As well, we're keenly watching butane. We're looking at a number of different projects to try to figure out where butane is going to fit best into North American markets, product markets as well as 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 all of those.

[Patrick Kenny, Managing Director, Research Analyst at National Bank Financial]

Okay. That's great. And then I guess just on the remarketing of the capacity at Cedar, would you say your patience is paying off here in terms of the geopolitical trends supporting higher demand and perhaps stronger economics for this capacity versus the first one point five million tonnes? And just curious as well if you can comment on the level of interest in the potential expansion at Cedar. Just wondering if counterparties are considering dovetailing an option for the expanded phase as well.

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

Pat, it's Scott here. I think it's more than just the geopolitical changes. I think it's also the fact that we continue to see growing gas out of Northeast BC that needs an egress solution. We're continuing to see strong ARBs between Canadian gas and Asian gas prices. And so that's driving pretty significant interest in the Cedar capacity.

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

So we're pleased with where that's going. Also the fact that, obviously, we're FID ed and we're a year into construction and a year closer in service date. So I think all of those factors are leading decent interest in this project, and we're pretty pleased with where we're going. So I would say the patience has paid off. I mean, at this stage, we are working very hard to turn the definitive into a final executable agreement.

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

But they're big complicated agreements. And as we've said for the last several months that we'll do the right deal for Pembina, not the fastest deal for Pembina, and we continue to progress that. I would say as it relates to potential Cedar 2, certainly the gas demand is there. We saw that from our recontracting efforts. Based on early stages negotiations on Cedar capacity, we believe there is demand for a Cedar 2.

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

But until we have line of sight to that gas on Coastal GasLink or other solutions, that's kind of the gating item and that's something that we continue to work on.

[Patrick Kenny, Managing Director, Research Analyst at National Bank Financial]

Okay. That's great color. I appreciate it, guys. I'll leave it there.

[Operator]

Your next question comes from Maurice Chao with RBC Capital Markets. Your line is now open.

[Maurice Choy, Research Analyst - Energy Infrastructure at RBC Capital Markets]

Thank you, and good morning, everyone. I just wanted to take a broader picture about the long term WCSP outlook and hone in on the Taylor to Gordon Dale NGL pipeline project. Clearly, is a competing third party project out there, obviously, against your projects in the CR process. So just just your thoughts as to how you think the CR will resolve these sort of issues. And taking one step further, any reason why you would think there wouldn't be sufficient contract in part until both projects to proceed in the coming quarters?

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

Good morning, Maurice. Jared here. So, yeah, we recognize that there's there's currently two two projects moving forward, and and we're actually may be surprised to hear this, but I think I mentioned to you before. We're very supportive of both projects moving forward. Removing egress constraints for our Western Canadian, sedimentary basin, customers, upstream customers is is critical.

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

That's what midstreamers do. We remove constraints so they can get to higher value markets. And overall, between LNG Canada phase one, Pembina's highly confident. LNG Canada phase two happens for all the reasons Scott just mentioned. World scale resource and low commodities.

[Jaret Sprott, Senior VP & COO at Pembina Pipeline]

You 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 you know, 250,000 plus barrels a day as as a nation. And the NGLs that are gonna come with that incremental gas egress need to get to need to get to a market, need to get to a fractionator, need to get to a pep chem facility. So we're very bullish that both projects are required, and and we'll continue to work with our customers and and work with the regulator to and the communities to satisfy the requirements to get ours across the finish line.

[Maurice Choy, Research Analyst - Energy Infrastructure at RBC Capital Markets]

Understood. If I could just finish up with a cleanup question here. Kim, I think in your prepared remarks, you mentioned you expect to exit 2025 at 3.4, three point seven times debt to EBITDA. I think that shifted a touch by about 0.1 from what you mentioned in the last conference call. So 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 hasn't perhaps some gross spending was assumed, just a thought there.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

A little bit of timing of spend, Maurice, and also just assumptions on timing of cash flow. Really sort of speaks to timing of cash flow in the calendar year versus subsequent year. That has to do with changes in non cash working capital as well as the timing of our cash tax payments. So it's it's really more so timing than any sort of structural change.

[Maurice Choy, Research Analyst - Energy Infrastructure at RBC Capital Markets]

Understood. And just to reconfirm the guidance that you have right now, still assumes interim aligned goals. Is that right?

[Dan Tucunel, Vice President - Capital Markets at Pembina Pipeline]

Correct.

[Maurice Choy, Research Analyst - Energy Infrastructure at RBC Capital Markets]

Perfect. Thank you.

[Operator]

Your next question comes from Robert Katteglie with CIBC Capital Markets. Your line is now open.

[Robert Catellier, Energy Infrastructure Analyst at CIBC Capital Markets]

Hey, just a follow-up on the situation with Dow. I wonder if you have any sense on what they need to see to resume this project. Was it delayed because of a trade related issue? For example, maybe their products was competitive because of tariffs, or is it something in the about the economy or anything related to Canadian policies?

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

Hey, Rob. It's it's Scott here. I I That's a better question for Dow. I just out of respect for our partner, can't comment on that.

[Robert Catellier, Energy Infrastructure Analyst at CIBC Capital Markets]

Okay. I understand that. And then just moving on to just tariffs in general. What has the tariff uncertainty done to activity levels for Watson Island and the export outlook in general?

[Chris Scherman, Senior VP of Marketing & Strategy Officer at Pembina Pipeline]

It's Chris.

[Chris Scherman, Senior VP of Marketing & Strategy Officer at Pembina Pipeline]

Well, first of all, tariffs have driven lots of volatility, which we've all seen and undoubtedly some trip shifting trade patterns. I think in the short term, we've seen strong volumes off the West Coast, which is really in line with increased demand for, frankly, Canadian propane as a result of some of the dynamics going on in the Gulf Coast and some of the curtailed supply from China. But I think in the long term, it really positions Watson and really positions the West Coast Of Canada really, really well. We've got tremendous resource in Western Canada. We've got a really proven pathway to get product to the West Coast.

[Chris Scherman, Senior VP of Marketing & Strategy Officer at Pembina Pipeline]

And we've got supply security concerns for a good part of the world that's going to be looking for alternate sources, and Canada is a great piece of that. And so we'll be looking to leverage that as much as possible.

[Robert Catellier, Energy Infrastructure Analyst at CIBC Capital Markets]

Okay. Thanks, everyone.

[Operator]

Your next question comes from Sumantra Banerjee with UBS. Your line is now open.

[Sumantra Banerjee, Equity Research Associate at UBS Group]

Hi. Thank you for taking the question. Just to go back to capital allocation and leverage, it's great to see that you had faced the dividend and also, the leverage target range went down. Just wanted to get any high level thoughts on capital allocation priorities going forward.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

Yes. Good morning. It's Cam. As I mentioned earlier, I think it's something we've clearly been watching in real time as the markets evolved through the greater macro volatility in the last couple of months here. Clearly, in our guidance, we indicated a preference or sort of a base case disposition towards debt reduction in 2025 as we have free cash flow, which we expected to do to have and continue to expect that.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

I think as we've seen things ebb and flow throughout the course of the year, we've obviously taken that information in. We obviously haven't changed that leading up to the Q1 print here. We were in blackout through April. So we wouldn't have been in a position to execute any share buybacks even if that would have made sense at the time. And so we are sort of looking at all the signals here and are looking at things on the back of the first quarter release and as we come out of blackout and obviously are reconsidering whether we shift some of that free cash flow towards share buybacks.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

Wouldn't put a pin in it at the moment, but certainly something with lots of active debate and will ultimately be market condition dependent.

[Sumantra Banerjee, Equity Research Associate at UBS Group]

Got it. Thank you. That's very helpful. And then just a more general one on guidance. So, you mentioned that you're tracking towards the midpoint currently.

[Sumantra Banerjee, Equity Research Associate at UBS Group]

And of course, there's a lot of, talk about, volatility in the macro. But are there any projects or other factors that could push you more towards the top of the guidance?

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

You know, I would say that the the biggest one would obviously be just, in the near term, it is frankly probably going to be where we see the commodity business. I mean, I think it's it's it's no secret that, that is the figure of driver biggest driver of variability in our business. Obviously, we do have some interruptible volume exposure in our business. And certainly, where there are dislocations on competing pipelines or alternatively egress constraints elsewhere, we stand to benefit from that. That's another driver of variability.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

Obviously, we do see seasonality in our business as we highlighted in the release. And certainly Q2 and we do expect to be sequentially lower compared to Q1, which is normal. And that's a function of all the elements we saw. The cost picture on that side is largely well understood, but really it's the revenue opportunities that could come on top of that. So if I summarize that, I would continue to say that market price variability will be the biggest single driver.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

And then lastly, sort of the interruptible volume situation as egress on our own or on third party pipelines becomes available or constrained.

[Sumantra Banerjee, Equity Research Associate at UBS Group]

Great. Thank you so much.

[Operator]

Your next question comes from Ben Pham with BMO Capital Markets. Your line is now open.

[Ben Pham, Managing Director at BMO Capital Markets]

Hi, thanks. Good morning. A couple of questions on the marketing and the guidance you've maintained for the year. Q1, you've pretty much hit almost half of it so far. Can you share details on hedging on that segment?

[Ben Pham, Managing Director at BMO Capital Markets]

And also just the trend around propane barrels. Is this a trend over time from your vantage to move more barrels to the Canadian West Coast? And how and if that could impact the long term outlook in market and EBITDA?

[Chris Scherman, Senior VP of Marketing & Strategy Officer at Pembina Pipeline]

Sure. It's Chris. So on the hedging side, our frac spread business is in and around 50% hedged here across the full year of 2025. And so we've got a degree of protection from the volatility that Cam was mentioning on the frac spread side. And then as to how we're thinking about the market long term, we've been I think fairly consistent for a while that we think the long term resilient markets for the Canadian wave of growth that's come and will continue to come is global.

[Chris Scherman, Senior VP of Marketing & Strategy Officer at Pembina Pipeline]

U. S. Demand has been strong and 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 global. And so we'll be striving to get as much growth as possible access to those markets.

[Chris Scherman, Senior VP of Marketing & Strategy Officer at Pembina Pipeline]

We remain constructive on our portfolio and think we've got a nice balance at the moment between some North American markets and global markets. But as we look forward, we truly think the most resilient markets are going to

[Chris Scherman, Senior VP of Marketing & Strategy Officer at Pembina Pipeline]

be global.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

And I would just add to that Ben that in terms of the hedging, Chris mentioned that we're both 50% hedged. We are hedged at levels which are in excess of the current sort of outlook for the balance of the year to the tune of 10% to 15% above current levels.

[Ben Pham, Managing Director at BMO Capital Markets]

Okay. Got it. Just on Alliance, but I'm not going ask the polls. I just wanted to go back. When you underwrote that asset yet, the synergy expectation.

[Ben Pham, Managing Director at BMO Capital Markets]

Just wondering where you're you tracked to that. And then also just wasn't there something about the Aux Sable marketing business in terms of higher volumes in the late decade time frame? Just where you have with that?

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

Yeah. Hey, Ben. Good call out. First thing I would say is that if you remember back to our announcement there, I would say that the lion's share of the synergies, the material amount of them were actually coming from the Aux Sable business. There's a significant amount of commercial opportunities in the Aux Sable business.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

Some small opportunities on the cost side across both assets, but more so on the commercial side, and those are largely on the Aux Sable side. I

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

would

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

say that so far our perspective is we're tracking very well to our plans. Timing. I think we we communicated at the time, you know, a range of 40,000,000 to 65,000,000, and and that had a obviously, had a a ramp to it. You know, some of those come very quickly. Some of those take a little bit of time.

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

And certainly for 2025, you know, we're we're tracking towards our intention there, which is probably at the lower end of the range as we expected. And continue to see the integration opportunities, and we'll continue to look for more, so far tracking according to plan.

[Ben Pham, Managing Director at BMO Capital Markets]

Okay. Got it. Just one last quick cleanup, and I don't think this applies to anything else in your asset base. But if anything, just to think about that alliance, any other assets through 2026? I guess that's your current guidance time frame that's up for toll challenges or reviews in an excellent bit?

[Cameron Goldade, Senior VP & CFO at Pembina Pipeline]

Those are the two assets. Obviously, the two assets here that are sort of federally regulated would have been Cotient and Alliance. And obviously, we've dealt with both of those. So

[Dan Tucunel, Vice President - Capital Markets at Pembina Pipeline]

nothing else.

[Aaron MacNeil, Director, Equity Research Analyst at TD Securities]

Okay. Got it. Thank you.

[Operator]

There are no further questions at this time. I will now turn the call over to Scott for closing remarks.

[Scott Burrows, President & Chief Executive Officer at Pembina Pipeline]

Well, thank you, everybody, for joining us today, and we look forward to speaking this afternoon at our AGM. Thank you.

[Operator]

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

Participants

Executives

• Dan Tucunel, Vice President - Capital Markets
• Scott Burrows, President & Chief Executive Officer
• Cameron Goldade, Senior VP & CFO
• Jaret Sprott, Senior VP & COO
• Chris Scherman, Senior VP of Marketing & Strategy Officer

Analysts

• Jeremy Tonet, Analyst at JPMorgan Chase
• Spiro Dounis, Analyst at Citigroup
• Theresa Chen, Senior Analyst at Barclays
• Aaron MacNeil, Director, Equity Research Analyst at TD Securities
• Praneeth Satish, Analyst at Wells Fargo
• Robert Hope, MD - Equity Research at Scotiabank
• Patrick Kenny, Managing Director, Research Analyst at National Bank Financial
• Maurice Choy, Research Analyst - Energy Infrastructure at RBC Capital Markets
• Robert Catellier, Energy Infrastructure Analyst at CIBC Capital Markets
• Sumantra Banerjee, Equity Research Associate at UBS Group
• Ben Pham, Managing Director at BMO Capital Markets