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Pembina Pipeline Plans C$1.9 Billion 2015 Capex

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Pembina Pipeline Corporation has announced that its Board of Directors has approved a capital program of approximately $1.9 billion in 2015.

This is the largest capital budget in the Company's history and is an increase of approximately 36 percent from our expected spending plan of $1.4 billion in 2014.

Mick Dilger, Pembina's President and Chief Executive Officer said: "Our 2015 capital program is mainly directed towards progressing our various multi-year execution projects, which are, for the most part, underpinned by long-term, fee-for-service contracts with our customers. 

In addition to advancing several multi-year builds in 2015, we will be placing approximately $1.5 billion of fee-for-service assets into service during the year ahead."

Mr. Dilger said: "The 2015 capital program is driven by Pembina's success over the past several years in securing an enviable suite of long-term, fee-for-service growth projects.

Our current roster of committed capital projects totals approximately $6 billion. The majority of these projects, which are in various stages of development, have in-service dates ranging between the end of 2014 and mid-2017. These secured projects, in aggregate, have the potential to add an incremental $700 million to $1 billion of EBITDA per year on a run-rate basis once they are all in-service, with the upper end of the range depending on utilization above take-or-pay levels. This represents an increase of 70 to 100 percent over Pembina's 12-month trailing EBITDA."

Mr. Dilger said: "We are backed by a strong balance sheet and have the right people and processes in place to bring our growth plans to fruition. 

As we execute our 2015 capital spending plan and move towards bringing these projects on-stream, I'm confident in our ability to continue growing cash flow per share and delivering meaningful and sustainable returns for our investors over the long-term."

Conventional Pipelines

Pembina plans to spend approximately $1,120 million in its Conventional Pipelines business, 58 percent of its overall 2015 capital spending plan. The spending will be primarily directed to major projects, as follows:

• Pembina expects to spend $25 million in 2015 to complete its previously announced Phase II Low Vapour Pressure Expansion, which will increase crude oil and condensate capacity on the Company's Peace Pipeline by 55,000 barrels per day (bpd). Completion is expected by early 2015, at which time the Peace Pipeline will have a capacity of 250,000 bpd. This expansion will accommodate increasing crude oil and condensate volumes resulting from continued producer activity in the crude oil and condensate-rich areas of the Montney resource play in the Dawson Creek, Grande Prairie and Kaybob/Fox Creek areas, as well as development of the condensate-rich Duvernay resource play in the Kaybob area.
• The Company expects to spend $225 million in 2015 to complete its previously announced Phase II NGL Expansion on its Peace and Northern natural gas liquids (NGL) Pipelines (the "Peace/Northern NGL System") to add an additional 53,000 bpd. Completion is expected in the third quarter of 2015, at which time the Peace/Northern NGL System will have a capacity of 220,000 bpd. This expansion will provide increased transportation capacity for producer activity focused on NGL development, which continues to be strong in the Deep Basin Cretaceous, Montney and Duvernay resource plays.
• Pembina expects to spend $550 million on its Phase III Expansion. During the year ahead, Pembina will work to complete construction of the 16 inch Kakwa to Simonette pipeline (currently under construction) and order long-lead equipment (including pipe) for the 24 inch and 16 inch pipelines from Fox Creek to Namao, Alberta.
• The Company expects to spend an additional $240 million on pipeline laterals to aggregate product for its mainline expansions.
• The remaining capital in Conventional Pipelines will be spent on upgrades and other business development activities aimed at ensuring maximum integration and optimization of the Company's value chain opportunities.

Midstream

Pembina continues to allocate its capital spending in Midstream on initiatives that increase its fee-for-service business. For 2015, capital of $510 million, or 26 percent of the overall budget, is projected to be spent in Midstream.

In crude oil Midstream, Pembina expects to spend $75 million to expand its current service offerings and enhance the interconnectivity of the infrastructure it accesses. Specific projects include:

• $40 million is expected to be spent in 2015 to expand above ground storage capacity from 310,000 barrels to 850,000 barrels at Pembina's Edmonton terminal, which is expected to be in-service in the second quarter of 2016;
• $15 million is to be spent on additional connections and inceasing delivery capacity within Pembina's Nexus Terminal, including commencement of activitiy at the Canadian Diluent Hub; and
• The remaining capital will be spent to upgrade several of Pembina's truck and full-service terminals and for other business development activities.
• In Pembina's NGL Midstream business, the Company expects to spend $435 million in 2015, which will largely be directed towards the construction of Pembina's previously announced two new fractionators at its Redwater site:
• $150 million is projected to be spent to complete Pembina's second fractionator (RFS II – expected to be in service in the fourth quarter of 2015) and $50 million is estimated to be spent on the Company's third fractionator (RFS III – expected to be in service in the third quarter of 2017);
• $70 million is to be spent at the Company's Redwater site developing infrastructure to facilitate the receipt, handling and loading of petrolum products produced from the adjacent Northwest Refinery;
• $40 million will be directed towards the Company's Corunna, Ontario facilities to increase product handling capacity at the facility (including optimizing rail infrastructure, new truck loading facilities and a new brine pond); and
• $35 million is anticipated to be spent on the development and completion of several underground storage caverns at Redwater West.
• The remaining capital in NGL Midstream will be allocated to various upgrades across the Redwater West and Empress East systems and to progressing Pembina's proposed west coast propane export terminal.

Gas Services

Pembina plans to allocate approximately $240 million, or 12 percent, of its 2015 capital budget to several new facilities within Gas Services:

• Resthaven Expansion – $100 million is planned to be spent to progress the 100 million cubic feet per day (MMcf/d) (gross) expansion at the Company's Resthaven facility, which, subject to regulatory and environmental approvals, is expected to bring total capacity to 300 MMcf/d (gross) by mid-2016;
• Musreau III Facility – $55 million is planned to be spent to progress the 100 MMcf/d expansion, which, subject to regulatory and environmental approvals, is expected to be in-service in the second quarter of 2016;
• Musreau II Facility – $5 million is planned to be directed towards final site clean-up activities related to the 100 MMcf/d shallow cut gas plant and associated infrastructure, which is expected to be in-service in December 2014;
• Saturn II Facility – $45 million is planned to be directed towards the 200 MMcf/d 'twin' of the Company's Saturn I Facility, which is expected to be in-service by late-2015; and
• Saskatchewan Ethane Extraction Plant (SEEP) – $30 million is allocated to complete SEEP, a 60 MMcf/d gas plant, which is expected to be in-service in the third quarter of 2015.
• Including Musreau II, Pembina will be placing 360 MMcf/d of new processing plants into service by the end of 2015, a 50 percent increase over its existing capacity. The remaining capital in Gas Services will be spent on upgrades and other business development activities.

Capital Spending Summary

During the year ahead, Pembina will continue to concentrate its efforts on expanding, diversifying and integrating its assets along the hydrocarbon value chain to better provide services for its customers and enhance long-term shareholder returns. To support these efforts, Pembina plans to spend approximately $65 million on other upgrades and corporate-related items, including various information services infrastructure improvements.

Key Accomplishments in 2014

• During the year, Pembina remained focused on expanding its integrated service offerings. In May, the Company announced that it had reached binding commercial agreements to proceed with RFS III, a new 55,000 bpd propane-plus fractionator at its existing Redwater fractionation and storage complex. With the addition of RFS III, which is subject to regulatory and environmental approvals, Pembina's fractionation capacity will total approximately 210,000 bpd, making the Company's Redwater complex the largest NGL fractionation facility in Canada.
• In September, the Company communicated its plans to proceed with developing its proposed West Coast Terminal under an agreement with the Port of Portland, Oregon (the "Port") that sets forth the terminal site, which includes an existing marine berth, located within the city of Portland for the development of the project. Since the announcement, Pembina has created a dedicated internal team to progress the 37,000 bpd facility, which is anticipated to be brought into service in early-2018 (subject to required permits and approvals). The Company expects that the West Coast Terminal will provide growing Canadian propane supply (that is derived from natural gas produced in western Canada) with access to large, international markets while complementing Pembina's expanding integrated service offering for products that are derived from natural gas.
• October 2014 marked Pembina's strategic and low-risk entry into one of the most promising hydrocarbon plays in North America: the North Dakota and Saskatchewan Bakken. Pembina acquired the Vantage pipeline system and SEEP for total consideration of approximately US$650 million. Vantage is a recently constructed high vapour pressure pipeline with a capacity of approximately 40,000 bpd that originates in Tioga, North Dakota and terminates near Empress, Alberta. Vantage provides long-term, fee-for-service cash flow and access to the prolific and growing North Dakota Bakken play for future NGL opportunities. SEEP, an under construction, 60 MMcf/d deep cut gas processing facility that is centrally located to service the southeast Saskatchewan Bakken region is underpinned by both a long-term ethane sales agreement and a long-term, fee-for-service processing agreement. SEEP is expected to produce approximately 4,500 bpd of ethane and will connect into Vantage through a pipeline lateral that is also currently under construction. Pembina expects SEEP and the associated pipeline lateral to be in-service in mid-2015. With these assets, Pembina now has a meaningful footprint in the Bakken and will be able to explore integration and growth opportunities in this new area.
• In the Company's Gas Services business, Pembina placed its recently constructed 200 MMcf/d (134 MMcf/d net) Resthaven Facility into service on October 6, 2014 and on October 10, 2014, Pembina announced that it entered into commercial agreements to proceed with a $170 million expansion of the facility. Pembina plans to build, own and operate a new gas gathering pipeline that will deliver gas into the plant and increase capacity of the existing Resthaven Facility by an additional 100 MMcf/d (gross), bringing total capacity to 300 MMcf/d (gross) (collectively, the "Resthaven Expansion"). The Resthaven Expansion is underpinned by a long-term, fee-for-service contract and, subject to regulatory and environmental approvals, the gathering system portion of the Resthaven Expansion is expected to be in-service by the second quarter of 2015, followed by the gas processing expansion in mid-2016.
• With the additional volumes anticipated at the Resthaven Facility, Pembina has also signed a long-term contract for Phase III pipeline capacity and fractionation capacity at the Company's Redwater fractionation and storage facility.
• Pembina is commissioning its Musreau II Facility, a 100 MMcf/d shallow cut gas plant, which is under budget and scheduled to come into service in December 2014, ahead of its previously anticipated in-service date of the first quarter 2015.
• The Company also recently announced that it entered into agreements to construct a new facility – "Musreau III" – for an estimated cost of $105 million. Musreau III will leverage the engineering and design work for Pembina's Musreau I and Musreau II facilities and will use the same pipeline lateral to access the Company's Peace Pipeline System. Musreau III, which is underpinned by long-term agreements with several area producers, involves the construction of a 100 MMcf/d shallow cut facility which will be built adjacent to Pembina's existing Musreau facility and its nearly complete Musreau II Facility. Pembina expects Musreau III to have liquids extraction capacity of approximately 3,000 bpd, subject to gas compositions. Similar to the Company's other gas processing facilities, the agreements for Musreau III are take-or-pay in nature and provide flow through of operating expenses. Subject to regulatory and environmental approvals, Pembina anticipates bringing Musreau III on-stream in mid-2016.
• The Company's Conventional Pipelines business realized record throughput thus far in 2014, largely resulting from expansions implemented in December of last year. During 2014, Pembina was successful in its recontracting efforts to secure the majority of its existing crude and condensate volumes under long-term, firm-service contracts. In aggregate, Pembina has now contracted approximately 650,000 bpd of crude oil, condensate and NGL through its recontracting efforts, and through its Phase I, II and III conventional pipeline expansions. Once the Phase III Expansion is brought into service, virtually all of the throughput on Pembina's Peace and Northern systems will be under long-term, take-or-pay contracts.
• Growing volume forecasts and customer support throughout the year also saw Pembina increase its Phase III Expansion program. Pembina now plans to construct two pipelines between Fox Creek and Namao, Alberta (one 16 inch diametre and one 24 inch diametre) with an initial combined capacity of 420,000 bpd and an ultimate capacity of over 680,000 bpd with the addition of midpoint pump stations. Another segment was also added to the project between Wapiti and Kakwa, Alberta. These additions are expected to increase capital spending for the project from $2 billion to $2.44 billion. Subject to regulatory and environmental approvals, Pembina expects the 16 inch and 24 inch diameter pipelines to be in-service between late-2016 and mid-2017. Pembina submitted its regulatory application for both pipelines from Fox Creek to Namao on September 2, 2014.
• Feeding into the Company's Phase III Expansion downstream of Taylor, British Columbia (B.C.) will be Pembina's recently announced $210 million, 75,000 bpd expansion to its pipeline infrastructure in northeast B.C.. The NEBC Expansion will transport condensate and NGL for various producers in the liquids-rich Montney resource play and is underpinned by a long-term, cost-of-service agreement with an anchor tenant. Subject to regulatory and environmental approvals, Pembina anticipates bringing the NEBC Expansion on-stream in the second quarter to fourth quarter of 2017 timeframe.
• Pembina also announced plans to develop the Canadian Diluent Hub (CDH) – a large-scale condensate and diluent terminal at its Heartland Terminal site near Fort Saskatchewan, Alberta. The proposed facilities are designed to accommodate contracted diluent supply volumes from the Company's previously announced field gas plant, pipeline and NGL fractionator expansions. The Company expects CDH to become a new market hub for condensate and other diluents by offering its customers a variety of value-added services.
• The Company's growth plan going into 2015 is backed by a strong financial position. In 2013 and 2014, Pembina raised $900 million in preferred shares and issued two tranches of 30-year notes: $200 million at 4.75 percent in April 2013 and $600 million at 4.81 percent in April 2014. Pembina also continues to have robust participation in its Premium Dividend™ and Dividend Reinvestment Plan, which should raise approximately $355 million for 2014 and access to its $1.5 billion credit facility.

Mr. Dilger said: "2014 has been a very positive year for Pembina, marked by strong operational, financial and safety performance, successful project execution, and securing excellent business development opportunities.

As we head into 2015 and undertake the largest capital program in the history of our Company, we will be focused on ensuring our projects are executed safely and on time and on budget. We'll also strive to continue delivering strong operational performance and safe, responsible and reliable services from our existing assets."