2018 Investor Day – Pembina Pipeline Corp

Pembina Pipeline Corp · May 29, 2018 · 108 slides

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Slides

Investor Day M a y 2 9 , 2018 TSX: PPL; NYSE: PBA
Our team presenting today and agenda Agenda and presentation outline Introduction Mick Dilger Purpose of Pembina Mick Dilger Strong Foundation Mick Dilger Mick Dilger Stuart Taylor President & Scott Burrows Senior Vice…
Introduction Mick Dilger
A lot can happen in a year Successfully integrated the largest acquisition in the Company's history Record 2017 Adjusted EBITDA of 1.7 BB and ACFPS(1) of 3.27, a year-over-year increase of 43% and 29%, respectively Placed 5 BB of…
Ten Year Scorecard 2008 2018 % Change WTI 99.68(1) 66.73(1) (33%) AECO 7.71(1) 1.71(1) (78%) WCSB Liquids production(2) (bbl/d) 2.7 mmbpd 4.5 mmbpd 67% WCSB Natural gas production(2) (bcf/d) 15.6 bcf/d 16.7 bcf/d 7%…
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Keys to success Assets serving the best geology in the basin Pursuit of integration across the value chain Commercial creativity 2 Developing critical mass of feedstocks Revolutionary technology revitalized the upstream oil and…
Purpose of Pembina Mick Dilger
Purpose of Pembina Customers choose us first for reliable and value added services Investors receive sustainable industry-leading total returns Employees say we are the employer of choice and value our safe, respectful,…
Pembina's strategy Preserve Value Diversify by providing safe, environmentally by providing integrated solutions which conscious, cost-effective, reliable services enhance profitability and customer services Our Strategy…
The Pembina Store: integrated, customer-focused services Empress, Sarnia and Corunna (Mainline Extraction, Fractionation, Distribution) Value chain extension opportunities Prince Rupert LPG Export Terminal (secured) Gas & NGL…
HoweverCanadian hydrocarbons are highly discounted Natural gas (average Jan-Mar 2018) Propane (average Jan-Mar 2018) Crude oil (average Jan-Mar 2018) 10.00 Premium to AECO 1.20 Premium to Edmonton 70.00 Premium to MSW 7.15 9.63…
Costing Canadians billions of dollars 20 Billion in lost revenue for Canadians in 2018 Lack of oil pipelines will cost Canadians approximately 15 billion in lost revenue in 2018 Inadequate gas transportation will cost Canadians…
Future energy demand will come from global markets Developing countries continue to drive energy demand growth Significant supply will be provided by increasing North American 500 450 natural gas and LPG production 400 Canada is one…
Pembina's advantage in accessing global markets Natural 'step' in Pembina's value chain extension model Strategically located assets supporting leading geology in North America Critical mass of products to meet global needs and…
New corporate structure aligns operations and strategy Mick Dilger President & Chief Executive Officer Operations Services Stu Taylor SVP Marketing & Scott Burrows Paul Murphy Harry Anderson Jason Wiun Jaret Sprott New…
A Strong Foundation Mick Dilger
Our business is highly contracted Contribution by revenue type (MM)(1) 4 77% fee-based 77% fee-based 81% fee-based 85% fee-based 60% of 2018 3 Take-or-pay/Cost-of-service total frac spread 6% is hedged(2) Fee-for-service 9% 3…
Location is everything WCSB drilling activity 2008 WCSB drilling activity 2018 TTM Pembina's assets serve the best geology where producers continue to drill and invest Source: Accumap. (1) Map illustrates newly spud or licensed…
Resource delivery continues to improve Montney drilling activity(1) Average single well cumulative condensate rates(2) Shift in focus from drilling in dry gas window to liquids-rich areas Activity in the liquids windows makes up 80%…
Liquids are driving well profitability Illustrative play netbacks(1) 30 Pricing Assumptions AECO: 1.50/mcf 25 WTI: 70/bbl 20 CAD/boe 15 10 5 0 Duvernay Rich Gas Montney Rich Gas Deep Basin Rich Gas Duvernay…
Our customers focus on long-life economic reserves North American Gas resource play break even(1) North American Oil resource play break even(1) Denotes plays which Pembina serves Denotes plays which Pembina serves 5.00 70 2018 YTD…
We are built to generate value throughout the cycle Crude oil historical prices(1) Adjusted cash flow per share vs. Canadian light oil price 160 120 4.00 120 3.50 US/bbl 80 100 3.00 40 80 2.50 0 CAD/bbl…
How Pembina will make money despite commodity cycles Natural Gas LPG Crude Oil and Condensate Marketing Volume increases on: Drives volumes on: Conventional Pipelines High price Oil Sands Pipelines Transmission Pipelines Gas…
We continue to secure new projects Secured Growth Projects Under Construction In-service Capital Cost(1) (MM) Prince Rupert Export North Central Duvernay II Mid to late 2019 290 Terminal Liquids Hub Prince Rupert Export Terminal…
We are working on billions of dollars of new projects PDH/PP Jordan Cove LNG 10 BB+ Alliance Expansion Peace pipeline expansions Duvernay development Processing facilities Laterals and connections Additional opportunities…
We have delivered on-time and on-budget Safety metric(1) Project Completed on-time Completed on-budget Man Hours Travel (km) LTI Frequency Pipelines NEBC Expansion On time On budget 750,000+ 2,900,000+ 0.53 Phase III Expansion On…
Veresen synergies are on track New staff in Pembina offices two days Re-contracted 95% of AEGS capacity Realization of synergies on-track and after closing the transaction under 20 year take-or-pay agreement trending within…
Updated 2018 Adjusted EBITDA guidance Utilization continues to Previous 2018 increase in both the Updated 2018 Adjusted EBITDA Pipelines and Facilities Adjusted EBITDA divisions Guidance: Guidance: Rising commodity prices are…
Transformational growth is generating record financial results Adjusted EBITDA and Adjusted EBITDA per share 2,650 MM to 2,750 MM 3,000 5.25 - 5.50 per share 6.00 Adjusted EBITDA Adjusted EBITDA per share 2,500 5.00 3.98…
Pipelines Division Overview Jason Wiun
Pipelines Division assets 34
Pipeline transportation Net pipeline capacity through time 3,500 In-service 3.0 3,000 Project under development mmboe/d 180 125 2,500 133 330 2,000 mboe/d 625 1,500 106 230 250 1,000 389 500 555 0 Pre…
Pipelines Division update Revenue volumes (mboe/d)(1) Operating margin (MM) 2017 and Q1 2018 highlights 2017 Highlights Y-o-Y increase of 45% Y-o-Y increase of 152% Record annual revenue volumes (2,304 416 mboe/d)(1) 2,424 Record…
Producer drilling is being driven by condensate demand Western Canadian condensate supply and demand 700 Supply - Base Case (WCSB Production) Supply - High Case (WCSB Production) Forecast 600 Demand (Bitumen Blending), Net of…
Our liquids pipelines are filling up Conventional Pipelines revenue volumes(1) 900 856 mbpd(2) 796 mbpd 800 715 mbpd 766 700 mbpd(3) 617 mbpd 620 mbpd 591 mbpd 600 560 mbpd 525 mbpd 500 444 mbpd mbpd 400 300…
Demand supports continued Peace build out 1.1 mbpd of Edmonton area market delivery (includes Phase IV) capacity Market delivery capacity can be further expanded to at least 1.3 mbpd through the addition of pump stations Peace…
Conventional Pipelines Phase IV and Phase V Expansions Project overview Phase IV: 75 million Two pump stations will be added from Fox Creek to Namao and will increase capacity in that area by 180 mbpd Further expansions possible…
Conventional Pipelines Phase VI Expansion Project overview Phase VI supports continued producer drilling in the Montney, Duvernay and Deep Basin plays Total expected capital 280 MM Project entails: Gordondale upgrades Laglace…
CDH is well-positioned and interconnected to drive value(1) CDH volume summary 180 160 140 120 100 mbpd 80 60 40 20 0 CDH volumes have increased by 115% since it was placed into service in July 2017 CDH…
Transmission Pipelines Alliance Pipeline Alliance Pipeline utilization 9.00 1,800 8.00 1,750 7.00 1,700 6.00 1,650 mmcf/d 5.00 CAD/GJ 1,600 4.00 1,550 3.00 1,500 2.00 1.00 1,450 0.00 1,400 2008 2009 2010…
Transmission Pipelines Proposed Alliance Expansion Project overview Expansion details Binding open season for expansion capacity commitments closes on May 31, 2018 Available for existing and prospective shippers Minimum term of…
Alliance delivers premium netbacks Natural gas transportation - illustrative shipper netbacks(1) Competitive advantages Existing Alliance capacity Potential Alliance capacity Access to both the premium Chicago Third-party capacity…
Pipelines Division outlook Outlook Record revenue volumes in Q1 2018 of 2,424 mboe/d Conventional throughputs continue to grow in line with contractual commitments and existing capacities Demand for Transmission Pipelines remain…
Facilities Division Overview Jaret Sprott
Facilities Division assets 48
Largest third-party gas processor serving the WCSB Net processing capacity Pembina 7,000 Provident acquisition 6.0 6,000 Veresen acquisition 100 bcf/d(1) Project under development 897 5,000 702 75 60 250 4,000 214…
Growing condensate stabilization capacity Net field based condensate stabilization Pembina 108 120 Veresen acquisition mbpd(1) Project under development 100 30 80 15 mbpd 60 10 12 40 24 20 17 0 Gas Services…
Largest fractionation capacity serving the WCSB Net fractionation capacity 350 307 Pembina Provident acquisition mbpd(1) 300 Veresen acquisition 30 Project under development 250 56 200 55 mbpd 150 73 100 20 50…
Significant hydrocarbon storage capacity Net storage capacity 16 14.2 Merchant Underground Storage Capacity Merchant Above Ground Storage Capacity mmbbls 14 0.5 Pembina 0.3 0.6 Provident acquisition 1.0 12 Veresen acquisition…
Facilities Division update Revenue volumes (mboe/d)(1) Operating margin (MM) 2017 and Q1 2018 highlights 2017 Highlights Y-o-Y increase of 20% Y-o-Y increase of 61% Record annual revenue volumes (746 225 mboe/d)(1) 842 Record…
Midstream Partnership: highly secured asset base Revenue volumes BBB (Stable) / BBB (Stable) (S&P / DBRS) 1,000 46% 54% Hythe/Steeprock supported by Ba1 (Stable) / BBB- (Stable) / A2 (Neg) / A (Stable) 900 take-or-pay contracts…
Gas Services Duvernay II Project overview Developing first tranche of infrastructure under the 20-year agreement with a significant area of dedication across Chevron and KUFPEC's Duvernay land base Pembina will develop and…
Midstream Partnership North Central Liquids Hub Project overview Supports operations of CRP within the world- class Montney resource play Will provide separation and stabilization of increased condensate volumes from the CRP to…
NGL Services Burstall Ethane Storage Cavern Project overview Salt cavern ethane storage facility with a capacity of 1 million barrels Expected in-service date of late 2018 at an estimated cost of 190 MM Pipeline connected to key…
NGL Services Empress Fractionation Project overview Constructing fractionation and terminalling facilities at Empress, Alberta 30 mbpd of propane-plus capacity will be added to the Empress East system Repurposing existing assets…
NGL Services Prince Rupert Export Terminal Project overview Developing a Prince Rupert LPG Export Terminal with an expected capital cost of 250 million Permitted up to 25 mbpd of LPG export capacity Site features sheltered berth,…
Prince Rupert is competitively located to export LPG LPG export terminal opportunity Illustrative shipping considerations(1) Global opportunity Growing North American production and robust international market demand Decline of…
LPG export creates value for our customers Propane import demand & historical waterborne supply(1) 2,000 Demand for propane in the Americas and Asia has 1,500 been growing and is forecast to continue growing mbpd 1,000 500 US…
Facilities Division outlook Outlook Revenue volumes continue to ramp up given Continuing to diversify the Facilities portfolio producer activity within the liquids rich WCSB Value chain extension; Empress Frac, Co- Record revenue…
Marketing and New Ventures Division Overview Stu Taylor
Value of Marketing to Pembina Marketing plays a role in utilizing capacity in Pembina's infrastructure and enabling western Canadian producer customers to access markets, connecting supply sources to demand points 15% of Pembinas…
Marketing Overview Marketing combines Pembina's infrastructure with market knowledge to capture value in a range of commodity market environments Pembina's Infrastructure Intellectual Capital Market Environment Marketing pays market…
Marketing highlights 145 mbpd of NGL 1.9 bcf/d transactions 60% of LPG sales are transported by rail, Marketing transported of contracted supply of 11% by truck and 41,000 bpd 29% by pipeline or of product in railcars natural…
Marketing value drivers Crude oil differentials(1) Propane inventories(2) Propane frac spreads(3) 30 140,000 60 20 120,000 North American Propane Inventory (Mbbl) 50 10 100,000 0 40 80,000 CAD/bbl -10 C/bbl…
Marketing Division outlook Outlook Base business volumes are expected to increase which results in access to more marketing barrels 2018 commodity outlook remains supportive: Low AECO gas price is driving strong frac spreads Solid…
New Ventures: Jordan Cove LNG Stu Taylor
Jordan Cove LNG project Situated on 240 acres on the North Spit of Coos Bay, Oregon Liquefaction and export facility with an LNG production capacity of 7.8 mmtpa(1) (1.3 bcf/d) Five 1.5 mmtpa liquefaction trains Two…
LNG demand is expected to almost double by 2030 Global LNG supply and demand balance(1) Demand considerations 700 65% of global gas demand growth will come from Asia Chinese imports in Q1 2018 have increased by 50% 600…
West coast shipping advantage(1) Shipping cost: 1.00 Shipping cost: 2.00 Shipping cost: 3.00 Shipping cost: 3.00 Shipping cost: 3.00 U.S. west coast holds significant shipping cost advantage to Far East markets and…
Highly competitive landed cost to Japan LNG and its role in global demand LNG cost stack against North American peers(1) LNG is expected to be the fastest 15.00 growing component of global gas consumption, increasing from 10% in…
Actively managing project risks Capital cost Funding Strategic alignment Liquefaction facility supported by Sell-down to maintain controlling Pembina prides itself as setting the lump sum turnkey EPC contract interest standard for…
High degree of alignment with Pembina's strategy What makes Jordan Cove attractive WCSB and U.S. Rockies provide sustainable low cost gas supply Long-term gas supply at Malin Hub from two long-haul pipelines fed by major resource…
Jordan Cove LNG: key milestones Ideally located on a 400 acre industrial site on the North Spit of Coos Bay, Oregon 1.5 hours from open ocean Opportunity Identification Strategically located to provide access to supplies from western…
New Ventures: Petrochemicals Kevin Jagger
New Ventures CKPC: PDH/PP project Project overview Canada Kuwait Petrochemical Corporation (CKPC) is developing a world-scale integrated propane dehydrogenation plant and polypropylene upgrading facility Joint venture of Pembina…
What is polypropylene Polypropylene is a downstream petrochemical product derived from propylene Polypropylene has a wide range of everyday uses: Automobiles Home electronic appliances Medical devices Carpet backing Packaging…
Structural changes supporting investment thesis Pricing Impact Unprecedented growth in liquids-rich drilling across North America resulting in continent-wide oversupply and corresponding lower propane prices 1 Alberta Propane…
Alberta advantaged by low-cost feedstock North American propane prices After Cochin Reversal Reflects Pipeline Costs 2.50 Reflects Rail Costs 0.60 0.40 2.00 26 cpg Avg Spread 0.20 MB - Edm Spread (US/gl) Propane Price…
The Alberta feedstock advantage Illustrative WCSB propane supply & demand(1)(2) 400 The WCSB currently has an excess supply of propane and ample propane fractionation capacity which creates the Alberta-feedstock 300 advantage WCSB…
Is there room for two Alberta PDH/PP facilities Global polypropylene supply & demand(1) The Alberta advantage is broader than feedstock 120 Incremental polypropylene supply 100 capacity is required to keep pace with global…
Polypropylene is a value-added product Polypropylene indicative margin Key Conversions 2,500 Pounds per tonne (PP) lbs/MT 2,205 Gallons per tonne (C3) gal/MT 521 2,000 1,500 US/MT Historical Price Spread of 1,200 / MT…
CKPC: stronger than the sum of its parts Canada Pembina RFS Propane Propylene Polypropylene United States (23,000 bpd) (550 kTa) (550 kTa) Asia South America PDH Facility PP Facility Shipping Third Party Frac Pembina PIC…
Partners with complementary strengths Alberta Well Suited Rail Alberta Robust Process Global Feedstock PP & PDH Project Land & Logistics Operating Access to Technology Marketing Access Experience Execution Connectivity Experience…
PIC's significant and growing global marketing reach PET marketed out of: PE marketed out of: Dubai, Germany & 335 kTa 825 kTa Singapore & Hong 150 kTa 940 kTa 1,400 kTa 850 kTa 1,200 kTa 1,000 kTa+ 550 kTa Italy Kong 750…
Consistent approach to managing risk Construction advantages Operating advantages Economic advantages Comprehensive FEED Leverage existing industry knowledge 50% partner with PIC EPC lump sum pricing for Global recruitment of…
PDH/PP Facility: key milestones Purchased 2,200 acres of lands adjacent to RFS PDH/PP only requires 400 acres Opportunity Identification PIC and Pembina announce they would be jointly evaluating feasibility of an Alberta-based…
Strong investment thesis Project has a long-term, diversified, secure and cost advantaged supply of propane feedstock Extensive existing connectivity to multiple sources of feedstock Cost effective access to domestic and global…
Strong Financial Position Scott Burrows
Financial Guard Rails 2015A 2018E Maintain target of 80% fee-based contribution 1 77% 85% to Adjusted EBITDA…
Dividend strategy supported by fee-for-service cash flow Illustrative fee-for-service distributable cash flow analysis(1) Considerations Dividend and all corporate costs are Fee-For-Service Payout underpinned 100% by fee-for- 85%…
Credit considerations and counterparty credit stats 60-day credit exposure(1,3) Pembina assesses all counterparties during on-boarding process and actively monitors credit limits and exposures Non Investment AA- to AA+ Grade 16%…
Commitment to a strong BBB credit rating Debt/Adjusted EBITDA (2018 Forecast)(1) Leverage comparison across industry(4) 4.5x 4.0x 3.75x - 4.25x 3.5x 9.0x Pembina continues to employ less leverage 3.0x 3.9x than its peers 2.5x 8.0x…
Financing history and objectives Historical funding (2012 2017)(1) Ongoing financing objectives Cash flow after dividends Finance growth 50/50 debt/equity over the long term DRIP 7% 9% Maintain strong BBB rating with conservative…
Approach to managing balance sheet Pembina manages it balance sheet to avoid falling below the rating agencies' downgrade threshold Upon completion, metrics trend back towards upper end of BBB range Illustrative FFO(1) / Debt…
Dividend growth supported by growing cash flow 4.00 700 3.50 5.6% dividend increase announced May 3, 2018 600 ACFPS CAGR: 10% 3.00 Dividend per share CAGR: 5% Cash flow after dividends (MM)(2) 500 2.50 400 /Share…
Conservative approach to adjusted cash flow Loans and Borrowing Amortization Schedule(1) Impact of amortization on Adjusted Cash Flow(2) 200 0.30 0.20 /Share MM 100 0.10 0 0.00 2018 2019 2020 2021 2018 2019…
Funding value chain extension projects Anticipate utilizing project level debt on Jordan Cove and PDH/PP Partner and off-taker equity contributions mitigate Pembina's equity requirement Long construction cycles Illustrative Jordan…
Long-dated debt maturity profile Peer group comparative tenor and cost of funds(1) Pembina's debt portfolio is more conservative than its peer group: 7% Peer 2 6% Peer 8 Weighted average maturity of 12.1 years vs. peer group Peer 4…
Conservatively positioned compared to our peers Payout ratio (Q1 2018)(1) Peer group credit rating changes(2) Peer group DRIP programs(3) 120% 4 13 100% 3 3 80% 60% 40% 20% 2 0% PPL KEY ENB IPL TRP ENF KML GEI ALA…