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Pembina to undertake pipeline expansion project

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World Pipelines,

The Board of Directors of Pembina Pipeline Corp. (Pembina) has approved a 6.25% increase in its monthly common share dividend rate (from CAN$0.16 per common share to CAN$0.17 per common share) – the company's sixth consecutive annual increase. Pembina also announced a CAN$325 million expansion of its pipeline infrastructure between Lator (Alberta) and Namao, (Alberta) related to its Phase III expansion project and provided an updated outlook for 2018 adjusted EBITDA and cost savings on capital projects.

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

Phase IV and V Peace pipeline expansion

Pembina's 420 000 bpd phase III expansion is nearing completion and continues to trend slightly under budget, with an expected on-time in-service date of July 2017. Given ongoing demand for capacity, Pembina is proceeding with two projects for a total estimated capital cost of CAN$325 million: (i) the Fox Creek and Namao pump stations (phase IV expansion), which is comprised of two pump stations on the newly installed 24 in. pipeline from Fox Creek to Namao and (ii) the Lator to Fox Creek expansion (phase V expansion), which is a new 95 km, 20 in. pipeline from Lator to Fox Creek.

The phase IV expansion is expected to increase capacity between Fox Creek and Namao by approximately 180 000 bpd. The estimated capital costs of the two pump stations is approximately CAN$75 million. Subject to regulatory and environmental approvals, Pembina expects to place this expansion into service in late 2018. The company also has the ability to further expand capacity between Fox Creek and Namao by adding additional pump stations.

The phase V expansion is aimed at addressing the current capacity constraints between Lator and Fox Creek and supporting future growth in the prolific Montney and Deep Basin resource plays. This CAN$250 million project is expected to provide approximately 260 000 bpd of additional capacity in this corridor and access to Pembina's downstream capacity at Fox Creek. The company has received regulatory and environmental approvals for the phase V expansion and clearing of the right-of-way is approximately 50% complete. The pipeline is expected to be brought into service in late 2018.

Updated 2018 outlook

In late 2015, Pembina’s secured capital programme was comprised of CAN$5.3 billion of new assets, which were scheduled to come into service between 2016 and 2017. Based on this capital programme, the company provided EBITDA guidance indicating that, once in-service, these projects could generate an incremental run rate annual EBITDA ranging from CAN$600 million - CAN$950 million in 2018.

At the time of these disclosures, the outlook for commodity prices remained uncertain, as did levels of activity in the Western Canadian Sedimentary Basin. Despite this uncertainty, Pembina also discussed its goal of achieving capital cost savings, which it estimated at the end of 2015 to be approximately CAN$225 million on the overall capital programme. With the majority of the remaining projects substantially complete and nearing on-time in-service by mid year, Pembina is revising its estimated capital cost savings and scope optimisations to approximately CAN$275 million.

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

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