Pembina Pipeline Corp. Q2 FY2024 earnings call

• Record adjusted EBITDA of $1.091 billion, record adjusted cash flow from operating activities of $837 million, and record adjusted cash flow per share of $1.44. - Acquired remaining 14.6% interest in Aux Sable U.S. operations from Williams. - Positive final investment decision on the Cedar LNG project. - PGI's transaction with Whitecap Resources, including acquisition of 50% interest in Whitecap's Kaybob Complex and infrastructure development. - Brought Phase VIII Peace Pipeline Expansion into service. - Revised 2024 capital investment program to $1.3 billion, reflecting net increase from original budget.

Pembina reported record second quarter adjusted EBITDA of $1.091 billion. In Pipelines, factors included higher adjusted EBITDA from Alliance due to stronger asset performance and increased ownership, contractual inflation adjustments, etc. Pipelines volumes were 2.7 million barrels per day, an 11% increase year-over-year. In Facilities, adjusted EBITDA was impacted by Aux Sable acquisition, and volumes were approximately 0.9 million barrels per day, a 14% increase year-over-year. Marketing and New Ventures results reflected net impact of Aux Sable ownership, NGL margins, etc. Corporate earnings were $479 million, a 32% increase year-over-year, impacted by various factors.

• Raised 2024 adjusted EBITDA guidance range to $4.2 billion to $4.35 billion, midpoint up $100 million from previous range. - Revised 2024 capital investment program to $1.3 billion, a net increase of approximately $140 million from original budget. - Revised program includes $300 million for contributions to equity accounted investees, with $240 million to Cedar LNG in first half of 2024.

• Market uncertainties affecting financial results. - Wildfires and weather events impacting operations. - Labor market tightness potentially affecting project costs. - Uncertainties in commodity price movements affecting marketing business.

Q: Just want to dial in on the acquisitions a little bit more, specifically Aux Sable alliance and outperformance.

A: Strength driven by Aux Sable's low gas price and high NGL prices; full ownership will allow capturing longer term synergies.

Q: On the expectations for 6% and 4% conventional and gas processing volume growth in 2024 and near term.

A: Volume growth due to timing of development, latent capacity in Alberta with Phase VIII in service, and need for incremental pipelines west of Gordondale.

Q: On Cedar LNG, update on reassigning capacity and interest from customers.

A: Ramping up marketing efforts, seeing high interest from potential off takers, target to complete conversations in 2024.

Q: On Vantage pipeline utilization, expansion, and cost to satisfy Dow ethane contract.

A: Vantage has wide space, diversified approach to fulfilling Dow contract, evaluating best use of capital.

Q: On Alliance and Aux Sable consolidation, accounting noise, and effective tax rate.

A: Accounting standards require marking existing interest to market, offsetting deferred tax recovery, and positive effect on effective tax rate.

Q: On RFS IV cost pressures, scope changes, and impact on returns.

A: Project increase in three buckets: scope changes, inflation, and shift to lump sum; returns still in line with expectations.

Q: On frac discussion, incremental contracts, whitespace at RFS, and ethane opportunities.

A: Limited whitespace, focused on RFS IV execution, combination of volume and downstream fees in contracts.

Q: On M&A opportunities in Western Canada, Whitecap JV structure, and PE firms.

A: Hard to predict large M&A pipeline, not seeing PE firm-driven activity currently.

Q: On guidance asymmetry, parallels between RFS and Cedar costs, and Whitecap deal upside.

A: Guidance accounts for uncertainty in back end of year, no parallels between RFS and Cedar costs, downstream pieces contribute to upside in Whitecap deal.