Pembina Pipeline Corporation · TSX:PPL
Pembina Pipeline — Investor Day (December 2010)
72 slides from Pembina Pipeline's investor day presentation, Dec 7, 2010
Slide 1: Investor & Analyst Day
INVESTOR & ANALYST DAY December 7, 2010 – Toronto, Ontario PEMBINA PIPELINE CORPORATION (TSX: PPL)
Slide 2: Agenda
AGENDA 9:00 am Welcome & Introductions 9:05 am Performance Today & Vision 2013 Bob Michaleski, President & CEO 9:15 am Vision to Reality: Growth Strategy Mick Dilger, COO 9:30 am Business Plans: Gas Services Stu Taylor, VP Gas Services Conventional Pipelines 10:00 am Break 10:15 am Business Plans: M
Slide 3: Forward-Looking Statements & Information
FORWARD-LOOKING STATEMENTS & INFORMATION The information in this presentation contains certain forward-looking statements and information within the meaning of applicable securities laws. Such forward-looking information and statements relate to business strategy and plans, financial performance, th
Slide 4: Performance Today & Vision 2013
Investor & Analyst Day 2010 PERFORMANCE TODAY & VISION 2013 Bob Michaleski, President & Chief Executive Officer
Slide 5: Pembina "Stand"
PEMBINA "STAND" Customer focused INVESTMENT OF CHOICE: Staged, carefully managed provide highly competitive growth & reliable returns to investors through monthly Operational excellence dividends while also enhancing the long-term Community-minded value of Pembina's shares. A great place to work 5
Slide 6: Pembina's Assets
PEMBINA'S ASSETS GAS SERVICES natural gas gathering & processing with 360 mmcf/d gross capacity (305 mmcf/d net) & associated gathering systems CONVENTIONAL PIPELINES 7,500 km network transports about 50% of Alberta's conventional crude oil & about 20% of Western Canada's NGL MIDSTREAM & MARKETING l
Slide 7: Competitive Position
COMPETITIVE POSITION Conventional Pipelines Fort McMurray Oil Sands & Heavy Oil Pipelines by Others Taylor Truck Terminal Hub Development Cutbank Complex Fort Prince George Saskatchewan Edmonton Calgary Kamloops 7
Slide 8: Corporate Profile
CORPORATE PROFILE Common Shares Outstanding 165.1 MM Common Share Trading Price $21.00 Effective Dividend Yield 7.4% 52-Week Trading Range $16.36 - $22.35 Annual Dividend (per common share) $1.56 2010 Average Daily Trading Volume 470,000 Total Enterprise Value $4.5 billion DBRS Corporate Credit Rati
Slide 9: Why Invest?
WHY INVEST? Strong track record, promising growth prospects, competitive yield, leading management team, financial flexibility 8% Value creation (key growth metrics 2006 to 2010F): CAGR cash flow per share Net revenue: 55% 2006-2010F Net operating income: 60% Net earnings: 85% Net earnings per share
Slide 10: Dividends
DIVIDENDS ($ millions/year) ($/unit or share) 280 1.60 240 1.40 1.20 200 1.00 160 0.80 120 0.60 80 0.40 40 0.20 0 0.00 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F Distributed cash per year Distributed cash per trust unit or share ~$1.5 billion in dividends since inception 10 Di
Slide 11: Total Return
TOTAL RETURN 900 800 Relative Performance (100 = Jan. 1, 1999) 700 600 500 400 300 200 100 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Pembina S&P/TSX Index 11 Source: Scotia Capital and Bloomberg. Distributions /dividends are reinvested in their respective securities. Pembina comm
Slide 12: Net Operating Income
NET OPERATING INCOME ($ millions) 360 320 280 240 200 160 120 80 40 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F Conventional Oil Sands & Heavy Oil Midstream & Marketing Gas Services 12 NOI is a non-GAAP measure, see note 1 in Appendix. The 2010 forecast for NOI reflects current assumptions
Slide 13: Vision 2013: Net Operating Income - Unrisked
VISION 2013: NET OPERATING INCOME - UNRISKED ~$1.75 billion in potential capital projects through 2013 (millions) NOI: Growth Potential $700 Midstream & Marketing $600 Conventional Pipelines Gas Services $500 Oil Sands & Heavy Oil $400 Existing Operations - Consolidated $300 $200 CAGR 2006 – 2009 16
Slide 14: Vision to Reality: Our Growth Strategy
Investor & Analyst Day 2010 VISION TO REALITY: OUR GROWTH STRATEGY Mick Dilger, Chief Operating Officer
Slide 15: WCSB Oil Production Forecast
WCSB OIL PRODUCTION FORECAST (mbpd) 4,500 In-Situ 4,000 Mining Conventional - Heavy 3,500 Conventional - Light/Medium 3,000 2,500 2,000 1,500 1,000 500 0 2005 2010 2015 2020 2025 15 Source: CAPP - June 2010 Forecast (Western Canadian Sedimentary Basin) - Growth Case
Slide 16: Strategy
STRATEGY Generate value by providing customers with competitive cost-effective, reliable services Diversify our asset base to enhance profitability. A diverse portfolio enables us to respond to market conditions, reduce risk & increase opportunities to leverage existing business. A priority is place
Slide 17: Growth: Value Chain Focus
GROWTH: VALUE CHAIN FOCUS New Services Traditional New Services Gas/NGL Production Feeder Collection, Field Fractionation Main-Line Pipelines Storage, Extraction Transmission Consumption Handling & Marketing & Distribution Processing Conventional Production Collection, Collection, Feeder Refining St
Slide 18: Growth Strategy
GROWTH STRATEGY MANAGE risk & return Operational excellence: maintain integrity and reliability of assets; decrease incidents, injuries and spills; be a low cost operator Anticipate and proactively address risk and opportunities ENHANCE competitive strengths Growth focus: Develop and maximize value
Slide 19: Organized for Success
ORGANIZED FOR SUCCESS President & CEO Sharp management focus on operational excellence & strategic Corporate Services growth Each business unit Chief Operating Officer fully capable with staff & resources to grow Major Technical concurrently Projects Services Gas Oil Sands & Midstream & Conventional
Slide 20: Opportunities
OPPORTUNITIES BUSINESSES ENVIRONMENT & TREND OPPORTUNITIES IMPACTED Nipisi & Mitsue expansion Greater heavy oil & diluent demand Oil Sands New oil sands pipelines, expansions • Growing production Midstream & connections Conventional System exploitation & expansion Horizontal multi-frac technology Ga
Slide 21: Gas Services
Investor & Analyst Day 2010 GAS SERVICES Stu Taylor, Vice President, Gas Services
Slide 22: Gas Services: Current Assets
GAS SERVICES: CURRENT ASSETS Acquired Cutbank Complex in 2009 NOI has increased approximately Ownership in three sweet gas 33% since acquisition of assets to processing plants with 360 (mmcf/d) $44mm/yr of processing capacity (305 mmcf/d Construction of 200 mmcf/d deep net to Pembina) cut facility a
Slide 23: The New Natural Gas Reality
THE NEW NATURAL GAS REALITY The North American gas outlook has undergone a structural change with abundant gas supply close to the Gas infrastructure major markets requirements have Gas prices will be constrained through the mid-term changed… Producers will be capital constrained Pembina ideally Pro
Slide 24: Growth Potential: Gas Services
GROWTH POTENTIAL: GAS SERVICES NGL rich gas focus Alberta Alberta DeepDeepBasin Basin Fort St. John Material liquid content Kaybob (generating integration value for West Central Pembina) Central AB BC Deep Basin Highest supply potential Peace River Low supply cost CBM Northeast BC Relative value of
Slide 25: Focus: Alberta Deep Basin
FOCUS: ALBERTA DEEP BASIN Pembina's existing NGL infrastructure is well positioned around one of the most attractive NGL rich gas areas TAYLOR FORT MCMURRAY Focus on NGL & gas opportunities within Alberta Deep Basin fairway Integration opportunities between gas services and conventional systems PRIN
Slide 26: Gas Services: Strategy
GAS SERVICES: STRATEGY MANAGE risk & return Underpin investments with appropriate commercial arrangements (fee for service) ENHANCE competitive strengths Competitive & flexible fee structure Customer relationships & service Willingness to add capacity Operational excellence & efficiency (99%+ online
Slide 27: Growth Opportunities: Unrisked
GROWTH OPPORTUNITIES: UNRISKED CURRENT FUTURE POTENTIAL Enhanced liquids extraction Incremental14,400 bpd ethane Shallow cut gathering & extraction processing: expand current construction underway; in service assets mid-2011 Establish long-term contracts to Shallow cut gathering & exploit existing c
Slide 28: Gas Services: Vision 2013 - Unrisked
GAS SERVICES: VISION 2013 - UNRISKED ~$650 million in potential capital projects through 2013 (millions) $250 NOI: Growth Potential Growth Opportunities New Projects $200 Existing Operations $150 CAGR 2006 – 2009 n/a $100 2009* – 2013F 34% *Annualized $50 $0 The information depicted is based on Pemb
Slide 29: Conventional Pipelines
Investor & Analyst Day 2010 CONVENTIONAL PIPELINES Stu Taylor, Vice President, Gas Services
Slide 30: Conventional Pipelines: Current Assets
CONVENTIONAL PIPELINES: CURRENT ASSETS Crude oil & NGL pipelines extend across Alberta & British Columbia TAYLOR FORT MCMURRAY 7,500 km network transports approximately half of Alberta's conventional crude oil production & about 20% of NGL produced in Fort Western Canada PRINCE GEORGE Saskatchewan C
Slide 31: Conventional Pipelines: Strategy
CONVENTIONAL PIPELINES: STRATEGY MANAGE risk & return Pembina transports approximately… Pipeline & service expansion 50% of Alberta's conventional crude Operating cost discipline production Asset rationalization 20% of Western Canada's NGL Power hedging ENHANCE competitive strengths Safe, reliable o
Slide 32: Growth Opportunities: Unrisked
GROWTH OPPORTUNITIES: UNRISKED CURRENT FUTURE POTENTIAL Plan to invest $40 million over next 18 months to make Pembina service Cardium: build volume by 30,000 provider of choice in the Cardium bpd through 2013 Willesden Green pipeline NGL: build volume by 50,000 bpd expansion to add 25,000 bpd of th
Slide 33: Conventional – Throughput & NOI
CONVENTIONAL – THROUGHPUT & NOI Throughput NOI (mbpd) ($ millions) 500 200 400 160 300 120 200 80 100 40 0 0 2005 2006 2007 2008 2009 2010F Conventional Throughput Conventional Net Operating Income 33 See "Forward-Looking Statements & Information" on slide 3. NOI is a non-GAAP measure, see note 1 in
Slide 34: Strategic Asset Rationalization
STRATEGIC ASSET RATIONALIZATION 10,000 Maintaining NOI despite asset rationalization Conventional Throughput: 2009 – 2010F Change 5,000 0 (bpd) bpd) -5,000 -10,000 -15,000 Cremona Bonnie Glen Miscible Flood Drayton Valley Peace (sold) (retrofit) (redeployed to Nipisi & Mitsue) 34 See "Forward-Lookin
Slide 35: Competitive Advantages
COMPETITIVE ADVANTAGES Capture prolific geology Well maintained, fully functional & strategically-located assets: Existing crude oil & NGL pipeline capacity Cost effectively get new production to market Integration opportunities: Terminals, storage, hubs (Midstream) Gas processing (Gas Services) Exp
Slide 36: Pembina's Cardium Exposure
PEMBINA'S CARDIUM EXPOSURE ALBERTA 36 Map for illustrative purposes
Slide 37: Conventional Pipelines: Vision 2013 - Unrisked
CONVENTIONAL PIPELINES: VISION 2013 - UNRISKED ~$300 million in potential capital projects through 2013 (millions) NOI: Growth Potential $250 New Projects Growth Opportunities $200 Existing Operations $150 $100 CAGR 2006 – 2009 4% $50 2009 – 2013F 8% $0 The information depicted is based on Pembina’s
Slide 38: Midstream & Marketing
Investor & Analyst Day 2010 MIDSTREAM & MARKETING Bob Jones, Vice President, Midstream & Marketing
Slide 39: Midstream Value Proposition
MIDSTREAM VALUE PROPOSITION Improve Pembina's competitiveness Value perspective relative to its peers Create optionality Provide portfolio diversification and a means to benefit from changing Customer focused market conditions solutions Focus on value in addition to volume Monetize the optionality i
Slide 40: Midstream & Marketing: Current Assets
MIDSTREAM & MARKETING: CURRENT ASSETS Model is to develop and provide terminal, hub & storage services TAYLOR Approximately $130 million of FORT MCMURRAY capital invested in the business since 2005 Three pipelines & associated linefill PRINCE Ten dry truck terminals & one full GEORGE Cutbank Fort Sa
Slide 41: Midstream & Marketing: Strategy
MIDSTREAM & MARKETING: STRATEGY MANAGE risk & return Broaden revenue mix Operate in a volatile commodity market Build on position Develop value-adding services Business leverage Expand fee-for-service component ENHANCE competitive strengths Customer focused Develop assets that increase number & vari
Slide 42: Essential Component of Value Chain
ESSENTIAL COMPONENT OF VALUE CHAIN Diversification overlaying existing asset base with an attractive growth profile (CAGR 9% 2006-2010F) Expanding demand for terminalling, storage, delivery & marketing services which is evolving with the downstream market Stability: provides a stable range of revenu
Slide 43: Growth Opportunities: Current & Potential
GROWTH OPPORTUNITIES: CURRENT & POTENTIAL CURRENT FUTURE POTENTIAL Peace single shipper conversion Five new full service terminals Three new dry truck terminals Terminal and hub development Terminalling opportunities (diluent) Monetization of Nipisi/ Mitsue Pipeline Request for solutions for oil san
Slide 44: Midstream & Marketing: Vision 2013 - Unrisked
MIDSTREAM & MARKETING: VISION 2013 - UNRISKED ~$225 million in potential capital projects through 2013 (millions) $250 NOI: Growth Potential Growth Opportunities $200 CAGR Existing Operations 2006 – 2009 21% 2009 – 2013F 6% $150 Midstream: Assuming sustained 2008 market conditions. For illustrative
Slide 45: Oil Sands & Heavy Oil
Investor & Analyst Day 2010 OIL SANDS & HEAVY OIL Mick Dilger, Chief Operating Officer
Slide 46: Oil Sands & Heavy Oil: Current Assets
OIL SANDS & HEAVY OIL: CURRENT ASSETS Owner & operator of the CNRL Horizon Syncrude, Horizon & Cheecham Syncrude pipelines Syncrude Terminal Over 1,000 km of pipelines 775,000 bpd of fully contracted FORT McMURRAY synthetic crude oil transportation Peace River/Seal Algar Station Cheecham Terminal ca
Slide 47: Oil Sands & Heavy Oil: Strategy
OIL SANDS & HEAVY OIL: STRATEGY MANAGE risk & return Long-term contracts provide a secure stream of stable cash flow, regardless of throughput Contracts have 10 to 20+ remaining years, Highly certain returns with renewal & expansion provisions Full recovery of operating expenses & ENHANCE competitiv
Slide 48: Nipisi & Mitsue Pipelines - Route
NIPISI & MITSUE PIPELINES - ROUTE FORT MCMURRAY EDMONTON CALGARY Spread "C" (Both Pipelines) Spread "B" (Nipisi Pipeline) 48 Spread "A" (Mitsue Pipeline) Existing Pembina Pipelines
Slide 49: Nipisi & Mitsue Construction Update
NIPISI & MITSUE CONSTRUCTION UPDATE Construction on Mitsue Pipeline from Whitecourt to Judy Creek COMPLETE Clearing of pump station sites Pipeline right-of-way clearing begins at selected dry locations Pipeline right-of-way clearing continues on freeze up Q4 2010 Civil and mechanical work at pump st
Slide 50: Building on a Foundation of Success
BUILDING ON A FOUNDATION OF SUCCESS Experienced builder: significant new construction over past five years Horizon contract awarded in 2006: $45 million NOI, $400 million capital Nipisi/Mitsue contract awarded in 2008: $45 million NOI, $440 million capital Nipisi/Mitsue expansion currently being pur
Slide 51: Growth Opportunities: Current & Potential
GROWTH OPPORTUNITIES: CURRENT & POTENTIAL CURRENT FUTURE POTENTIAL Nipisi & Mitsue Pipelines in service Nipisi expansion: mid-2011 Tranche 1 – 150,000 bpd On budget, on schedule; majority of Full – 175,000 bpd costs locked in Mitsue expansion: $45 million NOI, once fully operational Tranche 1– 30,00
Slide 52: Oil Sands & Heavy Oil: Vision 2013 - Unrisked
OIL SANDS & HEAVY OIL: VISION 2013 - UNRISKED ~$550 ~$290 million million in potential in potential capital capital projects projects through by 2013 2013 (millions) $180 NOI: Growth Potential New Projects Growth Opportunities $160 $140 Existing Operations $120 CAGR 2006 – 2009 30% $100 2009 – 2013F
Slide 53: Financial Plan
Investor & Analyst Day 2010 FINANCIAL PLAN Peter Robertson, Vice President & Chief Financial Officer
Slide 54: Liquidity & Access to Capital
LIQUIDITY & ACCESS TO CAPITAL Finance near-term growth Recent offering of $300 million 10 year 5.75% convertible debentures Access capital at attractive rates $800 million raised in 2009 during difficult credit conditions Cash & unutilized debt facilities ~$600 million Well positioned Option to rein
Slide 55: Prudent Financial Management
PRUDENT FINANCIAL MANAGEMENT Mitigate risk: Minimum 65% of debt at fixed rate Fixed rate debt 100% of Alberta power Electricity requirements hedged for hedging 2011 Strategic For Nipisi & Mitsue: 80% procurement of procurement locked in Insurance prior to construction beginning – cost certainty 55
Slide 56: Long-Term Debt Maturity & Structure
LONG-TERM DEBT MATURITY & STRUCTURE 9% LONG-TERM DEBT MATURITY SCHEDULE year $ millions 2014 175 91% 2017 58 Fixed Rate (average 2019 267 rate of 5.66%) 2021 400 Variable Rate (average rate of 3%) 56 All data as of September 30, 2010.
Slide 57: Capital Discipline
CAPITAL DISCIPLINE ($ millions) 500 NEAR TERM 400 RETURNS: 300 90% of 2011 capital investment expected 200 to generate cash flows by mid year 100 0 2011 capital program 2010F 2011F fully funded Conventional Pipelines Oil Sands & Heavy Oil Nipisi & Mitsue Pipelines Midstream & Marketing Gas Services
Slide 58: Potential Sources & Uses 2011-2013
POTENTIAL SOURCES & USES 2011-2013 ($ millions) ~ $2.6 billion (2011-2013) 3,000 Sufficient Other External liquidity & 2,000 Financing access to DRIP 1 Capital Available Expenditures capital to 1,000 Credit prudently Cash Flow Dividends finance growth 0 Potentional Sources Potential Uses 58 1 Assume
Slide 59: Total Enterprise Value
TOTAL ENTERPRISE VALUE ($ billions) Debt Equity 4.8 4.2 3.6 3.0 2.4 1.8 1.2 0.6 0.0 2005 2006 2007 2008 2009 Q3 2010 Total Debt to Total EV 27.3% 23.7% 26.2% 32.1% 30.1% 24.9% Senior Debt to EBITDA 2.7 3.0 3.5 3.3 3.5 3.5 59 Debt includes convertible debentures. Total EV (enterprise value) and EBITD
Slide 60: Taxation
TAXATION Pembina expects to utilize tax pools to offset corporate tax obligations until 2014/2015. After that time, cash taxes are expected to represent approximately 15% of cash flow ESTIMATED CCA POOLS & NON-CAPITAL LOSSES 2010 CCA Pools Non-Capital Losses $1.5 billion $300 million Average annual
Slide 61: IFRS Impact
IFRS IMPACT January 1, 2010 Transitional Balance Sheet Impact: Joint venture investments may adopt the equity method of accounting vs. proportionate consolidation Decommissioning provisions (ARO) is re-measured using a long term risk free rate vs. a credit adjusted rate Share based payments will be
Slide 62: Competitive Advantage: People, Stakeholder Relations & Integrity
Investor & Analyst Day 2010 COMPETITIVE ADVANTAGE: PEOPLE, STAKEHOLDER RELATIONS & INTEGRITY Bob Michaleski, President & Chief Executive Officer
Slide 63: Competitive Advantage: People
COMPETITIVE ADVANTAGE: PEOPLE EXPERIENCE MATTERS: 420 full time employees: average service 11 years Fully staffed & capable business units able to grow concurrently Field: longer term service; very experienced Calgary: entrepreneurial capability & business development; high-quality employees SOCIAL
Slide 64: Pipeline Integrity
PIPELINE INTEGRITY ($ thousands) 30000 25000 20000 15000 10000 5000 0 2005 2006 2007 2008 2009 2010F 2011F Cathotic Protection Geotechnical Repairs ILI Inspection 64
Slide 65: Creating Value
Investor & Analyst Day 2010 CREATING VALUE Bob Michaleski, President & Chief Executive Officer
Slide 66: Summary
SUMMARY Past performance: proven INVESTMENT OF CHOICE: track record provide highly competitive Operational excellence: & reliable returns to sustainable cash flow & investors through monthly dividend dividends while also enhancing the long-term Attractive suite of current & value of Pembina's shares
Slide 67: 2013: Balanced Portfolio
2013: BALANCED PORTFOLIO Conventional Pipelines Oil Sands & Heavy Oil Midstream & Marketing Gas Services 2010F NOI Business Unit 2013 Projected NOI by Business Unit Assets supported by long-term contracts or regulated returns represent ~45% of 2010F EBITDA; expected to rise to ~50% with Nipisi/Mitsu
Slide 68: Vision 2013: Net Operating Income - Unrisked
VISION 2013: NET OPERATING INCOME - UNRISKED ~$1.75 billion in potential capital projects through 2013 (millions) NOI: Growth Potential $700 Midstream & Marketing $600 Conventional Pipelines Gas Services $500 Oil Sands & Heavy Oil $400 Existing Operations - Consolidated $300 $200 CAGR 2006 – 2009 16
Slide 69: Total Return
TOTAL RETURN 900 800 Relative Performance (100 = Jan. 1, 1999) 700 600 500 400 300 200 100 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Pembina S&P/TSX Index 69 Source: Scotia Capital and Bloomberg. Distributions /dividends are reinvested in their respective securities. Pembina comm
Slide 70: Q&A
PEMBINAN Q&A www.pembina.com
Slide 71: The End of the Line
THE END OF THE LINE Bob Michaleski, President & Chief Executive Officer Peter Robertson, Vice President & Chief Financial Officer Glenys Hermanutz, Vice President, Corporate Affairs Mick Dilger, Vice President & Chief Operating Officer Stuart Taylor, Vice President, Gas Services Bob Jones, Vice Pres
Slide 72: Appendix
APPENDIX 1. This presentation uses the terms "total enterprise value" (market capitalization plus long-term debt), "distributed cash" (the amount of cash that has been, or is to be, available for distribution to investors), EBITDA (earnings before interest, taxes, depreciation and amortization) and