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spk15: first quarter 2024 results conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Friday, May 10th of 2024. I would now like to turn the conference over to Dan Tuchino, Vice President of Capital Markets. Please go ahead.
spk10: Thank you, Alan. Good morning, everyone. Welcome to Pemina's conference call and webcast to review highlights for the first quarter of 2024. On the call today, we have Scott Burrows, President and Chief Executive Officer, and Cameron Goldaid, Senior Vice President and Chief Financial Officer, along with other members of Pemina's leadership team, including Jared Sprout, Janet LaDuca, Stu Taylor, and Chris Sherman. I would like to remind you that some of the comments made today may be forward-looking in nature and are based on Pemina's current expectations, estimates, judgments, and projections. Forward-looking statements we may express or imply today are subject to risks and uncertainties, which could cause actual results to differ materially from expectations. further some of the information provided refers to non-gap measures to learn more about these forward-looking statements and non-gap measures please see the company's management's discussion and analysis dated may 9 2024 for the period ended march 31st 2024 as well as the press release pam and i issued yesterday which are all available online at pamina.com and on both cedar and edgar i will now turn things over to scott to make some opening remarks thanks dan
spk11: A strong first quarter was highlighted by record adjusted EBITDA of $1.044 billion, which provided a great start to 2024 and built upon our great momentum from the second half of 2023. In addition, recent industry developments and company successes have further bolstered our enthusiasm for the future of Pemina. On April 1st, 2024, we announced the completion of the Alliance and OxAble acquisition. We are excited to further enhance our business by increasing our ownership in these unique and world-class assets. The Alliance and OxAble acquisition aligns with Pemina's strategy for growing and strengthening our existing franchise and providing greater exposure to resilient end-use markets and lighter hydrocarbons. We executed this transaction with discipline and accretively to our financial guardrails. In conjunction with the acquisition closing, Pemina updated its 2024 adjusted EBITDA guidance range to $4.05 billion to $4.3 billion, which at the midpoint represents a $300 million increase over the previous range. The revised outlook for 2024 primarily reflects the incremental contribution from increased ownership of Alliance and Oxable as well as stronger outlook in the marketing business due to wider frac spreads. As previously announced during the first quarter, Pemina entered into a long-term agreement with Dow Chemical to supply and transport up to 50,000 barrels per day of ethane to support the recently announced construction of a new integrated ethylene cracker and derivatives facility in Fort Saskatchewan. DOW's Path to Zero project is an important development for the industry, representing a significant increase in the current ethane demand in Alberta. Given Pemina's existing leading ethane supply and transportation business and extensive integrated value chain, there are multiple opportunities for the company to benefit from this new development through both existing asset base and new investment opportunities. Finally, Pemina recently announced significant achievements in the development of the proposed Cedar LNG project. including securing long-term commercial agreements and issuing a notice to proceed to its engineering, procurement, and construction contractors. Following these critical milestones, Cedar LNG and Pemina's partner, the Heisler Nation, have commenced their respective financing processes in advance of the final investment decision, which is expected by June 2024. On the major project front, the Phase 8 Peace Pipeline expansion has entered the commissioning stage and startup is expected this month. As well, the RFS4 expansion at the Redwater Complex in the Northeast BC midpoint pump station expansion are proceeding as planned and during the first quarter, Pemina gas infrastructure approved an expansion at the Wapiti gas plant that will increase natural gas processing capacity by 115 million cubic feet per day. Additionally, Pemina continues to evaluate further expansions to support volume growth in Northeast BC including new pipelines and terminal upgrades on the Northeast BC pipeline and downstream systems between Taylor, British Columbia, and Gordondale, Alberta. On April 23rd, 2024, Pemina filed its project application with the Canadian Energy Regulator. And finally, we are pleased to have raised our quarterly common share dividend by 2.25 cents per share, or 3.4%, beginning with the dividend to be paid in June. The increase reflects the continued growth of Pemina's fee-based business which is benefiting from rising volumes and increasing utilization across many of its assets. We recognize the importance of our sustainable, reliable, and growing dividend to our shareholders, and we are proud of our long track record in this regard. It has been a very strong start to 2020 forward, and we look forward to continuing the momentum. I will now turn things over to Cam to discuss in more detail the financial highlights for the first quarter.
spk03: Thanks, Scott. As Scott noted, Pema recorded record first quarter adjusted EBITDA of $1.044 billion. This represents a 10% increase over the same period in the prior year. In pipelines, factors impacting the first quarter primarily included higher revenues and volumes on the Peace Pipeline System, the Northern Pipeline System outage in the first quarter of 2023, which had an impact of $40 million with no similar impacts for the first quarter of 2024, the reactivation of the Nipissi Pipeline, and higher contribution from Alliance Pipeline related to higher tolls on seasonal contracts. In facilities, factors impacting the first quarter included higher volumes at the Redwater Complex and younger compared to the first quarter of 2023, as the prior period was impacted by $14 million due to the Northern Pipeline system outage and higher operating expenses. In marketing and new ventures, first quarter results reflected the net impact of higher contribution from Oxable due to wider frac spreads and the new third-party marketing arrangement. change in the provision related to financial assurances for Cedar LNG, and realized losses on NGL-based derivatives in the first quarter of 2024 compared to realized gains in the first quarter of 2023. Finally, the corporate segment was impacted by higher general administrative costs, net of lower long-term incentive costs. Earnings in the fourth quarter were $438 million. This represents a 19% increase over the same period in the prior year. In addition to the factors impacting adjusted EBITDA, Earnings in the first quarter were impacted by unrealized losses on renewable power purchase agreements and on crude oil-based derivatives compared to unrealized gains in the first quarter of 2023 and lower income tax expense. Pipeline volumes of 2.6 million barrels per day in the first quarter represent a 5% increase compared to the same period in the prior year. The increase was primarily due to higher volumes on the peace pipeline system resulting from earlier recognition of take or pay deferred revenue and the impact of the northern pipeline system outage in the first quarter of 2023 combined with the reactivation of the Nipissi pipeline. Facilities volumes of 0.8M barrels per day in the first quarter of 2024 represent a 12% increase compared to the same period in the prior year. The increase was primarily due to higher volumes at the Redwater complex and younger as the first quarter of 2023 was impacted by the northern pipeline system outage combined with higher interruptible volumes on certain PGI assets. Pemina continues to generate significant cash flow after dividends and maintain its strong balance sheet. At March 31st, 2024, based on the trailing 12 months, the ratio of proportionally consolidated debt to adjusted EBITDA was 3.4 times below the low end of its target range. I'll now turn things back to Scott.
spk11: Thanks, Cam. For a few years now, Pemina has been highlighting key developments within the Western Canadian energy industry that we believe will catalyze a wave of growth that will benefit Pemina, its customers, and all Canadians. These developments include LNG projects on Canada's West Coast, the growth of Alberta's petrochemical industry, and the Trans Mountain pipeline expansion. All of us at Pemina wish to join the rest of industry and many others across Canada in celebrating the first of these to reach the finish line, the recent completion and shipment of first oil on the Trans Mountain Pipeline expansion. This project brings much needed new egress capacity for oil producers, providing greater access to global markets and full value for Canada's energy resources, while helping to ensure responsibly produced energy is available to meet growing global demand. In closing, I want to remind you that Pemina will hold its annual meeting of common shareholders today at 2 p.m. Mountain Time, 4 p.m. Eastern. It will be a virtual only meeting conducted via live audio webcast. Participants are recommended to register for the virtual webcast at least 10 minutes before the presentation start time. Further, Pemina will hold our 2024 Investor Day in Toronto on May 16th, beginning at 8.30 Eastern Time. Our team is excited to provide an overview of the business and discuss in greater detail our strategy and the outlook for the company amidst truly transformational changes underway in the Western Canadian energy industry. A live webcast event will be available on Pemina's website, and participants are encouraged to register well in advance. For further information on both the annual meeting and Investor Day, please visit the investor tab at www.pemina.com. We would once again like to thank all our stakeholders for their support. Operator, please go ahead and open up the line for questions.
spk15: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press the R1 in your touchtone phone. You will hear a three-tone prompt acknowledging your request, and the questions will be pulled in the order they are received. If you would like to withdraw from the question queue, please press R2. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Jeremy Tony of JP Morgan. Your line is already open.
spk11: Hi, good morning. Morning, Jeremy.
spk13: Thanks for all the detail this morning. I just wanted to dive in a little bit more on the fundamentals as you see them before you. And just if you could walk through, I guess, you know, producer-customer conversations at this point and how you see kind of activity unfolding over the balance of this year, the cadence of growth and how you see that trajectory at this point?
spk11: Yeah, I'll start, Jeremy, and I'll invite any of my colleagues to jump in. I mean, I think what we're seeing is continued strong results across the board. I mean, just previewing some of the results this week and last week, we're seeing many of our producers come in above expectations, especially driven by strong condensate pricing, strong oil pricing. And again, in anticipation of some of these transformational events that we've been talking about for a while now. So the conversations with producers have been great. The results are showing through and we're seeing a lot of momentum in the business.
spk03: Jeremy, it's Cam here. Maybe I'll just add that I think one of the things that we think makes Pemina unique is obviously our exposure to all the commodities in the industry here in the hydrocarbon value chain. And I think as you've seen results come out that Scott referenced, some folks who have the optionality to allocate capital between drier gas and more liquids-rich gas are indeed shifting towards the liquids-rich gas. And obviously, you know, both of those work for Pemina given the exposure in our portfolio. So, you know, we see that as a real unique element for us and continue to see, you know, good runway in 2024.
spk13: Got it. Thanks for that. And a little bit more time having passed since the Dow announcement, just wondering if there's any incremental details or thoughts you could provide as far as the scope of the opportunity set and what it could mean for, particularly, you know, operating leverage versus brownfield versus greenfield opportunities.
spk11: Jeremy, I think we'll dive into that a little bit more next week at our investor day. So I'm not, we'll answer your question, but we'll do it next week.
spk13: Fair enough, fair enough. And I think I might get the same answer for this one, but I'll try nonetheless. With leverage having fallen below, I guess, your targeted range, does any
spk03: updated thoughts on capital allocation uh between growth capex bolt on you know dividend growth buybacks what have you yeah you know it's a fair comment jeremy and i think as we look out at 2024 uh and 2025 uh you know potentially even even the year after that 2026 you know if we if we look at where we are today uh you know with some of the capital uh the investment in cedar through to the middle of this year, you know, we're sort of, depending on where you choose your point in the range, we're relatively on point with sort of funding all that capital with cash flow after dividends. And if you sort of take forward that proxy and assume that, you know, we make a positive FID on Cedar later this year, you know, 2025, probably not that different. And so we continue to think that the most accretive and best use of that capital right now, obviously, are those opportunities which are in strategy and provide long-term annuities with strong counterparties and downside protection. That said, if something changes there, we'll do the same thing as we've always done and look at the opportunity set between repayment of debt Obviously, we are at the low end of the range right now. Incremental buybacks, if they make sense, you know, from a capital allocation perspective or, you know, other opportunities. Obviously, we continue to have a backlog beyond the things we're talking about and continue to advance those. So probably not much different what you heard from us in the past.
spk16: Got it. Makes sense. Thank you for that.
spk15: Your next question. It comes from Rob Hope of Scotiabank. Your line is already open.
spk05: Morning, everyone. I want to just ask on the Lions Knox table. So it's been in your hands for a little while now. Obviously an asset you know well, but how are you progressing on thinking about commercial synergies there? And what is the timeline that we could potentially look to?
spk06: Rob Jarrett here. So, yeah, April 2nd, we brought over 161 employees over to Pemina. So, you know, step one is obviously business continuity, just working with Enbridge through the transition service agreement. And everything is going extremely well. We're just over a month into that. Commercial opportunities, I think it's a little bit early there right now, but the short-term synergies that we had talked about when we announced the deal, those are going extremely well. And then the longer term, kind of that midterm to longer term synergies, expansions, different commercial opportunities just continuing to be worked on. Like you said, we know the asset well. We were the commercial operator of Alliance previously and just continuing to work that and hopefully provide more color in the near future.
spk03: And Rob, maybe I'll just jump in. It's Kim. You know, I think maybe to say it a different way, you know, so far nothing we've seen is deviating us from what we saw, you know, at the time of the announcement. We're tracking with the near-term synergies that were sort of immediately executable and continue to progress. The one that, you know, would obviously take a little bit more time, but we're not seeing anything at the moment that is necessarily derailing us from what we saw. Everything seems to be on track.
spk11: And I just pile on in terms of operations, you know, not a synergy, but certainly with what's going on with Chicago gas price being a little bit lower than historical. We've seen, you know, a short-term tailwind at Oxable just with where frack spreads are. So, you know, currently for 2024, Oxable was tracking above our acquisition model.
spk05: I appreciate that. And then actually maybe sticking with marketing, you know, a nice tailwind for the quarter. You know, how are the spreads looking moving forward? And then can you add a little bit of color on the new marketing arrangement that was highlighted in the MD&A as a driver of the performance?
spk04: Hey, Rob. Chris Sherman. You know, I think we definitely saw in Q1 as others referenced, really positive frac spreads. Gas in particular ended up being the tailwind there, as well as obviously some positive momentum on the crude side, which pulled up NGLs. We're still seeing some of that same tailwind, although a little bit muted here over the last couple weeks, as I think U.S. gas prices have come up a little bit, but in particular NGL prices are seeing a little bit of pressure with some with some bigger inventory numbers. That said, we remain fairly positive on frack spreads for the remainder of the year and optimistic on that.
spk03: And Rob, just on your second question, so the reference to the new marketing agreement is the same reference that we made at the time that we announced the acquisition of Alliance and Oxable. You know, this would obviously be the first quarter where it's been in place. We'll go into specific details on it as is sort of customary for us with commercial agreements, but what I would say is that this agreement is simpler than the former one and obviously does create some opportunities for us in certain environments and down the line. So a simplification and obviously some different participation at different pricing thresholds.
spk16: Thank you.
spk15: Your next question comes from Linda Azargalis of TD Collins. Your line is already open.
spk01: Thank you. I'll try to high-grade my high-level questions, knowing that you're going to be sharing a lot with us at Investor Day. So maybe more in the near term. We're hearing of low water levels in Western Canada. We're hearing it's dry. There's concerns about wildfire risk. You know, how are you preparing for that, maybe in your marketing business and your operations? What is embedded into your guidance already versus maybe an emerging headwind for that? And can you talk us through kind of what you're seeing on the ground and what your expectations are in terms of bookends of what the impact might be even on volumes on your systems as facilities might even be preemptively shut down in advance of certain wildfires in the areas you operate, et cetera.
spk06: Good morning, Linda. Jared here. With respect to the first question, water levels and it being dry, that is 100% accurate. The conversations we have with our customers to date is the majority of our customers have retain the water that's required in their pits and or their storage facilities. A lot of our customers have recycling operations, et cetera. So that's what we're hearing from them to date is that their ability to stimulate the wells go forward. They don't have a lot of concerns with that. Now, your second portion of the question was around wildfires. So we're actively, I would say we're in a significantly better place as an industry, but definitely as an organization here at Pemina, we monitor wildfire activity on a 24-7 basis. And then, you know, there's nothing active to date near our assets that would give us any concern. There was no anticipation right now to be preemptively shutting in assets. And just to note, last year, any assets that we did shut in, they were primarily due to our ability to get our employees safely out of harm's way. So the actual assets themselves were never in physical danger. It was the egress component is why we would have had to shut down last year. But I would say we're well prepared monitoring it. And hopefully we proceed through the summer. We just did get some pretty good rain here in the last few days, but definitely hoping for wetter weather.
spk01: Good. Thank you for that update. And maybe just a follow-on question. Again, in discussions with your customers, how are they evolving commercially in terms of full path solutions versus discrete services? And what is the tilt in terms of where the offerings that you are leading with in those discussions?
spk11: I would say no real change. Most of the discussions that we're continuing to have are integrated services, mainly pipe frack or gas plant pipe frack. I think the nice thing about having sanctioned RFS4 when we did was that we have that capacity coming online in 2026. you know, in what is a relatively tight frack market. So we think we're well positioned to continue our integrated value chain service offering.
spk16: Thank you.
spk15: Your next question comes from Robert Cotillier of CIBC Capital Markets. Your line is already open.
spk12: Hey, good morning. As you're aware, there were some media reports over the last couple of weeks about a potential offtake agreement and alluding to potential sale of an equity stake in Cedar LNG. I don't expect you to comment on any specific transaction, but can you maybe describe in more detail your appetite to sell an equity stake in Cedar LNG at all? It sounded like from Cam's comments on the funding plan that Pemina doesn't need any external equity or an equity partner for that project. Hey, Rob.
spk02: It's Stu Taylor. We're continuing to progress our commercial conversations with a number of parties just on our intention to assign our Pemina capacity to an off-taker. with respect to the equity, there's no plans at this point in time for any equity structure change on the CEDAR pipeline, on the CEDAR project, sorry. And at this point in time, all of those conversations would require approval from our partner as well. So there is no equity change at this point in time.
spk12: Okay. And just on the assigning that capacity to a third party, I'm just curious if you see any benefit in waiting until closer to the commercial operating date in an effort to maximize value once the project is de-risked.
spk02: We're looking at that, Rob. It's one of those things that we're looking at the timing. Nothing will take place until post-FID. We've been in conversations with a number of parties for a fair period of time. We continue to have ongoing conversations, and at the end of the day, we'll look at that timing. We think we have the opportunity to do the right deal for us, and so we'll evaluate that timing. And if the right deal comes in for us to execute, we will move on it. If it means taking a bit more time, we'll do that as well. But we're actively engaged in conversations with people and making good progress on that.
spk12: Okay, and finally, it sounds like this might have to wait till next week, but I'm curious if there's any update on how you plan the source and supply of that thing for the transportation agreement with Dow.
spk03: Yeah, I think that's right, Rob. I think we'll probably punt that till next week and sort of give everyone the benefit of rolling that out.
spk16: Okay, thank you.
spk15: Your next question comes from Ben Pham of BMO. Your line is already open.
spk08: Hi, thanks, Amari. You mentioned the NEBC project, you have Cedar LNG, and it sounds like there's something on FA and DAO as well in terms of CapEx. When you think about all those projects and maybe other projects ahead, where do you see your annual CapEx spending going? the next three or four or five years? And what point do you have to start to consider other sources of funding beyond the debt markets? Hey, Ben, it's Jim.
spk03: You know, I think, you know, picking up on my earlier comments, I would say that, you know, if we look forward right now and, you know, let's play out a couple scenarios. If we proceed and make a positive final investment decision on Cedar, you know, we're probably running right around cash flow after dividends in terms of capital levels for the next couple of years. And then, you know, the heavy piece of the Cedar spend starts to trail off then. If we think about longer term, I mean, obviously that's a little bit harder to gauge, but obviously, you know, we continue to advance a backlog. But what I would say is, you know, we're very conscious of, of not only the nature of the projects, but how they fit together as a program in terms of our strategy and also the funding piece. So it is certainly an important input to the capital allocation process. If we look at a scenario where we didn't, in fact, proceed with CEDAR, just to play that out for a moment, obviously, we would have substantially more free cash flow to work with. And obviously, per my earlier comments, we'd look at the same alternatives that we've discussed already. But ultimately, you know, we've got some pretty attractive opportunities in front of us. And I think, you know, provided those continue on the path they're on, you know, we'll be running probably pretty close to free cash flow at those levels for the next couple of years at least.
spk08: Okay, got it. And I apologize, I may have missed this on your facility segment, your reference operating expense segment. pressure, I think that's the verbiage. Could you unpack that a bit? And can you also comment, is there anything you're seeing on maybe some of your producers curtailing production because of low eco prices?
spk06: Ben, like we've said before, I'll take the second part of your question. The majority of our assets, if not all of our assets, are pretty much in the liquorage, which liquids rich window so we haven't seen any curtailment and if we have it's been it's been so immaterial that we haven't noticed it our customers have great condensate yields and great ngl yields which you know ultimately even in a low eco natural gas price we're still seeing strong volumes through pgi um etc um no we're not seeing anything and with respect to cost pressures not seeing anything like out of the ordinary um just a little bit more work in certain areas that that wasn't totally contemplated at the time, but no, just your normal, you know, supply chain and inflation pressures, but nothing out of the ordinary that is keeping us up. That's for sure.
spk03: And then just to tag onto that, I mean, the one thing that we saw and did, you know, Informed part of that variance this quarter was just, you'll remember the union agreement that was renegotiated in the Port of Vancouver last year. That's showing up in the variance quarter over quarter in Q1. It's just a few million dollars, but that's part of the variance.
spk16: Okay, thank you very much.
spk15: Your next question comes from Zach Van Averin of TPH and Company. Your line is already open.
spk17: Zach Van Averin Perfect. Good morning, guys. Just a question on the new pipeline you mentioned between Taylor and Gordondale. Would there be any additional infrastructure downstream needed to support that if you guys sanction that project? And then is there enough space on PEACE and the FRACS to accommodate the incremental liquids there?
spk06: Good morning. Yeah, so once we cross the border from Taylor to Gordondale, there's no incremental, no material incremental like pipelining work that's required from Gordondale into the Edmonton and or the Fort Saskatchewan market. We will require some pump stations on certain segments of the line, and that's primarily from Fox Creek into the market, Edmonton and Fort Saskatchewan. That has always been contemplated right way back from the time of the phase three expansion. to grow those volumes. So we're extremely well positioned to capture those volumes without having to deploy a whole bunch of mainline capital.
spk17: Gotcha. That makes sense. And then maybe one on LPG exports. It's been very topical here in the States and was just curious if you had any updates around Prince Rupert expanding and do you need any additional facilities there if that would be sanctioned?
spk04: It's Chris Sherman. You know, we continue to see obviously this ramp up in Western Canadian production, increased propane length in Western Canada as well. We see, you know, see the ramp up in the lower 48 and that dynamic really pushes you towards the West Coast. So we continue to continue to look at our options there. We think we've got some really, really effective optimization options at our Prince Rupert facility, and we're looking to get more exposure to that market. So we continue to look at it and remain interested.
spk17: Perfect. That's all I had. Thanks, guys.
spk15: Your next question comes from Cole Pereira of Stiefel. Your line is already open.
spk09: Hi. Good morning, all. So, acknowledging you just completed an acquisition and you have a number of other large projects and opportunities in front of you, with TMX now in service, there's obviously still some uncertainty on tools and other factors, but can you just refresh us on your thinking about how you see that asset fitting with your asset base and your strategy?
spk03: Hey, Cole, it's Cam here. Yeah, you know, what I would say is I think, obviously, We've been quite clear that global exports are a critical pillar in our strategy. Obviously, you can see just from the last question what a focus it is for us on the NGL side, obviously on LNG as well with CEDAR. That said, I think we've been pretty consistent for some time. There exists a great deal of uncertainty still on TMX. Obviously, one very important milestone Dariush Mozaffarian, As has passed with the pipeline coming into service, but I you know I understand that you know that the toll resolution process, you know is ongoing and is likely to take some time to see resolution. Dariush Mozaffarian, And, and you know, from our perspective, there still exists a tremendous amount of uncertainty around that asset, and so you know, frankly, nothing. Nothing has changed from our prior messaging in terms of that as an investment opportunity. It's not something we're spending a great deal of time on right now, but obviously global exports are always important in our strategy.
spk09: Okay, great. That's all for me. Thanks. I'll turn it back.
spk15: Your next question comes from Robert Kwan of RBC Capital Markets. Your line is already open.
spk07: Thank you. Good morning. You've got a bunch of large projects, as you noted, LNG Canada, TMX, and then your own kind of CEDAR. Just wondering, just as you're talking with customers, what's the nature of the discussions at this point with respect to new projects kind of following on those developments upstream infrastructure, do you see a lot of potential there?
spk11: You know, I think, you know, for us, A lot of that was captured over the last call at 12 to 24 months with some of our big Northeast BC arrangements that we entered into. You know, we're starting to see those projects come to fruition in the next 12 to 24 months, which should provide some incremental volume growth in 25 and into 26. I think a lot of people are continuing to, as Jared said, drill in the liquids-rich areas, especially in the condensate-rich areas. With the outlook for increased oil demand and, ergo, incremental condensate need, we're seeing a lot of activity in the condensate windows. We are starting to see it, Rob, show up, but not just short-term, but as people are sanctioning some of these projects into 2025 and 2026.
spk07: Okay, Scott, just so I'm clear, you talked about the next 12 to 24 months. Are you talking about projects that you've already announced or that you expect that we will see additional projects kind of sanctioned over that next 12 to 24 to drive the volumes?
spk11: I'm saying a lot of both. We're seeing some of the volumes that we locked up, call it, a year ago. We're going to start to see those volumes materialize on the system in the next 12 to 24 months. And then we're also seeing and talking to producers about some of their developments that they could potentially sanction over the next 12 to 24 months, which would then drive volume further on in the plan. And that's always been, you know, what's given us confidence from changing, you know, from talking about volume growth in that 5% range. You know, we almost talked about it annually because that's the line of sight we had. But now, you know, for the last 12 months, we've been saying that we have a view that that could continue on for a couple years here at least because we have much more visibility into that.
spk07: Got it. If you just look at the lower take or pay deferrals in the quarter, is that a function of a more bullish outlook or is that more so that you're just so deep into the fee-based components of the contracts that deferring is just overly conservative and unnecessary?
spk03: You know, Rob, what it really comes down to is us having a number of years under our belt now in terms of observing history, how producers trend throughout the year, their history in terms of accessing those makeup rights. And now we have a statistical body of information which we can look at to create a higher degree of certainty where we can be comfortable recognizing those volumes early in the year than we have previously.
spk07: Got it. And if I can just finish with a clarification. Just there's been a lot of talk around, especially CEDAR specifically, but just CapEx and where you would be, you know, pre-tax, low-positive, or neutral. When you're looking at CEDAR, are you specifically looking at that as the equity contribution, or are you looking at it as your proportional CapEx?
spk03: We're looking at it as our equity contribution.
spk16: Okay, that's great. Thank you.
spk15: Your next question comes from Patrick Kenny of National Bank. Your line is already open.
spk14: Thank you. Good morning, guys. I'm wondering if you had any thoughts on how the destination of TMX volumes plays out here, Asia versus California, and how this dynamic might create opportunities for your tankage footprint or perhaps blending operations? whether at North 40, you know, Baseline, Mayo, you name it. Just your general thoughts on opportunities across your system.
spk04: Hey, it's Chris. You know, I think it's very difficult at this point for us to opine on where those volumes are going to end up. So we'll probably stay away from that one. But undoubtedly, there's some positive flow back into our business from from that commerce going west. And I think it shows up to some in tanks as customers are trying to optimize flows east and west, as well as they're trying to manage quality. So we definitely see a bit of a tailwind there and are optimistic about what it means for the basin more broadly, but certainly for our tankage and our business.
spk06: And obviously, Pat, the number one significant impact to Pemina long term, and I'm going to talk about this a little bit more next week, is Increased egress, it'll raise the price of the heavier oils here in Western Canada. That should spur on incremental supply that will require condensate. Obviously, Pamina has a fairly large condensate business with respect to peace and quotient, so higher utilization and incremental expansions to get more condensate into the Edmonton market, which ultimately will head up into the new supply that's coming on. So that's really where Pemina significantly benefits.
spk14: Got it. Okay. No, that's great. Appreciate that. And then maybe just on your hydrogen ammonia opportunity at Redwater, if I recall, I believe the feed study was expected to be completed by now. So maybe just there's a status update there. And then curious, too, if you believe the sequestration economics for your customers can be improved. underwritten solely by the proposed ITCs, or if perhaps these economics are also contingent on mitigating the price of carbon through CFDs or otherwise?
spk02: Pat, it's Stu. I'll start. We continue, as you mentioned. We progressed our ammonia project. We're wrapping up the pre-pin work. Mayor Benny's been a great partner to work with. We've progressed that study. It's a large amount of work. We have to look at the partnership, the capital structure, the capital for that project, look at the markets, the market timing, the Canadian government timing as well on things. And so we're continuing to progress that study and looking at all the integration of all the pieces there. And we're going to go and have further conversation with our partner in the coming weeks and see where we go with this project. It still is early days and we're learning a lot as we go and we're anticipating further information coming out from Asian governments as well as Canadian governments in the near future that will shed some light on the feasibility of the project itself. With respect to carbon pricing, we've done a lot of work on our ACG project. We're pretty pleased where we're sitting. We've completed our appraisal well. There's still some works in downhole subsurface work that's going to be completed. We've got an infrastructure plan and a preliminary capital cost estimate for that. But there's no question on the carbon sequestration side, it comes down to, you know, we have a cost for this, you know, the sequestration or customers have a capture cost as well. And trying to find that balance and what can be afforded and, you know, what are the government policies on a go-forward basis from a pricing perspective and what's needed to support that project. And it's challenging at this point in time for I think many customers as, The costs are not getting cheaper for carbon sequestration capture in particular. And so we're working through that with, again, our partner, TC Energy, and our various customers that we're having conversations with.
spk14: Okay, that's great, Stu. Thanks. I appreciate your comments.
spk15: There are no further questions at this time. I would hand over the call to Scott Burrows, President and CEO, for closing comments. Please go ahead.
spk11: Thanks, everyone, and thanks for taking the time to listen to us today. Again, just a friendly reminder of our AGM this afternoon and our Investor Day next week, and we look forward to seeing many of you there. Have a great weekend.
spk15: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.
spk16: and you may now disconnect.
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