Pembina Pipeline Corp. Ordinary Shares (Canada)

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 9th, 2025. I would now like to turn the conference over to Dan Tucano, VP, Capital Markets. Please go ahead.

Thank you, Joelle. Good morning, everyone. Welcome to PEMINA's conference call and webcast to review highlights from the first quarter of 2025. On the call today, we have Scott Burrows, President and Chief Executive Officer, and Cameron Goldate, Senior Vice President and Chief Financial Officer, along with other members of PEMINA's officer team. 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-GAAP measures. To learn more about these forward-looking statements and non-GAAP measures, please see the company's management's discussion and analysis dated May 8, 2025, for the period ended March 31, 2025, as well as the press release Pemina issued yesterday which are all available online at Pemina.com and on both CDAR Plus and NetGar. I will now turn things over to Scott.

Thanks, Dan. Yesterday, we reported our first quarter results, which were highlighted by quarterly adjusted EBITDA of $1.167 billion. This is a very strong start to the year and builds on the momentum from a record year in 2024, providing confidence in our full year outlook. As Cam will discuss in more detail, we are currently trending towards the midpoint of our 2025 adjusted EBITDA guidance range, $4.2 to $4.5 billion. Given the growth across Pemina's low-risk, fee-based business and confidence in the outlook for 2025 and beyond, we were pleased to yesterday announce a $0.02 per share, or 3% increase, in the quarterly common share dividend, beginning with the dividend to be paid in June. 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. On the commercial front, Pemina has entered into commercial agreements with the leading Montney producer covering Pemina's full value chain, including transportation, fractionation, and marketing services. The agreements include significant new and extended long-term take-or-pay volume commitments on Pemina's Peace Pipeline, Cruz Capay systems, and Northeast BC Pipelines. The new and extended fractionation agreements are expected to support higher utilization of Pemina's redwater complex, including RFS 4, currently under construction, and the proposed RFS 3 deethanizer, if sanctioned. Additionally, the process to remarket Pemina's capacity on the Cedar LNG project to third parties continues to progress well. We have now shortlisted the preferred counterparties and entered definitive agreement negotiations. Kevin continues to advance several in-flight construction projects to capitalize on growing WCSB volumes, diversify and market exposure and serve our customers better. Pemina has built a strong competitive advantage by effectively delivering projects safely on time and on budget. Further, we believe that recent and current expansions have been and continue to be executed with superior capital efficiency compared to others in the industry. In addition, Pemina is progressing development of more than a $4 billion portfolio of potential projects that includes conventional pipeline expansions, such as the Taylor to Gordondale project, an expansion of the Peace Pipeline system to add capacity to the market delivery pipelines from Fox Creek to the Mayo, and further expansions to support volume growth in Northeast BC, including new pipelines and terminal upgrades. While reiterating their commitment to their Path to Zero project, Dow recently announced the delay in construction of the project to manage capital allocation in light of current market conditions and economic uncertainty. At this time, other than changing the in-service date of Dow's project, the announcement delay has no impact on Pemina's ethane supply agreement and the development of potential infrastructure to meet its commitments. To date, Pemina has not spent material capital to support the ethane supply agreement and will continue to progress these projects, but may now have more time available to execute them. Kevin is evaluating the various options available to meet its ethnic supply commitment under the agreement with Dow, including the addition of a deethanization tower at RFS3 within the Redwater complex. Regarding Alliance Pipeline and ongoing Canadian Energy Regulator review process, Alliance is working collaboratively with its stakeholders and remains focused on delivering the highest standards of service that customers have come to expect. Based on discussions to date, Pemina expects lower future tolls on the Canadian portion of Alliance, reflecting a negotiated solution that continues to benefit both Pemina and the Alliance shippers through an equitable sharing of value and risk. We expect Pemina will continue to earn appropriate risk-adjusted returns, while shippers will continue to benefit from Alliance's firm capacity, high reliability, and cost-effective access to premium US natural gas markets. I will now turn things over to Cam to discuss in more detail the financial highlights for the first quarter.

Thanks, Scott. As Scott noted, Pemina reported first quarter adjusted EBITDA of $1.167 billion. This represents a 12% increase over the same period in the prior year. In pipelines, factors impacting the quarter primarily included a higher contribution from Alliance due to increased ownership following the Alliance Oxable acquisition, favorable U.S. foreign exchange rate, higher tolls, mainly related to contractual inflation adjustments, higher contracted volumes on the Nipissi pipeline and the Peace pipeline system, higher contribution from Alliance due to higher demand on seasonal contracts, and lower firm tolls on the Cochin pipeline due to the re-contracting that occurred in July of 2024. In facilities, factors impacting the quarter included the inclusion of OxAble following the Alliance OxAble acquisition, and higher contribution from PGI primarily related to the Whitecap and Varin transactions largely offset by lower interruptible volumes at Dawson due to third-party sales gas restrictions. In marketing and new ventures, first quarter results reflected the net impact of higher net revenue from contracts with customers due to increased ownership interest in Oxable, higher WCSB NGL margins and volumes, lower realized gains on commodity-related derivatives, lower Oxable NGL margins, And no similar gain to that recognized in the first quarter of 2024 from a change in the provision related to Pemina's financial assurances for Cedar LNG. Finally, in the corporate segment, first quarter results were lower than the prior period due to higher incentive costs driven by the change in Pemina's share price and relative performance to peers in the period compared to the first quarter of 2024. Earnings in the first quarter were $502 million. This represents a 15% increase over the same period in the prior year. In addition to the factors impacting adjusted EBITDA, the increase in earnings in the first quarter was primarily due to the net impact of higher depreciation and amortization expense, largely due to the Alliance OxABLE acquisition, unrealized losses recognized by PGI on interest rate derivative financial instruments compared to gains in the first quarter of 2024, higher unrealized gains on commodity-based derivative financial instruments recognized by PGI, lower unrealized losses on renewable power purchase agreements and crude oil-based derivatives, unrealized gains on NGL-based derivatives, unrealized losses on interest rate derivative financial instruments recognized by Cedar LNG, higher income tax expense, higher net finance costs, and lower interest income. Total volumes in the pipelines and facilities divisions were 3.7 million barrels of oil equivalent per day in the first quarter. This represents an increase of 9% over the same period in the prior year, reflecting the net impact of the Alliance Dock Stable acquisition, higher contracted volumes on the NIPC pipeline and the Peace Pipeline system, higher volumes at PGI related to the Whitecap and Barron transactions, and lower interruptible volumes at Dawson due to third-party restrictions. Thanks to strong results in the first quarter of 2025, Pemina generated meaningful free cash flow in the quarter, which was allocated to strengthening the balance sheet. Turning to the full year, as Scott mentioned, we are confident in our outlook and currently trending towards the midpoint of our 2025 adjusted EBITDA guidance range of $4.2 billion to $4.5 billion. Notably, the guidance range reflects the following full year and quarterly or seasonal assumptions. Pemina continues to see rising utilization on its conventional pipeline systems and at PGI that aligns with volume growth across the Western Canadian sedimentary basin. However, in 2025, Pemina's revenue volume growth within the conventional pipelines and gas processing assets is expected to be slightly lower than physical volume growth as certain customers expand into their contractual take or pay commitments. We expect a higher contribution from Alliance in the first and fourth quarters due to the ability to transport higher volumes during colder periods. Further, the current guidance assumes the existing Alliance toll is in effect for the full year. For the second quarter, our outlook assumes planned maintenance at Oxable and Lyons, certain PGI facilities, and the Redwater complex, as well as restrictions on third-party natural gas egress within the basin. We expect the third and fourth quarters will have higher integrity and geotechnical costs across the conventional pipeline assets, and we expect stronger first and fourth quarter results in the NGL marketing business due to typical seasonality. Additionally, while marketing results in the first quarter exceeded PEMNA's original guidance expectations. This has been offset by the outlook for the remainder of the year, which reflects lower commodity prices due to global economic uncertainty. As a result, Pemina's full year adjusted EBITDA outlook for the marketing and new ventures division of $550 million remains unchanged. Pemina does not expect any material impacts to its guidance from tariffs on U.S. energy imports. At March 31, 2025, based on the trailing 12 months, the ratio of proportionally consolidated debt to adjusted EBITDA was 3.4 times, and we'd expect to exit 2025 at 3.4 to 3.7 times. Our leverage remains well below the low end of our targeted range, reflective of our strong balance sheet and supporting a strong BBB credit rating. I'll now turn things back to Scott.

Thanks, Cam. In closing, I want to remind you that Pemina will hold its annual meeting of shareholders today at 2 p.m. Mountain Time, 4 p.m. Eastern Time. 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. For further information on the annual meeting, please visit the Investors tab at www.pemina.com. Thank you for joining us this morning. Please go ahead and open up the line for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the hands before pressing any keys. Your first question comes from Jeremy Tonnet with JP Morgan. Your line is now open.

Hi, good morning. Morning, Jeremy. Thanks for the color today. Just want to kind of start off with maybe a bit more color on your producer customer conversations at this point in how you see, I guess, drilling activity shaping up and, you know, should WTI be going below 60, staying there for some period of time, how in corresponding moves in condi prices, how you think that impacts motney production and your outlook here, you know, granted, Pembina has the material contractual protections, but just wondering any thoughts you could share there.

Yeah, Jeremy, it's Scott. I'll start off and make some comments and Jared might chime in as well. But I would say to date, we haven't seen any material changes to drilling plans. I would say we have seen, you know, in the last couple of days, a couple of producers start discussing about moving completions into Q3 and Q4. So I would say we are starting to see some timing of completions, but overall reductions of CapEx to date, we really haven't seen that.

Got it. Thank you for that. And then maybe shifting over to Alliance, if I could, and recognize that you're in a place where you can only say so much at this juncture, but Is it fair to kind of characterize, I guess, the range of outcomes at this point as relatively minor within the grand scheme of Pembina as far as what unfolds in the Canadian process here? And do you see, I guess, on the U.S. side, similar things materializing or any other color would be helpful? Thanks.

Good morning, Jeremy. Jared here. And, yeah, I appreciate you mentioning that we are obviously limited in what we can say. But what I can reassure you, Jeremy, is that Our customers continue to reiterate, they enjoy the high reliability availability of the Alliance asset. They enjoy the high value end market delivering into the Chicago area. Um, and they, they really value the risk sharing aspect. Um, you know, obviously Pemina takes a material amount of operating costs risk. Uh, we believe we're a good, safe, reliable operator. Um, and they do appreciate that with respect to that asset that on the Canadian side, that's unlike any other of the major gas transmission pipelines in Canada. Additionally, we heard from our customers that they do not want us, as part of the negotiated settlement, to move to a cost-of-service model, like a true traditional cost-of-service model. So with all that said, you know, we continue to work with them expeditiously to, you know, get to a negotiated settlement that we can get into the Canadian Energy Regulator as quickly as possible, you know, that ultimately will provide Pemina with that risk-based return. And that's, unfortunately, that's all we can really say right now due to the active aspect of those negotiations.

Got it. And as far as the U.S. side, nothing to think about there at this point?

You bet. And then on the U.S. side, Jeremy, so I believe it's December 1st of this year, we'll be submitting, it's roughly, it's every five years we have to submit our information to the FERC. And that's coming up, I believe, December 1 of 2025.

That's helpful. Thanks. And last one, if I could, just real quick. Pemina has done a great job getting the balance sheet, a very strong position, and just wondering if there's the opportunity to go from defense to offense, if different opportunities shake loose as far as potential smaller bolt-ons or what have you.

Yeah, Jeremy, I would say that a couple of things. One is that, you know, you've certainly seen us do that over the course of time on a targeted basis. You know, obviously, you know, we very, I think, successfully leveraged the PGI relationship to add some really exciting opportunities there over the past year or so. uh you know would say that in terms of capital allocation obviously you know we're it's a pretty dynamic environment right now and and we're obviously monitoring things kind of uh in real time but at the same time you know we always stand ready to to uh make our business better as opportunities present i would say that you know the the prospect for for big game hunting is not something we're focused on but certainly You know, the smaller value add opportunities, if they come about, you know, we're certainly going to be in a position to act on.

Got it. That's helpful. I'll leave it there. Thanks.

Your next question comes from Spiro Dunas with your line is now open.

Thanks, Operator. Morning, team. I wanted to start with the DF tower and the Dow contract. Sounds like your plan right now is still to develop it at some point, maybe even without Dow announcing their facility timeline once again. I just want to confirm, one, that's correct. Two, just curious if there's a point in that agreement with Dow where they would need to pay for the supply regardless of that cracker being online. And then lastly, sorry for the multi-part question here, but in the interim, this does seem to free up some capital if you're not developing this tower imminently. So just curious how you're thinking about redeploying some of that capital.

Good morning, Jared here. Maybe I'll just take a step back. So we announced, it was probably May of 2024, actually, we announced the supply agreement with Dow. And I think we've been saying quarter over quarter, we've been evaluating Pemina has the luxury of having multiple supply sources across its entire portfolio, and we've just been taking a prudent approach to evaluating what's the most cost-effective approach to that supply. And we have been signaling that RFS3, which was a clone of RFS2, does make a lot of logical sense to build the DF side of that asset as part of our overall portfolio. And we continue to believe that that still makes a lot of sense. There was minimal capital being spent on the portfolio of assets in the calendar year of 2025. So even with the most recent reprofiling or delay that Dow has mentioned, There isn't a material change to our overall capital in 2020, in 2025. And we still believe, you know, not knowing exactly when, um, the new on-stream date might be, um, be announced. We believe that it's, it's kind of that it's just normal routine execution, uh, doing the DF tower. Now my team is probably cringing that I'm saying that, but it's not like a three or four year build.

um for what we're doing so we absolutely believe that when we do get a little bit more line of sight we'll be able to act quickly and have that asset on to to meet our supply portfolio commitments got it that's that's good color thanks for that uh second question going back to Alliance quickly I don't think this was addressed in the prior question but you know I know at one point you've been talking about uh with these same customers discussion around expanding that pipeline

uh just sort of curious where those stand right now if we're looking at maybe a singular integrated solution here when you announce the resolution here and how you're thinking about the timing i won't get into the specifics of of the negotiation but i can say that obviously demand for incremental gas egress is extremely strong and we have a couple of opportunities we obviously alliance was built for a full path expansion all the way down into the into the Chicago market. And there's also opportunities to do shorter haul expansions with, you know, less compressor stations here on the Canadian side into the Alberta Heartland. So we're just continue to evaluate those and kind of in the pre-feed engineering stages of that. But lots of demand for incremental liquids, rich gas egress. Understood.

That's great to hear. I'll leave there for today. Thank you, gentlemen. Thanks.

Your next question comes from Teresa Chan with Barclays. Your line is now open.

Morning. I wanted to go back to the comments about risk sharing within Alliance. To your comment about your customers appreciating that Pembina is taking the risk, does that mean a risk sharing or incremental risk shift? from Pembina to customers is off the table or if that's still a point of negotiation? And if so, if the bricks were to move, what would that illustratively even look like?

I don't think I can get into too many of the details, but maybe I'll just provide some color that unlike some of the other pipelines in Canada, we do take operating cost risk. And the reason... at the time in the joint venture previously was open to that is that we do believe that we're extremely good at providing safe, reliable, and cost-effective operations. But with that said, as the back and forth goes with the customers, there could be changes to that overall risk-sharing profile as different inputs into the economic model change. So it's pretty live and dynamic right now, and that's all I can say about that.

Okay, fair enough. And to the earlier color about the bifurcation between volumes and revenue and EPIDOC contribution due to the gap as customers ramp into the NVCs, when do you expect that to true up?

Teresa, it's Cam here. I would say that that's a pretty consistent phenomenon or pretty consistent experience that we've seen. And the reason being is that, as you've seen from us and continues to be the case, we continue to sign up new contracts on a regular basis. So as we continue to sign up new contracts, and obviously, you know, the contracts are the leading indicator against the fiscal volumes. They typically come first, the volumes come second. We've continued to see that lag over time. I'm not sure that we will expect those to true up. I think we, you know, we continue to sign contracts as evidenced by this quarter. And so we will continue to see a gap between, you know, those revenue and physical volumes as a result of that.

And maybe I'll just add to that that... You do have to delaminate the difference between what we call our high vapor pressure products. So that's your C3 pluses and your C2 pluses versus your LVP, your low vapor pressure. So your crude and your condensate. It is customer dependent and it is commodity dependent. Obviously, Pemina has a suite of pipelines in our conventional system, C2 plus, C3 plus, condensate and crude. So there is different dynamics happening. Some customers are over on certain aspects of their contracts. But overall, you will see that true up. But it's not a blanket statement that all of our customers are below their firm or their take or pay, and they're all drilling into it. It is dynamic between asset, commodity, and customer and region.

Thank you for that detailed answer.

Your next question comes from Erin McNeil with TD Cowen. The line is now open.

Morning, all. Thanks for taking my questions. Obviously, great to see the Montney contract with the quarter. Just wondering if you could provide any more detail beyond what's in the release. I can obviously appreciate that the disclosure is intentionally vague, but we're fielding the obvious questions from investors on magnitude of the contract volumetrically, duration, new level of contracting at both Taylor to Gordondale and RFS4 and And maybe just confirmation that it is a BC Motney customer, given the contracting on specific pipelines that you noted. So just, you know, open-ended, anything you'd be comfortable sharing. Just giving you the opportunity to do that.

Yeah, you bet. Appreciate the question. So it is one of our, I can't say it is one of our largest customers. It is a Northeast BC customer. And I think what I'd like to leave the group with is that This announcement, I think it just provides confidence that we recognize our customers do have a choice to flow on other service providers and they continually to choose us for a safe, reliable and cost effective options specifically around the conventional pipeline. And it's not only the safe, reliable operations and cost effective it is that suite of different assets that i just referred to the different pipelines connected to all of the fractionators in in the fort saskatchewan area connected to all the egress outlets um etc um so you know we do recognize they have choices and we do appreciate them choosing us to be their service provider um i will say that this is a like i'll use the word material volume You know, it's existing volumes across the enterprise, so the pipelines, the fraction in our marketing business, but it is also new. And there's kind of twofold here. One is that it shows the resiliency and the requirement for high utilization across the base assets, but also reinforces the need and necessity for new expansions, albeit the Taylor to Gordondale area, you know, new pump stations within Alberta, etc., We've referenced a pump station expansions between Fox and the Mayo. These are all incrementally required as as customers reaffirm their base volumes and sign up with new revenue barrels throughout our system.

Aaron, I'll just maybe add a couple of data points. You know that the renewal pieces obviously talked about it. It's a very meaningful piece of our peace contract structure. You know it. It's not quite 10%, but it's pretty close. Um, and obviously the commitments beyond that flow through both the frack, uh, as well as, as other pieces. And so, uh, you know, when we, when we talk about it being a fair, fairly material contract, you know, that's the renewal piece, obviously that the new piece of it, it's obviously quite material, not quite to that magnitude, obviously, but, uh, but very meaningful on its own.

Wow. Okay. That was more than I expected to get. Thanks. Thanks for that. Um, I'm really sorry to go back to Alliance, but, You know, you did mention the risk sharing earlier and that you're not a cost of service pipeline. I just guess I bring that up because, you know, the original CER complaint essentially compared Alliance to rate regulated pipelines. You know, so the question is, how do you define an appropriate risk adjusted return? And, you know, obviously it's not a rate regulated return, but like is the right way to think about it? you know, in the context of prevailing industry-built multiples, or is there anything you can share there?

I'll touch quickly on that. That's one of the biggest challenges for this negotiation is exactly what you just touched on. And, you know, we are different than any other asset, and we're just working through that. What does that risk premium look like?

Yeah, Aaron, the only thing I'd say is, I mean, obviously, you know, the filings are public. You can look at all the other pipelines, which are, you know, effectively no risk utility type structure. and see that the ROEs there have climbed into the mid-teens in some cases. And so that's a no-risk scenario. So if you sort of look at Alliance, obviously taking on the kind of risk that it does today, we believe that it's appropriate to earn a premium to that, and perhaps that's what we're getting at with an appropriate risk-adjusted premium. Probably as far as I can go there, but I just make those data points clear.

That's super helpful. Thanks, everyone, for the answers. We'll turn it back.

Your next question comes from Praneesh Satish with Wells Fargo. Your line is now open.

Thanks. Good morning. Maybe let me get my alliance question out of the way here. It just kind of, you know, recognizing you're limited in what you can say, but can you clarify, you know, the timeline for when the tolls would take effect as it relates to EBITDA? I know sometimes that the timing of the actual settlement, it can be different than when you accrue it in EBITDA. And then second, you know, without giving a specific number, are you able to confirm that any potential impact would be contained within the guidance range that you've provided within, you know, the midpoint to low end of the range?

So, on the timing piece, you know, I'd say that's still part of the negotiation, so no update. And with that in mind, You know, we really can't comment on 2025 guidance and giving that clarity will just is another angle to try to figure out kind of where we're at in our negotiations. And it's just too confidential and sensitive. So we're just not going to answer that question. I apologize. As soon as we can say more, we will.

Understood. That's fine. And then switching gears, maybe if we could get an update on the Greenlight Data Center project. And I guess specifically what I wanted to know is any more color on... you know, whether the JV has entered the queue for gas turbines because, you know, we're seeing the lead times elongate, the prices go up. Have you, has the JV secured pricing on the turbines and other critical equipment costs and just any broader update you can provide?

Sure. It's Chris Sherman. Thanks for the question. You know, the project's progressing nicely. We're really focused on our interconnection applications at the minute, at the moment, and we haven't made any turbine long lead purchases, but we are actively engaged with equipment suppliers. We're very alive to the cost and timing dynamics that are unfolding out there, and we're going to be prudent with our um with our order placement and frankly the timing still aligns with our expectations um so everything's going well and on track both commercially and on on the project side got it thank you your next question comes from rob hope with kosher bank your line is now open hello everyone um

First questions on the yellowhead straddle. So ACTO continues to pursue that project, even with the Dow delay. How do you think about the potential to straddle that asset in the context of a Dow delay? Or could incremental ethane and C3 plus allow that project to stand on its own?

I think from a timing perspective, Rob, You know, nothing really changes on our end in terms of that project. That was always a late 2028, 2029 project. So, you know, without knowing the specifics around the extent of doubt delay, I really can't comment on that. But as of right now, we're continuing to progress that pipeline just due to, you know, when the in-service day was. So no change from that on our end.

Rob, I would just add that, obviously, you know, the announcement from Dow and the assessment on our part and everything that comes with that is kind of happening in real time here. You know, Dow is obviously a big customer of ours and a big partner. We were not spending material dollars on that in 2025, obviously. You know, it was obviously early works. And so we're obviously going to get more information as the weeks And the next, you know, two, three months tick by here. And, you know, we'll obviously make judgments at that point. But just want to make clear that we weren't spending material dollars on that in 2025. Obviously, just some early works and engineering work.

But you did nail it, Rob. Oh, sorry, that there is a creative C3 plus that can be extracted from the gas. You know, if this did go into service and, you know, the effing component on the sales side was a little bit delayed. There is NOI associated with this that would be accretive to the project. Alright, appreciate that. And then maybe, you know, diving deeper into the DAO agreement. So, you know, it appears that the commentary today is that it's a delay, not a cancel. But if the delay from DAO is substantial, do you have a sunset date or any recourse?

I appreciate the question, Rob. I think out of respect for our partner, we're going to refrain from sort of getting into the nitty-gritty of the agreement. I guess what I would say is that we feel very comfortable that we have capital protection for capital, which we would spend. And outside of that, I don't think we want to sort of go much deeper than that.

Understandable. Thank you. I'll hop back in the queue.

Your next question comes from Patrick Kenny with National Bank Financial. Your line is now open.

Hey, good morning, guys. I'll try not to ask anything too commercially sensitive here, but just on the strategy to diversify your NGL markets, I just wanted to get a better sense as to where you're at today relative to, say, where you want to land in terms of exposure to various markets and I guess if you had a bit more color on what kinds of opportunities you're looking at in order to access non-US markets, both on a proprietary basis as well as utilizing third-party infrastructure, that'd be great.

It's Chris Sherman. I think we've been fairly clear about our aspirations around propane and some of the optimism and bull case we have for the west coast of Canada. You know, I think the positions we have today, both through our own facilities and others, are serving us well. We like that ratio as far as how it fits into our portfolio, but we've also talked about a desire to optimize Prince Rupert to increase some of the margins there. And honestly, if the price is right, we'll look at more off the West Coast for propane. As well, we're keenly watching butane. We're looking at a number of different projects to try to figure out where butane is going to fit best into North American markets, other product markets, as well as potentially off the coast in the future. I can't get too much into that, but we're putting a lot of effort and time into into all of those.

OK, that's great. And then I guess just on the remarketing of the capacity of Cedar, would you say your patience is is paying off here in terms of, you know, the geopolitical trends supporting higher demand and perhaps stronger economics? for this capacity versus the first one and a half million tons. And just curious as well, if you can comment on the level of interest in the potential expansion at Cedar, just wondering if, you know, counterparties are considering dovetailing an option for the expanded phase as well.

Yeah. Yeah. Added it's Scott here. You know, I think it's more than just, The geopolitical changes, I think it's also the fact that we continue to see growing gas out of northeast BC that needs an egress solution. You know, we're continuing to see strong arms between Canadian gas and Asian gas prices. And so, you know, that's driving pretty significant interest in the CEDAR capacity. So we're pleased with where that's going. Also, the fact that, you know, obviously we're FID'd and we're a year into construction and a year closer in service days. So I think all of those factors are leading to, you know, decent interest in this project. And we're pretty pleased with where we're going. So I would say the patience has paid off. I mean, at this stage, we are, you know, working very hard to turn the definitives into a final executable agreement, but they're big, complicated agreements, and as we've said for the last several months, that, you know, we'll do the right deal for Pemina, not the fastest deal for Pemina, and we continue to progress that. I would say as it relates to a potential CEDAR II, certainly the gas demand is there. We saw that from our recontracting efforts recently, Based on early stages negotiations on cedar capacity, we believe there is demand for a cedar, too. But until we have line of sight to that gas on coastal gas link or other solutions, that's kind of the gating item, and that's something that we continue to work on.

Okay, that's great, Keller. I appreciate it, guys. I'll leave it there.

Your next question comes from Maurice Chow with RBC Capital Markets. Your line is now open.

Thank you, and good morning, everyone. I just wanted to take a broader picture about the long-term WCSP outlook and hone in on the Taylor to Goldendale MGL pipeline project. Clearly, there is a competing third-party project out there, obviously against your projects in the CR process. So just your thoughts. just how you think the CA will resolve these sort of issues. And taking it one step further, any reason why you would think there wouldn't be sufficient contracting funds for both projects to proceed in the coming quarters?

Morning, Maurice. Jared here. So yeah, we recognize that there is currently two projects moving forward. And we're actually, you may be surprised to hear this, but I think I mentioned to you before, We're very supportive of both projects moving forward. Removing egress constraints for our Western Canadian sedimentary basin customers, upstream customers, is critical. That's what midstreamers do. We've removed constraints so they can get to higher value markets. And overall, between LNG Canada Phase 1, Hemant is highly confident LNG Canada Phase 2 happens for all the reasons Scott just mentioned. world scale resource and low commodities. You got your Cedar, you got other projects in the works and or in construction. We believe that the overall NGL and condensate demand in Canada, we still import, you know, 250,000 plus barrels a day as a nation. and the NGLs that are going to come with that incremental gas egress need to get to a market, need to get to a fractionator, need to get to a pet chem facility. So we're very bullish that both projects are required, and we'll continue to work with our customers and work with the regulator and the communities to satisfy the requirements to get ours across the finish line.

Understood. Thank you. to finish up with a cleanup question here. Cam, I think in your prepared remarks you mentioned you expect to exit 2025 at 3.4, 3.7 times. That's evident. I think that shifted a touch by about 0.1 from what you mentioned in last conference call. So clearly still well below the low end of your target range, but just wondering what assumptions have changed, especially given that the guidance for EBITDA hasn't. Perhaps some growth spending versus you. Just a thought there.

A little bit of timing of spend, Maurice, and also just assumptions on timing of cash flow. It really sort of speaks to timing of cash flow in the calendar year versus subsequent year. That has to do with changes in non-cash working capital as well as the timing of our cash tax payments. So it's really more so timing than any sort of structural change.

Just to reconfirm, the guidance that you have right now still assumes interim aligned tools. Is that right?

Correct.

Perfect. Thank you.

Your next question comes from Robert Catelli with CIBC Capital Markets. Your line is now open.

Hey, just a follow-up on the situation with Dow. I wonder if you have any sense on what they need to see to resume this project. Was it delayed because of... a trade-related issue, for example, maybe their products are less competitive because of tariffs, or is it something about the economy or anything related to Canadian policies?

Rob, it's Scott here. That's a better question for Dow. Out of respect for our partner, I can't comment on that.

Okay, I understand that. And then just moving on to just tariffs in general. What has the tariff uncertainty done to activity levels for Watson Island and the export outlook in general?

It's Chris. Well, first of all, tariffs have driven lots of volatility, which we've all seen, and undoubtedly some shifting trade patterns. I think in the short term, We've seen strong volumes off the West Coast, which is really in line with increased demand for, frankly, Canadian propane as a result of some of the dynamics going on in the Gulf Coast and some of the curtailed supply from China. But I think in the long term, it really positions Watson and really positions the West Coast of Canada really really well we've got um you know tremendous resource in western canada we've got a really proven pathway to get product to the west coast and we've got supply security concerns for for a good part of the world that's going to be looking for alternate sources and canada is a great a great piece of that and so we'll be looking to to leverage that as much as possible okay thanks everyone

Your next question comes from Sumantra Banerjee with UBS. Your line is now open.

Hi. Thank you for taking the question. Just to go back to capital allocation and leverage, it's great to see that you would face the dividend and also the leverage target range went down. I just wanted to get any high-level thoughts on capital allocation priorities going forward.

good morning it's cam um you know as i as i mentioned earlier i think it's something we've clearly been uh watching uh in real time as the markets evolved through the you know the the greater macro volatility in the last uh in the last couple months here you know clearly uh in our guidance we indicated a preference or you know sort of a base case disposition towards debt reduction in 2025 as we had free cash flow, which we expected to have and continue to expect that. I think as we've seen things ebb and flow throughout the course of the year, we've obviously taken that information in and we obviously haven't changed that leading up to the q1 print here we were in blackout through april so uh you know we wouldn't have been in a position to execute any any share buybacks even if that you know would have made sense at the time uh and so uh you know we are sort of looking at at all the signals here and and are looking at things on the back of uh the first quarter release and as we come out of blackout and and obviously are reconsidering whether we shift some of that free cash flow towards share buybacks. You know, wouldn't put a pin in it at the moment, but certainly something with lots of active debate and will ultimately be market condition dependent.

Got it. Thank you. That's very helpful. And then just a more general one on guidance. So you mentioned that you're tracking towards the midpoint currently. And of course, there's a lot of talk about volatility in the macro, but are there any projects or other factors that could push you more towards the top of the guidance?

You know, I would say that the biggest one would obviously be just in the near term is frankly probably going to be where we see the commodity business. I mean, I think it's no secret that that is the biggest driver of variability in our business. Obviously, you know, we do have some interruptible volume exposure in our business and certainly where, you know, there are dislocations on competing pipelines or alternatively egress constraints elsewhere. And, you know, we stand to benefit from that. That's another driver variability. Obviously, we do see seasonality in our business, as we highlighted in the release, and certainly Q2 and Q3, we do expect to be sequentially successful. uh you know sequentially lower compared to q1 which is normal and that's a function of all the the elements we saw um you know the cost picture on that side is is is largely well understood but really it's the revenue opportunities that could come on top of that so um you know if i if i summarize that would continue to say that uh market price variability will be the biggest single driver uh and then lastly um sort of the interruptible volume situation as egress on our own or on third-party pipelines becomes available or constrained.

Great. Thank you so much.

Your next question comes from Ben Pham with BMO Capital Markets. Your line is now open.

Hi, thank you. Good morning. A couple of questions on the marketing and the guidance you've For the year, Q1, you've pretty much hit almost half of it so far. Can you share details on hedging on that segment and also just the trend around propane barrels? Is the trend over time from your vantage to move more barrels to the Canadian West Coast? How and if that could impact the long-term outlook in marketing EBITDA?

Sure, it's Chris. So on the hedging side, our frack spread businesses go in and around 50% hedged here across the full year of 25. And so we've got a degree of protection from the volatility that Cam was mentioning on the frack spread side. And then as to how we're thinking about the market long-term, You know, we've been, I think, fairly consistent for a while that we think, you know, the long-term resilient markets for the Canadian, you know, wave of growth that's come and will continue to come is global. You know, U.S. demand has been strong, and there's lots of different, you know, narratives out there about how that might unfold over the next while. But I think in the long term, the most resilient markets are going to be global. And so we'll be striving to get as much growth as possible, access to those markets. We remain constructive on our portfolio and think we've got a nice balance at the moment between some North American markets and global markets. But as we look forward, we truly think the most resilient markets are going to be global.

And I would just add to that, Ben, that, you know, in terms of the hedging, Chris mentioned that we're both 50% hedged. We are hedged at levels which are in excess of the current, you know, sort of outlook for the balance of the year, you know, to the tune of, you know, 10 to 15% above current levels.

Okay, got it. And just on alliance, but I'm not going to ask what the toll is. I just wanted to go back when you underwrote that asset, you had The synergy expectation just just want to where you're where you tracked to that and then also just wasn't there something about the table marketing business in terms of our volumes and the late decade time frame? Just where you have that.

Yeah, hey Ben, good good call out. First thing I would say is that you know if you remember back to our announcement there, I would say that the lion's share of the synergies The material amount of them were actually coming from the Oxable business. There's a significant amount of commercial opportunities in the Oxable business. Some small opportunities on the cost side across both assets, but more so on the commercial side, and those are largely on the Oxable side. Um, I would say that, you know, so far our perspective is, you know, we're, we're tracking very well to our plans timing. Uh, I think we communicated at the time, you know, a range of 40 to 65 million, and that had a. obviously had a ramp to it. Some of those come very quickly. Some of those take a little bit of time. And certainly for 2025, we're tracking towards our intention there, which is probably at the lower end of the range, as we expected, and continue to see the integration opportunities and we'll continue to look for more. But so far, tracking according to plan.

Okay, got it. Just one last quick cleanup, and I don't think this applies to anything else in your asset space, but if anything, just think about that alliance. Any other assets through 2026? I guess that's your current guidance timeframe that's up for toll, challenges, or reviews in an excellent way.

Those are the two assets. You know, obviously the two assets here that are sort of federally regulated would have been cohesion and alliance. And obviously, you know, we've dealt with both of those. So nothing else.

Okay. Okay. Got it. Thank you.

There are no further questions at this time. I'll now turn the call over to Scott for closing remarks.

All right. Well, thank you, everybody, for joining us today. And we look forward to speaking this afternoon at our AGM. Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and as I say, please disconnect your lines.