In response to the COVID-19 pandemic and the recent significant decline in global energy prices, Calgary-based Pembina Pipeline Corp. announced on March 18 its plans to protect its stakeholders. The company’s action plan is focused on protecting the health of its employees and communities, as well as ensuring a decisive response for customers and investors including a $900 million to $1.1 billion overall reduction to its 2020 capital spending plans.
“In these challenging times, Pembina’s priorities include protecting the health and safety of our staff and communities, ensuring critical infrastructure continues to operate safely and reliably and maintaining our strong financial position,” said Mick Dilger, Pembina’s president and CEO. “We are confident we are taking the necessary steps to allow us to successfully achieve these objectives.”
Protecting People and Communities
Citing safety as its first priority, Pembina continues to take steps to protect the health of staff and the public in response to the COVID-19 pandemic.
COVID-19 is a global public health challenge, and the company is doing its part in support of government and community efforts to slow down the spread of the virus. In line with recommendations from health authorities, Pembina has restricted business travel, canceled large group meetings, and is requiring non-essential employees and contractors who can work from home to do so.
Pembina has taken steps to determine the essential staff and critical infrastructure required to ensure uninterrupted service to its customers while maintaining the safety of its assets, employees, and other stakeholders. The company is focused on processing and transporting the maximum amount of product for customers, thus supporting their cashflow.
Taking Immediate and Decisive Action for Investors
In light of the rapid and significant decline in global energy prices and uncertainty as to the duration of this downturn, Pembina has made the prudent decision to defer some of its previously announced expansion projects to reflect the current market reality. The following projects will be deferred:
- Peace Pipeline Phase VII, VIII and IX expansions, representing $1.55 billion of total capital.
- Empress Co-generation Facility, representing $120 million of capital.
- Prince Rupert Terminal Expansion, representing $175 million of capital.
- Pembina’s investment in the integrated propane dehydrogenation plant and polypropylene upgrading facility, representing $2.7 billion of capital, net to Pembina.
In addition to deferring capital spending on these major projects, additional discretionary capital spending has been removed from Pembina’s 2020 capital budget.
The impact of these measures results in a reduction of $900 million to $1.1 billion, or approximately 40 to 50 percent, to the company’s previously announced 2020 capital budget of $2.3 billion. Pembina now expects its revised 2020 capital budget to be $1.2 billion to $1.4 billion.
“Pembina’s business is resilient and remains strong in the face of these current challenges,” said Scott Burrows, Pembina’s senior vice president and chief financial officer. “An unwavering commitment to our financial guardrails has been a guiding principle for many years and, as a result, Pembina is well positioned. These guardrails, in addition to actions recently taken, highlight our ability to preserve our already strong balance sheet while funding our ongoing business, including the reduced 2020 capital program.”