Pembina Pipeline Corp

TSX:PPL

Earnings Call Transcript 2018-Q1

[Operator]

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pembina Pipeline Corporation 2018 First Quarter Results Conference Call. [Operator Instructions]Thank you. Mr. Scott Burrows, Senior Vice President and Chief Financial Officer, you may begin your conference.

[J. Scott Burrows, Senior VP & CFO]

Thank you, Rob. Good morning, everyone, and welcome to Pembina's conference call and webcast to review highlights from the first quarter 2018 results. I'm Scott Burrows, Pembina's Senior Vice President and Chief Financial Officer. On the call with me today are Mick Dilger, Pembina's President and Chief Executive Officer; Jason Wiun, Senior Vice President and Chief Operating Officer; Jaret Sprott, Senior Vice President, Chief Operating Officer, Facilities; and Stu Taylor, Senior Vice President, Marketing, New Ventures and Corporate Development Officer. Before passing the call over to Mick, I'd like to remind you that some of the comments made today may be forward-looking in nature and are based on Pembina'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 various financial reports, which are available at pembina.com and on both SEDAR and EDGAR. Over to you, Mick.

[Michael H. Dilger, President, CEO & Director]

Well, good morning, everyone. We had fantastic first quarter results. In fact, a record once again, and the first quarter has seen a continuation of strong financial and operating results we experienced last year following the completion of our multiyear growth program and the largest acquisition in our history. On a quarterly basis, we set new financial records for net revenue, operating margin, adjusted EBITDA, adjusted cash flow from operations and adjusted cash flow from operations per share. We've also set new revenue volume records, all while continuing to operate both safely and reliably. With the ongoing strength of our business, we are also pleased to announce that the Board of Directors approved a $0.01 per month or 5.6% increase to the monthly common share dividend, resulting in a monthly dividend of $0.19 per share, which will commence with our May dividends that will be paid on June 15, 2018. This marks the seventh consecutive year that we have increased our dividend. Before we get into the highlights, I wanted to briefly touch on the new organizational structure that went into effect on January 1, 2018. Given the enhanced scale and scope of our business, we opted to restructure our company to 3 operating divisions: Pipelines, Facilities and Marketing & New Ventures. This structure allows us to place similar assets together, creating centers of excellence, which will increase both the reliability and cost efficiency and will provide better insight into our operations moving forward. Accordingly, we have changed our financial reporting structure to align with the new operating segments. Lastly, I would like to mention that our longest-standing member of our board, Lorne Gordon, will not be standing for election this year. Lorne served more than 20 years as a Director, including 17 years as Chairman, and was the President and CEO of Pembina Resources Limited. Pembina has greatly benefited from Lorne's experience, wisdom and counsel throughout our history as a public company. We wish him all the best in his retirement from Pembina. Scott will now discuss the few financial highlights from our first quarter 2018 results.

[J. Scott Burrows, Senior VP & CFO]

As Mick mentioned, Pembina achieved operational and financial records in the first quarter of 2018. Adjusted EBITDA was $688 million for the first quarter, a 92% increase compared to the same period last year and an all-time quarterly high driven by 2 factors. First, a larger asset base, both from the Veresen acquisition and new assets placed into service following a large-scale capital program, generating higher revenue volumes in the Pipelines and Facilities division; and second, improvements in crude oil and NGL market pricings in the Marketing & New Ventures division. First quarter revenue was partially offset by higher operating expenses and also impacted by deferred revenues resulting from the adoption of IFRS 15. For the first quarter of 2018, approximately $30 million of revenue has been deferred. We would expect to recognize this later in the year. Earnings were $330 million during the first quarter of 2018 compared to $210 million in the same period of 2017. In addition to the factors previously discussed, which contributed to higher gross profit, earnings were partially offset by higher tax expense and net finance cost during the quarter. We achieved a new quarterly revenue record in our -- volume record in our Pipelines division, averaging approximately 2.4 million BOE per day, a 45% increase compared to the same period last year. Higher revenue volumes were realized due to system expansions on Pembina's Peace Pipeline system in addition to the acquisition of AEGS, Alliance and Ruby, which together accounted for 71% of the revenue volume increase during the first quarter. Operating margin in our Pipelines division was $416 million for the first quarter of 2018, an increase of 152% compared to the first quarter of 2017. This increase was a result of higher revenue due to increased revenue volumes from new assets being placed into service as well as the inclusion of revenue generated by acquired assets, partially offset by higher operating cost and $27 million of revenue deferred as a result of IFRS 15. In our Facilities division, combined revenue volumes were at 842,000 BOE per day in the first quarter of 2018, a 20% higher than the comparable period in 2017. Increased revenue volumes were due to the startup of the Duvernay I gas plant and the acquisition of Veresen Midstream in the fourth quarter of 2017 as well as higher realized volumes at Empress, Kakwa River and Resthaven, partially offset by decreased volumes at Younger and at Cutbank Complex. Increased revenue volumes across our Facilities division has translated into an operating margin of $225 million for the first quarter, 61% higher than the comparable quarter last year. Operating margin for our marketing division was $118 million for the first quarter, which was 18% higher than the same period last year. The increase was primarily driven by increased propane, butane, condensate and crude oil market prices as compared to the first quarter of 2017 as well as the acquisition of Aux Sable during the fourth quarter of 2017. During the quarter, we closed an offering of $700 million of senior unsecured medium-term notes in addition to closing our $1 billion nonrevolving term loan and extended our $2.5 billion revolving credit facility, which now matures May 31, 2023. Pembina remains well positioned with one of the strongest balance sheets in the sector. Based on our 2018 forecast and guidance range, Pembina's proportionally consolidated debt-to-adjusted EBITDA ratio by the end of the year will be approximately 3.7 to 4x. Lastly, subsequent to the end of the quarter, Veresen Midstream successfully amended and extended its senior secured credit facilities. In addition to the reduction in pricing on outstanding debt that was negotiated in the fourth quarter of 2017, Veresen Midstream further reduced pricing on outstanding debt and reduced debt amortization. As a result of the refinancing, Veresen Midstream has increased its ability to distribute cash by approximately $75 million net to Pembina in 2018. I will now pass the call over to Jason, who will provide an update on growth projects within our Pipelines division.

[Jason Travis Wiun, Senior VP & COO of Pipelines]

Thanks, Scott. Good morning, everyone. We are pleased to announce yesterday that we are proceeding with our Peace Phase VI expansion, which will increase upgrades at Gordondale, a 16-inch pipeline and associated pump station upgrades from LaGlace to Wapiti -- pardon me, pump upgrades and LaGlace to Wapiti 20-inch pipeline -- pardon me, pump station upgrades from LaGlace to Wapiti; and a 20-inch pipeline from Kakwa to Lator. The approximately $280 million expansion is expected to be in service in early 2020 and will be backstopped with incremental long-term take-or-pay contracts. We continue to progress the Phase IV and V expansions, which will support growth in the prolific Montney, Deep Basin and Duvernay plays. Both Phase IV and V are expected to be placed into service in late 2018. As previously announced, Alliance Pipeline has commenced a binding 2-month open season for 400 million cubic feet per day of firm service capacity, which can be added to the pipeline through the addition of 13 compressor stations. During the open season process, Alliance will also be pursuing their recontracting of the existing capacity. Pending the results of the open season, the expansion is expected to be placed into service in the fourth quarter of 2021 for a growth capital cost of approximately $2 billion, $1 million -- or $1 billion net to Pembina, and we will -- and will be backstopped by long-term take-or-pay contracts. In addition to the expansion, Alliance announced plans to convert the operation and administration of Alliance into an owner-operated model. The new operating model is expected to be in place by mid-2018 and will have a number of strategic benefits. I will now pass the call on to Jaret to provide an update on growth projects within the Facilities division.

[Jaret A. Sprott, Senior VP & COO of Facilities]

Thanks, Jason. Good morning, everyone. We are continuing to progress the construction of our Duvernay II facility. These facilities are underpinned by a 20-year take-or-pay contract with the combination of fee-for-service and fixed-return arrangements. The Duvernay II facility is tracking on budget and ahead of schedule, with the majority of long-lead items having already been purchased. Pending regulatory and environmental approvals, which we expect to receive this month, the project will be placed into service in mid- to late 2019. Our 25,000 barrel per day LPG export terminal at Prince Rupert is continuing to progress. We're currently consulting with key stakeholders for the proposed Prince Rupert terminal and are working to complete the design and engineering requirements and obtain regulatory and environmental approvals. We expect to place this project into service mid-2020 subject to required approvals. As previously announced, we're planning to construct new fractionation and terminaling facilities at our Empress extractionation plant. The Empress expansion includes adding approximately 30,000 barrels per day of propane-plus fractionation capacity as well as the addition of propane rail loading and butane truck terminaling services to the site. These facilities will provide the company with additional NGL volumes and market optionality as well as enhanced propane supply, which could further support our Prince Rupert terminal and proposed PDH/PP facilities. The expansion is expected to cost $120 million, and detailed engineering work began in April with expected in-service date of late 2020. Construction is advancing for our Burstall Ethane Storage facility, which will have 1 million barrels of storage capacity. The facility is underpinned by a 20-year agreement and is expected to be placed into service in late 2018. Lastly, we're continuing to progress the development of the North Central Liquids Hub, which will provide separation and stabilization of condensate volumes to support the operations of the Cutbank Ridge partnership within the Montney formation. We expect to place this project into service in late 2018, with the project currently trending ahead of schedule and under budget. I'll now pass the call to Stu to provide an update on growth projects within the new ventures division.

[Michael H. Dilger, President, CEO & Director]

I'll take that section. In our new ventures division, we continue to progress engineering for the Jordan Cove project as well as PDH/PP project. Everything is developing as planned, and we hope to provide some additional announcements on those projects in the latter part of June. A couple of comments in closing, then. We are very pleased with our strong financial and operating results over the first quarter, which position us to deliver our 2018 adjusted EBITDA guidance range of $2.55 billion to $2.75 billion. Looking ahead, we are focused on completing our secured growth projects on time and on budget and converting our unsecured opportunities into secured projects, all while continuing to grow our dividend and create value for our shareholders. We are proud of what we have accomplished and are excited to continue realizing the benefits of our hard work. Before we wrap things up, I'd like to remind everyone about our Annual General Meeting, which will be held today at 2 p.m., Mountain time; 4 p.m., Eastern time. The AGM will be webcast, and details of the webcast can be found on our website. Lastly, I want to take this opportunity to remind listeners that Pembina is hosting its 2018 Investor Day on Tuesday, May 29, at the Fairmont Royal York Hotel in Toronto. With that, we'll wrap things up. Operator, please go ahead and open up the lines.

[Operator]

[Operator Instructions] Your first question comes from the line of Jeremy Tonet from JPMorgan.

[Jeremy Bryan Tonet, Senior Analyst]

Just want to touch on Veresen here and see how things are progressing. Would you say that, at this point, things are reaching kind of your base case? Or is anything better? I think you'd touched on it a bit, but could you expand more on how you think things are progressing there?

[Michael H. Dilger, President, CEO & Director]

I'd say we're ahead of the base case in a number of areas. We anticipated the Alliance expansion and restructuring, obviously, in our acquisition, and I would say that, that expansion is slightly larger, and we're in the open season earlier than we expected. As well as the restructuring, I think, is happening earlier than we expected. Obviously, the Aux Sable results are fantastic, and that was unforeseen, but I always do say it's half skill and half luck. Veresen Midstream, we announced the North Central Liquids Hub. That was expected but it's coming nicely. And the whole Veresen Midstream geology and amount of liquids that are coming out of there, it's all working out well. Of course, Jordan Cove, we didn't attribute a lot of value to Jordan Cove. It certainly has its challenges, but with the run-up in prices in Tokyo and the -- now I think there's pretty broad consensus that will be stored LNG capacity in the 2023 to 2025 time frame that's really shone a light on that project. So we're pleased with the way that's working out. Staff has firmly arrived and, I think, contributing very strongly to our business right now. They're teaching us the North American gas business, which is awesome, and our transmission business unit is gaining operating capability and really emerging powerfully. So we're, across the board, very pleased with how things are going. Scott, you want to add anything to that?

[J. Scott Burrows, Senior VP & CFO]

Probably just say, when we think about the base business, it's definitely tracking ahead of our acquisition model. Mick pointed out many of the operational synergies that we've been able to achieve, or close to achieve. And I would just add on, when we think about some of the synergies we had below the operating margin line around refinancing and lowering the cost of capital within those assets, I think we've achieved that as well with the refinancing at Veresen Midstream as well as Ruby. So things are tracking, as Mick said, better than our base case.

[Jeremy Bryan Tonet, Senior Analyst]

That's great to hear. Just following up with Alliance here. Two points. I was wondering if you might be able to quantify a bit or expand a bit more as far as what type of savings or synergies you could realize from the owner-operated model there. And then also with regards to the expansion, I think the CapEx was a little bit higher than maybe we were expecting. And just wondering if you could talk us through that and the type of economics you'd see on this project.

[J. Scott Burrows, Senior VP & CFO]

Sure. I'll just take the first part of that question, Jeremy, just in terms of the synergies. I think some of that was contemplated in our overall synergy guidance. If you remember, we were about $75 million to $100 million average for the first 4 years. So that's about all we're going to say on that. We're not going to get specific on Alliance on an individual basis, but it is part of that overall bucket of synergy that we provided early on.

[Michael H. Dilger, President, CEO & Director]

Yes, we'll be able to talk more about Alliance synergies by -- I think, by the end of the year. It's still a work in progress. We know there's synergy from the owner-operator model. I mean, it just stands to reason. But we're still working with Enbridge on who's doing what exactly and what the synergies will be. It's just a little too early to provide guidance.

[J. Scott Burrows, Senior VP & CFO]

Yes. And I think, Rob, on the -- or sorry, Jeremy, pardon me. On the capital cost estimate, we're still refining that capital cost estimate as we go forward. We're expecting to, later in the year, come down to Class 3 cost estimates, which would be sort of the point in time when we make a decision on proceeding with the expansion. So I think we're still refining those costs as we go along, hoping to find some opportunities for savings there.

[Jeremy Bryan Tonet, Senior Analyst]

Great. And Maybe I'll just finish up real quick here on the Peace -- the expansion here that you just announced. I think you talked about commitment of 830,000 barrels a day by 2019, but capacity is notably above that. And when you think about your kind of project economics here, is it hinged on just those commitments? Or what type of upside improvement economics could you see if you take kind of forward utilization there?

[Michael H. Dilger, President, CEO & Director]

I would just -- the economics are lumpy. Sometimes, we prebill the phase, and then the next little bit in isolation looks wildly economic because you spent money previously. So what we can say is these increments are very economic to us, but at some point, we're going to need to put another big piece -- long piece of pipe in the ground, and the economics of that, that might not be quite as accretive. I think what you're observing and what you've observed will continue. I mean, we keep rolling out the Duvernay complexes and the Peace expansions. And I would be surprised if we don't keep investing $500 million to $750 million between the Duvernay plants and the Peace expansions over the next number of years. And those are typical Pembina projects in aggregate that you're familiar with, Jeremy. There's -- some are more accretive and some are less accretive, just depending on which phase of development. In fact, we're almost confusing ourselves with which volumes go with which phase at this point, and then look at it more in aggregate. And the accretion is solid, for sure.

[Operator]

Your next question comes from the line of Rob Hope from Scotiabank.

[Robert Hope, Analyst]

Maybe just a follow-up on that prior question. So it looks like Phase VI is really just increasing capacity upstream of Phase V and Phase IV. With the contract that you have in hand now, where do you think the next bottleneck will be? Or I guess, to put it another way, where is Phase VII? And then, I guess, as a follow-up, when do you expect to put a -- I guess, another large pipe from Fox Creek down?

[Jason Travis Wiun, Senior VP & COO of Pipelines]

So really what -- when we built Phase III, we built it with the ability to really power up a lot more downstream of Fox Creek. So I think you'll see in our announcement, I think the number that we quoted was 1.3 million barrels a day of capacity. So we still have -- between what we have under contract and what we have available downstream of Fox Creek, there is still a lot of running room there. And with respect to the next phases of expansion, really, it is kind of about debottlenecking the pipeline to LaGlace to Fox Creek and really just accessing the capacity where it needs to be as producers develop plays from the Montney and Duvernay. So really, it's more of west of Kakwa, I guess, is where most of the expansion will continue.

[Michael H. Dilger, President, CEO & Director]

Yes. Between Kakwa and Wapiti might be the next place. And then, as -- if you think about it, it's -- we've laid pipe all the way -- from Fox all the way up to LaGlace. And then, the next step after that would probably be pumps on there and so on and so forth. So you've seen the pattern. It's hard to predict. I wish we could predict exactly where our next growth spurt will come from. But a -- new liquid hubs pop up, and they're 20,000 to 40,000 barrels a day, and it's a lot of volume. And it can come at you really quickly. The drilling can come out as much quicker than we're able to respond. And so having those power-ups, obviously, is very strategic to be able to respond. But we are going to spend some time looking at a strategic buildout of the system and trying to get back ahead. We came into the close of the year thinking we had a couple of years of running room on capacity, and 6 months later, we're expanding again. So it can come at you very quickly. And with these more favorable condensate and crude prices, there's a lot of activity in -- particularly in the Montney and the Duvernay that we need to once again get ahead of.

[Robert Hope, Analyst]

All right, I appreciate the color there. And then maybe just a clarification on Scott's comments on Veresen Midstream, the $75 million of incremental distribution capabilities post the debt refinancing. I just want to get a better sense of how you're thinking about distributions from Veresen Midstream. Is that $75 million off of a 2017 number and including growth? Or would that be also in addition to that?

[J. Scott Burrows, Senior VP & CFO]

It was really a function of the financing that was put in place. Both the existing -- or the expansion facility and the term loan B had some pretty punitive amortization that would kick in, in the middle of this year on a go-forward basis. So really, it's comparing to what our budget was, say, for 2018, where, at the time we acquired Veresen, they had those restrictive amortization restrictions within their agreements, which we've now gotten rid of a lot of them.

[Operator]

Your next question comes from the line of Ben Pham from BMO.

[Benjamin Pham, Analyst]

Okay. I wanted to get your thoughts on the prospects of B.C. LNG, and how you guys are thinking about that in terms of asset positioning, if you think you're well positioned to benefit from that or you think you potentially need to make some strategic additions to not lose out on the opportunity?

[Stuart V. Taylor]

Ben, it's Stu. So again, I think the B.C. LNG opportunity is, again, early days, but we're hopeful. And I think, along with many others, Canadian producers and Canadian infrastructure, that LNG facility on the West Coast of Canada does get announced. We're optimistic that we're positioned well from an infrastructure perspective to participate in the growth of the production that will utilize that asset and are excited to see that go forward. We think it opens up numerous opportunities for a variety of people, but we think we're well positioned.

[Michael H. Dilger, President, CEO & Director]

Yes, remember -- recall we built a pretty big pipe right into the -- right through the Montney -- North Montney, and we have a bunch of capacity that we built for progress, among others. And so that was all built with LNG success in mind. And so there's no question with this commodity price deck that the product being sought is condensate, crude and NGL. And the associated gas will hopefully find its way to LNG, but it's going to kick off a lot of liquids. And so we're -- as Stu said, we're optimistic and excited about that and very well positioned, I think, to provide needed services for gas that -- and liquids that would be associated with a successful LNG announcement. So we're cheering them on, along with every other export project that's out there.

[Benjamin Pham, Analyst]

Okay. That's great to hear. And on Jordan Cove, then, does the Shell plant actually impede the potential of that project? I know it's not in your numbers and outlook and whatnot, but there's a ton of gas that wants to get out of the system. But is -- do you really see 2 LNG projects potentially being needed on the West Coast?

[Stuart V. Taylor]

Yes, we don't see it as a hindrance at all. In fact, we think the -- they're pointing to the right direction from West Coast of the continent, being an LNG supplier. So we think there're some synergies there. We believe, as you've already stated, that the resource to support the LNG facilities that are being contemplated is plenty. And in fact, that -- they just need a sign of the projects going forward, and we think that resource could easily be developed quite quickly and the infrastructure be provided in the time frames that these are being contemplated in.

[J. Scott Burrows, Senior VP & CFO]

Yes, the Montney itself could fill a number of LNG projects. It could fill Shell's, it could fill Shell's expansion, it could fill Jordan Cove expansion, it could fill Jordan Cove's expansion, it could fill other LNG. The resource is absolutely massive with 100 years plus of reserve life out there. And then with Petronas' project not moving forward, I mean, they alone have enough gas to fill their projects. So we have a lot of stranded gas that's putting downward pressure on AECO pricing. So we could easily meet the needs of many projects. So I think, and my hope is, that Shell and Jordan Cove both go, but I think that's the first of hopefully a number of additional projects.

[Operator]

Your next question comes from the line of Patrick Kenny from National Bank Financial.

[Patrick Kenny, Research Analyst]

Just back to the Alliance expansion and as it relates to funding your $1 billion of the project. Is the plan to raise secured debt down at Alliance? Or do you expect to make an equity injection? And if so, can you talk about roughly how much we should be expecting at this point?

[Michael H. Dilger, President, CEO & Director]

Yes, Pat. I think the plan would be to raise debt down at the Alliance level. If you think about the cap on that structure right now, it's about 70% debt. So really, we're talking about $300 million of equity, really, between 2019 to the first quarter of 2021. So $150 million a year, so pretty de minimis and easily falls within our thesis of being able to find organic capital program of internally generated cash flow.

[Patrick Kenny, Research Analyst]

All right, that's great. And then I thought the original plan was to first try to extend the existing contracts beyond 2020, or at least in conjunction with the debottleneck here. So maybe you could just speak to where those discussions are at with shippers in terms of pushing out the existing 1.3 million Bs a day of take-or-pay contracts beyond 2020.

[Jason Travis Wiun, Senior VP & COO of Pipelines]

Yes. So as part of the open season process, we also solicited interest in expansion of those base contracts with all the customers. And so we're about 30 days into the 60-day process. The first 30 days was really information gathering and sharing between the customers and Alliance. And now we've started getting into the bidding process. And so we're still fairly early days there, but the intention is to extend enough of that base capacity under contract to secure the incremental expansion capital that we're going to be spending, so.

[J. Scott Burrows, Senior VP & CFO]

Yes, they have to go hand in hand.

[Patrick Kenny, Research Analyst]

Okay, that's great. And Stu, maybe shifting gears here. Could you remind us when you expect to have all the regulatory and environmental approvals in place out of Prince Rupert?

[Stuart V. Taylor]

I think they're working to have everything completed. It's at -- it's near year-end. It might push into 2019 for all the environmental permits. There's not a lot outstanding at this point in time, but I think that is the final time frame.

[Patrick Kenny, Research Analyst]

Okay, great. And just lastly for me. Or it's more of a comment, I guess, than a question. But when you declare record results by referencing adjusted EBITDA, I guess, I wouldn't be shy about also pointing out your cash flow per share metric, as I believe the $1.05 per share also reached a record level, if I'm not mistaken. So of course, that's really what creates value for shareholders.

[Michael H. Dilger, President, CEO & Director]

What are you doing later during the AGM? You might want to help me with -- I'll appreciate that. You know what? We see -- and there's a lot of headwinds on the sector, let's just talk about that for a minute. And we're powering along, like we don't see a lot of obstacles. We see more opportunities, more favorable commodity prices. And yes, interest rates are going up slightly, but we're still hedged out on our debt obligations, so we are very comfortable that our future is bright, and we think we can just keep doing what we've been doing for a lot of years.

[Operator]

Your next question comes from the line of Linda Ezergailis from TD Securities.

[Linda Ezergailis, Research Analyst]

Just a follow-up on your comment, Mick, around you've got lots of tailwinds versus some industry headwinds. As you can appreciate, some of your peers have had some goalposts shifted on them on the credit ratings. I'm just wondering, if you can -- if maybe Scott can comment on, when you last spoke with the debt-rating agencies, I'm sure you're in regular contact given your acquisition of Veresen, but any sense that the goalpost might move on you? And any sort of comments on how that might affect your capital allocation thoughts, if it all, going forward?

[J. Scott Burrows, Senior VP & CFO]

So Linda, we've met with them within the last 30 days for our yearly review, and what I'm prepared to share is that the feedback was nothing but positive. If the [ DVRS ] yearly report hasn't been published, it should be out any day now. And at the end of the day, both agencies, from my perspective, are very comfortable with where we're at. I mean, if you recall, I think S&P's last report when we acquired Veresen said, upgrade threshold's roughly 20% FFO to debt. And right now, we're currently tracking kind of 18%, 19%, 20% for 2018. So we feel very, very comfortable. And at this stage -- I mean, if you remember, our -- one of our guardrail's being strong BBB. And part of that rationale is being in the high BBB categories, such that if those goalposts do move, that we have ample room to absorb that. We're not trying to track the lowest metrics so if the goalposts move we're below those thresholds. We give ourselves quite a bit of buffer. So I have 0 concerns at this stage.

[Linda Ezergailis, Research Analyst]

Okay, that's helpful context. And then, maybe also just to follow on Mick's comment around seeing opportunities, and you mentioned it in your write-up as well, that there's other customer-driven development opportunities that you're evaluating. Can you comment on, beyond the -- doing more of what you do well in the Duvernay and the Montney, which segments, which geographies, which commodities are kind of percolating in your hopper of opportunities?

[Michael H. Dilger, President, CEO & Director]

I think it's pretty broad. We're seeing great activity in all of the business units. I mean, we've got our -- oil marketing businesses are back on track. I mean, we had that weird year last year where none of the yards work. And that's working. We've got really strong propane prices, good butane prices, crude's up. And the commodities that are -- we wish were higher but aren't, like the -- obviously, the WCS is down and gas is down. Long term, we certainly want those commodities to improve. But in the short term, that's a tailwind for us because gas -- natural gas is a feedstock cost for us, and having a good arb against WCS is a positive for us. So our outlook is good, I would say, across every business unit. Even in Oil Sands, there's some stuff that's awakening there. So very positive, and that's -- kind of the piece that works well with commodities are good, and the piece of our business that we're developing that works well when commodities are bad, our export initiatives, there's a huge arb between AECO and Tokyo, like, what, $10 today. It's massive, with AECO being so low. And so really, people want to step into that arb, and the polypropylene/propane spread is positive. So across our existing business but also our value chain opportunities are numerous really. So we're really optimistic about what Pembina can do despite -- it's very frustrating for us. I did a little research. Just to give you an example, in Q1 of 2015, our share price was between $40 and $42, and we've doubled our EBITDA per share since then, and our share price is doing $40 and $42. I mean, it's absurd. So -- and we have just as good of an outlook today as we did back then. So we think the market will, as they do, the pendulum tends to swing and drag every sector player along with it. And we think that the market will -- it's sophisticated enough. It'll dissect the good from the not-so-good. And even our customers, I think their health is improving. We've seen our customers' share prices disconnect from the price of crude oil, which makes no sense. So we just think the whole sector has opportunity for a positive correction, and we believe a catalyst event like Shell being announced or one of the pipes finally getting a real nod to go ahead. We think those can be catalyst events to create the kind of confidence we need in the basin. But the underlying results, I think, are self-evident.

[Linda Ezergailis, Research Analyst]

That's helpful. And just one maybe final operational question. There are some good commentary around your pipelines and some ramp-up in volumes there. But in your Facilities division, can you talk a bit about what sort of white space is there in terms of same-store sales, volume, filling up possibilities in addition to the new capacity that you're putting on?

[Jaret A. Sprott, Senior VP & COO of Facilities]

Linda, it's Jaret here. Actually, at our board meeting yesterday, I talked about this with our board members with respect to our white spaces going up extremely positively. And you can see that, with the associated liquids coming onto the pipe, we don't have a whole bunch of white space in our areas, but like as Mick mentioned, you're seeing really positive propane prices, butane prices, and even that little bit of condensate that you get in your C2+ stream by going through our Mercer deep cuts, our Saturn facilities, et cetera. That's a really, really positive uptick, considering how low the price of gas is for our customers. So the alternative to sell it as gas or extract it, they're definitely moving to wanting to fill up those facilities a lot quicker. So extremely positive in that direction.

[Michael H. Dilger, President, CEO & Director]

Yes, and our fractionators are filling. I mean, I remember, a year ago, maybe we were 65% full on the complex and it's -- they're filling up. And so, yes, it took a little longer but we went through such a tough time but the fracs are filling up. So -- we did -- Jaret set a whole section for our board on -- if we could fill all our whitespace, what that meant. And it's obviously fantastic because you're not spending any capital. So that's our mission.

[Linda Ezergailis, Research Analyst]

But you're not going to quantify it for us?

[Michael H. Dilger, President, CEO & Director]

Not today.

[Operator]

Your next question comes from the line of Robert Catellier from CIBC Capital Markets.

[Robert Catellier]

I just wanted to follow up on Ben's line of questioning. Now that you have Younger in your control, obviously, it shares a fence line with McMahon. I'm wondering if you see any strategic or operational benefits to having those assets under common ownership. Or more broadly, any strategic benefits to have a broader Northeast B.C. footprint?

[Michael H. Dilger, President, CEO & Director]

I think we got that, Rob, when we combined with Veresen. We -- I think we got the best bet of Midstream assets in the Montney. Completely capable, large plants, and we think there's lots of opportunity to exploit. We want to keep growing our Montney presence, and Younger is obviously a very strong asset. When we look at the -- that coal McMahon complex, it's not a high liquids complex. I don't know, maybe 10 or 20 barrels a million. So great gas assets, not-so-great liquid assets. But we're going to continue to look to expand in the Montney, both in our pipelines and in processing. It's one of the 2 areas that just have such tremendous potential. And we realized pre-Veresen we needed to be there, and that was one of the big catalysts. But in terms of the McMahon complex, yes, they share a fence line, and they are complementary assets. But we don't feel like we necessarily need to own McMahon to make sure Younger is a success. They're complementary; I don't know that they're synergistic.

[Robert Catellier]

Okay. In your -- and you had comments in your strategic summary about securing global markets. So what are the implications of that comment with respect to future investment? Are you really just referring to continuing to execute Jordan Cove, Prince Rupert, PDH and things like that? Or is it -- they are signaling there about an appetite for a broader spectrum of investments, maybe international or more on the U.S. side.

[Michael H. Dilger, President, CEO & Director]

I think it's just a reflection that we're waking up to the fact that we're spending time in Tokyo and we're heading to Kuwait next week, and our customers are worldwide now. And you think about the new venture stuff that soon is running. Propane exports, polypropylene, some of that market will be Canadian, some will be non-Canadians, the Jordan Cove customers. And so it's a realization that we're moving that way, and it's a realization that we really have a role in the basin to get hydrocarbons that aren't fetching appropriate pricing to better markets. And we're developing that line of thinking, and you'll hear more about it at Investor Day. But it's not -- we're not straying at all from our core values or our strategy or our guardrails. Anything we do has to fit into the guardrails. The guardrails aren't going to fit the businesses; the businesses have to fit the guardrail. So you know how we operate. We're pretty careful, and everything's going to fit our risk profile. But it's just realization that's -- that our customers are becoming -- are beyond Canada and even North America now.

[Robert Catellier]

Okay. And just to take that a little bit further. There's been a number of assets available in the U.S. market for some time. So now there's been some recent upsets with some FERC actions, which may have created more opportunities. So how significant and objective is it for you to expand the U.S. presence? And to the extent that it is, what parts of the value chain are most strategic?

[Michael H. Dilger, President, CEO & Director]

Well, we like to own connected assets. And we've just come off like a monster acquisition. We've got some monster opportunities in front of us. And what I'm pleased to say is we don't have to do anything. We think we can see chugging out $1 billion or $2 billion a year on new projects and tuck-in acquisitions, so we don't have to be in a hurry anywhere. But if you follow the way our strategy is, we usually hunt in areas where we have connected assets. So for us, that might be the Bakken. If it were U.S., maybe the Rockies. But it's early days there. We're not actively shopping, but we talk to a lot of analysts and investors, and they're encouraging us to start looking further afield. And that's something we'll probably pick up on in the latter part of the year, is start at least to look at different basins.

[Operator]

Your next question comes from the line of Robert Kwan from RBC Capital Markets.

[Robert Michael Kwan, Analyst]

Mick, I just wanted to ask about some statements you made earlier around the central pipeline system, and it sounds like the priority here is just smaller debottlenecking projects with pretty high returns and then using pumping expansion from Fox Creek. And -- but you talked about, at some point, needing to put in some major pipe from the Fox Creek area. And can you just talk about reconciling those 2, and especially just around maintaining the competitive advantage you have of that existing capacity?

[Michael H. Dilger, President, CEO & Director]

Yes. And we're actually -- I don't even know when the date is yet, but we're going to have a strategic review so we can speak more intelligently about that. I think what you're going to see in the next number of years is, as Jason said, exploiting that, call it, 400,000 barrels a day of capacity we have from Fox in. So that's a lot of volume still to come, but we still have to spend a lot of capital to get all that volume to Fox Creek. And what might you see is rather than us doing what I consider pretty modest expansions to something a little bolder, if commodity prices, particularly liquid prices, stay higher, we may frontline a phase just in anticipation of filling it faster. We are finding that the phase expansion, the producers can move quicker than we can, and we can offer them a tremendous level of service, but we just can't offer it to them in a time frame that we'd like to. Still much faster, obviously, than a greenfield with pumps and power-ups, but we're in a 2- to 2.5-year cycle when producers are on a 1-year cycle. So they drill a bunch of wells and they say, "Well, we need the service," and we don't want to be in a position all the time where we're saying, "Well, you got to wait 30 months." So we're going to look harder at getting ahead of -- at it to exploit the existing very accretive opportunity that we have from Fox then.

[Robert Michael Kwan, Analyst]

Understood. Had a good quarter, and I'm just wondering, you left your guidance unchanged. So I know it's early in the year, but can you just comment on what you're seeing at this point, headwinds and tailwinds, as it relates to your guidance range?

[Michael H. Dilger, President, CEO & Director]

Scott won't let me talk about that until Investor Day. But you can see like things are working out really good for us. So we will be prepared to say something about 2018 at least, possibly 2019, or we may wait with 2019 until later in the year. But with our fee-for-service cash flows in the high 80s to 90% range, maybe it's a little lower now because we've had success on the commodity side, it does afford us the luxury of providing some guidance. So I mean, we're thinking about what and how far out to go for Investor Day. But Scott wants to get another month behind us, and I think that makes sense.

[Robert Michael Kwan, Analyst]

Fair enough. If I can just finish up coming back to Alliance. Previously, you commented, and I think you kind of alluded to it today, that you need to -- or to proceed with the expansion, you need to secure base pipe volumes via long-term extensions. So just to confirm, that is still the strategy? Or put differently, what if you get a wildly oversubscribed expansion open season but you get minimal base volumes extended, does that pretty much kill the expansion project?

[Michael H. Dilger, President, CEO & Director]

No. I mean, you can't expand on top of interruptible or short-term capacity. It's just not sensible to -- for the partners to spend $2 billion on top of 2- or 3-year terms. So we have to secure the base to do the expansion. I think that stands to reason. It would be, I think, irresponsible to spend that kind of money without extending the base. And we're incentivizing the base to extend, and we're going to see what the open season brings. We have interest from -- significant interest in extension as well as expansion right now. So we'll see what the open season brings. Jason, anything to add?

[Jason Travis Wiun, Senior VP & COO of Pipelines]

Yes, I would just say, 1.5 billion today of access to a premium market, I think people are definitely interested in maintaining that market access. I think -- I'd say, we're cautiously optimistic that we wouldn't end up in a situation that you described.

[Robert Michael Kwan, Analyst]

Okay, are you getting early feedback that, that's the case? I know you've given existing shippers quite a leg up on the expansion capacity, but I'm just wondering what their thoughts in terms of taking that extension versus just using their renewal rights to roll year-to-year.

[Michael H. Dilger, President, CEO & Director]

There's not that many extension shippers, so we can't really comment. I would just say that overall response to the open season has been positive. And we're not going to need to wait that long. I think end of the month.

[J. Scott Burrows, Senior VP & CFO]

End of May.

[Michael H. Dilger, President, CEO & Director]

End of May, and it is a binding process, so we may have more to say it -- say about it in as early as June.

[Operator]

[Operator Instructions] Your next question comes from the line of Chris Cox from Raymond James.

[Christopher Cox]

Most of my questions have been asked already, but there is, I guess, a couple cleanups I have. The first is maybe just if you could kind of contextualize for us the opportunities for the east Shell basin for you guys and the Drayton Valley system or anything else that might involve. And I realize it's in the early days, but it certainly seems like there's a good level of enthusiasm from producers. And maybe just anything you can comment on that first?

[Jason Travis Wiun, Senior VP & COO of Pipelines]

Yes. I think the Drayton Valley system is starting to see some activity around it. We're seeing volumes ramp up. If you think back to, I think it was like 2008, we expanded that system quite a bit. And volumes sort of went into decline, I guess, during the down cycle. And so we actually have a lot of running room on capacity on the Drayton Valley system, and we're seeing those volumes start to come up. And then if you think more to the east there, we have the Bonnie Glen system, which is a 16-inch pipeline that's currently sitting idle. So I think we're definitely looking at opportunities out there and trying to see what's possible. We're currently assessing that system and doing some work on it to make sure it's ready if those volumes materialize.

[Michael H. Dilger, President, CEO & Director]

That's the one part of Alberta where smaller companies can -- without raising $1 billion which, it seems, what it takes to become a player in the Montney, drilling a 6-well pad and all the stabilization and processing you need alongside that just to make money in this market. It's the one area smaller guys can play and be successful in. With these higher prices, I think we're breaking through the threshold kind of commodity price we need to really activate that area. So I think that the trend is positive, and we can see a forward curve that's kind of CAD 60 or higher. I think we're going to see that area really pickup.

[Jason Travis Wiun, Senior VP & COO of Pipelines]

I just wanted to clean up my comments on the Bonnie Glen system is the joint venture with Keyera. That's -- well, Keyera and Pembina are actively engaged on discussions there.

[Christopher Cox]

All right, great. So the new viking, the sounds of it. Maybe onto Peace System. The first one I have there is of the 1.1 million barrels a day you have into the interim market. Maybe just how much of that would be related to condensate volumes.

[Michael H. Dilger, President, CEO & Director]

That's always a moving target depending on which commodity is hot. And that's really the beauty of our system. From Fox in, we've got 4 different pipes with each having a separate stream, C2+, C3+, through to Montney. And those pipes are interchangeable. So if we get a surge in one commodity and less of another, we can change the service of any of those pipes. And so it's a tremendous service for our customers because they don't always know what they're going to drill because they don't know necessarily where commodity prices are going. So that flexibility that we have there is really tremendous. And so you do have to think about it as 1.1 million barrels a day and not constrain your thinking by what commodity has to be flowing right now. But no question, if you do the work on our larger customers, the majority of the sizzle is around condensate right now.

[Christopher Cox]

Yes. [indiscernible]. And then there is a -- just a comment around kind of peak commitments on the pipeline in 2019. And maybe you could just talk around the cadence of contract rollover on the P system and whether you're having any discussions around extending those existing contracts.

[Michael H. Dilger, President, CEO & Director]

Yes. I think the -- most of the contracts extend out about 10 years, and so the peak is just the absolute peak. But the decline on volumes post 2019 is not very steep.

[Operator]

And there are no further questions. This concludes today's conference call, and you may now disconnect.

[Michael H. Dilger, President, CEO & Director]

Joining the call, and we hope to see you at either the Investor Day or the AGM later today. Thank you.