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Pembina Pipeline says potential Trans Mountain purchase not a priority

CALGARY — Exploring a potential purchase of the Trans Mountain oil pipeline is not a major priority right now for Pembina Pipeline Corp., the Calgary-based company said.
Pembina Pipeline Corp. says while it remains interested in global export opportunities, it isn't devoting much time currently to exploring a potential purchase of the Trans Mountain pipeline. The corporate logo of Pembina Pipeline Corp. (TSX:PPL) is shown. THE CANADIAN PRESS/HO

CALGARY — Exploring a potential purchase of the Trans Mountain oil pipeline is not a major priority right now for Pembina Pipeline Corp., the Calgary-based company said.

On a conference call with analysts to discuss first-quarter financial results, Pembina's chief financial officer Cameron Goldade acknowledged the recent completion of the $34 billion Trans Mountain expansion, which marked its official opening last week.

But he reiterated Pembina's previously stated stance that there are still too many questions surrounding the pipeline to support pursuing a purchase at this point. 

"From our perspective, there still exists a tremendous amount of uncertainty around that asset. And so you know, frankly, nothing has changed from our prior messaging in terms of that as an investment opportunity," Goldade said on Friday.

"It's not something we're spending a great deal of time on right now."

Pembina formed a partnership in 2021 with Western Indigenous Pipeline Group for the purpose of pursuing an Indigenous-led equity stake in Trans Mountain.

The pipeline is currently owned by the federal government, which bought it in 2018 to get the expansion project over the finish line. 

But the government has said it does not wish to be the long-term owner and has already launched the first of what is expected to be a two-phase divestment process.

Pembina is not eligible to participate in this first phase, which involves talks with more than 120 Indigenous nations located along the Trans Mountain route to see if any of them are interested in an equity stake.

The second phase, for which the timing is unclear, will involve the consideration of commercial offers.

Some analysts have suggested Pembina would be the most logical buyer for the 890,000-barrel-per-day pipeline, which opens up new global export markets for Canadian oil companies.

But during the course of the four years it took to construct the mega-project, the pipeline expansion ran into multiple regulatory snags, delays and budget overruns. 

And even though the project is complete, the Crown corporation that built it is still locked in a dispute with oil companies over the tolls it wishes to charge to use the pipeline.

Tolls are the way a pipeline earns revenue, so the final tolling structure for Trans Mountain will directly impact the pipeline's value as well as the price a prospective buyer is willing to pay.

Trans Mountain is looking to charge higher tolls to offset some of the project's budget overruns, but oil companies don't want to be held responsible for construction-related challenges.

The Canada Energy Regulator has approved Trans Mountain's proposed higher tolls on an interim basis to ensure a tolling structure was in place for the start-up of the pipeline, but it has yet to make a final decision.

Pembina's comments on Trans Mountain came one day after the company announced it earned $439 million in the first quarter, up from $369 million a year earlier.

Pembina said its revenue for the quarter ended March 31 was $1.54 billion, down from $1.62 billion during the same quarter last year.

Diluted earnings per common share were 73 cents, up from 61 cents.

During the quarter, Pembina entered into long-term agreements with Dow Chemical to supply and transport up to 50,000 barrels per day of ethane to support the recently announced construction of Dow's new integrated ethylene cracker and derivatives facility in Fort Saskatchewan, Alta.

Pembina and its project partner, the Haisla Nation of B.C., also announced recently that they have achieved a number of positive milestones on Cedar LNG, a proposed floating liquefied natural gas facility to be built near Kitimat. 

Pembina said a final investment decision on Cedar LNG will be made by June 2024.

This report by The Canadian Press was first published May 10, 2024.

Companies in this story: (TSX:PPL)

Amanda Stephenson, The Canadian Press