Pembina spending $470 million on pipelines, storage

Pembina Pipeline Corporation will spend approximately $470 million on capital projects in 2011, with the majority targeted at projects expected to provide new sources of cash flow by mid-year. These include conventional and oil sands pipeline construction, storage facilities, and natural gas extraction. 

"Our growth strategy is on track," said Bob Michaleski, President and Chief Executive Officer. "We expect the bulk of our 2011 investments to begin generating returns as we take some of our key expansion projects to the commissioning stage during the first half of the year."

Approximately $215 million, nearly half of Pembina's 2011 capital budget, is allocated to completing construction of the Nipisi and Mitsue Pipeline projects. The two pipelines, which will provide diluent supply and heavy oil take-away capacity for the region north of the Town of Slave Lake, Alberta, are on target for start-up mid-2011. Based on certain assumptions, Pembina's internal projections estimate the two pipelines, which are expected to cost approximately $440 million when complete, will generate approximately $45 million per year in net operating income once fully operational (see "Forward-Looking Statements & Information").

Other projects Pembina plans to complete in 2011 include the construction of a new facility to extract up to 14,400 barrels per day ("bpd") of additional natural gas liquids from its Cutbank Complex gas gathering and processing facility, and, subject to regulatory approval, the Willesden Green project, which is expected to add 25,000 bpd of throughput capacity to its Drayton Valley pipeline system.

Pembina plans to finance its 2011 capital expenditures through undrawn credit facilities and cash flow from operating activities.

2011 Capital Spending Breakdown

• The Conventional Pipelines business expects to invest approximately $90 million in 2011, with the majority allocated to Alberta-based pipeline systems including the Willesden Green project. This will allow Pembina to strengthen its transportation service offering to producers in the Cardium oil formation . Investments to enhance system-wide operational reliability and integrity are also being made to support the expected increase in pipeline throughput across many of Pembina's systems. 

• The Oil Sands & Heavy Oil business' capital spending plan for 2011 is approximately $220 million. This includes a $215 million investment to complete the Nipisi and Mitsue Pipeline projects, with the remainder being targeted at oil sands pipeline system upgrades.
  
  
• Midstream & Marketing intends to invest $65 million in 2011, excluding the recently announced acquisition of terminalling and storage facilities in the Edmonton, Alberta area which closed on January 7, 2011. A majority of this spending reflects linefill purchases for the Peace Pipeline system (which became a single shipper pipeline system for crude and condensate volumes in January 2011) and for the Nipisi and Mitsue Pipelines (Pembina Midstream Limited Partnership, a wholly-owned subsidiary of Pembina, has contracted capacity on the Nipisi and Mitsue Pipelines). The remainder is expected to be used to increase the connectivity of Pembina's Midstream & Marketing assets, including the Pembina Nexus Terminal, and upgrade existing truck and storage terminals.
  
  
• Pembina's Gas Services business plans to spend approxmately $75 million in capital in 2011 to enhance natural gas liquids extraction as well as gathering and processing capabilities at the company's Cutbank Complex.
  
  
• The remainder of Pembina's 2011 capital budget will be used to complete a variety of corporate-wide projects, primarily allowing for system and technology upgrades.

The 2011 program outlined above does not include any capital for acquisitions.

Pembina's capital expenditures totaled approximately $200 million in 2010.

Pembina Pipeline Corporation transports crude oil and natural gas liquids produced in western Canada, owns and operates oil sands pipelines, and has a growing presence in the midstream and marketing and gas services sectors. Pembina's common shares and convertible debentures are traded on the TSX under the symbols PPL and PPL.DB.C respectively.