Pembina Pipeline Corporation is slashing its capital spending plans this year by $900 million to $1.1 billion in response to the COVID-19 (coronavirus) pandemic and the recent significant decline in global energy prices.

The company announced Wednesday the reduction is approximately 40 to 50 per cent of its 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. 

“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. We are confident we are taking the necessary steps to allow us to successfully achieve these objectives,” said Mick Dilger, Pembina’s President and Chief Executive Officer, in a statement.

“Over the past many years, Pembina has been making its business better, not just bigger, through focused diversification efforts. The acquisition of high-quality assets such as the Alliance and Cochin pipelines and the Edmonton Terminal storage assets, combined with the development of highly contracted assets such as the Peace Pipeline system and the Duvernay Complex, has diversified Pembina across commodities and credit-worthy counterparties, while also substantially growing our basin and currency diversification. These actions, combined with our self-funding model, strong balance sheet and high contract quality all result in a high-quality, resilient cash flow stream, which allows us to protect our dividend, as we have always done through past downturns.

“We have many levers at our disposal. We entered 2020 expecting a more tempered contribution from our commodity business relative to the past two years, as reflected in our guidance range. Based on the resilience of the business and the decisive actions we are announcing today, we remain within our projected guidance range, while still maintaining significant future upside given our suite of high-quality growth projects and strong financial position.”

In light of the rapid and significant decline in global energy prices and uncertainty as to the duration of this downturn, Pembina said it 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, it said:

  • 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; and
  • Pembina’s investment in the integrated propane dehydrogenation plant and polypropylene upgrading facility, representing $2.7 billion of capital, net to Pembina.