Pembina Pipeline 2026 Q2 Earnings Call

Good morning, everyone. Welcome to Pembina's conference call and webcast to review highlights from the second quarter of 2026. On the call today, we have Scott Burrows, President and Chief Executive Officer, and Cameron Goldade, Chief Financial Officer, along with the other members of Pembina's leadership team. I would 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 management discussion and analysis dated July 30, 2026, for the period ended June 30, 2026, as well as the press release Pembina issued yesterday, all of which are available online at pembina.com and on both SEDAR+ and EDGAR. I will now turn things over to Scott.

Thanks, Dan. Yesterday we reported second quarter results, which were highlighted by adjusted EBITDA of CAD 1.064 billion. It was another solid quarter that reflects a constructive industry environment coupled with strong underlying operational performance and new assets entering service. As Cam will discuss in more detail, we have affirmed our 2026 adjusted EBITDA guidance range of CAD 4.35 billion to CAD 4.55 billion, while noting we are trending to midpoint of the range. Since our business update in April, we've continued to build momentum across all three pillars of our 3Cs Strategy and have further strengthened our visibility to long-term growth. As a reminder, our strategy is built around three complementary pillars. First, we aim to capture growing volumes across the Western Canadian Sedimentary Basin by leveraging our integrated midstream footprint and deep customer relationships.

Second, we strive to connect those volumes to the highest value markets through our and others' transportation and export infrastructure. Third, we want to catalyze new sources of hydrocarbon demand that create growth in the WCSB and incremental opportunities across our value chain. Together, we expect these pillars will provide multiple avenues for growth and allow us to create value across changing market environments. Over the past quarter, within Capture, we placed our RFS IV fractionator into service in late May on time and under budget, adding 55,000 barrels per day of propane plus fractionation capacity at the Redwater Complex, further strengthening our industry-leading NGL franchise. Within Connect, Cedar LNG continues to make excellent progress toward first exports in late 2028.

During the quarter, we achieved key construction milestones, including mechanical completion of the pipeline that will supply the facility and successfully moving the floating LNG vessel hull from dry dock to wet dock in South Korea. We also announced our participation in the proposed West Coast oil pipeline, where we can contribute our development and execution expertise to a project that has the potential to further expand market access for Canadian energy. We are participating in a purposeful and prudent way through a disciplined approach to capital allocation and risk management. Within Catalyze, we sanctioned the Heartland Extraction Plant, a highly capital-efficient project that leverages existing infrastructure and monetizes our extraction rights on the Yellowhead Pipeline. Equally important, the project was accompanied by an expansion of our long-term commercial relationship with Dow, increasing contracted ethane supply volumes by 15% and reinforcing the strength of our integrated NGL platform.

We also reached a positive final investment decision on the Greenlight Electricity Center, a 932-megawatt gas-fired generation facility that will provide dedicated power to a new Alberta data center being developed by Meta. Greenlight represents an exciting new growth platform for Pembina, creating stable long-term cash flows while also driving incremental demand for Western Canadian natural gas. Importantly, Greenlight has the potential to generate benefits across multiple parts of our existing business. We continue to advance discussions around additional gas to power and data center-related opportunities and recently acquired additional land proximal to the Greenlight Electricity Center and the Redwater Complex to support future projects. Taken together, the projects and announcements this quarter demonstrate the breadth of opportunities available across Pembina's franchise and our ability to identify and then convert those opportunities into tangible growth.

Whether it's expanding our NGL platform, connecting Canadian production to global markets, or creating entirely new demand pathways for natural gas, we're seeing strong execution across each pillar of our Three C Strategy. As a result, we remain confident in our ability to deliver our targeted 5%-7% compound annual fee-based adjusted EBITDA per share growth through 2030. We continue adding potential new opportunities such as the West Coast oil pipeline and are pursuing additional gas to power for data center projects that, if converted, will support extending our growth well into the next decade. I'll now turn things over to Cam.

Thanks, Scott. As Scott noted, Pembina reported second quarter adjusted EBITDA of CAD 1.064 billion. Compared to the second quarter of 2025 Continued strong operational performance across the pipelines and facilities divisions and higher results in the marketing business were offset by the impact of the new toll structure and revenue-sharing mechanism on the Alliance Pipeline announced last year.

The net result in the second quarter was a CAD 51 million or 5% increase in EBITDA over the same period in the prior year. Looking at quarter-over-quarter results by division, the major factors impacting the quarter in pipelines included higher contracted volumes on the Nipisi Pipeline, higher revenue on the Cochin Pipeline due to prior period tariff adjustments, and a lower contribution from the Alliance Pipeline due to the negotiated settlement between Alliance and its shippers, partially offset by higher interruptible volumes and lower operating expenses.

The facility segment benefited from the RFS IV fractionator entering service in May and the Wapiti Expansion in PGI entering service at the end of March, both on time and at or below budget. Further extending Pembina's track record of delivering solutions for our customers in a timely and capital-efficient manner. In addition, the quarter was positively impacted by higher contributions from PGI due to stronger performance at the Dawson assets, fewer unplanned outages, and higher recoveries from an asset upgrade, and no comparable planned outage at Redwater as occurred in the second quarter of 2025. In marketing and new ventures, second quarter results reflected the impact of wider WCSB and U.S. NGL frac spreads, resulting from higher NGL prices, including the benefits of Pembina's exposure to premium propane markets through West Coast exports, as well as benefits from higher crude oil prices and higher sales volumes.

In addition, the quarter was impacted by higher realized losses on NGL-based derivatives and lower realized gains on crude oil-based derivatives. Finally, in the corporate segment, second-quarter results were lower than the prior period, primarily due to higher long-term incentive costs driven by an increase in Pembina's share price and incentive multiplier during the quarter, compared to a decrease in Pembina's share price and incentive multipliers during the prior period. Earnings in the second quarter were CAD 512 million, which represents a 23% increase over the same period in the prior year. In addition to the factors impacting adjusted EBITDA, the change in earnings in the second quarter was due to higher unrealized gains on NGL-based and crude oil-based derivatives and unrealized losses from the Cedar LNG compared to unrealized gains in the second quarter of 2025.

Adjusted earnings were CAD 415 million, or a 10% increase over the same period in the prior year. Compared to the factors related to earnings, the change in adjusted earnings excludes the impact of the unrealized gains on NGL-based and crude oil-based derivatives and the unrealized losses in Cedar LNG. Total volumes in the pipelines and facilities divisions were 3.7 million barrels of oil equivalent per day in the second quarter. This represents an increase of 3% over the same period in the prior year. Higher second-quarter pipelines volumes were driven primarily by higher volumes on the Alliance Pipeline, primarily driven by stronger operational performance and higher contracted volumes on the Nipisi Pipeline serving the Clearwater formation. Higher second-quarter facilities volumes were driven primarily by the impact of RFS IV entering service in May and higher volumes from certain PGI assets, primarily from the Wapiti Expansion and at the Dawson assets.

Yesterday, Pembina reaffirmed its 2026 adjusted EBITDA guidance of CAD 4.35 billion-CAD 4.55 billion, we are currently trending towards the midpoint of that range. At the midpoint, due to seasonal factors, timing of spending, and certain one-time items, Pembina anticipates that the adjusted EBITDA contribution in the third quarter will be lower than the second quarter, with a strong seasonal contribution expected in the fourth quarter. It is worth noting that over the past 5 years, the third quarter has contributed between 23%-27% of the full-year adjusted EBITDA. Our current outlook for 2026 has the third quarter contributing at the low end of that range. A few specific factors that are expected to impact the second half of the year are worth noting.