Scott Burrows - Vice President of Finance and Chief Financial Officer Michael Dilger - President and Chief Executive Officer Paul Murphy - Senior Vice President, Pipeline and Crude Oil Facilities Stuart Taylor - Senior Vice President, NGL and Natural Gas Facilities.

Jeremy Tonet - JP Morgan David Noseworthy - Macquarie David Ezergailis - TD Securities Robert Kwan - RBC Capital Markets.

Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pembina Pipeline Corporation 2017 First Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session [Operator Instructions]. Thank you. Mr. Scott Burrows, you may begin your conference..

Thank you, Chris. Good morning, everyone, and welcome to Pembina's conference call and webcast to review highlights from the first quarter of 2017. I'm Scott Burrows, Pembina's Vice President, Finance and Chief Financial Officer.

On the call with me today are Mick Dilger, Pembina's President and Chief Executive Officer; Stu Taylor, Senior Vice President NGL and Natural Gas Facilities; and Paul Murphy, Senior Vice President, Pipelines and Crude Oil Facilities.

Before passing the call over to Mick, I'd like to remind you that some of the comments made today maybe forward-looking in nature and are based on Pembina's current expectations, estimates, judgments, projections and risks. 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. Actual results could differ materially from the forward-looking statements we may express or imply today. Over to you, Mick..

Thanks Scott. Good morning, everyone. We're going to try to keep our prepared remarks quite short this morning to allow the questions on the quarter and time to discuss the transaction we announced on Monday for Pembina to combine with Veresen. Before getting into our Q1 results, I wanted to again say how we please we are with the Veresen announcement.

This is truly a transformation event to the shareholders of Pembina and Veresen, as well as a positive development for our customers. During our call on Monday, we discussed the many benefits of the transaction in great detail. So I'll keep comments brief today.

For those looking for more information on the Veresen transaction, we have a webcast overview of the announcement on Pembina's website or you can listen to our AGM Presentation webcast this afternoon.

At a high level, the strategic transaction will create a larger, more diversified Canadian energy infrastructure company, supporting some of our of North America's most prolific resource place as well as a greater customer service offering.

The combined company will have a large integrated asset base supported by long life economic hydrocarbon reserves, a high proportion of fee for service cash flow and an impressive suite of both secured and unsecured growth opportunity. Upon closing of the transaction, we will increase our monthly dividend by 5.9% or to $0.18 per common share.

Turning to the first quarter, we are happy with our performance across the board. We again achieved record financial and operating results with record revenue and sales volumes of over 2 million barrels of oil equivalent per day. Also our impressive safety record remains intact.

Our employees worked over 755,000 hours in the first of 2017 with no employee lost-time injuries, while executing on a record quarterly capital expenditure of 709 million. With our continued success in financial strength, we are also happy we have increased the dividend in April by 6.25% marking our sixth consecutive annual increase.

We also saw a number of business units have success during the quarter. We secured an exciting opportunity to grow our presence in the Duvernay through our previously announced infrastructure development and service agreement with Chevron.

We announced our Phase IV and Phase V pipeline expansions committing an additional $325 million of capital and we identified a west coast propane export terminal site capable of exporting 20,000 barrels per day of product with an associated capital cost of between 125 million and 175 million.

Stuart and Paul will discuss these announcements in detail shortly. I remained very positive about the year ahead. Our long term strategy continues to unfold and deliver the promise results, while we work to work successfully closing the acquisition of Veresen. I will now pass the call back over to Scott..

Thanks Mick. As Mick mentioned, Pembina achieved strong operational and financial results in the first quarter of 2017. All the details are in the reports, so I am only going to hit the highlights here. Adjusted EBITDA was 363 million, an all-time quarterly high an increase of 35% compared to the same quarter last year.

The increase was a result of stronger performance across all businesses including new assets placed into service and Kakwa River acquisition. Our strong performance combined with reduced current tax expenses resulted in adjusted cash flow of 308 million for the quarter, a 47% increase over the same period last year.

On a per share basis, adjusted cash flow was $0.77, a 38% jump compared to Q1 of 2016. Our earnings came in at 215 million or $0.49 on a per share basis, which are respective increases of 111% and 113% compared to the same quarter of 2016. We achieved new quarterly records for revenue and sales volumes across all our businesses.

Average revenue volumes on our conventional pipelines were a record 691,000 barrels a day, 3% higher than Q1 last year. Our Gas Services business processed just over 1 billion cubic feet per day in the first quarter of 2017, a 52% increase over the Q1 of last year.

NGL sales volumes reached a record level of 173 barrels per day for the first quarter of the year. Higher volumes along with improved operational performance and new assets and service within certain business units result in strong operation margin in the first quarter compared to Q1 of last year.

Conventional Pipelines operation margin increased by 5% to 134 million. Gas Services operating margin increased by 89% to 70 million. And Midstream's operating margin increased 45% to 165 million.

This increase was also due to higher commodity margin and physical storage revenue partially offset by a settlement timing difference on our storage related financial instrument. Our Oil Sands business continued to perform in line with previous periods as expected.

Turning to our financial position, Pembina maintains one of the strongest balance sheets amongst our peers and it's further supported by ample liquidity and financing flexibility. As at March 31st, 2017, Pembina's debt to trailing 12 months adjusted EBITDA ratio was 3.5 times.

We completed a very successful $600 million debt offering early in the quarter. And as of April 28, our $2.5 billion credit facility had approximately 200 million drawn leaving substantial room for Pembina to find its remaining 2017 capital program.

We also suspended our dividend reinvestment program as we expect to fund our current equity needs to our internally generated cash flows from new assets been placed into service. I will pass the call over to Paul, who will provide an update on growth projects within our condensate and crude oil value chain..

Thanks Scott, good morning, everyone. We are excited we have announced in early April, our Phase IV and V piece pipeline expansions for total capital of approximately $325 million. As we alluded to in the last call, continued customer demand for transportation services is driving these incrementally expansion.

We have regulatory and environmental approvals for Phase V, which is the 98 kilometer pipeline and clearing of the way right away for this line is 50% complete. Phase IV, which are two mainline pump stations is still subject to regulatory and environmental approval, we expect to place both these projects in the service in late 2018.

Moving to our Phase III expansion, construction is essentially complete, all of the pump stations are built and all of the pipe is in the ground.

Our teams are working on the remaining activities including commissioning the pump stations and completing the last few pipe wells and final hydrostatic testing of the two pipelines in the Fox Creek and Namao, Alberta segment of the project.

The overall project continues to track slightly under budget and we expect to place it into service on July 1st this year exactly eight weeks from today.

For our Northeast BC expansion the mainline is almost 50% complete and the Altares Lateral, which will connect to the NEBC expansion is progressing now that we have environmental and regulatory approvals in hand. Both of these projects are expected to be completed in the fourth quarter of this year.

At our Canadian Diluent Hub, we completed initial pipeline connectivity in currently flowing piece pipeline condensate volumes directly into the Access, Cold Lake and for Saskatchewan building and pipeline systems. We expect the overall project which is trending under budget to be in the service July 1st to align with the Phase III startup.

Over to you, Stu..

Thanks Paul, and good morning everyone. Subsequent to the quarter end we're pleased to have announced that we signed a non-binding letter of intent with the city of Prince Rupert were asked to assess developing a West Coast they could buy propane export terminal, in Watson Island D.C.

Under the letter of intent, we have begun to say the site assessment and engagement with key stakeholders including aboriginal communities. The terminal is contingent on the completion of design and engineering requirements entering into appropriate definitive agreement and received necessary environmental and regulatory permits.

This project in conjunction with our proposed integrated propylene, polypropylene production facility is evidenced of our efforts to find new markets for Western Canadian hydrocarbons, which should benefit our producer customers, local communities, partners and shareholders.

Development of our proposed PDH and PP P facilities progressing and we are finalizing our evaluations and approvals to move into the feed phase. Key deliverables of the feed phasing include regulatory applications a Class 2 cost estimate approached execution plan among other items.

On the heels of our Chevron announcement our teams continue to progress work on several initiatives in the Duvernay area with the goal of increasing our service offerings in response to customer demand.

Engineering is 90% complete all major equipment has been set on site and the sale of product pipelines have been installed for 100 million cubic feet per day Duvernay I facility.

at the field hub engineering is 80% complete with all civil and piling or finished both projects are expect to be brought into service in the fourth quarter of 2017 and the expected total investment is approximately $240 million.

We are also advancing preliminary engineering on a replica of our Duvernay plant - Duvernay II, as well of the development for substantial liquids handling and stabilization and connecting our facilities to the alliance pipeline.

We have now completed construction of RFS III and commissioning activities are underway to meet our July 2017 target in service date to align with our Phase III expansion.

Pembina continues to progress construction of instructor in support of the Northwest red water partnerships refinery overall the project is 80% complete and will be placed in through service throughout this year. Back to you, Scott..

Thanks, Stu. We are pleased with our strong financial and operational results so far this year and are especially pleased with our announcement to combine with Veresen.

Are approximately $4 billion of large scale growth projects slated to come into service in the next couple of months combined with the associated incremental cash flows, we remain on track to deliver EBITDA between $1.8 billion and $1.9 billion in 2018 as a standalone company.

With the Veresen transaction these numbers increased to $2.55 billion to $2.75 billion with such clear visibility to near term high quality cash flow growth and the potential close of the transaction I look forward to the exciting milestones ahead for our company.

Thanks once again to our staff, customers and stakeholders to make all of this possible. Before moving into the Q&A, I'd like to remind listeners that Pembina's annual meeting is scheduled for today at 2 P.M. at the Metropolitan Center in Calgary. We look forward to seeing those of you who are able to make it.

For those of you unable to attend we will be webcasting the presentation. The details on how to access the webcast are on our website at www.pembina.com investor center. I also wanted to remind listeners that Pembina is hosting its 2017 Investor Day on Tuesday May, 16th at One King West Hotel in Toronto. With we'll wrap things up.

Chris, please go ahead and open the line for questions..

[Operator Instructions] Your first question comes from the line of Jeremy Tonet of JP Morgan. Your line is open..

Good morning..

Hi Jeremy..

I just want to pick up on the last call of Veresen a bit and I was wondering if you could talk a bit more about the opportunities that you guys see coming together that you wouldn't necessarily have been able to achieve as standalone companies just want to go back to that point, if you could help us?.

Sure obviously we talking a lot about that this afternoon, but when we look forward, we had guidance from our board about diversification first and foremost, our company is really peace pipeline with upstream and connect the peace pipeline and what connects downstream of peace pipeline.

Really that is that that's our core asset and with this transaction, we have another core assets with Alliance pipeline, and so we've become a two outset company, which diversified as to three basins really versus just one, it's a currency diversification, a customer diversification and also we're now not just a hydrocarbon liquids company, but a gas company.

So when we look at all those facets of the deal, we believe our risk is lower, and I think the extension of having lower risk is you have a higher quality dividend with a higher quality dividend it fast reason your value should go up.

So besides all the synergies we've toted and greater visibility to 8% to 10% cash flow per share growth over a longer period of time just to digress there for a minute. We saw the 8% to 10% and we have for years, but we usually only see it two or three years out.

With this combo we can see it beyond that three year period we have visibility to growth wave further out. So all those things combined just make us it's really the theme of the Investor Day as we finally have the missing puzzle pieces that we didn't have before. So we're absolutely excited about it..

That makes a lot of sense.

Just turning to the operations for a minute here just wondering, if you could share with us what type of capacity utilization RFS II with that currently will RFS III be able to take volumes during the commissioning process that's underway, we're just trying to see are you guys relative to MVC are you guys at those levels or do you see upside there?.

So we're sitting here today coming into commissioning of the RFS III one of the beauties of our assets is the interconnectivity of the three fractionators when we come into a commissioning phase we will be able to move volumes and products across to ensure that we are commissioning effectively and safely.

The beauty of our assets at this point and what we've stressed in the past with RFS II and RFS III are 100% take or pay, contracts from a utilization perspective where we're running the utilization RFS I we're building in RFS II as we expect and then we've always expect as the Phase III pipeline comes into service and those volumes begin to grow and ramp up on the pipeline will have the same increasing utilization in RFS III as it comes into service as well..

That's great.

And then the - for the condensate hub entered service, what type of EBITDA or contribution to just keep to the quarter is that kind of achieving everything that you guys were looking to do with that project?.

Yeah, Jeremy, we're delivering barrels, but at this stage I don't consider it almost in a commissioning mode up until we get the full slate into service in July, so that EBITDA was definitely there in the first quarter, but it wasn't overly meaningful to the overall results, we'll start to see that pick up in Q3 of this year when that project fully goes into service..

Gotcha, great.

And then was just wondering for the Veresen deal, just wondering if there is an opportunity for PBA to play a part here, or do you see other opportunities the kind of increased your PBA flow and kind of improved liquidity on that side?.

Potentially, I think Jeremy, we've spoken before about is our New York listing meaningful and we got to confess not yet. But with the greater U.S. footprint and the possibility of Jordan Kolb and greater U.S. investment, because we finally have a low risk but meaningful entry into the U.S.

market, that starts to be something were thinking about for sure..

Got it. That's helpful. That's it from me. Thanks..

Thank you..

Your next question comes from David Noseworthy from Macquarie. Your line is open..

Hi. Thank you, and good morning. Congratulations on a great quarter..

Thanks..

Maybe I could start off on the comments you made about the board guidance to diversify, so in your opinion has the diversification you achieved you are sufficient or is there further objective to diversify into other North American basins?.

You know you can never be too diversified. I mean when you look, we're going to be David a third roughly NGL, a third gas and the third crude condensate. So the product diversification is like perfect. The U.S. diversification it's a good start. We've just seen too many times Canadian companies going into the U.S. or U.S.

companies coming in to Canada and making big mistakes. So when we looked at this, it's the same Canadian customers that we have now behind lines and we're very comfortable with them. So it was a way for us to enter the U.S.

in a more meaningful way, diversify its gas without taking, jumping in with both feet, I think Scott said we're not just stepping our toe in the water, but were dipping our whole flit in the water, but we're not, I don't think we're opening ourselves up to making the kind of traditional mistakes that we've seen over the past couple of decades with people thinking business is easier across the border and learning that it isn't..

Alright. Okay. Thanks for that. And then this question maybe for Scott.

Can you give us an update on your financial strategy target credit rating especially as we look post the Veresen transaction?.

Sure, David. I think post of Veresen transaction, our financing strategy doesn't change, will remain roughly 50-50 debt equity at a high level. I mean we're still as we've always said want to be strong BBB, what that means is the high-end of the metrics in the BBB range.

But we're not chasing - we're not chasing an upgrade nor we kind of trying to escape the line from the downgrade. We like to be in that strong BBB. From an actual execution perspective, we signal to the market with the shut off of the drip that no more external equities required.

We think that we can fund the capital program with both the credit facility, medium term notes and internally generated cash flow. And when you actually look at pro forma various in the slide that within our webcast and I believe is in our AGM today, it shows that in 2018, the free cash flow after dividend is sufficient to fund the capital program.

Now that's not probably how we'd finance, we put a little leverage on it, but I think it goes to show you the strength of the free cash flow profile once we close on Veresen..

Got it. Thank you for that.

And then just as we - I mean as we look forward with the NGL mix contracting, I was wondering if you give us any color both in terms of price and volumes, what you were able to secure for the upcoming season relative to last year?.

I don't have the numbers right here in front of me. We continue to - you know obviously the praising is going up substantially. So we're benefiting from the market uptick in the pricing. I don't have the exact numbers here in front of me David at this point..

Okay. So in term of - sorry, yeah..

David, we've done quite a bit of hedging. As our capital program isn't quite done, we came into the year and we sit quite highly hedged through the balance of the year..

And what's the plan for that going forward now, is there still a need to hedge given the combination there or do you kind of go back to your original way of looking out it's like we can let that float?.

Yeah. The frac spread business with our crystal ball right now, we're only going to be 1% or 2% fracs in terms of EBITDA composition by 2018 it's only 1% or 2%.

So there's really no reason to hedge other than if the business - we're going to shift that from a kind of a corporate requirement to a business unit decision on whether they want to hedge, but we certainly don't need the hedge post combination..

Yeah. Perfect. I do have other questions, I think I'll get back in the queue. Thank you..

Thank..

Your next question is from Linda Ezergailis of TD Securities. Your line is open..

Thank you. One or two maybe move from your NGLs to your crude oil midstream business. We saw some declines year-over-year and it looks like there's some kind of one time type items.

But how might we think of a run rate going forward, with this be somewhat indicative of what might we start seeing more volatility or what are the other considerations in place?.

Yeah. Linda, I think you're always going to be a little volatility quarter-over-quarter just depending on the timing of some of our settlements especially, as we've gotten more and more storage barreled into the system. But what I would suggest is from a modeling perspective look at 2017 to be very similar to the 2016 result.

I think we showed in our Investor Day last year depend - it's not really dependent on oil price, it kind of in that $160 million to $180 million range. We would expect that to increase in 2018 as we bring on the ENT and the CH facilities, but the underlying business is relatively consistent.

So from a full year of 2017, I'd look for it to be relatively consistent with 2016 and I wouldn't get overly concerned about quarterly results..

Okay. Thank you. And just might maybe moving on to your Prince Rupert to LPG initiative, I know you're busy on a number of fronts.

But I'm wondering if you had any discussions with the NDP party about that project and your other presence in the province and how might - I guess I'm wondering how the election might affect that project in particular and your other assets and projects in DC?.

I'll start Linda. So we've met obviously with the government of the day was our conversation at this point. We've not reached out and met with the NDP party particularly on this asset.

That's something we're not speculating at this point as to who, or the election results were we continue to be optimistic that the project is it's a valuable project for the local communities; it's a valuable project from an investment perspective from a tax perspective and from a job creation perspective.

And we hope that that will carry the day and that the people the local communities are welcoming and we have support of the city of Prince Rupert to evaluate this opportunity and we move forward there. So we hope that carries the day with whoever wins the election in the future..

Thank you.

And are you aware of any stakeholder groups that have opposed in the media or anything, I haven't picked up anything substantially at this point?.

No, none at all..

Okay. Great. Thank you..

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

Good morning.

I was wondering if - are you able to or have you received and able to share any general customer feedback that you received so far on the Veresen combination?.

Yeah, Rob, it's Mick. I've talked to all the CEOs of all of our major customers and it's been very positive so far with no concerns raised. We have outstanding customer relationships and they're positive..

Okay. Maybe just turning to the conventional pipe side in the Phase IV and Phase V announcement in addition to just general commentary you've had with customers, post that announcement and I mean probably premature to think about even future expansions.

But what's the general dialogue that's going on right now given the cloudy environment, but also with the TransCanada mainline deal and do you think that there's additional volume that's just waiting for greater clarity on the both the mainline deal to be approved and future expansion of NGL upstream in James River?.

I think that plays a big part, I mean there are a lot of factors that have been driving the producers, and their activity. I mean obviously the uptick over the last year in commodity prices was a positive, eagerest as of course for the gas side was - did put the brakes on somewhat, but where we're at we have a lot of capacity coming on.

So we're not - we're not constraining a lot of customers are still drilling to fill our capacity, but obviously the more eagerness eagerest on the gas as the better. I think the first piece that needed to be solved was the actual expansion with TransCanada in Martin area and Alliance is going to announce potentially expanded.

So I think everything points to known as commodity prices cooperate to at the same sort of trajectory on that growth. I think the gas prices have to ketchup with us frankly we've done enough capacity for a couple of years..

Okay, that's great.

And maybe if I can just finish with if I can turn to the PH and PP projects and with the Veresen combination you're going to increase your fee based EBITDA, so I'm just wondering does your approach on the project change; a, just overall; but b, in terms of contracting given that increased amount of fee based EBITDA does that alter how you think about your targeted contracting of half of your half i.e.

would you be willing just to go pretty much completely open at this point?.

Robert it's Stu, at this point I'd say no, we're still very, I think excited about the opportunity and we like our strategy as it's today with that 50% of the 50% mindset we continue to have what I would describe as preliminary conversations with key NGL producers in the province, who are looking for an excited about opportunities to participate, in that value up with us, and so as we go forward I think as sit's today our plan is consistent and unchanged we're excited about working with our customers to provide market access for these constrained products..

What our customers like about the way we do this if you think about the propane terminal where some of the volumes are ours, the PDH where we have shoulder to shoulder exposure and even if you think about at Jordan coal moving forward we can say a small amount of exposure there too, and the customers really resonate with them that if it's working we all make money together, and so even if we could told a whole all those businesses, I think it takes away a little bit from the alignment, which is we all win and lose together that I think that really resonates with our customers..

Great, thanks Mike. Thanks so much..

Your next question comes from David Noseworthy of Macquarie. Your line is open..

Just a quick question, you had - you mentioned a couple of new projects early perspective projects in your MD&A at this quarter, one just being the possibility of expanding Fox Creek and Namao to 55, I've heard correctly you kind of think you don't need much more there for the next two years.

Can you give us - and then I guess everyone was increasing the livability both in and out of the Edmonton North Terminal or North Terminal.

Can you give us any idea of kind of EBITDA and CapEx that might be associated to those projects?.

Hey, David, in terms of the ENT, we announced that with our budget back in November, so we have the details on that project back in our press release. And then I think as we talked about the Phase IV and V are the $325 million. We don't give guidance on individual projects.

The ENT was always included in the initial $600 million to $950 million range, so it's embedded within that range. And then the Phase IV and V would be on top of that, but we're not prepared to give individual product - project guidance at this stage..

Okay.

So that is an incremental, that's all part of what you had talked about before?.

So the ENT all been talking about before, but the Phase IV and V it wasn't new in the quarter we press really did a couple weeks ago, but it's at same kind of $325 million, $350 million in capital..

I think the main event there David that you know the nugget is, we can go up to that kind of from $420 million we've been talking about a few years up to $840 million with just pumps, so we can be very responsive in the Fox Creek, Duvernay area to incremental volume, the regulatory approvals of expanding existing pump stations, we don't need pipe, we can do it very quickly and you know works obviously excited about the cost profile there, the regulatory profile and most importantly the high level of service we can give Duvernay shippers..

Makes lot of sense.

And do you have a similar number for the lines of pipe with 20 inch?.

That was in the press release that was 260,000 barrels we're going incremental..

Right I'm in the ultimate capacity..

Oh, I got - sorry..

It's not powered, so there's still room on that's it the pipe, right. The same think we tend to take some risk on over sizing the pipe, because it's easier to put pumps in, so would be no different there..

Perfect, thank you very much..

There are no further questions..

All right everyone, thanks for sharing our excitement, I'm absolutely pump to give this presentation this afternoon. I've been dreaming about it for about 60 days, so I hope you can join us on the call, and again further what's got that thanks. Thanks very much for the support over the last year.

Give us the confidence to do this exciting transformational transaction and we look forward to see this afternoon..

This concludes today's conference call. You may now disconnect..