Executive Summary / Key Takeaways

• Pembina Pipeline Corporation is strategically leveraging its integrated midstream and transportation value chain in the Western Canadian Sedimentary Basin (WCSB) to capture robust volume growth and diversify market access, underpinned by significant capital efficiency in project execution.
• The company's commitment to customer-supported growth is evident in its $1.3 billion updated 2025 capital program, focused on pipeline expansions, PGI tuck-in acquisitions, and major projects like Cedar LNG and RFS IV, which are progressing on or under budget.
• Technological differentiators and strategic partnerships, such as the Prince Rupert Terminal optimization for LPG exports and the Greenlight Electricity Centre for data center power, are extending Pembina's value chain and enhancing netbacks and market positioning.
• Despite some near-term headwinds from Alliance toll resets and commodity price volatility in its marketing segment, Pembina maintains a strong financial outlook, with updated 2025 adjusted EBITDA guidance of $4.225 billion to $4.425 billion and a commitment to low to mid-single-digit annual volume growth through the end of the decade.
• Pembina's disciplined capital allocation, strong balance sheet (targeting 3.5x-4x debt-to-EBITDA), and growing dividend underscore its resilience and focus on long-term shareholder value, even as it prioritizes growth capital over immediate share buybacks.

Pembina's Enduring Foundation and Strategic Vision

Pembina Pipeline Corporation, established in 1954, has evolved into a cornerstone of North America's energy infrastructure, distinguished by its integrated value chain spanning natural gas, NGLs, condensate, and crude oil. This foundational strategy, developed early in the last decade, has positioned Pembina as the sole Canadian energy infrastructure company offering such a comprehensive suite of services. The company's extensive network of strategically located assets, coupled with its scale and access to premium North American and global markets, is critical for capturing new volumes and unlocking growth avenues.

The Western Canadian Sedimentary Basin (WCSB) is a key driver for Pembina, experiencing robust growth fueled by visible catalysts. These include expanding gas egress through new LNG exports, enhanced Tidewater egress for oil, and emerging demand from petrochemical facilities and data centers. This dynamic environment provides a fertile ground for Pembina's integrated service offering, which aims to connect producers and consumers globally.

In a competitive landscape featuring formidable players like Enbridge Inc. , TC Energy Corporation , Kinder Morgan Inc. , and Williams Companies Inc. , Pembina differentiates itself through its capital execution and operational efficiency. The company consistently delivers projects with superior capital efficiency on a dollar per unit of capacity basis, whether in pipelines or fractionation. This cost advantage is further amplified by Pembina's lower operating costs, amortized over its large contracted volumes, and its extensive upstream and downstream connectivity. While larger rivals like Enbridge Inc. and TC Energy Corporation boast greater scale and broader geographic reach, Pembina's integrated approach and specialized focus on NGLs and rail terminalling provide a unique value proposition, particularly in the WCSB.

Technological Edge and Value Chain Extension

Pembina's strategic advantage is significantly bolstered by its technological differentiators and innovative project development. The company's RFS IV project, for instance, is a testament to its capital efficiency, trending approximately 5% under its previous cost estimate and on track to deliver its expansion 15% to 20% lower than competing projects. This superior capital efficiency directly translates into a more competitive service offering for customers and enhanced returns for investors.

Further enhancing its market access and profitability, Pembina has approved an optimization of its Prince Rupert Terminal. This involves increasing storage capacity to accommodate Medium Gas Carrier Vessels, which is expected to expand access to additional global markets with higher realized propane prices. This optimization will also significantly reduce shipping costs per unit, thereby improving netbacks for both Pembina and its customers.

In a forward-looking move, Pembina is extending its value chain into new energy demands. The Greenlight Electricity Centre, a partnership with Kineticor, is developing an up to 1,800-megawatt gas-fired combined cycle power generation facility. This project, strategically located on Pembina's land adjacent to its Redwater complex, aims to support Alberta's emerging data center industry, which the provincial government targets for $100 billion in investments by 2030. The proximity of the Alliance Pipeline offers a potentially accretive expansion opportunity to provide natural gas supply to Greenlight, showcasing Pembina's ability to integrate new ventures with existing infrastructure.

Moreover, Pembina has secured sole extraction rights from the Yellowhead mainline, a 1 billion cubic feet per day natural gas delivery pipeline. The company is advancing engineering for an up to 500 million cubic feet per day straddle facility, estimated to cost between $400 million and $500 million. This facility is designed to extract approximately 25,000 barrels per day of NGL mix, with roughly 50% expected to be ethane, which will then be transported to Fort Saskatchewan for fractionation and sale. This initiative further solidifies Pembina's position in NGL extraction and marketing. To meet its 50,000 barrel per day ethane supply agreement with Dow Chemicals Canada , Pembina is evaluating options, including the addition of a de-ethanization tower at RFS III, which is expected to require less than $300 million in capital investment by leveraging existing infrastructure.

Operational Momentum and Strategic Expansions

Pembina's operational achievements in 2024 and 2025 underscore its strategic execution. The company fully consolidated ownership of Alliance and Aux Sable in 2024, expanding its presence in resilient Northeast U.S. natural gas and NGL markets. This move enhanced global market access for Canadian natural gas producers and is expected to generate significant commercial synergies, primarily from the Aux Sable business. The Phase VIII Peace Pipeline expansion was completed, adding capital-efficient capacity to accommodate growing WCSB production.

The PGI joint venture with KKR (KKR) continues to be a growth engine, securing tailored solutions for Montney and Duvernay producers. Recent transactions include acquiring a 50% interest in Whitecap (WCP)'s Kaybob complex and agreements with Veren for Gold Creek and other oil batteries, backed by commitments to fund future infrastructure development. These deals enhance asset utilization and enable future volume capture, benefiting the entire value chain. The weighted average contract life on approximately 1 million barrels of firm contracted volumes on Peace and Northern pipelines stands at 7.5 years, a figure that has slightly increased over the past two years due to successful contract blending and extensions.

Financial Performance: A Story of Resilience and Growth

Pembina's financial performance reflects its robust asset base and strategic execution. For the second quarter of 2025, the company reported adjusted EBITDA of $1.013 billion, a 7% decrease year-over-year, with earnings of $417 million, down 13%. This was primarily influenced by lower firm tolls on the Cochin Pipeline due to recontracting, reduced revenue at Edmonton Terminals following decommissioning, and lower NGL margins in the Marketing & New Ventures segment. However, these were partially offset by stronger performance on the Peace Pipeline system, higher Alliance seasonal demand, and increased contributions from PGI due to recent acquisitions. Total volumes across the Pipeline and Facilities divisions increased by 1% to 3.6 million barrels of oil equivalent per day.

Looking at the broader picture, Pembina delivered a record financial year in 2024, with annual adjusted EBITDA reaching $4.408 billion, a 15% increase over 2023. This strong performance carried into Q1 2025, which saw adjusted EBITDA of $1.167 billion, up 12% year-over-year. This was driven by increased ownership in Alliance and Aux Sable, favorable foreign exchange rates, and higher WCSB NGL margins. The company's full-year 2025 adjusted EBITDA guidance has been updated to a range of $4.225 billion to $4.425 billion, reflecting confidence in its operational trajectory.

Pembina maintains a disciplined approach to capital allocation and a strong balance sheet. The 2025 capital investment program has been updated to $1.3 billion, a $200 million increase, primarily due to bolt-on acquisitions at PGI and the advancement of core projects, notably offset by capital savings across other initiatives. The company targets a proportionally consolidated debt-to-EBITDA ratio between 3.5x and 4x, expecting to exit 2025 within the 3.4x to 3.7x range. While Cedar LNG's four-year build project will see debt accrue without immediate EBITDA contribution until late 2028, Pembina anticipates being free cash flow neutral to slightly positive over a multi-year horizon. The company's commitment to shareholders is further demonstrated by a 3% increase in its quarterly common share dividend in Q1 2025.

Competitive Landscape: Differentiating in a Dynamic Market

Pembina operates in a highly competitive North American energy infrastructure market, vying with industry giants such as Enbridge Inc. (ENB), TC Energy Corporation (TRP), Kinder Morgan Inc. , and Williams Companies Inc. (WMB). While these competitors possess extensive networks and significant scale, Pembina distinguishes itself through a focused strategy and distinct advantages.

Pembina's capital execution is a strategic differentiator, as it consistently delivers projects with superior capital efficiency compared to direct competitors on a dollar-per-unit-of-capacity basis. This translates into lower operating costs amortized over its substantial contracted volumes, providing a competitive edge. The company's extensive upstream and downstream connectivity, linking numerous existing assets to its infrastructure and offering multiple condensate delivery points and fractionators, provides customers with crucial redundancy that alternatives often lack. This integrated offering ensures reliable flow, a critical factor for producers, especially with growing LNG demand.

In the NGL sector, Pembina's specialized facilities, including its Redwater complex and the upcoming RFS IV expansion, offer competitive fractionation services. While competitors like Kinder Morgan Inc. (KMI) excel in broader pipeline and terminal operations, Pembina's focus on NGLs and its Prince Rupert Terminal optimization enhance its efficiency and market access. The Fort Saskatchewan area, where Pembina has significant infrastructure, remains highly attractive due to its diversity in rail connectivity, inlet storage caverns, and access to diversified North American and global markets, offering optionality that smaller, niche facilities in Northeast BC may not provide.

The recent negotiated settlement for the Alliance Pipeline, approved by the Canada Energy Regulator in September 2025, highlights Pembina's ability to work with stakeholders to ensure appropriate risk-adjusted returns while maintaining a competitive service offering. This contrasts with the "death by a thousand cuts narrative" some investors have raised regarding challenges to Pembina's incumbency, which management views as "temporary noise" against a backdrop of "rock solid" fundamentals driven by customer demand.

Outlook and Growth Catalysts

Pembina's outlook is anchored by strong business fundamentals and visible growth catalysts in the WCSB. The company anticipates low to mid-single-digit annual volume growth through the end of the decade across all WCSB products, supported by the robust economics of the Montney formation and oil sands operations. This growth is further propelled by new egress projects, including LNG and NGL export facilities, potential oil pipeline expansions, and new demand from data centers and petrochemical facilities.

Key projects are advancing with clear timelines. The Cedar LNG Project remains on budget and on time for a late 2028 in-service date, with remarketing of Pembina's 1.5 million tonnes per annum capacity expected to finalize by the end of 2025. The RFS IV project is on track for an in-service date in the first half of 2026. Final investment decisions for the Fox Creek-to-Namao Expansion and the Taylor-to-Gordondale Project are anticipated by the end of 2025 and Q1 2026, respectively. The de-ethanization tower at RFS III, crucial for the Dow Chemicals Canada ethane supply agreement, is also expected to reach FID by the end of 2025.

The Greenlight Electricity Centre, targeting an in-service date in 2029, is in active discussions with a data center customer, having secured sufficient megawatt allocation. This project represents a significant new avenue for growth, leveraging Pembina's integrated value chain to support emerging industrial demand.

Risks and Challenges

Despite a compelling growth narrative, Pembina faces several risks. The recontracting of the Cochin Pipeline in July 2024 resulted in lower firm tolls, impacting revenue, and the Alliance Pipeline settlement is expected to lead to lower future tolls, albeit within a negotiated framework. The delay in Dow Chemicals Canada (DOW)'s project construction introduces uncertainty regarding the in-service date for Pembina's ethane supply commitments, though Pembina has capital protection for its expenditures.

Increased competition in the WCSB is a persistent challenge, with other midstreamers and even producers building out infrastructure. However, Pembina remains confident in its ability to secure its fair share of volumes due to its integrated service offering and capital efficiency. Regulatory and political environments, while showing signs of becoming more supportive of energy infrastructure, still present complexities and potential delays for greenfield projects. Commodity price volatility, particularly affecting NGL margins in the Marketing & New Ventures segment, remains a factor, though Pembina employs hedging strategies to mitigate this exposure.

Conclusion

Pembina Pipeline Corporation stands as a resilient and strategically positioned energy infrastructure leader, adept at transforming WCSB's abundant resources into long-term value. Its integrated value chain, spanning diverse commodities and services, provides a robust foundation for growth, further enhanced by a commitment to capital-efficient project execution and innovative technological solutions. From optimizing propane exports to pioneering power generation for data centers, Pembina is actively extending its competitive moat and adapting to evolving energy demands.

The company's disciplined financial management, evidenced by its strong balance sheet and consistent dividend growth, underpins its ability to fund a substantial capital program aimed at customer-supported expansions. While navigating competitive pressures and commodity market fluctuations, Pembina's focus on long-term contracts and strategic partnerships reinforces its stability. For investors, Pembina offers a compelling blend of stable, fee-based cash flows, a growing dividend, and a clear pathway to sustained growth, driven by its unique integrated model and proactive pursuit of new market opportunities.