Good morning. My name is Laurel, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Pembina Pipeline Corporation's 2013 First Quarter Results. [Operator Instructions] Thank you. I would now like to turn the call over to Mr. Bob Michaleski, Chief Executive Officer. Please go ahead, sir.

Thank you, Laurel. Good morning, everyone, and welcome to Pembina's conference call and webcast to review our first quarter 2013 results. I'm Bob Michaleski, Pembina's Chief Executive Officer. Joining me on the call today are Mick Dilger, President and Chief Operating Officer; Peter Robertson, Vice President of Finance and Chief Financial Officer; and Scott Burrows, Vice President of Corporate Development and Investor Relations. Our agenda today follows our standard process. I'll spend a few minutes reviewing the first quarter 2013 results we released yesterday, provide an update on recent developments, including our $1 billion NGL infrastructure expansion, and then open up the line for questions. I'd 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, projections, risks and assumptions. I must also point out that some of the information provided refers to non-GAAP measures. To learn more about these forward-looking statements and non-GAAP measures, please see Pembina's various financial reports 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. Our financial and operating performance during the quarter was very strong and I'm pleased with how our year has begun. Overall, the results generated by our businesses benefited from the enhanced suite of services we are now able to offer and relatively position positive industry fundamentals. I would like to point out, however, that the quarter-over-quarter variances were largely due to the acquisition of Provident. As you all know, we closed the acquisition on April 2 of last year, so the results of these assets are included in the 3 months ended March 31, 2013, but not the comparable period of 2012. Compared to the same quarter last year, we saw…

[Operator Instructions] And your first question comes from the line of Zayem Lakhani with Canaccord Genuity.

I hope you can hear me clearly. I'm getting a lot of static on my end. But with regards to the lower depreciation on the conventional system, are there some onetime items included in the $8.5 million depreciation decline or is this a good run rate going forward?

Well, it's bit of a complicated story relating to our adjustments in asset retirement obligations because of the discount. The rate we used at the end of the quarter was higher than the discount rate at the end of 2012, and because of that adjustment, some of the assets that they are all related to were already fully depreciated. As for that result, we'll roll back [ph] the depreciation that we would charge them in previous years. So as discount rates continue to rise, you'll see that impact going forward in future years.

Okay. And just on the successful nonbinding open season, what -- can you provide a little more color as to what the next steps will be and the timing for this initiative?

Well, I think what we can say is that we are now -- we've assembled the information from the various potential customers here and we're just starting to evaluate that information. Next steps will be to actually to really to work forward or move forward with respect to trying to determine sort of the ultimate potential and work with those who have submitted their information to us. So in terms of timing, I think it's going to take us a couple of months to do that, but we're, as I say, we're quite optimistic with respect to that go-forward position on that opportunity.

Your next question comes from the line of Linda Ezergailis with TD Securities.

I'm just wondering if you could help us maybe stratify the crude oil midstream operating margin growth a little bit. I'm assuming that maybe half would be as a result of higher volumes and activity, and maybe the balance would be wider margins. But perhaps you can just kind of walk us through that, and we're already in May, so maybe provide some comments on what you see in Q2 and for the balance of the year in terms of margins?

Well, I actually don't have the breakdown, Linda, that you're looking for. I'm not sure, Scott, whether we have that. All I can say, Linda, really, is the first quarter does represent a pretty strong quarter. I think that I would -- what I would not do, though, is I would not say that results for the first quarter were -- we simply could extrapolate through to the end of the year because the market conditions clearly are changing. They change pretty much every day. So I think, if we [indiscernible] a good strong quarter as far as the month of April is concerned, I think it was a reasonable month. It was not as strong as March. So really, we're off to a good start. I think volumes will continue to stay strong through the balance of the year, that's our projection. We'll certainly, obviously, not see any significant increase in volumes until we get the capacity additions added. And so to the extent there's additional LVP product coming our way by the end of year, that will be positive for the midstream results. So I really can't give you a really good guidance as to what to expect for the balance of the year. I would say that it's looking like, again, another solid year in our Crude Oil Midstream business.

That's helpful. And can you maybe provide us with some similar comments around Empress East as well, and the propane pricing and other dynamics there?

Well, it's sort of interesting. We have the -- I think, in our quarter, we identified that Empress East actually had a fairly decent quarter. Propane prices tend to remain fairly very strong. Out east, I think they have inventories [indiscernible]. So... [Audio Gap]

Prices at Sarnia. And these hedges are based off of Mont Belvieu price. Whereas we're getting at least a 20% premium to develop this place right now at Sarnia. We're happy with our 50% hedge in our gas supply cost but we'll monitor that -- always monitor that going forward if we see an opportunity to take time to later on additional hedges, if that's appropriate.

And Rob, just in terms of pricing, I mean, if you look at Canadian inventory, they were -- they decreased 1 million barrels from the first -- over the first quarter, so we're 64% lower than the 5-year average. So really, that's what's driving the strong Canadian pricing. And in April, we had another cold month. So winter really continued on, all the way through April, so just now it's starting to warm up, and we're starting to see injections versus withdrawals.

Okay. That's helpful. And then my other question had to do with just the capital program. Now that you've had significant customer commitments to move forward with the large part of your program, I'm wondering what you do in the control risk on that $1 billion capital spend this year? And I was wondering if you could address both the materials component and the labor component separately. So, just an update on how you're managing risk on those items?

Mick will handle that one Rob.

Well, let's kind of work step-by-step. The pipeline expansions are mainly pump station additions. So we're putting in, I think, 12 or 15 pumps and they're identical pumps and we know what they cost, so we don't have a linear disturbance there and no landowner impact. So we -- it's quite predictable what those costs might be, most of it's material purchase. With the fractionator, we've been working on the engineering there for many, many months and we are, as you know, twinning an existing asset. So we're building something we've built before and we know how to operate. So again, it's not a science experiment. It's something that we're quite comfortable with. Saturn II would be exactly the same thing. We're twinning something that we've already built and that's working out very well. So when you think about all 3 of those components, it's -- a lot of it is greenfield but it's stuff we've done the twin of in the past. So it takes a lot of risk out of the equation.

A lot of the long lead items as well, Rob, have been actually ordered already. If you look at Saturn I, we have said that will be starting up here in third quarter of this year and that our expectations are [ph] it will be on time and on budget. Actually, Scott just mentioned that with respect to the fractionator Redwater II, we actually now have a permit from ERCB. We received that permit 3 weeks after we applied for it, so that's good for us. So I think the only area that probably is looking a little different than we thought, we've talked about Resthaven being delayed. There's some scope and design changes there that we are continuing to work on. And so I think the costs are going to be higher. And obviously, when you delay a project, it's going to cost more as well. But we believe that we have justification for adjusting our fees to deal with the modifications that are being made here on Resthaven. So all in all, Rob, we're pretty comfortable with our ability to deliver on the budget. I think, one thing, like we didn't spend as much money probably in the first quarter as we probably anticipated, so there could be a carryforward into 2014, but we're still saying $1 billion or just over $1 billion of capital for the year, which will be, obviously, again, a record for Pembina, but I think we're feeling pretty comfortable about it.

Your next question comes from the line of Robert Kwan with RBC Capital Markets.

Just on Saturn I, you mentioned that it's going to come in third quarter. I think that's a quarter ahead of its schedule. I'm just wondering, have I read that right, and if so, is that just contingency on timing or did something else go right and is that something that might be repeatable in terms of some of your other projects?

Well, I wish they all could be repeatable. I like to be ahead of budget or -- on time and on budget is really pretty attractive at these stages. I don't think there's anything in particular there, Rob. We've got through the pipeline construction in good order, the gas plant, things have worked out quite well there. I mean, it's a good facility for us. Things like land and all that was good. It was little different than when we did Musreau. Musreau was a very tight complex and things were quite difficult working conditions there but Saturn has been good. As I talked about in the call, I mentioned that Resthaven is going to be delayed. So you get some good, some not good, but overall, we're pretty happy with where we are.

And I guess, just with Resthaven, the delay, you'd mentioned, I guess, today and also previously, that some of that was due to scope changes, and you were just mentioning that you think you will be able to recover that in fees. Was that something that -- the scope changes, was that initiated by you or was that initiated by the customer?

Make that a bit of both. The customers are planning finding to have more liquids out there than first thought. And so some of the equipment related to liquid handling had to be upsized, which is inconvenient in terms of timing but very good because it's pointing more product to our systems, ultimately, through our fractionator. So that was, let's call it half. And the other half was just design improvements. We took over a design from a producer and that was going to initially do this project and they handed it over to us and we weren't quite comfortable with all the elements of the design, so some of it was changed by us to make the plant a little more robust and a little safer.

Okay. Just wondering if you could provide any additional color on the funding plan generally, but specifically, and we'll assume you get the approval on the prefs, your thoughts on using that product? It's maybe a little bit more expensive than your debt cost on an after-tax basis, but your thoughts on kind of using that sometime this year?

Funding requirements will dependent a lot on when our capital does get spent, but the pref market will be another option for us going forward. I mean, we have our $1.5 billion bank facility virtually unutilized today. So that gives us a lot of flexibility with respect to timing but we certainly see the pref market as being a good market today, in general, and it will be a good product for us to use going forward. But I can't say anything about timing at this point.

I guess, just on that, Peter, philosophically, you mentioned that it will be driven a little bit by timing, but the pref market's open or, just frankly, any funding option. How much -- how out in front do you want to get in terms of having a more conservative funding plan? Or is your thought that things will be accommodated for quite a while, and therefore, you really do want to just match it directly with the need?

Yes, I mean, in the short-term, we don't see rates rising but beyond the 18 months to year mark, there's a concern there that rates could well be higher. So as we draw down on our bank facility, I think it's prudent to lock in as much of that kind of long-term basis as we can to match the life of our assets. So we won't -- I mean, we're not likely to be drawing down on our bank facility to the full extent and we'll term out at, generally, perhaps shorter that we might have done a number of years ago.

Your next question comes from the line of David Noseworthy with CIBC.

I'm sorry, I missed some of your discussion on Empress East. I think I got disconnected, but just wanted to, in case I missed it, follow-up on what your expectation was in the second half of the year around Mariner East and Mariner West impacting Sarnia prices.

Sorry, David, I didn't catch that part. The impact on Sarnia pricing caused by?

The COD or the commencement of Mariner East and Mariner West pipelines?

No, we don't have a view on that at this stage, David. I think, from our perspective, we're going to opportunistically still continue to try to access that premium market for the second half of the year. And at this stage, I think as far as our forecasts are concerned, obviously, we're not -- we don't share our forecast but we do know that the overall NGL business unit will exceed our budget expectations for 2013. So I think we're still expecting a positive result for the balance of the year.

And then, again, just in case I missed some of this. The Resthaven, just looking at the numbers that you have in your MD&A, both for Saturn and for Resthaven, those looked a little lower to what I've seen in the past. Is it that you've excluded the pipeline associated to these projects? Is that why the CapEx is lower or have the costs come down dramatically?

No, David, that's correct. We've excluded the pipeline portion. So we're now just showing the pure plant capital.

Okay. Perfect. And should I just assume that, really, the overall cost relative to when the pipeline was included is generally the same in the case of Resthaven in that additional $35 million?

Yes, that's correct.

Okay. And have the owners approve that scope change?

We're in discussions currently with them, David. So they haven't as yet given the blessing. But we think we have a strong case for justifying an increase in the capital fee.

Yes, they have approved the scope changes for the increased liquids, but some of the design changes are still under review. So some of that has been approved.

Okay. So part 1, yes; part 2 still to go?

Right.

Yes.

Got it. And in terms of -- one of your creditors, I guess, TransCanada, recently announced Hartland Pipeline and terminal facility. It seems like kind of the project that's ideally suited for Pembina's asset suite. Do you see more demand for that kind of service offering or does the lack of an international export pipeline limit Pembina's ability to secure this kind of service offering?

Well, we view any takeaway capacity from the basin as positive no matter whether it's gas, NGL, the stuff we're working on with propane or crude, so any of those kinds of developments are positive. With the expansion plans we've announced so far, we believe there's enough takeaway capacity in industry. But beyond that, for our open season, it remains to be seen how large that will be and if there's sufficient takeaway capacity. So certainly, any announcements for other takeaway projects would be viewed positively by Pembina.

Right. Sorry, I mean, what I kind of meant more was like do you see an opportunity to build out when you start doing this oil -- crude rail oil to build out more terminals in the Hartland and pipeline connected into either Edmonton or Hardesty, that's similar as to what TransCanada announced?

Yes, we do.

Okay. Fair enough. And then just one last question with regards to Younger and that tie-in that you completed. What kind of volumes do you expect related to that tie-in?

I think it's about under $100 million a day. So it's not massive in the scope of Younger's nameplate but it's certainly helpful. The volumes there are building and we build -- optimistically, we hope that can continue but we'll see.

And will the economics around those volumes be similar to the rest of volumes going through Younger?

Yes.

[Operator Instructions] And with no further questions, I'll turn the call back over to our presenters.

All right. Well, thanks for those who participated on the call this morning. And for those of you who are in Calgary, we'd love to see you at our AGM this afternoon and we can carry on this conversation further. So again, thanks for participating and we look forward to speaking to you again soon.

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