Pembina Pipeline Corporation (PBA) Q2 2021 Earnings Report, Transcript and Summary

Thank you for standing by, and welcome to the Pembina Pipeline Corporation 2021 Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instruction] I would now like to hand the conference over to your speaker today, Cameron Goldade, Vice President, Capital Markets. Thank you, sir. Please go ahead.

Good morning, everyone. And welcome to Pembina's conference call and webcast to review the highlights from the Second Quarter of 2021. On the call with me, today are Mick Dilger, President, and Chief Executive Officer. Scott Burrows, Senior Vice President and Chief Financial Officer, Harry Andersen, Senior Vice President and Chief Operating Officer, Pipelines, Jaret Sprott, Senior Vice President, and Chief Operating Officer, Facilities, Stu Taylor, Senior Vice President Marketing and New Ventures, and Corporate Development Officer and Janet Loduca, Senior Vice President External Affairs, and Chief Legal and Sustainability Officer. 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, 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 8/5/21 for the period ended 6/30/21, which is available online at pembina.com and on both SEDAR and EDGAR. With that, I'll now turn things over to Mick.

Thanks Cam. Good morning, everyone. We were pleased yesterday to announce that based on the year-to-date results and the outlook for the remainder of the year, Pembina has updated its 2021 Adjusted EBITDA guidance by raising the low end of the range. Adjusted EBITDA is now expected to be $3.3 billion to $3.4 billion, effectively positioning us in the upper half of our original guidance range. Similar to what we have seen in our year-to-date results, growing confidence in our 2021 outlook reflects stronger than expected full-year marketing results, net of significant realized hedging losses and modestly higher volumes across many of Pembina pipeline systems and facilities. Relative to our original guidance range, these positive factors are being partially offset by stronger than expected Canadian dollar relative to the U.S. dollar, increased operating costs due to higher integrity spending, and higher power costs in the conventional and oil sands pipeline businesses, and lower contributions from certain assets. In addition, the revised outlook reflects higher general and administrative expenses due to Pembina's rising share price and the resulting increase in the long-term incentive compensation costs. While supporting Pembina 2021 guidance update, stronger commodity prices and rising volumes also mean Pembina's customers are in ever better financial positions generating significant free cash flow and improving their balance sheets, with many reaching their leverage targets earlier than expected. This sets the stage we believe for increased drilling activity and increased capital spending by producers into 2022, with positive implications for Pembina's business. Constructive outlook for the WCSB and customer demand for incremental service led to the reactivation of the Peace Phase 9 pipeline expansion to supporting customers' long-term development plans while furthering product segregation on the Peace Pipeline system. Further decisions on the Peace 8 Pipeline expansion and the Prince Rupert Terminal expansion are expected later this year. The same outlook also supports our confidence in the development of a portfolio of growth projects totaling more than $5 billion. This quarter, Pembina announced three significant and transformational, and strategic partnerships with compelling ESG attributes. A partnership with the Haisla Nation to develop the Cedar LNG project, a partnership with TC Energy Corporation, which envisions the development of the Alberta carbon grid. And Chinook Pathways, a partnership with the Western Indigenous Pipeline Group to pursue ownership of the Trans Mountain Pipeline once that project is de-risked. Collectively, these partnerships support Pembina's global market access strategy, allow for meaningful indigenous participation in the Canadian energy development, and provide important large-scale infrastructure platforms to assist Alberta-based industries to manage their greenhouse gas emissions and contribute to a lower-carbon economy. We are proud of this work with communities and our role in creating meaningful solutions. Finally, in recent weeks, Pembina announced and ultimately terminated its proposed acquisition of Inter Pipeline. The industrial logic of a combined Pembina Inter pipeline remains unparalleled, and the value creation between certain of our assets is impossible to replicate. While we're disappointed with this outcome, we will continue to seek opportunities for growth through focused acquisition. I say that not as a signal for any imminent or specific targets but as a reminder that such acquisitions have been part of Pembina's success story over many years and will continue to be. The execution of Pembina's long-term strategy is never reliant on a single investment. The record continues to show that while acquisitions may be a tool to execute our strategy, we will remain disciplined, prioritizing shareholder returns and our financial guardrails. But for now, we are enjoying the receipt of a $350 million termination fee. We're studying the options available to best invest the termination fee, including business reinvestment, debt repayment, and share buybacks. With that, I'll pass it over to Scott to discuss the financial highlights.

Thanks, Mick. Pembina reported adjusted EBITDA of $778 million for the second quarter, 1% lower than the same period last year. Within our core business segments, we saw a strong performance from existing assets along with Prince Rupert Terminal, Empress infrastructure, and Duvernay III being placed into Service and Facilities, and higher interruptible volumes on the Peace Pipeline system. In the marketing business, Pembina benefited from higher margins on NGL and crude oil sales and the positive impact of the higher marketed NGL volumes. However, a portion of this improvement in marketing fundamentals was offset by an increase in the realized loss on commodity-related derivatives as part of our systematic hedging program compared to a gain in the same quarter last year. In addition, second-quarter marketing results were negatively impacted by approximately $8 million of rail transportation cost to reposition propane to Corona for sale in the fourth quarter of 2021 and first quarter of 2022, rather than for a sale in the second quarter. Further, a portion of the period-over-period differences are due to the timing of storage-related margins as the majority of 2020 storage margins were earned in the second quarter of 2020, compared to 2021, where storage margins are being realized evenly throughout the year. Improved overall results in the marketing business were offset by a lower U.S. dollar exchange rate, higher power costs, a portion of which were not recoverable in revenue, and higher general and administrative expenses due to higher long-term incentive costs, driven by Pembina's increasing share price. It is worth noting that in 2021, specifically, each $1 move in Pembina's share price impacts compensation-related expense by about $2 million. As well, comparatively, the current quarter was impacted by lower revenue at the Edmonton South Rail Terminal due to a one-time $11 million leasing adjustment made in the second quarter of last year that resulted in that quarter being better than it would've otherwise been. In contextualizing our second quarter and year-to-date results, as well as our outlook for the full-year 2021 adjusted EBITDA, it is worth pausing on the impact of changes in foreign exchange rates. Approximately 25% of Pembina's business is exposed to foreign currency, primarily the U.S. dollar. This exposure primarily resides in our transmission assets in the Pipeline division, as well as our marketing business with a primary pricing benchmark for the purchase and sale of commodity products that occur in U.S. dollars. As part of Pembina's frac spread hedging program, we hedged the currency exposure embedded in those hedges. Over the last 12 months, the Canada - U.S. dollar exchange rate has exhibited significant volatility. During the second quarter of 2020, the Canadian dollar averaged nearly $1.39, while in the Second Quarter of 2021, it averaged nearly $1.23. For the balance of 2021, for each $0.01 change in the Canadian U.S. exchange rate, it equates to roughly $6 million of adjusted EBITDA, with 2 million being attributed to the transmission assets and $4 million attributable to the marketing business. Furthermore, given the seasonal profiles of our marketing business, these sensitivities will vary when applied to quarterly results. Second-quarter earnings of $254 million were 2% lower than the same period in the prior year. In addition to the factors impacting EBITDA, earnings were positively impacted by a lower unrealized loss on commodity-related derivatives and lower current tax expense, as well as various other factors outlined in our second-quarter report. Total volumes of 3.5 million barrels per day for the second quarter represent approximately a 2% increase over the same period in the prior year. In pipelines, higher interruptible volumes on Peace and Cochin pipelines as well as higher seasonal volumes on Alliance were offset by lower interruptible volumes on Vantage, as market conditions exist for end-users to source their supply from the Redwater complex and lower volumes on Ruby Pipeline due to contract expiries. In Facilities, increased revenue volumes associated with Duvernay III being placed into service in the fourth quarter of 2020, was largely offset by lower supply volumes on the East NGL system, as these assets are now being processed at the Empress NGL extraction facility. Overall, however, as Mick highlighted, we have seen strong year-to-date results, and our outlook for the remainder of the year and into 2022 remains very positive, reflecting a stronger economic backdrop, robust energy prices, an improved outlook for producer activity levels. I'll now turn things over to Mick for closing comments.

Thanks, Scott. In closing, what has emerged over the course of an exciting past few months reflects continued progress towards a clear vision for Pembina's future. Our ambitions are being realized, and we look forward to continuing to build out our diversified and integrated value chain, providing an exceptional customer service offering, including global market access for their products. At the same time, we remain committed to providing industry-leading total shareholder returns, including a stable and growing dividend, and furthering our ESG strategy collectively in service of our employees, communities, customers, and investors. We'd once again like to thank all of our stakeholders for their support. And with that, we'll wrap things up. Operator, please open up the line for questions.

[Operator instruction] Your first question comes from Ben Pham from BMO.

Hi, thanks, Margaret. I just -- I wanted to -- I'll first start off with Alberta Carbon Grid. When you first announced that project as referenced the timing with the Inter Pipeline acquisition, you [Indiscernible] project in your package this morning. Is that still an opportunity regardless of the fact of you not moving forward and IPO?

Yes, it is.

Okay.

Okay. And then, could you then comment on the [Indiscernible] strategy, hedging, natural hedges -- how do you think about that going forward?

Ben, can you repeat the question? Sorry. We had trouble hearing you.

Yes. I had a question about the [Indiscernible] strategy or hedging strategy. As you think about the sensitivity -- [Indiscernible] sensitivity of [Indiscernible] goals and how do you think about the next 6 to 12 months?

Yeah. Ben, as we think about the U.S. dollar, I mean, for some time, we've been talking about diversification of currencies as being core to our strategy. And through that, looking at a global -- a more global enterprise for Pembina and that naturally occurring. So part of our strategy there has been obviously to hedge the marketing cash flows because across-the-board and including the commodities, as well as some of the foreign exchange on the frac spread business, knowing that that is some of the more variable cash flows in our business. At the same time, we have been in the past having a reasonably large U.S. dollar-denominated capital spend as well. And so we've always been somewhat naturally hedged a little bit less so in the last couple of quarters, which is why we've left the currency unhedged. But as we look forward, I mean, it's always something that we're thinking about as we execute our strategy.

Okay, great. And maybe to close off on acquisitions, I'm curious. What do you think the biggest sources of acquisitions could be for your next couple of years? You've been more consolidating the Canadian side. Some of those Canadian assets have come up with U.S. exposure. But now, as you look at the landscape, there are just not many names left in Canada. If you need to go to the U.S. more, there is still a lot of opportunities [indiscernible] see in Canada, for some tuck-ins, what's the thought process in the next couple of years?

Listen, we're focused on -- we've talked about advantaged Canada. We believe that. I think it's playing out very well for us. And the nice thing about Pembina is we're right in the middle of everything. Everything we look to acquire, we have tremendous synergy with. But I think most importantly, you can only buy things that are for sale. We have and continue to look at everything and see what has the biggest strategic importance to us, which generally relates to vertically integrating our value chain and pushing to tidewater on all products. Things that help us realize those two goals are most in scope.

Okay. Got it. Thank you.

Your next question is from Shneur Gershuni from UBS.

Let me start off with a discussion about PDH. Just following the IPL merger that -- given the fact that it's no longer proceeding, just thinking -- just wondering actually how we should be thinking about your PDH needs, with respect to Pembina. Do you consider potentially pursuing a JV option with Brookfield's to build [Indiscernible]? Are you sort of looking at the amount of volume that you control, can you potentially get an equity stake in the project through an MDC? I'm just wondering what the strategy is on a go-forward basis and how you're thinking about it -- and I truly recognize that you're probably very early in the process right now.

Yes and no. When we laid down the hammers on PDH the first time, it was really because of the pandemic and the lump sum turnkey contracts got away from us, but we never said that project was canceled; we said it was suspended, we said LNG and value-added projects remained in strategy. And so if you zoom out from that, for us to get products to tidewater, sometimes we need to turn them into something different. We're trying to create demand for our customer's products. And that might be direct exports of propane or turning propane into propylene or propylene into polypropylene, and then exporting it or -- it's all about the same route. To the extent we can build fee-for-service infrastructure and the petrochemical business, that's an avenue for us to create local demand and get our customers' products to the highest value markets. And sometimes, that's the product in its current form. Sometimes you've got to liquefy methane to move it. All that remains in scope for us, but it has the same route, which is we think that hydrocarbon demand long after North America stabilizes, and we don't know when peak demand is in North America. But long after that, there will be growing demand internationally, and we need to connect our world-leading basin to that demand.

Okay. So the point is is that you're probably still pursuing that with this option? Is that the takeaway?

Yes. Yes. We've stated LNG and value-added projects, including production of polypropylene, provided they meet our guardrails. They are a petrochemical infrastructure. And not necessarily being in the commodity chemical business. They remain in strategy, yes.

Right. Perfect. Maybe just pivot to a quick discussion about the guidance that you just laid out. From our perspective, to do with a bit of a challenge, but yet, you -- you've definitely have raised your guidance for this year. I'm curious what you're thinking about with respect to your kind of your exit rate for 4Q as we start to think about what that means as we set up for 2022.

Yeah. We think we're building through the year. I think our -- no, clearly the -- raising the lower end is a good thing. I know some analysts were hoping we would raise the top end, but it's still pretty early in the year. And boy, I sure don't know what I'm going to read in the newspaper next week. And so there's still a lot of moving pieces. We just didn't think that there was compelling evidence to do more than what we've done, but we're definitely building through the year. Some of the quarterly results I've read, I think like CNRL, I think they bump their capital spending for the year. So we're starting to see people drill one extra pad, for example, and one pad can be 100 million a day of gas and 20,000 barrels a day of liquid. So those things matter, and people are reaching their debt targets earlier. And they are buying back their shares. I'm talking about our customers. But as the generalists stepped into this space and share prices go up, at some point, there is a tipping point where producers are going to start to drill because that's a better investment than their shares. When they are trading at 3 or 4 times cash flow, you can't blame them for buying back their shares, but lots of wells have a 100% rate of return too. When that tipping point is, we don't think it's necessary now until debt targets have been reached. But we think for a lot of producers, that's going to change. And I'm waiting for 2022 capital guidance, like a kid waiting for Christmas, because I think it's going to be pretty exciting to see what the basin does next.

So the key takeaway here is that we should - outside of seasonal factors which are always there, we should - on the base business be seeing sequential improvements like 3Q versus 2Q, 4Q versus 3Q, and it’s sets up for ’22 if the tipping point that you just articulated comes to fruition. Is that the fair way to think about it?

Yeah, that’s how I think about it. I mean you heard the forward-looking information waiver, a lot can happen in the crazy world we’re in right now but, listen, our second quarter in usually our weakest quarter; last year was kind of anomalous because we made all our storage revenue in one month versus kind of ratably through the year, we feel pretty good about the way the year is going to finish. We're seeing some nice signs like Alliance is back in the money. The basis differential we haven't seen that. The dollar -- Canadian dollar actually dropped a little bit, I think from the end of the second quarter. Oil prices are stabilizing at around $70. So there are some positive things going on that had us raise the low end of our guidance. But like I said, it was just a little early, I think, with -- given what we're reporting now to go beyond that. I think our -- raising the low end of our guidance was prudent.

Perfect. Thank you very much. We really appreciate the color today, and have a great weekend.

You as well.

Your next question is from Robert Kwan from RBC Capital Markets.

Good morning. I'm just come back to how you're approaching or how you approach acquisition. You had IPO and other corporate deals; you have fairly seamless -- I know there is some friction but seamless where the equity hits the price. As you think about doing a discrete asset deal, where let's say the seller doesn't want to take equity, how much does the financing size factor into the magnitude of what you pursue just from that deal size perspective?

I'll just give you my layman's perspective, and then I'll turn it over to Cameron Scott, who has a much deeper knowledge. But if you look at the Kinder, I'll give you a real-life example. I mean, the bid-ask spread with Kinder after it was close to a year of negotiating was really conquered by the seller taking our equity. That was, I think, $100 million, give or take at that point, and that was the bit of spread. Those are important dollars to retain between the buyer and the seller. And if you look back at all of our large acquisitions, they've been funded with Pembina equity. And if you look back, things went well for the people who took our equity. They generally got 100 cents on the dollar or maybe at a point of leakage. But often, they actually held a little while and made money. Some of the happiest shareholders I have the privilege of meeting came in at Provident, and they've really, really rung the bell, and they have really low ECBs, and I wouldn't hazard to say if we had to close Inter Pipe, a bunch of those shareholders would have been very happy as well as synergies unfolded. So it's an important part of value sharing between buyers and sellers. Cameron, Scott, do you have anything to add to that?

Maybe I will just jump in here. I mean, obviously, Robert, to the extent that we do anything in the public market, there are pretty significant friction costs that come along with that. Our preference has always been to work directly with sellers and meet our shares directly. But backing up a step and answering the question more directly as it relates to kind of discrete assets. I think from our perspective, with access to the equity markets, the debt markets, hybrids, preps, what I can say is that we haven't run across a transaction that's been inhibited by our ability to access capital. We feel pretty comfortable, and not just our own opinion, but the advice of our third-party advisors of our ability to raise pretty significant capital. Now that being said, I think what has evolved over the last couple of years is our thinking around capital recycling, to the extent that we are limited by Capital Markets, or it makes sense. We have options as it relates to capital recycling. And also, over the last couple of years, we've developed some pretty significant relationships and could look at various partnerships or JV opportunities as well to help bridge financing. All that to be said, it's certainly something that we think a lot about, but to date, we haven't run into any major roadblocks as it relates to that.

Got it. Just as part of the guidance, you had a quote, temporary what you did just with a lower contribution or expected lower contribution from certain assets. Just wondering which ones are you referring to specifically? And maybe as part of that, can you just give some comments on the Ruby situation?

Who wants that? Scott?

Scott, you want to take that?

Sure. I think as we looked at Q2 specifically, we had slightly lower contributions as it relates to Ruby. Alliance volumes were okay. I think the interruptible [Indiscernible] was slightly lower. Our Kinder tanks had slightly lower revenue this quarter. And as we stated previously, there were some lower interruptible volumes on Vantage, so I wouldn't say, Robert, it was any kind of one specific asset. It was a small amount across a couple of different assets.

Got it. And if I can just finish with a question here on hedging. I think the '22 hedges, based on your disclosure, were all out either in Q2 or subsequent to the quarter if you've had additional activity. Can you just frame, best you can, what that pricing looks like for '22? I don't know if you can just do it against the elimination of the realized losses that you've had on the hedge book today?

Scott, maybe I can -- I can -- sure, go ahead. [Indiscernible]

No, you go ahead.

I was just going to say, I think your point is accurate in terms of when those hedges have been added. And you can look across the frac spreads for Q2 relative to Q1 and recognize that there have been fairly consistent on a ratable basis. And I think that's a good proxy for where the numbers are. And then, just looking forward to the realized losses, I think a bit about your answer. But to put into context, the losses from this year have been realized obviously, for hedges that were put on throughout the balance of 2020, through till the end of October 2020 on a relatively ratable basis. And if you look back, those levels are sort of close to half of where we are today. So I think that gives you a bit of a framework of how the losses might calibrate to what we see currently and looking forward to 2022.

That is great. Thanks so much.

Your next question is from Robert Catellier from CIBC Capital Markets.

Good morning. Mostly its going to be follow-ups, but I wondered if you could provide a little bit more color on the best use of the break fee. On the one hand, you have a lot of projects you could do internally, but some of the major projects have long development cycles. At what point does it make more sense to just buy back the stock quickly we're suggesting? And if one of the projects hits, then you can always finance later. I was wondering if you could provide more color on the -- really the best use of the break fee in the next six months.

Robert, it's the same debate we always have internally. The finance guys want to pay off debt, and I want to invest it in future projects, and others want to support the stock because we think it's -- the yield is very high, and it's a little underappreciated. That debate is alive and well, and I think we're sitting down as a management team and really assessing how and when our business grows. It would be a shame to buy back stock and then pay a big commission. Further to Robert Kwan's comment, pay a big commission to raise new money. You'd look a little foolish then. On the other hand, it's kind of a windfall, and we weren't counting on that money 90 days ago, and here it is. And so, have some fun with it, but we don't know, honestly. Every use is a good use among the three choices.

That puts a [Indiscernible] answer. A little bit more of a detailed question here, but just on the Alberta crude terminal capacity, can that be repurposed or, for example, for biofuels or anything else? What's the plan there?

Yeah, great question. It can be repurposed, but I think as we've talked about, it's under a long-term contract with our partner there. So obviously, that would be subject to negotiated arrangements with our partner.

Yeah. I mean, it's way underused, Robert. I mean, you're spot on. It's a shame the rate of under-utilization of that asset. So that's on our to-do list.

Okay, great. And just last question there. Given that change in basis differential, have you seen much improvement inactivity on the Alliance taking, not volumes, but the re-contracting efforts?

Yeah, we see really positive signs. And even before, probably more of the shorter-term improvement in the basis until we've seen an uptick in interest. Feeling direction that really positive about it, Robert.

It's fitting like -- it's always hard when you got a little pinch. But if you look back over a long period of time, that pipes and the money, particularly when you consider the valuable cargo of NGLs at carries. That's a great pipe. It's unique, and things tend to revert to the mean there. We'll -- it is nice, though, to see it come back in the money, I'm not going to lie. But it's doing what we expected.

On a more macro basis, we feel really strong in some of the structural advantages that align Haisla's 10BCF LNG facility still being constructed and commissioning, and I think our longer-term perspective we see from the market is that the U.S. is going to be on a net basis with LNG exports short. So we feel like Alliance is, on a longer-term basis, a really positive structural position.

Okay, thanks, guys. Have a great weekend. Cheers.

Your next question is from Patrick Kenny from National Bank Financial.

Hey, good morning, everybody. Maybe just to start with some of the higher maintenance and integrity costs in the quarter. Just curious if there were any unforeseen geotechnical issues or any acceleration of activities that might actually reduce integrity expense going forward?

From the geotechnical perspective, Patrick, there have been no surprises. Given the relatively dry spring season we had, it's been good from that perspective. The integrity work was really a rollover of some deferred work for last year that we were working through with our integrity group to get our heads around on when they spend needs to happen. And then, on the operating cost side, it's all driven by Alberta power cost pool prices.

Okay, great. And maybe on that front, Scott, thanks for the FX sensitivities, but just on the power cost exposure, it looks like about 2/3 of your power costs are flow-through if I'm reading that correctly. But maybe just some color on how far you are able to go out and hedge the remaining 1/3? How might you be thinking about mitigating your longer-term exposure? Perhaps a refresh on other co-gen opportunities across the Portfolio? That'd be great.

Good morning, Pat, Jaret here. With respect to the co-gen, you're fairly accurate in the 2/3 that is recoverable. The co-gen that's going in at Empress. So that is a Pembina marketing asset. So once that's in service, Q4 2022, that'll mitigate a significant chunk of power there and exposure to those costs. We're also -- we have two other sites that we're actively pursuing the engineering and doing our front-end feed in our gas processing business with co-gens, which will mitigate another pretty big chunk of power. And then I'll let Stu talk about the recent PPA that we signed go forward that will help mitigate those costs in the future.

Hey Patrick. So yeah, we're really pleased while working with TransAlta on our first PPA contract, 100 megawatts of power. We obviously really like the pricing and, at the same time, the credits and the benefits that will come with that. That power will -- is being built. We are on some short-term benefits and some additional power that are coming in and will grow from 50 megawatts to 100 megawatts over the next two years. So we're excited about the first 100 megawatts. We are active in the conversation for additional PPA contracts. We believe it's beneficial to lock those in. We see some positives on the pricing side, particularly in relation to the recent uptick in the power pricing that we've seen. We're very active on the larger scale -- power, PPA contracts. We're looking at smaller opportunities as well, as we look at some of our assets, and Jaret's mentioned some of the co-gens, but there are additional opportunities to pursue what we believe is some cheaper power pricing for Pembina's assets for both the benefit of Pembina itself and our customers.

Excellent. That's a great color, guys. Last one for me. Just on the Cedar LNG. Just curious how the Coastal GasLink cost overrun might jeopardize the economics, and I guess your chances of reaching a positive FID on the project. I know you still have until 2023 to make the call. But given it's a very fluid situation right now, any color on how sensitive the $3 billion capital cost and overall returns might be to the pipeline project itself? that would be great.

As we went in, obviously, we were aware of the challenges that Coastal GasLink was experiencing. We'd factored that into the economics. We still believe the Cedar LNG project, the benefit of a floating LNG project, our ability to have that built-in a -- I'll call it a lump sum environment overseas, to bring that here, the uniqueness of the size and the great work done by the Haisla in securing that capacity. We've taken into account, Patrick, some cost increase there. We are working closely with obviously LNG Canada as the major contractor on the Coastal GasLink pipeline working -- there'll be many conversations with Coastal GasLink themselves. But we've taken that into account and the economics and still believe SEDAR is economically advantageous from a cost structure perspective of delivering LNG into the Asian markets on a go-forward basis. So as you said, we've got lots of work to do as we work through the FID engineering. There'll be many conversations over the next little while. I believe those will be intense and accelerated as there's a lot of money on the ground already from many, many people. And so we're anxiously watching, but we do enjoy the benefit of the great work that the Haisla did in securing the capacity in the commercial arrangements on Coastal GasLink.

Okay, great. Thanks for that, Stu, and enjoy the rest of the summer, guys.

Thanks.

Thanks, Pat.

There are no further questions in queue. I would now like to turn the conference back to Mr. Mick Dilger for closing comments.

Well, thanks everybody for your support through the [Indiscernible] call at the IPL saga. Thanks to all my colleagues here for the great work. It wasn't what we hoped for, as I mentioned, but it was still a good outcome for us. And I think it was kind of a window into the future for Pembina and all the things we can do and we'll be focused on over the years to come. So, have a great summer, everybody, and I hope to see you in person sometime soon.

Bye.

This does conclude today's conference call. Thank you for your participation. You may now disconnect.