Good day. 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 speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. 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, 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 August 5, 2021, for the period ended June 30, 2021, 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 CAD 3.3 billion-CAD 3.4 billion, effectively positioning us in the upper half of our original guidance range. Excuse me. 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's systems and facility.
Relative to our original guidance range, these positive factors are being partially offset by stronger than expected Canadian dollar relative to the US 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 expense due to Pembina's rising share price and the resulting increase in the long-term incentive compensation cost. While supporting Pembina's 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 IX pipeline expansion to supporting customers' long-term development plans while furthering product segregation on the Peace pipeline system. Further decisions on the Peace VIII 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 CAD 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 a Cedar LNG project, a partnership with TC Energy Corporation, which envisions 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 platform 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. In recent weeks, Pembina announced and ultimately terminated its proposed acquisition of Inter Pipeline. The industrial logic of a combined Pembina and Inter Pipeline remains unparalleled, and the value creation between certain of our assets is impossible to replicate. While we are 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. For now, we are enjoying the receipt of a CAD 350 million termination fee. We are studying the options available to best invest the termination fee, including business reinvestment, debt repayment, and share buybacks. With that, I will pass it over to Scott to discuss the financial highlights.
Thanks, Mick. Pembina reported adjusted EBITDA of CAD 778 million for the second quarter, 1% lower than the same period last year. Within our core business segments, we saw 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 higher marketed NGL volumes. However, a portion of this improvement in marketing fundamentals was offset by an increase in the realized loss of 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 CAD 8 million of rail transportation costs to reposition propane to Corunna for sale in the fourth quarter of 2021 and the 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 US 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 CAD 1 move in Pembina's share price impacts compensation-related expense by about CAD 2 million. As well, comparatively, the current quarter was impacted by lower revenue at the Edmonton South Rail Terminal due to a one-time CAD 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 of 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, where the primary pricing benchmarks for the purchase and sale of commodity products occur in U.S. dollars. As part of Pembina's frac spread hedging program, we hedge the currency exposure embedded in those hedges. Over the last 12 months, the Canadian-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 1 cent change in the Canadian-U.S. exchange rate, it equates to roughly CAD 6 million of adjusted EBITDA, with CAD 2 million being attributed to the transmission assets and CAD 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 CAD 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 MMbpd 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, and 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. With that, we'll wrap things up. Operator, please open up the line for questions.
As a reminder, if you would like to ask a question, that is star followed by one on your telephone keypad. Once again, that is star one if you would like to ask a question. Your first question comes from Ben Pham from BMO.
Hi. Thanks. Good morning, everybody. I wanted to first start off with Alberta Carbon Grid. When you first announced that project, there's reference to timing with the Inter Pipeline acquisition. You still have that project in your package this morning. Is that still an opportunity for you regardless of you not moving forward on the IPL?
Yes, it is.
Okay. Could you then comment on the US dollar effects strategy, hedging, natural hedges, how you think about that going forward?
Hello? Ben, can you repeat the question? Sorry, we had trouble hearing you.
Yes. I had a question about the U.S. dollar effects strategy or hedging strategy as you think about the sensitivity, share some sensitivity levels and how do you think about that next 6 -12 months? Cam?
Ben, I think as we think about the U.S. dollar, for some time we've been talking about diversification of currencies as being core to our strategy, and through that looking at a more global enterprise, and that naturally occurring. Part of our strategy there has been obviously to hedge the marketing cash flows because, across the board, including the commodities, as well as some of the foreign exchange on the frac spread business, knowing 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. We've always been somewhat naturally hedged, a little bit less so in the last two quarters, which is why we've left the currency unhedged. As we look forward, it is always something that we are thinking about as we execute our strategy.
Okay, great. Maybe to close off on acquisitions, I'm curious, what do you think the biggest sources of acquisitions could be for you the next couple of years, even more consolidating the Canadian side? Some of those Canadian assets have come with U.S. exposure. Now as you look at the landscape, there's just not many names left in Canada. Do you need to go to the U.S. more? Is there still a lot of opportunity still you see in Canada for some tuck-ins? What's the thought process in the next couple of years?
Listen, we've talked about Advantage Canada. We believe that. I think it's playing out very well for us. The nice thing about Pembina is we're right in the middle of everything we look to acquire, we have tremendous synergy with. 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 sort of following the IPL merger that, given the fact that it's no longer proceeding. Just wondering actually how we should sort of be thinking about your PDH needs with respect to Pembina. Do you consider potentially pursuing a JV option with Brookfield to build both? Are you sort of looking at the amount of volume that you control? Can you potentially get an equity stake in a project through an MVC? I'm just kind of wondering what the strategy is on a go-forward basis and how you're thinking about it. 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. We never said that project was canceled. We said it was suspended. We said LNG and value-added projects remained in strategy. 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 customers' products, and that might be direct export of propane or turning propane into propylene, or propylene into polypropylene and then exporting it. It's all got the same root, to the extent we can build fee-for-service infrastructure in the petrochemical business, that's an avenue for us to create local demand and get our customers' products to the highest value markets.
Sometimes that's the product in its current form. Sometimes you got to liquefy methane to move it. All that remains in scope for us, but it has the same root, which is, we think that hydrocarbon demand, long after North America stabilizes, and we don't know when peak demand is in North America. Long after that, there'll be growing demand internationally, and we need to connect our world-leading basin to that demand.
Okay. The point is that you're probably still pursuing this option. Is that kind of the takeaway?
Yes. We've stated LNG and value-added projects, including production of polypropylene, provided they meet our guardrails. They are petrochemical infrastructure, and not necessarily being in the commodity chemical business, they remain in strategy, yes.
Right. Perfect. Maybe to just pivot to a quick discussion about your guidance that you just laid out. From our perspective, to you is a bit of a challenge. Yet, you definitely have raised your guidance for this year. I'm kind of curious what you're thinking about with respect to your exit rate for 4Q, as we sort of think about what that means as we set up for 2022.
We think we're building through the year. I think, clearly, 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. 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. We're definitely building through the year. Some of the quarterly results I've read, I think like CNRL, I think they bumped their capital spending for the year. We're starting to see people drill one extra pad, for example. One pad can be 100 million a day of gas and 20,000 bbl a day of liquid.
Those things matter, and people are reaching their debt targets earlier, and they're buying back their shares. I'm talking about our customers. As the generalists step into this space and share prices go up, at some point, there's a tipping point where producers are going to start to drill because that's a better investment than their shares. When they're trading at three or four times cash flow, you can't blame them for buying back their shares. Lots of wells have 100% rate of return, too. When that tipping point is, we don't think it's necessarily now until debt targets have been reached, but we think for a lot of producers, that's going to change. I'm kind of 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.
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 sets up for 2022 if the tipping point that you just articulated comes to fruition. Is that kind of the fair way to think about it?
Yeah, that's how I think about it. You heard the forward-looking information waiver. A lot can happen in this crazy world we're in right now. And listen, our second quarter is usually our weakest quarter. Last year was kind of anomalous because we made all of 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 Canadian dollar actually dropped a little bit, I think, from the end of the second quarter. Oil prices are stabilizing around $70 U.S. There's some positive things going on that had us raise the low end of our guidance.
Like I said, it was just a little early, I think, given what we're reporting now, to go beyond that. I think raising the low end of our guidance was prudent.
Perfect. Thank you very much. Really appreciate the call today, and have a great weekend.
You as well.
Your next question is from Robert Kwan from RBC Capital Markets.
Good morning. I'm going to come back to how you're approaching or how you approach acquisitions. You had IPL and other corporate deals you have, it's kind of fairly seamless. I know there is some friction, but seamless where the equity gets placed. As you think about doing discrete asset deals 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 Cam and Scott, who have a much deeper knowledge. If you look at the Kinder, I'll give you a real-life example. 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, CAD 100 million, give or take at that point. That was the bid-ask spread. Those are important dollars to retain between the buyer and the seller. If you look back at all of our large acquisitions, they've been funded with Pembina equity. If you look back, things went well for the people who took our equity. They generally got 100 cents on the dollar or maybe had 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. They've really rung the bell, they have really low ACBs, I would hazard to say if we'd have closed Interpipe, a bunch of those shareholders would've been very happy as well as the synergies unfolded. It's an important part of value sharing between buyers and sellers. Cam or Scott, do you have anything to add to that?
Maybe I'll just jump in here. Obviously, Robert, to the extent that we do anything in the public market, there's pretty significant friction costs that come along with that. Our preference has always been to work directly with sellers and use our shares directly. Backing up a step and I think 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, prefs, 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 advice of our third-party advisors, of our ability to raise pretty significant capital. 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. 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 is it's certainly something that we think a lot about, but to date, haven't run into any major roadblocks as it relates to that.
Got it. Just as part of the guidance, you had a quote tempering what you did just with lower contribution or expected lower contribution from certain assets. Just wondering, which ones are you referring to specifically? 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 tolls were slightly lower. Our Kinder tanks had slightly lower revenue this quarter. As we stated previously, there was some lower interruptible volumes on Vantage. I wouldn't say, Robert, it was any kind of one specific asset. It was kind of a small amount across a couple different assets.
Got it. If I can just finish with a question here on hedging. I think the 2022 hedges, based on your disclosure, were all added either in Q2 or subsequent to the quarter if you've had additional activity. Can you just frame, as best you can, what that pricing looks like for 2022? 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 to date.
Scott.
Yeah.
Sorry, go ahead.
Go ahead, Cam. 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. You can look across the frac spreads for Q2, relative to Q1, and recognize that they've been fairly consistent on a ratable basis. I think that's a good proxy for where the numbers are. Just looking forward to the realized losses, I have to think a bit about your answer. To put into context, the losses from this year have been realized, obviously, for hedges that were put on sort of throughout the balance of 2020, through till really the end of October of 2020 on a relatively ratable basis. If you look back, those levels are sort of close to half of where we are today.
I think that gives you a bit of a framework of how the losses might calibrate to what we're seeing currently and looking forward to 2022.
Okay. That's great. Thanks very much.
Your next question is from Robert Catellier from CIBC Capital Markets.
Hey, good morning. Most of these are going to be follow-ups. 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 like you were suggesting? If one of the projects hits, you can always finance later. I just wonder if you could provide more color on 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, I want to invest it in future projects, and others want to support the stock, because we think the yield is very high and it's a little underappreciated. That debate is alive and well. 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 a windfall and we weren't counting on that money 90 days ago, and here it is, and so have some fun with it. We don't know, honestly. Every use is a good use among the three choices.
Yeah, that's a fair 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, or what's the plan there?
Yeah. Great question. It can be repurposed, but I think as we've talked about it's under long-term contract with our partner there. Obviously that would be subject to a negotiated arrangement with our partner.
Yeah. It's way underused, Robert. You're spot on. It's a shame the rate of underutilization of that asset. That's on our to-do list.
Okay, great. Just last question there. Given the change in basis differential, have you seen much improvement in activity on Alliance? I'm thinking not the volumes, but the recontracting efforts.
We're seeing really positive signs and even before, probably more of the shorter-term improvement in the basis differential, we've seen an uptick in interest, so feeling directionally really positive about it, Robert.
Yeah, it's fitting. It's always hard when you got a little pinch, but if you look back over a long period of time, that pipe's in the money, particularly when you consider the valuable cargo of NGLs it carries. That's a great pipe. It's unique and things tend to revert to the mean there. 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 Alliance has with 10 BCF of LNG facilities still being constructed and commissioning. I think our longer-term perspective, and perspective we're seeing from the market, is that the U.S. is going to be, on a net basis with LNG exports, short. We feel like Alliance is, in 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?
On the geotechnical perspective, Patrick, there have been no surprises. I think 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 from last year that we were working through with our integrity group to get our heads around on when the spend needs to happen. On the operating cost side, it's all driven by Alberta power costs, pool prices.
Okay, great. Maybe on that front, Scott, thanks for the FX sensitivities, just on the power cost exposure, it looks like about two-thirds of your power costs are flow-through, if I'm reading that correctly. Maybe just some color on how far you're able to go out and hedge the remaining one-third, how you might be thinking about mitigating your longer-term exposure, perhaps a refresh on other cogen opportunities across the portfolio. That'd be great.
Good morning, Pat, Jaret here. With respect to the cogen, yeah, you're fairly accurate on the two-thirds that is recoverable. The cogen that's going in at Empress, that is a permanent marketing asset. Once that's in service Q4 2022, that'll mitigate a significant chunk of power there and exposure to those costs. We have two other sites that we're actively pursuing the engineering and doing our front-end FEED in our gas processing business with cogens, which will mitigate another pretty big chunk of power. I'll let Stu talk about the recent PPA that we signed go forward that'll help mitigate those costs in the future.
Hey, Patrick. Yeah, we're really pleased working with TransAlta on our first PPA contract, 100 MW of power. We obviously really like the pricing and at the same time, the credits and the benefits that'll come with that. That power is being built. We are on some short-term benefits and some additional power that are coming in, and we'll grow from 50 MW - 100 MW over the next two years. We're excited about the first 100 MW. We are active in conversation for additional PPA contracts. We believe it's beneficial to lock those in. We're seeing 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 cogens, but there's 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 great color, guys. Last one from 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, given it's a very fluid situation right now, any color on how sensitive the CAD 3 billion capital cost and overall returns might be to the pipeline project itself? That'd be great.
Yeah. As we went in, obviously we were aware of the challenges that Coastal GasLink was experiencing. We factored in 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 take it into account, Patrick, some cost increase there. We are working closely with, obviously, LNG Canada as the major contractor on the Coastal GasLink pipeline. There will be many conversations with Coastal GasLink themselves. We've taken that into account, the economics, and still believe Cedar is economically advantaged, from a cost structure perspective of delivering LNG into the Asian markets on a go-forward basis.
As you said, we've got lots of work to do as we work through the FEED 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 people and so we're anxiously watching. We do enjoy the benefit of the great work that the Haisla did in securing the capacity and 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, Kwan called it 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. I think it was 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. Have a great summer, everybody, and 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.