Pembina Opens Wallet for Oil Sands Business

Oil Sands Mining
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Pembina has unveiled a capital spending plan for 2010 of $240 million that places a priority on expanding its Oil Sands & Heavy Oil business.

"Our growth plan is on track and the investments we plan to make this year are aimed at generating long-term value for our investors without compromising our financial position," said Bob Michaleski, President and Chief Executive Officer. "This growth will generate new sources of revenue for Pembina by enhancing our integrated business model and by broadening the services we provide to customers."

Approximately $152 million, or about 60 percent of Pembina's 2010 capital budget, is allocated for the construction of the Nipisi and Mitsue Pipeline projects. The two projects, which support Pembina's Oil Sands & Heavy Oil business strategy, were initiated in response to industry demand for diluted heavy oil take-away from and diluent supply to, the region north of the Town of Slave Lake, Alberta.

Regulatory decisions relating to the projects are currently anticipated by September 2010 and construction will begin as soon as practical once approvals have been granted. Approximately 80 percent of the project engineering is complete and Pembina is on schedule to complete the projects in mid-2011. The two pipelines, estimated to cost $440 million combined, remain on budget and to date the company has entered into procurement agreements that have generated certainty for about 60 percent of the cost estimate. As of December 31, 2009, Pembina has spent approximately $76 million on the projects.

In addition to spending on the Nipisi and Mitsue Pipelines, Pembina's capital spending plans for 2010 include investing approximately $46 million in revenue generating projects within its Conventional Pipelines business, primarily to increase capacity at certain sites and improve the operational performance and integrity of its Peace, Drayton Valley and Western systems. Pembina's Midstream & Marketing business is expected to invest approximately $35 million on projects designed to expand terminals, storage facilities and gas processing facilities. The remainder of the 2010 capital budget supports various projects across Pembina.

Pembina continues to examine other investment opportunities which, pending approval of the Board of Directors, could increase the 2010 capital expenditure budget.

The 2010 capital expenditure plan will be financed through undrawn credit facilities, Pembina's Premium Distribution and Distribution Reinvestment Plan and cash flow from operating activities. Pembina's business model is expected to deliver a growing portion of cash flow derived from operating activities where returns are primarily investment driven and independent of commodity prices or capacity utilization.

"Delivering growth is just one priority for Pembina," said Michaleski. "As always, in 2010 we'll be equally focused on achieving good customer service and operational excellence across all our existing businesses. Safe, reliable and environmentally responsible operations drive down costs and provide the financial backbone for this period of expansion."

Pembina's growth strategy supports its plan to maintain current cash distributions of $1.56 per unit per year to investors through 2013 (see "Forward-Looking Statements and Information"). Pembina plans on converting to a corporation in 2010 and expects to maintain this cash distribution as a dividend once the new structure is approved by its Board of Directors, investors and regulators.

In 2009, Pembina's capital expenditures (unaudited) totaled approximately $424 million and were allocated as follows: Nipisi/Mitsue Pipeline projects approximately $69 million; Conventional Pipelines approximately $28 million; Oil Sands & Heavy Oil approximately $13 million; Midstream & Marketing approximately $314 million (this includes the investment to acquire the Cutbank Complex gas gathering and processing facility).


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