Inter Pipeline Ltd. (PPL) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Pembina Pipeline Corporation conference call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Scott Burrows, Senior VP and Chief Financial Officer. Thank you. Please go ahead, Scott.

Thank you, and good morning, everyone. I'm Scott Burrows, Pembina's Senior Vice President and Chief Financial Officer. I'm joined by Mick Dilger, Pembina's President and Chief Executive Officer, to discuss this announcement this morning of our combination with Inter Pipeline. We are pleased to be joined by 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. Also with us today is Cam Goldade, Vice President, Capital Markets. This call is being webcast and will be available for replay on our website. Throughout this call, we will refer to an accompanying presentation, which also is available for download on our website. Before we start, 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, projections and risks. Further, some of the information provided refers to non-GAAP financial measures. To learn more about these forward-looking statements and non-GAAP measures, please see the presentation slides as well as Pembina's financial reports, which are available at www.pembina.com or on SEDAR. Actual results could differ materially from the forward-looking statements we may express or imply today. We will begin with Slide 4, which outlines some of the specifics related to the transaction. Without going through every point on the page, I want to draw your attention to a few key items. The overall transaction of $15.2 billion is comprised of the offer to acquire all the issued and outstanding shares of Inter Pipeline Ltd. in a share-for-share exchange, which values Inter Pipeline common shares at approximately $8.3 billion or $19.45 per share based on the closing price of Pembina's common shares on May 31, 2001, and the assumption of $6.9 billion of Inter Pipeline's debt. This offer represents a premium of approximately 17.8% to the value implied by the takeover bid announced by Brookfield Infrastructure Corporation. In addition to the compelling strategic drivers associated with this transaction, which we will touch on momentarily, the financial outcomes are equally attractive. Firstly, the transaction creates a stronger financial platform and adheres to Pembina's financial guardrails, adding significant long-term contracted cash flow from assets that serve customers with many decades of resource life. Secondly, we expect to realize meaningful operating and project synergies through the combination, which I will discuss in more detail later. Thirdly, the transaction will enhance the company's scale and capabilities with an estimated pro forma enterprise value of approximately $53 billion and cash flow after dividends of $1.1 billion to $1.4 billion. The combined entity will benefit from significantly enhanced cash flow generation, allowing the company to further accelerate its strategy. And fourthly, Pembina's monthly dividend will increase $0.01 per share or 4.8% to $0.22 per share following the completion of the transaction. Further, following the successful commissioning and in service of HPC in 2022, incremental cash flow from project is expected to support a further increase to the monthly dividend of $0.01 per share. To summarize, Inter Pipeline shareholders will benefit immediately from an offer that provides a premium to the current trading price, an immediate 175% increase to their monthly dividend upon closing and by sharing in the synergies and enhanced growth potential arising from the combined company. With that, I will turn things over to Mick to outline a number of the additional benefits and future potential value creation associated with this transaction.

Thanks, Scott. Good morning, everybody. I can't even begin to explain how excited I am about this combination. And before I get into it, I want to thank the people on both sides who worked tirelessly over the last 10 days to bring this transaction over the line. Today, I'm going to talk about the amazing asset integration, expanded customer service offering, the leading condensate delivery system that we're going to have with the combined company, the derisking of HPC with Pembina's vast supply, the meaningful operating and project synergies that will come out of this transaction, the strength of the financial platform, the scale and the capability of the combined company, the readily actionable growth projects, the huge growth opportunities that come together with the companies, and the ability to invest in the sustainable future and be part of the solution towards a lower carbon economy. But first, this is going to be fun. I've done this now a few times, and it's just -- the industrial logic is literally heavy-duty industrial logic. And so what I'm going to do here is tour you through by business unit what the combined businesses look like. You're all familiar with Pembina's Conventional business trending up and down that BC-Alberta border where all the good geology is all the way up into Northeast BC. We're going to add Inter Pipe's assets. And you can see that, that trend continues right along the rocky mountain trend. And now we have the same business, both Conventional pipeline business units but servicing different parts of the province. So the same yet different. What does that mean? It means economies of scale. It means combinable, but it means different parts of the province and more diversification. Next, we're going to look at oil sands. So we're proud of our oil sands business. As you know, we've got 2 large-scale synthetic crude oil pipelines. We've got the Nipisi pipeline, move about 1 million barrels -- have about 1 million barrels a day of capacity. It's a great business. We add Inter Pipe's business. Look at the fit. I mean it's perfect. Operating in the same corridors. We're going to have operating cost synergies. We're going to leverage the infrastructure. We've got a huge amount of spare capacity to grow with the oil sands and also to position ourselves for future opportunities. Next slide, gas services. We have a number of world-scale processing centers distributed, again, along that geologic trend. All the way down to Empress where we extract and then all the way down into Chicago where we have, of course, our working interest in the Aux Sable facility. Next slide. And there's Inter Pipe. So they're in the places we're not. So we straddle gas going east; they straddle gas going west into the Pacific Northwest in California. That straddle plant, I think, is the largest plant of its kind in North America. And they also take off gas out of the oil sands. So again, the same business but in different parts of the province with different geology and behind it. Next slide. Our NGL business, of course, the epicenter is Redwater complex. We have a new frac down in Empress. We have the frac up at Younger. Our terminal businesses and NGLs, we've just commissioned and are super proud of what's going on at Prince Rupert. And then, of course, the Vancouver Wharves that we're slowly developing is down in the Vancouver area. So terminals, fractionators were about 350,000 barrels a day. Next slide. And then we add ROF that we currently operate. It's the sister plant of Redwater. It gets us to almost 400,000 barrels a day. And of course, that center is like a condensate machine, and HPC is right beside it. And just down the road from HPC is where we are going to build our petrochemical facility. So the leverage there both on fractionation but also the scale we can bring to the petrochemical business is unprecedented. Next slide. And there it is. There is the -- that's a beautiful thing. That is reaching all the best geology in the Western Canadian sedimentary basin. That's oil sands. That's conventional. That's gas transmission. That's processing. That's fractionation. That's exports. So the combined company, 6.2 million barrels a day of capacity. That's almost exactly a double of what Pembina had, 8.8 Bcf, up from 6.1. 390,000 barrels a day of frac capacity, up from 350, almost 40 million barrels of storage. That excludes Europe. Europe is another 32 million barrels. So that's a lot of barrels. A really meaningful acceleration of Pembina's strategy through the combination of Inter Pipe and advancement of the petrochemical capacity. You'll recall, when we delayed our project indefinitely that we said petrochemicals remains in strategy. It just wasn't the right time for us. And now it is the right time. And our great start on propane exports, we plan to grow that as well. And let's not forget the gas and liquids egress down to Aux Sable into the best market in North America for gas. Next slide. Now I'm going to take you through -- so that was the industrial logic of the steel and the geology. I'm going to take you through what it means to our customers, and that's one of the most exciting things. So you know we call our service offering the Pembina Store. And so there we go. The first value chain is the gathering and processing of the gas value chain. We take gas from the field. We deliver it all the way to mainline extraction through various pipelines. And the growth of the gas value chain for us will be LNG. It will be methanol. It will be gas to electricity, which we're already doing through a number of cogeneration plants. So that value chain is going to keep getting better and it's going to keep getting longer. And every time it gets longer, we add value to products. Next slide, please. Then we have the NGL value chain, which is the second big arrow. So NGL come out of our gas value chain. They feed our NGL value chain. We've got pipelines, all 4 products, C2+, C3+, crude and condensate, which are in the next value chain. It goes through our pipes, through Redwater, distributed, now exported. We have Vancouver Wharves. And so we are exporting NGLs and other products all over the globe now. Next slide. We've got a little bit of a gremlin here. There we go. Oil value chain, all the way from field terminals through now condensate. Think about condensate. We're gathering condensate in Northeast BC. We're delivering it to -- through our Peace Pipeline to CDH where we hand it off to the Polaris system, the leading diluent distribution system in Canada. It gets the full ride up there. It gets blended with bitumen back now to the recently acquired Kinder tank. So we're taking that product all the way from Northeast BC right up to Fort McMurray back down and handing it off to egress pipeline. So that's a tremendous service offering, a one-stop shop. Next slide. Got a little bit of a gremlin here. All right. Here we go. That's the good part. So these are the overlay of Inter Pipe on our value chain. And so more mainline extraction, more fractionation. You add HPC to the NGL value chain, turning propane into propylene into polypropylene, huge enhancement. So now we can access higher-value markets internationally, and we can convert the product, add value to the product. It can be exported or sold domestically. More condensate services, more oil sand services, more crude oil, more terminals. And so it's doing more of what we do but also expanding the value chain. The future of the NGL value chain is adding value to NGLs, isobutane, alkylate, and it just keeps on going. We're -- by combining the companies, we can truly do things that neither of the companies could do on their own. Next slide. Here we go. Up one, please. Now let's look at the opportunity set. Under construction in combination, we're just over $5 billion. Of course, the big adder there is the HPC facility. We were about $1 billion there. The rest is HPC under construction. You know about our deferred projects of $800 million. I'm not going to go over those again. The projects that become readily actionable upon closing or to tie Cochrane into our Brazeau system and the trip up to Redwater. Our isobutane project, those become readily actionable. But combined projects, we have another $6 billion now. We have tanks. We have cogeneration. We have gas plants. We have export terminal expansions on multiple products. We have ROF integrated solutions. We have additional opportunities at RFS. All that Cochrane C3+ has to get frac somewhere. And it's going to be fracked at RFS. We have pipeline expansion. So our current portfolio, our readily actionable portfolio and our long-term portfolio are greatly enhanced through this combination, not just as an opportunity set but also in regard to the ability financially with our new scale to advance these projects. Next slide. Now we've made a commitment to lower our intensity of all of our businesses. And we've been taking concrete steps in that regard over the last year. And you're going to hear a lot more about this from Pembina as we work towards closing and beyond in the near term. We just, as you know, signed a long-term agreement for the purchase of wind energy. We have cogen built. We have another one under construction. And I'd hazard to say we're 4 to 5 more opportunities with the combined companies. We are handling hydrogen right now. That's within our skill set. We are studying carbon capture. We're going to do a pilot at Redwater. We're very well positioned to learn there. We are very good at sequestration. And our LNG projects, as they arise, will displace coal globally. And so we are committed to being part of the solution towards -- moving towards a lower carbon economy. Next slide.

Thanks, Mick. Near-term synergies associated with the transaction are expected to immediately contribute to meaningful adjusted cash flow per share accretion upon closing. On a run rate basis, pretax synergies are expected to average $150 million to $200 million annually. As shown on Slide 14, approximately $100 million to $150 million of annual synergies will come from lower general, administration and operating costs and are expected to be realized in the first year after closing. The remaining $50 million of annual synergies will come from commercial and product optimization, including optimization of the Redwater complex, and are expected to be realized in the second year after closing. Beyond that, we expect to realize further long-term synergies through higher capacity utilization and asset repurposing. Turning to Slide 15. Pembina remains committed to building the business within our long-standing financial guardrails. This transaction further strengthens our financial platform by adding significant long-term contracted cash flows and long-lived underlying assets to Pembina's existing strong foundation. Notably, HPC will represent less than 10% of the combined company's adjusted EBITDA once HPC is in full service. Further, the share-for-share exchange will maintain Pembina's strong balance sheet with pro forma adjusted funds from operations to adjusted debt under rating agency methodology of approximately 17% to 19% over the next 3 years. Further, as shown on Slide 16, the combination of Pembina and Inter Pipeline further diversifies the company by commodity type through the addition of Inter Pipeline's PDH/PP petrochemical business. And our counterparty credit quality remains extremely strong and relatively unchanged.

There's a lot going on, on this slide. I'm going to break it apart quickly. The blue bars over the years from '08 all the way to the current state. This is Pembina only. We call that the stairway to heaven. These are per share metrics, EBITDA per share. The little diamonds are dividends per share. And we've signaled with this press release that upon closing, we're going to raise our dividend and then further signaled that next year upon HPC coming to service, yet another dividend increase. So those blue diamonds, what you see is what you get. The red line is the price of oil; the smaller bluish line, gray line, the price of gas. And you can see kind of no matter what's happening with the commodity price, we're still climbing that stairway to heaven. The shaded areas, financial crisis, commodity price collapse, COVID-19, some of the worst things the world has seen. We powered through those. We kept raising our EBITDA per share, our dividends per share through those -- through all that adversity. But what I really want to draw your attention to today is what happens after we do a synergistic combination. You look at Provident, we had a nice uptick in EBITDA per share, dividends per share after that. After Veresen, same thing. Kinder Morgan, even though we headed straight into a pandemic, our metrics kept improving right through the pandemic. And so the thought I'm going to leave you with is what you see is what you get. And that's our prediction of the future is the blue diamonds and the blue bars are going to keep on this trajectory on average. Next slide. So as we kind of think about everything rolled up, we're highly integrated. These businesses are readily combinable, and we're going to have tremendous synergies, both operating synergies and project synergies. We're going to enhance the Pembina Store, the customer service offering. We're sitting on top of, with the combination, even longer life geology with the oil sands. And something a little bit different than Pembina alone is the declines in that geology with the bigger oil sands footprint is dramatically reduced. And we've seen the benefits of that coming out of the pandemic that the oil sands only declined a couple of percent and are now back up there compared to other basins on the planet. Our scale, our financial strength, our asset diversity, as I said, the same businesses but in different parts of the province, is going to really enhance our ability to make money through additional adversity. We're going to stay steadfast in honoring our financial guardrails. And our ESG focus is going to become more and more apparent, as this year moves on and into future years that we will be part of the solution. So we are going to stay on strategy. This combination enhances our journey on our strategy. We're going to keep enhancing value to products, customer services and bring products to more favorable markets, benefiting our customers with higher netbacks. I guess with that, we'll open the line for questions.

[Operator Instructions] And your first question comes from the line of Jeremy Tonet with JPMorgan.

Just wanted to check on what you're able to say, I guess, with the history of this all coming together. Was this process really kind of born on out of the strategic review the IPL is undergoing now? Or have you kind of thought about this in the past? Just wondering, anything that you're able to say at this point kind of on the history of how this came together at this point.

Jeremy, I've been thinking about this for 10 years. It's my third try, all right? So we know the Inter Pipe people well. They're great people. We're partners with them at ROF. They've done some great things. We've tried to combine these companies in my lifetime literally 3 times at the infancy of IPL back when they are an income fund. When I was with a different company, we tried -- what year was that, guys? I don't know, 8 years ago. It's how I met Burrows, didn't work. That's how I met Harry, too, by the way. And now this is kind of third time lucky. I mean the industrial logic has existed. I mean it's a beautiful thing. It's -- the timing is ripe. Scale matters. Service matters. And the synergies here are incredible. We always knew they were. This is just the right time.

Got it. That's helpful. And then maybe I'm getting a bit ahead of myself here, but just wondering, if this deal closes as it is today, would the company look the same going forward? Or are there maybe more steps that could be taken such as IPL have been talking about getting a partner for HPC? Or selling -- European storage was partially sold? Or are there other steps that could happen upon a successful completion of the merger here?

For sure. Like obviously, there's -- beyond HPC and the effort it takes to run a plant of that size and complexity, there's a lot of fixed costs there administratively, operationally. And if you can add another plant, I mean, you're amortizing those costs by half, right? And so there's huge synergies. I mean the CKPC project becomes much, much more doable. The IPL people are bringing an organization that we don't have. We had a skeleton organization with CKPC. We never got near as mature as they are. We've got lots to learn from them. And listen, our plant in a box like 5 kilometers away. We got $300 million laying on its side in the yards there with towers and -- at the right time, when we learn what there is to be learned after we commission here, there's -- the odds of doing another project there go up a lot. Obviously, we have not been talking to our Kuwaiti partners through this confidential process. That's one of my calls after I get off this call. So we'll see what's possible. But -- yes, and then Europe, I mean, talking to Chris Bayle, he had plan to sell Europe. We haven't studied that. It looks like a good business. Is it strategic? We'll see. But that was on their radar, and so we'll investigate it, Jeremy. But I could -- the guys shortened my press release from 14 pages to 5. So just leave it at that.

Got it. Maybe one last one, if I could. If -- this maybe brings back one of those pages. But just wondering about the synergistic CapEx as you talked about, $450 million to achieve $100 million of EBITDA. It seems like quite a high rate of accretion on that spend. Just wondering if you could provide more details on what gives you the confidence on, I guess, that level of return just off with what you laid out there.

Yes. Listen, Jeremy, that's not the last opportunity. Those are just ones that we felt we could use as a straw man. Cochrane's sitting there, and it's not very far from our Brazeau pipeline. So we could just connect it. We got the capacity and we can bring it into Redwater, and that makes a huge amount of money. We get to market that product, which IPL of the C3+, they don't get to do right now. We stream that product to HPC. They couldn't -- they didn't have the supply for HPC on their own. And now they -- we're essentially coming as the meat in the sandwich that they were missing to connect all that. And so you're going pretty much on existing assets other than a little extension from Braz. And so I've been saying for years like the strength of the value chain is something is always easy to expand. And in this case, it's just the pipeline that needs to be expanded, and everything else is there. And so it's a brownfield, but it's almost like just filling spare capacity. And then on the isobutane, turning butane into iso and normal, when we finally got to compare notes with Chris, we are all smiling. We are working on the same stuff, and they are working on that, we were working on that. And now we have this massive supply of butane together. That project will lead to an alkylate project, we hope, and the economics of that look the same as this, and we can start to produce octane to add to cleaner burning fuels. I'm just sprinkling ideas. There's a bunch of these. The synergies -- the run rate synergies are super exciting. The project synergies are even more exciting to me.

And your next question comes from the line of Shneur Gershuni with UBS.

I was wondering if we can start off kind of a conversation or a bigger-picture conversation on the synergies. And I appreciate the layout on Slide 14 where you talk about the lower general expenses and so forth. But as I sort of see your assets sitting together and I think about the industrial logic that you just laid out, I would think that there would be, even without spending a lot of capital on growth projects but more like smaller optimization capital, that there could potentially be some long-term revenue opportunities even within the existing assets. I was wondering if you can sort of give us a flavor or taste of what that potential is beyond kind of the $150 million to $200 million just on sort of the assets working together and the fact that they kind of hand-in-glove type of fit that you have put together here.

Yes. That's an insightful question. The answer is yes, absolutely. Listen, when you have breaks in the value chain, there's leakage, right? Like when IPL can't connect Cochrane to HPC and they need to rely on a whole bunch of intermediaries, there's a lot of leakage, revenue leakage. And so when you connect the value chain, that leakage goes away. And normally, what that means is for every dollar of fee-for-service income you're getting by connecting those, you probably have another dollar of marketing income. And so absolutely, I think we're just getting started on the revenue synergies. And as we fill in the value chain and we connect what is not currently connected and we -- and IPL's propane can now get to global markets, for example, right, beyond what they would needed for HPC, the rest can go into our unit trains out to Prince Rupert and fetch higher international markets, by way of example. So that's a huge synergy, and they have a lot of proprietary propane. So the combined company will capture that. But I could go on and on. We're going to keep filling in the value chain. We're going to capture that leakage for our account and for the account of our customers. And if you're a customer and you're getting a higher netback because of the industrial logic that was on those maps, then you're going to phone us next. You're pretty much compelled to phone us as you're just going to get a higher price. And that's been what we've been trying to do for 10 years, and it's starting to manifest where our marketing pool is getting better pricing than anybody else. With HPC converting those products, it's really going to end up with much higher netbacks propane for our customers there as well. And we're not done. We would like to have the same international value chain on natural gas, and we're working -- and so was Inter Pipe, by the way, working on different opportunities to enhance the value of all hydrocarbons.

That makes perfect sense. Appreciate it. I could probably go on and on asking questions about it. But maybe one specific follow-up question. I understand that it's subject to regulatory approvals, the approval of the Court of Queen's Bench of Alberta. I was just wondering if you previewed this transaction at all with the rating agencies and other large shareholders. I believe an offer was made for Inter Pipeline recently. Just wondering if you've got those approvals as well, too, or those are some of the phone calls you're making today.

Shneur, it's Cam speaking. I'll just -- without sort of responding directly to that, I think we clearly mentioned in the presentation, in the press release that the transaction is within the company's guardrails and adheres to that and certainly have some comfort around that. In terms of shareholders, clearly, this was a confidential process and confidential transaction. So those calls are yet to come. But I would acknowledge that we have overlap with many of those shareholders and also know them well.

And your next question comes from the line of Matt Taylor with Tudor, Pickering, Holt & Co.

I just -- I was thinking about longer term here. You're seeing modest degradation in the fee-based guardrail, but you're still above your target of 80%. But I think a key question that I'd like you to answer is as you're expanding the value chain and you're looking more downstream, can you help investors get comfort on how you're going to protect the integrity of that cash flow stream? So like I said, you're still above the 80%. But historically, these petchem investments specifically lower contracting, lower valuation. But I assume it's your ability to supply the feedstock and push it through your entire value chain is how you're seeing it. But I'm just curious on how you're thinking about maintaining the multiple that you've had from traditional investments that are substantially contracted.

Yes. Listen -- I appreciate that question. Listen, we are steadfast in maintaining our guardrails. We've been way over 90%. I mean when we wrote the guardrails a number of years back, we were closer to 80%, and we've been inching all that up. We put everything we do through that sift and something that's going to violate our guardrails gets -- doesn't get make it through the sift. And so we're going to have a product mix that's going to manage that. It's going to balance security with profitability as it always has. And listen, we don't want to be 100% fee-for-service. There's a lot of merit in having 10% or 15% of your business be commodity exposed. We think that's good. I think some of our customers don't mind us being commodity exposed to a point because we sell our product alongside their product. They get what we get. We have the same skin in the game. So there's a lot of layers of why we want to have some commodity exposure. And when we know something is going to work, with this scale and flexibility, we can take some commodity risk, prove to the market it works and then contract it out when everyone thinks it's a great idea. And so Inter Pipe has done that on HPC. They had to take some risk. And now everybody is going, "Great idea," and they're all lining up to sign up. And so that's a model we can follow. But we're going to manage that actively. And just let me leave you with one thought. If we could manage our guardrails through free global crises than in a decent market, like we're at now a decent and rising market, not just for one commodity, but for gas, for [indiscernible], for crude oil, for condensate, this is really just something that we feel entirely in control of. We're not going to let investors down and do something that they don't expect.

Okay. That's great, Mick. Just digging on just a little bit more there. So you're going to build the petchem facility and contracts 50-50 and then Inter Pipe was looking to do this PDH plant at about 60% moving up to 70%, 85%. Understanding it's not -- it's hard to figure out the exact percentage for each product -- project. But just looking ahead, is that sort of what you're targeting is maybe a 50% to 70% range in terms of contracting and then prove it out, add various different pieces to the puzzle, like an alkylate project or butane splitter and then contract it more longer term?

That's one option, but I don't -- we don't want to be nailed down exactly what we do. Internally, we try to get -- our BD people try to nail us down exactly. We're going to do all the time. But we're going to do what makes sense at the time. With the -- imagine this diversity that we now have, we have a lot of options to take calculated risk in one area while we term out another. And so as I think about HPC today, I'm pretty comfortable at 60%. Enterprise is going to have to do what they need to do. They're still -- until closing, they still will operate independently but really comfortable at 60%. I like what the spreads look like right now. I wouldn't contract any more of that right now. But that doesn't mean that we wouldn't do so in the future. It doesn't necessarily mean that we're going to be not contract the next petrochemical plant that we do or our next petrochemical asset. We're going to do what makes sense at the time to manage the portfolio to maximize the risk/return balance.

Great. And then, I agree, the industrial logic looks sound. I'm wondering about the competitive environment and that'll be controlling a significant portion of each of the NGL products. Are you anticipating having to sell any of these assets or restructure any parts of the business to satisfy regulators?

We do not anticipate needing to sell any part of the business.

Okay. Great. And then last one on derisking HPC. You mentioned your ability to source a good chunk of propane supply. Can you just dig a little bit more into that on what factors you guys saw in taking HPC and bringing it in-house for you that gives you an advantage and will help derisk that project with your opportunity set as opposed to sitting in Inter Pipe?

Yes. I mean let's just start with supply. I mean we have 3x as much supply with the combined companies as that plant needs. So we have enough supply for that plant, for Rupert and for another plant. And then we still have some leftover. And so I think that speaks for itself. In terms of the risk profile, they've done a great job. I mean hats off to them what they've been able to do through the pandemic. We were lucky in a way that we had not really started. We took a write-off. And I believe write-off is going to come back -- a write-off, I guess, in the future, but they come off, and they did a fantastic job, kept everyone safe and healthy. So hats off to them. But they're over 90% done, completed. They've got a sound team ready to go. And so it's dramatically derisked from starting over. And the market is cooperating. The world needs a lot of this product, a ton of it. It's short. There's nothing coming on to fill the void. So the market is derisked. The capital is derisked. The organization is derisked. And the encore will be if we are able to do another one, then all the learnings come and dramatically derisk the next one that Pembina would have faced all the risk of the next one. And this team that we're going to inherit are of great value to us. So we're embracing this project. We're embracing the team. And I think it's going to be super fun and rewarding.

And your next question comes from the line of Andrew Kuske with Crédit Suisse.

Mick, maybe if you could just give us a bit of color on how you think about IPL fitting into the Pembina family in the spectrum of past transactions that you've done. Is this more like a Provident, I guess, more than a decade ago or about a decade ago or a bit more like a Veresen or KML?

It's -- I would say it's a bit different than all those. I mean the petchem step-out is massive and advances our strategy. As I mentioned earlier, we pulled back on petchem. We pulled back on LNG, but we were very clear in saying they remain within strategy, and we meant it. And so that's a wonderful step-out for us. As I said earlier, we are going to be in the petrochemical infrastructure business. We are not going to be in the commodity chemical business. And so we think there's a huge opportunity for chemical infrastructure without being in the commodity business. And we think that the market will understand that as they have understood that when we entered the frac business, which was all typically commodity exposed, and we converted that to fee-for-service. So the petchem is an awesome step-out. The Polaris addition, like we've been trying to secure what we call a diluent backbone. And what we mean by that is a delivery system to the oil sands, like we're the largest gatherer of condensate through Peace, through Drayton, through Cochin. We bring it to the center. We put it in CDH. And then we don't have control to interface with the oil sands customers, the demand side customers and now we do. So if you're one of the big guys or even if you're one of the smaller guys, you've got condensate in Northeast BC, we can get you your own condensate. We can make it that [ condensate ] into that blend that you want through -- at CDH. And so it's really just enhancing and filling in some missing parts of the existing business. Veresen was different in a way because it was a gas step-out. So we were NGL and crude and condensate, and we weren't gas. And so every time we went to a customer, they'd say, "Great. What about gas?" And we say, "Well, go -- here's a phone number." So we fill that. And here, it's just kind of extending our value chain and enhancing the offering. The offerings aren't unique. They're what we do now other than HPC. They're just in a different geographic location. So that's the coolest part about this is we get the synergies, but we actually increase our business diversification, our geographic diversification greatly. And I can't overemphasize that the average decline of Pembina pre this transaction and post of the underlying geology is way lower. So it doesn't sound like a big deal. It's a huge deal. That means if we hit the skids in another pandemic or whatever, God forbid, we're going to be declining at a way, way lower rate. That's worth a lot. It also means we're going to bounce back way, way faster. Like if you look at -- and this is our Advantage Canada discussion. The Permian with 30%, 40% declines is going to take a long time to come back. The oil sands guys are already back because they had low declines and high sunk costs. Their incremental [ capital ] producing is low. And so that's a huge attribute of our new business.

That's really helpful color. And then maybe just with the backdrop of volumes have increased out of the basin over the last sort of 6 to 9 months in a pretty steady lockstep fashion, which highlights your sort of return to a more normal environment. Credit quality has improved among the producers. And we're on the verge of having egress improvements on really all the hydrocarbons out of the basin in Western Canada. So when you have that kind of positioning, how do you think about the future for a combined Pembina-Inter?

Like I said, the guys wouldn't let me print the last 10 pages of the press release. So we'll be working on unveiling other ideas we have. I'm so excited. I just can't wait to let that come out as soon as it's reasonably practical. You're right, I mean, we've got all 3 commodities performing. We're getting the egress we haven't had in a decade. Profound changes are coming to the basin. We've got -- the oil sands is arguably 1 of the top 2 or 3 oil-producing regions on the planet. The Montney is arguably the best gas NGL condensate-producing resource on the planet. And we're the largest service provider by far in both of those areas. And we have egress. And we've got tons of spare capacity. [indiscernible] assets are half full. They're oil sands asset. And we're maybe 75% to 80% full on a lot of our stuff. And so the torque is just unbelievable in each of the businesses and when you combine them even more so. So I think we're on a very good path.