Announced $9.7
billion transformational combination with Veresen and placed
$2.8 billion of projects into service
safely and reliably
All financial figures are in Canadian dollars unless noted
otherwise.
CALGARY, Aug. 1, 2017 /CNW/ - Pembina Pipeline Corporation
("Pembina" or the "Company") (TSX: PPL; NYSE: PBA) announced today
its financial and operating results for the second quarter of
2017.
Operational and Financial Overview
($ millions,
except where noted)
|
3 Months
Ended
June
30
(unaudited)
|
|
6 Months
Ended
June
30
(unaudited)
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Conventional
Pipelines revenue volumes (mbpd)(1)(2)
|
692
|
|
648
|
|
692
|
|
659
|
|
Oil Sands & Heavy
Oil contracted capacity (mbpd)(1)
|
975
|
|
880
|
|
975
|
|
880
|
|
Gas Services revenue
volumes net to Pembina (mboe/d)(2)(3)
|
172
|
|
133
|
|
171
|
|
123
|
|
Midstream Natural Gas
Liquids ("NGL") sales volumes
(mbpd)(1)
|
124
|
|
132
|
|
148
|
|
136
|
|
Total volume
(mboe/d)(3)
|
1,963
|
|
1,793
|
|
1,986
|
|
1,798
|
|
Revenue
|
1,166
|
|
1,027
|
|
2,651
|
|
2,044
|
|
Net
revenue(4)
|
451
|
|
429
|
|
1,005
|
|
823
|
|
Operating
margin(4)
|
355
|
|
327
|
|
762
|
|
642
|
|
Gross
profit
|
276
|
|
248
|
|
657
|
|
485
|
|
Earnings
|
124
|
|
113
|
|
339
|
|
215
|
|
Earnings per common
share – basic and diluted (dollars)
|
0.26
|
|
0.25
|
|
0.75
|
|
0.48
|
|
Adjusted
EBITDA(4)
|
303
|
|
291
|
|
666
|
|
560
|
|
Cash flow from
operating activities
|
362
|
|
273
|
|
688
|
|
544
|
|
Cash flow from
operating activities per common share – basic
(dollars)(4)
|
0.90
|
|
0.70
|
|
1.72
|
|
1.42
|
|
Adjusted cash flow
from operating activities(4)
|
275
|
|
235
|
|
583
|
|
444
|
|
Adjusted cash flow
from operating activities per common share – basic
(dollars)(4)
|
0.68
|
|
0.60
|
|
1.46
|
|
1.16
|
|
Common share
dividends declared
|
205
|
|
187
|
|
396
|
|
359
|
|
Preferred share
dividends declared
|
19
|
|
16
|
|
38
|
|
30
|
|
Dividends per common
share (dollars)
|
0.51
|
|
0.48
|
|
0.99
|
|
0.94
|
|
Capital
expenditures
|
475
|
|
380
|
|
1,184
|
|
755
|
|
Acquisition
|
|
|
566
|
|
|
|
566
|
|
|
|
|
|
|
|
|
|
|
|
3 Months
Ended
June
30
(unaudited)
|
|
6 Months
Ended
June
30
(unaudited)
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
($
millions)
|
Revenue(5)
|
|
Operating
Margin(4)
|
|
Revenue(5)
|
|
Operating
Margin(4)
|
|
Revenue(5)
|
|
Operating
Margin(4)
|
|
Revenue(5)
|
|
Operating
Margin(4)
|
|
Conventional
Pipelines
|
197
|
|
147
|
|
177
|
|
127
|
|
385
|
|
281
|
|
352
|
|
255
|
|
Oil Sands & Heavy
Oil
|
50
|
|
36
|
|
47
|
|
34
|
|
104
|
|
72
|
|
99
|
|
67
|
|
Gas
Services(5)
|
87
|
|
66
|
|
64
|
|
46
|
|
179
|
|
136
|
|
117
|
|
83
|
|
Midstream(5)
|
117
|
|
104
|
|
142
|
|
118
|
|
337
|
|
269
|
|
256
|
|
232
|
|
Corporate
|
|
|
2
|
|
(1)
|
|
2
|
|
|
|
4
|
|
(1)
|
|
5
|
|
Total
|
451
|
|
355
|
|
429
|
|
327
|
|
1,005
|
|
762
|
|
823
|
|
642
|
|
(1)
|
mbpd is
thousands of barrels per day.
|
(2)
|
Revenue volumes
are equal to contracted plus interruptible volumes.
|
(3)
|
Revenue volumes
converted to mboe/d (thousands of barrels of oil equivalent per
day) from million cubic feet per day ("MMcf/d") at 6:1
ratio.
|
(4)
|
Refer to
"Non-GAAP Measures."
|
(5)
|
The amounts
presented for Midstream and Gas Services consist of net revenue
(revenue less cost of goods sold including product purchases).
Refer to "Non-GAAP Measures."
|
Project Highlights
- Placed $2.8 billion of new
projects into service at the end of the second quarter under budget
and either on time or ahead of schedule on an aggregate basis, with
all new assets operating successfully as expected;
- Entered into an arrangement agreement with Veresen Inc.
("Veresen") to create one of the largest energy infrastructure
companies in Canada with a
pro-forma total enterprise value of approximately $33 billion; and
- Proceeded to the front end engineering design phase for a
proposed integrated propylene dehydrogenation and polypropylene
production facility.
Financial Highlights
- Generated second quarter and year-to-date earnings of
$124 million and $339 million, a 10 percent and 58 percent
increase, respectively, over the same periods of the prior
year;
- Realized adjusted EBITDA of $303
million during the second quarter and $666 million year-to-date during 2017, four
percent and 19 percent higher than the second quarter and first
half of 2016, respectively;
- Recorded cash flow from operating activities of $362 million and $688
million for the three and six months ended June 30, 2017, an increase of 33 percent and 26
percent, respectively, from the same periods of the prior year.
Adjusted cash flow from operating activities increased by 17
percent and 31 percent to $275
million and $583 million in
the second quarter and first half of 2017 compared to the
respective periods in 2016; and
- On a per share (basic) basis during the three and six months
ended June 30, 2017, cash flow from
operating activities increased 29 percent and 21 percent,
respectively, compared to the same periods of the prior year.
Operational Highlights
- Gas Services generated record quarterly revenue volumes of
1,033 MMcf/d in the second quarter of 2017, an increase of 30
percent compared to the second quarter of 2016;
- Conventional Pipelines' second quarter revenue volumes
increased to a record 692 mbpd in 2017 compared to 648 mbpd in the
second quarter of 2016; and
- Employees worked almost 800,000 hours in the second quarter of
2017 with no employee lost time injuries while executing quarterly
capital expenditures of $475
million.
Business Highlights
Executive Comments
"We've had solid operational and financial results over the
first half of the year," said Mick
Dilger, Pembina's President and Chief Executive Officer. "On
a year-to-date basis, we've reached new volume records in our
Conventional Pipelines and Gas Services businesses, which have
contributed to beating records in almost all of our financial
metrics including adjusted EBITDA, adjusted cash flow from
operating activities and adjusted cash flow from operating
activities per share. We've also continued to achieve safety and
operational excellence with another quarter of zero lost time
employee incidents."
"As we announced at the end of the second quarter, I am very
proud we placed over $2.8 billion of
projects into service, with the entire portfolio coming in under
budget and either on time or ahead of schedule," continued Mr.
Dilger. "These new assets have begun generating significant
incremental cash flows, which will positively impact our financial
results going forward."
"We're working to complete our remaining growth portfolio slated
to come into service over the balance of the year and are excited
to have entered into the front end engineering design phase of our
proposed propane dehydrogenation and polypropylene facility," added
Mr. Dilger.
"We've also made great strides in working towards closing the
previously announced strategic acquisition of Veresen," said Mr.
Dilger. "On July 11, 2017, Veresen's
shareholders voted overwhelmingly to approve the transaction,
followed by approval from the Court of Queen's Bench. Looking
ahead, we are well on our way to fulfilling our goal of reaching
our projected 2018 adjusted EBITDA of between $2.55 and $2.75 billion, assuming successful
completion of the Veresen transaction."
Strategic Business Combination Announcement
- On May 1, 2017, Pembina and
Veresen announced that they entered into an arrangement agreement
where Pembina offered to acquire all the issued and outstanding
shares of Veresen (the "Transaction") to create one of the largest
energy infrastructure companies in Canada. The Transaction is valued at
approximately $9.7 billion (including
Veresen's debt and preferred shares) and the combined company will
have a pro-forma total enterprise value of approximately
$33 billion. On July 11, 2017, Veresen's common and preferred
shareholders voted to approve the Transaction at a special meeting
of Veresen shareholders. More than 99 percent of Veresen's
outstanding common and preferred shares voted at the meeting were
in favour of the Transaction. On July 12,
2017, the Court of Queen's Bench of Alberta approved the Transaction. Completion
of the Transaction is subject to final acceptance of the Toronto
Stock Exchange and approval under the Canadian Competition
Act. Pembina and Veresen currently expect the Transaction will
close late in the third quarter or early in the fourth quarter of
2017, subject to receipt of the remaining approvals. Upon closing
of the Transaction, Pembina intends to increase its monthly
dividend by 5.9 percent to $0.18 per
common share.
New Developments in 2017 and Growth Projects Update
- Pembina's Phase III pipeline expansion was placed into service
on June 30, 2017, ahead of schedule
and under budget from the expected $2.4
billion capital cost. The Phase III expansion added an
incremental 420 mbpd of capacity between Fox Creek and Namao,
Alberta and allows Pembina to improve operational
efficiencies by transporting four distinct hydrocarbons through
segregated pipelines;
- The Company's third fractionator at Redwater was placed into service on
June 30, 2017, aligning with the
Phase III pipeline expansion. Pembina's Redwater complex now has an aggregate
fractionation capacity of approximately 210,000 bpd. This project
was brought into service ahead of schedule and under budget;
- At Pembina's Canadian Diluent Hub, on June 30, 2017, additional condensate connections
were placed into service on time and under budget. The facility is
capable of delivering approximately 400 mbpd of condensate to
regional third-party diluent pipelines. By the end of 2017, Pembina
will have 500,000 barrels of above ground storage in operation and
additional third-party condensate connections;
- In May 2017, Pembina announced
the execution of 50/50 joint venture agreements that include key
binding commercial terms in support of the proposed propane
dehydrogenation and polypropylene facility as well as the formation
of a new entity, Canada Kuwait Petrochemical Corporation. The new
entity is currently proceeding with front end engineering design
and has also selected the technology for both the propane
dehydrogenation and the polypropylene portions of the facility. In
the event of project sanctioning, the facility would be constructed
in close proximity to the Company's Redwater fractionation complex;
- Pembina is continuing to progress its Phase IV and Phase V
expansions of its pipeline infrastructure. Phase IV will add
capacity between Fox Creek and
Namao, Alberta and Phase V will
add capacity between Lator and Fox Creek,
Alberta;
- Pembina is progressing infrastructure development in the
Duvernay area. For Pembina's 100
MMcf/d Duvernay I plant, all major equipment has been set on site
with significant mechanical and electrical field work now complete.
For the associated field hub, the sales product pipelines have been
installed with all equipment set on site and significant electrical
field work now complete. Pembina also previously entered into a
20-year Duvernay infrastructure
development and service agreement;
- Pembina continues to advance construction of infrastructure in
support of North West Redwater Partnership's refinery and has
completed over 90 percent of the overall project; and
- In April 2017, Pembina signed a
non-binding letter of intent identifying Watson Island,
Prince Rupert, as a potential site
for a west coast propane export terminal.
Dividends
- Declared and paid dividends of $0.17 per qualifying common share for the
applicable record dates in April, May and June 2017; and
- Declared and paid quarterly dividends per qualifying preferred
shares of: Series 1: $0.265625;
Series 3: $0.29375; Series 5:
$0.3125; Series 7: $0.28125; Series 9: $0.296875; Series 11: $0.359375; and Series 13: $0.359375 to shareholders of record on
April 28, 2017.
Second Quarter 2017 Conference Call & Webcast
Pembina will host a conference call on Wednesday, August 2, 2017 at 8:00 a.m. MT (10:00 a.m.
ET) for interested investors, analysts, brokers and media
representatives to discuss details related to the second quarter of
2017. The conference call dial-in numbers for Canada and the U.S. are 647-427-7450 or
888-231-8191. A recording of the conference call will be available
for replay until August 9, 2017 at
11:59 p.m. ET. To access the replay,
please dial either 416-849-0833 or 855-859-2056 and enter the
password 15480707.
A live webcast of the conference call can be accessed on
Pembina's website at pembina.com under Investor Centre,
Presentation & Events, or by entering:
http://event.on24.com/r.htm?e=1307560&s=1&k=08B6F851478FB0DAE44AB96C76BCA4B8
in your web browser. Shortly after the call, an audio archive will
be posted on the website for a minimum of 90 days.
About Pembina
Calgary-based Pembina Pipeline
Corporation is a leading transportation and midstream service
provider that has been serving North
America's energy industry for over 60 years. Pembina owns
and operates an integrated system of pipelines that transport
various products derived from natural gas and hydrocarbon liquids
produced primarily in western Canada. The Company also owns and operates gas
gathering and processing facilities and an oil and natural gas
liquids infrastructure and logistics business. Pembina's integrated
assets and commercial operations along the majority of the
hydrocarbon value chain allow it to offer a full spectrum of
midstream and marketing services to the energy sector. Pembina is
committed to working with its community and aboriginal neighbours,
while providing value for investors in a safe, environmentally
responsible manner. This balanced approach to operating ensures the
trust Pembina builds among all of its stakeholders is sustainable
over the long term. Pembina's common shares trade on the
Toronto and New York stock exchanges under PPL and PBA,
respectively. Pembina's preferred shares also trade on the
Toronto stock exchange. For more
information, visit www.pembina.com.
Forward-Looking Statements and Information
This document contains certain forward-looking statements and
information (collectively, "forward-looking statements"), including
forward-looking statements within the meaning of the "safe harbor"
provisions of applicable securities legislation, that are based on
Pembina's current expectations, estimates, projections and
assumptions in light of its experience and its perception of
historical trends. In some cases, forward-looking statements can be
identified by terminology such as "schedule", "will", "expects",
"estimate", "potential", "planned", "future", "continue" and
similar expressions suggesting future events or future
performance.
In particular, this document contains forward-looking
statements, including certain financial outlook, pertaining to,
without limitation, the following: Pembina's corporate strategy;
anticipated adjusted EBITDA projections for 2018 and financial
performance expectations resulting from Pembina's capital
expenditures; completion of, and the potential future benefits and
impacts of the Transaction including the timing thereof; planning,
construction, capital expenditure estimates, schedules, expected
capacity, incremental volumes, in-service dates, rights, activities
and operations with respect to planned new construction of, or
expansions on existing pipelines, gas services facilities,
fractionation facilities, terminalling, storage and hub facilities,
facility and system operations and throughput levels; anticipated
synergies between assets under development, assets being acquired
and existing assets of the Company; the future level and
sustainability of cash dividends that Pembina intends to pay its
shareholders, including the expected dividend increase upon
completion of the Transaction; and expected future cash flows and
the sufficiency thereof.
The forward-looking statements are based on certain
assumptions that Pembina has made in respect thereof as at the date
of this news release regarding, among other things: oil and gas
industry exploration and development activity levels and the
geographic region of such activity; the success of Pembina's
operations and growth projects; prevailing commodity prices and
exchange rates and the ability of Pembina to maintain current
credit ratings; the availability of capital to fund future capital
requirements relating to existing assets and projects; future
operating costs; geotechnical and integrity costs; that any
third-party projects relating to Pembina's growth projects will be
sanctioned and completed as expected; that any required commercial
agreements can be reached; that all required regulatory and
environmental approvals can be obtained on the necessary terms in a
timely manner (including in respect of the Transaction); that
counterparties will comply with contracts in a timely manner; that
there are no unforeseen events preventing the performance of
contracts or the completion of the relevant facilities that there
are no unforeseen material costs or liabilities, or other
significant events relating to the completion of the Transaction;
that there are no unforeseen material costs relating to the
facilities which are not recoverable from customers; prevailing
interest and tax rates; prevailing regulatory, tax and
environmental laws and regulations; maintenance of operating
margins; the amount of future liabilities relating to lawsuits and
environmental incidents; and the availability of coverage under
Pembina's insurance policies (including in respect of Pembina's
business interruption insurance policy).
Although Pembina believes the expectations and material
factors and assumptions reflected in these forward-looking
statements are reasonable as of the date hereof, there can be no
assurance that these expectations, factors and assumptions will
prove to be correct. These forward-looking statements are not
guarantees of future performance and are subject to a number of
known and unknown risks and uncertainties including, but not
limited to: the regulatory environment and decisions; the impact of
competitive entities and pricing; labour and material shortages;
reliance on key relationships and agreements; the strength and
operations of the oil and natural gas production industry and
related commodity prices; non-performance or default by
counterparties to agreements which Pembina or one or more of its
affiliates has entered into in respect of its business; actions by
governmental or regulatory authorities including changes in tax
laws and treatment, changes in royalty rates or increased
environmental regulation; the inability to meet the remaining
conditions to completion of the Transaction, in a timely manner or
at all; the failure to realize the anticipated benefits or
synergies of the Transaction following closing due to the factors
set out herein, integration issues or otherwise, fluctuations in
operating results; adverse general economic and market conditions
in Canada, North America and worldwide, including
changes, or prolonged weaknesses, as applicable, in interest rates,
foreign currency exchange rates, commodity prices, supply/demand
trends and overall industry activity levels; ability to access
various sources of debt and equity capital; changes in credit
ratings; counterparty credit risk; technology and security risks;
and certain other risks detailed from time to time in Pembina's
public disclosure documents available at
www.sedar.com, www.sec.gov and through
Pembina's website at www.pembina.com.
This list of risk factors should not be construed as
exhaustive. Readers are cautioned that events or circumstances
could cause results to differ materially from those predicted,
forecasted or projected. The forward-looking statements contained
in this document speak only as of the date of this document.
Pembina does not undertake any obligation to publicly update or
revise any forward-looking statements or information contained
herein, except as required by applicable laws. Readers are
cautioned that management of Pembina approved the financial outlook
contained herein as of the date of this press release. The purpose
of the 2018 Adjusted EBITDA projection is to provide investors with
an indication of the value to Pembina of capital projects that have
been and will be brought into service in 2017, and the closing of
the Transaction on 2018 full-year financial results. Readers should
be aware that the information contained in the financial outlook
contained herein may not be appropriate for other purposes. The
forward-looking statements contained in this document are expressly
qualified by this cautionary statement.
Non-GAAP Measures
In this news release, Pembina has used the terms net revenue,
operating margin, adjusted earnings before interest, taxes,
depreciation and amortization (Adjusted EBITDA), adjusted cash flow
from operating activities, cash flow from operating activities per
common share and adjusted cash flow from operating activities per
common share (also known as "cash flow per share" and "adjusted
cash flow per share") and total enterprise value, which do not have
any standardized meaning under International Financial Reporting
Standards ("IFRS") ("Non-GAAP Measures"). Since Non-GAAP financial
measures do not have a standardized meaning prescribed by Generally
Accepted Accounting Principles ("GAAP") and are therefore unlikely
to be comparable to similar measures presented by other companies,
securities regulations require that Non-GAAP financial measures are
clearly defined, qualified and reconciled to their nearest GAAP
measure. Except as otherwise indicated, these Non-GAAP Measures are
calculated and disclosed on a consistent basis from period to
period. Specific adjusting items may only be relevant in certain
periods. The intent of Non-GAAP Measures is to provide additional
useful information respecting Pembina's financial and operational
performance to investors and analysts and the measures do not have
any standardized meaning under IFRS. The measures should not,
therefore, be considered in isolation or used in substitute for
measures of performance prepared in accordance with IFRS.
Other issuers may calculate these Non-GAAP Measures
differently. Investors should be cautioned that these measures
should not be construed as alternatives to revenue, earnings, cash
flow from operating activities, gross profit or other measures of
financial results determined in accordance with GAAP as an
indicator of Pembina's performance. For additional information
regarding Non-GAAP Measures, including reconciliations to measures
recognized by GAAP, please refer to Pembina's management's
discussion and analysis for the period ended June 30, 2017, which is available online at
www.sedar.com, www.sec.gov and through
Pembina's website at www.pembina.com.
SOURCE Pembina Pipeline Corporation