Pembina reports first
quarter results under new Divisional organizational structure and
announces a 5.6 percent dividend increase
All financial figures are in Canadian dollars unless noted
otherwise.
CALGARY, May 3, 2018
/PRNewswire/ - Pembina Pipeline Corporation ("Pembina" or the
"Company") (TSX: PPL; NYSE: PBA) announced today its financial and
operating results for the first quarter of 2018.
Operational and Financial Overview
|
|
($ millions,
except where noted)
|
3 Months
Ended March
31 (unaudited)
|
|
2018
|
2017
|
Revenue
|
1,837
|
1,480
|
Net
revenue(1)
|
719
|
549
|
Share of profit of
investments in equity accounted investees(3)
|
76
|
|
Gross
profit
|
568
|
376
|
Earnings
|
330
|
210
|
Earnings per common
share – basic and diluted (dollars)
|
0.59
|
0.48
|
Cash flow from
operating activities
|
498
|
326
|
Cash flow from
operating activities per common share – basic
(dollars)(1)
|
0.99
|
0.82
|
Adjusted cash flow
from operating activities(1)
|
530
|
308
|
Adjusted cash flow
from operating activities per common share – basic
(dollars)(1)
|
1.05
|
0.77
|
Common share
dividends declared
|
272
|
191
|
Preferred share
dividends declared
|
30
|
19
|
Dividends per common
share (dollars)
|
0.54
|
0.48
|
Capital
expenditures
|
324
|
709
|
|
|
|
Proportionately
Consolidated Financial Overview(1)(4)
|
Total volume
(mboe/d)(2)
|
3,266
|
2,371
|
Operating
margin(1)
|
757
|
407
|
Adjusted
EBITDA(1)
|
688
|
358
|
(1)
|
Refer to "Non-GAAP
Measures".
|
(2)
|
Total sales and
revenue volumes. Revenue volumes are physical plus volumes
recognized from take-or-pay commitments. Volumes are stated in
thousands of barrels of oil equivalent per day ("mboe/d"), with
natural gas volumes converted to mboe/d from millions of cubic feet
per day ("MMcf/d") at a 6:1 ratio. Volumes have been restated to
reflect the Corporate Reorganization.
|
(3)
|
Includes Investments
in Equity Accounted Investees in Alliance, Aux Sable, Ruby, Veresen
Midstream, CKPC, Grand Valley and Fort Corp. See "Unaudited
Supplementary Information" for definitions of equity accounted
investees.
|
(4)
|
See "Unaudited
Supplementary Information".
|
Financial and Operational Overview by Division
|
|
|
3 Months Ended
March 31 (unaudited)
|
|
2018
|
2017(3)
|
($
millions)
|
Total
Volumes (2)
|
Gross
Profit
|
Operating
Margin (1)
|
Total
Volumes (2)
|
Gross
Profit
|
Operating
Margin (1)
|
Pipelines
Division
|
2,424
|
294
|
416
|
1,667
|
126
|
165
|
Facilities
Division
|
842
|
143
|
225
|
704
|
102
|
140
|
Marketing & New
Ventures Division
|
|
133
|
118
|
|
146
|
100
|
Corporate
|
|
(2)
|
(2)
|
|
2
|
2
|
Total
|
3,266
|
568
|
757
|
2,371
|
376
|
407
|
(1)
|
Refer to "Non-GAAP
Measures".
|
(2)
|
Pipelines and
Facilities Division are revenue volumes which are physical plus
volumes recognized from take-or-pay commitments. Volumes are stated
in mboe/d, with natural gas volumes converted to mboe/d from MMcf/d
at a 6:1 ratio.
|
(3)
|
Financial results
reported for all periods commencing on or after January 1, 2017
have been restated to reflect the Corporate Reorganization and
adoption of IFRS 15.
|
Financial Highlights
- Record first quarter financial results were largely driven by a
larger asset base, due to the acquisition of Veresen Inc. ("Veresen
Acquisition") and new assets placed into service following a
large-scale capital program, which has resulted in generating
higher revenue volumes and revenue in the Pipelines and Facilities
Divisions;
- Generated first quarter earnings of $330
million, a 57 percent increase over the same period of the
prior year, due to increased net revenue and share of profit from
equity accounted investees;
- Generated record first quarter operating margin of $757 million, an 86 percent increase over the
same period in 2017. Operating margin includes Pembina's proportionate share of operating
margin from jointly controlled investments which are accounted for
using equity accounting;
- Achieved first quarter Adjusted EBITDA of $688 million representing a 92 percent increase
over the same period in 2017;
- Cash flow from operating activities was $498 million for the first quarter, an increase
of 53 percent over the same period in 2017. Adjusted cash flow from
operating activities increased by 72 percent to $530 million in the first quarter of 2018
compared to the same period in 2017;
- On a per share (basic) basis, cash flow from operating
activities for the first quarter increased 21 percent compared to
the same period of the prior year. On a per share (basic) basis,
adjusted cash flow from operating activities for the first quarter
increased 36 percent compared to the same period of the prior year;
and
- On May 3, 2018, Pembina's Board of Directors approved a 5.6
percent increase in its monthly common share dividend rate (from
$0.18 per common share to
$0.19 per common share), commencing
with the dividend to be paid on June 15,
2018.
Operational Highlights
- Achieved record total volumes on a quarterly basis of 3,266
mboe/d, a 38 percent increase over the prior year;
- Realized record Pipeline Division revenue volumes during the
first quarter of 2,424 mboe/d, representing a 45 percent increase
compared to 1,667 mboe/d in the first quarter of 2017. Higher
revenue volumes were the result of the Veresen Acquisition and
system expansions on Pembina's
Peace and northeast B.C. pipeline systems, namely the Phase III
pipeline expansion as well as the northeast B.C. pipeline
expansion, which were placed into service in the second and fourth
quarters of 2017, respectively; and
- Facilities Division generated solid revenue volumes of 842
mboe/d in the first quarter of 2018, an increase of 20 percent
compared to the first quarter of 2017. Gas processing revenue
volumes increased due to the startup of the Duvernay I gas plant
and acquisition of Veresen Midstream in the fourth quarter of 2017,
as well as higher realized revenue volumes at Empress, Kakwa River and Resthaven. These
increases were partially offset by decreased volumes at Younger and
the Cutbank Complex. NGL services revenue volumes increased largely
as a result of increased volumes from RFS III which was placed into
service on June 30, 2017.
Executive Overview
The first quarter of 2018 saw the continuation of the strong
financial and operating results we experienced last year following
the completion of a multi-year growth program and the Veresen
Acquisition. 2018 will be the first full year Pembina benefits from these transformational
changes to the Company.
The first quarter generated record results
in revenue volumes, net revenue, adjusted cash flow from
operating activities, operating margin and Adjusted EBITDA. Based
on a strong start to the year, Pembina maintains its outlook for 2018
Adjusted EBITDA of $2.55 to
$2.75 billion.
The previously announced open season for the Alliance Pipeline
Ltd. ("Alliance") expansion and the announcement today of our Phase
VI pipeline expansion are two exciting new additions to
Pembina's portfolio of growth
projects. This portfolio already includes our Phase IV and V Peace
Pipeline expansions, a west coast propane export facility, the
proposed Jordan Cove LNG Project, the proposed polypropylene
production facility, Veresen Midstream's North Central Liquids Hub
and the Duvernay infrastructure
development. As well, we continue to evaluate a steady stream of
customer-driven development opportunities to grow the business even
further.
"We've seen another great start to a new year with Pembina once again setting record quarterly
results," said Mr. Dilger, Pembina's President and Chief Executive
Officer. "Amidst a backdrop of political and economic uncertainty
within Canada and abroad, Pembina
remains focused on delivering exceptional financial and operational
results, growing the business and building out our value-chain to
provide our customers with enhanced market access."
"With the ongoing strength we are seeing in the business, we
were also pleased to have announced a 5.6 percent dividend
increase, which marks our seventh consecutive year of increasing
the dividend," added Scott Burrows,
Pembina's Senior Vice President
and Chief Financial Officer.
Finally, this quarter saw the implementation of a new
organizational structure that reflects the fact that Pembina is an increasingly larger and more
diverse company. Accordingly, the Company's financial reporting
format has also changed to better align with the new structure. Mr.
Dilger commented, "When we considered the future needs of both the
Company and the energy industry, it was clear to us that this
evolution would best position us for continued success."
New Developments and Growth Projects Update
Pipelines Division
- Due to continued strong customer demand for its transportation
services, Pembina announced today
that it is proceeding with its Phase VI Peace Pipeline expansion
("Phase VI") which will include: upgrades at Gordondale,
Alberta; a 16-inch pipeline from
LaGlace to Wapiti, Alberta and associated pump station upgrades;
and a 20-inch pipeline from Kakwa to Lator, Alberta. The approximately $280 million Phase VI expansion is anticipated to
be in service in early 2020, subject to environmental and
regulatory approvals;
- On March 28, Pembina announced that Alliance, in which it
owns a 50 percent interest, has commenced a two-month open season
for an incremental 400 MMcf/d of firm service capacity commitments
through the addition of compression and other facilities. Subject
to regulatory and environmental approvals and the results of the
open season, the project is expected to be placed into service in
the fourth quarter of 2021 for a total capital cost of
approximately $2 billion
($1 billion net) and would be
backstopped by long-term, take-or-pay contracts;
- Pembina, together with
Enbridge Income Fund, the other 50 percent owner of Alliance, have
announced plans to convert the operation and administration of
Alliance into an owner-operator model. The new operating model is
expected to be in place by mid-2018 and will have a number of
benefits, including creating strategic alignment that will result
in improved efficiencies by being part of a larger organization;
and
- Pembina is continuing to
progress its Phase IV and Phase V expansions of its Peace Pipeline
system. Both of these projects are tracking on budget and on
schedule with an expected in-service date of late 2018.
Facilities Division
- As previously announced, Pembina will construct new fractionation and
terminalling facilities at the Company's Empress, Alberta extraction plant (the
"Empress Expansion") for a total expected capital cost of
approximately $120 million. The
Empress Expansion includes adding approximately 30,000 barrels per
day ("bpd") of propane-plus fractionation capacity as well as the
addition of propane rail loading and butane truck terminalling
services to the site. Detailed engineering commenced in April with
an anticipated in-service date of late 2020, subject to
environmental and regulatory approvals. These facilities will
provide the Company with increased NGL volumes and market
optionality, as well as enhanced propane supply access which could
further support the Company's Prince
Rupert export terminal and proposed propane dehydrogenation
and polypropylene production facility;
- The Company continues to advance the construction of a 1
million barrel ethane storage facility ("Burstall Ethane Storage")
located near Burstall,
Saskatchewan for a total expected capital cost of
approximately $189 million. The
Burstall Ethane Storage is underpinned by a 20-year agreement and
is tracking on schedule with the expected in-service date of late
2018;
- As previously disclosed, on April 1,
2018, Pembina became the
operator of the Company's Younger facility, which was operated by
its joint interest partner;
- Pembina is continuing the
development of its liquefied petroleum gas ("LPG") export terminal
(the "Prince Rupert Terminal"). The Prince Rupert Terminal is
located on Watson Island, British
Columbia and is expected to have a permitted capacity of
approximately 25,000 bpd of LPG. The LPG supply will primarily be
sourced from the Company's Redwater fractionation complex. Pembina continues to progress stakeholder
consultation, permitting and detailed engineering work. The Prince
Rupert Terminal is anticipated to be in service mid-2020, subject
to regulatory and environmental approvals;
- Veresen Midstream L.P. ("Veresen Midstream"), in which
Pembina owns a 46.2 percent
interest, is continuing to progress the development of its North
Central liquids hub ("North Central Liquids Hub") which will
provide separation and stabilization of condensate volumes to
support operations of the Cutbank Ridge Partnership (a third-party
exploration and production joint venture) within the Montney formation. The North Central Liquids
Hub is expected to be placed into service in late 2018 and is
currently trending under budget and ahead of schedule;
- Pembina continues to progress
construction of its 100 MMcf/d sweet gas shallow cut processing
facility, 30,000 bpd condensate stabilization facility and other
associated infrastructure located at the Company's Duvernay Complex
("Duvernay II"). The facilities are under 20-year term contracts
with a combination of fee-for-service and fixed-return
arrangements. The majority of long lead items have been purchased
and the project is tracking on budget and on schedule. Subject to
regulatory and environmental approvals, which are expected in
May 2018, this project has an
expected in-service date of mid-to-late 2019; and
- As previously announced, in January
2018, Veresen Midstream, placed its second 200 MMcf/d gross
(93 MMcf/d net) Saturn gas processing facility into service ahead
of schedule and under budget. In support of the liquids-rich
Montney resource play development,
Veresen Midstream has placed one billion of cubic feet per day
(gross) of gas processing capacity into service over late 2017 and
early 2018.
Marketing & New Ventures Division
- Canada Kuwait Petrochemical Company ("CKPC") continues to
progress front end engineering design ("FEED") for a combined
propane dehydrogenation and polypropylene production facility. It
is expected that FEED activities will be completed by late 2018,
followed by a final investment decision. Pembina and Kuwait's Petrochemical Industries Company
K.S.C. (''PIC'') are each 50 percent joint venture partners of
CKPC; and
- Pembina continues to progress
its proposed liquefied natural gas export terminal in Coos Bay, Oregon, and the related Pacific
Connector Gas Pipeline (collectively "Jordan Cove") that will
transport natural gas from the Malin Hub in southern Oregon to the export terminal.
Corporate
- On March 9, 2018, Pembina closed its $1
billion non-revolving term loan ("Term Loan") with certain
existing lenders. The Term Loan has been used to partially repay
existing amounts drawn under Pembina's $2.5
billion revolving credit facility, thereby providing
additional liquidity, flexibility and interest cost savings. The
Term Loan has an initial term of three years and is pre-payable at
the Company's option. The other terms and conditions of the Term
Loan, including financial covenants, are substantially similar to
Pembina's $2.5 billion revolving credit facility.
Concurrently, Pembina also
completed an extension of its $2.5
billion revolving credit facility, which now matures
May 31, 2023.
- On March 26, 2018, Pembina closed an offering of $400 million of senior unsecured Series 10
medium-term notes (the "Series 10 Notes"). The Series 10 Notes have
a fixed coupon of 4.02 percent per annum, paid semi-annually, and
mature on March 27, 2028.
Simultaneously, Pembina closed an
offering of $300 million of senior
unsecured Series 11 medium-term notes (the "Series 11 Notes"). The
Series 11 Notes have a fixed coupon of 4.75 percent per annum, paid
semi-annually, and mature on March 26,
2048. The net proceeds will be used to repay short-term
indebtedness of the Company under its credit facilities, as well as
to fund Pembina's capital program
and for general corporate purposes;
- On March 29, 2018, Ruby Pipeline,
L.L.C., in which Pembina owns a 50
percent preferred interest, amended the maturity date of its
US$203 million 364-Day Term Loan,
originally maturing March 30, 2018,
by one year to March 29, 2019. The
Term Loan will continue to amortize at US$15.6 million per quarter (US$7.8 million per quarter net), beginning
March 30, 2018, until a final bullet
payment of US$141 million
(US$71 million net) is payable on the
amended maturity date; and
- Subsequent to quarter end on April 20,
2018 Veresen Midstream successfully amended and extended its
Senior Secured Credit Facilities that were originally scheduled to
mature on March 31, 2020. Under the
term of the amendment and extension reached with a syndicate of
lenders, Veresen Midstream increased its borrowing capacity to
$200 million under the Revolving
Credit Facility and to $2,550 million
of availability under the Term Loan A and used the proceeds to
repay an existing US$705 million Term
Loan B on April 30, 2018. Other terms
and conditions in the facilities were modified to reflect the
operating nature of the business including modifying the covenant
package and increasing the permitted distributions out of Veresen
Midstream. The maturity date of the two debt facilities was
extended to April 20, 2022.
Changes in Reporting
Given the enhanced scale and scope of Pembina's business and considering the future
needs of both the Company and the energy industry, Pembina's management structure was
reorganized, effective January 1,
2018, into three Divisions: Pipelines, Facilities and
Marketing & New Ventures ("Corporate Reorganization").
Accordingly, the Company's financial reporting format has changed
to better align with the new structure.
Pembina also adopted IFRS 15
Revenue from Contracts with Customers retrospectively, effective
January 1, 2018. While this change is
not currently expected to have a material impact on annual revenue
recognition, it is expected to result in a change in timing for
quarterly revenue recognition with lower revenue in the first and
second quarters and higher revenue in the third and fourth
quarters. For the quarter ending March 31,
2018, $30 million of revenue
which would have been recognized in the quarter under previous
accounting principles has been deferred as a result of the adoption
of the new standard and $1 million
was recognized in 2018 that under previous accounting policies
would have been recognized in 2017.
Financial results reported for all periods commencing on or
after January 1, 2017 have been
restated to reflect the Corporate Reorganization and adoption of
IFRS 15.
Dividends
- Declared and paid dividends of $0.18 per qualifying common share in January,
February and March 2018 for the
applicable record dates;
- 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; Series 13: $0.359375; and Series 21: $0.2819 to shareholders of record as of
February 1, 2018. Declared and paid
quarterly dividends per qualifying preferred shares of: Series 15:
$0.279; Series 17: $0.3125; and Series 19: $0.3125 to shareholders of record on March 15, 2018; and
- On May 3, 2018, Pembina's Board of Directors approved a 5.6
percent increase in its monthly common share dividend rate (from
$0.18 per common share to
$0.19 per common share), commencing
with the dividend to be paid on June 15,
2018.
First Quarter 2018 Conference Call & Webcast
Pembina will host a conference
call on Friday, May 4, 2018 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 first quarter 2018 results. 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 May 11, 2018 at
11:59 p.m. ET. To access the replay,
please dial either 416-849-0833 or 855-859-2056 and enter the
password 9280599.
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=1586740&s=1&k=47B62FC50195DAE9E9D4355E0648F355
in your web browser. Shortly after the call, an audio archive will
be posted on the website for a minimum of 90 days.
Annual General Meeting of Shareholders
The Company will hold its annual general meeting of shareholders
("AGM") on Friday, May 4, 2018 at
2:00 p.m. MT (4:00 p.m. ET) at the Telus Convention Centre.
A live webcast of Pembina's AGM
presentation can be accessed on Pembina's website at www.pembina.com under
Investor Centre, Presentation & Events, or by entering:
https://event.on24.com/wcc/r/1586872/3974AF1920923BF05B61AB4F622A26B8 in
your web browser.
Participants are recommended to register for the webcast at
least 10 minutes before the presentation start time.
2018 Investor Day
Pembina will host an Investor
Day on Tuesday, May 29, 2018 at the
Fairmont Royal York Hotel in Toronto,
Ontario. For parties interested in attending the event,
please email investor-relations@pembina.com to request an
invitation.
UNAUDITED SUPPLEMENTARY INFORMATION
Three months ending March
31, 2018
Financial results reported for all periods commencing on or
after January 1, 2017 have been
restated to reflect the Corporate Reorganization and adoption of
IFRS 15.
Pipelines Division
|
|
|
|
|
3 Months Ending
March 31
(unaudited)
|
Conventional
Pipelines
|
Transmission
Pipelines
|
Oil
Sands
Pipelines
|
Total
|
($ millions,
except where noted)
|
2018
|
2017
|
2018
|
2017
|
2018
|
2017
|
2018
|
2017
|
Financial
Overview
|
|
|
|
|
|
|
|
|
Revenue(3)
|
257
|
169
|
36
|
14
|
60
|
61
|
353
|
244
|
Operating
expenses(3)
|
55
|
53
|
8
|
3
|
22
|
22
|
85
|
78
|
Share of profit from
equity accounted investees
|
|
|
75
|
|
|
|
75
|
|
Realized loss on
commodity-related derivative financial instruments
|
|
1
|
|
|
|
|
|
1
|
Depreciation and
amortization included in operations
|
34
|
28
|
8
|
6
|
7
|
5
|
49
|
39
|
Gross
profit
|
168
|
87
|
95
|
5
|
31
|
34
|
294
|
126
|
Proportionately
Consolidated Financial Overview(1)
|
|
|
|
|
|
|
|
|
Revenue Volume
(mboe/d)(2)
|
766
|
617
|
584
|
35
|
1,074
|
1,015
|
2,424
|
1,667
|
Operating
Margin(1)(3)
|
202
|
115
|
176
|
11
|
38
|
39
|
416
|
165
|
(1)
|
Refer to "Non-GAAP
Measures".
|
(2)
|
Revenue volumes which
are physical plus volumes recognized from take-or-pay
commitments.
|
(3)
|
Includes
Inter-Divisional transactions. See note 12 to the Interim Financial
Statements.
|
Facilities Division
|
|
|
|
3 Months Ending
March 31
(unaudited)
|
Gas
Services
|
NGL
Services
|
Total
|
($ millions,
except where noted)
|
2018
|
2017
|
2018
|
2017
|
2018
|
2017
|
Financial
Overview
|
|
|
|
|
|
|
Revenue(3)
|
141
|
113
|
188
|
118
|
329
|
231
|
Net revenue
(1)
|
138
|
107
|
110
|
81
|
248
|
188
|
Operating
expenses(3)
|
46
|
32
|
19
|
21
|
65
|
53
|
Share of (loss)
profit from equity accounted investees
|
(6)
|
|
1
|
|
(5)
|
|
Depreciation and
amortization included in operations
|
20
|
19
|
15
|
14
|
35
|
33
|
Gross
profit
|
66
|
56
|
77
|
46
|
143
|
102
|
|
|
|
|
|
|
|
Proportionately
Consolidated Financial Overview(1)
|
|
|
|
|
|
|
Revenue Volume
(mboe/d)(2)
|
636
|
545
|
206
|
159
|
842
|
704
|
Operating
Margin(1)(3)
|
130
|
75
|
95
|
65
|
225
|
140
|
(1)
|
Refer to "Non-GAAP
Measures".
|
(2)
|
Revenue volumes are
physical plus volumes recognized from take-or-pay commitments.
Volumes are stated in mboe/d, with natural gas volumes converted to
mboe/d from MMcf/d at a 6:1 ratio.
|
(3)
|
Includes
Inter-Divisional transactions. See note 12 to the Interim Financial
Statements.
|
Marketing & New Ventures Division
|
|
|
|
3 Months Ending
March 31
(unaudited)
|
Marketing
|
New
Ventures
|
Total
|
($ millions,
except where noted)
|
2018
|
2017(3)
|
2018
|
2017(3)
|
2018
|
2017(3)
|
Financial
Overview
|
|
|
|
|
|
|
Revenue
|
1,254
|
1,067
|
|
|
1,254
|
1,067
|
Cost of goods
sold(2)
|
1,134
|
928
|
|
|
1,134
|
928
|
Net
revenue(1)
|
120
|
139
|
|
|
120
|
139
|
Operating
expenses
|
|
|
|
|
|
|
Share of profit from
equity accounted investees
|
6
|
|
|
|
6
|
|
Realized loss on
commodity-related derivative financial instruments
|
18
|
39
|
|
|
18
|
39
|
Unrealized gain on
commodity-related derivative financial instruments
|
(30)
|
(53)
|
|
|
(30)
|
(53)
|
Depreciation and
amortization included in operations
|
5
|
7
|
|
|
5
|
7
|
Gross
profit
|
133
|
146
|
|
|
133
|
146
|
|
|
|
|
|
|
|
Proportionately
Consolidated Financial Overview(1)
|
|
|
|
|
|
|
Total Marketed NGL
Volumes (mboe/d)
|
189
|
155
|
|
|
189
|
155
|
Operating
Margin(1)(3)
|
118
|
100
|
|
|
118
|
100
|
(1)
|
Refer to "Non-GAAP
Measures".
|
(2)
|
Includes
Inter-Divisional transactions. See note 12 to the Interim Financial
Statements.
|
(3)
|
Financial results
reported for all periods commending on or after January 1, 2017
have been restated to reflect the Corporate Reorganization and
adoption of IFRS 15.
|
INVESTMENTS IN EQUITY ACCOUNTED
INVESTEES
Investments in Equity Accounted Investees include:
Pipelines Division
- 50 percent interest in the Alliance Pipeline ("Alliance");
- 50 percent convertible preferred interest in the Ruby Pipeline
("Ruby") which entitles Pembina to
a US$91 million distribution per
year; and
- 75 percent jointly controlled interest in Grand Valley 1 Limited Partnership ("Grand
Valley").
Facilities Division
- 46.2 percent interest (as of March 31,
2018) in Veresen Midstream ("Veresen Midstream"), which owns
assets in western Canada serving the Montney geological play in northwestern
Alberta and northeastern B.C.
including gas processing plants and gas gathering pipelines and
compression; and
- 50 percent interest in Fort Saskatchewan Ethylene Storage
Limited Partnership and Fort Saskatchewan Ethylene Corporation
("Fort Corp").
Marketing & New Ventures Division
- An ownership interest in Aux
Sable (approximately 42.7 percent in Aux Sable U.S. and 50
percent in Aux Sable Canada)
(combined, "Aux Sable"), which includes an NGL fractionation
facility and gas processing capacity near Chicago, Illinois and other natural gas and
NGL processing facilities, logistics and distribution assets in the
U.S. and Canada, as well as transportation contracts on Alliance;
and
- 50 percent interest in Canadian Kuwait Petrochemical
Corporation ("CKPC").
Share of Profit and Proportionately Consolidated Operating
Margin and Adjusted EBITDA
|
|
3 Months Ended
March 31, 2018
($
millions)
(unaudited)
|
Pipelines
Division
|
Facilities
Division
|
Marketing &
New
Ventures Division
|
|
|
|
Alliance
|
Ruby
|
Veresen
Midstream
|
Aux
Sable
|
Other(2)
|
Total
|
Total Volumes, net
(mboe/d)(3)
|
148
|
89
|
66
|
46
|
|
349
|
Operating
Margin(1)
|
98
|
48
|
38
|
16
|
6
|
206
|
General and
administrative
|
8
|
1
|
3
|
3
|
|
15
|
Adjusted
EBITDA(1)
|
90
|
47
|
35
|
13
|
6
|
191
|
Finance costs and
other
|
9
|
12
|
19
|
2
|
|
42
|
Depreciation and
amortization
|
35
|
17
|
22
|
5
|
4
|
83
|
Share of earnings in
excess of equity interest
|
|
(10)
|
|
|
|
(10)
|
Share of profit
(loss) of investments in equity accounted investees
|
46
|
28
|
(6)
|
6
|
2
|
76
|
(1)
|
Refer to "Non-GAAP
Measures".
|
(2)
|
Includes interest in
Fort Corp, Grand Valley and CKPC.
|
(3)
|
Total revenue
volumes. Revenue volumes are physical plus volumes recognized from
take-or-pay commitments. Volumes are stated in mboe/d, with natural
gas volumes converted to mboe/d from MMcf/d at a 6:1
ratio.
|
Distributions by Investments in Equity Accounted Investees to
Pembina
|
|
(unaudited)
($
millions)
|
3 Months Ended
March 31, 2018
|
Alliance
|
61
|
Ruby
|
29
|
Veresen
Midstream
|
17
|
Aux Sable
|
17
|
Other(1)
|
2
|
Total Distributions
from Investments in Equity Accounted Investees (per Pembina's
Consolidated Statement of Cash Flows)
|
126
|
(1)
Distributions from Fort Corp.
|
Loans and Borrowings Amortization Schedule of Investments in
Equity Accounted Investees
|
|
|
|
|
|
|
|
(unaudited)
($ millions)
(1)
|
3 Months
Ended March
31, 2018(2)
|
Balance of
2018(3)
|
2019(3)
|
2020(3)
|
2021(3)
|
2022+(3)
|
Total(3)
|
|
|
|
|
|
|
|
|
Fixed
Maturity
|
|
|
|
|
|
|
|
Alliance
|
|
65
|
125
|
65
|
65
|
264
|
584
|
Ruby(4)
|
10
|
87
|
147
|
57
|
28
|
306
|
625
|
Veresen
Midstream
|
1
|
18
|
37
|
37
|
37
|
1,048
|
1,177
|
Aux Sable
|
|
2
|
|
|
|
|
2
|
Other
|
1
|
1
|
24
|
2
|
2
|
26
|
55
|
|
12
|
173
|
333
|
161
|
132
|
1,644
|
2,443
|
|
|
|
|
|
|
|
|
Revolving
|
|
|
|
|
|
|
|
Alliance
|
|
|
|
106
|
|
|
106
|
Veresen
Midstream(4)
|
30
|
|
|
|
|
|
|
|
30
|
|
|
106
|
|
|
106
|
|
|
|
|
|
|
|
|
Total
|
42
|
173
|
333
|
267
|
132
|
1,644
|
2,549
|
(1)
|
Balances reflect
Pembina's ownership percentage of the reported balance, translated
at CAD$1.2894:US$1.00.
|
(2)
|
Balances reflect
payments that occurred during the three-month period ended March
31, 2018.
|
(3)
|
Balances presented at
face value remaining at March 31, 2018.
|
(4)
|
Reflects recent
changes as described further under "Financing Activity" in the
March 31, 2018 MD&A.
|
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 an integrated system of pipelines
that transport various hydrocarbon liquids and natural gas products
produced primarily in western Canada. The Company also owns 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 identifying additional opportunities to connect
hydrocarbon production to new demand locations through the
development of infrastructure that would extend Pembina's service offering even further along
the hydrocarbon value chain. These new developments will contribute
to ensuring that hydrocarbons produced in the Western Canada
Sedimentary Basin and the other basins where Pembina operates can reach the highest value
markets throughout the world.
Pembina strives to provide
sustainable, industry-leading total returns for our investors;
reliable and value-added services for our customers; a net positive
impact to communities; and a safe, respectful, collaborative and
fair work culture for our employees.
Pembina's strategy is to:
- Preserve value by providing safe, environmentally
conscious, cost-effective and reliable services;
- Diversify by providing integrated solutions which
enhance profitability and customer service;
- Implement Growth by pursuing projects or assets that are
expected to generate cash flow per share accretion and capture
long-life, economic hydrocarbon reserves; and
- Secure Global Markets by understanding what the world
needs, where they need it, and delivering it.
Pembina is structured into
three Divisions: Pipelines Division, Facilities Division and
Marketing & New Ventures Division.
Pembina's common shares trade
on the Toronto and New York stock exchanges under PPL and PBA,
respectively. 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
"continue", "anticipate", "schedule", "will", "expects",
"estimate", "potential", "planned", "future" 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; expectations
about commodity pricing and industry activities; dividend
increases, further anticipated dividend growth and access to
capital; anticipated adjusted EBITDA projections for 2018 and
financial performance expectations resulting from Pembina's capital expenditures; the potential
future benefits and impacts of the Veresen Acquisition; 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 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; 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 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, climate change initiatives or policies or
increased environmental regulation; the failure to realize the
anticipated benefits or synergies of acquisitions 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 cyber
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 2018, and the closing of the
acquisition of Veresen 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), cash flow from
operating activities per common share, adjusted cash flow from
operating activities per common share, which do not have any
standardized meaning under IFRS ("Non-GAAP Measures"). Since
Non-GAAP financial measures do not have a standardized meaning
prescribed by 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.
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.
Non-GAAP Proportionate Consolidation of Investments in Equity
Accounted Investees Results
In accordance with IFRS, Pembina's jointly controlled investments are
accounted for using equity accounting. Under equity
accounting, the assets and liabilities of the investment are net
into a single line item on the Consolidated Statement of Financial
Position, Investments in Equity Accounted Investees. Net earnings
from Investments in Equity Accounted Investees are recognized in a
single line item in the Consolidated Statement of Earnings and
Comprehensive Earnings, Share of Profit of Investments in Equity
Accounted Investees. Cash contributions and distributions from
Investments in Equity Accounted Investees represent Pembina's proportionate share paid and
received in the period to and from the equity accounted
investment.
To assist the readers' understanding and evaluation of the
performance of these investments, Pembina is supplementing the IFRS disclosure
with Non-GAAP disclosure of Pembina's proportionately consolidated
interest in the Investments in Equity Accounted Investees.
Pembina's proportionate interest
in Investments in Equity Accounted Investees has been included in
operating margin, Adjusted EBITDA and other reconciling line items
to IFRS. A reconciliation of operating margin and Adjusted EBITDA
to Share of profit of investments in equity accounted investees can
be found under the heading "Proportionately Consolidated Results by
Investments in Equity Accounted Investees".
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
March 31, 2018, which is available online at
www.sedar.com, www.sec.gov and through
Pembina's website at
www.pembina.com.
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SOURCE Pembina Pipeline Corporation