Pembina reports strong
third quarter results with record volumes and a tripling of
earnings over the prior year.
All financial figures are in Canadian dollars unless noted
otherwise.
CALGARY, Alberta, Nov. 1, 2018 /PRNewswire/ -- Pembina
Pipeline Corporation ("Pembina" or
the "Company") (TSX: PPL; NYSE: PBA) announced today its financial
and operating results for the third quarter of 2018.
Operational and Financial Overview
|
|
|
|
3 Months Ended
September
30
|
9 Months Ended
September
30
|
($ millions,
except where noted)
|
(unaudited)
|
(unaudited)
|
|
2018
|
2017(1)
|
2018
|
2017(1)
|
Revenue
|
2,045
|
1,045
|
5,827
|
3,684
|
Net
revenue(2)
|
742
|
536
|
2,130
|
1,529
|
Share of profit from
equity accounted investees(3)
|
110
|
—
|
282
|
—
|
Gross
profit
|
585
|
274
|
1,664
|
919
|
Earnings
|
334
|
111
|
910
|
438
|
Earnings per common
share – basic (dollars)(4)
|
0.60
|
0.23
|
1.62
|
0.95
|
Cash flow from
operating activities
|
481
|
302
|
1,582
|
990
|
Cash flow from
operating activities per common share – basic
(dollars)(2)
|
0.95
|
0.75
|
3.14
|
2.47
|
Adjusted cash flow
from operating activities(2)
|
523
|
314
|
1,611
|
897
|
Adjusted cash flow
from operating activities per common share – basic
(dollars)(2)
|
1.03
|
0.78
|
3.20
|
2.24
|
Common share
dividends declared
|
288
|
205
|
842
|
601
|
Dividends per common
share (dollars)
|
0.57
|
0.51
|
1.67
|
1.5
|
Preferred share
dividends declared
|
30
|
19
|
91
|
57
|
Capital
expenditures
|
291
|
341
|
870
|
1,525
|
Proportionately
Consolidated Financial Overview(2)(5)
|
Total volumes
(mboe/d)(6)
|
3,465
|
2,514
|
3,378
|
2,391
|
Operating
margin(2)
|
810
|
413
|
2,354
|
1,173
|
Adjusted
EBITDA(2)
|
732
|
369
|
2,120
|
1,023
|
(1)
|
Financial results
reported for all 2017 periods have been restated to reflect the
Corporate Reorganization and adoption of IFRS 15.
|
(2)
|
Refer to "Non-GAAP
Measures".
|
(3)
|
Includes Investments
in Equity Accounted Investees - Alliance, Aux Sable, Ruby, Veresen
Midstream, CKPC, Grand Valley and Fort Corp. See "Unaudited
Supplementary Information" for definitions of equity accounted
investees.
|
(4)
|
Earnings per share -
basic is calculated using earnings attributable to common
shareholders adjusted for the after-tax amounts of preferred share
dividends.
|
(5)
|
See "Unaudited
Supplementary Information".
|
(6)
|
Total revenue
volumes. Revenue volumes are physical volumes 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. Volumes for 2017 have been restated to reflect the
Corporate Reorganization.
|
Financial and Operational Overview by Division
|
|
|
|
3 Months Ended
September 30
|
9 Months Ended
September 30
|
|
(unaudited)
|
(unaudited)
|
|
2018
|
2017
(1)
|
2018
|
2017
(1)
|
($
millions)
|
Total
Volumes (2)
|
Gross
Profit
|
Operating
Margin (3)
|
Total
Volumes (2)
|
Gross
Profit
|
Operating
Margin (3)
|
Total
Volumes (2)
|
Gross
Profit
|
Operating
Margin (3)
|
Total
Volumes (2)
|
Gross
Profit
|
Operating
Margin (3)
|
Pipelines
Division
|
2,593
|
338
|
469
|
1,840
|
166
|
213
|
2,517
|
954
|
1,336
|
1,726
|
428
|
553
|
Facilities
Division
|
872
|
149
|
223
|
674
|
103
|
143
|
861
|
419
|
661
|
665
|
293
|
410
|
Marketing & New
Ventures Division(4)
|
—
|
91
|
111
|
—
|
3
|
55
|
—
|
281
|
347
|
—
|
191
|
203
|
Corporate
|
—
|
7
|
7
|
—
|
2
|
2
|
—
|
10
|
10
|
—
|
7
|
7
|
Total
|
3,465
|
585
|
810
|
2,514
|
274
|
413
|
3,378
|
1,664
|
2,354
|
2,391
|
919
|
1,173
|
(1)
|
Financial results
reported for all 2017 periods have been restated to reflect the
Corporate Reorganization and the adoption of IFRS 15 (see
disclosure under "Changes in Reporting" in the third quarter 2018
MD&A).
|
(2)
|
Pipelines and
Facilities Divisions 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. Volumes for 2017 have been restated to reflect the
Corporate Reorganization.
|
(3)
|
Refer to "Non-GAAP
Measures".
|
(4)
|
Marketed NGL volumes
are excluded from Total Volumes to avoid double counting. Refer to
"Marketing & New Ventures Division" in the third quarter 2018
MD&A for further information.
|
Financial Highlights
Pembina achieved another strong
quarter with increasing volumes leading to robust earnings and
Adjusted EBITDA. These results were largely driven by a
$10 billion increase in assets
year-over-year from the acquisition of Veresen Inc. ("Veresen") in
2017 ("Veresen Acquisition"), new assets placed into service
following a large-scale capital program driving growing revenue
volumes, widening NGL frac spreads and volatility across the crude
oil complex. These factors contributed to:
- Third quarter and year-to-date earnings of $334 million and $910
million, a 201 percent and 108 percent increase,
respectively, over the same periods in 2017;
- Cash flow from operating activities of $481 million for the third quarter and
$1.6 billion year-to-date in 2018,
increases of 59 percent and 60 percent, respectively, over the same
periods in 2017. Adjusted cash flow from operating activities
increased by 67 percent and 80 percent to $523 million and $1.6
billion in the third quarter and year-to-date 2018,
respectively, compared to the same periods in 2017;
- On a per share (basic) basis, cash flow from operating
activities for the third quarter and year-to-date in 2018 both
increased 27 percent compared to the same periods in the prior
year. On a per share (basic) basis, adjusted cash flow from
operating activities for the third quarter increased 32 percent and
43 percent year-to-date compared to the same periods of the prior
year;
- Record third quarter and year-to-date operating margin of
$810 million and $2.4 billion, 96 percent and 101 percent higher,
respectively, than the same periods of the prior year; and
- Record third quarter and year-to-date Adjusted EBITDA of
$732 million and $2.1 billion, representing 98 percent and 107
percent increases, respectively, over the same periods in
2017.
Operational Highlights
- The Competition Bureau announced on September 26, 2018, that they will not challenge
the acquisition of Alberta Ethane Gathering System ("AEGS") through
the Veresen Acquisition by Pembina;
- Pembina achieved record total
volumes on a quarterly basis of 3,465 mboe/d and 3,378 mboe/d
year-to-date, 38 percent and 41 percent increases, respectively,
over the prior year;
- Realized record Pipeline Division revenue volumes during the
third quarter of 2,593 mboe/d and year-to-date of 2,517 mboe/d,
representing 41 percent and 46 percent increases, respectively,
compared to the same periods of 2017. Higher revenue volumes were
the result of system expansions on Pembina's Peace and northeast B.C. pipeline
systems, in addition to the fourth quarter 2017 Veresen Acquisition
which included AEGS, and equity investments in Alliance and Ruby.
The acquired assets accounted for an increase of 532 mboe/d revenue
volumes (net to Pembina) in the
third quarter of 2018 and 531 mboe/d on a year-to-date basis;
- Facilities Division generated record revenue volumes of 872
mboe/d in the third quarter and 861 mboe/d year-to-date in 2018,
both increased 29 percent compared to the same periods of 2017.
Increased revenue volumes were a result of the Redwater
Fractionation Site III ("RFS III") being placed into service on
June 30, 2017. Revenue volumes were
also driven by the startup of the Duvernay I gas plant, the
acquisition of Veresen Midstream Limited Partnership ("Veresen
Midstream") in the fourth quarter of 2017, and increased
take-or-pay commitments and additional physical volumes; and
- Marketing & New Ventures Division realized strong third
quarter performance, increasing marketed NGL sales volumes by 50
percent to 160 mboe/d over the comparable period in 2017 and
generating quarterly operating margin of $111 million, a 102 percent increase over the
comparable period in 2017. Strong results in the marketing business
were driven by higher margins on commodity sales, and the
acquisition of an ownership interest in Aux Sable U.S. and
Aux Sable Canada ("Aux Sable"), which contributed 37 mboe/d and
$38 million in the third quarter and
40 mboe/d and $93 million
year-to-date. Aux Sable was acquired
in the fourth quarter of 2017, benefiting Pembina in 2018 with access to US markets
which offer relatively strong propane plus margins and a wide
Chicago-AECO differential.
Executive Overview
Pembina's strategy and business
model continue to prove out as once again we have achieved strong
financial results. Resiliency in our business comes from a
combination of serving long-lived, economic hydrocarbons and
ensuring strong commercial frameworks. As well, the Company
is realizing the strategic benefits of our marketing business which
continues to experience solid results in the current
environment.
The prospects for future growth, both within the base business
and further extensions of our value chain, remain robust. "We
are as rich in growth opportunities as we have ever been, which is
a testament to both our customers and the underlying attractiveness
of the WCSB," stated Mick Dilger,
Pembina's President and Chief
Executive Officer.
As previously announced, Pembina was pleased this quarter to update its
2018 Adjusted EBITDA guidance range
to $2.75 to $2.85 billion, up
from $2.65 to $2.75 billion. "Pembina's base business is performing
extremely well. We are seeing increased throughput on our
conventional pipelines and fractionators, strong results from the
assets acquired previously from Veresen and higher marketing
revenues due to strong NGL frac spreads and oil price volatility,"
said Scott Burrows, Senior Vice President and Chief Financial
Officer.
Pembina's strategy of accessing
global markets also continues to unfold. Early construction work is
underway at the Company's Prince Rupert LPG Export Terminal; we
received a United States Federal Energy Regulatory Commission
("FERC") Notice of Schedule and based on that notice, we anticipate
a final FERC decision on the proposed Jordan Cove LNG project
("Jordan Cove") in November of 2019;
and we have made substantial progress on the proposed propane
dehydrogenation plant and polypropylene upgrading facility ("PDH/PP
facility"), with front end engineering design ("FEED") activities
completed and a final investment decision expected by year end.
Mr. Dilger concluded, "We are operating a strong and growing
base business while extending our value chain by pursuing three
exciting projects to access global markets, and we are doing so
within our financial guardrails. Our strong business performance
has contributed to setting new operational and financial records in
each quarter this year, and our future opportunities are numerous
and exciting," concluded Mr. Dilger.
New Developments and Growth Projects Update
New Infrastructure Announcement
- As announced today, Pembina is
undertaking development of new pipeline and processing
infrastructure totaling approximately $1.3
billion. Further information on this announcement is
contained in the news release available on Pembina's website.
Pipelines Division
- Pembina is continuing to
progress the Phase IV and Phase V expansions of its Peace Pipeline
system. These projects are tracking on budget and on schedule and
are expected to be placed into service in December 2018;
- Pembina continues to progress
its Phase VI Peace Pipeline expansion ("Phase VI") which includes:
upgrades at Gordondale, Alberta; a
new 16-inch pipeline from LaGlace to Wapiti, Alberta and associated
pump station upgrades; and a 20-inch pipeline from Kakwa to Lator,
Alberta. This project is trending
over budget and on schedule, with an anticipated in-service date in
the second half of 2019, subject to environmental and regulatory
approvals;
- As previously announced in the quarter, the Company will be
developing, in the Wapiti region, a new 12-inch condensate lateral
which will connect growing condensate volumes from a third-party
owned facility in the Pipestone Montney region into Pembina's Peace pipeline. Subject to
regulatory and environmental approvals, this lateral is expected to
be in-service in the second half of 2019, aligning with the Phase
VI expansion;
- In addition, Pembina
previously announced agreements to construct new infrastructure
("NEBC Montney Infrastructure") in proximity to the Company's Birch
Terminal. This new infrastructure will include an area production
connection to Pembina's Birch
Terminal as well as upgrades to the terminal including additional
storage and pumps, along with minor site modifications. This new
infrastructure is anticipated to be in-service in the second
quarter of 2019; and
- Effective October 2, 2018,
Pembina assumed control of the
operation and administration of AEGS.
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. Detailed
engineering is on track and all major equipment purchases have been
made. These facilities have an anticipated in-service date of late
2020, subject to environmental and regulatory approvals;
- The Company continues to advance the construction of a one
million barrel ethane storage facility located near Burstall, Saskatchewan for a total expected
capital cost of approximately $190
million. Construction is nearing completion and the project
is tracking on schedule with the expected in-service date of
December 2018;
- 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 mbpd of LPG. The LPG supply will be sourced
primarily from the Company's Redwater fractionation complex. Detailed
engineering is ongoing and early construction work continues. The
Prince Rupert Terminal is anticipated to have a total capital cost
of $250 million and will be in
service in mid-2020, subject to regulatory and environmental
approvals; and
- Pembina continues to progress
construction of its 100 MMcf/d sweet gas, shallow cut processing
facility, 30 mbpd condensate stabilization facility and other
associated infrastructure located at the Company's Duvernay Complex
("Duvernay II"). The facilities are under pinned by 20-year term
contracts with a combination of fee-for-service and fixed-return
arrangements. Construction has commenced and the project is
expected to be in-service mid-to-late 2019.
Marketing & New Ventures Division
- Canada Kuwait Petrochemical Company ("CKPC") continues to
progress the proposed PDH/PP facility. FEED activities have been
completed, the results are being evaluated and a final investment
decision is anticipated by year end. Pembina and Kuwait's Petrochemical Industries Company
K.S.C. (''PIC'') are each 50 percent joint venture owners of CKPC;
and
- Pembina continues to progress
its proposed Jordan Cove LNG project that will transport natural
gas from the Malin Hub in southern Oregon to an export terminal. In September 2017, the Company filed applications
with FERC for the construction and operation of Jordan Cove. The Company received a FERC Notice
of Schedule during the third quarter and based on that notice,
currently anticipates a final FERC decision on Jordan Cove in November of 2019. Pembina continues to anticipate first gas in
2024, pending the receipt of the necessary regulatory approvals, a
positive final investment decision and other requirements.
Financing
- On November 1, 2018, Pembina announced that it does not intend to
exercise its right to redeem the currently outstanding 10,000,000
Cumulative Redeemable Rate Reset Class A Preferred Shares, Series 1
("Series 1 Shares") on December 1,
2018 (the "Conversion Date"). For more information on the
terms of, and risks associated with an investment in, the Series 1
Shares and the Series 2 Shares, please see the prospectus
supplement dated July 19, 2013 filed
on SEDAR at www.sedar.com and the news release dated November 1, 2018.
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 retrospectively
adopted IFRS 15 Revenue from Contracts with Customers ("IFRS
15"), effective January 1, 2018.
While this change is not expected to have a material impact on
annual revenue recognition, it has resulted in a change in timing
for quarterly revenue recognition.
For the third quarter, $37 million
of take-or-pay revenue in excess of physical deliveries has been
collected and deferred and revenue of $60
million related to take-or-pay deferral was recognized
during the period.
For the nine months ending September 30, 2018, $107 million of take-or-pay revenue in excess of
physical deliveries has been collected and deferred in addition to
the $8 million that had been deferred
at January 1, 2018. Revenue of
$112 million related to take-or-pay
deferral was recognized during the period, and the outstanding
deferral as at September 30, 2018 was $3 million.
Financial results reported for all 2017 periods have been
restated to reflect the Corporate Reorganization and the
retrospective adoption of IFRS 15.
Dividends
- Declared and paid dividends of $0.19 per qualifying common share for the
applicable record dates in July, August and September 2018; 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; Series 13: $0.359375; and Series 21: $0.306250 to shareholders of record as of
August 1, 2018. Declared and paid
quarterly dividends per qualifying preferred shares of: Series 15:
$0.279; Series 17: $0.3125; and Series 19: $0.3125 to shareholders of record on September 15, 2018.
Third Quarter 2018 Conference Call & Webcast
Pembina will host a conference
call on Friday, November 2, 2018 at 8:00 a.m. MT (10:00 a.m.
ET) for interested investors, analysts, brokers and media
representatives to discuss details related to the third quarter
2018 results. The conference call dial-in numbers for Canada and
the U.S. are 647-427-7450 or 888-231-8191. A recording of the
conference call will be available for replay until November 9,
2018 at 11:59 p.m. ET. To access the
replay, please dial either 416-849-0833 or 855-859-2056 and enter
the password 7697531. A live webcast of the conference call can be
accessed on Pembina's website at
pembina.com under Investor Centre, Presentation & Events, or by
entering:
https://event.on24.com/wcc/r/1652776/3F954F3630A028629E570FDCB6625739
in your web browser. Shortly after the call, an audio archive will
be posted on the website for a minimum of 90 days.
UNAUDITED SUPPLEMENTARY INFORMATION
Three Months ending September 30, 2018
Financial results reported for all 2017 periods have been
restated to reflect the Corporate Reorganization and the adoption
of IFRS 15.
Pipelines Division
|
|
|
|
|
3 Months Ended
September 30
(unaudited)
|
Conventional
Pipelines
|
Transmission
Pipelines
|
Oil
Sands
Pipelines
|
Total
|
($ millions,
except where noted)
|
2018
|
2017(4)
|
2018
|
2017(4)
|
2018
|
2017(4)
|
2018
|
2017(4)
|
Financial
Overview
|
|
|
|
|
|
|
|
|
Revenue(1)
|
320
|
214
|
47
|
23
|
61
|
58
|
428
|
295
|
Operating
expenses(1)
|
65
|
55
|
11
|
5
|
23
|
21
|
99
|
81
|
Share of profit from
equity accounted investees
|
—
|
—
|
65
|
—
|
—
|
—
|
65
|
—
|
Realized loss on
commodity-related derivative financial instruments
|
—
|
1
|
—
|
—
|
—
|
—
|
—
|
1
|
Unrealized gain on
commodity-related derivative financial instruments
|
—
|
(1)
|
—
|
—
|
—
|
—
|
—
|
(1)
|
Depreciation and
amortization included in operations
|
39
|
37
|
9
|
6
|
8
|
5
|
56
|
48
|
Gross
profit
|
216
|
122
|
92
|
12
|
30
|
32
|
338
|
166
|
Proportionately
Consolidated Financial Overview(2)
|
|
|
|
|
|
|
|
|
Revenue Volumes
(mboe/d)(3)
|
946
|
715
|
571
|
38
|
1,076
|
1,087
|
2,593
|
1,840
|
Operating
Margin(1)(2)
|
255
|
158
|
176
|
18
|
38
|
37
|
469
|
213
|
(1)
|
Includes
Inter-Divisional transactions. See note 13 to the Interim Financial
Statements.
|
(2)
|
Refer to "Non-GAAP
Measures".
|
(3)
|
Revenue volumes are
physical volumes plus volumes recognized from take-or-pay
commitments.
|
(4)
|
Financial results
reported for all 2017 periods have been restated to reflect the
Corporate Reorganization and the adoption of IFRS 15.
|
Facilities Division
|
|
|
|
3 Months Ended
September 30
(unaudited)
|
Gas
Services
|
NGL
Services
|
Total
|
($ millions,
except where noted)
|
2018
|
2017(4)
|
2018
|
2017(4)
|
2018
|
2017(4)
|
Financial
Overview
|
|
|
|
|
|
|
Revenue(1)
|
136
|
105
|
241
|
125
|
377
|
230
|
Net revenue
(2)
|
134
|
103
|
110
|
88
|
244
|
191
|
Operating
expenses(1)
|
44
|
32
|
32
|
22
|
76
|
54
|
Share of profit from
equity accounted investees
|
16
|
—
|
2
|
—
|
18
|
—
|
Depreciation and
amortization included in operations
|
24
|
18
|
13
|
16
|
37
|
34
|
Gross
profit
|
82
|
53
|
67
|
50
|
149
|
103
|
Proportionately
Consolidated Financial Overview(2)
|
|
|
|
|
|
|
Revenue Volumes
(mboe/d)(3)
|
669
|
486
|
203
|
188
|
872
|
674
|
Operating
Margin(1)(2)
|
141
|
71
|
82
|
72
|
223
|
143
|
(1)
|
Includes
Inter-Divisional transactions. See note 13 to the Interim Financial
Statements.
|
(2)
|
Refer to "Non-GAAP
Measures".
|
(3)
|
Revenue volumes are
physical volumes 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.
|
(4)
|
Financial results
reported for all 2017 periods have been restated to reflect the
Corporate Reorganization and adoption of IFRS 15.
|
Marketing & New Ventures Division
|
|
|
|
3 Months Ended
September 30
|
|
|
|
(unaudited)
|
Marketing
|
New
Ventures(4)
|
Total
|
($ millions,
except where noted)
|
2018
|
2017(3)
|
2018
|
2017(3)
|
2018
|
2017(3)
|
Financial
Overview
|
|
|
|
|
|
|
Revenue(1)
|
1,341
|
575
|
—
|
—
|
1,341
|
575
|
Cost of goods
sold(1)
|
1,239
|
504
|
—
|
—
|
1,239
|
504
|
Net
revenue(2)
|
102
|
71
|
—
|
—
|
102
|
71
|
Share of profit from
equity accounted investees
|
27
|
—
|
—
|
—
|
27
|
—
|
Realized loss on
commodity-related derivative financial instruments
|
29
|
16
|
—
|
—
|
29
|
16
|
Unrealized loss on
commodity-related derivative financial instruments
|
—
|
45
|
—
|
—
|
—
|
45
|
Depreciation and
amortization included in operations
|
9
|
7
|
—
|
—
|
9
|
7
|
Gross
profit
|
91
|
3
|
—
|
—
|
91
|
3
|
Proportionately
Consolidated Financial Overview(2)
|
|
|
|
|
|
|
Total Marketed NGL
Volumes (mboe/d)
|
160
|
107
|
—
|
—
|
160
|
107
|
Operating
Margin(1)(2)
|
111
|
55
|
—
|
—
|
111
|
55
|
(1)
|
Includes
Inter-Divisional transactions. See note 13 to the Interim Financial
Statements.
|
(2)
|
Refer to "Non-GAAP
Measures".
|
(3)
|
Financial results
reported for all 2017 periods have been restated to reflect the
Corporate Reorganization and adoption of IFRS 15.
|
(4)
|
All New Ventures
projects have not yet commenced operations and therefore have no
results of operations.
|
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$91 million distribution per
year; and
- 75 percent jointly controlled interest in Grand Valley 1 Limited Partnership wind farm
("Grand Valley").
Facilities Division
- 46 percent interest (as of September 30,
2018) in Veresen Midstream Limited Partnership ("Veresen
Midstream"), which owns assets in western Canada serving the
Montney geological play in
northwestern Alberta and
northeastern B.C. including gas processing plants and gas gathering
pipelines and compression; and
- 50 percent interest in Fort Saskatchewan Ethylene Storage
Limited Partnership and Fort Saskatchewan Ethylene Corporation
("Fort Corp").
Marketing & New Ventures Division
- An ownership interest in Aux
Sable (approximately 42.7 percent in Aux Sable U.S. and 50
percent in Aux Sable Canada)
(combined, "Aux Sable"), which
includes an NGL fractionation facility and gas processing capacity
near Chicago, Illinois and other
natural gas and NGL processing facilities, logistics and
distribution assets in the U.S. and Canada, as well as
transportation contracts on Alliance; and
- 50 percent interest in Canadian Kuwait Petrochemical
Corporation ("CKPC").
Share of Profit and Proportionately Consolidated Operating
Margin and Adjusted EBITDA
|
|
|
|
|
3 Months Ended
September 30, 2018
(unaudited)
($ millions,
except where noted)
|
Pipelines
Division
|
Facilities
Division
|
Marketing
&
New
Ventures
Division
|
|
|
|
Alliance
|
Ruby
|
Veresen
Midstream
|
Aux
Sable(3)
|
Other(4)
|
Total
|
Total Volumes, net
(mboe/d)(1)
|
139
|
89
|
86
|
37
|
—
|
351
|
Operating
Margin(2)
|
90
|
50
|
51
|
38
|
4
|
233
|
General and
administrative
|
11
|
2
|
1
|
5
|
—
|
19
|
Adjusted
EBITDA(2)
|
79
|
48
|
50
|
33
|
4
|
214
|
Finance costs and
other
|
9
|
11
|
13
|
3
|
(1)
|
35
|
Depreciation and
amortization
|
36
|
18
|
21
|
3
|
3
|
81
|
Share of earnings in
excess of equity interest
|
—
|
12
|
—
|
—
|
—
|
12
|
Share of profit of
Investments in Equity Accounted Investees
|
34
|
31
|
16
|
27
|
2
|
110
|
|
|
(1)
|
Total revenue
volumes. Revenue volumes are physical volumes 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.
|
(2)
|
Refer to "Non-GAAP
Measures".
|
(3)
|
Aux Sable volumes
include marketed NGL volumes.
|
(4)
|
Includes interest in
Fort Corp (Facilities Division), Grand Valley (Pipelines Division)
and CKPC (Marketing & New Ventures Division).
|
Distributions by Investments in Equity Accounted Investees to
Pembina
|
3 Months Ended
September 30, 2018
(unaudited)
($
millions)
|
Alliance
|
68
|
Ruby
|
30
|
Veresen
Midstream
|
31
|
Aux Sable
|
38
|
Other(1)
|
3
|
Total Distributions
from Investments in Equity Accounted Investees (per Pembina's
Consolidated Statement of Cash Flows)
|
170
|
(1)
|
Distributions from
Fort Corp. and Grand Valley
|
Loans and Borrowings Amortization Schedule of Investments in
Equity Accounted Investees
|
|
|
|
|
|
|
|
(unaudited)
($ millions)
(1)
|
9 Months Ended
September 30,
2018(2)
|
Balance of
2018(3)
|
2019(3)
|
2020(3)
|
2021(3)
|
2022+(3)
|
Total(3)
|
|
|
|
|
|
|
|
|
Fixed
Maturity
|
|
|
|
|
|
|
|
Alliance
|
32
|
32
|
126
|
65
|
65
|
265
|
553
|
Ruby(4)
|
59
|
38
|
148
|
57
|
28
|
307
|
578
|
Veresen
Midstream
|
10
|
9
|
36
|
36
|
36
|
1,022
|
1,139
|
Aux Sable
|
1
|
1
|
—
|
—
|
—
|
—
|
1
|
Other
|
1
|
1
|
24
|
2
|
2
|
26
|
55
|
|
103
|
81
|
334
|
160
|
131
|
1,620
|
2,326
|
|
|
|
|
|
|
|
|
Revolving
|
|
|
|
|
|
|
|
Alliance
|
—
|
—
|
—
|
—
|
111
|
—
|
111
|
Veresen
Midstream(4)
|
—
|
—
|
—
|
—
|
—
|
37
|
37
|
Other
|
1
|
—
|
13
|
—
|
—
|
—
|
13
|
|
1
|
—
|
13
|
—
|
111
|
37
|
161
|
|
|
|
|
|
|
|
|
Total
|
104
|
81
|
347
|
160
|
242
|
1,657
|
2,487
|
(1)
|
Balances reflect
Pembina's ownership percentage of the reported balance.
|
(2)
|
Balances reflect
payments that occurred during the nine-month period ended
September 30, 2018.
|
(3)
|
Balances presented at
face value remaining at September 30, 2018.
|
(4)
|
Reflects recent
changes as described further under "Financing Activity" in the
September 30, 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 Canadian 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 PL
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 their limitation, the following: Pembina's corporate strategy; expectations
about commodity pricing industry activities and development
opportunities; expectations about future growth opportunities and
demand for our service; expectations regarding new corporate
developments and impact on access to markets; anticipated adjusted
EBITDA projections for 2018 and financial performance expectations
resulting from Pembina's capital
expenditures; planning, construction, capital expenditure
estimates, schedules, regulatory and environmental applications and
approvals, 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), Adjusted EBITDA
per common share, 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 in 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 from 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 from 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
September 30, 2018, which is available online at
www.sedar.com, www.sec.gov and through Pembina's website at www.pembina.com.
For further information:
Investor Relations: Cameron Goldade,
Vice President Capital Markets, (403) 231-3156, 1-855-880-7404,
E-mail: investor-relations@pembina.com, www.pembina.com