Full year results reflect the resilience of Pembina's
diversified and highly contracted business; pre-pandemic adjusted
EBITDA guidance achieved
All financial figures
are in Canadian dollars unless otherwise noted. This news release
refers to certain financial measures that are not defined by
Generally Accepted Accounting Principles ("GAAP"), including net
revenue; adjusted earnings before interest, taxes, depreciation and
amortization ("adjusted EBITDA"); cash flow from operating
activities per common share; adjusted cash flow from operating
activities; and adjusted cash flow from operating activities per
common share. For more information see "Non-GAAP Measures"
herein
|
CALGARY, AB, Feb. 25, 2021 /PRNewswire/ - Pembina
Pipeline Corporation ("Pembina" or the "Company") (TSX: PPL) (NYSE:
PBA) announced today its financial and operating results for the
fourth quarter and full year 2020.
Financial and Operational Overview
|
3 Months Ended
December 31
|
12 Months Ended
December 31
|
($ millions,
except where noted) (unaudited)
|
2020
|
2019(3)
|
2020
|
2019(3)
|
Infrastructure and
other services revenue
|
798
|
662
|
2,997
|
2,426
|
Product sales
revenue
|
896
|
1,092
|
3,205
|
4,804
|
Total
Revenue
|
1,694
|
1,754
|
6,202
|
7,230
|
Net
revenue(1)
|
954
|
837
|
3,444
|
3,120
|
Earnings
(loss)
|
(1,216)
|
150
|
(316)
|
1,507
|
Earnings (loss) per
common share – basic (dollars)
|
(2.28)
|
0.22
|
(0.86)
|
2.69
|
Earnings (loss) per
common share – diluted (dollars)
|
(2.28)
|
0.22
|
(0.86)
|
2.68
|
Cash flow from
operating activities
|
766
|
728
|
2,252
|
2,532
|
Cash flow from
operating activities per common share – basic
(dollars)(1)
|
1.39
|
1.41
|
4.10
|
4.94
|
Adjusted cash flow
from operating activities(1)
|
603
|
576
|
2,289
|
2,234
|
Adjusted cash flow
from operating activities per common share – basic
(dollars)(1)
|
1.10
|
1.11
|
4.16
|
4.36
|
Common share
dividends declared
|
346
|
314
|
1,385
|
1,213
|
Dividends per common
share (dollars)
|
0.63
|
0.60
|
2.52
|
2.36
|
Capital
expenditures
|
161
|
429
|
1,029
|
1,645
|
Total volume
(mboe/d)(2)
|
3,614
|
3,577
|
3,500
|
3,451
|
Adjusted
EBITDA(1)
|
866
|
787
|
3,281
|
3,061
|
(1)
|
Refer to "Non-GAAP
Measures".
|
(2)
|
Total revenue
volumes. Revenue volumes are physical volumes plus volumes
recognized from take-or-pay commitments. Volumes are stated in
thousand 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.
|
(3)
|
Comparative 2019
period has been restated. See "Voluntary Change in Accounting
Policy" in Pembina's Management's Discussion and Analysis, for the
three and twelve months ended December 31, 2020 ("MD&A") and
Note 3 to the Consolidated Financial Statements for the three and
twelve months ended December 31, 2020.
|
Financial and Operational Overview by Division
|
3 Months Ended
December 31
|
12 Months Ended
December 31
|
|
2020
|
2019
|
2020
|
2019
|
($ millions,
except where noted)
|
Volumes(1)
|
Adjusted
EBITDA(2)
|
Volumes(1)
|
Adjusted
EBITDA(2)
|
Volumes(1)
|
Adjusted
EBITDA(2)
|
Volumes(1)
|
Adjusted
EBITDA(2)
|
Pipelines
|
2,730
|
577
|
2,667
|
467
|
2,623
|
2,208
|
2,566
|
1,854
|
Facilities
|
884
|
255
|
910
|
254
|
877
|
1,012
|
885
|
955
|
Marketing & New
Ventures(3)
|
—
|
75
|
—
|
120
|
—
|
193
|
—
|
423
|
Corporate
|
—
|
(41)
|
—
|
(54)
|
—
|
(132)
|
—
|
(171)
|
Total
|
3,614
|
866
|
3,577
|
787
|
3,500
|
3,281
|
3,451
|
3,061
|
(1)
|
Volumes for Pipelines
and Facilities divisions are revenue volumes, which 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)
|
Marketed natural gas
liquids ("NGL") volumes are excluded from Volumes to avoid double
counting. Refer to "Marketing & New Ventures Division" in
Pembina's MD&A for further information.
|
Financial & Operational Highlights
Adjusted EBITDA
Change in Full Year Adjusted EBITDA ($
millions)(1)
(1)
|
Comparative 2019
period has been restated. See "Voluntary Change in Accounting
Policy" in Pembina's MD&A and Note 3 to the Consolidated
Financial Statements for the three and twelve months ended December
31, 2020.
|
Pembina reported record fourth quarter adjusted EBITDA of
$866 million and record full year
adjusted EBITDA of $3,281 million,
representing a ten percent and seven percent increase,
respectively, over the same periods in the prior year and within
its original guidance range.
Fourth quarter and annual adjusted EBITDA were positively
impacted primarily by contributions from the assets acquired in the
Kinder Acquisition; Duvernay II, Phase VI Expansion and Empress
infrastructure coming into service in November 2019, June
2020 and October 2020,
respectively; lower operating expenses in Pipelines; and lower
general & administrative expenses. In addition, relative to the
prior year, both periods were negatively impacted by lower margins
on crude oil sales and a lower contribution from Alliance Pipeline
due to a narrower AECO-Chicago natural gas price differential.
Fourth quarter adjusted EBITDA also was positively impacted by
higher deferred revenue recognized on the Peace Pipeline system and
from monetizing a portion of storage positions built up during the
second and third quarters of 2020 in Marketing & New
Ventures.
Full year adjusted EBITDA was negatively impacted by lower
margins on NGL sales, a lower contribution from Aux Sable as a
result of lower NGL margins, offset by higher realized gains on
commodity-related derivatives.
Earnings
Change in Full Year Earnings ($
millions)(1)
(1)
|
Comparative 2019
period has been restated. See "Voluntary Change in Accounting
Policy" in Pembina's MD&A and Note 3 to the Consolidated
Financial Statements for the three and twelve months ended December
31, 2020.
|
Pembina recorded a loss in the fourth quarter of $1,216 million and a loss for the full year of
$316 million compared to earnings of
$150 million and $1,507 million, respectively, in the same periods
in the prior year.
In addition to the factors impacting adjusted EBITDA, as noted
above, earnings in both periods were negatively impacted by
$1.6 billion of non-cash after-tax
impairments recognized in the CKPC joint venture, as well as
investments in Ruby and Jordan Cove.
Both periods were also negatively impacted by higher unrealized
losses on commodity-related derivatives.
Full year earnings also were positively impacted by other income
associated with the Canadian Emergency Wage Subsidy and negatively
impacted by increased net finance costs due to higher interest
expense, driven by higher average debt levels from the Kinder
Acquisition, and foreign exchange losses on the repayment of U.S.
dollar denominated debt.
Excluding impairments and the associated deferred tax recovery,
earnings for the fourth quarter and full year would have been
$338 million and $1,238 million, respectively.
Cash Flow From Operating Activities
Cash flow from operating activities of $766 million for the fourth quarter and
$2,252 million for the full year were
an increase of five percent and a decrease of 11 percent,
respectively, over the same periods in the prior year.
The increase in the fourth quarter was primarily driven by an
increase in operating results after adjusting for non-cash items,
largely due to the Kinder Acquisition, and a decrease in taxes
paid, partially offset by higher net interest paid, changes in
non-cash working capital and lower distributions from equity
accounted investees.
The full year decrease was due primarily to a change in non-cash
working capital, an increase in taxes paid, a decrease in
distributions from equity accounted investees and an increase in
net interest paid, partially offset by the increase in operating
results after adjusting for non-cash items.
On a per share (basic) basis, cash flow from operating
activities for the fourth quarter and full year 2020 decreased by
one percent and 17 percent, respectively, compared to the same
periods in the prior year due to the same factors, as well as the
additional common shares issued pursuant to the Kinder
Acquisition.
Adjusted Cash Flow From Operating Activities
Record quarterly and record full year adjusted cash flow from
operating activities of $603 million
and $2,289 million, respectively,
represent five percent and two percent increases, respectively,
over the same periods in the prior year. The increases are due to
the factors impacting cash flow from operating activities,
discussed above, net of the change in non-cash working capital,
taxes paid and accrued share-based payments. In addition, the
fourth quarter impact was partially offset by higher current tax
expense and the full year impact was partially offset by an
increase in preferred share dividends following the Kinder
Acquisition. On a per share (basic) basis, adjusted cash flow
from operating activities for the fourth quarter and full year
decreased by one percent and five percent, respectively, compared
to the same periods in the prior year due to the same factors, as
well as the additional common shares issued pursuant to the Kinder
Acquisition.
Volumes
Total volume of 3,614 mboe/d for the fourth quarter and 3,500
mboe/d for the full year represent approximately one percent
increases over the same periods in the prior year. As discussed in
further detail below, the positive contributions from assets
acquired in the Kinder Acquisition and new assets coming into
service were partially offset by lower interruptible volumes on
certain Pipelines assets, as a result of a lower commodity price
environment, and lower volumes in certain Facilities assets due to
lower supply volumes, scheduled turnarounds and COVID-19 related
factors.
Divisional Highlights
- Pipelines reported adjusted EBITDA for the fourth quarter of
$577 million and $2,208 million for the full year, which
represents 24 percent and 19 percent increases, respectively,
compared to the same periods in the prior year. The fourth quarter
was positively impacted by higher revenue associated with Cochin
Pipeline and Edmonton Terminals following the Kinder Acquisition,
combined with higher deferred revenues recognized on the Peace
Pipeline system and Phase VI Expansion coming into service in
June 2020, partially offset by a
slightly lower contribution from Alliance Pipeline due to the
narrower AECO-Chicago natural gas price differential. The full year
increase was largely due to the same items impacting the fourth
quarter, combined with lower operating expenses on the conventional
pipeline assets.
Pipelines volumes of 2,730 mboe/d in the fourth quarter and 2,623
mboe/d for the full year, represent two percent increases compared
to the same periods in the prior year. Volumes in both periods were
positively impacted by the contribution from Cochin Pipeline
following the Kinder Acquisition and Phase VI Expansion coming into
service. These factors were partially offset by lower interruptible
volumes on Drayton Valley Pipeline and Peace Pipeline due to market
conditions. Additionally, fourth quarter volumes were positively
impacted by higher deferred revenues recognized on the Peace
Pipeline system, partially offset by lower interruptible volumes on
Ruby Pipeline. Full year volumes were also negatively impacted by
lower interruptible volumes on Alliance Pipeline.
- Facilities reported adjusted EBITDA of $255 million for the fourth quarter and
$1,012 million for the full year,
which represents consistent results and a six percent increase,
respectively, over the same periods in the prior year. The fourth
quarter was positively impacted by the increased contribution from
Vancouver Wharves following the Kinder Acquisition and Duvernay II
and Empress infrastructure being placed into service in
November 2019 and October 2020, respectively, largely offset by
lower revenue at Resthaven Facility and Cutbank Complex as a result
of lower capital fees and lower volumes at the Younger facility.
The full year was positively impacted by assets placed into
service, combined with lower general & administrative expenses,
as a result of lower long-term incentive costs.
Facilities volumes of 884 mboe/d in the fourth quarter and 877
mboe/d for the full year, represent a three percent and one percent
decrease, respectively, compared to the same periods in the prior
year. The quarterly and full year decreases were primarily due to
lower volumes at the Younger facility due to regularly scheduled
maintenance and lower gas feedstock availability, combined with
lower volumes at Veresen Midstream as a result of deferred drilling
and completions by a key customer due to COVID-19 restrictions,
partially offset by volumes associated with Duvernay II being
placed into service.
- Marketing & New Ventures reported fourth quarter adjusted
EBITDA of $75 million and
$193 million for the full year, which
represents a 38 percent and 54 percent decrease, respectively,
compared to the same periods in the prior year. Both periods were
impacted by lower margins on crude oil sales as a result of the
lower crude oil prices relative to 2019. In addition, the fourth
quarter was negatively impacted by a realized loss on
commodity-related derivatives due to higher NGL market prices,
compared to a realized gain in the prior period. The full year
decrease was also a result of lower propane prices and frac spreads
during 2020, lower revenues at Aux Sable as a result of lower NGL
margins and a narrower AECO-Chicago natural gas price differential,
partially offset by higher realized gains on commodity-related
derivatives and lower general & administrative and other
expenses, due to cost saving initiatives.
NGL marketed volumes of 207 mboe/d in the fourth quarter and 182
mboe/d for the full year, represent a nine percent increase and
four percent decrease, respectively, compared to the same periods
in the prior year. Marketed NGL volumes for the fourth quarter
increased as Pembina monetized a portion of the storage positions
that were built up during the second and third quarters of 2020,
combined with increased volumes at Aux Sable due to higher ethane
sales. Full year marketed NGL volumes were lower as Pembina built
up NGL storage positions during the second and third quarters of
2020 when commodity prices were at the lowest levels, largely
offset by higher marketed NGL volumes during the fourth quarter and
increased ethane volumes at Aux Sable.
Executive Overview
Pembina entered 2020 with a great deal of momentum and
enthusiasm as we had recently completed a strategic value chain
acquisition, were successfully executing our strategy to access
global markets, and had $5.8 billion
of secured growth projects underway. Like many other companies,
Pembina was soon faced with the challenge of responding to the
COVID-19 pandemic and the decline in global energy prices. Given
the tremendous uncertainty and potential risks, it was incumbent on
Pembina to react quickly and decisively, and we did just that. Our
response included permanently reducing our operating and
administrative cost structure by $100
million annually as well as reducing our capital investment
budget by $1 billion. We were
steadfast in our assertion that we would remain within our
pre-pandemic guidance range, albeit near the low end. It would turn
out that these targets were all exceeded by year end. Pembina takes
great pride in consistently doing what it says it will do.
Our commitment to our four stakeholder groups – employees,
customers, investors and communities - was never more important
than it was in 2020 and our response to the pandemic focused on
protecting each of their interests:
- Our first priority was the health of our employees and
communities. We are pleased to report that the Company has not
experienced any operational disruptions to its assets as a result
of COVID-19 and despite all the new pandemic-related risks and
additional considerations, Pembina had its best safety record ever
in 2020. Further, we took all necessary steps to limit the spread
of COVID-19 within our communities while fulfilling our role as an
essential service provider;
- Our strong safety performance led to our ability to provide
uninterrupted service to customers, processing and transporting all
product tendered, and thus supporting their cash flow during a
difficult year. We also engaged in extensive discussions throughout
the year to affirm our customers' short- and long-term
infrastructure needs and thanks to long-standing and strong
relationships, we struck new bargains that were good for our
customers and for Pembina;
- For our investors, we took bold steps to protect our balance
sheet, preserve our BBB credit rating, and ensure we had the
available liquidity to weather an uncertain storm. We were pleased
to have increased the common share monthly dividend in early 2020
and maintain that dividend even after the onset of the pandemic.
More than ever, we take pride in the fact that our dividend has
never been reduced; and
- For our communities, we delivered on all commitments made,
matured our environmental, social and governance ("ESG") reporting
and strategy, and continued to advance many projects with these
communities during a challenging time.
If there is a silver lining to be found in 2020, it would be a
clear validation of our long-term strategy, diversification efforts
and steadfast commitment to the Company's financial guardrails. The
resilience, stability and predictability of Pembina's business,
were once again proven, as they were during the 2009 financial
crisis and 2015 commodity price downturn. In each of these
challenging years, Pembina continued to grow adjusted EBITDA. In
2020, the COVID-19 pandemic drove commodity prices lower and
prompted unprecedented defensive actions by our producer customers.
However, given the ingenuity of our customers and the exceptional
geology they sit upon; the highly diversified nature of our Company
across commodities, geographies, and customers; the highly
contracted nature of our assets; our frac spread hedging program;
as well as substantial cost savings achieved throughout the
business, Pembina delivered adjusted EBITDA of approximately
$3.3 billion, which is within our
pre-pandemic guidance range and at 97 percent of the midpoint of
that range.
Some of the challenges we faced in 2020 were related to asset
impairments. We were forced to acknowledge that due to COVID-19,
alongside changing commodity price dynamics, combined with evolving
political priorities, Pembina recognized an impairment in the value
of certain assets, including our investments in Ruby, Jordan Cove, and our CKPC petrochemical
investment. We believe these opportunities remain in strategy, make
economic sense when de-risked, and are aligned with Pembina's ESG
priorities. We believe the time for these projects may come;
however, we can sadly no longer predict with certainty when that
time will be and hence were compelled to reflect their impairments
in our 2020 financial statements through a non-cash charge.
Having successfully navigated 2020 and emerged in a position of
strength, our focus turns to 2021 and beyond. While COVID-19 is
still an urgent global concern and much uncertainty remains, there
has been significant progress made on understanding and mitigating
the threat, and there is a growing expectation of a return to some
normalcy and associated rising energy demand at some point this
year. In 2020, Pembina effectively 'hit the pause button', but in
2021 renewed optimism gives us the confidence to 'hit play' once
again. This view is informed by the following:
- 'Advantage Canada'. New third-party export options in the form
of Trans Mountain Pipeline expansion, LNG Canada, Enbridge's Line 3
Replacement, and Pembina's and third-party NGL export terminals
will collectively improve relative pricing for Canadian
hydrocarbons, support future growth in the Western Canadian
Sedimentary Basin ("WCSB") and provide new opportunities for
Pembina. Further, Canadian producers, particularly the mid-size
companies, have emerged from 2020 stronger on average than their
U.S. peers, given their balance sheet repair programs started much
earlier, resulting in comparably stronger balance sheets. They also
have a proven ability to live within their own cash flow and enjoy
lower production decline rates;
- Overall, WCSB activity levels have stabilized and are
increasing, with a particularly promising growth outlook for the
northeast British Columbia Montney and Alberta Duvernay areas, where Pembina provides
most of its services;
- Physical throughput on Pembina's systems remains stable and
trending upward, providing an encouraging start to the new year.
Further, with many of Pembina's systems currently operating at, or
near, take-or-pay levels, and given various pipeline capacity
optimization opportunities available to Pembina, there is
tremendous operational leverage, or 'torque', as incremental
volumes arising from an economic recovery will contribute directly
to the Company's financial results, while at the same time lowering
per unit costs to customers; and
- The first two months of the new year have seen stronger
commodity prices, allowing for a further degree of cautious
optimism for both our customers' and Pembina's 2021 financial
outlooks, both in terms of volume growth and Pembina's marketing
activities.
Pembina acknowledges the need to contribute to reducing global
emissions, part of the 'E' in ESG. We have committed to reducing
the carbon intensity of each business we operate. By the end of
2021, Pembina will have taken concrete action in this area and
published 5-year emission targets. That said, ESG is more than the
'E'. We are on track to continuously improve in the areas of the
'S' and the 'G' also. We recently published a comprehensive ESG
update and will continue to move methodically forward on all fronts
in the year to come. As an example, at our Prince Rupert Terminal,
Pembina invested heavily and together with the City of Prince Rupert removed a toxic and
abandoned pulp mill, replacing it with a new propane export
terminal.
Safety led to operational reliability, and together with prudent
financial stewardship through 2020 this put Pembina in a strong
financial position and set the groundwork for 2021 and a return to
accretive growth. Following the pandemic-related project deferrals
earlier in the year, we were delighted in December to announce the
reactivation of the improved Phase VII Expansion of the Peace
Pipeline system and Empress Co-generation Facility. The other Peace
Pipeline expansion projects, namely the Phase VIII Expansion and
Phase IX Expansion, remain deferred, during which time we are also
improving them. The initial contracts supporting the projects are
still in place and there are ongoing negotiations for incremental
capacity. We are also carefully evaluating our deferred Prince
Rupert Terminal Expansion project. We are making good use of the
deferral period and are now considering a larger expansion of the
facility and the use of larger vessels, which will provide even
greater value to customers by improving economies of scale and
lowering per unit lifting and vessel transport costs to premium
markets. Pembina expects to make a decision in the second half of
2021 to re-activate all three projects. Taken together they are
indicative of the growth opportunities afforded by Pembina's
industry-leading footprint, even during a period of more moderated
industry growth.
We are very excited about the start-up of our propane export
facility, the Prince Rupert Terminal, which will come into service
near the end of the first quarter. This project is important as it
represents our first export facility and will provide customers
with improved access to more international markets and attract
higher pricing for their propane. Pembina remains committed to its
global market access strategy and helping to ensure that
hydrocarbons produced in the WCSB, and the other basins where the
Company operates, can reach the highest value markets throughout
the world. The combination of Pembina's integrated value chain and
the west coast of North America's
proximity to Asian markets and that continent's growing energy
demand means we are well positioned to deliver value to both our
producer customers and end users.
In addition to our announced projects, we are working on an
extensive portfolio of unsecured opportunities, which are all
accretive and collectively comprise over $4
billion of potential capital investment, including both
brownfield and greenfield projects. Momentum with customers behind
these opportunities continues to build and we are confident in the
trajectory.
At the low end of the our $3.2 to
$3.4 billion 2021 adjusted EBITDA
guidance range, Pembina's capital program is fully funded by cash
flow after dividends. Towards the middle and upper end of the
guidance range, we expect to generate excess discretionary cash
flow. Pembina has a history of disciplined and strategic capital
allocation. This includes a strong track record of generating
long-term shareholder value through capital investment and we will
continue to prioritize growth projects with attractive
risk-adjusted returns. Investing in growth projects enhances our
capabilities, extends the longevity of Pembina's long-term, stable
cash flow streams and increases our efficiency through economies of
scale, which can be shared with customers. When we grow, either
organically or by acquisition, we invariably improve the 'goods
available in the Pembina Store'. Absent those growth opportunities,
excess cash flow will be available for debt reduction,
opportunistic common share repurchases, or dividend increases,
depending on market circumstances.
In 2020, Pembina proved once again that we are resilient, agile
and capable of safely and reliably delivering services which are
vital to the world and which we are proud to supply. While much
uncertainty remains, Pembina's track record across all stakeholder
groups speaks for itself, and we are well positioned to navigate
2021. Pembina led our industry with a decade-long run of
outperformance prior to 2020. Following a pandemic-driven pause, we
are ready to begin again and are working hard for another 10-year
run. We anticipate 2021 to be a turn-around year with a return to a
more traditional growth trajectory in 2022. We will not waver in
our commitment to long-term value creation that benefits each of
our stakeholder groups and we are optimistic about the future and
the many opportunities in front of us.
Projects and New Developments1
Pipelines:
- As previously announced during the quarter, Pembina
re-activated its Phase VII Expansion ("Phase VII"). The capital
cost estimate for Phase VII has been revised lower, by
approximately $175 million, to
$775 million, reflecting a
reimagining of the project to optimize the scope with customers'
current development plans and transportation requirements. The
initial capacity of Phase VII has been reduced from the previous
240,000 barrels per day ("bpd"), to 160,000 bpd, however, the
ability to quickly and efficiently return the project to its
original capacity has been retained. The lower capital cost
reflects fewer pump stations, as well as additional savings
achieved through value engineering and an optimized construction
and procurement strategy. Phase VII is trending on budget with an
expected in-service date in the first half of 2023.
- As previously announced, in response to the COVID-19 pandemic,
the resulting economic slowdown and decreased demand for crude oil
and NGL, Pembina made the decision to defer some of its expansion
projects including the Phase VIII Expansion and Phase IX Expansion.
While these two projects remain deferred, the initial contracts
supporting the projects are still in place and there remain strong
indications of interest for incremental capacity. Value engineering
work is ongoing and given strong customer interest, Pembina expects
to make a decision in the second half of 2021 to re-activate these
projects.
_________________________
|
(1)
|
For further details
on the Company's significant assets, including definitions for
capitalized terms used herein that are not otherwise defined, refer
to Pembina's Annual Information Form filed at www.sedar.com (filed
with the U.S. Securities and Exchange Commission at www.sec.gov
under Form 40-F) and on Pembina's website at
www.pembina.com.
|
Facilities:
- During the quarter, Pembina completed the start up of new
fractionation and terminalling facilities at the Empress NGL
Extraction Facility. This project was placed into service on time
and on budget. These new assets add approximately 30,000 bpd of
propane-plus fractionation capacity and enable Pembina to optimize
propane marketing from the facility between eastern and western
markets.
- During the quarter, Pembina completed the start up of Duvernay
III, which includes a 100 MMcf/d sweet gas, shallow cut processing
train; 20,000 bpd of inlet condensate stabilization; and other
associated infrastructure. The project was placed into service on
time and under budget.
- As previously announced during the quarter, Pembina
re-activated its Empress Co-generation Facility. This is the
Company's second co-generation project following the very
successful development of a co-generation facility at the Redwater
Complex. The project has a capital budget of $120 million and is trending on budget with an
expected in-service date in the first quarter of 2023.
- As previously announced during the quarter, Pembina has
acquired an additional 11.25 percent interest in the Pembina
Empress Extraction Plant, of which Pembina currently is the
majority owner and operator. The acquisition provides Pembina with
135 MMcf/d of incremental ethane-plus extraction capacity at the
Empress facility.
- Development continues at Pembina's Prince Rupert Terminal
located on Watson Island, British
Columbia. The approximately 25,000 bpd project will
primarily source propane from the Company's Redwater Complex.
Marine, rail, sphere, and mechanical construction is nearing
completion, and electrical construction and commissioning
activities are in progress. The project has a capital budget of
$250 million and is over budget with
an expected in-service date in the first quarter of 2021.
- The Prince Rupert Terminal Expansion project remains deferred.
Engineering of the expansion is well advanced and Pembina expects
to make a final investment decision in the second half of 2021.
- Construction of the Hythe Developments project, consisting of
natural gas gathering and processing infrastructure in the
Pipestone Montney region, was completed during the quarter. The
project is awaiting a third-party tie-in and is expected to be in
service in the first quarter of 2021.
Marketing & New Ventures
- As previously announced, Pembina and its partner, Petrochemical
Industries Company K.S.C. have indefinitely suspended the
integrated propane dehydration ("PDH") plant and polypropylene
upgrading facility through their joint venture, CKPC. While Pembina
continues to believe in the strategic rationale of this project,
this decision reflects the significant risks arising from the
ongoing COVID-19 pandemic, most notably with respect to costs under
the lump sum contract for construction of the PDH plant, which
remains under a force majeure condition. CKPC is working through a
process to manage, defer or cancel existing agreements with, among
others, the lump-sum consortium, lenders, and technology licensors,
in order to minimize the need for additional capital contributions.
CKPC will continue to take action to safeguard its existing
investment associated with long-lead equipment and intellectual
property. As a result of the project suspension Pembina recognized
an impairment on its investment in the joint venture during the
fourth quarter. The Company remains committed to its global market
access strategy and helping to ensure that hydrocarbons produced in
the WCSB, and the other basins where the Company operates, can
reach the highest value markets throughout the world. We remain
equally committed to supporting further development of the
petrochemical industry in Alberta
and are ideally positioned to do so as the leading transporter of
ethane in the province of Alberta.
- In light of current regulatory and political uncertainty,
Pembina recognized an impairment in its investment in Jordan Cove and is evaluating the path forward.
The Company continues to believe in the strategic rationale of
Jordan Cove, which would be the
first U.S. west coast LNG facility and would benefit from
advantaged access to Asian markets. Additionally, the project would
bring significant economic benefits to Oregon and contribute to reducing global
greenhouse gas emissions by displacing the use of coal
globally.
Financing
- On November 2, 2020, Pembina
announced that it did not intend to exercise its right to redeem
the nine million Cumulative Redeemable Rate Reset Class A Preferred
Shares, Series 9 ("Class A Preferred Shares, Series 9") outstanding
on December 1, 2020. The annual
dividend rate for the Class A Preferred Shares, Series 9 for the
five-year period from and including December
1, 2020 to, but excluding, December
1, 2025 is 4.302 percent.
- Subsequent to quarter end, on January
25, 2021, Pembina closed an offering of $600 million of Fixed-to-Fixed Rate Subordinated
Notes, Series 1 (the "Subordinated Notes, Series 1"). The
Subordinated Notes, Series 1 have a fixed coupon of 4.80 percent
per annum, are payable semi-annually and mature on January 25, 2081.
- Subsequent to quarter end, on January
25, 2021, Pembina announced its intention to redeem all of
its 6,800,000 issued and outstanding Cumulative Redeemable Minimum
Rate Reset Class A Preferred Shares, Series 11 (the "Class A
Preferred Shares, Series 11") on March 1,
2021 for a redemption price equal to $25.00 per Class A Preferred Shares, Series 11,
less any tax required to be deducted or withheld by the
Company.
Dividends
- Pembina declared and paid dividends of $0.21 per common share in October, November and
December 2020 for the applicable
record dates.
- Pembina declared and paid quarterly dividends per Class A
Preferred Share of: Series 1: $0.306625; Series 3: $0.279875; Series 5: $0.285813; Series 7: $0.27375; Series 9: $0.296875; Series 11: $0.359375; Series 13: $0.359375; and Series 21: $0.30625 to shareholders of record as of
November 2, 2020. Pembina also
declared and paid quarterly dividends per Class A Preferred Share
of: Series 15: $0.279; Series 17:
$0.301313; and Series 19:
$0.29275 to shareholders of record on
December 15, 2020. Pembina also
declared and paid quarterly dividends per Class A Preferred Share
of Series 23: $0.328125; and Series
25: $0.3250 to shareholders of record
on November 2, 2020.
Fourth Quarter 2020 Conference Call & Webcast
Pembina will host a conference call on Friday, February 26, 2021 at 8:00 a.m. MT (10:00 a.m.
ET) for interested investors, analysts, brokers and media
representatives to discuss results for the fourth quarter of 2020.
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 March 5, 2021 at
11:59 p.m. ET. To access the replay,
please dial either 416-849-0833 or 855-859-2056 and enter the
password 9683262.
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://produceredition.webcasts.com/starthere.jsp?ei=1354433&tp_key=5d1cdd55ec 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
Pembina is a leading transportation and midstream service
provider that has been serving North
America's energy industry for more than 65 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; an oil and natural
gas liquids infrastructure and logistics business; and is growing
an export terminals 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.
Purpose of Pembina:
To be the leader in delivering integrated infrastructure
solutions connecting global markets;
- Customers choose us first for reliable and
value-added services;
- Investors receive sustainable industry-leading
total returns;
- Employees say we are the 'employer of choice'
and value our safe, respectful, collaborative and fair work
culture; and
- Communities welcome us and recognize the net
positive impact of our social and environmental
commitment.
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
forward looking 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", "outlook",
"strategy", "protect", "trend", "commit", "maintain", "focus",
"ongoing", "believe" and similar expressions suggesting future
events or future performance.
In particular, this document contains forward-looking
statements, including certain financial outlooks, pertaining to,
without limitation, the following: Pembina's corporate strategy and
the development of new business initiatives and growth
opportunities and the expected timing thereof; expectations about
industry activities and development opportunities; expectations
about future demand for Pembina's infrastructure and services;
plans regarding impaired assets or investments; the timing of when
Pembina expects to publish 5-year greenhouse gas emissions targets;
planning, construction, capital expenditure estimates, schedules,
locations, expected capacity, incremental volumes, completion
and in-service dates, rights, activities and operations with
respect to the construction of, or expansions on, existing
pipelines systems, gas services facilities, processing and
fractionation facilities, terminalling, storage and hub facilities
and other facilities or energy infrastructure, as well as the
impact of Pembina's projects on its future financial performance;
pipeline, processing, fractionation and storage facility and system
operations and throughput levels; decisions and activities related
to deferred projects; budget trends; the impact of current market
conditions on Pembina; expectations regarding adjusted EBITDA;
expected sources of liquidity; expected cost savings and Pembina's
ability to maintain such cost savings into the future; expectations
regarding Pembina's NGL storage positions and its intentions with
respect thereto; expected volumes across Pembina's conventional
pipelines business; levels and types of contracted volumes;
Pembina's options for allocating capital; expected future
cash flows and the sufficiency thereof to fund Pembina's capital
program.
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; prevailing commodity prices, interest rates, carbon
prices, tax rates and exchange rates; 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
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 and Indigenous
and landowner consultation requirements; the impact of competitive
entities and pricing; reliance on third parties to successfully
operate and maintain certain assets; 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;
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; risks
relating to the current and potential adverse impacts of the
COVID-19 pandemic; constraints on the, or the unavailability of,
adequate infrastructure; the political environment in North
American and elsewhere, and public opinion; ability to access
various sources of debt and equity capital; changes in credit
ratings; counterparty credit risk; technology and cyber security
risks; natural catastrophes; 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
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,
adjusted earnings before interest, taxes, depreciation and
amortization (adjusted EBITDA), cash flow from operating activities
per common share, adjusted cash flow from operating activities, and
adjusted cash flow from operating activities per common share,
which do not have any standardized meaning under International
Financial Reporting Standards ("IFRS"). Since these 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 be clearly defined,
qualified and reconciled to their most directly comparable 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 of cash 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 adjusted
EBITDA.
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, other than as described herein,
including reconciliations to, the most directly comparable measures
recognized by GAAP, please refer to Pembina's management's
discussion and analysis for the three and twelve months ended
December 31, 2020, 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