Existing operations demonstrate continued improved
performance; acquisition of Provident Energy Ltd. complete
All financial figures are in Canadian dollars unless noted
otherwise. This report contains forward-looking statements and
information that are based on Pembina Pipeline Corporation's
current expectations, estimates, projections and assumptions in
light of its experience and its perception of historical trends.
Actual results may differ materially from those expressed or
implied by these forward-looking statements. Please see
"Forward-Looking Statements & Information" for more details.
This report also refers to financial measures that are not defined
by Canadian Generally Accepted Accounting Principles. For more
information about the measures which are not defined by Canadian
Generally Accepted Accounting Principles see "Non-GAAP
Measures."
CALGARY, May 3, 2012 /PRNewswire/ - Pembina Pipeline
Corporation ("Pembina" or the "Company") achieved strong first
quarter 2012 results, driven by increased performance in all four
of the Company's businesses.
"Our first quarter 2012 results are a clear reflection of the
progress we are continuing to make on our growth strategy," said
Bob Michaleski, Pembina's Chief
Executive Officer. "Each of our businesses have progressed their
expansion plans while simultaneously reporting higher operating and
financial metrics in their existing operations. All of this gives
us tremendous confidence in our ability to enhance shareholder
value in 2012 and beyond."
Acquisition of Provident Energy Ltd. ("Provident")
On April 2, 2012, subsequent to
the end of the first quarter, Pembina completed its acquisition of
Provident Energy Ltd. ("Provident") by way of a plan of arrangement
pursuant to Section 193 of the Business Corporations Act
(Alberta) (the "Arrangement").
This transaction positions Pembina as a leader in the North
American energy infrastructure sector with more highly integrated
operations, a full suite of complementary services and an estimated
total enterprise value of approximately $10
billion (total enterprise value is a Non-GAAP Measure, see
"Non-GAAP Measures"). Following the closing of the Arrangement,
Pembina has implemented its previously announced plan to increase
its monthly dividend from $0.13 per
share per month ($1.56 annualized) to
$0.135 per share per month
($1.62 annualized), representing a
3.8 percent increase and reflecting management's confidence in the
significant operational and financial strength of the combined
entity going forward (see "Forward-Looking Statements &
Information").
In conjunction with the closing of the Arrangement, Pembina also
announced a new credit facility of $1.5
billion and its common shares began trading on the New York
Stock Exchange ("NYSE") under the symbol "PBA."
First Quarter Highlights
- Pembina realized strong consolidated volume growth of 15
percent, with first quarter 2012 aggregate volumes of 1,379
thousand barrels of oil equivalent per day ("mboe/d") compared to
1,203 mboe/d in the first quarter of 2011.
- Adjusted EBITDA was $111.6
million ($0.66 per share) in
the first quarter of 2012 compared to $87.2
million ($0.52 per share) in
the first quarter of 2011.(1)
- Cash flow from operating activities was $65.3 million ($0.39 per share) during the first quarter of 2012
compared to $74.5 million
($0.45 per share) during the first
quarter of 2011.
- Adjusted cash flow from operating activities was $98.8 million ($0.59 per share) for the first quarter of 2012
compared to $75.9 million
($0.45 per share) for the same period
in 2011.(1)
- Earnings were $32.6 million
($0.19 per share) during the first
quarter of 2012 compared to $42.5
million ($0.25 per share) for
the same period in 2011. Excluding expenses related to the
acquisition of Provident (net of tax), earnings were $48.4 million ($0.29 per share) for the first quarter of
2012.
- Adjusted earnings were $65.4
million ($0.39 per share)
during the first quarter of 2012 compared to $52.7 million ($0.32 per share) in the first quarter of
2011.(1)
- Dividends declared were $65.7
million during the first quarter of 2012, representing
$0.39 per share ($0.13 per common share per month), compared to
$65.1 million in the first quarter of
2011 (no change in per share dividend payments during these
periods, as the recent dividend increase was implemented subsequent
to quarter end).
Revenue, net of product purchases, increased approximately 26
percent during the first quarter of 2012 to $176.4 million compared to $140.6 million in the first quarter of 2011. This
was driven by strong performance in each of Pembina's four
businesses, particularly the Oil Sands & Heavy Oil business
which realized revenue of $43.1
million in the first quarter of 2012 compared to
$30.6 million in the first quarter of
2011. This 41 percent increase was due to contributions from the
Nipisi and Mitsue pipelines, which began generating returns in the
third quarter of 2011. Pembina's Gas Services business also
generated higher revenue, contributing $19.1
million during the first quarter of 2012, an increase of 27
percent compared to $15 million in
the first quarter of 2011. This increase primarily reflects higher
processing volumes at Pembina's Cutbank Complex. In the Midstream
& Marketing business, revenue, net of product purchases, grew
to $32.0 million during the first
quarter of 2012 from $25.8 million
during the first quarter of 2011. This 24 percent increase was
primarily due to higher volumes and activity on Pembina's Peace
Pipeline and Drayton Valley
Pipeline systems, stronger commodity prices for the majority of
liquid hydrocarbon products and wider margins. During the first
quarter of 2012 and as a result of higher volumes on the majority
of Conventional Pipelines' largest pipeline systems, this business
generated revenue of $82.2 million
which represents an increase of approximately 19 percent from the
$69.2 million in the same quarter of
2011.
Operating margin grew by more than 30 percent during the quarter
from $97.4 million during the first
quarter of 2011 to $127.9 million
during the first quarter of 2012 as a result of increases in all
four businesses.(1) The Oil Sands & Heavy Oil
business generated operating margin of $30.1
million in the first quarter of 2012 compared to
$19.3 million in the first quarter of
2011 due to contributions from the Nipisi and Mitsue pipelines.
Operating margin was also positively impacted by the Company's Gas
Services business which saw an average processing volume, net to
Pembina, at the Cutbank Complex during the quarter of 250.4 million
cubic feet per day ("MMcf/d"), approximately 10 percent higher than
the 228.3 MMcf/d processed during the first quarter of 2011. As a
result, this business contributed operating margin of $13.0 million during the quarter compared to
$10.3 million during the first
quarter of 2011. The Midstream & Marketing business contributed
$29.6 million to operating margin
compared to $23.7 million during the
first quarter of 2011, while the Conventional Pipelines business
realized operating margin for the first quarter of 2012 of
$54.6 million compared to
$44.1 million during the same period
of 2011. During the first quarter of 2012 and as a result of
increased industry activity on the Conventional Pipelines' major
pipeline systems, throughput averaged 466.9 thousands of barrels
per day ("mbpd") which is approximately 20 percent higher than the
same period in 2011.
Growth initiatives in the first quarter included beginning
construction at the plant sites for both the Resthaven and Saturn
gas plants.
"This was a strong quarter for Pembina and marks a major
milestone in the Company's history," said Mr. Michaleski. "Not only
did we achieve exceptional financial and operating results during
the quarter, but we also closed our acquisition of Provident
shortly thereafter. We know we have lots of work ahead of us to
bring our two companies together, but we are already beginning to
see some of the benefits we had predicted from the transaction
because of the services we can now provide our customers."
Provident First Quarter
Highlights(2)
Provident delivered strong 2012 first quarter results which were
in line with its first quarter of 2011, despite softening propane
pricing. Adjusted EBITDA(3) was approximately
$61 million for the first quarter of
2012, consistent with the first quarter of 2011. Natural gas
liquids ("NGL") sales volumes averaged approximately 126 mbpd, a
seven percent increase over the first quarter of 2011.
Adjusted funds flow from operations(4) was also
comparable to the first quarter of 2011 at approximately
$53 million for both the first
quarter of 2012 and 2011.
Total debt at March 31, 2012 was
$532 million compared to $510 million at December
31, 2011. Capital expenditures were $37 million in the first quarter of 2012 and were
primarily directed towards cavern development at the Redwater facility.
Market frac spread, which is the value received on the market
for the sale of a standard natural gas liquids ("NGL") barrel less
the cost of the natural gas from which the NGL was extracted,
increased by 10 percent during the first quarter of 2012 over the
first quarter of 2011 and reflects the reduced cost of natural gas
which more than offset reduced propane sales prices.
Hedging Information
Pembina has posted updated hedging information on its website,
www.pembina.com, under "Investor Centre - Hedging".
Conference Call & Webcast
Pembina will host a conference call Friday, May 4, at 9:00
a.m. MT (11:00 a.m. ET) to
discuss details related to the first quarter of 2012. The
conference call dial-in numbers for Canada and the U.S. are 647-427-7450 or
888-231-8191. A live webcast of the conference call can be accessed
on Pembina's website under "Investor Centre - Presentation &
Events," or by entering
http://event.on24.com/r.htm?e=453896&s=1&k=2C8C2F59CCA01EA3C57985701E6AA180
in your web browser.
____________________________
(1) |
EBITDA, adjusted cash flow from operating activities, adjusted
earnings and operating margin are non-GAAP measures, see "Non-GAAP
Measures". |
(2) |
As Pembina did not own Provident during the first quarter of
2012, these results are not consolidated with Pembina's for this
period and the results provided are for information purposes only.
Provident's results will be consolidated with Pembina commencing in
the second quarter of 2012. |
(3) |
Adjusted EBITDA for the Provident results is earnings before
interest, taxes, depreciation, amortization, and other non-cash
items, and excludes hedge buy-out, non-controlling interest and
acquisition-related expenses. |
(4) |
Adjusted funds flow from operations for the Provident results
excludes changes in non-cash operating working capital,
acquisition-related expenses, hedge buy-out and non-controlling
interest. |
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following management's discussion and analysis ("MD&A")
of the financial and operating results of Pembina Pipeline
Corporation ("Pembina" or the "Company") is dated May 3, 2012 and is supplementary to, and should
be read in conjunction with, Pembina's condensed consolidated
unaudited interim financial statements for the period ended
March 31, 2012 ("Interim Financial
Statements") as well as Pembina's consolidated audited annual
financial statements and MD&A for the year ended December 31, 2011 (the "Consolidated Financial
Statements").
Management is responsible for preparing the MD&A. This
MD&A has been reviewed and recommended by the Audit Committee
of Pembina's Board of Directors and approved by its Board of
Directors.
This MD&A contains forward-looking statements (see
"Forward-Looking Statements & Information") and refers to
financial measures that are not defined by Canadian Generally
Accepted Accounting Principles ("GAAP"). For more information about
the measures which are not defined by Canadian Generally Accepted
Accounting Principles, see "Non-GAAP Measures."
About Pembina
With nearly 60 years experience, Calgary-based Pembina Pipeline Corporation is
a leading transportation and service provider to North America's energy industry. Pembina has
leveraged its strong record of profitable growth to expand beyond
its core business of operating conventional crude oil and natural
gas liquids ("NGL") feeder pipelines. Today, Pembina owns and
operates pipelines that transport crude oil, NGL, diluent and
synthetic crude produced in western Canada; offers a full spectrum of midstream
and marketing services; and, has a strong presence in the gas
services sector. Pembina also owns an NGL infrastructure and
logistics business, with facilities strategically located in
western Canada and in the premium
NGL markets in eastern Canada and
the United States. Pembina's
integrated assets and commercial operations enable it to offer
services needed by the energy sector along each step of the
hydrocarbon value chain.
Pembina is a trusted member of the communities in which it
operates and is committed to generating value for its investors
through operational excellence: running its businesses in a safe,
environmentally responsible manner that is respectful of community
stakeholders.
Strategy
Pembina's goal is to provide highly competitive and reliable
returns to investors through monthly dividends while enhancing the
long-term value of its common shares. To achieve this, Pembina's
strategy is to:
- Generate value by providing customers with safe,
cost-effective, reliable services.
- Diversify Pembina's asset base to enhance profitability. A
diverse portfolio provides Pembina with the ability to respond to
market conditions, reduce risk and increase opportunities to
leverage existing businesses. A priority is placed on developing
businesses that support Pembina's core competency - operating crude
oil and NGL transportation systems, and gas gathering and
processing infrastructure - which allow for expansion, vertical
integration and accretive growth.
- Implement growth and conduct operations in a safe and
environmentally responsible manner. Growth is expected to occur
through expansion of existing businesses, acquisitions and the
development of new services. Pembina's investment criteria include
pursuing projects or assets that are expected to generate increased
cash flow per share and capture long-life, economic hydrocarbon
reserves.
- Maintain a strong balance sheet through the application of
prudent financial management to all business decisions.
Pembina is structured in four businesses: Conventional
Pipelines, Oil Sands & Heavy Oil, Gas Services and Midstream
& Marketing, which are described in their respective sections
of this MD&A.
Acquisition of Provident Energy Ltd. ("Provident")
On April 2, 2012, Pembina
completed its acquisition of Provident by way of a plan of
arrangement pursuant to Section 193 of the Business Corporations
Act (Alberta) (the "Arrangement").
Provident shareholders received 0.425 of a Pembina share for each
Provident share held (the "Provident Exchange Ratio"). In addition,
Pembina has assumed all of the rights and obligations of Provident
relating to the 5.75 percent convertible unsecured subordinated
debentures of Provident maturing December
31, 2017 ("Series E Debentures") (TSX Trading Symbol:
PPL.DB.E), and the 5.75 percent convertible unsecured subordinated
debentures of Provident maturing December
31, 2018 ("Series F Debentures") (TSX Trading Symbol:
PPL.DB.F). On closing of the acquisition, Pembina listed its common
shares, including those issued under the Arrangement, on the New
York Stock Exchange ("NYSE") under the symbol "PBA". Pursuant to
the Arrangement, Provident amalgamated with a wholly-owned
subsidiary of Pembina and was continued under the name "Pembina NGL
Corporation."
Common Abbreviations
The following is a list of abbreviations that may be used in
this MD&A:
Measurement |
|
|
|
|
bbl |
|
|
|
barrel |
bpd |
|
|
|
barrels per day |
mbpd |
|
|
|
thousands of barrels per day |
boe |
|
|
|
barrels of oil equivalent |
boe/d |
|
|
|
barrels of oil equivalent per day |
mboe |
|
|
|
thousands of barrels of oil equivalent |
mboe/d |
|
|
|
thousands of barrels of oil equivalent per day |
MMcf |
|
|
|
millions of cubic feet |
MMcf/d |
|
|
|
millions of cubic feet per day |
GJ |
|
|
|
gigajoule |
km |
|
|
|
Kilometre |
|
|
|
|
|
Other |
|
|
|
|
WCSB |
|
|
|
Western Canadian Sedimentary Basin |
WTI |
|
|
|
West Texas Intermediate (crude oil benchmark price) |
AECO |
|
|
|
Alberta gas trading price |
USD |
|
|
|
United States dollars |
DRIP |
|
|
|
Premium Dividend™ and Dividend Reinvestment Plan |
TSX |
|
|
|
Toronto Stock Exchange |
IFRS |
|
|
|
International Financial Reporting Standards |
|
|
|
|
|
Financial & Operating Overview
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
($ millions, except
where noted) |
|
|
|
|
|
3
Months Ended
March 31 |
|
|
|
|
|
|
2012 |
|
|
|
2011 |
Revenue |
|
|
|
|
|
475.3 |
|
|
|
394.3 |
Operations |
|
|
|
|
|
48.5 |
|
|
|
43.2 |
Product purchases |
|
|
|
|
|
298.9 |
|
|
|
253.7 |
Operating margin(1) |
|
|
|
|
|
127.9 |
|
|
|
97.4 |
Depreciation and amortization included
in operations |
|
|
|
|
|
21.7 |
|
|
|
14.9 |
Gross profit |
|
|
|
|
|
106.2 |
|
|
|
82.5 |
Deduct/(add) |
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
|
|
|
|
17.6 |
|
|
|
14.7 |
|
Acquisition-related and other |
|
|
|
|
|
22.1 |
|
|
|
|
|
Net finance costs |
|
|
|
|
|
23.2 |
|
|
|
14.0 |
|
Share of profit of investments in
equity accounted investee, net of tax |
|
|
|
|
|
(0.2) |
|
|
|
(2.2) |
|
Deferred income tax expense |
|
|
|
|
|
10.9 |
|
|
|
13.5 |
Earnings for the period |
|
|
|
|
|
32.6 |
|
|
|
42.5 |
Earnings per share - basic and diluted
(dollars) |
|
|
|
|
|
0.19 |
|
|
|
0.25 |
Adjusted EBITDA(1) |
|
|
|
|
|
111.6 |
|
|
|
87.2 |
Cash flow from operating
activities |
|
|
|
|
|
65.3 |
|
|
|
74.5 |
Adjusted cash flow from operating
activities(1) |
|
|
|
|
|
98.8 |
|
|
|
75.9 |
Dividends declared |
|
|
|
|
|
65.7 |
|
|
|
65.1 |
Dividends per common share
(dollars) |
|
|
|
|
|
0.39 |
|
|
|
0.39 |
Capital expenditures |
|
|
|
|
|
54.9 |
|
|
|
223.3 |
Total enterprise value(1)
($ millions) |
|
|
|
|
|
6,492.9 |
|
|
|
5,453.1 |
Total assets ($ millions) |
|
|
|
|
|
3,351.9 |
|
|
|
3,153.3 |
Average throughput - conventional
(mbpd) |
|
|
|
|
|
466.9 |
|
|
|
390.3 |
Contracted capacity - oil sands
(mbpd) |
|
|
|
|
|
870.0 |
|
|
|
775.0 |
Average processing
volume - gas services (mboe/d net to
Pembina)(2) |
|
|
|
|
|
41.7 |
|
|
|
38.1 |
Aggregate volumes
(mboe/d) (2) |
|
|
|
|
|
1,378.6 |
|
|
|
1,203.4 |
(1) |
Refer to "Non-GAAP Measures." |
(2) |
Gas Services processing volumes converted to
mboe/d from MMcf/d at a 6:1 ratio. |
|
|
Revenue, net of product purchases, increased approximately 26
percent during the first quarter of 2012 to $176.4 million compared to $140.6 million in the first quarter of 2011. This
was driven by strong performance in each of Pembina's four
businesses, particularly the Oil Sands & Heavy Oil business
which realized revenue of $43.1
million in the first quarter compared to $30.6 million in the first quarter of 2011. This
41 percent increase was due to contributions from the Nipisi and
Mitsue pipelines, which began generating returns in the third
quarter of 2011. Pembina's Gas Services business also generated
higher revenue, contributing $19.1
million during the first quarter of 2012, which is an
increase of 27 percent compared to $15
million during in the first quarter of 2011. This increase
reflects higher processing volumes at Pembina's Cutbank Complex. In
the Midstream & Marketing business, revenue, net of product
purchases, grew to $32.0 million
during the first quarter of 2012, from $25.8
million during the first quarter of 2011. This 24 percent
increase was primarily due to higher volumes and activity on
Pembina's Peace Pipeline and Drayton
Valley Pipeline systems, stronger commodity prices for the
majority of liquid hydrocarbon products and wider margins. During
the first quarter of 2012 and as a result of higher volumes on the
majority of Conventional Pipelines' largest pipeline systems, this
business generated revenue of $82.2
million which represents an increase of approximately 19
percent from the $69.2 million in the
same quarter of 2011.
Operating expenses were $48.5
million during the first quarter of 2012 compared to
$43.2 million in the first quarter of
2011. The 12 percent increase was primarily due to increased
variable costs associated with higher volumes and new assets which
are now in service.
Operating margin totaled $127.9
million during the first quarter of 2012 compared to
$97.4 million during the first
quarter of 2011 (operating margin is a Non-GAAP measure, see
"Non-GAAP Measures"). This increase was primarily due to higher
revenue, as discussed above.
The increases in revenue and operating margin contributed to
gross profit of $106.2 million during
the first quarter of 2012 compared to $82.5
million during the first quarter of 2011.
General and administrative expenses ("G&A") of $17.6 million were incurred during the first
quarter of 2012 compared to $14.7
million during the first quarter of 2011 due to an increase
in salaries and benefits for existing and new employees and
increased rent for new and expanded office space. Every
$1 change in share price is expected
to change Pembina's annual share-based incentive expense by
$0.5 million.
Pembina generated earnings before interest, taxes, depreciation
and amortization, and acquisition-related expenses ("Adjusted
EBITDA") of $111.6 million during the
first quarter of 2012 compared to $87.2
million during the first quarter of 2011 (Adjusted EBITDA is
a Non-GAAP measure, see "Non-GAAP Measures"). The increase in
quarterly Adjusted EBITDA was due to strong operating results from
each business, new assets having been brought on-stream and new
services being offered during this period in 2012 compared to the
same period of 2011.
Depreciation and amortization (operational) increased to
$21.7 million during the first
quarter of 2012 compared to $14.9
million during the same period in 2011 which reflects
depreciation on new capital additions including the Nipisi and
Mitsue pipeline assets which began operating in the third quarter
of 2011.
The Company's earnings were $32.6
million ($0.19 per share)
during the first quarter of 2012 compared to $42.5 million ($0.25 per share) during the first quarter of
2011. Earnings were impacted by $15.8
million (net of tax) of expenses related to the acquisition
of Provident, included in acquisition-related and other expenses.
Adjusted earnings were $65.4 million
($0.39 per share) during the first
quarter of 2012 compared to $52.7
million ($0.32 per share)
during the first quarter of 2011 (adjusted earnings is a Non-GAAP
measure, see "Non-GAAP Measures").
Cash flow from operating activities was $65.3 million ($0.39 per share) during the first quarter of 2012
compared to $74.5 million
($0.45 per share) during the first
quarter of 2011. The decrease in cash flow from operating
activities is primarily related to acquisition-related expenses of
$21.1 million, higher interest
expenses and an increase in working capital during the first
quarter of 2012.
Adjusted cash flow from operating activities was $98.8 million ($0.59 share) during the first quarter of 2012
compared to $75.9 million
($0.45 per share) during the first
quarter of 2011 (adjusted cash flow from operating activities is a
Non-GAAP measure, see "Non-GAAP Measures").
Operating Results
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
Months Ended
March 31, 2012 |
|
|
3 Months Ended
March 31, 2011 |
($ millions) |
|
|
|
|
|
Net
Revenue(1) |
|
|
Operating
Margin(2) |
|
|
Net Revenue(1) |
|
|
Operating
Margin(2) |
Conventional Pipelines |
|
|
|
|
|
82.2 |
|
|
54.6 |
|
|
69.2 |
|
|
44.1 |
Oil Sands & Heavy Oil |
|
|
|
|
|
43.1 |
|
|
30.1 |
|
|
30.6 |
|
|
19.3 |
Gas Services |
|
|
|
|
|
19.1 |
|
|
13.0 |
|
|
15.0 |
|
|
10.3 |
Midstream & Marketing |
|
|
|
|
|
32.0 |
|
|
29.6 |
|
|
25.8 |
|
|
23.7 |
Corporate |
|
|
|
|
|
|
|
|
0.6 |
|
|
|
|
|
|
Total |
|
|
|
|
|
176.4 |
|
|
127.9 |
|
|
140.6 |
|
|
97.4 |
(1) |
Midstream & Marketing revenue is net of $298.9 million in
product purchase expense for three months ended March 31, 2012
(three months ended March 31, 2011: $253.7 million). |
(2) |
Refer to "Non-GAAP Measures." |
|
|
Conventional Pipelines
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
Months Ended
March 31 |
($ millions, except where noted) |
|
|
|
|
|
|
|
|
2012 |
|
|
|
2011 |
Revenue |
|
|
|
|
|
|
|
|
82.2 |
|
|
|
69.2 |
Operations |
|
|
|
|
|
|
|
|
27.6 |
|
|
|
25.1 |
Operating margin(1) |
|
|
|
|
|
|
|
|
54.6 |
|
|
|
44.1 |
Depreciation and amortization
included in operations |
|
|
|
|
|
|
|
|
11.9 |
|
|
|
9.7 |
Gross profit |
|
|
|
|
|
|
|
|
42.7 |
|
|
|
34.4 |
Capital expenditures |
|
|
|
|
|
|
|
|
11.1 |
|
|
|
16.7 |
Average throughput (mbpd) |
|
|
|
|
|
|
|
|
466.9 |
|
|
|
390.3 |
Average revenue (dollar/bbl) |
|
|
|
|
|
|
|
|
1.94 |
|
|
|
1.97 |
Operating expenses (dollar/bbl) |
|
|
|
|
|
|
|
|
0.62 |
|
|
|
0.69 |
(1) |
Refer to "Non-GAAP Measures." |
|
|
Business Overview
Pembina's Conventional Pipelines business comprises a
well-maintained and strategically located 7,500 km pipeline network
that extends across much of Alberta and British
Columbia, and transports approximately half of Alberta's conventional crude oil production
and approximately twenty percent of the NGL produced in western
Canada. The Conventional Pipelines
business' primary objective is to generate sustainable operating
margins while pursuing opportunities for increased throughput and
revenue. Pembina endeavors to maintain and/or improve operating
margins by capturing incremental volumes, expanding its pipeline
systems, managing revenues and adopting strong discipline over
operating expenses.
Operational Performance: Throughput
During the first quarter of 2012, Conventional Pipelines
throughput averaged 466.9 mbpd, consisting of an average of 281.4
mbpd of crude oil, 60.3 mbpd of condensate and 125.2 mbpd of NGL.
This is approximately 20 percent higher than the same period of
2011 when average throughput was 390.3 mbpd, primarily due to
continued production growth from regional resource play development
in the Cardium (oil), Deep Basin Cretaceous (NGL), Montney (oil/NGL) and Beaverhill Lake (oil)
formations. Pipeline receipts during the first quarter of 2012
increased on all of Pembina's major conventional pipeline systems
including the Drayton Valley,
Peace, Swan Hills and Northern
systems.
Financial Performance
During the first quarter of 2012, Conventional Pipelines
generated revenue of $82.2 million,
representing an increase of 19 percent from the $69.2 million in the same quarter of 2011. This
is due to higher volumes on Pembina's larger pipeline systems as
discussed in more detail above.
During the first quarter, operating expenses were slightly
higher at $27.6 million compared to
$25.1 million in the first quarter of
2011 as a result of increased variable costs associated with higher
volumes and new assets which are now in service.
Operating margin for the first quarter of 2012 was $54.6 million compared to $44.1 million during the same period of 2011.
This 24 percent increase was primarily due to higher revenue and
realized operating efficiencies.
Depreciation and amortization included in operations increased
from $9.7 million during the first
quarter of 2011 to $11.9 million
during the first quarter of 2012 reflecting capital additions in
this business.
For the three months ended March 31,
2012, gross profit was $42.7
million compared to $34.4
million during the same period in 2011 and is due to higher
revenue generated during the quarter, for the reasons discussed
above.
Capital expenditures for the first quarter 2012 totaled
$11.1 million compared to
$16.7 million during the first
quarter 2011. The majority of this spending relates to the
expansion of certain pipeline assets as described below.
New Developments: Conventional Pipelines
Liquids-Rich Natural Gas: Expansion of Peace and Northern
Pipelines
Pembina is progressing plans to expand its NGL throughput
capacity on its Peace and Northern pipelines (together the
"Northern NGL System") by 55 mbpd (the "NGL Expansion") to
accommodate increased customer demand following strong drilling
results and increased field liquids extraction by area
producers.
The NGL Expansion will require Pembina to install five new pump
stations and upgrade five existing pump stations. Pembina
expects the NGL Expansion will cost approximately $100 million and is subject to reaching long-term
commercial arrangements with its customers and receiving regulatory
and environmental approvals. Assuming the commercial agreements and
regulatory approvals are achived in a timely manner, Pembina
expects 20 mbpd of the NGL Expansion can be brought into service by
the end of 2012 and the remaining 35 mbpd by the end of 2013.
Pembina's Northern NGL System is strategically located across
liquids-rich natural gas production areas in the WCSB and serves
producers in the Deep Basin, Montney, Cardium and emerging Duvernay Shale plays. Currently, the Northern
NGL System's capacity is 115 mbpd. As at the end of March 2012, average daily throughput on the
Northern NGL System was approximately 104 mbpd. Once complete, the
proposed NGL Expansion will increase capacity on the Northern NGL
System by 48 percent to 170 mbpd.
Pembina has existing long-term contracts in place for a portion
of the capacity on its Northern NGL System and continues to consult
with its customers to increase the volumes under long-term, firm
service incentive contracts to underpin the NGL Expansion.
Drayton Valley Area
In the area of the Cardium formation of west central
Alberta, Pembina continues to
actively work with producers on numerous connection and expansion
opportunities.
As of the end of March 2012, the
Company's Drayton Valley Pipeline system was operating at over 90
percent capacity, transporting 130 mbpd with a capacity of 145 mbpd
under its existing configuration. Pembina expects to complete the
refurbishment of its Calmar
booster station in May, 2012 to add 50 mbpd of capacity to the
Drayton Valley mainline and bring
the total capacity of the system to 195 mbpd.
Supporting Gas Services' Saturn and Resthaven
Projects
Pembina is committed to its integrated strategy. To this end,
the Conventional Pipelines business is working closely with Gas
Services to construct the pipeline portions of the Saturn and
Resthaven gas plant projects. The two pipeline projects will gather
NGL from the gas plants for delivery to Pembina's Peace Pipeline
system. During the first quarter of 2012, Pembina continued its
consultation activities related to the right-of-way and pipeline
routing for both of these projects with First Nations, community
stakeholders and the appropriate regulators, and ordered long-lead
equipment for the pipeline and pump stations for both projects.
Oil Sands & Heavy Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
Months Ended
March 31 |
($ millions, except where noted) |
|
|
|
|
|
|
|
2012 |
|
|
|
2011 |
Revenue |
|
|
|
|
|
|
|
43.1 |
|
|
|
30.6 |
Operations |
|
|
|
|
|
|
|
13.0 |
|
|
|
11.3 |
Operating margin(1) |
|
|
|
|
|
|
|
30.1 |
|
|
|
19.3 |
Depreciation and amortization
included in operations |
|
|
|
|
|
|
|
4.9 |
|
|
|
1.9 |
Gross profit |
|
|
|
|
|
|
|
25.2 |
|
|
|
17.4 |
Capital expenditures |
|
|
|
|
|
|
|
5.8 |
|
|
|
99.8 |
Capacity under contract (mbpd) |
|
|
|
|
|
|
|
870.0 |
|
|
|
775.0 |
(1) |
Refer to "Non-GAAP Measures." |
|
|
Business Overview
With five pipelines in this business, Pembina plays an important
role in supporting Alberta's oil
sands and heavy oil industry. Pembina is the sole transporter of
crude oil for Syncrude Canada Ltd. (via the Syncrude Pipeline) and
Canadian Natural Resources Ltd.'s Horizon Project (via the Horizon
Pipeline) to delivery points near Edmonton, Alberta. Pembina also owns and
operates the Cheecham Lateral, which transports product to oil
sands producers operating southeast of Fort McMurray, Alberta. Pembina has expanded
its Oil Sands & Heavy Oil business by bringing the Nipisi and
Mitsue pipeline projects on-stream in June and July of 2011, which
provide transportation for producers operating in the Pelican Lake
and Peace River heavy oil regions
of Alberta. The Mitsue Pipeline is
the sole provider of diluent by pipeline to this region. The Oil
Sands & Heavy Oil business operates approximately 1,650 km of
pipeline and accounts for about 30 percent of the total take-away
capacity from the Athabasca oil
sands region. These assets operate under long-term, extendible
contracts that provide for the flow-through of operating expenses
to customers. As a result, operating margin from this business is
primarily related to invested capital and is not sensitive to
fluctuations in operating expenses or actual throughputs.
Operating Margin
Syncrude Pipeline
The Syncrude Pipeline has a capacity of 389 mbpd and is fully
contracted to the owners of Syncrude Canada Ltd. under an
extendible agreement that expires in 2035. Operating margin
generated by the Syncrude Pipeline during the first quarter 2012
was $6.7 million, virtually unchanged
from $6.5 million during the same
period in 2011.
Cheecham Lateral
Pembina's Cheecham Lateral has a capacity of 136 mbpd and is
fully contracted to shippers under an agreement that expires in
2032. Operating margin generated by the Cheecham Lateral during the
first quarter of 2012 was $1.1
million, consistent with the results for the same period in
2011.
Horizon Pipeline
The Horizon Pipeline has an ultimate capacity of 250 mbpd and is
fully contracted to Canadian Natural Resources Ltd. under an
extendible agreement that expires in 2033. Operating margin
generated by the Horizon Pipeline during the first quarter of 2012
was $11.2 million compared to
$11.4 million during the same period
in 2011.
Nipisi & Mitsue Pipelines
In June and July of 2011, Pembina completed construction of its
Nipisi and Mitsue pipelines. Pembina is in the process of
installing two remaining pump stations which will bring the
combined capacity to approximately 120 mbpd. Operating margin
generated by these assets in the first quarter of 2012 was
$10.5 million.
Financial Performance
The Oil Sands & Heavy Oil business realized revenue of
$43.1 million in the first quarter
compared to $30.6 million in the
first quarter of 2011. This 41 percent increase can largely be
attributed to the contributions from the Nipisi and Mitsue
pipelines, which began generating returns in the third quarter of
2011.
Operating expenses in Pembina's Oil Sands & Heavy Oil
business were $13.0 million during
the first quarter of 2012 compared to $11.3
million during the first quarter of 2011. This
increase primarily reflects the addition of the Nipisi and Mitsue
pipelines.
For the three months ended March 31,
2012, gross profit was $25.2
million compared to $17.4
million during the same period in 2011, primarily due to
results generated by the Nipisi and Mitsue pipelines as discussed
above.
Depreciation and amortization included in operations during the
first quarter of 2012 totaled $4.9
million compared to $1.9
million during the same period of the prior year. This
increase is largely due to the addition of the Nipisi and Mitsue
pipelines.
As of March 31, 2012, capital
expenditures within the Oil Sands & Heavy Oil business totaled
$5.8 million compared to $99.8 million during 2011. The majority of
Pembina's 2011 investment in this business related to completing
the Nipisi and Mitsue pipeline projects.
Gas Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
Months Ended
March 31 |
($ millions, except where noted) |
|
|
|
|
|
|
|
2012 |
|
|
|
2011 |
Revenue |
|
|
|
|
|
|
|
19.1 |
|
|
|
15.0 |
Operations |
|
|
|
|
|
|
|
6.1 |
|
|
|
4.7 |
Operating margin(1) |
|
|
|
|
|
|
|
13.0 |
|
|
|
10.3 |
Depreciation and amortization
included in operations |
|
|
|
|
|
|
|
3.2 |
|
|
|
2.3 |
Gross profit |
|
|
|
|
|
|
|
9.8 |
|
|
|
8.0 |
Capital expenditures |
|
|
|
|
|
|
|
34.0 |
|
|
|
15.6 |
Average processing volume
(mboe/d)(2) |
|
|
|
|
|
|
|
41.7 |
|
|
|
38.1 |
(1) |
Refer to "Non-GAAP Measures." |
(2) |
Average processing volume converted to mboe/d from MMcf/d at a
6:1 ratio. |
|
|
Business Overview
Pembina's operations include a growing natural gas gathering and
processing business. Located approximately 100 km south of
Grande Prairie, Alberta, Pembina's
key revenue-generating Gas Services assets - the Cutbank Complex -
include 300 km of gathering lines and ownership in three sweet gas
processing plants with 360 million cubic feet per day ("MMcf/d") of
processing capacity (305 MMcf/d net to Pembina). The Cutbank
Complex is connected to Pembina's Peace Pipeline system and serves
an active exploration and production area in the WCSB. Construction
of Pembina's Musreau Deep Cut Facility, a new 205 MMcf/d ethane
extraction facility and the related 10 km pipeline, was completed
and the facility became operational in mid-February 2012. Pembina is also expanding this
business to meet the growing needs of producers throughout west
central Alberta who are looking to
capture the higher prices associated with NGL. See below for more
details.
Financial Performance
Gas Services recorded an increase in revenue of approximately 27
percent during the first quarter of 2012, contributing $19.1 million compared to $15.0 million in the first quarter of 2011. This
increase primarily reflects higher processing volumes at Pembina's
Cutbank Complex. Average processing volume, net to Pembina, was
250.4 MMcf/d during the first quarter of 2012, nine percent higher
than the 228.3 MMcf/d processed during the first quarter of
2011.
During the first quarter of 2012, operating expenses were
$6.1 million, an increase from the
$4.7 million spent in the first
quarter of 2011. This increase was primarily due to variable costs
incurred to process more volume at the Cutbank Complex.
Gas Services realized operating margin of $13.0 million compared to $10.3 million during the same period of the prior
year, primarily as a result of handling more volume at the Cutbank
Complex.
Depreciation and amortization included in operations during the
first quarter of 2012 totaled $3.2
million compared to $2.3
million during the same period of the prior year, primarily
due to higher in-service capital balances from the completion of
the Musreau Deep Cut Facility.
For the three months ended March 31,
2012, gross profit was $9.8
million compared to $8.0
million during the same period in 2011.
For the three months ended March 31,
2012, capital expenditures within Gas Services totaled
$34.0 million compared to
$15.6 million during the same period
of 2011 as a result of spending to complete the Musreau Deep Cut
Facility, the expansion of the shallow cut facility at the Cutbank
Complex combined with capital expenditures incurred on the Saturn
and Resthaven enhanced NGL extraction facilities. For more
information about these and other new Gas Services projects, see
discussion below.
Musreau Deep Cut Facility
Pembina completed construction and began operations at its
Musreau Deep Cut Facility, a 205 MMcf/d ethane extraction facility,
mid-February 2012. The Musreau Deep
Cut Facility is currently experiencing an unplanned outage. Pembina
continues to process natural gas at its Musreau gas plant, and as
such, no producers have been shut-in as a result of the outage.
New Developments: Gas Services
Pembina continues to see significant growth opportunities
resulting from the trend towards liquids-rich gas drilling and the
extraction of valuable NGL from gas in the WCSB. The three
expansions detailed below are expected to bring Pembina's gas
processing capacity to 890 MMcf/d (net), including enhanced NGL
extraction capacity of approximately 535 MMcf/d (net) which would
be processed largely on a contracted, fee-for-service basis and
result in approximately 45 mbpd of incremental NGL to be
transported for additional toll revenue on Pembina's conventional
pipelines by the end of 2013.
Expansion at the Cutbank Complex: Musreau Shallow Cut
Expansion
Pembina is expanding Musreau's shallow cut gas processing
capability by 50 MMcf/d at an estimated cost of $17 million. The expansion is expected to be
in-service in July 2012. Once
complete, the Cutbank Complex is expected to have an aggregate raw
gas processing capacity of 410 MMcf/d (355 MMcf/d net to Pembina),
an increase of 16 percent net to Pembina. In respect of this
expansion, Pembina has entered into contracts with a minimum term
of five years with area producers for the entire capacity of the
expansion on a fee-for-service basis.
Resthaven Facility
Pembina is developing a combined shallow cut and deep cut NGL
extraction facility (the "Resthaven Facility") by modifying and
expanding an existing gas plant and is also constructing a pipeline
to transport the extracted NGL from the Resthaven Facility to
Pembina's Peace Pipeline System at an estimated cost of
$230 million. Once complete, Pembina
will own approximately 65 percent of the Resthaven Facility and
will own 100 percent of the NGL pipeline. Pembina expects the
initial phase of the Resthaven Facility will have a gross capacity
of 200 MMcf/d and 13 mbpd of liquids extraction capability, with
ultimate processing capacity of 300 MMcf/d and 18 mbpd of liquids
extraction capability. Subject to regulatory and environmental
approvals, Pembina expects these new assets to be in-service in
late 2013.
As of the beginning of May 2012,
Pembina has executed a Construction Agreement, ordered long-lead
equipment and begun plant site construction for the project. Other
activities related to the project include pipeline stakeholder
consultation, environmental planning, route selection, engineering,
and right-of-way surveying.
Saturn Facility
Pembina is developing a $200
million 200 MMcf/d enhanced NGL extraction facility (the
"Saturn Facility") and associated NGL and gas gathering pipelines
in the Berland area of west central Alberta. Once operational, Pembina expects the
Saturn Facility will have the capacity to extract up to 13.5 mbpd
of NGL. Subject to regulatory and environmental approval, Pembina
expects the Saturn Facility and associated pipelines to be
in-service in the fourth quarter of 2013.
As of the beginning of May 2012,
Pembina has ordered 80 percent of the major, long-lead equipment
for the project and begun plant site construction. Pipeline
environmental field assessments have been completed, stakeholder
consultation is ongoing, final routing and work space requirements
are being evaluated and regulatory meetings are underway.
Midstream & Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
Months Ended
March 31(2) |
($ millions) |
|
|
|
|
|
|
|
2012 |
|
|
|
2011 |
Revenue |
|
|
|
|
|
|
|
331.0 |
|
|
|
279.5 |
Operations |
|
|
|
|
|
|
|
2.5 |
|
|
|
2.1 |
Product purchases |
|
|
|
|
|
|
|
298.9 |
|
|
|
253.7 |
Operating margin(1) |
|
|
|
|
|
|
|
29.6 |
|
|
|
23.7 |
Depreciation and amortization
included in operations |
|
|
|
|
|
|
|
1.7 |
|
|
|
0.9 |
Gross profit |
|
|
|
|
|
|
|
27.9 |
|
|
|
22.8 |
Capital expenditures |
|
|
|
|
|
|
|
2.3 |
|
|
|
90.3 |
(1) |
Refer to "Non-GAAP Measures." |
(2) |
Share of profit from equity accounted investees not included in
results above. |
|
|
Business Overview
Pembina's Midstream & Marketing business consists of a
network of terminals, pipeline-connected storage and hub locations
situated at key sites across the Company's conventional pipeline
system. This includes the development of the Pembina Nexus Terminal
(as discussed below) as well as a 50 percent non-operated interest
in both the Fort Saskatchewan Ethylene Storage Facility and the
LaGlace Full Service Terminal. By providing integrated services
along the crude oil and NGL value chains, this business has
increased the range of services Pembina provides to customers and
contributes throughput to the Company's Conventional Pipelines and
Oil Sands & Heavy Oil businesses. The value potential
associated with terminal, storage and hub assets is dependent on
Pembina's ability to: provide connections to both downstream
pipelines and end-use markets; understand the value of the
commodities transported and terminalled; and provide flexibility
and a variety of storage options - all in an environment of a
liquid, dynamic, forward commodity market. Pembina actively
monitors market conditions to target revenue opportunities.
Performance
In the Midstream & Marketing business, revenue, net of
product purchases, grew 24 percent to $32.0
million during the first quarter of 2012 from $25.8 million during the first quarter of 2011.
This increase was primarily due to higher volumes and activity on
Pembina's pipeline systems, stronger commodity prices for the
majority of liquid hydrocarbon products and wider margins.
Operating expenses during the first quarter of 2012 were
$2.5 million, up slightly from the
$2.1 million in operating expenses
incurred in the first quarter of 2011.
Operating margin was $29.6 million
during the first quarter of 2012 compared to $23.7 million during the first quarter of 2011.
This increase was largely due to the same factors that contributed
to the increase in revenue, net of product purchases, as discussed
above.
For the three months ended March 31,
2012, gross profit in this business increased to
$27.9 million from $22.8 million during the same period in 2011.
This increase was a result of the higher operating margin realized
during the first quarter of 2012.
For the three months ended March 31,
2012, capital expenditures within the Midstream &
Marketing business totaled $2.3
million compared to $90.3
million during the same period of 2011. Capital spending in
the first quarter of 2011 had included the acquisition of a
terminalling and storage facility near Edmonton, Alberta and the acquisition of
linefill for the Peace Pipeline.
New Developments: Midstream & Marketing
The Company continues to develop the Pembina Nexus Terminal
("PNT"), which has been designed to connect key infrastructure in
the Edmonton - Fort Saskatchewan - Namao, Alberta area. The assets that comprise
PNT are interconnected via pipelines to other Pembina
infrastructure as well as refineries and downstream terminals, and
will enable Pembina to create tailored products and services for
customers while facilitating growth opportunities for its other
business units. During the first quarter of 2012, Pembina increased
the interconnectivity of PNT by commissioning a connection to the
Enbridge Southern Lights diluent pipeline. Pembina anticipates
undertaking additional activities to further increase connectivity
to the terminal which would be completed over time, based on market
demand and customer needs.
Pembina is also moving forward on its plans to expand services
at a number of its existing truck terminals and construct new
full-service terminals that focus on emulsion treating (separating
oil from impurities to meet shipping quality requirements),
produced water handling and water disposal. In addition to earning
fees for these services, Pembina's truck terminals will secure
volumes for its pipeline systems and generate additional pipeline
toll revenue.
Fort Saskatchewan Ethylene Storage Facility
Three of the five ethylene storage caverns in Pembina's Storage
Facility in Fort Saskatchewan are
currently out of service and it is unlikely those caverns will be
put back into ethylene storage service. While alternative uses are
being considered, no assurance that future economic benefits from
such out-of-service caverns (or their disposal) can be given at
this time. Pembina has entered into agreements to wash a new
ethylene storage cavern and does not expect a reduction in cash
flow.
During the quarter, Pembina provided a guarantee for its 50
percent share of Fort Saskatchewan Ethylene Storage Limited
Partnership's ("FSESLP") credit facility of $43 million. On March 28,
2012, the loan receivable from FSESLP of $18.8 million was repaid in full.
Business Environment
The first quarter of 2012 saw a 3.7 percent increase in the
S&P TSX Composite; however, the value of the Index is down 12.2
percent since the same time a year ago. The benchmark WTI oil price
trended downward for most of January and recovered through
mid-February to March, but exited the quarter at USD $96 which is comparable to early January prices.
Canadian crude (both light and heavy) suffered from
higher-than-average price differentials in the first quarter of
2012 due to increasing crude supply, refinery downtime and export
constraints. Furthermore, low natural gas prices persisted as a
result of strong natural gas supply across North America and a relatively warm winter.
The opening AECO price in January was $2.59 per GJ, which declined 34 percent during
the quarter to exit at $1.70 per
GJ.
The outlook for the energy infrastructure sector in the WCSB
remains positive for all of Pembina's businesses. Strong activity
levels within the oil sands region represent opportunities for the
Company to leverage existing assets to capitalize on additional
growth opportunities. Pembina also continues to benefit from the
combination of relatively high oil prices and low natural gas
prices which has resulted in oil and gas producers extracting the
liquids value from their natural gas production and favouring
liquids-rich natural gas plays over dry natural gas. Pembina's
Conventional Pipelines and Gas Services businesses are
well-positioned to capitalize on the increased activity levels in
key NGL-rich producing basins. Oil and NGL plays being developed in
the vicinity of its pipelines include Cardium, Montney, Cretaceous, Duvernay and Swan
Hills.
Non-Operating Expenses
G&A
G&A expenses of $17.6 million
were incurred during the first quarter of 2012 compared to
$14.7 million during the first
quarter of 2011 due to an increase in salaries and benefits for
existing and new employees and increased rent for new and expanded
office space. Every $1 change in
share price is expected to change Pembina's annual share-based
incentive expense by $0.5
million.
Depreciation & Amortization (Operational)
Depreciation and amortization (operational) increased to
$21.7 million during the first
quarter 2012 compared to $14.9
million during the same period of 2011 which reflects
depreciation on new capital additions including the Nipisi and
Mitsue pipeline assets which began operating in the third quarter
of 2011.
Acquisition-Related and Other
Acquisition-related expenses of $21.1
million include acquisition expenses of $13.1 million and $8.0
million on account of the required make whole payment for
the redemption of the senior secured notes. See "Liquidity and
Capital Resources."
Net Finance Costs
Net finance costs in the first quarter of 2012 were $23.2 million compared to $14.0 million in the first quarter of 2011. The
net increase of $9.2 million relates
primarily to a $4.2 million increase
in loans and borrowings interest expense due to higher debt
balances combined with a $4.8 million
change in the fair value of financial derivatives. See Note 5 to
the Interim Financial Statements for the period ended March 31, 2012.
Deferred Income Tax Expense
Deferred income taxes arise from differences between the
accounting and tax basis of assets and liabilities. An income tax
expense of $10.9 million was recorded
in the first quarter of 2012 compared to $13.5 million in the first quarter of 2011. The
change in income tax expense is consistent with the change in
earnings before income tax and equity accounted investees.
Liquidity & Capital Resources
($ millions) |
|
|
|
|
|
March
31, 2012 |
December 31, 2011 |
Working Capital |
|
|
|
|
|
(42.0)(1) |
(343.7)(1) |
Variable rate debt(2) |
|
|
|
|
|
|
|
Bank debt |
|
|
|
|
|
379.9 |
313.8 |
Variable rate debt swapped
to fixed |
|
|
|
|
|
(200.0) |
(200.0) |
Total variable rate debt
outstanding (average rate of 1.66%) |
|
|
|
|
|
179.9 |
113.8 |
Fixed rate debt(2) |
|
|
|
|
|
|
|
Senior secured notes |
|
|
|
|
|
55.9 |
58.0 |
Senior unsecured
notes |
|
|
|
|
|
642.0 |
642.0 |
Senior unsecured term
debt |
|
|
|
|
|
75.0 |
75.0 |
Senior unsecured medium
term note |
|
|
|
|
|
250.0 |
250.0 |
Variable rate debt swapped
to fixed |
|
|
|
|
|
200.0 |
200.0 |
Total fixed rate debt outstanding (average rate of
5.65%) |
|
|
|
|
|
1,222.9 |
1,225.0 |
Convertible debentures(2) |
|
|
|
|
|
299.8 |
299.8 |
Finance lease liability |
|
|
|
|
|
5.5 |
5.6 |
Total debt and debentures outstanding |
|
|
|
|
|
1,708.1 |
1,644.2 |
Cash and unutilized debt
facilities(3) |
|
|
|
|
|
449.1 |
235.1 |
(1) |
As at March 31, 2012, working capital includes senior secured
notes of $55.9 million. As at December 31,
2011, working capital includes $310 million of current,
non-revolving unsecured credit facilities. |
(2) |
Face value. |
(3) |
Based on the $800 million credit facility. |
|
|
Pembina anticipates cash flow from operating activities will be
more than sufficient to meet its short-term operating obligations
and fund its targeted dividend level. On March 20, 2012, Pembina successfully negotiated a
new unsecured $800 million credit
facility and subsequently cancelled its previous $500 million credit facility. In connection with
the closing of the Arrangement on April 2,
2012, Pembina increased the $800
million facility to $1.5
billion for a term of five years. Upon closing of the
Arrangement, Pembina used the facility, in part, to repay
Provident's revolving term credit facility of $205 million. Further, Pembina re-negotiated its
operating facility to $30 million
from $50 million. In the medium-term,
funds required for capital projects are expected to be sourced from
cash and unutilized debt facilities totaling $449.1 million as at March
31, 2012 and Pembina believes, based on its successful
access to financing in the debt and equity markets during the past
several years, that it would likely continue to have access to
funds at attractive rates. Additionally, Pembina has reinstated its
DRIP as of the January 25, 2012
record date to help fund its ongoing capital program (see "Common
Share Information" for further details). Management remains
satisfied that the leverage employed in Pembina's capital structure
is sufficient and appropriate given the characteristics and
operations of the underlying asset base.
Management may make adjustments to Pembina's
capital structure as a result of changes in economic conditions or
the risk characteristics of the underlying assets. To maintain or
modify Pembina's capital structure in the future, Pembina may
renegotiate new debt terms, repay existing debt and seek new
borrowing and/or issue equity.
Pembina's credit facilities at March 31,
2012 consisted of an unsecured $800
million revolving credit facility due March 2017 and an operating facility of
$30 million due July 2013. Borrowings on the revolving credit
facility bear interest at prime lending rates plus nil percent to
1.25 percent or Bankers' Acceptances rates plus 1.00 percent to
2.25 percent. Margins on the Bankers' Acceptances rate are based on
the credit rating of Pembina's senior unsecured debt. Current
borrowings on the operating facility bear interest at prime lending
rates plus nil percent to 1.25 percent or Bankers' Acceptances
rates plus 1.00 percent to 2.25 percent. There are no repayments
due over the term of these facilities. As at March 31, 2012, Pembina had $379.9 million drawn on bank debt and
$3.2 million in letters of credit and
$2.2 million in cash, leaving
$449.1 million of unutilized debt
facilities on the $830.0 million of
established bank facilities. Other debt includes $55.9 million in fixed rate senior secured notes
due 2017; $75 million in senior
unsecured term debt due 2014; $175
million in senior unsecured notes due 2014; $267 million in senior unsecured notes due 2019;
$200 million in senior unsecured
notes due 2021; and, $250 million in
medium term notes due 2021. On March 27,
2012, a redemption notice for the senior secured notes was
distributed for a redemption date of April
30, 2012. Pembina has recognized an estimated $8.0 million on account of the make whole
payment, which has been included in acquisition-related and other
expenses. At March 31, 2012, Pembina
had loans and borrowing (excluding amortization, letters of credit
and finance lease liabilities) of $1,402.8
million. Pembina's senior debt to total capital at
March 31, 2012 was 53 percent.
Pembina considers the maintenance of an investment grade credit
rating as important to its ongoing ability to access capital
markets on attractive terms. On March 30,
2012, DBRS lowered the BBB (high) ratings of the senior
unsecured notes and the 7.38 percent senior secured notes of
Pembina to 'BBB'. On April 3, 2012,
subsequent to the end of the first quarter, Standard & Poor's
lowered its ratings, including its 'BBB+' long-term corporate
credit rating on Pembina to 'BBB' following closing of the
Arrangement (see "Acquisition of Provident Energy Ltd."). These
ratings are not recommendations to purchase, hold or sell the
securities in as much as such ratings do not comment as to market
price or suitability for a particular investor. There is no
assurance any rating will remain in effect for any given period of
time or that any rating will not be revised or withdrawn entirely
by a rating agency in the future if, in its judgment, circumstances
so warrant.
Assumption of rights related to the Provident
Debentures
On closing of the Arrangement on April 2,
2012 (subsequent to the end of the first quarter), Pembina
assumed all of the rights and obligations of Provident relating to
the 5.75 percent convertible unsecured subordinated debentures of
Provident maturing December 31, 2017
(TSX: PPL.DB.E), and the 5.75 percent convertible unsecured
subordinated debentures of Provident maturing December 31, 2018 (TSX: PPL.DB.F). Outstanding
Provident debentures at April 2, 2012
were $345 million.
Capital Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
Months Ended
March 31 |
($ millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 |
|
|
|
2011 |
Development capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional Pipelines |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.1 |
|
|
|
16.7 |
Oil Sands
& Heavy Oil |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.8 |
|
|
|
99.8 |
Gas
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34.0 |
|
|
|
15.6 |
Midstream
& Marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.3 |
|
|
|
90.3 |
Corporate/other projects |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.7 |
|
|
|
0.9 |
Total development capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54.9 |
|
|
|
223.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the first quarter of 2012, capital expenditures were
$54.9 million compared to
$223.3 million during the same three
month period in 2011. Capital expenditures in the first quarter of
2011 were significantly higher than the first quarter of 2012 due
to construction of the Nipisi and Mitsue pipelines and the
acquisition of midstream assets in the Edmonton, Alberta area (related to PNT) and
linefill for the Peace Pipeline system. The majority of the capital
expenditures in the first quarter of 2012 were in Gas Services as a
result of spending to complete the Musreau Deep Cut Facility, the
expansion of the shallow cut facility at the Cutbank Complex
combined with capital expenditures incurred on the Saturn and
Resthaven enhanced NGL extraction facilities.
Contractual Obligations at March 31,
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ thousands) |
|
|
|
Payments Due By
Period |
Contractual
Obligations |
|
|
|
Total |
|
|
Less
than
1 year |
|
|
1 - 3
years |
|
|
4 - 5
years |
After
5 years |
Office and vehicle leases |
|
|
|
71,906 |
|
|
8,575 |
|
|
11,979 |
|
|
8,015 |
43,337 |
Loans and borrowings(1) |
|
|
|
1,784,726 |
|
|
122,038 |
|
|
385,850 |
|
|
458,329 |
818,509 |
Convertible debentures(1) |
|
|
|
449,280 |
|
|
17,250 |
|
|
51,750 |
|
|
34,500 |
345,780 |
Construction commitments |
|
|
|
386,378 |
|
|
300,033 |
|
|
86,345 |
|
|
|
|
Provisions |
|
|
|
414,078 |
|
|
3,666 |
|
|
2,749 |
|
|
503 |
407,160 |
Total contractual obligations |
|
|
|
3,106,368 |
|
|
451,562 |
|
|
538,673 |
|
|
501,347 |
1,614,786 |
(1) |
Excluding deferred financing costs and finance leases included
under "office and vehicle leases". |
|
|
Pembina is, subject to certain conditions, contractually
committed to the construction and operation of the Musreau Deep Cut
Facility at its Cutbank Complex, the Musreau Shallow Cut Expansion,
the Saturn Facility and the Resthaven Facility and the remaining
capital expenditure associated with the Nipisi and Mitsue
pipelines. See "Forward-Looking Statements & Information."
Critical Accounting Estimates
The preparation of the Interim Financial Statements in
conformity with IFRS requires management to make judgments,
estimates and assumptions that are based on the circumstances and
estimates at the date of the financial statements and affect the
application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ
from these estimates.
Judgments, estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are recognized
in the period in which the estimates are revised and in any future
periods affected.
Please refer to the "Critical Accounting Estimates" section of
Pembina's MD&A for the year ended December 31, 2011 for more information.
Changes in Accounting Principles and Practices
For a discussion of future changes to Pembina's IFRS accounting
policies, see Pembina's MD&A for the year ended December 31, 2011.
Common Share Information (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at and for the 3
months ended |
($ thousands, except where
noted) |
|
|
|
|
|
May 1
, 2012(2) |
|
|
March 31,
2012 |
|
|
March 31,
2011 |
Trading volume and value |
|
|
|
|
|
|
|
|
|
|
|
|
Total volume
(shares) |
|
|
|
|
|
23,866,463 |
|
|
59,689,803 |
|
|
17,781,372 |
Average daily volume
(shares) |
|
|
|
|
|
1,136,498 |
|
|
947,601 |
|
|
286,796 |
Value traded |
|
|
|
|
|
700,109 |
|
|
1,648,021 |
|
|
390,673 |
Shares outstanding
(shares) |
|
|
|
|
|
286,146,286 |
|
|
169,029,860 |
|
|
167,122,897 |
Closing share price
(dollars) |
|
|
|
|
|
29.73 |
|
|
28.18 |
|
|
22.94 |
Market value |
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
8,507,121 |
|
|
4,763,266 |
|
|
3,833,802 |
5.75% convertible debentures
(PPL.DB.C) |
|
|
|
|
|
331,257(3) |
|
|
326,760(4) |
|
|
308,250(5) |
5.75% convertible debentures
(PPL.DB.E)(6) |
|
|
|
|
|
210,002
(7) |
|
|
|
|
|
|
5.75% convertible debentures
(PPL.DB.F)(6) |
|
|
|
|
|
190,181(8) |
|
|
|
|
|
|
Market capitalization |
|
|
|
|
|
9,238,560 |
|
|
5,090,026 |
|
|
4,142,052 |
Senior debt |
|
|
|
|
|
1,622,549 |
|
|
1,402,890 |
|
|
1,311,017 |
Total enterprise
value(9) |
|
|
|
|
|
10,861,109 |
|
|
6,492,916 |
|
|
5,453,069 |
(1) |
Trading information in this table reflects the activity of
Pembina securities on the TSX. |
(2) |
Based on 21 trading days from April 1, 2012 to May 1, 2012
inclusive. |
(3) |
$299.8 million principal amount of 5.75 percent convertible
debentures (PPL.DB.C) outstanding at a market
price of $110.50 at May 1, 2012 and with a conversion price of
$28.55. |
(4) |
$299.8 million principal amount of 5.75
percent convertible debentures (PPL.DB.C) outstanding at a
market
price of $109.00 at March 31, 2012. |
(5) |
$300 million principal amount of 5.75 percent
convertible debentures (PPL.DB.C) outstanding at a market
price of $102.75 at March 31, 2011. |
(6) |
Pursuant to the Arrangement, Pembina assumed the rights and
obligations of Provident debentures, which
are listed on the TSX under PPL.DB.E and PPL.DB.F. |
(7) |
$172.5 million principal amount of 5.75 percent convertible
debentures (PPL.DB.E) outstanding at a market
price of $121.74 at May 1, 2012 and with a conversion price of
$24.94. |
(8) |
$172.5 million principal amount of 5.75 percent convertible
debentures (PPL.DB.F) outstanding at a market
price of $110.25 at May 1, 2012 and with a conversion price of
$29.53. |
(9) |
Refer to "Non-GAAP Measures." |
|
|
As indicated in the table above, the total market value of
Pembina's outstanding securities was $5.1
billion at March 31, 2012 and
issued and outstanding shares of Pembina rose to 169.0 million by
the end of the first quarter 2012, compared to 167.1 million in the
same period of 2011.
Dividends
Pembina announced on January 16,
2012 that following closing of the Arrangement it would
increase its monthly dividend rate 3.8 percent from $0.13 per share per month (or $1.56 annualized) to $0.135 per share per month (or $1.62 annualized). Pembina is committed to
providing increased shareholder returns over time by providing
stable dividends and, where appropriate, further increases in
Pembina's dividend, subject to compliance with applicable laws and
the approval of Pembina's Board of Directors. Pembina has a history
of delivering dividend increases once supportable over the long
term by the underlying fundamentals of Pembina's businesses as a
result of, among other things, accretive growth projects or
acquisitions (see "Forward-Looking Statements &
Information").
Dividends are payable if, as, and when declared by Pembina's
Board of Directors. The amount and frequency of dividends declared
and payable is at the discretion of the Board of Directors, which
will consider earnings, capital requirements, the financial
condition of Pembina and other relevant factors.
Eligible Canadian investors may benefit from an enhanced
dividend tax credit afforded to the receipt of dividends, depending
on individual circumstances. Dividends paid to eligible U.S.
investors should qualify for the reduced rate of tax applicable to
long-term capital gains but investors are encouraged to seek
independent tax advice in this regard.
DRIP
Pembina has reinstated the DRIP as of January 25, 2012. Beginning with the dividend
payable on February 15, 2012,
eligible Pembina shareholders have the opportunity to receive, by
reinvesting the cash dividends declared payable by Pembina on their
shares, either: (i) additional common shares at a discounted
subscription price equal to 95 percent of the Average Market Price
(as defined in the DRIP), pursuant to the "Dividend Reinvestment
Component" of the DRIP, or (ii) premium cash payment (the "Premium
Dividend™") equal to 102 percent of the amount of reinvested
dividends, pursuant to the "Premium Dividend™ Component" of the
DRIP. Additional information about the terms and conditions of the
DRIP can be found at www.pembina.com.
Participation in the DRIP for March
2012 was 65 percent of common shares outstanding for
proceeds of approximately $14.4
million.
Listing on the NYSE
On April 2, 2012, Pembina listed
its common shares, including those issued under the Arrangement, on
the NYSE under the symbol "PBA".
Risk Factors
Management has identified the primary risk factors that could
potentially have a material impact on the financial results and
operations of Pembina. Such risk factors are presented in the
MD&A for the year ended December 31,
2011 and in Pembina's Annual Information Form for the year
ended December 31, 2011. These
documents are available on www.pembina.com and in Canada under Pembina's company profile on
www.sedar.com.
Selected Quarterly Financial Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 |
|
|
2011 |
|
|
2010 |
($ millions, except where noted) |
|
|
Q1 |
|
|
Q4 |
|
|
Q3 |
|
|
Q2 |
|
|
Q1 |
|
|
Q4 |
|
|
Q3 |
|
|
Q2 |
|
|
Q1 |
Revenue |
|
|
475.3 |
|
|
468.0 |
|
|
302.9 |
|
|
511.5 |
|
|
394.3 |
|
|
290.2 |
|
|
266.6 |
|
|
386.4 |
|
|
289.0 |
Operations |
|
|
48.5 |
|
|
55.1 |
|
|
55.9 |
|
|
37.8 |
|
|
43.2 |
|
|
42.3 |
|
|
40.0 |
|
|
37.2 |
|
|
36.4 |
Product purchases |
|
|
298.9 |
|
|
308.2 |
|
|
146.6 |
|
|
363.4 |
|
|
253.7 |
|
|
161.7 |
|
|
148.4 |
|
|
261.9 |
|
|
163.1 |
Operating margin |
|
|
127.9 |
|
|
104.7 |
|
|
100.4 |
|
|
110.3 |
|
|
97.4 |
|
|
86.2 |
|
|
78.2 |
|
|
87.3 |
|
|
89.5 |
Depreciation and amortization
Included in operations |
|
|
21.7 |
|
|
19.5 |
|
|
17.8 |
|
|
15.8 |
|
|
14.9 |
|
|
15.6 |
|
|
15.3 |
|
|
15.3 |
|
|
15.5 |
Gross profit |
|
|
106.2 |
|
|
85.2 |
|
|
82.6 |
|
|
94.5 |
|
|
82.5 |
|
|
70.6 |
|
|
62.9 |
|
|
72.0 |
|
|
74.0 |
Adjusted EBITDA(1) |
|
|
111.6 |
|
|
87.0 |
|
|
86.8 |
|
|
103.1 |
|
|
87.2 |
|
|
79.1 |
|
|
68.1 |
|
|
78.0 |
|
|
85.6 |
Cash flow from operating
activities |
|
|
65.3 |
|
|
74.3 |
|
|
88.0 |
|
|
50.4 |
|
|
74.5 |
|
|
54.6 |
|
|
66.6 |
|
|
69.6 |
|
|
66.5 |
Cash flow from operating
activities
per common share ($ per share) |
|
|
0.39 |
|
|
0.44 |
|
|
0.53 |
|
|
0.30 |
|
|
0.45 |
|
|
0.33 |
|
|
0.41 |
|
|
0.43 |
|
|
0.41 |
Adjusted cash flow from operating
activities(1) |
|
|
98.8 |
|
|
57.3 |
|
|
90.8 |
|
|
81.8 |
|
|
75.9 |
|
|
62.6 |
|
|
67.6 |
|
|
63.0 |
|
|
73.3 |
Adjusted cash flow from
operating
activities per common share(1)
($ per share) |
|
|
0.59 |
|
|
0.34 |
|
|
0.54 |
|
|
0.49 |
|
|
0.45 |
|
|
0.39 |
|
|
0.41 |
|
|
0.38 |
|
|
0.44 |
Earnings for the period |
|
|
32.6 |
|
|
45.1 |
|
|
30.1 |
|
|
48.0 |
|
|
42.5 |
|
|
55.2 |
|
|
28.6 |
|
|
37.7 |
|
|
52.2 |
Earnings per common share
($ per share): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
0.19 |
|
|
0.27 |
|
|
0.18 |
|
|
0.29 |
|
|
0.25 |
|
|
0.34 |
|
|
0.19 |
|
|
0.23 |
|
|
0.32 |
Diluted |
|
|
0.19 |
|
|
0.27 |
|
|
0.18 |
|
|
0.29 |
|
|
0.25 |
|
|
0.33 |
|
|
0.19 |
|
|
0.23 |
|
|
0.32 |
Common shares outstanding
(millions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average (basic) |
|
|
168.3 |
|
|
167.4 |
|
|
167.6 |
|
|
167.3 |
|
|
167.0 |
|
|
165.0 |
|
|
164.0 |
|
|
163.2 |
|
|
161.8 |
Weighted
average (diluted) |
|
|
168.9 |
|
|
168.2 |
|
|
168.2 |
|
|
168.0 |
|
|
167.6 |
|
|
171.7 |
|
|
166.9 |
|
|
166.2 |
|
|
165.2 |
End of
period |
|
|
169.0 |
|
|
167.9 |
|
|
167.7 |
|
|
167.5 |
|
|
167.1 |
|
|
166.9 |
|
|
164.5 |
|
|
163.6 |
|
|
162.2 |
Dividends declared |
|
|
65.7 |
|
|
65.4 |
|
|
65.4 |
|
|
65.3 |
|
|
65.1 |
|
|
64.6 |
|
|
64.0 |
|
|
63.8 |
|
|
62.8 |
Dividends per common share
($ per share): |
|
|
0.39 |
|
|
0.39 |
|
|
0.39 |
|
|
0.39 |
|
|
0.39 |
|
|
0.39 |
|
|
0.39 |
|
|
0.39 |
|
|
0.39 |
(1) |
Refer to "Non-GAAP measures." |
|
|
Selected Quarterly Operating
Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 |
|
|
2011 |
|
|
2010 |
|
|
|
|
Q1 |
|
|
Q4 |
|
|
Q3 |
|
|
Q2 |
|
|
Q1 |
|
|
Q4 |
|
|
Q3 |
|
|
Q2 |
|
|
Q1 |
Average throughput
(thousands of bpd) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Conventional Throughput |
|
|
|
466.9 |
|
|
422.8 |
|
|
430.4 |
|
|
411.4 |
|
|
390.3 |
|
|
375.0 |
|
|
361.4 |
|
|
370.4 |
|
|
389.3 |
Oil Sands & Heavy
Oil(1) |
|
|
|
870.0 |
|
|
870.0 |
|
|
775.0 |
|
|
775.0 |
|
|
775.0 |
|
|
775.0 |
|
|
775.0 |
|
|
775.0 |
|
|
775.0 |
Gas Services Processing
(mboe/d)(2) |
|
|
|
41.7 |
|
|
44.0 |
|
|
41.3 |
|
|
39.6 |
|
|
38.1 |
|
|
38.0 |
|
|
36.0 |
|
|
36.9 |
|
|
36.2 |
Aggregate volumes
(mboe/d) |
|
|
|
1,378.6 |
|
|
1,336.8 |
|
|
1,246.7 |
|
|
1,226.0 |
|
|
1,203.4 |
|
|
1,188.0 |
|
|
1,172.4 |
|
|
1,182.3 |
|
|
1,200.5 |
(1) |
Oil Sands & Heavy Oil throughput refers to
contracted capacity. |
(2) |
Converted to mboe/d from MMcf/d at a 6:1 ratio. |
|
|
Additional Information
Additional information relating to Pembina, including its Annual
Information Form, Management Information Circular and financial
statements can be found at www.pembina.com or at www.sedar.com.
Non-GAAP Measures
Throughout this MD&A, Pembina has used the following terms
that are not defined by GAAP but are used by management to evaluate
performance of Pembina and its business. Since certain Non-GAAP
financial measures may not have a standardized meaning, securities
regulations require that Non-GAAP financial measures are clearly
defined, qualified and reconciled to their nearest GAAP
measure.
Earnings before interest, taxes, depreciation and
amortization ("EBITDA")
EBITDA is commonly used by management, investors and creditors
in the calculation of ratios for assessing leverage and financial
performance and is calculated as results from operating activities
plus share of profit from equity accounted investees (before tax)
plus depreciation and amortization (included in operations and
general and administrative expense). Adjusted EBITDA is EBITDA
excluding acquisition-related expenses in connection with the
Arrangement.
|
|
|
|
3 Months Ended
March 31 |
($ millions, except per share amounts) |
2012 |
2011 |
Results from operating activities |
66.5 |
67.8 |
Add: |
|
|
Share of profit from equity accounted investees
(before tax, depreciation and amortization) |
1.5 |
4.3 |
Depreciation and amortization |
22.5 |
15.1 |
EBITDA |
90.5 |
87.2 |
Add: |
|
|
Acquisition-related expenses |
21.1 |
|
Adjusted EBITDA |
111.6 |
87.2 |
EBITDA per common share - basic
(dollars) |
0.54 |
0.52 |
Adjusted EBITDA per common share - basic
(dollars) |
0.66 |
0.52 |
Adjusted earnings
Adjusted earnings is commonly used by management for assessing
and comparing financial performance each reporting period and is
calculated as earnings before tax excluding unrealized hedging
activities and acquisition-related expenses in connection with the
Arrangement plus share of profit from equity accounted investees
(before tax).
|
|
|
|
3 Months Ended
March 31 |
($ millions, except per share amounts) |
2012 |
2011 |
Earnings before income tax and equity accounted
investees |
43.3 |
53.8 |
Add (deduct): |
|
|
Change in fair value of derivatives |
0.7 |
(4.0) |
Share of profit of investments in equity accounted
investees (after tax) |
0.2 |
2.2 |
Tax on share of profit of investments in equity
accounted investees |
0.1 |
0.7 |
Acquisition-related expenses |
21.1 |
|
Adjusted earnings |
65.4 |
52.7 |
Adjusted earnings per common share - basic
(dollars) |
0.39 |
0.32 |
Adjusted cash flow from operating activities
Adjusted cash flow from operating activities is commonly used by
management for assessing financial performance each reporting
period and is calculated as cash flow from operating activities
plus the change in non-cash working capital and excluding
acquisition-related expenses.
|
|
|
|
3 Months Ended
March 31 |
($ millions, except per share amounts) |
2012 |
2011 |
Cash flow from operating activities |
65.3 |
74.5 |
Add (deduct): |
|
|
Change in non-cash working capital |
12.4 |
1.4 |
Acquisition-related expenses |
21.1 |
|
Adjusted cash flow from operating activities |
98.8 |
75.9 |
Adjusted cash flow from operating activities per
common share - basic (dollars) |
0.59 |
0.45 |
Operating margin
Operating margin is commonly used by management for assessing
financial performance and is calculated as gross profit less
operating expense and product purchases.
|
|
|
Reconciliation of operating margin to
gross profit: |
|
|
3 Months Ended
March 31 |
($ millions) |
2012 |
2011 |
Revenue |
475.3 |
394.3 |
Cost of sales: |
|
|
|
Operations |
48.5 |
43.2 |
|
Product purchases |
298.9 |
253.7 |
Operating margin |
127.9 |
97.4 |
Depreciation and amortization included
in operations |
21.7 |
14.9 |
Gross profit |
106.2 |
82.5 |
Total enterprise value
Total enterprise value, in combination with other measures, is
used by management and the investment community to assess the
overall market value of the business. Total enterprise value is
calculated based on the market value of common shares and
convertible debentures at a specific date plus senior debt.
Management believes these supplemental Non-GAAP measures
facilitate the understanding of Pembina's results from operations,
leverage, liquidity and financial positions. Investors should be
cautioned that EBITDA, Adjusted EBITDA, adjusted earnings, adjusted
cash flow from operating activities, operating margin and total
enterprise value should not be construed as alternatives to net
earnings, cash flow from operating activities or other measures of
financial results determined in accordance with GAAP as an
indicator of Pembina's performance. Furthermore, these Non-GAAP
measures may not be comparable to similar measures presented by
other issuers.
Forward-Looking Statements & Information
In the interest of providing our shareholders and potential
investors with information regarding Pembina, including
management's assessment of our future plans and operations, certain
statements contained in this MD&A constitute forward-looking
statements or information (collectively, "forward-looking
statements") within the meaning of the "safe harbour" provisions of
applicable securities legislation . Forward-looking statements are
typically identified by words such as "anticipate", "continue",
"estimate", "expect", "may", "will", "project", "should",
"believe", "plan", "intend", "design", "target", "undertake",
"view", "indicate", "maintain", "explore", "entail", "schedule",
"objective", "strategy", "likely", "potential", "envision", "aim",
"outlook", "propose" and similar expressions suggesting future
events or future performance.
By their nature, such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause
actual results or events to differ materially from those
anticipated in such forward-looking statements. Pembina believes
the expectations reflected in those forward-looking statements are
reasonable but no assurance can be given that these expectations
will prove to be correct and such forward-looking statements
included in this MD&A should not be unduly relied upon. These
statements speak only as of the date of the MD&A.
In particular, this MD&A contains forward-looking
statements, including certain financial outlook, pertaining to the
following:
- the future levels of cash dividends that Pembina intends to pay
to its shareholders;
- capital expenditure estimates, plans, schedules, rights and
activities and the planning, development, construction, operations
and costs of pipelines, gas service facilities, terminalling,
storage and hub facilities and other facilities or energy
infrastructure, including, but not limited to, in relation to the
Pembina Nexus Terminal, the expansions at the Cutbank Complex's
Musreau Gas Plant, the proposed Resthaven Facility and the proposed
Saturn Facility, the proposed expansion plans to strengthen
Pembina's transportation service options that it provides to
producers developing the Cardium oil formation located in
Central Alberta, the expansion of
throughput capacity on the Northern NGL System and the proposed
expansion of a number of existing truck terminals and construction
of new full service terminals;
- future expansion of Pembina's pipelines and other
infrastructure;
- pipeline, processing and storage facility and system operations
and throughput levels;
- oil and gas industry exploration and development activity
levels;
- Pembina's strategy and the development of new business
initiatives;
- expectations regarding Pembina's ability to raise capital and
to carry out acquisition, expansion and growth plans;
- treatment under governmental regulatory regimes including
environmental regulations and related abandonment and reclamation
obligations;
- future results of operations from Provident's business
following the completion of the Arrangement;
- future G&A expenses at Pembina;
- increased throughput potential due to increased activity and
new connections and other initiatives on Pembina's pipelines;
- future cash flows, potential revenue and cash flow enhancements
across Pembina's businesses and the maintenance of operating
margins;
- tolls and tariffs and transportation, storage and services
commitments and contracts;
- cash dividends and the tax treatment thereof;
- operating risks (including the amount of future liabilities
related to pipeline spills and other environmental incidents) and
related insurance coverage and inspection and integrity
systems;
- the expected capacity of the proposed Resthaven Facility and
the proposed Saturn Facility;
- expectations regarding in-service dates for new developments,
including the Resthaven Facility, the Saturn Facility and the
Northern NGL System;
- expectations regarding incremental NGL volumes to be
transported on Pembina's conventional pipelines by the end of 2013
as a result of new developments in Pembina's Gas Services
business;
- the possibility of renegotiating debt terms, repayment of
existing debt, seeking new borrowing and/or issuing equity;
- expectations regarding participation in Pembina's DRIP; and
- competitive conditions.
Various factors or assumptions are typically applied by Pembina
in drawing conclusions or making the forecasts, projections,
predictions or estimations set out in forward-looking statements
based on information currently available to Pembina. These factors
and assumptions include, but are not limited to:
- the success of Pembina's operations;
- prevailing commodity prices and exchange rates;
- the availability of capital to fund future capital requirements
relating to existing assets and projects, including but not limited
to future capital expenditures relating to expansion, upgrades and
maintenance shutdowns;
- future operating costs;
- in respect of the proposed Resthaven Facility and the proposed
Saturn Facility and their estimated in-service dates of late 2013
and the fourth quarter of 2013, respectively; 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
such facilities; that such facilities will be fully supported by
long-term firm service agreements accounting for the entire
designed throughput at such facilities at the time of such
facilities' completion, that there are no unforeseen construction
costs related to the facilities; and that there are no unforeseen
material costs relating to the facilities which are not recoverable
from customers;
- in respect of the expansion of NGL throughput capacity on the
Northern NGL System and the estimated in-service dates with respect
to the same; that Pembina will receive regulatory approval; that
Pembina will reach satisfactory long-term arrangements with
customers with respect to the Northern NGL System; that
counterparties will comply with contracts in a timely manner; that
there are no unforeseen events preventing the performance of
contracts by Pembina; that there are no unforeseen construction
costs related to the expansion; and that there are no unforeseen
material costs relating to the pipelines that are not recoverable
from customers;
- in respect of the stability of Pembina's dividend; prevailing
commodity prices, margins and exchange rates; that Pembina's future
results of operations will be consistent with past performance and
management expectations in relation thereto; that Provident's
results will be consistent with past performance following the
acquisition of Provident by Pembina, the continued availability of
capital at attractive prices to fund future capital requirements
relating to existing assets and projects, including but not limited
to future capital expenditures relating to expansion, upgrades and
maintenance shutdowns; the success of growth projects; future
operating costs; that counterparties to material agreements will
continue to perform in a timely manner; that there are no
unforeseen events preventing the performance of contracts; and that
there are no unforeseen material construction or other costs
related to current growth projects or current operations;
- in respect of other developments, expansions and capital
expenditures planned, including the proposed expansion of a number
of existing truck terminals and construction of new full service
terminals, the expectation of additional NGL volumes being
transported on the convention pipelines, the proposed expansion of
the Musreau Gas Plant's shallow cut gas processing capability and
the proposed expansion plans to strengthen Pembina's transportation
service options that it provides to producers developing the
Cardium oil formation located in Central
Alberta, that counterparties will comply with contracts in a
timely manner; that there are no unforeseen events preventing the
performance of contracts by Pembina; that there are no unforeseen
construction costs; and that there are no unforeseen material costs
relating to the developments, expansions and capital expenditures
which are not recoverable from customers;
- the future exploration for and production of oil, NGL and
natural gas in the capture area around Pembina's conventional and
midstream and marketing assets, including new production from the
Cardium formation in western Alberta, the demand for gathering and
processing of hydrocarbons, and the corresponding utilization of
Pembina's assets; and
- prevailing regulatory, tax and environmental laws and
regulations.
The actual results of Pembina could differ materially from those
anticipated in these forward-looking statements as a result of the
material risk factors set forth below:
- the regulatory environment and decisions;
- the impact of competitive entities and pricing;
- labour and material shortages;
- reliance on key alliances and agreements;
- the strength and operations of the oil and natural gas
production industry and related commodity prices;
- non-performance or default by counterparties to agreements
which Pembina or one or more of its affiliates has entered into in
respect of its business;
- actions by governmental or regulatory authorities including
changes in tax laws and treatment, changes in royalty rates or
increased environmental regulation;
- fluctuations in operating results;
- adverse general economic and market conditions in Canada, North
America and elsewhere, including changes in interest rates,
foreign currency exchange rates and commodity prices;
- the failure to realize the anticipated benefits of the
Arrangement;
- the failure to integrate the businesses of Pembina and
Provident; and
- the other factors discussed under "Risk Factors" in Pembina's
Management's Discussion and Analysis for the year ended
December 31, 2011 and in Pembina's
current Annual Information Form available under Pembina's profile
at www.sedar.com.
These factors should not be construed as exhaustive. Unless
required by law, Pembina does not undertake any obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. Any
forward-looking statements contained herein are expressly qualified
by this cautionary statement.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL
POSITION
(unaudited)
|
|
|
|
|
($
thousands) |
Note |
March
31
2012 |
December
31
2011 |
Assets
Current assets |
|
|
|
|
Cash and cash equivalents |
|
2,247 |
|
|
Trade and other receivables |
|
150,770 |
148,267 |
|
Derivative financial instruments |
|
3,328 |
4,643 |
|
Inventory |
|
2,451 |
21,235 |
|
|
158,796 |
174,145 |
Non-current assets |
|
|
|
|
Property, plant and equipment |
2 |
2,774,742 |
2,747,530 |
|
Intangible assets |
|
248,730 |
243,904 |
|
Investments in equity accounted investees |
|
159,827 |
161,002 |
|
Derivative financial instruments |
|
1,765 |
1,807 |
|
Other receivables |
|
8,073 |
10,814 |
|
|
3,193,137 |
3,165,057 |
|
|
|
|
Total Assets |
|
3,351,933 |
3,339,202 |
|
|
|
|
Liabilities and Shareholders'
Equity
Current liabilities |
|
|
|
|
Bank indebtedness |
|
|
676 |
|
Trade payables and accrued liabilities |
|
116,174 |
166,646 |
|
Dividends payable |
|
21,974 |
21,828 |
|
Loans and borrowings |
3 |
58,070 |
323,927 |
|
Derivative financial instruments |
|
4,593 |
4,725 |
|
|
200,811 |
517,802 |
Non-current
liabilities |
|
|
|
|
Loans and borrowings |
3 |
1,340,084 |
1,012,061 |
|
Convertible debentures |
|
289,657 |
289,365 |
|
Derivative financial instruments |
|
12,320 |
12,813 |
|
Employee benefits |
|
15,882 |
16,951 |
|
Share-based payments |
|
5,633 |
14,060 |
|
Deferred revenue |
|
2,367 |
2,185 |
|
Provisions |
|
409,377 |
405,433 |
|
Deferred tax liabilities |
|
117,840 |
106,915 |
|
|
2,193,160 |
1,859,783 |
Total Liabilities |
|
2,393,971 |
2,377,585 |
|
|
|
|
Shareholders' Equity |
|
|
|
|
Share capital |
4 |
1,841,235 |
1,811,734 |
|
Deficit |
|
(868,077) |
(834,921) |
|
Accumulated other comprehensive income |
|
(15,196) |
(15,196) |
|
|
957,962 |
961,617 |
|
|
|
|
Total Liabilities
and Shareholders' Equity |
|
3,351,933 |
3,339,202 |
See accompanying notes to consolidated financial
statements
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE
INCOME
(unaudited)
|
|
|
|
|
3 Months Ended March 31 |
|
|
|
|
|
|
|
($ thousands, except per share
amounts) |
Note |
2012 |
2011 |
Revenues |
|
475,262 |
394,293 |
Cost of sales |
|
369,052 |
311,801 |
Gross profit |
6 |
106,210 |
82,492 |
|
|
|
|
|
General and administrative |
|
17,577 |
14,646 |
|
Acquisition-related and other |
|
22,131 |
80 |
|
|
39,708 |
14,726 |
|
|
|
|
Results from operating
activities |
|
66,502 |
67,766 |
|
Finance income |
|
(266) |
(8,633) |
|
Finance costs |
|
23,518 |
22,577 |
|
Net finance costs |
5 |
23,252 |
13,944 |
|
|
|
|
Earnings before income tax and
equity accounted investees |
|
43,250 |
53,822 |
|
|
|
|
|
Share of profit of investments in equity accounted
investees, net of tax |
|
(172) |
(2,190) |
|
|
|
|
|
Deferred income tax expense |
|
10,870 |
13,520 |
|
|
|
|
Earnings and total comprehensive
income for the period |
|
32,552 |
42,492 |
|
|
|
|
Earnings per share |
|
|
|
|
Basic and diluted earnings per share
(dollars) |
|
0.19 |
0.25 |
See accompanying notes to consolidated financial
statements
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN
EQUITY
(unaudited)
|
|
|
|
3 Months Ended March 31
($ thousands) |
Note |
2012 |
2011 |
Share Capital |
|
|
|
|
Balance, beginning of period |
|
1,811,734 |
1,794,536 |
|
Dividend reinvestment plan |
|
28,001 |
|
|
Share-based payment transactions |
|
1,503 |
3,986 |
|
Other |
|
(3) |
(5) |
|
Balance, end of period |
4 |
1,841,235 |
1,798,517 |
|
|
|
|
Deficit |
|
|
|
|
Balance, beginning of period |
|
(834,921) |
(739,351) |
|
Earnings for the period |
|
32,552 |
42,492 |
|
Dividends declared |
|
(65,708) |
(65,145) |
|
Balance, end of period |
|
(868,077) |
(762,004) |
|
|
|
|
Other Comprehensive Income
(Loss) |
|
|
|
|
Balance, beginning of period |
|
(15,196) |
(4,577) |
|
Balance, end of period |
|
(15,196) |
(4,577) |
Total Shareholders'
Equity |
|
957,962 |
1,031,936 |
See accompanying notes to consolidated financial
statements
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
|
|
3 Months Ended March 31
($ thousands) |
Note |
2012 |
2011 |
Cash provided by (used
in): |
|
|
|
Operating activities: |
|
|
|
Earnings for the period |
|
32,552 |
42,492 |
Adjustments for: |
|
|
|
|
Depreciation and amortization |
|
22,512 |
15,104 |
|
Net finance costs |
5 |
23,252 |
13,944 |
|
Share of profit of investments in equity
accounted investees (net of tax) |
|
(172) |
(2,190) |
|
Deferred income tax expense |
|
10,870 |
13,520 |
|
Share-based payments |
|
3,610 |
3,978 |
|
Employee future benefits expense |
|
1,431 |
1,198 |
|
Other |
|
314 |
83 |
|
Changes in non-cash working capital |
|
(12,429) |
(1,451) |
|
Distributions from investments in equity accounted
investees |
|
4,145 |
1,448 |
|
Decommissioning liability expenditures |
|
(1,057) |
(1,036) |
|
Employer future benefit contributions |
|
(2,500) |
(2,000) |
|
Interest paid |
|
(17,194) |
(10,612) |
Cash flow from operating
activities |
|
65,334 |
74,478 |
Financing activities: |
|
|
|
|
Bank borrowings |
|
66,861 |
40,000 |
|
Repayment of senior secured notes |
|
(2,087) |
(1,942) |
|
Repayment of finance leases |
|
(635) |
(570) |
|
Issuance of debt |
|
|
250,000 |
|
Financing fees |
|
(2,791) |
(1,702) |
|
Exercise of stock options |
|
1,036 |
3,820 |
|
Issue of shares under Dividend Reinvestment
Plan |
|
28,001 |
|
|
Dividends paid |
|
(65,562) |
(65,116) |
Cash flow from financing
activities |
|
24,823 |
224,490 |
Investing activities: |
|
|
|
|
Net capital expenditures |
|
(87,234) |
(207,578) |
Cash flow used in investing
activities |
|
(87,234) |
(207,578) |
Change in cash |
|
2,923 |
91,390 |
Cash (bank indebtedness), beginning of
period |
|
(676) |
125,397 |
Cash and cash equivalents,
end of period |
|
2,247 |
216,787 |
See accompanying notes to consolidated financial
statements
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
(unaudited)
1. REPORTING ENTITY
Pembina Pipeline Corporation ("Pembina" or the "Company") is an
energy transportation and service provider domiciled in
Canada. The condensed consolidated
interim financial statements ("Interim Financial Statements")
include the accounts of the Company, its wholly owned subsidiary
companies, partnerships and any interests in associates and jointly
controlled entities as at and for the three months ending
March 31, 2012. These Interim
Financial Statements and the notes thereto have been prepared in
accordance with IAS 34 - Interim Financial Reporting. They do not
include all of the information required for full annual financial
statements and should be read in conjunction with the consolidated
financial statements of the Company as at and for the year ended
December 31, 2011. The Interim
Financial Statements were authorized for issue by the Board of
Directors on May 3, 2012.
Pembina owns or has interests in pipelines and related
facilities to transport crude oil, condensate and natural gas
liquids, gather and process natural gas; and provide midstream
services in Alberta and
British Columbia.
2. PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
($ thousands) |
Land and
Land Rights |
Pipelines |
Facilities
and
Equipment |
Linefill
and
Other |
Assets
Under
Construction |
Total |
Cost |
|
|
|
|
|
|
Balance at December 31, 2011 |
67,219 |
2,500,027 |
528,620 |
200,726 |
307,358 |
3,603,950 |
Additions |
|
3,452 |
91,254 |
829 |
(40,607) |
54,928 |
Transfers |
1 |
795 |
41,886 |
(34,690) |
(7,992) |
|
Disposals and other |
(5,000) |
(324) |
(20) |
(294) |
|
(5,638) |
Balance at March 31, 2012 |
62,220 |
2,503,950 |
661,740 |
166,571 |
258,759 |
3,653,240 |
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
Balance at December 31, 2011 |
4,088 |
707,095 |
92,998 |
52,239 |
|
856,420 |
Depreciation |
69 |
16,313 |
4,767 |
1,189 |
|
22,338 |
Transfers |
|
3,935 |
21,915 |
(25,850) |
|
|
Disposals and other |
|
(14) |
(8) |
(238) |
|
(260) |
Balance at March 31, 2012 |
4,157 |
727,329 |
119,672 |
27,340 |
|
878,498 |
|
|
|
|
|
|
|
Carrying amounts |
|
|
|
|
|
|
At December 31, 2011 |
63,131 |
1,792,932 |
435,622 |
148,487 |
307,358 |
2,747,530 |
At March 31, 2012 |
58,063 |
1,776,621 |
542,068 |
139,231 |
258,759 |
2,774,742 |
Leased asset
The Company leases vehicles under a finance lease agreement. At
March 31, 2012 the net carrying
amount of leased vehicles was $5.4
million (December 31, 2011:
$5.6 million).
Property, plant and equipment under construction
For the quarter ended March 31,
2012, capitalized borrowing costs related to the
construction of the new pipelines or facilities amounted to
$2.7 million (2011:
$3.4 million), with capitalization
rates ranging from 4.68 percent to 4.77 percent (2011: 5.14 percent
to 5.29 percent).
Commitments
At March 31, 2012, the Company has
contractual commitments for the acquisition and or construction of
property, plant and equipment of $386.4
million (March 31, 2011:
$255.5 million).
3. LOANS AND BORROWINGS
This note provides information about the contractual terms of
the Company's interest-bearing loans and borrowings, which are
measured at amortized cost.
Carrying value terms and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
|
|
|
|
|
|
($ thousands) |
|
|
|
March 31,
2012 |
Dec. 31,
2011 |
|
Available
facilities |
Nominal interest
rate |
Year of
maturity |
Carrying
amount(3) |
Operating
facility(1) |
30,000 |
prime + 0.50
or BA(2) + 1.50 |
2013 |
|
3,139 |
Revolving unsecured credit
facility |
800,000(4) |
prime + 0.50
or BA(2) + 1.50 |
2017 |
377,254 |
309,981 |
Senior unsecured term facility |
75,000 |
6.16 |
2014 |
74,694 |
74,658 |
Senior unsecured notes - Series A |
175,000 |
5.99 |
2014 |
174,516 |
174,462 |
Senior unsecured notes - Series C |
200,000 |
5.58 |
2021 |
196,724 |
196,638 |
Senior unsecured notes - Series D |
267,000 |
5.91 |
2019 |
265,453 |
265,403 |
Senior secured notes |
55,890 |
7.38 |
2017 |
55,434 |
57,499 |
Senior unsecured medium term notes |
250,000 |
4.89 |
2021 |
248,597 |
248,558 |
Finance lease liabilities |
|
|
|
5,482 |
5,650 |
Total interest-bearing liabilities |
1,852,890 |
|
|
1,398,154 |
1,335,988 |
Less current portion |
|
|
|
(58,070) |
(323,927) |
Total non-current |
|
|
|
1,340,084 |
1,012,061 |
(1) Operating facility expected to be renewed on
an annual basis.
(2) Bankers Acceptance.
(3) Deferred financing fees are all classified as
non-current. Non-current carrying amount of facilities are net of
deferred financing fees.
(4) Available facility increased to $1.5 billion effective April 2, 2012.
On March 27, 2012 a redemption
notice for the senior secured notes was distributed with a
redemption date of April 30,
2012.
4. SHAREHOLDERS' EQUITY
Shareholder's capital
|
|
|
($ thousands, except share amounts) |
Number |
Shareholder's Capital |
|
|
|
Balance December 31, 2011 |
167,908,271 |
1,811,734 |
Exercise of stock options |
61,919 |
1,503 |
Dividend reinvestment plan |
1,059,670 |
28,001 |
Other |
|
(3) |
Balance March 31, 2012 |
169,029,860(1) |
1,841,235 |
(1) |
Weighted average number of common shares outstanding for the
three months ended March 31, 2012 is 168.3 million (March 31, 2011:
167.0 million). On a fully diluted basis, the weighted average
number of common shares outstanding for the three months ended
March 31, 2012 is 168.9 million (March 31, 2011: 167.6
million). |
Dividends
The following dividends were declared and paid by the
Company:
|
|
|
|
3 Months Ended
March 31 |
($ thousands) |
2012 |
2011 |
$0.39 per qualifying common share (2011:
$0.39) |
65,708 |
65,145 |
On April 12, 2012, Pembina's Board
of Directors declared a dividend for April of $38.6 million, representing $0.135 per qualifying common share ($1.62 annualized) which is a 3.8 percent increase
from the prior dividend rate.
5. NET FINANCE COSTS
|
|
|
|
($
thousands) |
3 Months Ended
March 31 |
|
2012 |
2011 |
Interest income on: |
|
|
|
Loans to related parties(1) |
263 |
190 |
|
Bank deposits |
3 |
105 |
Foreign exchange gains |
|
80 |
Change in fair value of
derivatives |
|
8,258 |
Finance income |
266 |
8,633 |
|
|
|
Interest expense on financial
liabilities measured at amortized cost: |
|
|
|
Loans and borrowings |
15,416 |
11,165 |
|
Convertible debentures |
4,605 |
4,567 |
|
Finance leases |
105 |
96 |
|
Unwinding of discount |
2,474 |
2,512 |
Realized loss on power
derivatives |
156 |
|
Change in fair value of
derivatives |
731 |
4,237 |
Foreign exchange losses |
31 |
|
Finance costs |
23,518 |
22,577 |
Net finance costs |
23,252 |
13,944 |
(1) |
The Company was funding its share of
the construction of new assets for its equity accounted investment
and had recorded a $17.9 million receivable from related party as
at December 31, 2011. The loan was repaid in full on March 28,
2012. |
6. OPERATING SEGMENTS
|
|
|
|
|
|
|
|
3 Months Ended
March 31, 2012
($ thousands) |
Conventional
Pipelines(1) |
Oil Sands
&
Heavy Oil |
Gas
Services |
Midstream &
Marketing |
Corporate |
Total |
Revenue from external customers: |
|
|
|
|
|
|
|
Pipeline transportation |
82,171 |
43,097 |
|
|
|
125,268 |
|
Terminalling, storage and hub
services |
|
|
|
330,943 |
|
330,943 |
|
Gas Services |
|
|
19,051 |
|
|
19,051 |
Total revenue |
82,171 |
43,097 |
19,051 |
330,943 |
|
475,262 |
Cost of sales: |
|
|
|
|
|
|
|
Operations |
27,575 |
13,001 |
6,027 |
2,509 |
(635) |
48,477 |
|
Product purchases |
|
|
|
298,895 |
|
298,895 |
Operating margin |
54,596 |
30,096 |
13,024 |
29,539 |
635 |
127,890 |
|
Depreciation and amortization
(operational) |
11,945 |
4,892 |
3,162 |
1,681 |
|
21,680 |
Gross profit |
42,651 |
25,204 |
9,862 |
27,858 |
635 |
106,210 |
|
Depreciation and amortization included in
general and administrative |
|
|
|
|
832 |
832 |
|
Other general and administrative |
898 |
940 |
522 |
1,287 |
13,098 |
16,745 |
|
Acquisition-related and other |
1,234 |
(131) |
11 |
(1) |
21,018 |
22,131 |
Reportable segment results from
operating activities |
40,519 |
24,395 |
9,329 |
26,572 |
(34,313) |
66,502 |
|
Net finance costs |
4,746 |
477 |
170 |
603 |
17,256 |
23,252 |
Reportable segment
earnings before tax |
35,773 |
23,918 |
9,159 |
25,969 |
(51,569) |
43,250 |
Share of profit of investments in
equity
accounted investees, net of tax |
|
|
|
172 |
|
172 |
Reportable segment assets |
669,512 |
1,115,434 |
514,453 |
413,335(2) |
639,199 |
3,351,933 |
Capital expenditures |
11,115 |
5,833 |
33,966 |
2,310 |
1,704 |
54,928 |
Reportable segment liabilities |
311,805 |
96,328 |
52,937 |
10,241 |
1,922,660 |
2,393,971 |
|
(1) 4.5 percent of Conventional Pipelines
revenue is under regulated tolling arrangements.
(2) Includes investments in equity accounted
investees of $159,827. |
|
|
|
|
|
|
|
|
3 Months Ended
March 31, 2011
($ thousands) |
Conventional
Pipelines(1) |
Oil Sands
&
Heavy Oil |
Gas
Services |
Midstream &
Marketing |
Corporate |
Total |
Revenue from external customers: |
|
|
|
|
|
|
|
Pipeline transportation |
69,256 |
30,547 |
|
|
|
99,803 |
|
Terminalling, storage and hub services |
|
|
|
279,516 |
|
279,516 |
|
Gas Services |
|
|
14,974 |
|
|
14,974 |
Total revenue |
69,256 |
30,547 |
14,974 |
279,516 |
|
394,293 |
Cost of sales: |
|
|
|
|
|
|
|
Operations |
25,214 |
11,206 |
4,690 |
2,094 |
|
43,204 |
|
Product purchases |
|
|
|
253,742 |
|
253,742 |
Operating margin |
44,042 |
19,341 |
10,284 |
23,680 |
|
97,347 |
|
Depreciation and amortization (operational) |
9,757 |
1,943 |
2,288 |
867 |
|
14,855 |
Gross profit |
34,285 |
17,398 |
7,996 |
22,813 |
|
82,492 |
|
Depreciation and amortization
included in
general and administrative |
|
|
|
|
249 |
249 |
|
Other general and administrative |
1,286 |
597 |
1,141 |
1,187 |
10,186 |
14,397 |
|
Acquisition-related and other |
42 |
|
6 |
15 |
17 |
80 |
Reportable segment
results from operating activities |
32,957 |
16,801 |
6,849 |
21,611 |
(10,452) |
67,766 |
Net finance costs |
(2,734) |
316 |
313 |
4,238 |
11,811 |
13,944 |
Reportable segment earnings before
tax |
35,691 |
16,485 |
6,536 |
17,373 |
(22,263) |
53,822 |
Share of profit
investments in equity
accounted investees, net of tax |
|
|
|
2,190 |
|
2,190 |
Reportable segment assets |
878,882 |
891,068 |
386,616 |
385,102(2) |
611,678 |
3,153,346 |
Capital expenditures |
16,698 |
99,763 |
15,626 |
90,345 |
850 |
223,282 |
Reportable segment liabilities |
236,302 |
75,296 |
45,123 |
20,434 |
1,744,255 |
2,121,410 |
|
(1) 5.8 percent of Conventional Pipelines
revenue is under regulated tolling arrangements.
(2) Includes investments in equity accounted
investees of $189,341. |
|
7. RELATED PARTY TRANSACTIONS
During the quarter, Pembina provided a guarantee for its 50
percent share of Fort Saskatchewan Ethylene Storage Limited
Partnership's ("FSESLP") credit facility of $43 million. On March 28,
2012, the loan receivable from FSESLP of $18.8 million was repaid in full.
8. SUBSEQUENT EVENTS
On April 2, 2012, Pembina acquired
all of the outstanding Provident Energy Ltd. ("Provident") common
shares (the "Provident Shares") in exchange for Pembina common
shares valued at approximately $3.3
billion ("Provident Acquisition") to create an integrated
company that will be a leading player in the North American energy
infrastructure sector. Provident shareholders received 0.425 of a
Pembina common share for each Provident Share held for a total of
116,535,750 Pembina common shares. On closing, Pembina assumed all
of the rights and obligations of Provident relating to the 5.75
percent convertible unsecured subordinated debentures of Provident
maturing December 31, 2017, and the
5.75 percent convertible unsecured subordinated debentures of
Provident maturing December 31, 2018
(collectively, the "Provident Debentures"). Outstanding Provident
Debentures at April 2, 2012 were
$345 million. Pursuant to the
respective trust indenture, Pembina was required to make a
repurchase offer for the Provident Debentures at 100 percent of
their principal values plus accrued and unpaid interest, which took
place on April 24, 2012. Should a
holder of Provident Debentures elect not to accept the repurchase
offer, the debentures will remain outstanding and mature as
originally set out in their respective indentures. Pursuant to the
Arrangement, Provident amalgamated with a wholly-owned subsidiary
of Pembina and has continued under the name "Pembina NGL
Corporation".
The preliminary purchase price allocation is estimated as
follows:
|
|
($ billions) |
|
Property, plant and equipment |
2.0 |
Intangibles |
2.5 |
Long-term debt |
(0.5) |
Other long term liabilities |
(0.7) |
|
3.3 |
The preliminary purchase price allocation for the Provident
acquisition is based upon preliminary information and will be
adjusted for information obtained subsequently. Upon finalization
of the accounting for the acquisition for Provident, the actual
amounts assigned to the fair values of the identifiable assets,
liabilities and goodwill acquired may differ materially from the
preliminary purchase price allocation.
In connection with the closing of the Arrangement, Pembina's
unsecured revolving credit facility with a syndicate of Canadian
banking institutions was increased from $800 million to $1.5
billion for a term of five years. Upon closing of the
Provident acquisition, Pembina repaid Provident's revolving term
credit facility of $205 million.
The Pembina Shares were listed and began trading on the New York
Stock Exchange under the symbol "PBA" on April 2, 2012.
On April 12, 2012, Pembina's Board
of Directors declared a dividend for April of $38.6 million, representing $0.135 per qualifying common share ($1.62 annualized) which is a 3.8 percent increase
from the prior dividend rate.
CORPORATE INFORMATION
HEAD OFFICE
Pembina Pipeline Corporation
Suite 3800, 525 - 8th Avenue S.W.
Calgary, Alberta T2P 1G1
AUDITORS
KPMG LLP
Chartered Accountants
Calgary, Alberta
TRUSTEE, REGISTRAR & TRANSFER AGENT
Computershare Trust Company of Canada
Suite 600, 530 - 8th Avenue SW
Calgary, Alberta T2P 3S8
1-800-564-6253
STOCK EXCHANGE
Pembina Pipeline Corporation
TSX listing symbols for:
Common shares: PPL
Convertible debentures: PPL.DB.C, PPL.DB.E, PPL.DB.F
NYSE listing symbol for:
Common shares: PBA
ANNUAL GENERAL MEETING
Shareholders are invited to attend Pembina's annual general meeting
on Tuesday, May 22, 2012 at 2 pm (Calgary time). The meeting will
be held in the Main Ballroom, The Metropolitan Centre, 333 -
4th Avenue SW Calgary, Alberta.
|
SOURCE Pembina Pipeline Corporation