New in-service assets and expansions drive improved
operating and financial performance
All financial figures are in Canadian dollars unless noted
otherwise. This news release contains forward-looking statements
and information that are based on Pembina Pipeline Corporation's
("Pembina" or the "Company") current expectations, estimates,
projections and assumptions in light of its experience and its
perception of historic trends. Actual results may differ materially
from those expressed or implied by these forward-looking
statements. Please see "Forward-Looking Statements &
Information" herein and in the Company's Management's Discussion
& Analysis for the period ended March
31, 2014 ("MD&A") for more details. This news release
also refers to financial measures that are not defined by Generally
Accepted Accounting Principles ("GAAP"), as identified herein. For
more information about the measures which are not defined by GAAP
see "Non-GAAP and Additional GAAP Measures" herein and in the
MD&A, which is available on SEDAR at www.sedar.com.
CALGARY,
May 8, 2014 /CNW/ - Pembina Pipeline
Corporation ("Pembina" or the "Company") (TSX: PPL) (NYSE: PBA)
announced today that it achieved strong financial and operational
performance during the first quarter of 2014.
Financial Overview
|
|
|
($ millions, except where
noted) |
|
3 Months Ended
March 31 |
|
|
2014 |
2013 |
Revenue |
|
1,759 |
1,249 |
Operating
margin(1) |
|
350 |
240 |
Gross profit |
|
302 |
204 |
Earnings |
|
147 |
91 |
Earnings per common share - basic
(dollars) |
|
0.44 |
0.30 |
Earnings per common share -
diluted (dollars) |
|
0.41 |
0.30 |
EBITDA(1) |
|
316 |
211 |
Cash flow from operating
activities |
|
261 |
232 |
Cash flow from operating
activities per common share - basic
(dollars)(1) |
|
0.82 |
0.78 |
Adjusted cash flow from operating
activities(1) |
|
264 |
202 |
Adjusted cash flow from operating
activities per common share - basic
(dollars)(1) |
|
0.83 |
0.68 |
Common share dividends
declared |
|
134 |
121 |
Preferred share dividends
declared |
|
6 |
|
Dividends per common share
(dollars) |
|
0.42 |
0.41 |
Capital expenditures |
|
287 |
137 |
(1) |
Refer to "Non-GAAP and Additional GAAP Measures." |
"Pembina achieved another strong quarter," said Mick Dilger, Pembina's President and Chief
Executive Officer ("CEO"). "Compared to this time last year, we
have increased our adjusted cash flow from operating activities by
approximately 31 percent and our adjusted cash flow from operating
activities per share (basic) by just over 22 percent. Our Phase I
Expansions in our Conventional Pipelines business, which came on
stream in December of last year, along with our Saturn I Facility,
which started up in October 2013,
helped drive these results. The successful execution of these
projects and our strong financial and operating performance are
clear demonstrations, once again, of our ability to realize the
vision we have set out for ourselves - to continue to produce
exceptional shareholder value."
Mr. Dilger added: "We are confident in the long-term
sustainability and growth in our cash flows, and so today, our
Board of Directors approved and declared a dividend increase of 3.6
percent. Pembina's dividend on its common shares will go from
$0.14 per common share per month (or
$1.68 annualized) to $0.145 per common share per month (or
$1.74 annualized) effective as of the
May 25, 2014 record date, payable
June 13, 2014. As we've said before,
we expect the future to look much like the past and we are
committed to growing our dividend over the long-term."
Net revenue increased 42 percent to $447
million during the first quarter of 2014 from $315 million during the same period of 2013. This
increase was due to strong performance in each of Pembina's
businesses, particularly in the Company's Midstream business, as
well as returns on new capital investments including the Saturn I
Facility and Phase I Conventional Pipelines expansions.
Operating expenses were $95
million during the first quarter of 2014 compared to
$77 million in the same period of
2013. The increase was largely the result of higher variable costs,
such as power and labour expenses, due to growth in volumes along
with having new facilities and expansions in-service.
Operating margin totalled $350
million during the first quarter of 2014, up 46 percent from
the same period last year when operating margin totalled
$240 million. This increase was
primarily the result of the same factors that impacted net revenue,
as discussed above.
Depreciation and amortization included in operations increased
to $52 million during the first
quarter of 2014 compared to $42
million during the same period in 2013. The increase is
primarily because the depreciation expense in the first quarter of
2013 included a $7 million reduction
of depreciation due to a re-measurement of the decommissioning
provision in excess of the carrying amount of the related asset in
the Company's Conventional Pipelines business. The increase also
reflects the growth in Pembina's asset base since the prior
period.
Increased revenue and operating margin, which were partially
offset by higher depreciation and amortization included in
operations, contributed to gross profit of $302 million during the first quarter of 2014, a
48 percent increase compared to gross profit of $204 million for the same period of 2013.
Pembina incurred general and administrative expenses (including
corporate depreciation and amortization) of $37 million during the first quarter of 2014
compared to $33 million during the
first quarter of 2013. This increase was primarily due to the
addition of new employees and consultants as a result of Pembina's
growth since the prior period as well as increased short-term and
share-based incentive expenses. Every $1 change in share price is expected to change
Pembina's annual share-based incentive expense by approximately
$1 million.
Net finance costs in the first quarter of 2014 were $61 million compared to $51 million in the first quarter of 2013. The
increase is primarily attributed to an increase in the unrealized
loss relating to the revaluation of the conversion feature of
convertible debentures due to the increase in the Company's common
share price during the first quarter of 2014, which was offset by
lower interest expense on loans and borrowings.
Income tax expense was $56 million
for the first quarter of 2014, including current taxes of
$34 million and deferred taxes of
$22 million, compared to current
taxes of $4 million and deferred
taxes of $26 million in the same
period of 2013. The current taxes increased during the quarter
primarily as a result of increased earnings before income tax in
addition to earnings before income tax exceeding available
deductions. Deferred income tax expense arises from the difference
between the accounting and tax basis of assets and liabilities.
Pembina generated EBITDA of $316
million during the first quarter of 2014 compared to
$211 million during the first quarter
of 2013. This increase was largely due to improved results from
operating activities in each of Pembina's businesses and returns on
new assets, expansions and services.
The Company's earnings increased to $147
million ($0.44 per common
share - basic) during the first quarter of 2014 compared to
$91 million ($0.30 per common share - basic and diluted)
during the first quarter of 2013. The increase was primarily due to
improved operating margin but was offset by the Company's income
tax expense and the increase in net finance costs during the
quarter ended March 31, 2014, as
described above.
Cash flow from operating activities was $261 million ($0.82
per common share - basic) during the first quarter of 2014 compared
to $232 million ($0.78 per common share - basic) for the same
period in 2013. The increase was primarily due to improved results
from operating activities and a decrease in the non-cash working
capital in 2014 as compared to an increased change in the same
period in 2013.
Adjusted cash flow from operating activities was $264 million ($0.83
per common share - basic) during the first quarter of 2014 compared
to $202 million ($0.68 per common share - basic) during the first
quarter of 2013. This 31 percent increase (22 percent increase per
share) was primarily due to higher cash flow from operations net of
increased current tax expense.
Operating Results
|
|
|
|
|
3
Months Ended March 31 |
(mbpd, except where
noted)(1) |
|
2014 |
2013 |
Conventional Pipelines
throughput |
|
553 |
494 |
Oil Sands & Heavy Oil
contracted capacity |
|
880 |
870 |
Gas Services average volume
processed (mboe/d) net to Pembina(2) |
|
88 |
50 |
Midstream NGL sales volume |
|
133 |
123 |
Total volume |
|
1,654 |
1,537 |
(1) |
mbpd is thousands of barrels per day. |
(2) |
Gas Services average volume processed converted to mboe/d
(thousands of barrels of oil equivalent per day) from million cubic
feet per day ("MMcf/d") at 6:1 ratio. |
|
|
|
3 Months Ended March
31 |
|
2014 |
2013 |
($ millions) |
Revenue |
Operating
Margin(2) |
Revenue |
Operating
Margin(2) |
Conventional Pipelines |
117 |
77 |
96 |
61 |
Oil Sands & Heavy Oil |
52 |
34 |
43 |
31 |
Gas Services |
42 |
29 |
28 |
19 |
Midstream |
236(1) |
209 |
148(1) |
128 |
Corporate |
|
1 |
|
1 |
Total |
447 |
350 |
315 |
240 |
(1) |
Net revenue. Refer to "Non-GAAP and Additional
GAAP Measures." |
(2) |
Refer to "Non-GAAP and Additional GAAP Measures." |
- First quarter 2014 financial and operating results in
Conventional Pipelines were higher than the comparable period of
2013 primarily because of the Phase I Expansion being placed into
service in late-December 2013.
Improved revenue was partially offset by higher operating expenses
relating mainly to volume growth and the Phase I Expansion. The
Phase I Expansion increased crude oil and condensate capacity on
the Peace Pipeline by 40 mbpd and NGL capacity on the Peace
Pipeline and Northern System by 52 mbpd.
- In Oil Sands & Heavy Oil, the increases in net revenue and
operating margin during the first quarter of 2014 compared to the
same period of 2013 were primarily related to higher volumes
transported on the Nipisi Pipeline during the 2014 period. This is
due to the completion of a new pump station on that system, which
was placed into service in the second quarter of 2013.
- Gas Services' financial and operating results were higher in
the first quarter of 2014 than the first quarter of 2013, mainly
because of the new 200 MMcf/d Saturn I Facility, which was placed
into service in late-October 2013,
combined with improved plant reliability at the Company's Musreau
deep cut facility.
- In Midstream, improved first quarter 2014 results compared to
the first quarter of 2013 were largely due to a stronger propane
market across North America which
was caused by extended periods of colder than average temperatures
during the winter, and enhanced service offerings in this
business.
Growth Project Update
During the first quarter of 2014, Pembina spent approximately
$287 million in capital to progress
its growth initiatives as follows:
- In the Company's Conventional Pipelines business, work
continued on the Phase II crude oil, condensate and NGL expansions
("Phase II Expansions"). Regulatory applications have been
submitted for certain portions of the project and, subject to
timely receipt of regulatory approvals, it is expected to be
in-service in late-2014 (for the crude oil and condensate capacity)
and mid-2015 (for the NGL capacity).
- Construction of the previously announced pipeline expansion
between Simonette and Fox Creek,
Alberta is substantially complete. Pembina will conduct
clean-up activities along the right-of-way and hydrostatic testing
prior to placing the pipeline into service in the third quarter of
2014. With this expansion, Pembina expects to be able to deliver an
initial 40 mbpd into its Peace Pipeline from Fox Creek into Edmonton once the crude oil and condensate
Phase II Expansion is complete.
- Stakeholder consultation continues on the Company's previously
announced Phase III Expansion and Pembina expects to file
regulatory applications for the project in the third quarter of
2014. Subject to regulatory approvals, Pembina expects this
expansion to be in-service between late-2016 and mid-2017. Over the
next several months, the Company anticipates securing further
pipeline transportation commitments from customers while it refines
the project scope. Any additional commitments made before Pembina
begins to order long-lead equipment would support increasing the
design capacity of the Phase III Expansion.
- At the Company's Gas Services business Resthaven Facility,
Pembina has completed 70 percent of site construction to date and
expects to bring the facility and associated pipelines into service
in the third quarter of 2014.
- At the Musreau II Facility, Pembina has completed approximately
15 percent of site construction to date and expects the facility to
be in-service in the first quarter of 2015.
- The Company's Saturn II Facility is expected to be in-service
by late-2015 and, to date, Pembina has completed approximately 10
percent of site construction.
- Pembina's Midstream business is nearing completion of a new
full-service truck terminal in the Cynthia area of Alberta and expects it to be placed into
service in the second quarter of 2014.
- Regarding Pembina's previously announced $415 million RFS II project (a second ethane-plus
73 mbpd fractionator at Pembina's Redwater site), the Company continued to
progress with facility construction during the first quarter of
2014. Long lead equipment purchasing is substantially complete,
with all major items expected to be delivered to the site by the
end of the third quarter of 2014. Earthwork on site is complete,
and the mechanical contractor mobilized to the site at the start of
April 2014. The project is on
schedule and anticipated to be on-stream late in the fourth quarter
of 2015.
- In March 2014, Pembina signed an
incremental underground storage cavern arrangement with a major
petrochemical company on a long-term, fee-for-service basis.
Financing Activity
On January 16, 2014, Pembina
closed its offering of 10,000,000 cumulative redeemable rate reset
class A preferred shares, series 5 (the "Series 5 Preferred
Shares") at a price of $25.00 per
share. The Series 5 Preferred Shares began trading on the Toronto
Stock Exchange on January 16, 2014
under the symbol PPL.PR.E. Proceeds from the Series 5 Preferred
Shares were used to partially fund Pembina's 2014 capital
expenditure program, including capital expenditures relating to
Pembina's current expansion and growth projects, to reduce
indebtedness under the Company's credit facilities, and for general
corporate purposes of the Company and its affiliates.
Subsequent to quarter end, on April 4,
2014, Pembina closed its offering of $600 million of senior unsecured medium-term
notes. The notes have a fixed interest rate of 4.81 percent per
annum, paid semi-annually, and will mature on March 25, 2044. The Company used a portion of the
proceeds from the notes offering to repay the $75 million senior unsecured term facility on
April 7, 2014. Pembina intends to use
the remainder of the proceeds to partially fund capital projects,
repay the Series A unsecured notes and for other general corporate
purposes.
Transition of Chairman of the Board
Effective April 1, 2014, the
Company's Chairman of the Board, Lorne
Gordon, stepped down and Randall
Findlay, a director of Pembina since 2007 and previous
director of Provident Energy Ltd. from 2001 to 2012, assumed the
role of Chairman of the Board. Mr. Gordon continues to serve as a
member of Pembina's Board of Directors.
Summary
"During the first quarter of 2014, our focus was on progressing
the multitude of projects we secured over the past year or so, and
on safely and reliably operating our existing assets" said Mr.
Dilger, Pembina's President and CEO. "We continue to strive for
excellence by advancing our safety culture initiative and the
current focus is on safely executing our suite of growth
projects."
"We were also named one of Alberta's top 65 employers and added to the
S&P/TSX 60 during the first three months of this year," added
Mr. Dilger. "This is my first quarter as Pembina's CEO and I'm very
proud of these accomplishments; I feel they reflect the strength of
the Company we have built. I'm grateful to Pembina's previous CEO,
Bob Michaleski, who retired at the
end of last year and to Lorne
Gordon, who stepped down as Board Chairman in April. They
both contributed greatly to the success we are realizing today and
to the strong footing we have for our Company going forward. We
have a clear path in front of us and know what we need to do to
achieve our goals. Both our vision and our existing operations are
driving strong continued shareholder value today and are helping us
lay the foundation for a sustainable future."
First Quarter 2014 Conference Call & Webcast
Pembina will host a conference call on May 9, 2014 at 7:00 a.m.
MT (9:00 a.m. ET) for
interested investors, analysts, brokers and media representatives
to discuss details related to the 2014 first quarter. The
conference call dial-in numbers for Canada and the U.S. are 647-427-7450 or
888-231-8191. A recording of the conference call will be available
for replay until May 16, 2014 at
11:59 p.m. ET. To access the replay,
please dial either 416-849-0833 or 855-859-2056 and enter the
password 41585575.
A live webcast of the conference call can be accessed on
Pembina's website at www.pembina.com under Investor Centre,
Presentation & Events, or by entering:
http://event.on24.com/r.htm?e=742968&s=1&k=2EBCC5DD17E5F9CC9D61659A4510E23B
in your web browser. Shortly after the call, an audio archive will
be posted on the website for a minimum of 90 days.
Annual and Special Meeting Information
The Company will hold its Annual and Special Meeting of
Shareholders ("AGM") on Friday, May 9,
2014 at 2:00 p.m. MT
(4:00 p.m. ET) at the Metropolitan
Conference Centre, 333 - 4th Avenue S.W., Calgary, Alberta, Canada.
A live webcast of Pembina's AGM presentation can be accessed on
Pembina's website at www.pembina.com under Investor Centre,
Presentation & Events, or by entering:
http://event.on24.com/r.htm?e=768520&s=1&k=4BCAED7117CB62E1E2F997A222AFFAA4.
Participants are recommended to register for the webcast at least
10 minutes before the presentation start time.
About Pembina
Calgary-based Pembina Pipeline
Corporation is a leading transportation and midstream service
provider that has been serving North
America's energy industry for 60 years. Pembina owns and
operates pipelines that transport various hydrocarbon liquids
including conventional and synthetic crude oil, heavy oil and oil
sands products, condensate (diluent) and natural gas liquids
produced in western Canada. The
Company also owns and operates gas gathering and processing
facilities and an oil and natural gas liquids infrastructure and
logistics business. With facilities strategically located in
western Canada and in natural gas
liquids markets in eastern Canada
and the U.S., Pembina also offers a full spectrum of midstream and
marketing services that spans across its operations. Pembina's
integrated assets and commercial operations enable it to offer
services needed by the energy sector along the hydrocarbon value
chain.
Forward-Looking Statements &
Information
This document contains certain forward-looking statements and
information (collectively, "forward-looking statements"), including
forward-looking statements within the meaning of the "safe harbor"
provisions of applicable securities legislation, that are based on
Pembina's current expectations, estimates, projections and
assumptions in light of its experience and its perception of
historical trends. In some cases, forward-looking statements can be
identified by terminology such as "schedule", "will", "expects",
"plans", "anticipates", "intends", and similar expressions
suggesting future events or future performance.
In particular, this document contains forward-looking
statements pertaining to, without limitation, the following:
Pembina's corporate strategy; future dividends which may be
declared on Pembina's common shares; planning, construction,
capital expenditure estimates, schedules, expected capacity,
incremental volumes, in-service dates, rights, activities and
operations with respect to planned new construction of, or
expansions on existing, pipelines, gas services facilities,
terminalling, storage and hub facilities, and; the anticipated use
of proceeds from financing.
The forward-looking statements are based on certain
assumptions that Pembina has made in respect thereof as at the date
of this news release regarding, among other things: oil and gas
industry exploration and development activity levels; the success
of Pembina's operations and growth projects; prevailing commodity
prices and exchange rates and the ability of Pembina to maintain
current credit ratings; the availability of capital to fund future
capital requirements relating to existing assets and projects;
expectations regarding participation in Pembina's dividend
reinvestment plan; future operating costs; geotechnical and
integrity costs; that any third party projects relating to
Pembina's growth projects will be sanctioned and completed as
expected; that any required commercial agreements can be reached;
that all required regulatory and environmental approvals can be
obtained on the necessary terms in a timely manner; that
counterparties will comply with contracts in a timely manner; that
there are no unforeseen events preventing the performance of
contracts or the completion of the relevant facilities; that there
are no unforeseen material costs relating to the facilities which
are not recoverable from customers; interest and tax rates;
prevailing regulatory, tax and environmental laws and regulations;
maintenance of operating margins; the amount of future liabilities
relating to environmental incidents; and the availability of
coverage under Pembina's insurance policies (including in respect
of Pembina's business interruption insurance policy).
Although Pembina believes the expectations and material
factors and assumptions reflected in these forward-looking
statements are reasonable as of the date hereof, there can be no
assurance that these expectations, factors and assumptions will
prove to be correct. These forward-looking statements are not
guarantees of future performance and are subject to a number
of known and unknown risks and uncertainties including, but not
limited to: the regulatory environment and decisions; the impact of
competitive entities and pricing; labour and material shortages;
reliance on key relationships and agreements; the strength and
operations of the oil and natural gas production industry and
related commodity prices; non-performance or default by
counterparties to agreements which Pembina or one or more of its
affiliates has entered into in respect of its business; actions by
governmental or regulatory authorities including changes in tax
laws and treatment, changes in royalty rates or increased
environmental regulation; 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; and certain
other risks detailed from time to time in Pembina's public
disclosure documents available at www.sedar.com. This list of risk
factors should not be construed as exhaustive.
Readers are cautioned that events or circumstances could
cause results to differ materially from those predicted, forecasted
or projected. The forward-looking statements contained in this
document speak only as of the date of this document. Pembina does
not undertake any obligation to publicly update or revise any
forward-looking statements or information contained herein, except
as required by applicable laws. The forward-looking statements
contained in this document are expressly qualified by this
cautionary statement.
Non-GAAP and Additional GAAP
Measures
In this news release, Pembina has used the
terms operating margin, earnings before interest, taxes,
depreciation and amortization (EBITDA), adjusted cash flow from
operating activities, and adjusted cash flow from operating
activities per share. Since Non-GAAP and Additional GAAP financial
measures do not have a standardized meaning prescribed by GAAP and
are therefore unlikely to be comparable to similar measures
presented by other companies, securities regulations require that
Non-GAAP and Additional GAAP financial measures are clearly
defined, qualified and reconciled to their nearest GAAP measure.
Except as otherwise indicated, these Non-GAAP and Additional GAAP
measures are calculated and disclosed on a consistent basis from
period to period. Specific adjusting items may only be relevant in
certain periods. The intent of Non-GAAP and Additional GAAP
measures is to provide additional useful information to investors
and analysts and the measures do not have any standardized meaning
under IFRS. The measures should not, therefore, be considered in
isolation or used in substitute for measures of performance
prepared in accordance with IFRS. Other issuers may calculate the
Non-GAAP and Additional GAAP measures differently. Investors
should be cautioned that these measures 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. For additional
information regarding non-GAAP and additional GAAP measures,
including reconciliations to measures recognized by GAAP,
please refer to the MD&A, which is available on SEDAR at
www.sedar.com.
SOURCE Pembina Pipeline Corporation
Image with caption: "Pembina's Saturn I Facility (CNW
Group/Pembina Pipeline Corporation)". Image available at:
http://photos.newswire.ca/images/download/20140508_C7263_PHOTO_EN_40095.jpg