Milestone results with increased financial metrics year
over year
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
("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" in the Company's Management's Discussion &
Analysis ("MD&A") for more details. This report also refers to
net revenue, operating margin, earnings before interest, taxes,
depreciation and amortization ("EBITDA"), adjusted cash flow from
operating activities (and cash flow from operating activities per
common share and adjusted cash flow from operating activities per
common share), and total enterprise value, which are financial
measures that are not defined by Generally Accepted Accounting
Principles ("GAAP"). Pembina's
methods of calculating these financial measures may not be directly
comparable to that of other companies. Pembina considers these non-GAAP financial
measures to provide useful information to both management and
investors in measuring Pembina's
financial performance and financial condition. For more information
about the measures which are not defined by GAAP, including a
reconciliation to the most directly comparable GAAP measure, see
"Non-GAAP and Additional GAAP Measures" in the accompanying
MD&A.
CALGARY, Feb. 25, 2016 /CNW/ - Pembina Pipeline
Corporation ("Pembina" or the "Company") (TSX: PPL; NYSE: PBA)
announced today its financial and operating results for the fourth
quarter and full year 2015.
Financial Overview
|
|
|
($ millions,
except where noted)
|
3 Months
Ended December
31 (unaudited)
|
12 Months
Ended December
31
|
|
2015
|
2014
|
2015
|
2014
|
Conventional
Pipelines revenue volumes (mbpd)(1)(2)
|
621
|
612
|
614
|
575
|
Oil Sands & Heavy
Oil contracted capacity (mbpd)(1)
|
880
|
880
|
880
|
880
|
Gas Services average
revenue volumes (mboe/d) net to
Pembina(2)(3)
|
103
|
97
|
110
|
86
|
Midstream NGL sales
volumes (mbpd)(1)(4)
|
123
|
130
|
116
|
119
|
Total volume
(mbpd)(1)
|
1,727
|
1,719
|
1,720
|
1,660
|
Revenue
|
1,242
|
1,259
|
4,635
|
6,069
|
Net
revenue(5)
|
407
|
304
|
1,507
|
1,469
|
Operating
margin(5)
|
304
|
195
|
1,118
|
1,078
|
Gross
profit
|
237
|
144
|
866
|
876
|
General and
administrative expenses (excluding corporate
depreciation)
|
36
|
25
|
143
|
146
|
Earnings
|
130
|
84
|
406
|
383
|
Earnings per common
share – basic (dollars)
|
0.32
|
0.22
|
1.02
|
1.07
|
Earnings per common
share – diluted (dollars)
|
0.32
|
0.22
|
1.02
|
1.06
|
EBITDA(5)
|
260
|
170
|
955
|
920
|
Cash flow from
operating activities
|
285
|
196
|
801
|
800
|
Cash flow from
operating activities per common share – basic
(dollars)(5)
|
0.79
|
0.58
|
2.31
|
2.45
|
Adjusted cash flow
from operating activities(5)
|
280
|
164
|
878
|
777
|
Adjusted cash flow
from operating activities per common share – basic
(dollars)(5)
|
0.77
|
0.49
|
2.53
|
2.38
|
Common share
dividends declared
|
168
|
146
|
628
|
563
|
Preferred share
dividends declared
|
13
|
10
|
48
|
31
|
Dividends per common
share (dollars)
|
0.46
|
0.44
|
1.80
|
1.72
|
Capital
expenditures
|
448
|
483
|
1,811
|
1,412
|
(1)
|
mbpd is thousands of
barrels per day.
|
(2)
|
Revenue volumes are
equal to contracted plus interruptible volumes.
|
(3)
|
Gas Services average
revenue volumes converted to mboe/d (thousands of barrels of oil
equivalent per day) from
million cubic feet per day ("MMcf/d") at 6:1 ratio.
|
(4)
|
NGL is natural gas
liquids.
|
(5)
|
Refer to "Non-GAAP
and Additional GAAP Measures."
|
2015 Highlights
"I am very proud to report that 2015 was another milestone year
for Pembina," said Scott Burrows, Pembina's Vice President, Finance and Chief
Financial Officer. "During 2015, we successfully and safely placed
into service over $1.3 billion of new
projects which, along with the sound and reliable operations of our
underlying business, supported our record volumes and allowed us to
achieve our highest ever annual financial metrics including
operating margin, EBITDA and adjusted cash flow from operating
activities per share."
"While the energy markets have changed dramatically during 2015
compared to the previous year, we continue to deliver solid results
through these challenging times faced by our industry," continued
Mr. Burrows. "Given this market volatility, it is important that I
reiterate our goals at Pembina
have not changed and we remain focused on doing the important
things right, which includes operating our business safely and
reliably, successfully executing on our growth plans, working to
achieve our cost savings goal of $225
million and taking a prudent approach to maintaining and
growing shareholder value. Pembina
has always been a dividend-paying company and our management and
Board are very proud of the fact that we have never cut the
dividend and have increased it over the last four consecutive
years, which includes the 5.2 percent increase we announced during
2015."
"We are also pleased with the continued access to capital that
we have achieved, raising approximately $2.3
billion (including our Dividend Reinvestment Program) of
capital in 2015, as well as completing our most recent $170 million preferred share offering, subsequent
to year end. Heading into 2016 with record capital expenditures
ahead of us, we are confident in our ability to fund our capital
program," concluded Mr. Burrows.
Mick Dilger, Pembina's President and Chief Executive
Officer commented: "Further highlighting our operational
achievements over 2015, I am very pleased to report that we have
reached record throughput levels in both our Conventional Pipelines
and Gas Services businesses, where annual revenue volumes increased
7 and 27 percent, respectively. We are also continuing to see
strong operational results into 2016, where our Conventional
Pipelines average revenue volumes were in excess of 650 thousand
barrels per day in the month of January – our strongest month
yet."
"On an even more important note, I also want to commend our
staff on our exceptional safety record. We have now achieved two
consecutive years without any employee lost-time injuries, where
employees have worked over 5.1 million hours since the beginning of
2014 and 18 percent more hours in 2015 compared to 2014. This
remarkable track record demonstrates our safety-first culture and
complete dedication by our staff – safety is truly a way of life
here at Pembina."
"We are now at a point where we will be bringing new assets
online almost every quarter into 2017. These projects are backed by
firm contracts with our customers and will serve to further de-risk
our business by providing incremental, stable, contracted cash flow
streams and ultimately growing the bottom line for our
shareholders. In fact, almost 80 percent of our 2015 EBITDA was
generated from fee-for-service contracts and we forecast this to
exceed 80 percent by 2018, given current commodity strip
pricing."
"Other achievements during 2015 include announcing a further
$600 million of new capital projects,
substantially backed by long-term, fee-for-service contracts, and
having also brought in over $1.3
billion of new, fee-for-service projects into service, which
going forward will add between $100 and $150
million of incremental run-rate EBITDA, depending on
utilization. We are also continuing to progress a further
$5.3 billion of growth projects,
which in 2018 is estimated to add between $600 and $950 million of incremental run-rate
EBITDA, depending on utilization. This will be a transformative
milestone for us and is something we are very excited about."
"On another matter, we understand that the current environment
is difficult for our customers. We value these relationships and
are committed to continually work with our customers to do what we
can to decrease our operating costs in order to help support and
improve producer net backs."
"Further, helping the communities we operate in is more
important than ever during these times, and is why I'm proud of the
community programs Pembina and our
employees support by committing time volunteering and through
donations. We are confident that our investment of time and funds
has the profound potential to make a difference in our communities
– especially during times when it is needed the most."
"Overall, 2015 has been a year of many successes and has also
been a year of challenges, given the current macroeconomic
environment. I remain cautiously optimistic that we can overcome
today's current headwinds and continue to provide sustainable
returns for our shareholders for many years to come," concluded Mr.
Dilger.
2015 Financial Review
Pembina delivered solid
financial and operational results in 2015 with record throughput,
EBITDA, operating margin, cash and adjusted cash flow per share,
demonstrating the financial resilience of Pembina's fee-for-service business model.
Revenue was $4.6 billion and
$1.2 billion for the full year and
fourth quarter of 2015, compared to $6.1
billion and $1.3 billion in
the same periods of 2014, largely a result of the reduced commodity
prices that also positively impacted the cost of product purchases.
The Company's Conventional Pipelines and Gas Services businesses
had an increase in revenue of 22 percent and 27 percent during 2015
compared to 2014. This strong performance resulted from higher
volumes and new assets being placed in service and was complemented
with the steady results in the Oil Sands and Heavy Oil business.
For the full year, net revenue (revenue less cost of goods sold
including product purchases) in 2015 was $1.5 billion, consistent with 2014 and
$407 million for the fourth quarter
of 2015 as compared to $304 million
for the same period in 2014. Net revenue in the Midstream business
declined by 22 percent as compared to 2014, largely due to lower
commodity prices, and, to a lesser extent, tighter price
differentials across most commodities.
Operating expenses were $426
million for the full year in 2015, compared to $401 million during the same period of 2014, with
the increase primarily due to the addition of assets, offset by the
sale of the Company's non-core trucking subsidiary in its Midstream
business recognized in the second quarter of 2014. For the fourth
quarter of 2015, operating expenses were $110 million compared to $117 million in the same period of 2014. The
quarter-over-quarter decrease in operating expenses was primarily
related to timing of integrity spending in the Company's
Conventional Pipelines business, which was partially offset by the
addition of new assets.
For the year ended December 31,
2015, operating margin was $1,118
million compared to $1,078
million in 2014 primarily due to increases in the Company's
Conventional Pipelines and Gas Services businesses from new assets
being placed in service and increased volumes, offset by decreases
in the Midstream business. The Oil Sands and Heavy Oil business
maintained a reliable contribution to the operating margin with a
two percent year-over-year increase. During the fourth quarter of
2015, operating margin was $304
million compared to $195
million in the fourth quarter of 2014 primarily due to
increased contribution from the Company's Conventional Pipelines
and Midstream businesses. Pembina's Midstream business results in 2014
were impacted by an inventory impairment recognized in the fourth
quarter and overall higher cost of product which reduced net
revenue.
Depreciation and amortization included in operations during 2015
was $249 million compared to
$216 million for the full year of
2014. This increase was primarily due to the year-over-year growth
in Pembina's asset base primarily
associated with the Company's pipeline expansions, the Vantage
pipeline acquisition, in addition to certain useful life
adjustments partially offset by decreased amortization in the
Midstream business associated with intangibles that were fully
depreciated in the prior year and the sale of a non-core trucking
related subsidiary. In the fourth quarter of 2015, depreciation and
amortization included in operations rose to $73 million compared to $62 million in the same period last year
primarily due to new assets in service.
Gross profit for 2015 was $866
million compared to $876
million for 2014 due to increased operating margin offset by
a greater increase in depreciation and amortization included in
operations. In the fourth quarter of 2015, gross profit was
$237 million compared to $144 million in 2014. This quarter-over-quarter
increase was a result of increased operating margin partially
offset by an increase in depreciation and amortization included in
operations and increased unrealized mark-to-market positions of
commodity-related derivative financial instruments.
The Company's general and administrative expenses (excluding
corporate depreciation and amortization) remained relatively
consistent year over year. For the year ending December 31, 2015, Pembina incurred general and administrative
expenses (excluding corporate depreciation and amortization) of
$143 million compared to $146 million in 2014. Increased salary, benefit
and rent expenses due to increased staff to support new in-service
assets were offset by decreased short and long-term incentives.
General and administrative expenses (excluding corporate
depreciation and amortization) for the fourth quarter of 2015
increased to $36 million as compared
to $25 million in the same period of
2014. These increases were primarily due to fluctuations in the
share price and the impact on long-term incentive expenses incurred
in the quarter as compared to the previous year. Every $1 change in share price is expected to change
Pembina's annual share-based
incentive expense by approximately $1
million.
Pembina generated EBITDA of
$955 million in 2015, a $35 million increase over 2014 EBITDA of
$920 million. The increase was
largely due to higher operating margin as described above. EBITDA
for the fourth quarter of 2015 was $260
million, compared to $170
million for the same period in 2014. This increase was due
to higher operating margin partially offset by the
quarter-over-quarter increase in general and administrative
expenses and other expenses. Other expenses in 2015 include a
$13 million de-recognition of costs
related to the propane export terminal project and an $8 million loss on the sale of linefill.
Net finance costs totalled $71
million in 2015, a $59 million
decrease from $130 million recognized
in 2014. This decrease is largely attributable to the change in
fair value of the conversion feature on the series E and F
convertible debentures ("Conversion Feature"). The Conversion
Feature was impacted by the reduction in the principal outstanding,
primarily as a result of the October 13,
2015 redemption of the series E convertible debentures, as
well as changes in the share price. In 2015, Pembina recognized a gain on revaluation of
$40 million, compared to a loss on
revaluation of $41 million in 2014.
Partially offsetting the decreased costs were interest expenses on
loans and borrowings, which increased from $90 million in 2014 to $103 million in 2015, as a result of an increased
level of outstanding loans and borrowings to fund growth capital.
Net finance costs incurred during the fourth quarter of 2015 were
$22 million compared to income of
$9 million for the fourth quarter of
2014. This increase is largely attributable to the revaluation of
the Conversion Feature identified above.
Income tax expense for 2015 totalled $199
million, including current tax of $41
million and deferred tax of $158
million, compared to income tax expense of $167 million in 2014, including current tax of
$103 million and deferred tax of
$64 million. Current tax expense for
2015 was lower than the comparable period in 2014 predominantly due
to lower taxable income allocations from deferral partnerships in
our corporate structure. The increase in deferred tax expense in
the current quarter is mainly attributable to an increase in the
income tax rate and higher taxable temporary differences between
book and tax basis. Alberta's
Finance Minister increased the general corporate tax rate from 10
percent to 12 percent, effective July 1,
2015. Income tax expense was $31
million for the fourth quarter of 2015, including current
tax recovery of $19 million and
deferred tax of $50 million, compared
to $39 million, including current tax
expense of $28 million and deferred
tax of $11 million in the same period
of 2014. The decrease in current taxes is attributable to a
decrease in taxable income in the fourth quarter of 2015 as
compared to the prior year for the same reasons as noted above. The
increase in deferred taxes was due to the increase in the income
tax rate previously noted.
The Company's earnings increased six percent to $406 million ($1.02
per common share-basic) in 2015 compared to $383 million ($1.07
per common share-basic) in 2014. The increase was most
significantly impacted by the increased operating margin and lower
net finance costs offset by increased deferred tax and depreciation
and amortization expenses in 2015. For the fourth quarter of 2015,
the Company's earnings increased $46
million to $130 million
($0.32 per common share-basic)
compared to $84 million ($0.22 per common share-basic) during the fourth
quarter of 2014. This was driven by higher operating margin
slightly offset by higher net finance costs as well as increased
general and administrative and depreciation and amortization
expenses recognized in the fourth quarter. The per common share
amounts were impacted by the increase in the number of common
shares outstanding largely as a result of the dividend reinvestment
plan, convertible debenture redemptions and conversions and the
November 19, 2015 common share
issuance.
Cash flow from operating activities remained relatively
consistent year over year. Cash flow from operating activities was
$801 million ($2.31 per common share-basic) for the year ended
December 31, 2015 compared to
$800 million ($2.45 per common share-basic) in 2014. Increased
operating margin and a decreased change in non-cash working capital
was offset by increased taxes paid in 2015. Cash flow from
operating activities increased $89
million in the fourth quarter of 2015 as compared to the
same period in 2014. Cash flow from operating activities was
$285 million ($0.79 per common share-basic) during the fourth
quarter of 2015 compared to $196
million ($0.58 per common
share-basic) for the same period in 2014 primarily due to increased
operating margin and payments received and deferred.
Adjusted cash flow from operating activities increased
$101 million to $878 million ($2.53
per common share-basic) in 2015 as compared to $777 million ($2.38
per common share-basic) during 2014. The increase was primarily due
to increased operating margin and lower current tax and share-based
compensation expenses offset by increased preferred share dividends
declared. Adjusted cash flow from operating activities increased in
the fourth quarter of 2015 as compared to 2014. Adjusted cash flow
from operating activities was $280
million ($0.77 per common
share-basic) in 2015 as compared to $164
million ($0.49 per common
share-basic) during the fourth quarter of 2014. The increase is
largely due to higher operating margin and lower current tax,
offset by an increase in preferred share dividends declared.
Operating Results
|
|
|
|
|
|
3 Months
Ended December
31
|
12 Months
Ended December
31
|
(mbpd, except
where noted)(1)
|
|
2015
|
2014
|
2015
|
2014
|
Conventional
Pipelines revenue volumes(2)
|
|
621
|
612
|
614
|
575
|
Oil Sands & Heavy
Oil contracted capacity
|
|
880
|
880
|
880
|
880
|
Gas Services average
volumes processed (mboe/d) net to
Pembina(2)(3)
|
|
103
|
97
|
110
|
86
|
Midstream NGL sales
volume(4)
|
|
123
|
130
|
116
|
119
|
Total
volume
|
|
1,727
|
1,719
|
1,720
|
1,660
|
(1)
|
mbpd is thousands of
barrels per day.
|
(2)
|
Revenue volumes are
equal to contracted plus interruptible volumes.
|
(3)
|
Gas Services average
revenue volumes converted to mboe/d from MMcf/d at 6:1
ratio.
|
(4)
|
NGL is natural gas
liquids.
|
|
|
|
|
|
|
3 Months
Ended December
31 (unaudited)
|
12 Months Ended December 31
|
|
|
2015
|
2014
|
2015
|
2014
|
($
millions)
|
|
Revenue
|
Operating Margin(1)
|
Revenue
|
Operating Margin(1)
|
Revenue
|
Operating Margin(1)
|
Revenue
|
Operating Margin(1)
|
Conventional
Pipelines
|
|
163
|
109
|
146
|
74
|
628
|
401
|
513
|
302
|
Oil Sands & Heavy
Oil
|
|
56
|
36
|
52
|
34
|
213
|
139
|
204
|
136
|
Gas
Services
|
|
51(1)
|
33
|
46
|
29
|
208(1)
|
144
|
165
|
107
|
Midstream
|
|
137(1)
|
123
|
61(1)
|
57
|
458(1)
|
427
|
587(1)
|
528
|
Corporate
|
|
|
3
|
(1)
|
1
|
|
7
|
|
5
|
Total
|
|
407
|
304
|
304
|
195
|
1,507
|
1,118
|
1,469
|
1,078
|
(1)
|
Net revenue (revenue
less cost of goods sold including product purchases). Refer to
"Non-GAAP and Additional GAAP Measures."
|
- For the twelve and three months ended December 31, 2015, financial and operating
results in Conventional Pipelines were higher than the comparable
periods of 2014 primarily due to the completion of Pembina's Peace and Northern Phase II
expansion (the "Phase II Expansion") which includes (i) the crude
oil and condensate or the low vapour pressure ("LVP") expansion
("Phase II LVP"), which was placed into service in April 2015, and (ii) the NGL or the high vapour
pressure ("HVP") expansion ("Phase II HVP"), which was placed into
service in September 2015 and is now
fully commissioned. Mainline throughput also increased as a result
of: additional volumes from the Vantage pipeline beginning late in
2014; new connections placed into service on Pembina's Peace Phase I crude oil, condensate
and NGL pipeline expansions; and new storage facilities and
portions of pipeline associated with other expansion programs
commissioned during 2015.
- In the Oil Sands & Heavy Oil business, for the three months
ended December 31, 2015, net revenue
was slightly higher compared to the same period in 2014 due to
higher flow-through operating expenses, which are eligible to be
recovered under Pembina's
contractual arrangements with its customers, and was partially
offset by reduced power and labour costs. Operating margin for the
full year and fourth quarter of 2015 were also modestly increased
compared to the same periods in 2014.
- In the Gas Services business, financial and operating results
increased in the fourth quarter and year ended 2015 compared to the
same periods of 2014 primarily due to the addition of the Musreau
II facility ("Musreau II"), which was placed into service in
December 2014, the addition of the
Resthaven facility ("Resthaven"), which was placed into service in
October 2014, and the Saturn II
facility ("Saturn II") and the Saskatchewan Ethane Extraction Plant
("SEEP"), which were placed into service in August 2015.
- In the Midstream business, net revenue and operating margin for
the fourth quarter of 2015 increased compared to the same period in
2014. This increase was largely a result of an inventory impairment
recognized in the fourth quarter of 2014, as well as higher product
margin sales in the fourth quarter of 2015, where inventory costs
were significantly lower than the previous year. For the year end
2015 compared to the same period in 2014, net revenue and operating
margin decreased due to the significantly lower commodity prices,
particularly the weaker period-over-period propane and butane
prices and tighter price differentials across most
commodities.
New Developments in 2015 and Growth Projects Update
Conventional Pipelines
Pembina has been successful in
its commercial efforts to secure the majority of its existing crude
oil, NGL and condensate volumes under long-term, firm-service
contracts. In aggregate, and including contracted volumes on the
Vantage pipeline, Pembina
currently has secured 777 mbpd of firm service contracts of crude
oil, condensate and NGL across its Conventional Pipelines business
once all expansions are placed into service.
Pembina commissioned its Phase
II HVP expansion in September 2015.
In conjunction with the Phase II LVP portion of the expansion,
which was placed into service in April
2015, the entire Phase II Expansion is now in service. In
aggregate, the Phase II Expansion has increased the Peace and
Northern systems' capacity by 108 mbpd and is underpinned by five
to ten-year contracts with substantial take-or-pay commitments from
40 customers.
Pembina continues work on its
Phase III pipeline expansions ("Phase III Expansion"), which
included bringing into service a 70 kilometre, 16-inch pipeline
segment from Kakwa to Simonette in 2015. To date, the Company has
completed 30 percent of the overall Phase III Expansion
program and estimates the total capital cost to be $2.4 billion.
The Phase III Expansion also includes two pipelines between
Fox Creek and Namao, Alberta (one 16-inch diameter and one
24-inch diameter) which would provide an initial combined capacity
of 420 mbpd. The Alberta Energy Regulator ("AER") hearing for the
project concluded in the fourth quarter of 2015 and Pembina expects to receive an AER written
decision near the end of the first quarter of 2016. Subject to
regulatory and environmental approvals, the Company continues to
anticipate an in-service date of mid-2017.
As part of the Company's plans to expand its gathering presence
in Alberta and British Columbia ("B.C."), Pembina completed its lateral in the Willesden
Green area of Alberta during 2015
and is continuing work on its pipeline lateral in the Karr area of
Alberta (the "Karr Lateral") which
will service production from the Montney resource play and will access the
Company's Phase III Expansion. All approvals have been received and
construction has now commenced. Generally due to unseasonably warm
weather, the project is tracking above budget; however, the
contract largely protects Pembina
from a cost risk perspective. Pembina continues to anticipate an in-service
date of early 2016.
Pembina is continuing to
progress its pipeline infrastructure in northeast B.C. (the "NEBC
Expansion"). The NEBC Expansion, which is underpinned by a
long-term, cost-of-service agreement with an anchor tenant, will
transport condensate and NGL for various producers in the
liquids-rich Montney resource
play. To date, engineering is 90 percent complete and applications
for regulatory and environmental approvals have now been submitted.
The NEBC Expansion has an expected capital cost of $220 million and is anticipated to be in service
in late 2017, subject to regulatory and environmental
approvals.
In early 2016, subsequent to year end, Pembina entered into agreements for the
construction of a new pipeline lateral in the Altares area of B.C.
(the "Altares Lateral") which will transport production from the
Montney resource play and will
connect into Pembina's NEBC
Expansion for an expected capital cost of $70 million. The Altares Lateral, underpinned by
a long-term, cost-of-service agreement, is expected to have initial
capacity of approximately 17 mbpd with an in-service date of
mid-2017, subject to environmental and regulatory approval.
As announced in February 2015,
Pembina continues to progress its
expansion of the Vantage pipeline system (the "Vantage Expansion")
for an estimated capital cost of $85
million. Supported by a long-term, fee-for-service agreement
with a take-or-pay component, the Vantage Expansion will increase
the mainline capacity from 40 mbpd to 68 mbpd through the addition
of mainline pump stations and the construction of a gathering
lateral. All regulatory and environmental approvals have now been
received and construction of the gathering lateral is now complete
with final commissioning work underway. Construction of the pump
stations has now begun, and to date, the project cost is expected
to be under budget. Pembina
originally expected the Vantage Expansion to be completed in early
2016; however, due to a third-party plant delay, the Company
expects to place it into service in the third quarter of 2016, with
the contract commencing on August 1,
2016.
Pembina's projects and existing
pipeline networks continue to have expansion capacity available to
meet the needs of future developments currently under evaluation by
its customers. Capacity increases to meet the Company's customers'
existing and future demands can often be achieved through simple
upgrades, such as adding new pump stations, which can be installed
in less than 18 months. For example, adding pump stations to the
Phase III Expansion could increase capacity from 420 mbpd to 680
mbpd in the Fox Creek to
Edmonton corridor for an aggregate
capacity on the Peace and Northern systems of 1,200 mbpd.
Gas Services
During the fourth quarter and full year 2015, Pembina continued to advance its growth
projects as well as place new assets into service within the Gas
Services business.
As previously announced in November, Pembina will construct, own and operate a new
100 MMcf/d shallow cut gas plant ("Duvernay I") in close proximity
to the Company's Fox Creek Terminal for an expected capital cost,
including supporting infrastructure, of $125
million. Duvernay I, which is underpinned by a substantial
take-or-pay agreement with a large, diversified, investment-grade
customer, will leverage the design of Pembina's Musreau II and the Musreau III
facility ("Musreau III"). Duvernay I will be the first large-scale
gas processing plant designed specifically for the Duvernay and creates a new growth platform for
the Company. As part of this development, NGL production from
Duvernay I will be transported on Pembina's Peace Pipeline under a long-term,
take-or-pay agreement as well as fractionated under another
agreement at the Company's Redwater site. Pembina has now received AER approval for the
gas plant and is currently awaiting approval for the associated
pipeline in relation to this project. The Company anticipates
bringing Duvernay I in service in the second half of 2017, subject
to the remaining environmental and regulatory approvals.
In late August, Pembina
commissioned its Saturn II and SEEP facilities. Saturn II was
placed into service ahead of schedule and under budget and SEEP was
placed into service on time and also under budget. With the Saturn
II and SEEP facilities in service, Pembina's Gas Services' capacity has increased
26 percent from 1.0 to 1.3 billion cubic feet per day
("bcf/d").
Plant construction of Pembina's
100 MMcf/d expansion of Resthaven (the "Resthaven Expansion") is
ongoing. The overall project is approximately 80 percent complete
and has an estimated capital cost of $105
million. In September, Pembina placed the gathering pipeline
associated with the Resthaven Expansion into service. In advance of
the Resthaven Expansion being placed into service, the newly
commissioned pipeline is able to provide additional gas volumes for
the Company's existing Resthaven facility. Pembina expects the Resthaven Expansion, which
is underpinned by a fee-for-service agreement with a substantial
take-or-pay component, to be in service in mid-2016.
The Company continues to advance its 100 MMcf/d shallow cut
Musreau III facility, which is being built adjacent to Pembina's existing Musreau I facility
("Musreau I") and Musreau II. Regulatory and environmental
approvals have been received and the overall project is
approximately 75 percent complete and is tracking under budget from
the original expected cost of $105
million. Pembina
anticipates bringing Musreau III, which is underpinned by
long-term, take-or-pay agreements, on-stream in mid-2016.
Once the facilities under development described above are in
service, Pembina expects Gas
Services' processing capacity to reach approximately 1.6 bcf/d,
including deep cut capacity of 900 MMcf/d. The volumes from
Pembina's existing assets and
those under development will be processed largely on a contracted,
fee-for-service basis and results in condensate and NGL to be
transported for additional toll revenue on Pembina's Conventional Pipelines.
Midstream
In December 2015, Pembina completed the construction of its
second Redwater fractionator, a 73
mbpd ethane-plus fractionator at the Company's Redwater site ("RFS II"). RFS II is
anticipated to be completed generally on budget from the estimated
$415 million capital cost and is
currently being commissioned with an expectation of being on stream
by the end of March 2016 (one quarter
later than originally expected).
Pembina is also advancing its
third fractionator at Redwater
("RFS III") for an estimated capital cost of $400 million, which will have propane-plus
capacity of 55 mbpd. Regulatory and environmental approval has been
received and over 50 percent of all long-lead items have arrived
onsite with construction of pilings and foundations now complete.
Pembina expects RFS III to be in
service in the third quarter of 2017 and, once complete,
Pembina's Redwater site will be the largest
fractionation facility in Canada
with a total of 210 mbpd of fractionation capacity.
Pembina is progressing work to
provide terminalling services for the North West Redwater
Partnership ("North West") with respect to North West's planned
refinery for an expected capital cost of $180 million. Underpinned by a long-term fixed
return agreement and a long-term NGL mix purchase and sale
agreement related to RFS III, the terminalling services include
truck and rail loading, storage, as well as handling and processing
equipment for a variety of products delivered from North West.
Detailed engineering and procurement is 40 percent complete with
substantially all long-lead mechanical items ordered. Subject to
regulatory and environmental approvals, the storage services are
expected to be in service in early 2017, with the remaining
facilities to be phased in with final completion expected by late
2017.
Pembina continues to advance a
detailed class three engineering estimate associated with the
proposed Canadian Diluent Hub ("CDH"). Subject to further
regulatory and environmental approvals, Pembina anticipates phasing in additional
connections to various condensate delivery systems with a view to
achieving full connectivity and service offerings at CDH in
mid-2017.
At the Edmonton North Terminal ("ENT"), Pembina has now completed construction of
three above ground storage tanks, which have a total working
capacity of 550 thousand barrels, with the electrical work nearing
completion and the mechanical integration continuing to be
progressed. The project is estimated to have a capital cost of
$75 million and is tracking on budget
and on schedule to be in service in mid-2016.
At its NGL storage and terminalling facilities in Corunna, Ontario, Pembina is progressing a number of initiatives
including the installation of a new brine pond, upgrades to its
rail rack and construction of a new propane truck rack to meet
increased demand for services. The propane racks were completed in
December 2015, with remaining
construction underway for the brine pond and rail racks. The
remainder of the project is expected to be in service in early
2016.
Pembina remains committed to
providing market access solutions for its customers by developing a
North American west coast propane export terminal. Pembina is currently evaluating multiple
potential west coast sites; however, the Company has decided that
it will no longer pursue the previously announced Portland, Oregon location.
Oil Sands & Heavy Oil
In June 2015, Pembina announced that it will expand its
existing Horizon Pipeline System (the "Horizon Expansion"),
underpinned by a fixed return, long-term agreement, for an
estimated capital cost of $125
million. The Horizon Expansion will increase the pipeline's
capacity up to 250 mbpd, which will be achieved by upgrading
mainline pump stations and other facility modifications, as
required. Engineering work is now complete, most regulatory and
environmental approvals have been received and civil construction
is underway. The Horizon Expansion is expected to be in service
mid-2016.
Financing Activity
On February 2, 2015, Pembina closed an offering of $600 million of senior unsecured medium-term
notes. The offering was conducted in two tranches: gross proceeds
of $450 million in senior unsecured
medium-term notes, Series 5, having a fixed coupon of 3.54 percent
per annum, paid semi-annually, and which mature on February 3, 2025 and gross proceeds of
$150 million through the re-opening
of Pembina's Series 3, 4.75
percent medium-term notes, which mature April 30, 2043.
On April 10, 2015, Pembina closed a $225
million offering of nine million cumulative redeemable rate
reset class A preferred shares, Series 9 (the "Series 9 Preferred
Shares") at a price of $25.00 per
share. The Series 9 Preferred Shares began trading on the Toronto
Stock Exchange on April 10, 2015
under the symbol PPL.PR.I.
On June 16, 2015, Pembina closed an offering of $600 million of senior unsecured medium-term
notes. The offering was conducted in two tranches: gross proceeds
of $500 million in senior unsecured
medium-term notes, Series 6, having a fixed coupon of 4.24 percent
per annum, paid semi-annually, and which mature on June 15, 2027 and gross proceeds of $100 million through the re-opening of
Pembina's Series 3, 4.75 percent
medium-term notes, which mature April 30,
2043.
On November 19, 2015, Pembina closed a bought deal offering of
15,335,250 common shares at a price of $30.00 per share for aggregate gross proceeds of
$460 million.
Subsequent to year end, on January 15,
2016, Pembina closed a
$170 million offering of 6.8 million
cumulative redeemable minimum rate reset class A preferred shares,
Series 11 (the "Series 11 Preferred Shares") at a price of
$25.00 per share. The Series 11
Preferred Shares began trading on the Toronto Stock Exchange on
January 15, 2016 under the symbol
PPL.PR.K.
Annual and Fourth Quarter 2015 Conference Call &
Webcast
Pembina will host a conference
call on Friday, February 26, 2016 at
8:00 a.m. MT (10:00 a.m. ET) for interested investors,
analysts, brokers and media representatives to discuss details
related to the full year and fourth quarter of 2015. The conference
call dial-in numbers for Canada
and the United States are (647)
427-7450 or (888) 231-8191. A recording of the conference call will
be available for replay until March 5,
2016 at 9:59 p.m. MT
(11:59 p.m. ET). To access the
replay, please dial either (416) 849-0833 or (855) 859-2056 and
enter the password 92799429.
A live webcast of the conference call can be accessed on
Pembina's website at pembina.com
under Investor Centre, Presentation & Events, or by entering:
http://event.on24.com/r.htm?e=1102318&s=1&k=5FC80138EB180EE6821C12D03D56BE1B
in your web browser. Shortly after the call, an audio archive will
be posted on the website for a minimum of 90 days.
2016 Investor Day
Pembina will hold an Investor
Day on Monday, April 11, 2016 at the
One King West Hotel in Toronto,
Ontario.
For parties interested in attending the event, please email
investor-relations@pembina.com to request an invitation. A live
webcast will begin at 8:30 a.m. ET.
To register for the webcast please click the following link or
enter the URL into your web browser:
http://event.on24.com/r.htm?e=1054297&s=1&k=59B6FBD6993495A1ADA68C3DEA2BB5B8
The webcast and presentation will be accessible and available
for replay through Pembina's
website under Investor Centre, Presentations & Events.
About Pembina
Calgary-based Pembina Pipeline
Corporation is a leading transportation and midstream service
provider that has been serving North
America's energy industry for over 60 years. Pembina owns and operates an integrated system
of pipelines that transport various hydrocarbon liquids including
conventional and synthetic crude oil, heavy oil and oil sands
products, condensate (diluent) and NGL produced in western
Canada and ethane produced in
North Dakota. The Company also
owns and operates gas gathering and processing facilities and an
oil and NGL infrastructure and logistics business. With facilities
strategically located in western Canada and in NGL 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",
"should", "estimates", "continue", "could", "forecast" and similar
expressions suggesting future events or future performance.
In particular, this document contains forward-looking
statements, including certain financial outlooks, pertaining to,
without limitation, the following: Pembina's corporate strategy; 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, fractionation facilities, terminalling,
storage and hub facilities, pipeline, processing, fractionation and
storage facility and system operations and throughput levels;
anticipated synergies between acquired assets, assets under
development and existing assets of the Company; the impact of share
price on annual share-based incentive expense; and, the anticipated
use of proceeds from financings.
The forward-looking statements are based on certain
assumptions that Pembina has made
in respect thereof as at the date of this news release regarding,
among other things: oil and gas industry exploration and
development activity levels and the geographic region of such
activity; the success of Pembina's
operations and growth projects; prevailing commodity prices and
exchange rates and the ability of Pembina to maintain current credit ratings;
the availability of capital to fund future capital requirements
relating to existing assets and projects; 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 worldwide,
including changes, or prolonged weaknesses, as applicable, in
interest rates, foreign currency exchange rates, commodity prices,
supply/demand trends and overall industry activity levels; ability
to access various sources of debt and equity capital; changes in
credit ratings; technology and security risks; 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 net revenue,
operating margin, earnings before interest, taxes, depreciation and
amortization (EBITDA), adjusted cash flow from operating
activities, cash flow from operating activities per common share
and adjusted cash flow from operating activities per common 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