Delivered record operational and financial results with
continued success in capital program execution; announced strategic
business combination
All financial figures are in
Canadian dollars unless noted otherwise.
CALGARY, May 4, 2017 /CNW/ - Pembina Pipeline Corporation
("Pembina" or the "Company") (TSX: PPL; NYSE: PBA) announced today
its financial and operating results for the first quarter of
2017.
Financial Overview
|
|
($ millions,
except where noted)
|
3 Months
Ended March
31 (unaudited)
|
|
2017
|
|
2016
|
Conventional
Pipelines revenue volumes (mbpd)(1)(2)
|
691
|
|
670
|
Oil Sands & Heavy
Oil contracted capacity (mbpd)(1)
|
975
|
|
880
|
Gas Services revenue
volumes net to Pembina (mboe/d)(2)(3)
|
171
|
|
113
|
Midstream Natural Gas
Liquids ("NGL") sales volumes
(mbpd)(1)
|
173
|
|
141
|
Total volume
(mboe/d)(3)
|
2,010
|
|
1,804
|
Revenue
|
1,485
|
|
1,017
|
Net
revenue(4)
|
554
|
|
394
|
Operating
margin(4)
|
407
|
|
315
|
Gross
profit
|
381
|
|
237
|
Earnings
|
215
|
|
102
|
Earnings per common
share – basic and diluted (dollars)
|
0.49
|
|
0.23
|
Adjusted
EBITDA(4)
|
363
|
|
269
|
Cash flow from
operating activities
|
326
|
|
271
|
Cash flow from
operating activities per common share – basic
(dollars)(4)
|
0.82
|
|
0.72
|
Adjusted cash flow
from operating activities(4)
|
308
|
|
209
|
Adjusted cash flow
from operating activities per common share – basic
(dollars)(4)
|
0.77
|
|
0.56
|
Common share
dividends declared
|
191
|
|
172
|
Preferred share
dividends declared
|
19
|
|
14
|
Dividends per common
share (dollars)
|
0.48
|
|
0.46
|
Capital
expenditures
|
709
|
|
375
|
|
|
|
|
|
3 Months
Ended March
31 (unaudited)
|
|
|
2017
|
2016
|
($
millions)
|
|
Revenue(5)
|
Operating Margin(4)
|
Revenue(5)
|
Operating Margin(4)
|
Conventional
Pipelines
|
|
188
|
134
|
175
|
128
|
Oil Sands & Heavy
Oil
|
|
54
|
36
|
52
|
33
|
Gas
Services(5)
|
|
92
|
70
|
53
|
37
|
Midstream(5)
|
|
220
|
165
|
114
|
114
|
Corporate
|
|
|
2
|
|
3
|
Total
|
|
554
|
407
|
394
|
315
|
(1)
|
mbpd is thousands of
barrels per day.
|
(2)
|
Revenue volumes are
equal to contracted plus interruptible volumes.
|
(3)
|
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)
|
Refer to "Non-GAAP
Measures."
|
(5)
|
The amounts presented
for Midstream and Gas Services consist of net revenue (revenue less
cost of goods sold including product purchases). Refer to "Non-GAAP
Measures."
|
Financial Highlights
- Generated year-to-date earnings of $215
million in the first quarter of 2017, a 111 percent increase
over the same period of the prior year;
- Realized record financial results for operating margin,
earnings per share, adjusted EBITDA, adjusted cash flow from
operating activities and adjusted cash flow from operating
activities per share;
- Adjusted EBITDA was $363 million
during the first quarter of 2017, 35 percent higher than the first
quarter of 2016;
- Cash flow from operating activities was $326 million for the three months ended
March 31, 2017 compared to
$271 million for the same period in
2016, an increase of 20 percent. Adjusted cash flow from operating
activities increased by 47 percent to $308
million in the first quarter of 2017 compared to the
respective quarter in 2016;
- On a per share (basic) basis during the quarter, cash flow from
operating activities increased 14 percent compared to the same
period of the prior year; and
- Raised $600 million of gross
proceeds through the issuance of medium-term notes.
Operational Highlights
- Gas Services generated record quarterly revenue volumes of
1,024 MMcf/d in the first quarter of 2017, representing an increase
of 52 percent compared to the first quarter of 2016;
- First quarter 2017 NGL sales volumes reached a record 173
mboe/d, a 23 percent increase compared to the respective period in
2016;
- Conventional Pipelines' first quarter revenue volumes increased
to a record 691 mbpd in 2017 compared to 670 mbpd in the first
quarter of 2016; and
- Employees worked over 755,000 hours in the first quarter of
2017 with no employee lost-time injuries while executing record
quarterly capital expenditures of $709
million.
"We've had a very successful start to a transformational year in
2017," said Mr. Dilger, Pembina's President and Chief Executive
Officer. "I'm happy to report that we delivered another quarter of
solid financial results and record volumes on our systems, reaching
over two million barrels of oil equivalent per day. Our business
development successes so far this year have also been impressive.
We secured an exciting opportunity to grow our presence in the
Duvernay through our previously
announced infrastructure development and service agreement,
announced $325 million in capital for
our Phase IV and V pipeline expansions and identified a potential
west coast propane export terminal site."
"I am also very excited about our announcement on May 1, 2017, where we shared our intentions to
combine with Veresen to create a larger-scale, more diversified,
premier energy infrastructure company," added Mr. Dilger. "Among
the many benefits we see from this combination, this transaction
will allow for greater future growth opportunities, thereby
enabling us to continue generating long-term, industry-leading
shareholder returns."
"Building on this year's success and ongoing financial strength,
we were also pleased to have announced a 6.25 percent dividend
increase, which marks our sixth consecutive year of increasing the
dividend. In addition, we also suspended our dividend reinvestment
program," continued Mr. Dilger.
Mr. Dilger concluded: "We are nearing completion of
approximately $4 billion in
large-scale, capital projects set to be placed into service this
year. We will soon realize the associated incremental cash flows
from these multi-year construction projects, which will drive
increased financial performance. In fact, by next year in 2018, we
expect adjusted EBITDA to reach approximately $1.8 to $1.9 billion – essentially doubling our
2015 adjusted EBITDA; this increases to $2.55 to $2.75 billion, should the transaction
with Veresen successfully close."
Strategic Business Combination Announcement
- On May 1, 2017, Pembina and
Veresen Inc. announced that they have entered into an arrangement
agreement where Pembina is offering to acquire all the issued and
outstanding shares of Veresen Inc. to create one of the largest
energy infrastructure companies in Canada. The transaction is valued at
approximately $9.7 billion (including
Veresen's debt, which includes subsidiary debt, and preferred
shares) and will result in a combined pro-forma enterprise value of
approximately $33 billion. The
combined entity will be able to provide customers a
highly-integrated service offering not only across the hydrocarbon
liquids value chain, but also the natural gas value chain. With an
aggregate portfolio of over $6
billion in secured projects and a strong balance sheet, the
company expects to be favourably positioned to secure and execute
future growth opportunities due to its expanded geographic
footprint and enhanced capabilities, thereby continuing to drive
strong shareholder returns. The combined entity will also offer an
attractive and sustainable cash dividend, which would be entirely
underpinned by fee-based cash flows. The transaction is expected to
close late in the third quarter or early in the fourth quarter of
2017 and is subject to Veresen shareholder and certain regulatory
approvals. Upon closing of this transaction, Pembina will also
increase its monthly dividend by 5.9 percent to $0.18 cents per common share.
New Developments in 2017 and Growth Projects Update
- Pembina's $2.4 billion Phase III
pipeline expansion is nearly complete and construction continues on
the largest section of the project between Fox Creek and Namao,
Alberta. Remaining activities include finalization of
commissioning activities on pump stations and the completion of
final welds, testing and cleanup on this segment. The project
continues to track slightly under budget and on-schedule for a
July 2017 in-service date;
- Given ongoing customer demand for capacity, Pembina is
progressing the Phase IV and Phase V expansions of its pipeline
infrastructure. Phase IV will add approximately 180 mbpd of
capacity between Fox Creek and
Namao, Alberta and Phase V will
add approximately 260 mbpd between Lator and Fox Creek, Alberta. Pembina expects to put
these expansions into service in late 2018 for a total estimated
capital cost of $325 million;
- Development in the Duvernay
area continues as Pembina continues its infrastructure development
and expands its position in the area. For Pembina's 100 MMcf/d
Duvernay I plant, engineering is 90 percent complete, with all
major equipment onsite and the sales product pipelines now
installed. Engineering for the associated field hub is 80 percent
complete with all civil and piling work finished. Pembina also
entered into a 20-year infrastructure development and service
agreement with a multi-national, investment grade customer in
respect of the Duvernay which has
the potential to represent a material investment for the Company
over the coming years;
- Pembina is expanding the gathering and inlet facilities at its
Kakwa River Facility to accommodate incremental development along
with increasing liquids handling capabilities;
- Construction of the Company's third fractionator at
Redwater is complete with
commissioning now underway. The project, which continues to trend
on-budget, is expected to be completed in July 2017;
- Pembina continues to advance construction of infrastructure in
support of North West Redwater Partnership's refinery and has
completed over 80 percent of the overall project;
- At Pembina's Canadian Diluent Hub, pipeline connectivity was
completed in early 2017, with volumes flowing to third-party
diluent pipelines. Additionally, 95 percent of above ground tank
construction is now complete;
- In April 2017, Pembina signed a
non-binding letter of intent identifying Watson Island,
Prince Rupert, as a potential site
for a west coast propane export terminal; and
- In December 2016, Pembina's
proposed propane dehydrogenation and polypropylene facility was
conditionally awarded $300 million in
royalty credits from the Alberta Government's Petrochemicals
Diversification Program. Following project sanctioning, the
facility would be constructed in close proximity to the Company's
Redwater Fractionation complex.
Dividends
- Declared and paid dividends of $0.16 per qualifying common share in January,
February and March 2017 for the
applicable record dates;
- Declared and paid quarterly dividends per qualifying preferred
shares of: Series 1: $0.265625;
Series 3: $0.29375; Series 5:
$0.3125; Series 7: $0.28125; Series 9: $0.296875; Series 11: $0.359375; and Series 13: $0.359375 to shareholders on record as of
February 1, 2017;
- Announced on April 3, 2017 that
the Company's Board of Directors approved a 6.25 percent increase
in Pembina's monthly common share dividend rate (from $0.16 per common share to $0.17 per common share and declared a monthly
dividend of $0.17 payable, subject to
applicable law, on May 15, 2017 to
shareholders of record on April 25,
2017; and
- On March 7, 2017, the Company's
Board of Directors suspended, until further notice, its Premium
DividendTM 1 and Dividend Reinvestment Plan ("DRIP"),
effective April 25, 2017.
____________________________________________
1 TM denotes trademark of Canaccord Genuity Corp.
First Quarter 2017 Conference Call & Webcast
Pembina will host a conference call on Friday, May 5, 2017
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 first quarter of 2017. 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 12, 2017 at
11:59 p.m. ET. To access the replay,
please dial either 416-849-0833 or 855-859-2056 and enter the
password 15480289.
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=1307553&s=1&k=AB5E15E3786D8EB4AE79BCA104ECFE1C
in your web browser. Shortly after the call, an audio archive will
be posted on the website for a minimum of 90 days.
Annual General Meeting of Shareholders
The Company will hold its annual general meeting of shareholders
("AGM") on Friday, May 5, 2017 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=1346919&s=1&k=4A258BF189ABB38A8CD0BEF7AFF390AC
Participants are recommended to register for the webcast at
least 10 minutes before the presentation start time.
2017 Investor Day
Pembina will hold an Investor Day on Tuesday, May 16, 2017 at One King West Hotel in
Toronto, Ontario.
For parties interested in attending the event, please email
investor-relations@pembina.com to request an invitation.
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 products derived from natural gas and hydrocarbon liquids
produced primarily 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. Pembina's integrated
assets and commercial operations along the majority of the
hydrocarbon value chain allow it to offer a full spectrum of
midstream and marketing services to the energy sector. Pembina is
committed to working with its community and aboriginal neighbours,
while providing value for investors in a safe, environmentally
responsible manner. This balanced approach to operating ensures the
trust Pembina builds among all of its stakeholders is sustainable
over the long term. Pembina's common shares trade on the
Toronto and New York stock exchanges under PPL and PBA,
respectively. Pembina's preferred shares also trade on the
Toronto stock exchange. For more
information, visit www.pembina.com.
Forward-Looking Statements and Information
This document contains certain forward-looking statements and
information (collectively, "forward-looking statements"), including
forward-looking statements within the meaning of the "safe harbor"
provisions of applicable securities legislation, that are based on
Pembina's current expectations, estimates, projections and
assumptions in light of its experience and its perception of
historical trends. In some cases, forward-looking statements can be
identified by terminology such as "schedule", "will", "expects",
"estimate", "potential", "planned", "future", "continue" and
similar expressions suggesting future events or future
performance.
In particular, this document contains forward-looking
statements, including certain financial outlook, pertaining to,
without limitation, the following: Pembina's corporate strategy;
with respect to the proposed acquisition of Veresen Inc. (the
"Transaction"): the expected closing date, anticipated benefits,
expected size of the resulting entity, anticipated synergies
(including strategic integration and diversification
opportunities), and future dividends, including the proposed
increase in amount thereof, which may be declared on Pembina's
common shares and any future dividend payment date; anticipated
adjusted EBITDA projections for 2018 and financial performance
expectations resulting from Pembina's capital expenditures;
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,
facility and system operations and throughput levels; anticipated
synergies between assets under development and existing assets of
the Company; the future level and sustainability of cash dividends
that Pembina intends to pay its shareholders; and expected future
cash flows and the sufficiency thereof.
The forward-looking statements are based on certain
assumptions that Pembina has made in respect thereof as at the date
of this news release regarding, among other things: the ability of
Pembina and Veresen Inc. to satisfy the conditions to closing of
the Transaction; oil and gas industry exploration and development
activity levels and the geographic region of such activity; the
success of Pembina's operations and growth projects; prevailing
commodity prices and exchange rates and the ability of Pembina to
maintain current credit ratings; the availability of capital to
fund future capital requirements relating to existing assets and
projects; future operating costs; geotechnical and integrity costs;
that any third-party projects relating to growth projects will be
sanctioned and completed as expected; that any required commercial
agreements can be reached; that all required regulatory and
environmental approvals can be obtained on the necessary terms in a
timely manner; that counterparties will comply with contracts in a
timely manner; that there are no unforeseen events preventing the
performance of contracts or the completion of the relevant
facilities; that there are no unforeseen material costs relating to
the facilities which are not recoverable from customers; prevailing
interest and tax rates; prevailing regulatory, tax and
environmental laws and regulations; maintenance of operating
margins; the amount of future liabilities relating to lawsuits and
environmental incidents; and the availability of coverage under
Pembina's insurance policies (including in respect of
Pembina's business interruption insurance policy).
Although Pembina believes the expectations and material
factors and assumptions reflected in these forward-looking
statements are reasonable as of the date hereof, there can be no
assurance that these expectations, factors and assumptions will
prove to be correct. These forward-looking statements are not
guarantees of future performance and are subject to a number of
known and unknown risks and uncertainties including, but not
limited to: the abilities of the parties to the Transaction to
receive, in a timely manner, the necessary court, regulatory,
securityholder, stock exchange and other third-party approvals; the
ability of the parties to the Transaction to satisfy, in a timely
manner, the other conditions to closing of the Transaction; the
failure to realize the anticipated benefits or synergies of the
Transaction following closing due to integration issues or
otherwise; 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; counterparty credit
risk; technology and security risks; and certain other risks
detailed from time to time in Pembina's public disclosure documents
available at www.sedar.com, www.sec.gov
and through Pembina's website at
www.pembina.com.
This list of risk factors should not be construed as
exhaustive. Readers are cautioned that events or circumstances
could cause results to differ materially from those predicted,
forecasted or projected. The forward-looking statements contained
in this document speak only as of the date of this document.
Pembina does not undertake any obligation to publicly update or
revise any forward-looking statements or information contained
herein, except as required by applicable laws. Readers are
cautioned that management of Pembina approved the financial outlook
contained herein as of the date of this press release. The purpose
of the 2018 Adjusted EBITDA projection is to provide investors with
an indication of the value to Pembina of capital projects that have
been and will be brought into service in 2017 on 2018 full-year
financial results. Readers should be aware that the information
contained in the financial outlook contained herein may not be
appropriate for other purposes. The forward-looking statements
contained in this document are expressly qualified by this
cautionary statement.
Non-GAAP Measures
In this news release, Pembina has used the terms net revenue,
operating margin, adjusted earnings before interest, taxes,
depreciation and amortization (Adjusted EBITDA), adjusted cash flow
from operating activities, cash flow from operating activities per
common share and adjusted cash flow from operating activities per
common share (also known as "cash flow per share" and "adjusted
cash flow per share"), which do not have any standardized meaning
under IFRS ("Non-GAAP Measures"). Since Non-GAAP financial measures
do not have a standardized meaning prescribed by GAAP and are
therefore unlikely to be comparable to similar measures presented
by other companies, securities regulations require that Non-GAAP
financial measures are clearly defined, qualified and reconciled to
their nearest GAAP measure. Except as otherwise indicated, these
Non-GAAP measures are calculated and disclosed on a consistent
basis from period to period. Specific adjusting items may only be
relevant in certain periods. The intent of Non-GAAP measures is to
provide additional useful information respecting Pembina's
financial and operational performance to investors and analysts and
the measures do not have any standardized meaning under IFRS. The
measures should not, therefore, be considered in isolation or used
in substitute for measures of performance prepared in accordance
with IFRS.
Other issuers may calculate these Non-GAAP measures
differently. Investors should be cautioned that these measures
should not be construed as alternatives to revenue, earnings, cash
flow from operating activities, gross profit or other measures of
financial results determined in accordance with GAAP as an
indicator of Pembina's performance. For additional information
regarding Non-GAAP measures, including reconciliations to measures
recognized by GAAP, please refer to Pembina's management's
discussion and analysis for the period ended March 31, 2017,
which is available online at www.sedar.com,
www.sec.gov and through Pembina's website at
www.pembina.com.
SOURCE Pembina Pipeline Corporation