Pembina reports record
second quarter results including a 136 percent increase in Adjusted
EBITDA over the second quarter 2017.
All financial figures are in Canadian dollars unless noted
otherwise.
CALGARY, Alberta, Aug. 2,
2018 /PRNewswire/ -- Pembina Pipeline Corporation
("Pembina" or the "Company") (TSX:
PPL; NYSE: PBA) announced today its financial and operating results
for the second quarter of 2018.
Operational and Financial Overview
($ millions,
except where noted)
|
3 Months Ended
June 30
(unaudited)
|
6 Months Ended
June 30 (unaudited)
|
|
2018
|
2017
|
2018
|
2017
|
Revenue
|
1,945
|
1,159
|
3,782
|
2,639
|
Net
revenue(1)
|
669
|
444
|
1,388
|
993
|
Share of profit from
equity accounted investees(2)
|
96
|
|
172
|
|
Gross
profit
|
511
|
269
|
1,079
|
645
|
Earnings
|
246
|
117
|
576
|
327
|
Earnings per common
share – basic (dollars)(3)
|
0.43
|
0.24
|
1.02
|
0.72
|
Cash flow from
operating activities
|
603
|
362
|
1,101
|
688
|
Cash flow from
operating activities per common share – basic
(dollars)(1)
|
1.20
|
0.90
|
2.19
|
1.72
|
Adjusted cash flow
from operating activities(1)
|
558
|
275
|
1,088
|
583
|
Adjusted cash flow
from operating activities per common share – basic
(dollars)(1)
|
1.11
|
0.68
|
2.16
|
1.46
|
Common share
dividends declared
|
282
|
205
|
554
|
396
|
Preferred share
dividends declared
|
31
|
19
|
61
|
38
|
Dividends per common
share (dollars)
|
0.56
|
0.51
|
1.10
|
0.99
|
Capital
expenditures
|
255
|
475
|
579
|
1,184
|
Proportionately
Consolidated Financial Overview(1)(4)
|
|
|
|
|
Total volumes
(mboe/d)(5)
|
3,385
|
2,289
|
3,333
|
2,330
|
Operating
margin(1)
|
787
|
353
|
1,544
|
760
|
Adjusted
EBITDA(1)
|
700
|
297
|
1,388
|
655
|
|
(1)
|
Refer to "Non-GAAP
Measures".
|
(2)
|
Includes Investments
in Equity Accounted Investees - Alliance, Aux Sable, Ruby, Veresen
Midstream, CKPC, Grand Valley and Fort Corp. See "Unaudited
Supplementary Information" for definitions of equity accounted
investees.
|
(3)
|
Earnings per share -
basic is calculated using earnings attributable to common
shareholders adjusted for the after-tax amounts of preferred share
dividends.
|
(4)
|
See "Unaudited
Supplementary Information".
|
(5)
|
Total revenue
volumes. Revenue volumes are physical volumes plus volumes
recognized from take-or-pay commitments. Volumes are stated in
mboe/d, with natural gas volumes converted to mboe/d from MMcf/d at
a 6:1 ratio. Volumes for 2017 have been restated to reflect the
Corporate Reorganization.
|
Financial and Operational Overview by Division
|
|
|
3 Months Ended
June 30
(unaudited)
|
|
|
|
|
6 Months
Ended
June 30 (unaudited)
|
|
|
|
|
2018
|
|
|
2017
(1)
|
|
|
2018
|
|
|
2017(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($
millions)
|
Total
Volumes (2)
|
Gross
Profit
|
Operating
Margin (3)
|
Total
Volumes (2)
|
Gross
Profit
|
Operating
Margin (3)
|
Total
Volumes (2)
|
Gross
Profit
|
Operating
Margin (3)
|
Total
Volumes (2)
|
Gross
Profit
|
Operating
Margin (3)
|
Pipelines
Division
|
2,536
|
322
|
451
|
1,671
|
136
|
175
|
2,479
|
616
|
867
|
1,669
|
262
|
340
|
Facilities
Division
|
849
|
127
|
213
|
618
|
88
|
127
|
854
|
270
|
438
|
661
|
190
|
267
|
Marketing & New
Ventures Division
|
|
57
|
118
|
|
42
|
48
|
|
190
|
236
|
|
188
|
148
|
Corporate
|
|
5
|
5
|
|
3
|
3
|
|
3
|
3
|
|
5
|
5
|
Total
|
3,385
|
511
|
787
|
2,289
|
269
|
353
|
3,333
|
1,079
|
1,544
|
2,330
|
645
|
760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Financial results
reported for all 2017 periods have been restated to reflect the
Corporate Reorganization and the adoption of IFRS 15 (see
disclosure under "Changes in Reporting" in the second quarter 2018
MD&A).
|
(2)
|
Pipelines and
Facilities Divisions are revenue volumes which are physical plus
volumes recognized from take-or-pay commitments. Volumes are stated
in mboe/d, with natural gas volumes converted to mboe/d from MMcf/d
at a 6:1 ratio. NGL sales volumes are excluded from Total Volumes
to avoid double counting.
|
(3)
|
Refer to
"Non-GAAP Measures".
|
Financial Highlights
- Pembina generated record
second quarter results in revenue volumes, adjusted cash flow from
operating activities, operating margin and Adjusted EBITDA, largely
driven by a $10 billion increase in
assets year-over-year from the acquisition of Veresen in 2017, and
new assets placed into service following a large-scale capital
program;
- Generated second quarter and year-to-date earnings of
$246 million and $576 million, a 110 percent and 76 percent
increase, respectively, over the same periods of the prior year,
due to increased net revenue and share of profit from equity
accounted investees;
- Realized record second quarter and year-to-date operating
margin of $787 million and
$1.5 billion, 123 percent and 103
percent higher, respectively, than the second quarter and first
half of 2017.
- Achieved record second quarter and year-to-date Adjusted EBITDA
of $700 million and $1.4 billion, representing 136 percent and 112
percent increases, respectively, over the same periods in 2017;
- Cash flow from operating activities was $603 million for the second quarter and
$1.1 billion year-to-date in 2018,
increases of 67 percent and 60 percent, respectively, over the same
periods in 2017. Adjusted cash flow from operating activities
increased by 103 percent and 87 percent to $558 million and $1.1
billion in the second quarter and first half of 2018,
respectively, compared to the same period in 2017; and
- On a per share (basic) basis, cash flow from operating
activities for the second quarter and year-to-date in 2018
increased 33 percent and 27 percent, respectively, compared to the
same periods in the prior year. On a per share (basic) basis,
adjusted cash flow from operating activities for the second quarter
increased 63 percent and 48 percent year-to-date compared to the
same periods of the prior year.
Operational Highlights
- Achieved record total volumes on a quarterly basis of 3,385
mboe/d and 3,333 mboe/d year-to-date, 48 percent and 43 percent
increases, respectively, over the prior year;
- Realized record Pipeline Division revenue volumes during the
second quarter of 2,536 mboe/d and year-to-date of 2,479 mboe/d,
representing 52 percent and 49 percent increases, respectively,
compared to the same periods of 2017. Higher revenue volumes were
the result of system expansions on Pembina's Peace and northeast B.C. pipeline
systems, in addition to the fourth quarter 2017 Veresen Acquisition
which included Alberta Ethane Gathering System ("AEGS"), Alliance
and Ruby. The acquired assets accounted for an increase of 518
mboe/d revenue volumes (net to Pembina) in the second quarter of 2018 and 530
mboe/d on a year-to-date basis;
- Facilities Division generated record revenue volumes of 849
mboe/d in the second quarter and 854 mboe/d year-to-date in 2018,
increases of 37 percent and 29 percent, respectively, compared to
the same periods of 2017. Increased revenue volumes were a result
of the Redwater Fractionation Site III ("RFS III") being placed
into service on June 30, 2017.
Revenue volumes were also driven by the startup of the Duvernay I
gas plant, the acquisition of Veresen Midstream in the fourth
quarter of 2017, and increased take-or-pay commitments and
additional volumes; and
- Marketing & New Ventures Division realized strong second
quarter performance, increasing marketed NGL volumes by 38 percent
to 155 mboe/d over the comparable period in 2017 and generating
quarterly operating margin of $118
million, a 146 percent increase over the comparable period
in 2017. Strong results in the marketing business were driven by
increased product prices and margins resulting in greater market
opportunities, as well as Aux Sable,
which contributed 37 mboe/d and $39
million in the second quarter and 41 mboe/d and $55 million year-to-date. Aux Sable was acquired in the fourth quarter of
2017, and has benefiting Pembina
in 2018 from with access to US markets which offer relatively
strong propane plus margins and a wide Chicago-AECO
differential.
Executive Overview
Pembina continues to generate
record results driven by new assets acquired or placed into service
over the past 18 months.
"We are seeing strong customer demand for our services, leading
to higher volumes and increased utilization in the Pipelines and
Facilities Divisions, combined with rising commodity prices which
drive solid performance in our Marketing business," said
Mick Dilger, Pembina's President and Chief Executive
Officer. "As well, the recent strengthening of crude oil and
condensate prices is a welcome development for our customers,"
added Mr. Dilger.
At Pembina's 2018 Investor Day
held on May 29, we announced the next
evolution in Pembina's corporate
strategy, being the move towards accessing global markets.
Pembina is committed to
identifying additional opportunities to connect hydrocarbon
production to new demand locations through the development of
infrastructure that would extend our service offering further along
the hydrocarbon value chain. These new developments will contribute
to ensuring that hydrocarbons produced in the Western Canada
Sedimentary Basin and the other basins where Pembina operates can reach the highest value
markets throughout the world. Our proposed Jordan Cove LNG project,
the proposed PDH/PP facility, and the Prince Rupert LPG Export
Terminal are examples of such developments.
Based on strong year-to-date results and the outlook for the
remainder of the year, we reiterate our 2018 Adjusted EBITDA
guidance range of $2,650 to
$2,750 million.
"Our strong second quarter results have once again demonstrated
the strength of the underlying business, our unwavering commitment
to our financial guardrails and our strategic approach to growth,"
concluded Scott Burrows,
Pembina's Senior Vice President
and Chief Financial Officer.
New Developments and Growth Projects Update
Pipelines Division
- Pembina is continuing to
progress the Phase IV and Phase V expansions of its Peace Pipeline
system. The projects are tracking on budget and on schedule with an
expected in-service date of late 2018;
- Pembina continues to progress its Phase VI Peace
Pipeline expansion ("Phase VI") which includes: upgrades at
Gordondale, Alberta; a 16-inch
pipeline from LaGlace to Wapiti, Alberta and associated pump
station upgrades; and a 20-inch pipeline from Kakwa to Lator,
Alberta. The approximately
$280 million Phase VI expansion is
anticipated to be in service in early 2020, subject to
environmental and regulatory approvals;
- On June 15, Alliance announced
that binding commitments for the open season which ended on
May 30, 2018 did not reach the target
of 400 million cubic feet per day. Based on the open season results
and feedback from producers, Alliance is assessing potential
alternatives and next steps;
- On June 25, Pembina, together with Enbridge Income Fund,
the other 50 percent owner of Alliance, converted the operation and
administration of Alliance into an owner-operator model.
Pembina and Enbridge have worked
together to develop a business structure for Alliance that allows
the business to safely and efficiently deliver value to all
stakeholders. The new operating model will have a number of
benefits, including creating strategic alignment that will result
in improved efficiencies by Alliance being managed as part of the
owners' larger organizations; and
- Effective October 1, 2018,
Pembina will assume control of the
operation and administration of AEGS.
Facilities Division
- As previously announced, Pembina will construct new fractionation and
terminalling facilities at the Company's Empress, Alberta extraction plant (the
"Empress Expansion") for a total expected capital cost of
approximately $120 million. Detailed
engineering continued to progress and major equipment contracts
were awarded during the second quarter. These facilities have an
anticipated in-service date of late 2020, subject to environmental
and regulatory approvals;
- The Company continues to advance the construction of a 1
million barrel ethane storage facility ("Burstall Ethane Storage")
located near Burstall,
Saskatchewan for a total expected capital cost of
approximately $189 million. The
Burstall Ethane Storage is underpinned by a 20-year agreement and
is tracking on schedule with the expected in-service date of late
2018;
- Pembina is continuing the
development of its liquefied petroleum gas ("LPG") export terminal
(the "Prince Rupert Terminal"). The Prince Rupert Terminal is
located on Watson Island, British
Columbia and is expected to have a permitted capacity of
approximately 25 mbpd of LPG. The LPG supply will be sourced
primarily from the Company's Redwater fractionation complex. Site
preparation required for facility construction has been undertaken
by the City of Prince Rupert ("the
City") and is nearing completion. Given the progress of the site
preparation, Pembina has triggered
a key milestone that will allow construction of the above-ground
facility to proceed. Additionally, the Company will begin making
monthly payments for lands leased from the City. Pembina and the City continue to work with the
applicable regulatory authorities to obtain the required permits
and authorizations for the Project. The Prince Rupert Terminal is
anticipated to be in service mid-2020, subject to regulatory and
environmental approvals;
- On April 1, 2018, Pembina exercised its option to assume an
additional interest in the Younger extraction and fractionation
facilities ("Younger Facilities"), bringing its ownership to 71.7
percent and 50 percent (previously 43 percent and nil,
respectively. On the same day, Pembina took over operatorship of the Younger
Facilities, which were previously operated by its joint interest
partner. Given Pembina's extensive
experience as an operator and its ability to leverage and integrate
with its current operational systems, the Company expects to
realize efficiencies going forward.
- Late in the second quarter, Veresen Midstream L.P. ("Veresen
Midstream"), in which Pembina owns
a 46 percent interest, placed into service its North Central
liquids hub ("North Central Liquids Hub") which will provide
separation and stabilization of condensate volumes to support
operations of the Cutbank Ridge Partnership (a third-party
exploration and production joint venture) within the Montney formation. The North Central Liquids
Hub was placed into service ahead of schedule and below budget;
and
- Pembina continues to progress
construction of its 100 MMcf/d sweet gas shallow cut processing
facility, 30 mbpd condensate stabilization facility and other
associated infrastructure located at the Company's Duvernay Complex
("Duvernay II"). The facilities are under 20-year term contracts
with a combination of fee-for-service and fixed-return
arrangements. The majority of long lead items have been purchased
and the project is tracking on budget and on schedule. The project
has received regulatory approval and construction will commence in
the third quarter. The project has an expected in-service date of
mid-to-late 2019.
Marketing & New Ventures Division
- Canada Kuwait Petrochemical Company ("CKPC") continues to
progress front end engineering design ("FEED") for a combined
propane dehydrogenation and polypropylene production facility. It
is expected that FEED activities will be completed by late 2018,
followed by a final investment decision. Pembina and Kuwait's Petrochemical Industries Company
K.S.C. (''PIC'') are each 50 percent joint venture partners of
CKPC;
- Pembina continues to progress
its proposed liquefied natural gas export terminal in Coos Bay, Oregon, and the related Pacific
Connector Gas Pipeline (combined "Jordan Cove") that will transport
natural gas from the Malin Hub in southern Oregon to the export terminal. In September 2017, the Company filed applications
with the United States Federal Energy Regulatory Commission
("FERC") for the construction and operation of Jordan Cove. Based
on the most recent information available to us, the Company is
positioned to receive a FERC decision during the second half of
2019. Further, Pembina continues
to anticipate first gas in 2024, pending the receipt of the
necessary regulatory approvals and other requirements.
- During the quarter, Pembina
undertook a leadership transition for the Jordan Cove project.
Stu Taylor, Pembina's Senior Vice President, Marketing
& New Ventures and Corporate Development Officer will provide
greater oversight of the commercial aspects of the project, while
Harry Andersen, Pembina's Senior Vice President, External
Affairs and Chief Legal Officer will have greater oversight over
external affairs, communications, and community and government
relations for the project. In conjunction with the transition,
Betsy Spomer has left Pembina to pursue other opportunities.
Pembina wishes to thank Ms. Spomer
for her significant contribution to the Jordan Cove LNG project;
and
- Pembina, in conjunction with
its partners Enbridge and Williams, are currently developing a new
operating model for the future operation and administration of
Aux Sable. The new operating model
will have a number of benefits, including creating strategic
alignment that will result in improved efficiencies by being part
of a larger organization, and is expected to be completed during
the third quarter of 2018.
Financing
- As previously announced, during the second quarter of 2018,
Veresen Midstream successfully amended and extended its Senior
Secured Credit Facilities which were originally scheduled to mature
on March 31, 2020. Under the terms of
the amendment and extension reached with a syndicate of lenders,
Veresen Midstream increased its borrowing capacity to $200 million under the Revolving Credit Facility
and to $2,550 million of availability
under the Term Loan A and used the proceeds to repay an existing
US$705 million Term Loan B on
April 30, 2018. Other terms and
conditions in the facilities were modified to reflect the operating
nature of the business including modifying the covenant package and
increasing the permitted distributions out of Veresen Midstream.
The maturity date of the two debt facilities was extended to
April 20, 2022; and
- On April 4, 2018, Pembina entered into a note exchange agreement
with AEGS noteholders to exchange AEGS senior notes for unsecured
senior notes ("Series A") of Pembina under Pembina's Note Indenture. The Series A fixed
coupon remained at 5.565 percent per annum and the notes are
non-amortizing with a bullet payment of $73
million at maturity on May 4,
2020.
Changes in Reporting
Given the enhanced scale and scope of Pembina's business and considering the future
needs of both the Company and the energy industry, Pembina's management structure was
reorganized, effective January 1,
2018, into three Divisions: Pipelines, Facilities and
Marketing & New Ventures ("Corporate Reorganization").
Accordingly, the Company's financial reporting format has changed
to better align with the new structure.
Pembina also retrospectively
adopted IFRS 15 Revenue from Contracts with Customers, effective
January 1, 2018. While this
change is not expected to have a material impact on annual revenue
recognition, it is expected to result in a change in timing for
quarterly revenue recognition.
For the second quarter, $36
million of take-or-pay revenue in excess of physical
deliveries has been collected and deferred and revenue of
$47 million related to take-or-pay
deferrals was recognized during the period.
For the six months ending June 30,
2018, $70 million of
take-or-pay revenue in excess of physical deliveries has been
collected and deferred in addition to the $8
million that had been deferred at January 1, 2018. Revenue of $52 million related to take-or-pay deferral was
recognized during the period, and the outstanding deferral as at
June 30, 2018 was $26 million.
Financial results reported for all 2017 periods have been
restated to reflect the Corporate Reorganization and the
retrospective adoption of IFRS 15.
Dividends
- Declared dividends of $0.18 per
qualifying common share in April and $0.19 per qualifying common share in May and June
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; Series 13: $0.359375; and Series 21: $0.30625 to shareholders of record as of
May 1, 2018. Declared and paid
quarterly dividends per qualifying preferred shares of: Series 15:
$0.279; Series 17: $0.3125; and Series 19: $0.3125 to shareholders of record on June 15, 2018.
Second Quarter 2018 Conference Call & Webcast
Pembina will host a conference
call on Thursday, August 2, 2018 at 4:00 p.m. MT (6:00 p.m.
ET) for interested investors, analysts, brokers and media
representatives to discuss details related to the second quarter
2018 results. The conference call dial-in numbers for Canada and
the U.S. are 647-427-7450 or 888-231-8191. A recording of the
conference call will be available for replay until August 8,
2018 at 11:59 p.m. ET. To access the
replay, please dial either 416-849-0833 or 855-859-2056 and enter
the password 9759609. A live webcast of the conference call can be
accessed on Pembina's website at
pembina.com under Investor Centre, Presentation & Events, or by
entering:
https://event.on24.com/wcc/r/1652758/9925786A5302A92CC937EC8D8E8C4D01 in
your web browser. Shortly after the call, an audio archive will be
posted on the website for a minimum of 90 days.
UNAUDITED SUPPLEMENTARY
INFORMATION
Three Months ending June 30, 2018
Financial results reported for all 2017 periods have been
restated to reflect the Corporate Reorganization and the adoption
of IFRS 15.
Pipelines Division
3 Months Ended
June 30
(unaudited)
|
Conventional
Pipelines
|
Transmission
Pipelines
|
Oil
Sands
Pipelines
|
Total
|
($ millions,
except where noted)
|
2018
|
2017(4)
|
2018
|
2017(4)
|
2018
|
2017(4)
|
2018
|
2017(4)
|
Financial
Overview
|
|
|
|
|
|
|
|
|
Revenue(1)
|
306
|
171
|
38
|
18
|
60
|
58
|
404
|
247
|
Operating
expenses(1)
|
61
|
52
|
11
|
4
|
20
|
17
|
92
|
73
|
Share of profit from
equity accounted investees
|
|
|
65
|
|
|
|
65
|
|
Realized gain on
commodity-related derivative financial instruments
|
|
(1)
|
|
|
|
|
|
(1)
|
Depreciation and
amortization included in operations
|
35
|
28
|
13
|
5
|
7
|
6
|
55
|
39
|
Gross
profit
|
210
|
92
|
79
|
9
|
33
|
35
|
322
|
136
|
Proportionately
Consolidated Financial Overview(2)
|
|
|
|
|
|
|
|
|
Revenue Volumes
(mboe/d)(3)
|
900
|
620
|
559
|
36
|
1,077
|
1,015
|
2,536
|
1,671
|
Operating
Margin(1)(2)
|
245
|
120
|
166
|
14
|
40
|
41
|
451
|
175
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes
Inter-Divisional transactions. See note 13 to the Interim Financial
Statements.
|
(2)
|
Refer to "Non-GAAP
Measures".
|
(3)
|
Revenue volumes are
physical volumes plus volumes recognized from take-or-pay
commitments.
|
(4)
|
Financial results
reported for all 2017 periods have been restated to reflect the
Corporate Reorganization and the adoption of IFRS 15.
|
Facilities Division
|
|
|
|
3 Months Ended
June 30 (unaudited)
|
Gas
Services
|
NGL
Services
|
Total
|
($ millions,
except where noted)
|
2018
|
2017(4)
|
2018
|
2017(4)
|
2018
|
2017(4)
|
Financial
Overview
|
|
|
|
|
|
|
Revenue(1)
|
137
|
106
|
223
|
109
|
360
|
215
|
Net revenue
(2)
|
136
|
103
|
113
|
77
|
249
|
180
|
Operating
expenses(1)
|
44
|
34
|
41
|
24
|
85
|
58
|
Share of profit from
equity accounted investees
|
|
|
1
|
|
1
|
|
Depreciation and
amortization included in operations
|
22
|
19
|
16
|
15
|
38
|
34
|
Gross
profit
|
70
|
50
|
57
|
38
|
127
|
88
|
Proportionately
Consolidated Financial Overview(2)
|
|
|
|
|
|
|
Revenue Volumes
(mboe/d)(3)
|
650
|
485
|
199
|
133
|
849
|
618
|
Operating
Margin(1)(2)
|
137
|
69
|
76
|
58
|
213
|
127
|
|
|
|
|
|
|
|
(1)
|
Includes
Inter-Divisional transactions. See note 13 to the Interim Financial
Statements.
|
(2)
|
Refer to "Non-GAAP
Measures".
|
(3)
|
Revenue volumes are
physical volumes plus volumes recognized from take-or-pay
commitments.
Volumes are stated in mboe/d, with natural gas volumes converted to
mboe/d from MMcf/d at a 6:1 ratio.
|
(4)
|
Financial results
reported for all 2017 periods have been restated to reflect the
Corporate Reorganization and adoption of IFRS 15.
|
Marketing & New Ventures Division
3 Months Ended
June 30
(unaudited)
|
Marketing
|
New
Ventures
|
Total
|
($ millions,
except where noted)
|
2018
|
2017(3)
|
2018
|
2017(3)
|
2018
|
2017(3)
|
Financial
Overview
|
|
|
|
|
|
|
Revenue(1)
|
1,300
|
758
|
|
|
1,300
|
758
|
Cost of goods
sold(1)
|
1,212
|
714
|
|
|
1,212
|
714
|
Net
revenue(2)
|
88
|
44
|
|
|
88
|
44
|
Share of profit from
equity accounted investees
|
30
|
|
|
|
30
|
|
Realized loss (gain)
on commodity-related derivative financial instruments
|
9
|
(4)
|
|
|
9
|
(4)
|
Unrealized loss on
commodity-related derivative financial instruments
|
46
|
|
|
|
46
|
|
Depreciation and
amortization included in operations
|
6
|
6
|
|
|
6
|
6
|
Gross
profit
|
57
|
42
|
|
|
57
|
42
|
Proportionately
Consolidated Financial Overview(2)
|
|
|
|
|
|
|
Total Marketed NGL
Volumes (mboe/d)
|
155
|
112
|
|
|
155
|
112
|
Operating
Margin(1)(2)
|
118
|
48
|
|
|
118
|
48
|
|
|
|
|
|
|
|
(1)
|
Includes
Inter-Divisional transactions. See note 13 to the Interim Financial
Statements.
|
(2)
|
Refer to "Non-GAAP
Measures".
|
(3)
|
Financial results
reported for all 2017 periods have been restated to reflect the
Corporate Reorganization and adoption of IFRS 15.
|
INVESTMENTS IN EQUITY ACCOUNTED
INVESTEES
Investments in Equity Accounted Investees include:
Pipelines Division
- 50 percent interest in the Alliance Pipeline ("Alliance");
- 50 percent convertible preferred interest in the Ruby Pipeline
("Ruby") which entitles Pembina to
a US$91 million distribution per
year; and
- 75 percent jointly controlled interest in Grand Valley 1 Limited Partnership wind farm
("Grand Valley").
Facilities Division
- 46.0 percent interest (as of June 30,
2018) in Veresen Midstream Limited Partnership ("Veresen
Midstream"), which owns assets in western Canada serving the
Montney geological play in
northwestern Alberta and
northeastern B.C. including gas processing plants and gas gathering
pipelines and compression; and
- 50 percent interest in Fort Saskatchewan Ethylene Storage
Limited Partnership and Fort Saskatchewan Ethylene Corporation
("Fort Corp").
Marketing & New Ventures Division
- An ownership interest in Aux
Sable (approximately 42.7 percent in Aux Sable U.S. and 50
percent in Aux Sable Canada)
(combined, "Aux Sable"), which
includes an NGL fractionation facility and gas processing capacity
near Chicago, Illinois and other
natural gas and NGL processing facilities, logistics and
distribution assets in the U.S. and Canada, as well as
transportation contracts on Alliance; and
- 50 percent interest in Canadian Kuwait Petrochemical
Corporation ("CKPC").
Share of Profit and Proportionately Consolidated Operating
Margin and Adjusted EBITDA
3 Months
Ended June 30, 2018 (unaudited) ($
millions)
|
Pipelines
Division
|
Facilities
Division
|
Marketing
&
New
Ventures
Division
|
|
|
|
|
|
|
|
|
|
Alliance
|
Ruby
|
Veresen
Midstream
|
Aux
Sable(3)
|
Other(4)
|
Total
|
Total Volumes, net
(mboe/d)(1)
|
141
|
89
|
76
|
37
|
|
343
|
Operating
Margin(2)
|
93
|
45
|
45
|
39
|
5
|
227
|
General and
administrative
|
8
|
1
|
1
|
5
|
|
15
|
Adjusted
EBITDA(2)
|
85
|
44
|
44
|
34
|
5
|
212
|
Finance costs and
other
|
9
|
11
|
24
|
(2)
|
1
|
43
|
Depreciation and
amortization
|
40
|
17
|
20
|
6
|
3
|
86
|
Share of earnings in
excess of equity interest
|
|
13
|
|
|
|
13
|
Share of profit of
Investments in Equity Accounted Investees
|
36
|
29
|
|
30
|
1
|
96
|
|
|
|
|
|
|
|
(1)
|
Total revenue
volumes. Revenue volumes are physical volumes plus volumes
recognized from take-or-pay commitments. Volumes are stated in
mboe/d, with natural gas volumes converted to mboe/d from MMcf/d at
a 6:1 ratio.
|
(2)
|
Refer to "Non-GAAP
Measures".
|
(3)
|
Aux Sable volumes
include marketed NGL volumes.
|
(4)
|
Includes interest in
Fort Corp (Facilities Division), Grand Valley (Pipelines Division)
and CKPC (Marketing & New Ventures Division).
|
Distributions by Investments in Equity Accounted Investees to
Pembina
|
|
3 Months
Ended June 30, 2018 (unaudited) ($
millions)
|
|
Alliance
|
74
|
Ruby
|
30
|
Veresen
Midstream
|
38
|
Aux Sable
|
23
|
Other(1)
|
3
|
Total Distributions
from Investments in Equity Accounted Investees (per Pembina's
Consolidated Statement of Cash Flows)
|
168
|
|
|
(1)
|
Distributions from
Fort Corp. and Grand Valley.
|
Loans and Borrowings Amortization Schedule of Investments in
Equity Accounted Investees
(unaudited)
($ millions)
(1)
|
6 months
ended
June 30,
2018(2)
|
Balance of
2018(3)
|
2019(3)
|
2020(3)
|
2021(3)
|
2022+(3)
|
Total(3)
|
|
|
|
|
|
|
|
|
Fixed
Maturity
|
|
|
|
|
|
|
|
Alliance
|
33
|
33
|
126
|
66
|
65
|
266
|
556
|
Ruby(4)
|
49
|
49
|
150
|
58
|
29
|
313
|
599
|
Veresen
Midstream
|
1
|
18
|
37
|
37
|
37
|
1,048
|
1,177
|
Aux Sable
|
1
|
1
|
|
|
|
|
1
|
Other
|
1
|
1
|
24
|
2
|
2
|
26
|
55
|
|
85
|
102
|
337
|
163
|
133
|
1,653
|
2,388
|
|
|
|
|
|
|
|
|
Revolving
|
|
|
|
|
|
|
|
Alliance
|
|
|
|
|
102
|
|
102
|
Veresen
Midstream(4)
|
30
|
|
|
|
|
|
|
Other
|
|
|
13
|
|
|
|
13
|
|
30
|
|
13
|
|
102
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
115
|
102
|
350
|
163
|
235
|
1,653
|
2,503
|
|
|
|
|
|
|
|
|
(1)
|
Balances reflect
Pembina's ownership percentage of the reported balance.
|
(2)
|
Balances reflect
payments that occurred during the six-month period ended
June 30, 2018.
|
(3)
|
Balances presented at
face value remaining at June 30, 2018.
|
(4)
|
Reflects recent
changes as described further under "Financing Activity" in the
June 30, 2018 MD&A.
|
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 an integrated
system of pipelines that transport various hydrocarbon liquids and
natural gas products produced primarily in western Canada. The
Company also owns gas gathering and processing facilities 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 identifying additional
opportunities to connect hydrocarbon production to new demand
locations through the development of infrastructure that would
extend Pembina's service offering
even further along the hydrocarbon value chain. These new
developments will contribute to ensuring that hydrocarbons produced
in the Western Canada Sedimentary Basin and the other basins where
Pembina operates can reach the
highest value markets throughout the world.
Pembina strives to provide
sustainable, industry-leading total returns for our investors;
reliable and value-added services for our customers; a net positive
impact to communities; and a safe, respectful, collaborative and
fair work culture for our employees.
Pembina's strategy is
to:
- Preserve Value by providing safe,
environmentally conscious, cost-effective and reliable
services;
- Diversify by providing integrated solutions
which enhance profitability and customer service;
- Implement Growth by pursuing projects or
assets that are expected to generate cash flow per share accretion
and capture long-life, economic hydrocarbon reserves; and
- Secure Global Markets by understanding what
the world needs, where they need it, and delivering it.
Pembina is structured into
three Divisions: Pipelines Division, Facilities Division and
Marketing & New Ventures Division.
Pembina's common shares
trade on the Toronto and
New York stock exchanges under PPL
and PBA, respectively. For more information, visit
www.pembina.com.
Forward-Looking Statements and Information
This document contains certain forward-looking statements and
information (collectively, "forward-looking statements"), including
forward-looking statements within the meaning of the "safe harbor"
provisions of applicable securities legislation, that are based on
Pembina's current expectations,
estimates, projections and assumptions in light of its experience
and its perception of historical trends. In some cases,
forward-looking statements can be identified by terminology such as
"continue", "anticipate", "schedule", "will", "expects",
"estimate", "potential", "planned", "future" 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; expectations
about commodity pricing industry activities and development
opportunities; 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, assets being acquired
and existing assets of the Company; the future level and
sustainability of cash dividends that Pembina intends to pay its shareholders,
including the 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: 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 Pembina's growth
projects will be sanctioned and completed as expected; that any
required commercial agreements can be reached; that all required
regulatory and environmental approvals can be obtained on the
necessary terms in a timely manner; that counterparties will comply
with contracts in a timely manner; that there are no unforeseen
events preventing the performance of contracts or the completion of
the relevant facilities; that there are no unforeseen material
costs relating to the facilities which are not recoverable from
customers; prevailing 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 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, climate change initiatives or policies or
increased environmental regulation; the failure to realize the
anticipated benefits or synergies of acquisitions due to the
factors set out herein, integration issues or otherwise;
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 cyber
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 2018, and the closing of the
acquisition of Veresen 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 EBITDA
per common share, cash flow from operating activities per common
share, adjusted cash flow from operating activities per common
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. These Non-GAAP measures are calculated and
disclosed on a consistent basis from period to period. Specific
adjusting items may only be relevant in certain periods. The intent
of Non-GAAP measures is to provide additional useful information
respecting Pembina's financial and
operational performance to investors and analysts and the measures
do not have any standardized meaning under IFRS. The measures
should not, therefore, be considered in isolation or used in
substitute for measures of performance prepared in accordance with
IFRS.
Non-GAAP Proportionate Consolidation of Investments in Equity
Accounted Investees Results
In accordance with IFRS, Pembina's jointly controlled investments are
accounted for using equity accounting. Under equity
accounting, the assets and liabilities of the investment are net
into a single line item in the Consolidated Statement of Financial
Position, Investments in Equity Accounted Investees. Net earnings
from Investments in Equity Accounted Investees are recognized in a
single line item in the Consolidated Statement of Earnings and
Comprehensive Earnings, share of profit from equity accounted
investees. Cash contributions and distributions from Investments in
Equity Accounted Investees represent Pembina's proportionate share paid and
received in the period to and from the equity accounted
investment.
To assist the readers' understanding and evaluation of the
performance of these investments, Pembina is supplementing the IFRS disclosure
with Non-GAAP disclosure of Pembina's proportionately consolidated
interest in the Investments in Equity Accounted Investees.
Pembina's proportionate interest
in Investments in Equity Accounted Investees has been included in
operating margin, Adjusted EBITDA and other reconciling line items
to IFRS. A reconciliation of operating margin and Adjusted EBITDA
to share of profit from equity accounted investees can be found
under the heading "Proportionately Consolidated Results by
Investments in Equity Accounted Investees".
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
June 30, 2018, which is available online at
www.sedar.com, www.sec.gov and through
Pembina's website at
www.pembina.com.
For further information: Investor Relations, Cameron Goldade, Vice President Capital Markets,
(403) 231-3156, 1-855-880-7404, E-mail:
investor-relations@pembina.com, www.pembina.com