Pembina Pipeline Corporation Reports Strong Third Quarter 2017 Results
Transformational quarter with multi-billion capital program now largely in service and closed the acquisition of Veresen
All financial figures are in Canadian dollars unless noted otherwise.
CALGARY, Nov. 2, 2017 /CNW/ - Pembina Pipeline Corporation ("Pembina" or the "Company") (TSX: PPL; NYSE: PBA) announced today its financial and operating results for the third quarter of 2017.
Operational and Financial Overview
"This quarter marked an inflection point in Pembina's history," said Mick Dilger, Pembina's President and Chief Executive Officer. "Pembina embarked on an unprecedented suite of growth projects in 2013 and since the beginning of 2015, we have placed over $5 billion of new fee-for-service assets into service. The largest component of this growth program, being the Phase III Expansion, the third Redwater fractionator and the Canadian Diluent Hub, were placed into service at the end of the second quarter. The third quarter of 2017 represented the first full quarter of cash flow contribution from these assets – which we continue to expect to ramp up over future quarters. Pembina's robust financial position provides a strong platform to pursue our next suite of growth projects."
"Thanks to the newly in-service assets, we've set a revenue volume record in our Conventional Pipelines business on a quarterly and year-to-date basis, which have contributed to reaching new financial records including adjusted EBITDA, adjusted cash flow from operating activities and adjusted cash flow from operating activities per share," continued Mr. Dilger.
"As volumes continue to ramp up on the recently in-service assets, our financial position will strengthen and our adjusted cash flow from our operating activities per share will continue to grow."
"On October 2, 2017, we closed the acquisition of Veresen – marking a transformational moment for our company," said Mr. Dilger. "With increased size and scale, greater diversification and a broader service offering, the future is bright for Pembina. Going forward, we are capable of pursuing expanded growth opportunities in support of continued value creation for our shareholders. Given the strong financial position of the combined company, we were also proud to have increased the dividend for a second time this year."
"Looking ahead, we will stay focused on successfully completing the remaining growth portfolio, further progressing our large-scale potential project roster as well as working to integrate Veresen and to achieve the near-term expected synergies of $75 to $100 million on a run-rate basis. We are now positioned as a leading North American infrastructure company able to continue delivering top-tier performance and I am excited to realize our expected transformational results," concluded Mr. Dilger.
New Developments in 2017 and Growth Projects Update
Strategic Business Combination Announcement
On October 2, 2017, Pembina announced that it completed its business combination (the "Transaction") with Veresen pursuant to a plan of arrangement (the "Arrangement") under Section 193 of the Business Corporations Act (Alberta) to create one of the largest energy infrastructure companies in Canada. Pursuant to the Arrangement, Pembina acquired all of the issued and outstanding common shares of Veresen valued at approximately $9.4 billion, including the assumption of Veresen debt, the proportionate interest in the debt of Veresen's equity accounted investments and Veresen preferred shares (Veresen and equity accounted investee's debt assumption is approximately $3 billion). All regulatory conditions have been satisfied prior to closing. These conditions included termination of the Hart-Scott-Rodino waiting period by the US Federal Trade Commission on May 30, 2017; approval by the Minister of Transport under the Canada Transportation Act on June 28, 2017; and expiry of the waiting period under the Canadian Competition Act on September 13, 2017. With respect to the Canadian Competition Act, Pembina continues to work with the Commissioner of Competition and his staff post-closing relative to the Alberta Ethane Gathering System ("AEGS"), and their review relating to AEGS is ongoing. In conjunction with closing the Transaction, Pembina increased its common share dividend by 5.9 percent to $0.18 per share per month effective for the October 2017 common share dividend.
Given the closing of the Arrangement occurred on October 2, 2017, Veresen's financial and operating results for the third quarter of 2017 are not reflected in Pembina's third quarter financial and operating results. Furthermore, pursuant to Canadian securities regulations, Veresen will not be filing financial statements and management's discussion and analysis for the third quarter of 2017. However, a summary of Veresen's proportionately consolidated EBITDA for the third quarter and nine months ended September 30, 2017 is as follows:
Alliance Pipeline ("Alliance") continued to benefit from high demand for seasonal and interruptible services, driven by a wide Chicago-AECO gas price differential, Alliance's high rate of availability and outages or curtailments on other transportation options out of western Canada.
Ruby Pipeline EBITDA continues to benefit from take-or-pay contracts despite volumes flowing on the pipeline being negatively impacted due to the strong competition from western Canadian gas.
Aux Sable earnings benefited from improved propane plus margins as well as the ability to recognize the margin deferred in previous quarters due to the annual nature of the counterparty margin sharing agreement underpinning this asset.
Veresen Midstream Limited Partnership ("Veresen Midstream") EBITDA is generated from the Hythe and Steeprock gas processing facilities, which are governed by a take-or-pay arrangement, as well as the Dawson natural gas gathering and compression assets, which are on a fee-for-service basis with a contracted mechanism that ensures the return of capital within eight years. The Dawson assets noted lower revenues and volumes in the quarter, primarily due to downstream outages impacting the ability to flow gas.
Veresen also progressed a number of development opportunities during and following the third quarter of 2017. Major new developments and growth project updates include:
Third Quarter 2017 Conference Call & Webcast
Pembina will host a conference call on Friday, November 3, 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 third 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 November 10, 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 15481006.
A live webcast of the conference call can be accessed on Pembina's website at www.pembina.com under Investor Centre, Presentation & Events, or by entering:
http://event.on24.com/r.htm?e=1307572&s=1&k=FDC4D235F6A00EF6BE8D08BC522465AB in your web browser. Shortly after the call, an audio archive will be posted on the website for a minimum of 90 days.
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; anticipated adjusted EBITDA projections for 2018 and financial performance expectations resulting from Pembina's capital expenditures; completion of, and the potential future benefits and impacts of the Transaction including the timing thereof; 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 dividend increase upon completion of the Transaction; 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: 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 (including in respect of the Transaction); 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 or liabilities, or other significant events relating to the completion of the Transaction; 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 or increased environmental regulation; the inability to meet the remaining conditions to completion of the Transaction, in a timely manner or at all; the failure to realize the anticipated benefits or synergies of the Transaction following closing 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 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, and the closing of the Transaction 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.
In this news release, Pembina has used the terms net revenue, operating margin, adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA), Veresen 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") and total enterprise value, 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. Veresen EBITDA has been calculated as defined in the table provided. 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 September 30, 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
For further information: Investor Relations, Cameron Goldade, Vice President, Capital Markets, (403) 231-3156, 1-855-880-7404, E-mail: [email protected], www.pembina.com