Pembina Pipeline Corporation 2011 Third Quarter Results
Strong quarterly performance; future growth fueled by Gas Services
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 current expectations, estimates, projections and assumptions in light of its experience and its perception of historical trends. Actual results may differ materially from those expressed or implied by these forward-looking statements. Please see page 7 for more information. This report also refers to financial measures that are not defined by International Financial Reporting Standards ("IFRS"). For more information about the measures which are not part of Generally Accepted Accounting Principles ("Non-GAAP Measures") please see page 6.
CALGARY, Nov. 9, 2011 /CNW/ - Pembina Pipeline Corporation ("Pembina" or the "Company") achieved strong results during the third quarter of 2011 due to continued solid performance in each of its four business units. The Company's earnings were $30.1 million ($0.18 per share) during the third quarter of 2011 compared to $30.8 million ($0.19 per share) during the third quarter of 2010. Earnings totaled $120.7 million ($0.72 per share) for the first nine months of 2011 compared to $120.6 million ($0.74 per share) during the first nine months of 2010.
Adjusted earnings were $47.4 million ($0.28 per share) during the third quarter of 2011 compared to $34.4 million ($0.21 per share) during the third quarter of 2010 (adjusted earnings is a non-GAAP measure, see "Non-GAAP Measures" on page 6). Adjusted earnings were $165.1 million ($0.99 per share) for the first nine months of 2011 compared to $128.7 million ($0.79 per share) during the first nine months of 2010.
Cash flow from operating activities was $88 million ($0.53 per share) during the third quarter of 2011 compared to $66.6 million ($0.41 per share) during the third quarter of 2010. Pembina generated cash flow from operating activities of $212.8 million ($1.27 per share) during the first nine months of 2011 compared to $202.6 million ($1.24 per share) during the first nine months of 2010.
Adjusted cash flow from operating activities was $84.8 million ($0.51 per share) during the third quarter of 2011, an increase of 57 percent, compared to $54 million ($0.33 per share) during the third quarter of 2010 (adjusted cash flow from operating activities is a non-GAAP measure, see "Non-GAAP Measures" on page 6). Adjusted cash flow from operating activities was $239.6 million ($1.43 per share) during the first nine months of 2011, an increase of 28 percent, compared to $187.7 million ($1.15 per share) during the first nine months of 2010.
Pembina generated earnings before interest, taxes, depreciation and amortization ("EBITDA") of $86.8 million during the third quarter of 2011 compared to $68.1 million during the third quarter 2010 (EBITDA is a non-GAAP measure, see "Non-GAAP Measures" on page 6). Pembina generated strong EBITDA of $277.3 million during the first nine months of 2011, an increase of 20 percent, compared to $231.7 million during the first nine months of 2010.
The increases in adjusted earnings, cash flow from operating activities, adjusted cash flow from operating activities and EBITDA were primarily due to improved results from Pembina's Conventional Pipelines and Midstream & Marketing businesses during the third quarter and first nine months of 2011 compared to the third quarter and first nine months of 2010.
"We expect that Pembina's current suite of growth projects, coupled with strong performance in our existing operations, will continue to drive shareholder value in the coming years," said Bob Michaleski, Pembina's President and Chief Executive Officer. "This year, we've completed a $57 million midstream terminal acquisition, brought our $400 million heavy oil and diluent Nipisi and Mitsue Pipeline projects on-stream, extended the capture area of our conventional pipelines and are nearing completion of our Musreau Deep Cut Facility. With a large number of projects now on the books, including new and expanded gas processing projects, the future expansion of our truck terminal network, and the capacity increases we expect to complete on our pipeline assets, we believe Pembina is well-poised to take advantage of the substantial development we are seeing by producers in our operating areas."
Revenue, net of product purchases, during the third quarter of 2011 increased to $156.3 million, compared to $118.2 million during the same period in 2010. Year-to-date revenue, net of product purchases, in 2011 was $444.9 million, compared to $368.5 million during the first nine months of 2010. The increase in revenue was driven by strong performance in each of Pembina's four business units, particularly Conventional Pipelines which realized a $14.3 million year-over-year quarterly gain in revenue primarily as a result of higher throughput, as well as results from Midstream & Marketing which realized a $12.8 million year-over-year quarterly increase in revenue, net of product purchases due to higher volumes and positive market conditions. Operating expenses were $55.9 million during the third quarter and $136.8 million during the first nine months of 2011, compared to $40 million and $113.5 million during the same periods in 2010, with the increase primarily due to enhanced and expanded integrity and maintenance work in Conventional Pipelines, and higher labour, power and operating costs associated with Pembina's growth over the past year. Operating margin totaled $100.4 million during the third quarter of 2011, compared to $78.2 million during the third quarter of 2010. Year-to-date operating margin in 2011 was $308.1 million, compared to $255 million during the first nine months of 2010 (operating margin is a non-GAAP measure, see "Non-GAAP Measures" on page 6).
Dividends were $65.4 million during the third quarter of 2011, representing $0.39 per share ($0.13 per share monthly), compared to $64 million in the third quarter of 2010 (no change in per share dividend payments).
GROWTH STRATEGY UPDATE
Gas Services Business Undertakes Numerous Expansions
Pembina continues to see significant growth opportunities resulting from the trend towards liquids-rich resource play gas drilling and the extraction of valuable natural gas liquids ("NGL") from gas in the Western Canadian Sedimentary Basin ("WCSB"). Over the past year, Pembina's Gas Services team has focused on expanding this line of business, capitalizing on its experience and expertise, and building out its capacity to extract these liquids from the gas stream and transport them to market using Pembina's existing conventional pipeline network. This has resulted in four expansion projects and demonstrates the strength of the Company's integrated approach. Two of these projects are expansions of Pembina's existing assets at its Musreau gas plant, one of the three plants that make up the Company's Cutbank Complex. The other two projects, as outlined below, diversify Pembina's Gas Services operations and provide access into new regions that are seeing similar increases in development and gas processing requirements by producers.
These expansions are expected to bring Pembina's net enhanced NGL extraction capacity to approximately 600 million cubic feet per day ("mmcf/d"), which would be processed largely on a contracted, fee-for-service basis and result in approximately 40,000 barrels per day ("bpd") of incremental NGL to be transported for additional toll revenue on Pembina's conventional pipelines by the end of 2013. Pembina expects these expansions could contribute $75 million to $90 million of EBITDA annually.
Expansion at the Cutbank Complex's Musreau Gas Plant
At Pembina's Musreau gas plant, the Company is completing work on an enhanced NGL extraction facility (the "Musreau Deep Cut Facility") as well as expanding its existing shallow cut gas processing capability.
Construction of Pembina's Musreau Deep Cut Facility, a new 205 mmcf/d ethane extraction facility and the related 10 kilometre pipeline, is complete and commissioning is well underway with start-up expected in December 2011. This new $75 million plant will deliver an ethane mix stream to Pembina's Peace Pipeline. Pembina has contracted approximately 80 percent of the planned capacity at the Musreau Deep Cut Facility and expects to contract the remaining capacity under terms designed to provide Pembina with cash flow certainty. Once on-stream and at full capacity, the Musreau Deep Cut Facility is expected to provide Pembina with approximately $12 to $15 million of additional EBITDA annually, as well as up to 13,000 bpd of liquids which Pembina will transport on its conventional pipelines and for which it will receive additional toll revenue.
Pembina also plans to expand Musreau's shallow cut gas processing capability by 50 mmcf/d due to high plant utilization and strong customer demand. Once the expansion is complete, the Cutbank Complex is expected to have an aggregate raw gas processing capacity of 410 mmcf/d (355 mmcf/d net to Pembina), an increase of 16 percent net to Pembina. The Company estimates the expansion will cost approximately $26 million and, subject to regulatory and environmental approval, is expected to be in-service by mid-2012. Pembina has entered into contracts with a minimum term of five years with area producers for the entire capacity of the expansion on a fee-for-service basis.
Expansion into new region: Resthaven
Pembina announced on October 13, 2011 that it plans to further expand its gas handling assets in the Deep Basin in west central Alberta, an area which is becoming known for its prolific liquids-rich gas supply. Pembina has entered into agreements to develop a combined shallow cut and deep cut NGL extraction facility (the "Resthaven Facility") by modifying and expanding an existing gas plant. Once operational, the initial phase of the Resthaven Facility will have a gross capacity of 200 mmcf/d and 13,000 bpd of liquids extraction capability, with ultimate processing capacity of 300 mmcf/d and 18,000 bpd of liquids extraction capability. Pembina plans to construct a 44 kilometre, 6 inch diameter NGL pipeline to transport the extracted NGL from the Resthaven Facility to Pembina's Peace Pipeline, which delivers product into Edmonton, Alberta. Once completed, Pembina will own approximately 65 percent of the Resthaven Facility and will own 100 percent of the NGL pipeline.
Pembina estimates that the Resthaven Facility, associated NGL pipeline, and storage facilities will cost approximately $230 million (net to Pembina) and will contribute annual EBITDA of $30 to $40 million (including pipeline tolls). Subject to regulatory approval, Pembina expects these new facilities to be in-service in late 2013. Pembina's investment in the Resthaven Facility is supported by long-term firm service agreements with two of the major area producers while the NGL pipeline is underpinned by long-term service agreements with the Resthaven Facility owners.
Expansion into new region: Berland
Pembina announced on October 28, 2011 that it plans to construct, own and operate a 200 mmcf/d enhanced NGL extraction facility (the "Saturn Facility") and associated NGL and gas gathering pipelines in the Berland area of west central Alberta.
The Saturn Facility will be connected to Talisman Energy Inc.'s ("Talisman") Wild River and Bigstone gas plants through existing and newly constructed gas gathering lines. Once operational, Pembina expects the Saturn Facility will be able to extract up to 13,500 bpd of liquids. Pembina plans to construct an 83 kilometre, 8 inch NGL pipeline to transport the extracted NGL from the Saturn Facility to Pembina's Peace Pipeline.
Pembina expects the Saturn Facility, associated NGL and gas gathering pipelines and storage to cost approximately $200 million and contribute annual EBITDA of approximately $30 million (including pipeline tolls). Subject to regulatory and environmental approval, Pembina expects the Saturn Facility and associated pipelines to be in-service in the fourth quarter of 2013 and has entered into a long-term, firm service agreement with Talisman.
"The Saturn Facility is an exciting gas services and infrastructure project located in an area of strong liquids rich natural gas supply growth," said Bob Michaleski, Pembina's President and Chief Executive Officer. "This project is consistent with our strategy to optimize our existing asset base and, as is the goal with all of our projects, we will generate additional value through integration with our conventional pipelines and midstream and marketing services."
Conventional Pipelines Development
Drayton Valley Area
To continue meeting the needs of shippers and accommodate increasing production in the Cardium formation located in west central Alberta, Pembina plans to spend approximately $40 million prior to mid-2012 on projects that will provide additional transportation service options to customers.
This includes an investment of approximately $23 million to increase the capacity of an existing 8 inch 42 kilometre section of pipeline that transports crude oil between Willesden Green and Buck Creek, Alberta. As of the end of the third quarter of 2011, Pembina has spent $18 million to progress construction on this expansion, which is expected to increase the capacity of the line from 12,000 bpd to approximately 37,000 bpd. Pembina expects the project to be completed in the fourth quarter of 2011.
During the third quarter of 2011, Pembina completed a $5 million extension to segments of its 10 inch Drayton Valley mainline. Some additional capital is expected to be spent on tie-ins, new extensions and mainline pump station reactivations.
Additional capital is also being invested to complete the Baptiste Truck Terminal, which is scheduled to be operational during the first quarter of 2012. To date, Pembina has spent $3.1 million with a projected cost of approximately $6 million.
The Company also expects to deploy capital to debottleneck certain existing pipeline systems and on various new receipt points in the Drayton Valley area.
Pembina announced in the first quarter of 2011 that it would extend the reach of its conventional pipeline network to provide liquids transportation solutions to producers in the greater Edson, Alberta area.
The reactivation and re-certification of an existing 6 inch line from Windfall Junction on Pembina's Peace Pipeline system to Edson has been completed at an estimated capital cost of $15 million and began deliveries on October 15, 2011. This pipeline will provide transportation options for producers exploring for liquids rich gas opportunities in Deep Basin Cretaceous plays, including Cardium oil opportunities south of Edson. The re-commissioned pipeline is underpinned by a long-term transportation agreement with an area producer for approximately 5,000 bpd and has an initial capacity of approximately 12,500 bpd with an ultimate capacity of approximately 17,500 bpd. Due to high levels of industry activity in the greater Edson area, Pembina expects additional capacity and tie-in opportunities on the new line segment.
Liquids Rich Natural Gas
Pembina's Peace Pipeline and Northern Pipeline systems are located in prolific areas of the WCSB where producers are aggressively pursuing liquids rich natural gas. The impact of this increased drilling activity to Pembina is evidenced by the substantial increase in the amount of NGL, extracted from the natural gas, being transported on the Company's pipelines. Pembina is currently undertaking a detailed review and assessment of its pipeline systems' capacity to proactively prepare for additional volume increases.
Conference Call & Webcast
Pembina will host a conference call and webcast on Thursday, November 10, at 9:00 a.m. MT (11:00 a.m. ET) for interested investors, analysts, brokers and media representatives.
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 17, 2011 at 11:59 p.m. ET. To access the replay, please dial either 416-849-0833 or 855-859-2056 and enter the password 16947300.
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=367528&s=1&k=044B1EDF3CC70BB301B50C4C83BA47EF in your web browser. Shortly after the call, an audio archive will be posted on the website for 90 days.
Head Office Move Notice
Pembina is proud to announce that to accommodate our growing company we are moving to Eighth Avenue Place in Calgary. Please update your records accordingly with the information provided below and note that our phone numbers remain the same.
Our current office will close at noon MST on Thursday, November 10th for the move and we will re-open in our new space at 8:00 am MST on Tuesday, November 15th. We will not have access to any of our systems (email, voicemail, servers, etc.) beginning Wednesday, November 9th at 6:00 pm MST and expect to regain access to systems on November 15th once in our new location.
Our new address:
MD&A, Financial Statements & Notes
Pembina's management's discussion and analysis, consolidated financial statements and notes for the period ended September 30, 2011 provide a detailed explanation of Pembina's operating results for the three and nine month period ended September 30, 2011 as compared to the three and nine month period ended September 30, 2010. These documents are available at www.pembina.com and at www.sedar.com.
Throughout this news release, Pembina has used the following terms that are not defined by GAAP but are used by management to evaluate performance of Pembina and its business. Since certain non-GAAP financial measures may not have a standardized meaning, securities regulations require that non-GAAP financial measures are clearly defined, qualified and reconciled to their nearest GAAP measure. For additional information, see the section entitled "Non-GAAP Measures" in Pembina's management's discussion and analysis for the period ended September 30, 2011, which can be found at www.pembina.com and under Pembina's SEDAR profile at www.sedar.com.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
Adjusted cash flow from operating activities
Management believes these supplemental non-GAAP measures facilitate the understanding of Pembina's results from operations, leverage, liquidity and financial positions. Investors should be cautioned that EBITDA, adjusted earnings, adjusted cash flow from operating activities and and operating margin 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. Furthermore, these non-GAAP measures may not be comparable to similar measures presented by other issuers.
Forward-Looking Statements & Information
Certain statements contained in this news release constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation (collectively, "forward-looking statements").
All forward-looking statements are based on Pembina's current expectations, estimates, projections, beliefs and assumptions based on information available at the time the statement was made and in light of its experience and its perception of historical trends. The use of any of the words "estimate", "expect", "may", "will", "believe", "plan", "design", "expand", "schedule" and similar expressions are intended to identify forward-looking statements.
By their nature, such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Pembina believes the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
In particular, this news release contains forward-looking statements, including certain financial outlook, pertaining to the following:
These forward-looking statements are being made by Pembina based on certain assumptions that Pembina has made in respect thereof as at the date of this document including those discussed under the section entitled "Forward-Looking Statements and Information" in Pembina's management's discussion and analysis for the period ended September 30, 2011 which can be found under Pembina's SEDAR profile at www.sedar.com.
None of the forward-looking statements described above are guarantees of future performance and they are all subject to a number of known and unknown risks and uncertainties, including but not limited to:
Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted, forecasted or projected. Such forward-looking statements are expressly qualified by the above statement. Unless required by law, Pembina does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Management of Pembina approved the financial outlook contained herein as of the date of this document. Readers should be aware that the information contained in the financial outlook contained herein may not be appropriate for other purposes.
For additional detail and information, please see Pembina's public disclosure documents, including Pembina's annual information form for the year ended December 31, 2010 and Pembina's MD&A for the year ended December 31, 2010, each of which can be found under Pembina's SEDAR profile at www.sedar.com.
For further information: