Pembina Pipeline earns $90.5-million in Q1
Pembina Pipeline Corp
Symbol C : PPL
Shares Issued 306,997,444
Close 2013-05-08 C$ 33.29
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Pembina Pipeline earns $90.5-million in Q1
2013-05-09 18:26 ET - News Release
Mr. Bob Michaleski reports
PEMBINA PIPELINE CORPORATION ANNOUNCES 2013 FIRST QUARTER RESULTS
On April 2, 2012, Pembina Pipeline Corp. completed its acquisition of Provident Energy Ltd. The amounts disclosed herein for the three month period ending March 31, 2012 reflect results of legacy Pembina excluding Provident ("Legacy Pembina"). For further information with respect to the Acquisition, please refer to Note 4 of the Condensed Consolidated Interim Financial Statements for the period ended March 31, 2013.
First Quarter Highlights
During the first quarter, Pembina announced that it had secured an additional $1.3 billion in growth projects.
Consolidated operating margin during the first quarter of 2013 increased 88 percent to $239.8 million compared to $127.7 million during the same period of the prior year. Operating margin is a non-GAAP measure; see "Non-GAAP Measures."
Pembina generated $60.5 million in operating margin from its Conventional Pipelines business, $31.5 million from Oil Sands & Heavy Oil and $18.6 million from Gas Services. Operating margin was positively impacted by increased volumes on Pembina's Conventional Pipelines, as discussed below, and an increase in gas processed through and fees generated by Pembina's Gas Services assets. The Company's Midstream business also saw a significant increase in operating margin to $128.5 million, which includes results generated by the assets acquired through the Acquisition.
Operationally, Pembina experienced one of the strongest quarters in its history. Conventional Pipelines transported an average of 493.7 thousand barrels per day ("mbpd") in the first quarter of 2013, six percent more than the same period of 2012 when average volumes were 466.9 mbpd. Gas Services also saw an increase in volumes of 13 percent, with the Cutbank Complex processing an average of 299.3 million cubic feet per day ("MMcf/d") during the first quarter of 2013 compared to 264.9 MMcf/d in the same period of the previous year.
The Company's earnings were $90.5 million ($0.30 per share) for the first quarter of 2013 compared to $32.6 million ($0.19 per share) for the first quarter of 2012. This increase was the result of the Acquisition as well as improved performance in each of Legacy Pembina's businesses. Per share metrics were also impacted by the Acquisition.
Pembina generated adjusted EBITDA of $210.2 million during the first quarter of 2013 compared to $111.4 million during the first quarter of 2012 (adjusted EBITDA is a non-GAAP measure; see "Non-GAAP Measures"). The quarter-over-quarter increase in adjusted EBITDA was due to strong results from each of Pembina's legacy businesses, new assets and services having been brought on-stream, and the completion of the Acquisition.
Cash flow from operating activities was $229 million ($0.77 per share) for the first quarter of 2013 compared to $65.3 million ($0.39 per share) for the same period in 2012. This increase was primarily due to higher adjusted EBITDA, combined with changes in working capital, lower acquisition-related costs in the period and lower interest paid due to timing of payments.
Adjusted cash flow from operating activities was $207.4 million ($0.70 per share) for the first quarter of 2013 compared to $98.8 million ($0.59 per share) for the same period of 2012 (adjusted cash flow from operating activities is a Non-GAAP measure; see "Non-GAAP Measures").
Growth and Operational Update
During the first quarter of 2013, Pembina made substantial progress on its growth plans, securing approximately $1.3 billion in additional capital projects which the Company expects will provide long-term, sustainable returns once complete. With these new projects, Pembina's estimated capital spending plan for the year has increased from $965 million to approximately $1.04 billion.
NGL Infrastructure Expansion
The most significant of Pembina's planned investments is the $1 billion expansion of its NGL-related infrastructure, which was announced on March 5, 2013 and comprises the following three integrated components along the NGL value chain:
Twinning of the 200 MMcf/d Saturn deep cut facility ("Saturn II") which will extract valuable NGL from raw gas streams in the Berland area of Alberta at an estimated capital cost of $170 million; --Twinning of its 73,000 bpd ethane-plus fractionator ("RFS II") at its Redwater site, near Fort Saskatchewan, Alberta at an estimated capital cost of $415 million; and, --The Phase II NGL pipeline capacity expansion of its Peace/Northern NGL System which will accommodate increased NGL volumes at an estimated capital cost of $415 million.
For its Saturn II project, Pembina has entered into a firm-service contract for 130 MMcf/d (approximately 65 percent of the facility's total capacity) for a term of 10 years with a third-party producer. Based on 100 percent capacity utilization, Saturn II is expected to extract approximately 13,000 barrels per day ("bpd") of NGL which will be transported on the same pipeline lateral Pembina is currently constructing for Saturn I, and then on Pembina's Peace Pipeline, which will carry the product into the Edmonton, Alberta area. Because Saturn II will leverage existing site engineering work completed for the original Saturn facility, Pembina expects the project could be in-service by late 2015, subject to regulatory and environmental approvals.
For RFS II, Pembina has entered into contracts for 97 percent of the facility's operating capacity with producers which will provide Pembina committed take-or-pay operating margin for an initial 10-year term from the in-service date. Ethane produced at RFS II will be sold under a long-term arrangement with NOVA Chemicals Corporation. Because RFS II will leverage engineering work completed for Pembina's original Redwater fractionator, the Company expects the project to be in-service late in the fourth quarter of 2015, subject to regulatory and environmental approvals.
To accommodate increasing NGL volumes on its systems and to address constrained capacity throughout the Province of Alberta, Pembina is proceeding with its proposed Phase II NGL pipeline capacity expansion on its Peace/Northern NGL System. The Company is currently completing its Phase I expansion, which will increase NGL capacity on the Peace/Northern NGL System by 45 percent to 167,000 bpd. In April, Pembina completed three pump stations which will provide 17,000 bpd of additional NGL capacity. The Company expects to commission and bring the pump stations into service in June of this year. The remaining pump stations, which are expected to be in-service in October, 2013, will add an additional 35,000 bpd of capacity. The Phase II NGL Expansion will increase capacity from 167,000 bpd to 220,000 bpd. In total, Pembina expects the Phase I and II expansions to increase NGL transportation capacity by 90 percent. Subject to regulatory and environmental approvals, Pembina expects the Phase II NGL Expansion will cost approximately $415 million (including mainline and tie-in capital) and will be complete in early to mid-2015.
Pembina also plans to construct a new NGL lateral approximately 30 kilometres in length into the Ferrier region to tie a third-party's facility into Pembina's Brazeau Pipeline System, subject to regulatory and environmental approvals.
Crude Oil and Condensate Pipeline Capacity Expansion
On February 13, Pembina also announced that the Company reached its contractual threshold to proceed with its previously announced $250 million crude oil and condensate throughput capacity expansion on its Peace Pipeline (the "Phase II LVP Expansion") to accommodate increased producer crude oil and condensate volumes arising from strong drilling results in the Dawson Creek, Grande Prairie and Kaybob/Fox Creek areas of Alberta. Once complete, this expansion will increase capacity on the Peace Pipeline by 55,000 bpd to 250,000 bpd. The combination of Pembina's Phase I and Phase II LVP Expansions will increase capacity by 61 percent from current levels. Subject to obtaining regulatory and environmental approvals, Pembina anticipates being able to bring the Phase II LVP Expansion into service by late-2014.
Pembina's previously announced northwest Alberta pipeline expansion non-binding open season closed on April 30, 2013. Nominations were sufficient such that Pembina plans to proceed to the next stage of the open season.
Other Growth Project Updates
Pembina brought two long-term fee-for-service hydrocarbon storage caverns into service at its Redwater site in April, 2013. Pembina expects to bring a third cavern into service late in the second quarter of this year.
On the Nipisi Pipeline, Pembina has commissioned a new pump station which increased capacity to 105,000 bpd.
Pembina is also continuing to investigate offshore propane export opportunities that would allow it to leverage its existing assets and provide a potential solution for Canadian producers impacted by weak North American pricing.
Financing Activity
On March 21, 2013, Pembina announced that it had closed its bought deal offering of 11,206,750 common shares at a price of $30.80 per share through a syndicate of underwriters, which includes 1,461,750 common shares issued at the same price on the exercise in full of the over-allotment option granted to the underwriters. The aggregate gross proceeds from the offering was approximately $345 million. The net proceeds from the offering were used to reduce the Company's debt, which it used to fund its capital program and for other general corporate purposes.
On April 30, 2013, Pembina closed the offering of $200 million, 30-year senior unsecured, medium-term notes ("Notes"). The Notes have a fixed interest rate of 4.75 percent per annum paid semi-annually, and will mature on April 30, 2043. The net proceeds from the offering of Notes were used to pay down Pembina's existing credit facility.
Summary
"The first quarter of 2013 was a very exciting one at Pembina," said Bob Michaleski, Pembina's Chief Executive Officer. "First, we had another quarter of solid operational and financial results from our existing businesses. And on the growth front, we are beginning to see the tangible benefits of the Provident acquisition and our resulting fully-integrated platform by securing projects across the hydrocarbon value chain and increasing our 2013 capital spending plan to just over $1 billion. With the closing of our bought deal equity financing and 30-year term debt issuance, we're more confident than ever in our ability to execute our business plan and generate long-term, sustainable returns for our investors."
First Quarter 2013 Conference Call & Webcast
Pembina will host a conference call on May 10, 2013 at 8 a.m. MT (10 a.m. ET) to discuss details related to the first quarter. The conference call dial-in numbers for Canada and the U.S. are 647-427-7450 or 888-231-8191. A recording of the conference call will be available for replay until May 17, 2013 at 11:59 p.m. ET. To access the replay, please dial either 416-849-0833 or 855-859-2056 and enter the password 21796840.
Annual and Special Meeting Information
The Company will hold its Annual and Special Meeting of Shareholders ("AGM") on Friday, May 10, 2013 at 2:00 p.m. MT (4:00 p.m. ET) at the Metropolitan Conference Centre, 333 - 4th Avenue S.W., Calgary, Alberta, Canada.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
3 Months Ended March 31($ millions, except per share amounts) Note 2013 2012
Revenue 1,285.7 475.5
Cost of sales 1,089.8 369.2
Gain (loss) on commodity-related derivative financial instruments 11 7.9 (3.8)
Gross profit 203.8 102.5
General and administrative 32.6 17.6
Acquisition-related and other expense (income) (0.6) 22.1
32.0 39.7
Results from operating activities 171.8 62.8
Finance income (1.6) (3.1)
Finance costs 52.4 22.6
Net finance costs 9 50.8 19.5
Earnings before income tax and equity accounted investees 121.0 43.3
Share of loss (profit) of investments in equity accounted investees, net of tax 0.3 (0.2)
Current tax expense 4.2
Deferred tax expense 26.0 10.9
Income tax expense 30.2 10.9
Earnings and total comprehensive income for the period 90.5 32.6
Earnings and total comprehensive income attributable to:
Shareholders of the Company 90.3 32.6
Non-controlling interest 0.2
90.5 32.6
Earnings per share attributable to shareholders of the Company:
Basic and diluted earnings per share (dollars) 0.30 0.19
We seek Safe Harbor.