New in-service assets and expansions drive improved operating and
financial performance
All financial figures are in Canadian dollars unless noted otherwise.
This news release contains forward-looking statements and information
that are based on Pembina Pipeline Corporation's ("Pembina" or the
"Company") current expectations, estimates, projections and assumptions
in light of its experience and its perception of historic trends.
Actual results may differ materially from those expressed or implied by
these forward-looking statements. Please see "Forward-Looking
Statements & Information" herein and in the Company's Management's
Discussion & Analysis for the period ended March 31, 2014 ("MD&A") for
more details. This news release also refers to financial measures that
are not defined by Generally Accepted Accounting Principles ("GAAP"),
as identified herein. For more information about the measures which are
not defined by GAAP see "Non-GAAP and Additional GAAP Measures" herein
and in the MD&A, which is available on SEDAR at www.sedar.com.
CALGARY, May 8, 2014 /CNW/ - Pembina Pipeline Corporation ("Pembina" or
the "Company") (TSX: PPL) (NYSE: PBA) announced today that it achieved
strong financial and operational performance during the first quarter
of 2014.
Financial Overview
|
|
|
($ millions, except where noted)
|
|
3 Months Ended March 31
|
|
|
2014
|
2013
|
Revenue
|
|
1,759
|
1,249
|
Operating margin(1)
|
|
350
|
240
|
Gross profit
|
|
302
|
204
|
Earnings
|
|
147
|
91
|
Earnings per common share - basic (dollars)
|
|
0.44
|
0.30
|
Earnings per common share - diluted (dollars)
|
|
0.41
|
0.30
|
EBITDA(1)
|
|
316
|
211
|
Cash flow from operating activities
|
|
261
|
232
|
Cash flow from operating activities per common share - basic (dollars)(1)
|
|
0.82
|
0.78
|
Adjusted cash flow from operating activities(1)
|
|
264
|
202
|
Adjusted cash flow from operating activities per common share - basic (dollars)(1)
|
|
0.83
|
0.68
|
Common share dividends declared
|
|
134
|
121
|
Preferred share dividends declared
|
|
6
|
|
Dividends per common share (dollars)
|
|
0.42
|
0.41
|
Capital expenditures
|
|
287
|
137
|
(1)
|
Refer to "Non-GAAP and Additional GAAP Measures."
|
"Pembina achieved another strong quarter," said Mick Dilger, Pembina's
President and Chief Executive Officer ("CEO"). "Compared to this time
last year, we have increased our adjusted cash flow from operating
activities by approximately 31 percent and our adjusted cash flow from
operating activities per share (basic) by just over 22 percent. Our
Phase I Expansions in our Conventional Pipelines business, which came
on stream in December of last year, along with our Saturn I Facility,
which started up in October 2013, helped drive these results. The
successful execution of these projects and our strong financial and
operating performance are clear demonstrations, once again, of our
ability to realize the vision we have set out for ourselves - to
continue to produce exceptional shareholder value."
Mr. Dilger added: "We are confident in the long-term sustainability and
growth in our cash flows, and so today, our Board of Directors approved
and declared a dividend increase of 3.6 percent. Pembina's dividend on
its common shares will go from $0.14 per common share per month (or
$1.68 annualized) to $0.145 per common share per month (or $1.74
annualized) effective as of the May 25, 2014 record date, payable June
13, 2014. As we've said before, we expect the future to look much like
the past and we are committed to growing our dividend over the
long-term."
Net revenue increased 42 percent to $447 million during the first
quarter of 2014 from $315 million during the same period of 2013. This
increase was due to strong performance in each of Pembina's businesses,
particularly in the Company's Midstream business, as well as returns on
new capital investments including the Saturn I Facility and Phase I
Conventional Pipelines expansions.
Operating expenses were $95 million during the first quarter of 2014
compared to $77 million in the same period of 2013. The increase was
largely the result of higher variable costs, such as power and labour
expenses, due to growth in volumes along with having new facilities and
expansions in-service.
Operating margin totalled $350 million during the first quarter of 2014,
up 46 percent from the same period last year when operating margin
totalled $240 million. This increase was primarily the result of the
same factors that impacted net revenue, as discussed above.
Depreciation and amortization included in operations increased to $52
million during the first quarter of 2014 compared to $42 million during
the same period in 2013. The increase is primarily because the
depreciation expense in the first quarter of 2013 included a $7 million
reduction of depreciation due to a re-measurement of the
decommissioning provision in excess of the carrying amount of the
related asset in the Company's Conventional Pipelines business. The
increase also reflects the growth in Pembina's asset base since the
prior period.
Increased revenue and operating margin, which were partially offset by
higher depreciation and amortization included in operations,
contributed to gross profit of $302 million during the first quarter of
2014, a 48 percent increase compared to gross profit of $204 million
for the same period of 2013.
Pembina incurred general and administrative expenses (including
corporate depreciation and amortization) of $37 million during the
first quarter of 2014 compared to $33 million during the first quarter
of 2013. This increase was primarily due to the addition of new
employees and consultants as a result of Pembina's growth since the
prior period as well as increased short-term and share-based incentive
expenses. Every $1 change in share price is expected to change
Pembina's annual share-based incentive expense by approximately $1
million.
Net finance costs in the first quarter of 2014 were $61 million compared
to $51 million in the first quarter of 2013. The increase is primarily
attributed to an increase in the unrealized loss relating to the
revaluation of the conversion feature of convertible debentures due to
the increase in the Company's common share price during the first
quarter of 2014, which was offset by lower interest expense on loans
and borrowings.
Income tax expense was $56 million for the first quarter of 2014,
including current taxes of $34 million and deferred taxes of $22
million, compared to current taxes of $4 million and deferred taxes of
$26 million in the same period of 2013. The current taxes increased
during the quarter primarily as a result of increased earnings before
income tax in addition to earnings before income tax exceeding
available deductions. Deferred income tax expense arises from the
difference between the accounting and tax basis of assets and
liabilities.
Pembina generated EBITDA of $316 million during the first quarter of
2014 compared to $211 million during the first quarter of 2013. This
increase was largely due to improved results from operating activities
in each of Pembina's businesses and returns on new assets, expansions
and services.
The Company's earnings increased to $147 million ($0.44 per common share
- basic) during the first quarter of 2014 compared to $91 million
($0.30 per common share - basic and diluted) during the first quarter
of 2013. The increase was primarily due to improved operating margin
but was offset by the Company's income tax expense and the increase in
net finance costs during the quarter ended March 31, 2014, as described
above.
Cash flow from operating activities was $261 million ($0.82 per common
share - basic) during the first quarter of 2014 compared to $232
million ($0.78 per common share - basic) for the same period in 2013.
The increase was primarily due to improved results from operating
activities and a decrease in the non-cash working capital in 2014 as
compared to an increased change in the same period in 2013.
Adjusted cash flow from operating activities was $264 million ($0.83 per
common share - basic) during the first quarter of 2014 compared to $202
million ($0.68 per common share - basic) during the first quarter of
2013. This 31 percent increase (22 percent increase per share) was
primarily due to higher cash flow from operations net of increased
current tax expense.
Operating Results
|
|
|
|
|
3 Months Ended March 31
|
(mbpd, except where noted)(1)
|
|
2014
|
2013
|
Conventional Pipelines throughput
|
|
553
|
494
|
Oil Sands & Heavy Oil contracted capacity
|
|
880
|
870
|
Gas Services average volume processed (mboe/d) net to Pembina(2)
|
|
88
|
50
|
Midstream NGL sales volume
|
|
133
|
123
|
Total volume
|
|
1,654
|
1,537
|
(1)
|
mbpd is thousands of barrels per day.
|
(2)
|
Gas Services average volume processed converted to mboe/d (thousands of
barrels of oil equivalent per day) from million cubic feet per day
("MMcf/d") at 6:1 ratio.
|
|
|
|
3 Months Ended March 31
|
|
2014
|
2013
|
($ millions)
|
Revenue
|
Operating
Margin(2)
|
Revenue
|
Operating
Margin(2)
|
Conventional Pipelines
|
117
|
77
|
96
|
61
|
Oil Sands & Heavy Oil
|
52
|
34
|
43
|
31
|
Gas Services
|
42
|
29
|
28
|
19
|
Midstream
|
236(1)
|
209
|
148(1)
|
128
|
Corporate
|
|
1
|
|
1
|
Total
|
447
|
350
|
315
|
240
|
(1)
|
Net revenue. Refer to "Non-GAAP and Additional GAAP Measures."
|
(2)
|
Refer to "Non-GAAP and Additional GAAP Measures."
|
-
First quarter 2014 financial and operating results in Conventional
Pipelines were higher than the comparable period of 2013 primarily
because of the Phase I Expansion being placed into service in
late-December 2013. Improved revenue was partially offset by higher
operating expenses relating mainly to volume growth and the Phase I
Expansion. The Phase I Expansion increased crude oil and condensate
capacity on the Peace Pipeline by 40 mbpd and NGL capacity on the Peace
Pipeline and Northern System by 52 mbpd.
-
In Oil Sands & Heavy Oil, the increases in net revenue and operating
margin during the first quarter of 2014 compared to the same period of
2013 were primarily related to higher volumes transported on the Nipisi
Pipeline during the 2014 period. This is due to the completion of a new
pump station on that system, which was placed into service in the
second quarter of 2013.
-
Gas Services' financial and operating results were higher in the first
quarter of 2014 than the first quarter of 2013, mainly because of the
new 200 MMcf/d Saturn I Facility, which was placed into service in
late-October 2013, combined with improved plant reliability at the
Company's Musreau deep cut facility.
-
In Midstream, improved first quarter 2014 results compared to the first
quarter of 2013 were largely due to a stronger propane market across
North America which was caused by extended periods of colder than
average temperatures during the winter, and enhanced service offerings
in this business.
Growth Project Update
During the first quarter of 2014, Pembina spent approximately $287
million in capital to progress its growth initiatives as follows:
-
In the Company's Conventional Pipelines business, work continued on the
Phase II crude oil, condensate and NGL expansions ("Phase II
Expansions"). Regulatory applications have been submitted for certain
portions of the project and, subject to timely receipt of regulatory
approvals, it is expected to be in-service in late-2014 (for the crude
oil and condensate capacity) and mid-2015 (for the NGL capacity).
-
Construction of the previously announced pipeline expansion between
Simonette and Fox Creek, Alberta is substantially complete. Pembina
will conduct clean-up activities along the right-of-way and hydrostatic
testing prior to placing the pipeline into service in the third quarter
of 2014. With this expansion, Pembina expects to be able to deliver an
initial 40 mbpd into its Peace Pipeline from Fox Creek into Edmonton
once the crude oil and condensate Phase II Expansion is complete.
-
Stakeholder consultation continues on the Company's previously announced
Phase III Expansion and Pembina expects to file regulatory applications
for the project in the third quarter of 2014. Subject to regulatory
approvals, Pembina expects this expansion to be in-service between
late-2016 and mid-2017. Over the next several months, the Company
anticipates securing further pipeline transportation commitments from
customers while it refines the project scope. Any additional
commitments made before Pembina begins to order long-lead equipment
would support increasing the design capacity of the Phase III
Expansion.
-
At the Company's Gas Services business Resthaven Facility, Pembina has
completed 70 percent of site construction to date and expects to bring
the facility and associated pipelines into service in the third quarter
of 2014.
-
At the Musreau II Facility, Pembina has completed approximately 15
percent of site construction to date and expects the facility to be
in-service in the first quarter of 2015.
-
The Company's Saturn II Facility is expected to be in-service by
late-2015 and, to date, Pembina has completed approximately 10 percent
of site construction.
-
Pembina's Midstream business is nearing completion of a new full-service
truck terminal in the Cynthia area of Alberta and expects it to be
placed into service in the second quarter of 2014.
-
Regarding Pembina's previously announced $415 million RFS II project (a
second ethane-plus 73 mbpd fractionator at Pembina's Redwater site),
the Company continued to progress with facility construction during the
first quarter of 2014. Long lead equipment purchasing is substantially
complete, with all major items expected to be delivered to the site by
the end of the third quarter of 2014. Earthwork on site is complete,
and the mechanical contractor mobilized to the site at the start of
April 2014. The project is on schedule and anticipated to be on-stream
late in the fourth quarter of 2015.
-
In March 2014, Pembina signed an incremental underground storage cavern
arrangement with a major petrochemical company on a long-term,
fee-for-service basis.
Financing Activity
On January 16, 2014, Pembina closed its offering of 10,000,000
cumulative redeemable rate reset class A preferred shares, series 5
(the "Series 5 Preferred Shares") at a price of $25.00 per share. The
Series 5 Preferred Shares began trading on the Toronto Stock Exchange
on January 16, 2014 under the symbol PPL.PR.E. Proceeds from the Series
5 Preferred Shares were used to partially fund Pembina's 2014 capital
expenditure program, including capital expenditures relating to
Pembina's current expansion and growth projects, to reduce indebtedness
under the Company's credit facilities, and for general corporate
purposes of the Company and its affiliates.
Subsequent to quarter end, on April 4, 2014, Pembina closed its offering
of $600 million of senior unsecured medium-term notes. The notes have a
fixed interest rate of 4.81 percent per annum, paid semi-annually, and
will mature on March 25, 2044. The Company used a portion of the
proceeds from the notes offering to repay the $75 million senior
unsecured term facility on April 7, 2014. Pembina intends to use the
remainder of the proceeds to partially fund capital projects, repay the
Series A unsecured notes and for other general corporate purposes.
Transition of Chairman of the Board
Effective April 1, 2014, the Company's Chairman of the Board, Lorne
Gordon, stepped down and Randall Findlay, a director of Pembina since
2007 and previous director of Provident Energy Ltd. from 2001 to 2012,
assumed the role of Chairman of the Board. Mr. Gordon continues to
serve as a member of Pembina's Board of Directors.
Summary
"During the first quarter of 2014, our focus was on progressing the
multitude of projects we secured over the past year or so, and on
safely and reliably operating our existing assets" said Mr. Dilger,
Pembina's President and CEO. "We continue to strive for excellence by
advancing our safety culture initiative and the current focus is on
safely executing our suite of growth projects."
"We were also named one of Alberta's top 65 employers and added to the
S&P/TSX 60 during the first three months of this year," added Mr.
Dilger. "This is my first quarter as Pembina's CEO and I'm very proud
of these accomplishments; I feel they reflect the strength of the
Company we have built. I'm grateful to Pembina's previous CEO, Bob
Michaleski, who retired at the end of last year and to Lorne Gordon,
who stepped down as Board Chairman in April. They both contributed
greatly to the success we are realizing today and to the strong footing
we have for our Company going forward. We have a clear path in front of
us and know what we need to do to achieve our goals. Both our vision
and our existing operations are driving strong continued shareholder
value today and are helping us lay the foundation for a sustainable
future."
First Quarter 2014 Conference Call & Webcast
Pembina will host a conference call on May 9, 2014 at 7:00 a.m. MT (9:00
a.m. ET) for interested investors, analysts, brokers and media
representatives to discuss details related to the 2014 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 16, 2014 at 11:59 p.m. ET. To access
the replay, please dial either 416-849-0833 or 855-859-2056 and enter
the password 41585575.
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=742968&s=1&k=2EBCC5DD17E5F9CC9D61659A4510E23B in your web browser. Shortly after the call, an audio archive will be
posted on the website for a minimum of 90 days.
Annual and Special Meeting Information
The Company will hold its Annual and Special Meeting of Shareholders
("AGM") on Friday, May 9, 2014 at 2:00 p.m. MT (4:00 p.m. ET) at the
Metropolitan Conference Centre, 333 - 4th Avenue S.W., Calgary,
Alberta, Canada.
A live webcast of Pembina's AGM presentation can be accessed on
Pembina's website at www.pembina.com under Investor Centre, Presentation & Events, or by entering: http://event.on24.com/r.htm?e=768520&s=1&k=4BCAED7117CB62E1E2F997A222AFFAA4. Participants are recommended to register for the webcast at least 10
minutes before the presentation start time.
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 60 years. Pembina owns and operates pipelines that
transport various hydrocarbon liquids including conventional and
synthetic crude oil, heavy oil and oil sands products, condensate
(diluent) and natural gas liquids produced 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. With facilities strategically located in western Canada and
in natural gas liquids markets in eastern Canada and the U.S., Pembina
also offers a full spectrum of midstream and marketing services that
spans across its operations. Pembina's integrated assets and commercial
operations enable it to offer services needed by the energy sector
along the hydrocarbon value chain.
Forward-Looking Statements & 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", "plans", "anticipates",
"intends", and similar expressions suggesting future events or future
performance.
In particular, this document contains forward-looking statements
pertaining to, without limitation, the following: Pembina's corporate
strategy; future dividends which may be declared on Pembina's common
shares; 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, terminalling, storage and hub facilities, and; the
anticipated use of proceeds from financing.
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; 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; expectations regarding participation in Pembina's
dividend reinvestment plan; 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;
interest and tax rates; prevailing regulatory, tax and environmental
laws and regulations; maintenance of operating margins; the amount of
future liabilities relating to 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; fluctuations in operating results; adverse general economic
and market conditions in Canada, North America and elsewhere, including
changes in interest rates, foreign currency exchange rates and
commodity prices; and certain other risks detailed from time to time in
Pembina's public disclosure documents available at www.sedar.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. The
forward-looking statements contained in this document are expressly
qualified by this cautionary statement.
Non-GAAP and Additional GAAP Measures
In this news release, Pembina has used the terms operating margin,
earnings before interest, taxes, depreciation and amortization
(EBITDA), adjusted cash flow from operating activities, and adjusted
cash flow from operating activities per share. Since Non-GAAP and
Additional 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 and Additional GAAP financial measures are
clearly defined, qualified and reconciled to their nearest GAAP
measure. Except as otherwise indicated, these Non-GAAP and Additional
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 and Additional GAAP measures is
to provide additional useful information 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 the Non-GAAP and Additional GAAP
measures differently. Investors should be cautioned that these
measures 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. For additional information regarding non-GAAP and
additional GAAP measures, including reconciliations to measures
recognized by GAAP, please refer to the MD&A, which is available on SEDAR at www.sedar.com.
SOURCE Pembina Pipeline Corporation
Image with caption: "Pembina's Saturn I Facility (CNW Group/Pembina Pipeline Corporation)". Image available at: http://photos.newswire.ca/images/download/20140508_C7263_PHOTO_EN_40095.jpg