Project execution is tracking on time and on budget; new capital
projects and additional secured Phase III pipeline expansion volumes
support future growth
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 December 31, 2014 ("MD&A")
for more details. This news release also refers to net revenue,
operating margin, earnings before interest, taxes, depreciation and
amortization ("EBITDA") and adjusted cash flow from operating
activities (and cash flow from operating activities per common share
and adjusted cash flow from operating activities per common share)
which are financial measures that are not defined by Generally Accepted
Accounting Principles ("GAAP"). Pembina's methods of calculating these
financial measures may not be directly comparable to that of other
companies. Pembina considers these non-GAAP financial measures to
provide useful information to both management and investors in
measuring Pembina's financial performance and financial condition. 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, Feb. 26, 2015 /CNW/ - Pembina Pipeline Corporation ("Pembina"
or the "Company") (TSX: PPL; NYSE: PBA) announced today its financial
and operating results for the fourth quarter and full year 2014.
Financial Overview
|
|
|
|
|
($ millions, except where noted)
|
3 Months Ended
December 31
(unaudited)
|
12 Months Ended
December 31
|
|
2014
|
2013
|
2014
|
2013
|
Revenue
|
1,259
|
1,282
|
6,069
|
5,006
|
Net revenue(1)
|
304
|
379
|
1,469
|
1,306
|
Operating margin(1)
|
195
|
275
|
1,078
|
949
|
Gross profit
|
144
|
235
|
876
|
793
|
Earnings
|
84
|
95
|
383
|
351
|
Earnings per common share - basic (dollars)
|
0.22
|
0.29
|
1.07
|
1.12
|
Earnings per common share - diluted (dollars)
|
0.22
|
0.29
|
1.06
|
1.12
|
EBITDA(1) (2)
|
170
|
235
|
920
|
832
|
Cash flow from operating activities
|
196
|
208
|
800
|
685
|
Cash flow from operating activities per common share - basic (dollars)(1)
|
0.58
|
0.66
|
2.45
|
2.23
|
Adjusted cash flow from operating activities(1)
|
164
|
185
|
777
|
725
|
Adjusted cash flow from operating activities per common share - basic (dollars)(1)
|
0.49
|
0.59
|
2.38
|
2.36
|
Common share dividends declared
|
146
|
132
|
563
|
507
|
Preferred share dividends declared
|
10
|
5
|
31
|
5
|
Dividends per common share (dollars)
|
0.44
|
0.42
|
1.72
|
1.65
|
Capital expenditures
|
483
|
275
|
1,412
|
880
|
|
|
(1)
|
Refer to "Non-GAAP and Additional GAAP Measures."
|
(2)
|
Includes inventory write-down for the three and twelve months ended
December 31, 2014 of $38 million and other expenses as discussed below.
|
|
|
2014 Highlights
"I'm very happy to report that 2014 was another record year for Pembina
and the most successful year in the history of our Company," said Mick
Dilger, Pembina's President and Chief Executive Officer. "Driven by
strong operational performance, we achieved record operating margin,
which increased nearly 14 percent over 2013. We also reached an
all-time high for cash flow from operating activities, which grew
almost 17 percent and 10 percent on a per share basis in 2014 compared
to 2013 as well as for EBITDA, which increased by almost 11 percent
over the prior year."
"Another 2014 achievement that I'm particularly proud of is our safety
record. Pembina had a full year of zero lost time injuries and zero
recordable employee injuries, despite employees having worked 24
percent more hours than in 2013," added Mick. "This is an extraordinary
accomplishment and evidence of our commitment to achieving safe,
reliable and responsible operations - an effort that is clearly paying
off."
Other highlights from 2014 included: continuing to progress Pembina's
$5.8 billion of committed capital growth projects while keeping the
overall portfolio tracking on time and on budget; placing almost $900
million of new assets into service; completing the Vantage acquisition
and subsequently securing an expansion in February 2015; signing new
contracts to support additions to the Company's Phase III Expansion
plans; announcing approximately $1.4 billion of new projects and
locking in future growth; raising $1.1 billion in new financings; and
increasing the common share dividend.
"Our Phase III Expansion, which is slated to be in-service between
late-2016 and mid-2017, continued to receive support from customers
throughout the year," commented Mick. "This is a positive indication of
the ongoing confidence in the oil and gas reserves in western Canada,
despite challenging markets near the end of 2014 and into early 2015.
Since September 2014, we've secured an additional 75,000 barrels per
day under long-term, fee-for-service agreements and total committed
volume is now 362,000 barrels per day, or 86 percent of the initial
420,000 barrel per day capacity."
"As I've said, this was the most successful year in our history," stated
Mick. "We continue to do the important things right - operating safely
and reliably, de-risking our business, securing additional Phase III
volumes, and positioning ourselves to generate long-term shareholder
value. Doing the important things right will continue to be our focus
as we progress through 2015. Pembina has been proactively working to
grow its fee-for-service business to minimize future impacts of
commodity prices on its financial results. With our $5.8 billion of
committed projects, we should see operating margin underpinned by
fee-for-service agreements grow from approximately 65 percent in 2014
to in excess of 80 percent in 2018. Our objective is to continue our
strategy of pursuing low-risk, contracted projects and to outgrow the
component of our overall business that is directly tied to commodity
prices."
Mick concluded: "There is no disputing the decline in commodity prices
took a toll on our fourth quarter results. However, I'm confident that
this will not interfere with our medium-term goal of essentially
doubling our EBITDA by mid-2017, which in the end will reward our loyal
shareholders. We plan to stay the course, do what's required, and
achieve this outcome."
2014 Financial Review
Revenue in 2014 was $6.1 billion compared to $5 billion in 2013 while
net revenue for 2014 was $1.5 billion compared to $1.3 billion during
2013. The increase in net revenue was largely due to the Company's
Conventional Pipelines and Gas Services businesses which generated
increases in net revenue of almost 25 percent and 36 percent,
respectively, during 2014 compared to the prior year. Strong
performance in each of these businesses was driven by new assets and
facilities being placed into service as well as increased volumes on
legacy assets.
Revenue for the fourth quarter of 2014 was $1.3 billion, essentially
unchanged from the fourth quarter of 2013. Net revenue decreased by 20
percent in the fourth quarter of 2014 to $304 million from $379 million
during the same period of 2013. This decrease was primarily due to the
decline in commodity prices, which resulted in lower price
differentials and an inventory write-down of $38 million in the
Company's Midstream business. Partially offsetting net revenue was the
Company's Conventional Pipelines business, which generated an increase
of approximately 32 percent in net revenue in the fourth quarter of
2014 compared to the same period of 2013 due to contributions from the
Phase I crude oil, condensate and natural gas liquids pipeline capacity
expansions which were completed in December 2013 (the "Phase I
Expansions"). In addition, start-up at the new Resthaven Facility and
strong performance at the Company's Saturn I Facility helped drive an
increase of over 39 percent in Gas Services' net revenue in the fourth
quarter of 2014 compared to the same period of 2013.
Operating expenses were $401 million for the full-year in 2014 and $117
million during the fourth quarter compared to $356 million and $101
million during the same periods of 2013. The increase in operating
expenses for the year and fourth quarter ended December 31, 2014 was
primarily the result of new in-service assets, offset by a reduction in
operating expenses in the Company's Midstream business resulting from
Pembina's disposition of certain of its non-core trucking-related
assets recognized in the second quarter of 2014.
During 2014, operating margin increased almost 14 percent to $1.1
billion compared to $949 million for the full-year of 2013. The
year-over-year increase was primarily because of strong performance in
the Company's Conventional Pipelines and Gas Services businesses, as
well as the Midstream business in the first nine months of the year.
Operating margin totalled $195 million during the fourth quarter of
2014, down from $275 million in the same period last year. This
decrease was largely related to the Midstream business, which was
impacted by weak commodity prices during the last several months of
2014, as discussed above.
Depreciation and amortization included in operations during 2014 was
$216 million compared to $163 million for the full-year of 2013. This
increase was partially due to depreciation and amortization of $40
million stemming from the growth in Pembina's asset base since 2013.
This includes the acquisition of the Vantage pipeline system (the
"Vantage Pipeline") which increased the Company's asset base by seven
percent and contributed $4 million in depreciation expense since the
closing of the acquisition (discussed below). In addition, Pembina
recognized $13 million in accelerated depreciation associated with the
Company's non-core trucking-related assets in the second quarter of
2014, as well as a reduced recovery recognized in 2014 compared to 2013
with respect to the re-measurement of the decommissioning provision due
to changes in discount rates. In the fourth quarter of 2014,
depreciation and amortization included in operations rose to $62
million compared to $42 million during the same period in 2013 as a
result of the same factors which impacted the full-year results noted
above.
Gross profit for 2014 was $876 million compared to $793 million for
2013. This 10 percent year-over-year increase was driven by strong
operating performance in 2014, as previously mentioned. In the fourth
quarter of 2014, decreased operating margin coupled with increased
depreciation and amortization included in operations contributed to
gross profit of $144 million, a 39 percent reduction compared to $235
million in the same period in 2013.
For the year ended December 31, 2014, Pembina incurred general and
administrative expenses (excluding corporate depreciation and
amortization) of $156 million compared to $132 million during 2013. The
increase was largely due to higher salaries, benefits, incentives and
rental expenses related to the addition of new employees and
consultants to support Pembina's growth. General and administrative
expenses (excluding corporate depreciation and amortization) were $28
million in the fourth quarter of 2014 compared to $43 million in the
same period of 2013. This decrease was primarily due to lower
share-based payment expenses which were partially offset by an increase
in salaries, benefits and rental expenses. The decrease in share-based
payment expense in the fourth quarter of 2014 is correlated with the
Company's share price, which decreased during that period compared to
an increase in the Company's share price in the fourth quarter of 2013.
Every $1 change in share price is expected to change Pembina's annual
share-based incentive expense by approximately $1 million.
Pembina generated EBITDA of $920 million in 2014 ($976 million prior to
an inventory write-down and other expenses, as discussed below), 11
percent higher than EBITDA of $832 million in 2013. The increase in
EBITDA was due to higher operating margin, partially offset by an
inventory write-down of $38 million (2013: nil) in the Company's
Midstream business recorded in the fourth quarter of the year and other
expenses of $18 million (2013: $1 million). Other expenses increased
year-over-year primarily due to a net impairment for non-recoverable
costs associated with the Cornerstone pipeline project (which did not
proceed), arbitration settlement costs and acquisition-related expenses
for the Vantage Pipeline. EBITDA was $170 million during the fourth
quarter of 2014, down from $235 million during the fourth quarter of
2013 due to decreased operating margin, which was partially offset by
reduced general and administrative and other expenses. EBITDA for the
fourth quarter of 2014 before the $38 million inventory write-down was
$208 million.
Full-year net finance costs in 2014 totalled $130 million, down from
$166 million in 2013. Net finance costs were lower in 2014 primarily
due to a $30 million decrease in the loss on the revaluation of the
conversion feature of the series E and F convertible debentures
resulting from fewer debentures outstanding and lower prices for these
securities. A $9 million decrease in interest expense on the
convertible debentures as a result of conversions during the year and
foreign exchange gains and other of $3 million also contributed to
lower net finance costs. These changes were partially offset by an
increase of $8 million in the loss on fair value of
non-commodity-related derivative financial instruments and increased
interest expense of $2 million on loans and borrowings, reflecting
increased borrowing levels, net of capitalized borrowing costs.
Income tax expense for 2014 totalled $167 million, including current tax
of $103 million and deferred tax of $64 million, compared to income tax
expense of $143 million in 2013, including current tax of $38 million
and deferred tax of $105 million. The current tax rose in 2014
primarily as a result of taxable income exceeding losses and deductions
available for carry-over in certain of Pembina subsidiary corporations.
Income tax expense was $39 million for the fourth quarter of 2014,
including current tax of $28 million and deferred tax of $11 million,
compared to $41 million, including current tax of $19 million and
deferred tax of $22 million in the same period of 2013 for the same
reasons noted above.
The Company's earnings increased to $383 million in 2014 compared to
$351 million in 2013. This was largely due to higher gross profit in
the Conventional Pipelines, Gas Services and Midstream businesses and
lower finance costs, which were offset by increased general and
administrative expenses, other expenses, share of loss from equity
accounted investees and income tax expense. Despite increased earnings,
earnings per share decreased from $1.12 per common share in 2013 to
$1.07 per common share in 2014, largely because of the increased
weighted average number of common shares outstanding due to shares
issued in the following ways: upon conversion of convertible
debentures; under the dividend reinvestment component of Pembina's
Premium Dividend™ and Dividend Reinvestment Plan; and, in association
with the Vantage Pipeline acquisition. Also offsetting the increase in
earnings was the Company's share of loss from equity accounted
investees, which included accelerated depreciation of $25 million for
certain out-of-service assets at Pembina's Fort Saskatchewan ethylene
storage facility which was recorded in the third quarter of 2014. The
Company's earnings decreased to $84 million ($0.22 per common share)
during the fourth quarter of 2014 compared to $95 million ($0.29 per
common share) during the fourth quarter of 2013 largely due to reduced
gross profit in the Company's Midstream business, higher taxes and
depreciation and amortization included in operations in 2014.
Cash flow from operating activities for the year ended December 31, 2014
was $800 million ($2.45 per common share) compared to $685 million
($2.23 per common share) during 2013. The increase was mainly due to
higher earnings as well as a decreased change in non-cash working
capital in 2014 compared to 2013 and partially offset by increased
taxes paid. Cash flow from operating activities was $196 million ($0.58
per common share) during the fourth quarter of 2014 compared to $208
million ($0.66 per common share) for the same period last year, with
the decrease primarily due to lower fourth quarter earnings in 2014.
Adjusted cash flow from operating activities in 2014 was $777 million
($2.38 per common share) compared to $725 million ($2.36 per common
share) during 2013. The increase was largely related to higher
operating margin offset by increased current taxes, share-based payment
expenses and preferred share dividends declared and paid. Adjusted cash
flow from operating activities for the fourth quarter of 2014 was $164
million ($0.49 per common share) compared to $185 million ($0.59 per
common share) during the fourth quarter of 2013. This decrease was
primarily due to lower operating margin, increased current taxes and
preferred share dividends declared and paid.
Operating Results
|
|
|
|
|
|
3 Months Ended
December 31
(unaudited)
|
12 Months Ended
December 31
|
(mbpd, except where noted)(1)
|
2014
|
2013
|
2014
|
2013
|
Conventional Pipelines throughput
|
612
|
500
|
575
|
492
|
Oil Sands & Heavy Oil contracted capacity
|
880
|
880
|
880
|
880
|
Gas Services average volume processed (mboe/d) net to Pembina(2)
|
97
|
66
|
86
|
53
|
Midstream NGL sales volume(3)
|
130
|
122
|
119
|
109
|
Total volume
|
1,719
|
1,568
|
1,660
|
1,534
|
|
|
(1)
|
mbpd is thousands of barrels per day.
|
(2)
|
Gas Services average volume processed converted to mboe/d (thousands of
barrels of oil equivalent per day) from million cubic feet per day
("MMcf/d") at 6:1 ratio.
|
(3)
|
NGL is natural gas liquids.
|
|
|
|
|
|
|
|
|
|
|
|
|
3 Months Ended
December 31
(unaudited)
|
12 Months Ended
December 31
|
|
2014
|
2013
|
2014
|
2013
|
($ millions)
|
Net
Revenue(1)
|
Operating
Margin(1)
|
Net
Revenue(1)
|
Operating
Margin(1)
|
Net
Revenue(1)
|
Operating
Margin(1)
|
Net
Revenue(1)
|
Operating
Margin(1)
|
Conventional Pipelines
|
146
|
74
|
111
|
59
|
513
|
302
|
411
|
251
|
Oil Sands & Heavy Oil
|
52
|
34
|
53
|
34
|
204
|
136
|
195
|
131
|
Gas Services
|
46
|
29
|
33
|
21
|
165
|
107
|
121
|
78
|
Midstream
|
61
|
57
|
183
|
161
|
587
|
528
|
580
|
486
|
Corporate
|
(1)
|
1
|
(1)
|
|
|
5
|
(1)
|
3
|
Total
|
304
|
195
|
379
|
275
|
1,469
|
1,078
|
1,306
|
949
|
|
|
(1)
|
Refer to "Non-GAAP and Additional GAAP Measures."
|
|
|
-
For the twelve and three months ended December 31, 2014, financial and
operating results in the Conventional Pipelines business were higher
than the comparable periods of 2013 primarily due to the Phase I
Expansions being placed into service at the end of 2013, which allowed
for increased volumes on the Company's Peace and Northern pipeline
systems. Fourth quarter results in 2014 were also positively impacted
by volumes on the Vantage Pipeline, which are recorded in this
business.
-
In the Oil Sands & Heavy Oil business, increases in net revenue and
operating margin during the year ended December 31, 2014 compared to
2013 were primarily related to higher interruptible volumes on the
Nipisi Pipeline. Additional flow through operating expenses further
increased net revenue in the first and third quarters of 2014. Net
revenue and operating margin remained consistent during the fourth
quarter of 2014 as compared to the same period of 2013.
-
Gas Services' financial and operating results were higher in both the
full-year and fourth quarter of 2014 compared to the commensurate
periods of the prior year primarily due to the addition of the Saturn I
Facility, which was placed into service in late October 2013, and
improved operational performance at the Company's Cutbank Complex. The
Resthaven Facility, which was placed into service in October 2014, also
contributed to the higher fourth quarter results.
-
In the Midstream business, full-year net revenue and operating margin of
$587 million and $528 million respectively, improved over the $580
million and $486 million realized in 2013. Higher net revenue and
operating margin in 2014 was primarily because of increased storage
opportunities in the first half of the year along with higher
throughput volumes, wider margins, stronger NGL and propane pricing
early in the year (predominantly in Empress East), offset by reduced
commodity prices in the fourth quarter. Pembina generated net revenue
of $61 million during the fourth quarter of 2014, down from $183
million during the fourth quarter of 2013. Operating margin in the
fourth quarter of 2014 in this business was $57 million compared to
$161 million during the same period of the prior year. These decreases
were mainly due to the decline in commodity prices, particularly the
weaker price for propane in the fourth quarter of 2014 compared to the
same period in 2013, which resulted in Pembina recognizing an inventory
write-down of $38 million. Pembina's average realized sales price for
propane declined approximately 30 percent in the fourth quarter of 2014
compared to the same period of 2013. Lower price differentials combined
with lower crude oil midstream storage revenue also negatively impacted
fourth quarter net revenue and operating margin in 2014.
Acquisition of the Vantage Pipeline and Vantage Pipeline Expansion
On October 24, 2014, Pembina acquired the Vantage Pipeline and Mistral
Midstream Inc.'s ("Mistral") interest in the Saskatchewan Ethane
Extraction Plant ("SEEP") for total consideration of $733 million
(U.S.$653 million). To enact the purchase, Pembina acquired all of the
issued and outstanding equity interests of Vantage Pipeline Canada ULC,
Vantage Pipeline US LP and Mistral. Consideration for the transaction
consisted of cash of $217 million (U.S.$193 million), the issuance of
5,610,317 common shares of the Company valued at $266 million (U.S.$237
million), and repayment of Vantage's bank indebtedness of $250 million
(U.S.$223 million) at closing (the "Vantage Acquisition"). The fair
value of the common shares issued was based on the Toronto Stock
Exchange listed share price on the closing date of the acquisition.
The Vantage Pipeline is a recently constructed high vapour pressure
pipeline that is approximately 700 kilometres ("km") long with a
capacity of approximately 40 mbpd. The pipeline originates in Tioga,
North Dakota and terminates near Empress, Alberta and it provides
long-term, fee-for-service cash flow and access to the North Dakota
Bakken play for future NGL opportunities. The Vantage Pipeline forms
part of Pembina's Conventional Pipelines business.
As part of the Vantage Acquisition, Pembina also acquired pipeline
infrastructure from Mistral and Mistral's interest in SEEP, a 60 MMcf/d
deep cut gas processing facility that is currently under construction
and is centrally located to service the southeast Saskatchewan Bakken
region. SEEP, which is underpinned by both a long-term ethane sales
agreement and a long-term, fee-for-service processing agreement, is
expected to produce approximately 4.5 mbpd of ethane and will connect
into the Vantage Pipeline through a pipeline lateral. Pembina expects
SEEP and the associated pipeline lateral to be in-service in mid-2015.
SEEP and the associated pipeline lateral form part of Pembina's Gas
Services business.
Subsequent to the Vantage Acquisition and year end, on February 10,
2015, the Company announced that it has entered into agreements to
expand the Vantage pipeline system (the "Vantage Expansion") for an
estimated capital cost of $85 million.
The Vantage Expansion entails increasing the Vantage Pipeline's mainline
capacity from 40 mbpd to 68 mbpd through the addition of mainline pump
stations and the construction of a new 80 km, 8-inch gathering lateral.
The Vantage Expansion is supported by a long-term, fee-for-service
agreement, with a substantial take-or-pay component, and the gathering
lateral is underpinned by a fixed return on invested capital agreement.
Subject to regulatory and environmental approvals, the Vantage Expansion is
expected to be in-service in early-2016.
New Developments in 2014 and Growth Project Update
2014 was a particularly successful year for Pembina in terms of securing
customer support for announced projects, acquiring assets to expand the
Company's operations into new areas and progressing longer-term growth
opportunities. The Company remained focused on expanding its integrated
service offerings and proactively growing its fee-for-service asset
base.
Conventional Pipelines
As announced in September 2014, Pembina is increasing the size of its
Phase III Pipeline Expansion program (the "Phase III Expansion") due to
strong customer demand throughout the year. Pembina now plans to
construct two pipelines between Fox Creek and Namao, Alberta (one
16-inch diameter and one 24-inch diameter) with an initial combined
capacity of 420 mbpd and an ultimate capacity of over 690 mbpd with the
addition of midpoint pump stations. Another segment was also added to
the project between Wapiti and Kakwa, Alberta. These additions are
expected to increase capital spending for the mainline project from $2
billion to $2.44 billion. Subject to regulatory and environmental
approvals, Pembina expects the 16-inch and 24-inch diameter pipelines
to be in-service between late-2016 and mid-2017. Pembina submitted its
regulatory application for both pipelines from Fox Creek to Namao on
September 2, 2014.
The Phase III Expansion continued to receive positive customer support
through the latter part of 2014, with new contracts being signed for
volumes. Pembina announced on September 10, 2014 that it had
commitments for 289 mbpd and by September 25, 2014, the Company
announced that it had secured additional agreements, bringing total
volume under contract to 307 mbpd. Since then, Pembina has received
further commitments for an additional 55 mbpd, despite challenging
markets near the end of the year. Total committed volume is now 362
mbpd, or 86 percent of the initial 420 mbpd capacity.
Pembina placed its previously announced pipeline expansion between
Simonette and Fox Creek into service on August 6, 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, discussed below, is complete. The 35
km segment from Lator to Simonette is also complete and came into
service in January 2015 and construction is progressing on the 35 km
segment from Kakwa to Lator, with an anticipated April 2015 in-service
date. To date, over 10 percent of the overall Phase III Expansion
program has been completed on time and on budget.
Also during 2014, Pembina was successful in its commercial efforts to
secure the majority of its existing crude and condensate volumes under
long-term, firm-service contracts. In aggregate, Pembina has now
contracted 690 mbpd of crude oil, condensate and NGL through its
recontracting efforts and through its Phase I, II and III conventional
pipeline expansions. Once the Phase III Expansion is brought into
service, virtually all of the throughput on Pembina's Peace and
Northern systems will be under long-term, fee-for-service contracts.
With the completion of the Phase III Expansion, the Company will have
four pipelines in the corridor between Fox Creek and Namao which will
allow for operational efficiencies and improved quality management of
product on its systems.
Work continued on the Phase II crude oil, condensate and NGL expansions
("Phase II Expansions") over the fourth quarter of 2014. Pembina
expects the crude oil and condensate portion of the project to be
mechanically complete in April 2015 and commissioned in the second
quarter of 2015. Pembina has now received all regulatory and
environmental approvals for the NGL portion of the pipeline and expects
this component of the project to be in-service in the third quarter of
2015. Overall, the Phase II Expansions are continuing to track
on-budget.
The Company is also continuing to progress its previously announced
plans to expand its presence in the Edson and Willesden Green areas of
Alberta. Pembina expects the Willesden Green pipeline lateral to be
in-service in mid-2015 and, subject to regulatory and environmental
approvals, its pipeline laterals in the Edson area to be in-service
mid-2016.
On November 11, 2014, Pembina announced that it has entered into binding
agreements to proceed with a $220 million expansion to its pipeline
infrastructure in northeast British Columbia ("B.C.") (the "NEBC
Expansion"). The NEBC Expansion will transport condensate and NGL for
various producers in the liquids-rich Montney resource play.
The project entails the construction of approximately 160 km of up to
12-inch diameter pipeline with a base capacity of up to 75 mbpd that
will parallel the Company's Blueberry pipeline system northwest of
Taylor, B.C. to the Highway/Blair Creek area of B.C. The project is
underpinned by a long-term, cost-of-service agreement with an anchor
tenant. Subject to regulatory and environmental approvals, Pembina
anticipates bringing the NEBC Expansion on-stream in late-2017.
Gas Services
The Company continued to attract significant support for new gas
gathering and processing infrastructure throughout 2014 and
successfully progressed its roster of projects within this business.
On October 6, 2014, Pembina placed its 200 MMcf/d (134 MMcf/d net)
Resthaven Facility into service and it is now delivering NGL into
Pembina's Peace Pipeline.
On October 10, 2014, Pembina announced that it plans to proceed with a
$170 million (gross) 100 MMcf/d expansion of the Resthaven Facility and
to build, own and operate a new gas gathering pipeline that will
deliver gas into the plant (collectively, the "Resthaven Expansion").
The Resthaven Expansion is underpinned by a long-term fee-for-service
agreement and Pembina expects the plant expansion to be in-service in
mid-2016 and the gathering pipeline to be in-service in mid-2015.
On November 27, 2014, Pembina announced that it plans to construct a new
100 MMcf/d shallow cut facility ("Musreau III") and further expand its
gas processing capacity at Musreau for an estimated cost of $105
million. Musreau III, which is underpinned by long-term agreements with
several area producers, will be built adjacent to Pembina's existing
Musreau I and Musreau II facilities. The new gas plant will leverage
the engineering, design and execution strategy from the Company's
Musreau I and Musreau II facilities and will use the same pipeline
lateral to access Pembina's Peace Pipeline System. Pembina expects
Musreau III to have liquids extraction capacity of 3 mbpd, subject to
gas compositions. The agreements for Musreau III are take-or-pay in
nature and provide flow through of operating expenses. Subject to
regulatory and environmental approvals, Pembina anticipates bringing
Musreau III on-stream in mid-2016.
In total, once Musreau III is complete, the Cutbank Complex will have
568 MMcf/d of shallow cut processing capacity, net to Pembina, 205
MMcf/d of deep cut processing capacity and will be able to produce
roughly 25 mbpd of liquids for transportation on Pembina's Conventional
Pipelines.
Pembina has also completed commissioning of its newly constructed 100
MMcf/d shallow cut gas plant, the Musreau II Facility, which came in
slightly under budget and was placed into service on December 17, 2014,
ahead of its previously anticipated in-service date of the first
quarter 2015.
The Company is progressing the construction of the newly-acquired SEEP
facility. The project is currently on budget and on schedule for a
mid-2015 in-service date with plant site construction approximately 25
percent complete. All regulatory and environmental approvals have been
obtained and all engineering, fabrication and construction services
have been largely contracted.
Pembina's Saturn II Facility (a 200 MMcf/d 'twin' of the Saturn I
Facility) is on schedule and on budget and is expected to be
commissioned in the third quarter and placed into service by late-2015.
To-date, the Company has completed 36 percent of site construction.
Once the facilities listed above come on-stream, Pembina expects Gas
Services' processing capacity to reach 1.5 bcf/d (net to Pembina),
including ethane-plus extraction capacity of 870 MMcf/d (net to
Pembina). The volumes from Pembina's existing assets and those under
development (as discussed above) will be processed largely on a
contracted, fee-for-service basis and could result in 70 mbpd of NGL,
subject to gas compositions, that would be transported for toll revenue
on Pembina's Conventional Pipelines. Volumes from these projects
support Pembina's pipeline expansion plans as discussed under
"Conventional Pipelines."
Midstream
Pembina continues to progress facility construction of its second 73
mbpd ethane-plus fractionator at the Company's Redwater site ("RFS
II"). Over 80 percent of equipment has been set on site and module
fabrication is substantially complete. On site construction is
currently 65 percent complete. The project is on schedule and
anticipated to be on-stream late in the fourth quarter of 2015.
With the addition of RFS III, Pembina's third fractionator at its
Redwater site with propane-plus capacity of 55 mbpd, which was
announced on May 12, 2014, fractionation capacity will total 210 mbpd,
making the Company's Redwater complex the largest fractionation
facility in Canada. Detailed engineering work is underway and over 30
percent of long-lead equipment has been ordered, with all critical
orders in place. Pembina has now received regulatory approval and has
submitted its application for environmental approval, which it
anticipates receiving later this year. Subject to obtaining this
approval, Pembina expects RFS III to be in-service in the third quarter
of 2017. Overall, the project is tracking on schedule and on budget.
As announced on October 9, 2014, Pembina plans to develop the Canadian
Diluent Hub ("CDH"), a large-scale condensate and diluent terminal at
its Heartland Terminal site near Fort Saskatchewan, Alberta. The
proposed facilities are designed to accommodate contracted diluent
supply volumes from the Company's previously announced field gas plant,
pipeline and NGL fractionator expansions. The Company expects CDH to
become a new market hub for condensate and other diluents by offering
its customers a variety of value-added services.
Site preparation began in late-2013 and is on-going. Subject to further
regulatory and environmental approvals, Pembina anticipates phasing-in
incremental pipeline connections to regional condensate delivery
systems in 2016 with a view to achieving full connectivity and service
offerings at CDH in mid-2017.
On June 16, 2014, Pembina's Midstream business placed a new full-service
truck terminal in the Cynthia area of Alberta into service which was
operating at full capacity by the end of the year. The Company also
continued with the development of storage capacity at its Edmonton
North Terminal. During the fourth quarter, Pembina progressed
construction at the site with a view to bringing the additional 540,000
barrels of above-ground storage tanks into service in mid-2016.
At its storage and terminalling facilities in Corunna, Ontario, Pembina
progressed development of a new brine pond, rail upgrades, and the
installation of a new propane truck rack to meet increased demand for
services. Pembina also continued throughout the year on its underground
hydrocarbon cavern development program at its Redwater facility.
In September, the Company communicated its plans to proceed with
developing a 37 mbpd west coast propane export terminal under an
agreement with the Port of Portland, Oregon. This agreement sets forth
the terminal site, which includes an existing marine berth located
within the city of Portland, for the development of the project. Since
the announcement, Pembina's dedicated project team is continuing to
make progress with community, regulatory and special interest group
engagement, and is also advancing detailed engineering design work in
advance of a number of permit applications to be submitted throughout
2015. The project is anticipated to be brought into service in
early-2018 (subject to obtaining required permits and approvals). The
Company expects that the proposed terminal will provide growing
Canadian propane supply (that is derived from natural gas produced in
western Canada) with access to large, international markets, while
complementing Pembina's expanding integrated service offering for
products that are derived from natural gas.
Financing Activity
On January 16, 2014, Pembina closed its offering of 10 million
cumulative redeemable rate reset class A preferred shares, Series 5
("Series 5 Preferred Shares") at a price of $25.00 per share for
aggregate proceeds of $250 million. Dividends on the Series 5 Preferred
Shares are $0.3125 quarterly, or $1.25 per share on an annualized
basis, payable on the 1st day of March, June, September and December,
as and when declared by the Board of Directors of Pembina, for the
initial fixed rate period to but excluding June 1, 2019. The Series 5
Preferred Shares began trading on the Toronto Stock Exchange on January
16, 2014 under the symbol PPL.PR.E.
On April 4, 2014, the Company issued $600 million in senior unsecured
medium-term notes and subsequently repaid its $75 million senior
unsecured term facility on April 7, 2014 and its $175 million senior
unsecured notes (Series A) on June 16, 2014.
On September 11, 2014, Pembina closed its offering of 10 million
cumulative redeemable rate reset class A preferred shares, series 7
("Series 7 Preferred Shares") at a price of $25.00 per share for
aggregate gross proceeds of $250 million. Dividends on the Series 7
Preferred Shares are $0.2813 quarterly, or $1.125 per share on an
annualized basis, payable on the 1st day of March, June, September and
December, as and when declared by the Board of Directors of Pembina,
for the initial fixed rate period to but excluding December 1, 2019.
The Series 7 Preferred Shares began trading on the Toronto Stock
Exchange on September 11, 2014 under the symbol PPL.PR.G.
Subsequent to year-end 2014, Pembina closed an offering of $600 million
of senior unsecured medium-term notes on February 2, 2015. The offering
was conducted in two tranches consisting of $450 million in senior
unsecured medium-term notes, series 5 having a fixed coupon of 3.54
percent per annum, paid semi-annually, and maturing on February 3,
2025, and $150 million through the re-opening of its 4.75 percent
medium-term notes, series 3, due April 30, 2043. Net proceeds were used
to reduce short-term indebtedness of the Company under its credit
facilities, and will also be used to fund Pembina's capital program and
for other general corporate purposes.
Fourth Quarter 2014 Conference Call & Webcast
Pembina will host a conference call on Friday, February 27, 2015 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 full-year and
fourth quarter of 2014. 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 March 4, 2015 at
11:59 p.m. ET. To access the replay, please dial either 416-849-0833 or
855-859-2056 and enter the password 41655527.
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=908208&s=1&k=6DBCFDBECA3074FAE21EB2E3398FFCB8 in your web browser. Shortly after the call, an audio archive will be
posted on the website for a minimum of 90 days.
2015 Investor Day
Pembina will hold an Investor Day on Tuesday, March 10, 2015 at the One
King West Hotel in Toronto, Ontario.
Parties interested in attending the event please email investor-relations@pembina.com to request an invite. A live webcast will begin at 8:30 a.m. ET. To
register for the webcast please click the following link or enter the
URL into your web browser: http://event.on24.com/r.htm?e=909285&s=1&k=9ADA55600DE489890511AB3328511E0A
The webcast and presentation will be accessible and available for replay
through Pembina's website under Investor Centre, Presentations &
Events.
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 and operates an
integrated system of pipelines that transport various hydrocarbon
liquids including conventional and synthetic crude oil, heavy oil and
oil sands products, condensate (diluent) and NGL produced in western
Canada and ethane produced in North Dakota. The Company also owns and
operates gas gathering and processing facilities and an oil and NGL
infrastructure and logistics business. With facilities strategically
located in western Canada and in NGL 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", "should", "anticipates", "estimates" 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, fractionation facilities, terminalling, storage and hub
facilities; the anticipated impact of acquisitions on the Company's
future cash flows, financial position and commercial opportunities;
anticipated synergies between newly acquired assets, assets under
development and existing assets of the Company; the impact of share
price on annual share-based incentive expense; and, the anticipated use
of proceeds from financings.
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 net revenue, operating
margin, earnings before interest, taxes, depreciation and amortization
(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. 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