Pembina Pipeline Corporation Reports Record Annual Results in 2019

Pembina Pipeline Corporation Reports Record Annual Results in 2019

PR Newswire

CALGARY, Feb. 27, 2020

Pembina's record annual earnings, cash flow and adjusted EBITDA were driven by new assets recently placed into service

All financial figures are in Canadian dollars unless noted otherwise.

CALGARY, Feb. 27, 2020 /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 2019.

Financial and Operational Overview



3 Months Ended
December 31


12 Months Ended
December 31

($ millions, except where noted) (unaudited)

2019


2018


2019


2018

Revenue

1,754


1,726


7,230


7,351

Net revenue(1)

837


706


3,120


2,836

Gross profit

603


663


2,433


2,327

Earnings

145


368


1,492


1,278

Earnings per common share – basic (dollars)

0.21


0.66


2.66


2.28

Earnings per common share – diluted (dollars)

0.21


0.66


2.65


2.28

Cash flow from operating activities

728


674


2,532


2,256

Cash flow from operating activities per common share – basic (dollars)(1)

1.41


1.33


4.94


4.47

Adjusted cash flow from operating activities(1)

576


543


2,234


2,154

Adjusted cash flow from operating activities per common share – basic (dollars)(1)

1.11


1.07


4.36


4.27

Common share dividends declared

314


289


1,213


1,131

Dividends per common share (dollars)

0.60


0.57


2.36


2.24

Capital expenditures

429


356


1,645


1,226

Total volume (mboe/d)(2)

3,577


3,453


3,451


3,398

Adjusted EBITDA(1)

787


715


3,061


2,835









(1)        

Refer to "Non-GAAP Measures".

(2)        

Total revenue volumes. Revenue volumes are physical volumes plus volumes recognized from take-or-pay
commitments. Volumes are stated in thousand barrels of oil equivalent per day ("mboe/d"), with natural gas
volumes converted to mboe/d from millions of cubic feet per day ("MMcf/d") at a 6:1 ratio.

 

Financial and Operational Overview by Division


3 Months Ended December 31

12 Months Ended December 31


2019

2018

2019

2018

($ millions, except
where noted)

Volumes(1)

Gross
Profit

Adjusted
EBITDA(2)

Volumes(1)

Gross
Profit

Adjusted
EBITDA(2)

Volumes(1)

Gross
Profit

Adjusted
EBITDA(2)

Volumes(1)

Gross
Profit

Adjusted
EBITDA(2)

Pipelines

2,667

345

467

2,529

301

417

2,566

1,376

1,854

2,521

1,255

1,703

Facilities

910

169

254

924

155

233

885

655

955

877

574

880

Marketing & New
Ventures (3)

93

120

203

109

406

423

484

409

Corporate

(4)

(54)

4

(44)

(4)

(171)

14

(157)

Total

3,577

603

787

3,453

663

715

3,451

2,433

3,061

3,398

2,327

2,835



(1)                

Pipelines and Facilities Divisions are revenue volumes, which are physical volumes plus volumes recognized from take-or-pay commitments. Volumes are
stated in mboe/d, with natural gas volumes converted to mboe/d from MMcf/d at a 6:1 ratio.

(2)                

Refer to "Non-GAAP Measures".

(3)        

Marketed natural gas liquids ("NGL") volumes are excluded from Volumes to avoid double counting. Refer to "Marketing & New Ventures
Division" in Pembina's Management's Discussion and Analysis for the period ended December 31, 2019 ("MD&A") for further information.

 

Financial & Operational Highlights

Divisional Highlights

Executive Overview

This past year, Pembina marked its 65th anniversary and we have much to celebrate with this milestone. From rather humble beginnings as a single pipeline in Alberta with 31 people and an enterprise value of $20 million, Pembina has grown into one of Canada's largest companies. Today, we are nearly 3,000 people strong with an enterprise value in excess of $40 billion.

As proud as we are about the past, our stakeholders are more interested in the future.  The keys to our success to date - our unwavering commitment to long-term value creation, rather than chasing trends or fads, combined with solid core values and consideration of all stakeholders - will continue to propel us to new successes.  Furthermore, we have put forth a number of financial rules, or 'guardrails', which are our commitment to continue to grow both the depth and breadth of our value chain in a disciplined way.  This approach results in greater synergy, value-added service and diversification.  This is the Pembina way and it will not change.

From a financial perspective, a number of new records were set in 2019. Earnings in 2019 of $1.5 billion were 17 percent higher than the previous year.  Record adjusted EBITDA of $3.1 billion, exceeded the high end of our guidance range and our 2019 adjusted cash flow per share of $4.36 was another all-time high.

In 2019, we placed in excess of $600 million of projects safely and successfully into service, including Duvernay II, Burstall Ethane Storage as well as other infrastructure at our Redwater Complex. Furthermore, we are excited about the $1.2 billion of additional fee based projects which are expected to enter service in 2020.  With these new projects coming online, in conjunction with the contribution from the Kinder Acquisition assets, we anticipate generating 2020 adjusted EBITDA of between $3.25 and $3.55 billion.

The most significant single event this year was the $4.25 billion Kinder Acquisition.  At our 2019 Investor Day, we talked about our focus on getting better, not just bigger and this acquisition clearly make us better. The majority of the assets we acquired are already directly connected to our system.  The Edmonton Terminals connect our pipeline systems with the major trunkline third-party export pipelines.  Based on their location and connectivity, these assets sit at the nexus of the Canadian oil market and are essentially impossible to replicate. By owning these assets, Pembina gains another premium franchise, thereby enhancing the longevity and stability of our earnings stream.  In addition, in the current political and regulatory environment, 'pipe in the ground' and particularly cross-border pipelines, possess considerable scarcity value.  The Cochin Pipeline, which transports premium condensate from the U.S. Midwest to Fort Saskatchewan, Alberta, offers access to another condensate supply basin, is connected to Pembina's Canadian Diluent Hub and strengthens our existing condensate franchise.  Finally, the assets we acquired have considerable upside by overlaying Pembina's exiting commercial models.

In addition to the strategic benefits, the acquisition also has a positive financial impact, enhancing the diversification in our business and providing opportunities for future growth. These assets are predominantly supported by long-term fee-for-service, take-or-pay contracts, which are underpinned by strong investment grade counterparties, enhancing Pembina's financial guardrails. We have identified meaningful financial upside available from a portfolio of small capital projects and the integration of the acquired assets within Pembina's existing businesses. Over the next five years, we expect to realize additional annual adjusted EBITDA of $100 million, a roughly 30 percent increase, with only modest capital spending.

As we look to the future, we are excited about our continued progress in accessing global markets. In early 2019, we took a major step forward with the approval of the integrated propane dehydrogenation ("PDH") plant and polypropylene ("PP") upgrading facility ("PDH/PP Facility") through our 50 percent owned joint-venture entity, Canada Kuwait Petrochemical Limited Partnership ("CKPC").  This project is true to our strategy of trying to 'do more with the hydrocarbon molecules we touch' and leverages our position as the largest supplier of propane in western Canada. More recently, we were pleased to announce that we have executed a lump sum engineering, procurement and construction ("EPC") contract relating to the construction of the PDH plant. With this contract, we have locked in approximately 60 percent of the cost of the PDH/PP Facility thus far, reflecting our disciplined and prudent approach to spending.

In addition to advancing our petrochemical facility, we also are very excited about our Prince Rupert Terminal. This project is important as it represents our first export facility. Demand for propane export capacity was significant and we were pleased to approve an expansion of this export terminal, increasing capacity to approximately 40 mbpd.

We are entering a new decade with significant momentum and abundant growth opportunities. In fact, some of the hardest decisions we must make are what projects are we not going to pursue. Our continued focus on being better and not just bigger, in addition to our financial guardrails and strategic investment criteria based on long-term thinking, will remain our guiding principles for future growth, ensuring we continue to create long-term sustainable value.

Projects and New Developments(1)

Pipelines and Facilities have $3.1 billion of capital projects underway, which in aggregate are trending on budget.

Pipelines:

(1)

For further details on the Company's significant assets, including definitions, refer to Pembina's AIF filed at www.sedar.com (filed with the U.S. Securities and Exchange Commission at www.sec.gov under Form 40-F) and on Pembina's website at www.pembina.com.

 

Facilities:

Marketing & New Ventures:

Kinder Acquisition

Financing

Dividends

Fourth Quarter 2019 Conference Call & Webcast

Pembina will host a conference call on Friday, February 28, 2020 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 fourth quarter 2019 results. 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 6, 2020 at 11:59 p.m. ET. To access the replay, please dial either 416-849-0833 or 855-859-2056 and enter the password 9883147.

A live webcast of the conference call can be accessed on Pembina's website at pembina.com under Investor Centre/ Presentation & Events, or by entering:

https://event.on24.com/wcc/r/2069094/71FE24986EF4AA2586DFEB2F80A50DCA in your web browser. Shortly after the call, an audio archive will be posted on the website for a minimum of 90 days.

About Pembina

Pembina is a leading transportation and midstream service provider that has been serving North America's energy industry for 65 years. Pembina owns an integrated system of pipelines that transport various hydrocarbon liquids and natural gas products produced primarily in western Canada. The Company also owns gas gathering and processing facilities; an oil and natural gas liquids infrastructure and logistics business; is growing an export terminals business; and is currently constructing a petrochemical facility to convert propane into polypropylene. Pembina's integrated assets and commercial operations along the majority of the hydrocarbon value chain allow it to offer a full spectrum of midstream and marketing services to the energy sector. Pembina is committed to identifying additional opportunities to connect hydrocarbon production to new demand locations through the development of infrastructure that would extend Pembina's service offering even further along the hydrocarbon value chain. These new developments will contribute to ensuring that hydrocarbons produced in the WCSB and the other basins where Pembina operates can reach the highest value markets throughout the world.

Purpose of Pembina:

To be the leader in delivering integrated infrastructure solutions connecting global markets;

Pembina is structured into three Divisions: Pipelines Division, Facilities Division and Marketing & New Ventures Division.

Pembina's common shares trade on the Toronto and New York stock exchanges under PPL and PBA, respectively. For more information, visit www.pembina.com.

Forward-Looking Statements and Information

This document contains certain forward-looking statements and forward looking 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 "continue", "anticipate", "schedule", "will", "expects", "estimate", "potential", "planned", "future" and similar expressions suggesting future events or future performance.

In particular, this document contains forward-looking statements, including certain financial outlook, pertaining to, without limitation, the following: Pembina's corporate strategy; expectations about industry activities and development opportunities; expectations about future growth opportunities and demand for our service; expectations regarding new corporate developments and impact on access to markets; planning, construction, capital expenditure estimates, schedules, locations, regulatory and environmental applications and approvals, expected capacity, incremental volumes, in-service dates, rights, activities and operations with respect to planned new construction of, or expansions on, existing pipelines, gas services facilities, fractionation facilities, terminalling, storage and hub facilities, facility and system operations and throughput levels; anticipated synergies between assets under development, assets being acquired and existing assets of the Company; the future level and sustainability of cash dividends that Pembina intends to pay its shareholders, and including the expected future cash flows and the sufficiency thereof.

The forward-looking statements are based on certain assumptions that Pembina has made in respect thereof as at the date of this news release regarding, among other things: oil and gas industry exploration and development activity levels and the geographic region of such activity; the success of Pembina's operations and growth projects; prevailing commodity prices and exchange rates and the ability of Pembina to maintain current credit ratings; the availability of capital to fund future capital requirements relating to existing assets and projects; future operating costs; geotechnical and integrity costs; that any third-party projects relating to Pembina's growth projects will be sanctioned and completed as expected; that any required commercial agreements can be reached; that all required regulatory and environmental approvals can be obtained on the necessary terms in a timely manner; 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; prevailing interest and tax rates; prevailing regulatory, tax and environmental laws and regulations; maintenance of operating margins; the amount of future liabilities relating to lawsuits and environmental incidents; and the availability of coverage under Pembina's insurance policies (including in respect of Pembina's business interruption insurance policy).

Although Pembina believes the expectations and material factors and assumptions reflected in these forward-looking statements are reasonable as of the date hereof, there can be no assurance that these expectations, factors and assumptions will prove to be correct. These forward-looking statements are not guarantees of future performance and are subject to a number of known and unknown risks and uncertainties including, but not limited to: the regulatory environment and decisions; the impact of competitive entities and pricing; labour and material shortages; reliance on key relationships and agreements; the strength and operations of the oil and natural gas production industry and related commodity prices; non-performance or default by counterparties to agreements which Pembina or one or more of its affiliates has entered into in respect of its business; actions by governmental or regulatory authorities, including changes in tax laws and treatment, changes in royalty rates, climate change initiatives or policies or increased environmental regulation; the failure to realize the anticipated benefits or synergies of acquisitions (including the Kinder Acquisition) due to the factors set out herein, integration issues or otherwise; fluctuations in operating results; adverse general economic and market conditions in Canada, North America and worldwide, including changes, or prolonged weaknesses, as applicable, in interest rates, foreign currency exchange rates, commodity prices, supply/demand trends and overall industry activity levels; ability to access various sources of debt and equity capital; changes in credit ratings; counterparty credit risk; technology and cyber security risks; and certain other risks detailed from time to time in Pembina's public disclosure documents available at www.sedar.com, www.sec.gov and through Pembina's website at www.pembina.com.

This list of risk factors should not be construed as exhaustive. Readers are cautioned that events or circumstances could cause results to differ materially from those predicted, forecasted or projected. The forward-looking statements contained in this document speak only as of the date of this document. Pembina does not undertake any obligation to publicly update or revise any forward-looking statements or information contained herein, except as required by applicable laws. Readers are cautioned that management of Pembina approved the financial outlook contained herein as of the date of this press release. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.

Non-GAAP Measures

In this news release, Pembina has used the terms net revenue, adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA), cash flow from operating activities per common share, adjusted cash flow from operating activities, adjusted cash flow from operating activities per common share, which do not have any standardized meaning under IFRS. Since these non-GAAP financial measures do not have a standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies, securities regulations require that non-GAAP financial measures be clearly defined, qualified and reconciled to their nearest GAAP measure. These non-GAAP measures are calculated and disclosed on a consistent basis from period to period. Specific adjusting items may only be relevant in certain periods. The intent of non-GAAP measures is to provide additional useful information respecting Pembina's financial and operational performance to investors and analysts and the measures do not have any standardized meaning under IFRS. The measures should not, therefore, be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS.

Non-GAAP Proportionate Consolidation of Investments in Equity Accounted Investees Results

In accordance with IFRS, Pembina's jointly controlled investments are accounted for using equity accounting. Under equity accounting, the assets and liabilities of the investment are net into a single line item in the Consolidated Statement of Financial Position, Investments in Equity Accounted Investees. Net earnings from Investments in Equity Accounted Investees are recognized in a single line item in the Consolidated Statement of Earnings and Comprehensive Earnings, Share of Profit from Equity Accounted Investees. Cash contributions and distributions from Investments in Equity Accounted Investees represent Pembina's proportionate share paid and received in the period to and from the equity accounted investment. 

To assist the readers' understanding and evaluation of the performance of these investments, Pembina is supplementing the IFRS disclosure with non-GAAP disclosure of Pembina's proportionately consolidated interest in the Investments in Equity Accounted Investees. Pembina's proportionate interest in Investments in Equity Accounted Investees has been included in adjusted EBITDA.

Other issuers may calculate these non-GAAP measures differently. Investors should be cautioned that these measures should not be construed as alternatives to revenue, earnings, cash flow from operating activities, gross profit or other measures of financial results determined in accordance with GAAP as an indicator of Pembina's performance. For additional information regarding non-GAAP measures, including reconciliations to, the most directly comparable measures recognized by GAAP, please refer to Pembina's management's discussion and analysis for the year ended December 31, 2019, which is available online at www.sedar.com, www.sec.gov and through Pembina's website at www.pembina.com.

Investor Relations, Scott Arnold, Manager Investor Relations, (403) 231-3156, 1-855-880-7404, E-mail: investor-relations@pembina.com, www.pembina.com 

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