Pembina Pipeline Corporation Reports First Quarter Results

Pembina Pipeline Corporation Reports First Quarter Results

PR Newswire

CALGARY, Alberta, May 7, 2020

First quarter results reflect the resilience of Pembina's diversified and integrated business

All financial figures are in Canadian dollars unless noted otherwise.

CALGARY, Alberta, May 7, 2020 /CNW/ - Pembina Pipeline Corporation ("Pembina" or the "Company") (TSX: PPL; NYSE: PBA) announced today its financial and operating results for the first quarter of 2020.

Financial and Operational Overview


3 Months Ended March 31

($ millions, except where noted)(unaudited)

2020

2019

Revenue

1,671

1,968

Net revenue(1)

865

774

Gross profit

728

588

Earnings

314

313

Earnings per common share – basic (dollars)

0.50

0.55

Earnings per common share – diluted (dollars)

0.50

0.55

Cash flow from operating activities

410

608

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

0.75

1.20

Adjusted cash flow from operating activities(1)

576

578

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

1.05

1.14

Common share dividends declared

346

290

Dividends per common share (dollars)

0.63

0.57

Capital expenditures

483

361

Total volume (mboe/d)(2)

3,508

3,403

Adjusted EBITDA(1)

830

773







(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 March 31


2020

2019

($ millions, except where noted)

Volumes(1)

Gross Profit

Adjusted
EBITDA(2)

Volumes(1)

Gross Profit

Adjusted
EBITDA(2)

Pipelines

2,629

396

550

2,507

340

457

Facilities

879

174

256

896

158

232

Marketing & New Ventures(3)

157

55

93

121

Corporate

1

(31)

(3)

(37)

Total

3,508

728

830

3,403

588

773



(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 March 31, 2020 ("MD&A") for further information.

Financial & Operational Highlights

Divisional Highlights

Executive Overview(1)

During this challenging and unprecedented period, everyone at Pembina hopes the Company's stakeholders - its employees, communities, customers and investors - are safe, healthy and finding a way to manage through these uniquely difficult circumstances.  Pembina remains focused on the business and meeting the needs of customers while acknowledging the human impact and the immense toll the COVID-19 pandemic is having on everyone.

The current pandemic has far reaching implications for both human health and the health of the global economy. The concurrent decline in global energy prices further magnifies this crisis for energy-related businesses and the people and communities that are dependent upon them.

Today, while Pembina reported strong quarterly financial and operational results, the impact of these crises will begin to materialize more fully in subsequent quarters and this has informed Pembina's outlook for the remainder of the year, including our 2020 guidance, as discussed further below. In response to the health pandemic and the resulting significant decline in global energy prices, Pembina previously announced a decisive action plan to protect all its stakeholders.

$1.3 billion of new projects are expected to come into service throughout 2020 and early 2021.  The decision to continue spending on these projects was informed by the fact that they are all well advanced, or nearing completion, and are therefore expected to contribute incremental adjusted EBITDA in the near future. By contrast, the deferred projects were in the early stages of planning or construction.

Planning, engineering and regulatory work done to date on the deferred projects will allow Pembina to quickly resume these projects to meet customers' needs when global energy prices and the broader economic environment support such action.

(1)

Notwithstanding the steps taken by Pembina to mitigate the impact of the COVID-19 pandemic and the low commodity price environment on its business, these events and circumstances create and heighten certain risks and uncertainties that may impact its results of operations and financial conditions in future periods.  These risks and uncertainties are outlined in more detail in Pembina's management's discussion and analysis for the first quarter of 2020 (the "Q1 MD&A") and readers are urged to carefully review this disclosure, including under section 11 "Risk Factors" of the Q1 MD&A.

Pembina recognizes that the prevailing energy prices and temporary demand disruptions have forced the Company's producing customers to take actions to preserve liquidity and strengthen their balance sheets.  Capital budgets are being drastically reduced, which will result in moderation of growth or production declines. At the same time, producers continue to require safe and reliable midstream services to ensure their products continue to reach demand markets to maximize cash generation in this environment and ensure North American energy needs continue to be met.

Pembina has evaluated the impact producer spending decisions are expected to have on its business. While some volume declines across our system are anticipated, much of Pembina's business is protected by strong contracts. Pembina expects its marketing business will be more negatively impacted by the rapid and significant decline in energy prices. However, declining volumes and a lower marketing contribution will be somewhat offset by approximately $100 million of operating and administrative cost savings and efficiencies, which have been implemented throughout the business.

Overall, Pembina continues to expect 2020 adjusted EBITDA to remain within the previously disclosed guidance range, albeit the Company expects to be near the lower end of that range based on current estimates. While factoring in reduced volumes and lower commodity prices as noted above, the duration of the current situation and large-scale shut-ins could cause Pembina to fall below the low end of the guidance range.

Pembina's business is resilient in the face of current challenges. An unwavering commitment to the Company's financial guardrails has been a guiding principle for many years and, as a result, Pembina is well positioned.

The current situation is unparalleled and brings with it some unique challenges. However, Pembina has faced adversity before and always emerged strong.  The Company weathered the 2008-09 financial crisis and the 2015- 16 energy price collapse. Pembina remained resilient throughout these cycles, growing both organically and through acquisition, which allowed it to deliver annual increases in adjusted EBITDA and dividends per common share. Further, the Company maintained an investment grade credit rating throughout. Today, a long-term commitment to the Company's financial guardrails and decisive action to defer capital spending ensures Pembina has the balance sheet strength and liquidity to weather the current storm and ensure that upon a return to more normal economic conditions and higher energy prices, Pembina will be ready and able to continue its long track record of delivering value to all stakeholders.

Projects and New Developments(2)

Pipelines and Facilities have $1.1 billion of capital projects underway, which in aggregate are trending on budget.

Pipelines:

As previously announced, in response to the COVID-19 pandemic, the resulting virtual shutdown of the global economy and the recent significant decline in global energy prices, Pembina made the decision to defer some projects within Pipelines:

(2)

For further details on the Company's significant assets, including definitions, refer to Pembina's Annual Information Form 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:

Financing

Dividends

First Quarter 2020 Conference Call & Webcast

Pembina will host a conference call on Friday, May 8, 2020 at 8:00 a.m. MT (10:00 a.m. ET) for interested investors, analysts, brokers and media representatives to discuss results for the first quarter of 2020. 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 15, 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 3298148.

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://produceredition.webcasts.com/starthere.jsp?ei=1290098&tp_key=0acdce5bbf in your web browser. Shortly after the call, an audio archive will be posted on the website for a minimum of 90 days.

Annual Meeting of Common Shareholders

The Company will hold its Annual Meeting of common shareholders ("AGM") on Friday, May 8, 2020 at 2:00 p.m. MT (4:00 p.m. ET).  The AGM will be held as a virtual-only meeting, which will be conducted via live audio webcast at https://web.lumiagm.com/m#/119921742. Participants are recommended to register for the virtual webcast at least 10 minutes before the presentation start time. A copy of the AGM presentation will be accessible on Pembina's website at www.pembina.com under Investor Centre, Presentation & Events.

For further information on Pembina's virtual AGM, kindly visit the Shareholder Information page under the Investor Centre tab at www.pembina.com.

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 developing 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 and the development and expected timing of new business initiatives and growth opportunities and the expected timing thereof; 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 impact of the current commodity price environment on Pembina; and the future level and sustainability of cash dividends that Pembina intends to pay its shareholders, 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, interest rates 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 and the outcome of stakeholder engagement; 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; risks relating to the current and potential adverse impacts of the COVID-19 pandemic and continued depressed commodity prices; 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 (basic), adjusted cash flow from operating activities, adjusted cash flow from operating activities per common share (basic) and fee-based distributable cash flow, 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 March 31, 2020, 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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