Pembina Pipeline Corporation Reports Third Quarter Results

Pembina Pipeline Corporation Reports Third Quarter Results

PR Newswire

CALGARY, AB, Nov. 5, 2020

Solid results continue to demonstrate the Company's resilience

All financial figures are in Canadian dollars unless otherwise noted. This news release refers to certain financial measures that are not defined by Generally Accepted Accounting Principles ("GAAP"), including 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 and adjusted cash flow from operating activities per common share. For more information see "Non-GAAP Measures" herein.

CALGARY, AB, Nov. 5, 2020 /PRNewswire/ -- Pembina Pipeline Corporation ("Pembina" or the "Company") (TSX: PPL) (NYSE: PBA) announced today its financial and operating results for the third quarter of 2020.

Financial and Operational Overview








3 Months Ended

   September 30

9 Months Ended

September 30

($ millions, except where noted)(unaudited)

2020

2019

2020

2019

Infrastructure and other services revenue

744

594

2,199

1,764

Product sales revenue

825

1,106

2,309

3,712

Total Revenue

1,569

1,700

4,508

5,476

Net revenue(1)

849

751

2,490

2,283

Gross profit

563

613

1,746

1,830

Earnings

318

370

885

1,347

Earnings per common share – basic (dollars)

0.51

0.66

1.39

2.45

Earnings per common share – diluted (dollars)

0.51

0.66

1.39

2.44

Cash flow from operating activities

434

535

1,486

1,804

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

0.79

1.05

2.70

3.53

Adjusted cash flow from operating activities(1)

524

530

1,686

1,658

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

0.95

1.04

3.07

3.25

Common share dividends declared

346

307

1,039

899

Dividends per common share (dollars)

0.63

0.60

1.89

1.76

Capital expenditures

174

421

868

1,216

Total volume (mboe/d)(2)

3,451

3,436

3,462

3,408

Adjusted EBITDA(1)

796

736

2,415

2,274


(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 September 30

9 Months Ended September 30


2020

2019

2020

2019

($ 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

2,580

378

541

2,570

331

458

2,588

1,150

1,631

2,532

1,031

1,387

Facilities

871

180

251

866

161

233

874

517

757

876

486

701

Marketing & New Ventures(3)

5

34

120

83

77

118

313

301

Corporate

(30)

1

(38)

2

(91)

(115)

Total

3,451

563

796

3,436

613

736

3,462

1,746

2,415

3,408

1,830

2,274


(1) 

Volumes for 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 three and nine months ended September 30, 2020 ("MD&A") for further information.

Financial & Operational Highlights

Divisional Highlights

Executive Overview

Pembina's results for the third quarter of 2020 again reinforced the stability and resiliency of our business and the strategy that underpins it. Our focus on integration across the hydrocarbon value chain began over 10 years ago with the acquisition of the Cutbank Complex. It was furthered in 2012, by an expansion into the natural gas liquids midstream business, and then more so in 2017 with an expansion into the natural gas value chain. Along with integration came diversification of customers, commodities and currencies. Finally, an unwavering commitment to Pembina's financial guardrails has been a common thread through this cycle and those which have preceded it, including the 2015-16 oil price collapse and the 2008-09 financial crisis. Evidence of Pembina's resilience include:

While it is easy to become mired in the challenges facing the energy industry, a number of opportunities are beginning to come into greater focus and we remain optimistic as we approach 2021.

Firstly, the disruptions and challenges of the COVID-19 pandemic, deferral of major capital projects and new work-from-home protocols have afforded Pembina the opportunity to sharpen its focus on the productivity and efficiency of the business. Our focus has been overwhelmingly growth oriented for many years and current circumstances have created space to enhance another capability, ultimately benefiting all our stakeholders – customers, investors, employees and communities. In March, we announced a target of reducing full year operating and general and administrative expenses by $100 million relative to the Company's 2020 budget. We currently expect that 2020 cost savings will exceed our original target by approximately 50 percent.  A significant portion of those savings are expected to be sustainable into 2021 and beyond.

Secondly, activity levels have stabilized and are beginning to improve. In Pembina's conventional pipelines business, physical volumes in July and August were consistent with levels seen at the end of the second quarter, or roughly eight percent below first quarter levels and well above the lows experienced in late April and early May.  As is typical for the third quarter of each year, physical volumes declined in September as operators elected to perform routine maintenance and turnaround activities. Additional unplanned outages at third-party facilities also contributed to lower physical volumes. October physical volumes have since recovered to levels slightly above those in July and August. Notably, despite slightly lower and more volatile physical volumes, due to the take-or-pay nature of the underlying contracts, revenue volumes in the conventional pipeline business during the third quarter were relatively unaffected.

Finally, Pembina continues to evaluate its portfolio of deferred projects. As it relates to the Phase VII Peace Pipeline Expansion in particular, engineering work is ongoing and focused on optimizing the scope of the project to meet customers' needs. As a result of this work, estimated project costs are trending materially lower. Phase VII and the other deferred projects, including CKPC's PDH/PP Facility, and the conditions under which they may be restarted, continue to be evaluated within the context of our customers' future plans and the ongoing COVID-19 pandemic and resulting global economic outlook. Further options for allocating capital include funding a growing backlog of other uncommitted growth projects, debt repayment and returning capital to shareholders. Pembina looks forward to providing a fulsome business update in early December, including an update on each of the Company's currently deferred capital projects, as well as its 2021 outlook, capital budget and funding plan.

Projects and New Developments1

Pipelines:

________

(1) 

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:

Financing

Dividends

Third Quarter 2020 Conference Call & Webcast

Pembina will host a conference call on Friday, November 6, 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 third 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 November 13, 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 4396278.

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=1290111&tp_key=6417bd122e 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 more than 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 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 Western Canadian Sedimentary Basin 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", "outlook", "strategy", "protect", "trend", "commit", "maintain", "focus", "ongoing" and similar expressions suggesting future events or future performance.

In particular, this document contains forward-looking statements, including certain financial outlooks, 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 the demand for our service; expectations regarding new corporate developments and their impact on access to markets; planning, construction, capital expenditure estimates, schedules, locations, regulatory and environmental applications and approvals, expected capacity, incremental volumes, completion and in-service dates, rights, activities and operations with respect to planned new construction of, or expansions on, existing pipelines systems, gas services facilities, processing and fractionation facilities, terminalling, storage and hub facilities, facility and system operations and throughput levels; plans and activities related to deferred projects and estimated project costs; the impact of current market conditions on Pembina; expectations regarding adjusted EBITDA; Pembina's hedging strategy and expected results therefrom; expected sources of liquidity; expected cost savings and Pembina's ability to maintain such cost savings into the future; expectations regarding Pembina's NGL storage positions and its intentions with respect thereto; expected volumes across Pembina's conventional pipelines business; levels and types of contracted volumes; Pembina's options for allocating capital; timing of the provision of the 2021 outlook; Pembina's intentions with respect to the conversion of the Series 9 Shares; Pembina's commitment to 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; 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; 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, and adjusted cash flow from operating activities per common share, which do not have any standardized meaning under International Financial Reporting Standards ("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 most directly comparable 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 of cash 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, other than as described herein, including reconciliations to, the most directly comparable measures recognized by GAAP, please refer to Pembina's management's discussion and analysis for the three and nine months ended September 30, 2020, which is available online at www.sedar.com, www.sec.gov and through Pembina's website at www.pembina.com.

Contact: 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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