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