Strong start to 2013; $1.3
billion of recently secured projects to drive continued
growth
All financial figures are in Canadian dollars unless noted
otherwise. This report contains forward-looking statements and
information that are based on Pembina Pipeline Corporation's
("Pembina" or the "Company") current expectations, estimates,
projections and assumptions in light of its experience and its
perception of historic trends. Actual results may differ materially
from those expressed or implied by these forward-looking
statements. Please see "Forward-Looking Statements &
Information" in the accompanying Management's Discussion &
Analysis ("MD&A") for more details. This report also refers to
financial measures that are not defined by Generally Accepted
Accounting Principles ("GAAP"). For more information about the
measures which are not defined by GAAP, see "Non-GAAP Measures" of
the accompanying MD&A.
CALGARY, May 9, 2013 /PRNewswire/ - On April 2, 2012 Pembina completed its acquisition
of Provident Energy Ltd. ("Provident") (the "Acquisition"). The
amounts disclosed herein for the three month period ending
March 31, 2012 reflect results of
legacy Pembina excluding Provident ("Legacy Pembina"). For further
information with respect to the Acquisition, please refer to Note 4
of the Condensed Consolidated Interim Financial Statements for the
period ended March 31, 2013.
Financial & Operating Overview
|
|
|
|
|
|
|
|
|
|
($ millions, except where
noted) |
|
|
|
|
|
3
Months Ended
March 31 |
|
|
|
|
|
|
2013 |
|
|
2012 |
Revenue |
|
|
|
|
|
1,285.7 |
|
|
475.5 |
Operating margin(1) |
|
|
|
|
|
239.8 |
|
|
127.7 |
Gross profit |
|
|
|
|
|
203.8 |
|
|
102.5 |
Earnings for the period |
|
|
|
|
|
90.5 |
|
|
32.6 |
Earnings per share - basic and diluted
(dollars) |
|
|
|
|
|
0.30 |
|
|
0.19 |
Adjusted EBITDA(1) |
|
|
|
|
|
210.2 |
|
|
111.4 |
Cash flow from operating activities |
|
|
|
|
|
229.0 |
|
|
65.3 |
Adjusted cash flow from operating
activities(1) |
|
|
|
|
|
207.4 |
|
|
98.8 |
Adjusted cash flow from operating activities per
share(1) |
|
|
|
|
|
0.70 |
|
|
0.59 |
Dividends declared |
|
|
|
|
|
121.0 |
|
|
65.7 |
Dividends per common share (dollars) |
|
|
|
|
|
0.41 |
|
|
0.39 |
|
|
|
|
(1) |
|
Refer to "Non-GAAP
Measures." |
First Quarter Highlights
- During the first quarter, Pembina announced that it had secured
an additional $1.3 billion in growth
projects.
- Consolidated operating margin during the first quarter of 2013
increased 88 percent to $239.8
million compared to $127.7
million during the same period of the prior year. Operating
margin is a non-GAAP measure; see "Non-GAAP Measures."
- Pembina generated $60.5 million
in operating margin from its Conventional Pipelines business,
$31.5 million from Oil Sands &
Heavy Oil and $18.6 million from Gas
Services. Operating margin was positively impacted by increased
volumes on Pembina's Conventional Pipelines, as discussed below,
and an increase in gas processed through and fees generated by
Pembina's Gas Services assets. The Company's Midstream business
also saw a significant increase in operating margin to $128.5 million, which includes results generated
by the assets acquired through the Acquisition.
- Operationally, Pembina experienced one of the strongest
quarters in its history. Conventional Pipelines transported an
average of 493.7 thousand barrels per day ("mbpd") in the first
quarter of 2013, six percent more than the same period of 2012 when
average volumes were 466.9 mbpd. Gas Services also saw an increase
in volumes of 13 percent, with the Cutbank Complex processing an
average of 299.3 million cubic feet per day ("MMcf/d") during the
first quarter of 2013 compared to 264.9 MMcf/d in the same period
of the previous year.
- The Company's earnings were $90.5
million ($0.30 per share) for
the first quarter of 2013 compared to $32.6
million ($0.19 per share) for
the first quarter of 2012. This increase was the result of the
Acquisition as well as improved performance in each of Legacy
Pembina's businesses. Per share metrics were also impacted by the
Acquisition.
- Pembina generated adjusted EBITDA of $210.2 million during the first quarter of 2013
compared to $111.4 million during the
first quarter of 2012 (adjusted EBITDA is a non-GAAP measure; see
"Non-GAAP Measures"). The quarter-over-quarter increase in adjusted
EBITDA was due to strong results from each of Pembina's legacy
businesses, new assets and services having been brought on-stream,
and the completion of the Acquisition.
- Cash flow from operating activities was $229 million ($0.77
per share) for the first quarter of 2013 compared to $65.3 million ($0.39 per share) for the same period in 2012.
This increase was primarily due to higher adjusted EBITDA, combined
with changes in working capital, lower acquisition-related costs in
the period and lower interest paid due to timing of payments.
- Adjusted cash flow from operating activities was $207.4 million ($0.70 per share) for the first quarter of 2013
compared to $98.8 million
($0.59 per share) for the same period
of 2012 (adjusted cash flow from operating activities is a Non-GAAP
measure; see "Non-GAAP Measures").
Growth and Operational Update
During the first quarter of 2013, Pembina made substantial
progress on its growth plans, securing approximately $1.3 billion in additional capital projects which
the Company expects will provide long-term, sustainable returns
once complete. With these new projects, Pembina's estimated capital
spending plan for the year has increased from $965 million to approximately $1.04 billion.
NGL Infrastructure Expansion
The most significant of Pembina's planned investments is the
$1 billion expansion of its
NGL-related infrastructure, which was announced on March 5, 2013 and comprises the following three
integrated components along the NGL value chain:
- Twinning of the 200 MMcf/d Saturn deep cut facility ("Saturn
II") which will extract valuable NGL from raw gas streams in the
Berland area of Alberta at an
estimated capital cost of $170
million;
- Twinning of its 73,000 bpd ethane-plus fractionator ("RFS II")
at its Redwater site, near
Fort Saskatchewan, Alberta at an
estimated capital cost of $415
million; and,
- The Phase II NGL pipeline capacity expansion of its
Peace/Northern NGL System which will accommodate increased NGL
volumes at an estimated capital cost of $415
million.
For its Saturn II project, Pembina has entered into a
firm-service contract for 130 MMcf/d (approximately 65 percent of
the facility's total capacity) for a term of 10 years with a
third-party producer. Based on 100 percent capacity utilization,
Saturn II is expected to extract approximately 13,000 barrels per
day ("bpd") of NGL which will be transported on the same pipeline
lateral Pembina is currently constructing for Saturn I, and then on
Pembina's Peace Pipeline, which will carry the product into the
Edmonton, Alberta area. Because
Saturn II will leverage existing site engineering work completed
for the original Saturn facility, Pembina expects the project could
be in-service by late 2015, subject to regulatory and environmental
approvals.
For RFS II, Pembina has entered into contracts for 97 percent of
the facility's operating capacity with producers which will provide
Pembina committed take-or-pay operating margin for an initial
10-year term from the in-service date. Ethane produced at RFS II
will be sold under a long-term arrangement with NOVA Chemicals
Corporation. Because RFS II will leverage engineering work
completed for Pembina's original Redwater fractionator, the Company expects the
project to be in-service late in the fourth quarter of 2015,
subject to regulatory and environmental approvals.
To accommodate increasing NGL volumes on its systems and to
address constrained capacity throughout the Province of
Alberta, Pembina is proceeding
with its proposed Phase II NGL pipeline capacity expansion on its
Peace/Northern NGL System. The Company is currently completing its
Phase I expansion, which will increase NGL capacity on the
Peace/Northern NGL System by 45 percent to 167,000 bpd. In April,
Pembina completed three pump stations which will provide 17,000 bpd
of additional NGL capacity. The Company expects to commission and
bring the pump stations into service in June of this year. The
remaining pump stations, which are expected to be in-service in
October, 2013, will add an additional 35,000 bpd of capacity. The
Phase II NGL Expansion will increase capacity from 167,000 bpd to
220,000 bpd. In total, Pembina expects the Phase I and II
expansions to increase NGL transportation capacity by 90 percent.
Subject to regulatory and environmental approvals, Pembina expects
the Phase II NGL Expansion will cost approximately $415 million (including mainline and tie-in
capital) and will be complete in early to mid-2015.
Pembina also plans to construct a new NGL lateral approximately
30 kilometres in length into the Ferrier region to tie a
third-party's facility into Pembina's Brazeau Pipeline System,
subject to regulatory and environmental approvals.
Crude Oil and Condensate Pipeline Capacity Expansion
On February 13, Pembina also
announced that the Company reached its contractual threshold to
proceed with its previously announced $250
million crude oil and condensate throughput capacity
expansion on its Peace Pipeline (the "Phase II LVP Expansion") to
accommodate increased producer crude oil and condensate volumes
arising from strong drilling results in the Dawson Creek, Grande
Prairie and Kaybob/Fox
Creek areas of Alberta.
Once complete, this expansion will increase capacity on the Peace
Pipeline by 55,000 bpd to 250,000 bpd. The combination of Pembina's
Phase I and Phase II LVP Expansions will increase capacity by 61
percent from current levels. Subject to obtaining regulatory and
environmental approvals, Pembina anticipates being able to bring
the Phase II LVP Expansion into service by late-2014.
Pembina's previously announced northwest Alberta pipeline expansion non-binding open
season closed on April 30, 2013.
Nominations were sufficient such that Pembina plans to proceed to
the next stage of the open season.
Other Growth Project Updates
- Pembina brought two long-term fee-for-service hydrocarbon
storage caverns into service at its Redwater site in April, 2013. Pembina expects
to bring a third cavern into service late in the second quarter of
this year.
- On the Nipisi Pipeline, Pembina has commissioned a new pump
station which increased capacity to 105,000 bpd.
- Pembina is also continuing to investigate offshore propane
export opportunities that would allow it to leverage its existing
assets and provide a potential solution for Canadian producers
impacted by weak North American pricing.
Financing Activity
On March 21, 2013, Pembina
announced that it had closed its bought deal offering of 11,206,750
common shares at a price of $30.80
per share through a syndicate of underwriters, which includes
1,461,750 common shares issued at the same price on the exercise in
full of the over-allotment option granted to the underwriters. The
aggregate gross proceeds from the offering was approximately
$345 million. The net proceeds from
the offering were used to reduce the Company's debt, which it used
to fund its capital program and for other general corporate
purposes.
On April 30, 2013, Pembina closed
the offering of $200 million, 30-year
senior unsecured, medium-term notes ("Notes"). The Notes have a
fixed interest rate of 4.75 percent per annum paid semi-annually,
and will mature on April 30, 2043.
The net proceeds from the offering of Notes were used to pay down
Pembina's existing credit facility.
Summary
"The first quarter of 2013 was a very exciting one at Pembina,"
said Bob Michaleski, Pembina's Chief
Executive Officer. "First, we had another quarter of solid
operational and financial results from our existing businesses. And
on the growth front, we are beginning to see the tangible benefits
of the Provident acquisition and our resulting fully-integrated
platform by securing projects across the hydrocarbon value chain
and increasing our 2013 capital spending plan to just over
$1 billion. With the closing of our
bought deal equity financing and 30-year term debt issuance, we're
more confident than ever in our ability to execute our business
plan and generate long-term, sustainable returns for our
investors."
First Quarter 2013 Conference Call & Webcast
Pembina will host a conference call on May 10, 2013 at 8 a.m.
MT (10 a.m. ET) to discuss
details related to the first quarter. 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
17, 2013 at 11:59 p.m. ET. To
access the replay, please dial either 416-849-0833 or 855-859-2056
and enter the password 21796840.
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=595645&s=1&k=DA9E32B7267860A93271D1CC68237A63
in your web browser. Shortly after the call, an audio archive will
be posted on the website for a minimum of 90 days.
Annual and Special Meeting Information
The Company will hold its Annual and Special Meeting of
Shareholders ("AGM") on Friday, May 10,
2013 at 2:00 p.m. MT
(4:00 p.m. ET) at the Metropolitan
Conference Centre, 333 - 4th Avenue S.W., Calgary, Alberta, Canada.
A live webcast of Pembina's AGM presentation 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=595658&s=1&k=FE7334F74D0AD428C124C57DA0269B27.
Participants are recommended to register for the webcast at least
10 minutes before the presentation start time.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following management's discussion and analysis ("MD&A")
of the financial and operating results of Pembina Pipeline
Corporation ("Pembina" or the "Company") is dated May 9, 2013 and is supplementary to, and should
be read in conjunction with, Pembina's unaudited condensed
consolidated interim financial statements for the period ended
March 31, 2013 ("Interim Financial
Statements") as well as Pembina's consolidated audited annual
financial statements and MD&A for the year ending December 31, 2012 (the "Consolidated Financial
Statements"). All dollar amounts contained in this MD&A are
expressed in Canadian dollars unless otherwise noted.
Management is responsible for preparing the MD&A. This
MD&A has been reviewed and recommended by the Audit Committee
of Pembina's Board of Directors and approved by its Board of
Directors.
This MD&A contains forward-looking statements (see
"Forward-Looking Statements & Information") and refers to
financial measures that are not defined by Generally Accepted
Accounting Principles ("GAAP"). For more information about the
measures which are not defined by GAAP, see "Non-GAAP
Measures."
On April 2, 2012, Pembina
completed its acquisition of Provident Energy Ltd. ("Provident")
(the "Acquisition"). The amounts disclosed herein for the three
months ending March 31, 2012 reflect
results of legacy Pembina excluding Provident ("Legacy Pembina").
The results of the business acquired through the Acquisition are
reported as part of the Company's Midstream business. For further
information with respect to the Acquisition, please refer to Note 4
of the Interim Financial Statements.
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 nearly 60 years. Pembina owns
and operates: pipelines that transport conventional and synthetic
crude oil and natural gas liquids produced in western Canada; oil sands, heavy oil and diluent
pipelines; gas gathering and processing facilities; and, an oil and
natural gas liquids infrastructure and logistics business. With
facilities strategically located in western Canada and in natural gas liquids 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.
Pembina is a trusted member of the communities in which it
operates and is committed to generating value for its investors by
running its businesses in a safe, environmentally responsible
manner that is respectful of community stakeholders.
Strategy
Pembina's goal is to provide highly competitive and reliable
returns to investors through monthly dividends while enhancing the
long-term value of its shares. To achieve this, Pembina's strategy
is to:
- Preserve value by providing safe, responsible, cost-effective
and reliable services;
- Diversify Pembina's asset base along the hydrocarbon value
chain by providing integrated service offerings which enhance
profitability;
- Pursue projects or assets that are expected to generate
increased cash flow per share and capture long-life, economic
hydrocarbon reserves; and,
- Maintain a strong balance sheet through the application of
prudent financial management to all business decisions.
Pembina is structured into four businesses: Conventional
Pipelines, Oil Sands & Heavy Oil, Gas Services and Midstream,
which are described in their respective sections of this
MD&A.
Common Abbreviations
The following is a list of abbreviations that may be used in
this MD&A:
Measurement |
|
|
|
Other |
mmbbls |
|
|
|
millions of barrels |
|
|
|
AECO |
|
|
|
Alberta gas trading price |
bpd |
|
|
|
barrels per day |
|
|
|
AESO |
|
|
|
Alberta Electric Systems Operator |
mbpd |
|
|
|
thousands of barrels per day |
|
|
|
B.C. |
|
|
|
British Columbia |
mboe/d |
|
|
|
thousands of barrels of oil equivalent per
day |
|
|
|
DRIP |
|
|
|
Premium Dividend™ and Dividend Reinvestment
Plan |
MMcf/d |
|
|
|
millions of cubic feet per day |
|
|
|
Frac |
|
|
|
Fractionation |
bcf/d |
|
|
|
billions of cubic feet per day |
|
|
|
IFRS |
|
|
|
International Financial Reporting Standards |
MW/h |
|
|
|
megawatts per hour |
|
|
|
NGL |
|
|
|
Natural gas liquids |
GJ |
|
|
|
gigajoule |
|
|
|
NYSE |
|
|
|
New York Stock Exchange |
km |
|
|
|
kilometre |
|
|
|
TSX |
|
|
|
Toronto Stock Exchange |
|
|
|
|
|
|
|
|
U.S. |
|
|
|
United States |
|
|
|
|
|
|
|
|
WCSB |
|
|
|
Western Canadian Sedimentary Basin |
|
|
|
|
|
|
|
|
WTI |
|
|
|
West Texas Intermediate (crude oil benchmark price) |
Financial & Operating Overview
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 Months
Ended
March 31 |
($ millions, except where
noted) |
|
|
|
|
|
2013 |
|
|
|
2012 |
Conventional Pipelines throughput
(mbpd) |
|
|
|
|
|
493.7 |
|
|
|
466.9 |
Oil Sands & Heavy Oil contracted
capacity (mbpd) |
|
|
|
|
|
870.0 |
|
|
|
870.0 |
Gas Services average processed volume
(mboe/d) net to Pembina(1) |
|
|
|
|
|
49.9 |
|
|
|
44.1 |
NGL sales volume (mbpd) |
|
|
|
|
|
122.9 |
|
|
|
|
Total volume (mbpd) |
|
|
|
|
|
1,536.5 |
|
|
|
1,381.0 |
Revenue |
|
|
|
|
|
1,285.7 |
|
|
|
475.5 |
Operations |
|
|
|
|
|
77.2 |
|
|
|
48.4 |
Cost of goods sold, including product
purchases |
|
|
|
|
|
970.8 |
|
|
|
299.1 |
Realized gain (loss) on
commodity-related derivative financial instruments |
|
|
|
|
|
2.1 |
|
|
|
(0.3) |
Operating margin(2) |
|
|
|
|
|
239.8 |
|
|
|
127.7 |
Depreciation and amortization included
in operations |
|
|
|
|
|
41.8 |
|
|
|
21.7 |
Unrealized gain (loss) on
commodity-related derivative financial instruments |
|
|
|
|
|
5.8 |
|
|
|
(3.5) |
Gross profit |
|
|
|
|
|
203.8 |
|
|
|
102.5 |
Deduct/(add) |
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
|
|
|
|
32.6 |
|
|
|
17.6 |
|
Acquisition-related and other expense
(income) |
|
|
|
|
|
(0.6) |
|
|
|
22.1 |
|
Net finance costs |
|
|
|
|
|
50.8 |
|
|
|
19.5 |
|
Share of loss (profit) of
investments in equity accounted investee, net of tax |
|
|
|
|
|
0.3 |
|
|
|
(0.2) |
Income tax expense |
|
|
|
|
|
30.2 |
|
|
|
10.9 |
Earnings for the period |
|
|
|
|
|
90.5 |
|
|
|
32.6 |
Earnings per share - basic and diluted
(dollars) |
|
|
|
|
|
0.30 |
|
|
|
0.19 |
Adjusted EBITDA(2) |
|
|
|
|
|
210.2 |
|
|
|
111.4 |
Cash flow from operating
activities |
|
|
|
|
|
229.0 |
|
|
|
65.3 |
Cash flow from operating activities
per share |
|
|
|
|
|
0.77 |
|
|
|
0.39 |
Adjusted cash flow from operating
activities(2) |
|
|
|
|
|
207.4 |
|
|
|
98.8 |
Adjusted cash flow from operating
activities per share(2) |
|
|
|
|
|
0.70 |
|
|
|
0.59 |
Dividends declared |
|
|
|
|
|
121.0 |
|
|
|
65.7 |
Dividends per common share
(dollars) |
|
|
|
|
|
0.41 |
|
|
|
0.39 |
Capital expenditures |
|
|
|
|
|
137.1 |
|
|
|
54.9 |
Total enterprise value ($
billions) (2) |
|
|
|
|
|
12.2 |
|
|
|
6.5 |
Total assets ($ billions) |
|
|
|
|
|
8.4 |
|
|
|
3.4 |
|
|
(1) |
Gas Services
processing volumes converted to mboe/d from MMcf/d at 6:1
ratio. |
(2) |
Refer to "Non-GAAP
Measures." |
Revenue, net of cost of goods sold, increased 79 percent to
$314.9 million during the first
quarter of 2013 compared to $176.4
million during the same period of 2012. This increase was
primarily due to the addition of results generated by the assets
acquired through the Acquisition, which are reported in the
Company's Midstream business, as well as improved performance in
each of Pembina's legacy businesses, as discussed in further detail
below.
Operating expenses were $77.2
million during the first quarter of 2013 compared to
$48.4 million in the same period in
2012. The increase was largely due to additional costs associated
with the growth in Pembina's asset base primarily resulting from
the Acquisition and higher variable costs in each of the Company's
legacy businesses because of increased volumes and activity.
Operating margin totalled $239.8
million during the first quarter of 2013, up 88 percent from
the same period last year when operating margin totalled
$127.7 million (operating margin is a
Non-GAAP measure; see "Non-GAAP Measures"), primarily due to higher
revenue as discussed above.
Realized and unrealized gains/losses on commodity-related
derivative financial instruments resulting from Pembina's market
risk management program are primarily related to frac spread,
product margin and power derivative financial instruments (see
"Market Risk Management Program" and Note 11 to the Interim
Financial Statements). The unrealized gain on commodity-related
derivative financial instruments was $5.8
million for the three months ended March 31, 2013, reflecting changes in the future
NGL, natural gas and power price indices between December 31, 2012 and March 31, 2013.
Depreciation and amortization (operational) increased to
$41.8 million during the first
quarter of 2013 compared to $21.7
million during the same period in 2012 which reflects
depreciation on new capital additions including those assets
acquired through the Acquisition.
The increases in revenue and operating margin contributed to
gross profit of $203.8 million during
the first quarter of 2013 compared to $102.5
million for the same period of 2012.
General and administrative expenses ("G&A") of $32.6 million were incurred during the first
quarter of 2013 compared to $17.6
million during the first quarter of 2012. The increase for
the period was mainly due to the addition of employees who joined
Pembina through the Acquisition and new employees who joined the
Company, as well as an increase in salaries and benefits for
existing employees, including increased share-based payment
accruals. In addition, every $1
change in share price is expected to change Pembina's annual
share-based incentive expense by approximately $1 million.
Pembina generated adjusted EBITDA of $210.2 million during the first quarter of 2013
compared to $111.4 million during the
first quarter of 2012 (adjusted EBITDA is a Non-GAAP measure; see
"Non-GAAP Measures"). The increase in adjusted EBITDA was due to
strong results from each of Pembina's legacy businesses, new assets
and services having been brought on-stream, and the growth of
Pembina's operations since completion of the Acquisition.
The Company's earnings were $90.5
million ($0.30 per share)
during the first quarter of 2013 compared to $32.6 million ($0.19 per share) during the first quarter of
2012. This increase was the result of the Acquisition as well as
improved performance in each of the Company's legacy businesses.
Per share metrics were also impacted by the Acquisition.
Cash flow from operating activities was $229 million ($0.77
per share) during the first quarter of 2013 compared to
$65.3 million ($0.39 per share) for the comparative period of
2012. The increase in cash flow from operating activities was
primarily due to an increase in adjusted EBITDA, combined with
changes in working capital, lower acquisition-related costs in the
period and lower interest paid due to timing of payments.
Adjusted cash flow from operating activities was $207.4 million ($0.70 per share) during the first quarter of
2013, an increase of 110 percent, compared to $98.8 million ($0.59 per share) during the first quarter of 2012
(adjusted cash flow from operating activities is a Non-GAAP
measure; see "Non-GAAP Measures").
Operating Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 Months Ended
March 31 |
|
|
|
|
|
|
2013 |
|
|
2012 |
($ millions) |
|
|
|
|
|
Net
Revenue |
(1) |
|
Operating
Margin |
(2) |
|
Net
Revenue |
(1) |
|
Operating
Margin |
(2) |
Conventional Pipelines |
|
|
|
|
|
95.8 |
|
|
60.5 |
|
|
82.2 |
|
|
54.4 |
|
Oil Sands & Heavy Oil |
|
|
|
|
|
43.4 |
|
|
31.5 |
|
|
43.1 |
|
|
30.1 |
|
Gas Services |
|
|
|
|
|
27.5 |
|
|
18.6 |
|
|
19.1 |
|
|
13.0 |
|
Midstream |
|
|
|
|
|
148.2 |
|
|
128.5 |
|
|
32.0 |
|
|
29.6 |
|
Corporate |
|
|
|
|
|
|
|
|
0.7 |
|
|
|
|
|
0.6 |
|
Total |
|
|
|
|
|
314.9 |
|
|
239.8 |
|
|
176.4 |
|
|
127.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Midstream revenue
is net of $983.9 million in cost of goods sold, including
product
purchases, for the quarter ended March 31, 2013 (quarter ended
March 31, 2012:
$299.1 million). |
(2) |
Refer to "Non-GAAP
Measures." |
|
|
Conventional Pipelines
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
Months Ended March 31 |
($ millions, except where noted) |
|
|
|
|
|
2013 |
2012 |
Average throughput (mbpd) |
|
|
|
|
|
493.7 |
466.9 |
Revenue |
|
|
|
|
|
95.8 |
82.2 |
Operations |
|
|
|
|
|
35.3 |
27.5 |
Realized gain (loss) on commodity-related
derivative financial instruments |
|
|
|
|
|
|
(0.3) |
Operating margin(1) |
|
|
|
|
|
60.5 |
54.4 |
Depreciation and amortization included in
operations |
|
|
|
|
|
1.6 |
11.9 |
Unrealized gain (loss) on
commodity-related derivative financial instruments |
|
|
|
|
|
0.9 |
(3.0) |
Gross profit |
|
|
|
|
|
59.8 |
39.5 |
Capital expenditures |
|
|
|
|
|
61.4 |
11.1 |
|
|
(1) |
Refer to "Non-GAAP
Measures." |
Business Overview
Pembina's Conventional Pipelines business comprises a
well-maintained and strategically located 7,850 km pipeline network
that extends across much of Alberta and B.C. It transports approximately
half of Alberta's conventional
crude oil production, about thirty percent of the NGL produced in
western Canada, and virtually all
of the conventional oil and condensate produced in B.C. This
business' primary objective is to generate sustainable operating
margin while pursuing opportunities for increased throughput and
revenue. Conventional Pipelines endeavours to maintain and/or
improve operating margin by capturing incremental volumes,
expanding its pipeline systems, managing revenue and following a
disciplined approach to its operating expenses.
Operational Performance: Throughput
During the first quarter of 2013, Conventional Pipelines'
throughput averaged 493.7 mbpd, consisting of an average of 363.7
mbpd of crude oil and condensate and 130 mbpd of NGL. This
represents an increase of approximately 6 percent compared to the
same period of 2012, when average throughput was 466.9 mbpd.
Financial Performance
During the first quarter of 2013, Conventional Pipelines
generated revenue of $95.8 million
compared to $82.2 million in the same
quarter of the previous year. The 17 percent increase during the
period was primarily due to strong volumes generated by newly
connected facilities on Pembina's Conventional Pipelines systems,
as well as producer enhanced recovery techniques resulting in
increased deliveries from existing connected locations. In
addition, as of the first quarter of 2013, results from certain
pipeline assets purchased through the Acquisition and previously
included in the Midstream business are now included in Conventional
Pipelines, which also helped drive increased revenue. However, this
had no impact on the volumes mentioned above as the assets are
interconnected to existing Conventional Pipelines systems.
Quarterly operating expenses increased to $35.3 million compared to $27.5 million in the first quarter of 2012 due to
several factors, including costs associated with ensuring safe and
reliable operations at higher throughput levels and higher costs
associated with geotechnical work which can only be completed
during winter months.
As a result of higher revenue, which was partially offset by an
increase in operating expenses, operating margin for the first
quarter of 2013 was $60.5 million
compared to $54.4 million during the
same period of 2012.
Depreciation and amortization included in operations was
$1.6 million during the first quarter
of 2013 compared to $11.9 million
during the first quarter of 2012. This decrease is primarily due to
a reduction in depreciation because of a re-measurement of the
decommissioning provision in excess of the carrying amount of the
related asset.
For the three months ended March 31,
2013, gross profit was $59.8
million due to higher revenue generated during the quarter,
for the reasons discussed above, compared to $39.5 million during the same period in 2012.
Capital expenditures for the first quarter of 2013 totalled
$61.4 million compared to
$11.1 million during the first
quarter of 2012. The majority of this spending relates to the
expansion of certain pipeline assets as described below.
New Developments
Pembina is pursuing several crude oil, condensate and NGL
expansions on its Conventional Pipelines systems to accommodate
increased customer demand and address constrained pipeline capacity
in several areas of the WCSB.
NGL Pipeline Capacity Expansions
Pembina is progressing its Phase I NGL Expansion, which is
expected to add 52,000 bpd of additional NGL capacity to the Peace
and Northern Pipelines (the "Peace/Northern NGL System"). In April,
Pembina completed three pump stations which will provide 17,000 bpd
of additional NGL capacity at a cost $30
million. The Company expects to commission and bring the
pump stations into service in June, 2013. On its Peace Pipeline,
the Company expects to commission three new pump stations by
August 2013 and upgrade four existing
stations by October 2013 to provide
an additional 35,000 bpd of NGL capacity at an estimated cost of
$70 million. Once complete, the Phase
I NGL Expansion will increase NGL capacity on the Peace/Northern
NGL System by 45 percent to 167,000 bpd.
As part of the Company's approximately $1
billion expansion of its existing NGL infrastructure,
Pembina is also proceeding with its proposed Phase II NGL Expansion
of its Peace/Northern NGL System which will increase capacity from
167,000 bpd to 220,000 bpd. In total, the Phase I and II expansions
are expected to increase NGL transportation capacity by 90 percent.
Subject to obtaining regulatory and environmental approvals,
Pembina expects the Phase II NGL Expansion to cost approximately
$415 million (including mainline and
tie-in capital) and to be complete in early to mid-2015.
Pembina also plans to construct a new 30 kilometre NGL lateral
into the Ferrier region of Alberta
to tie a third-party's facility into the Company's Brazeau Pipeline
System, subject to regulatory and environmental approvals.
Crude Oil and Condensate Pipeline Capacity Expansions
The Phase I Peace low vapour pressure ("LVP") expansion requires
three upgraded pump stations and associated pipeline work between
Fox Creek and Edmonton, Alberta, and will provide an
additional 40,000 bpd of crude oil and condensate capacity on this
segment. Pembina expects to commission one of the three pump
stations by June 2013, and the
remaining two stations by October
2013 at an estimated cost of $30
million.
On February 13, 2013, Pembina
announced that it had reached its contractual threshold to proceed
with its previously announced plans to significantly expand its
crude oil and condensate throughput capacity on its Peace Pipeline
system by 55,000 bpd ("Phase II LVP Expansion"). Pembina expects
the total cost of the Phase II LVP Expansion to be approximately
$250 million (including the mainline
expansion and tie-ins). Subject to regulatory and environmental
approvals, Pembina anticipates being able to bring the expansion
into service by late 2014. Once complete, this expansion will
increase LVP capacity on Pembina's Peace Pipeline to 250,000 bpd.
The Phase II LVP Expansion is underpinned by long-term
fee-for-service agreements with area producers. The combined LVP
expansions will increase capacity by 61 percent from current
levels.
Open Season Update
Pembina's previously announced northwest Alberta pipeline expansion non-binding open
season closed on April 30, 2013.
Nominations were sufficient such that Pembina plans to proceed to
the next stage of the open season.
Supporting Gas Services
Conventional Pipelines is also constructing the pipeline
components of the Company's Saturn I, Saturn II and Resthaven gas
plant projects. These pipeline projects will gather NGL from the
gas plants for delivery to Pembina's Peace Pipeline system. Both
Saturn I and Saturn II will use the same pipeline lateral. Pembina
has received the required environmental and regulatory approvals
for the pipelines and is continuing with construction on both
projects.
Oil Sands & Heavy Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
Months Ended March 31 |
($ millions, except where noted) |
|
|
|
|
|
2013 |
2012 |
Contracted capacity (mbpd) |
|
|
|
|
|
870.0 |
870.0 |
Revenue |
|
|
|
|
|
43.4 |
43.1 |
Operations |
|
|
|
|
|
11.9 |
13.0 |
Operating margin(1) |
|
|
|
|
|
31.5 |
30.1 |
Depreciation and amortization
included in operations |
|
|
|
|
|
4.9 |
4.9 |
Gross profit |
|
|
|
|
|
26.6 |
25.2 |
Capital expenditures |
|
|
|
|
|
12.1 |
5.8 |
|
|
(1) |
Refer to "Non-GAAP
Measures." |
Business Overview
Pembina plays an important role in supporting Alberta's oil sands and heavy oil industry.
Pembina is the sole transporter of crude oil for Syncrude Canada
Ltd. (via the Syncrude Pipeline) and Canadian Natural Resources
Ltd.'s Horizon Oil Sands operation (via the Horizon Pipeline) to
delivery points near Edmonton,
Alberta. Pembina also owns and operates the Nipisi and
Mitsue Pipelines, which provide transportation for producers
operating in the Pelican Lake and Peace
River heavy oil regions of Alberta, and the Cheecham Lateral which
transports synthetic crude to oil sands producers operating
southeast of Fort McMurray,
Alberta. The Oil Sands & Heavy Oil business operates
approximately 1,650 km of pipeline and has 870 mbpd of capacity
under long-term, extendible contracts which provide for the
flow-through of operating expenses to customers. As a result,
operating margin from this business is proportionate to the amount
of capital invested and is predominantly not sensitive to
fluctuations in operating expenses or actual throughput.
Financial Performance
The Oil Sands & Heavy Oil business realized revenue of
$43.4 million in the first quarter of
2013, virtually unchanged from $43.1
million in the first quarter of 2012 due to the contracted
nature of this business.
Operating expenses were $11.9
million during the first quarter of 2013, slightly lower
than $13 million during the first
quarter of 2012 and due to lower maintenance and power costs during
the period.
For the three months ended March 31,
2013, operating margin increased to $31.5 million compared to $30.1 million during the same period in 2012.
Additional throughput above contracted volumes on the Nipisi and
Mitsue pipelines contributed to the slight increase in operating
margin during the first quarter of 2013.
Depreciation and amortization included in operations for the
first quarter of 2013 totalled $4.9
million, unchanged from the same period of the prior
year.
During the quarter ended March 31,
2013, gross profit was $26.6
million compared to $25.2
million during the same period of 2012.
In the first quarter of 2013, capital expenditures within the
Oil Sands & Heavy Oil business totalled $12.1 million and were primarily related to the
construction of additional pump stations on the Nipisi and Mitsue
pipelines. This compares to $5.8
million spent during the same period in 2012, the majority
of which related to completing the two projects.
New Developments
On the Nipisi Pipeline, Pembina commissioned a new pump station
in April 2013 which increased its
capacity to 105,000 bpd. Work is continuing on the corresponding
pump station for the Mitsue condensate pipeline. With this
additional pump station, which is anticipated to be in-service in
the third quarter of 2013, Mitsue's capacity will increase from
18,000 bpd to 22,000 bpd.
Pembina continues to actively work with customers on oil sands
and heavy oil related solutions. With the Acquisition, the Company
has increased its access to diluent supply and can offer customers
condensate and butane products from various sources including
Pembina's conventional pipeline systems, the Redwater fractionator, rail imports and truck
racks.
Gas Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
Months Ended March 31 |
($ millions, except where noted) |
|
|
|
|
|
2013 |
2012 |
Average processed volume (MMcf/d) net to
Pembina |
|
|
|
|
|
299.3 |
264.9 |
Average processed volume
(mboe/d) (1) net to Pembina |
|
|
|
|
|
49.9 |
44.1 |
Revenue |
|
|
|
|
|
27.5 |
19.1 |
Operations |
|
|
|
|
|
8.9 |
6.1 |
Operating margin(2) |
|
|
|
|
|
18.6 |
13.0 |
Depreciation and amortization included in
operations |
|
|
|
|
|
3.6 |
3.2 |
Gross profit |
|
|
|
|
|
15.0 |
9.8 |
Capital expenditures |
|
|
|
|
|
38.5 |
34.0 |
|
|
(1) |
Average processing
volume converted to mboe/d from MMcf/d at a 6:1 ratio. |
(2) |
Refer to "Non-GAAP
Measures." |
Business Overview
Pembina's operations include a growing natural gas gathering and
processing business. Located approximately 100 km south of
Grande Prairie, Alberta, Pembina's
key revenue-generating Gas Services assets form the Cutbank Complex
which comprises three sweet gas processing plants with 425 MMcf/d
of processing capacity (368 MMcf/d net to Pembina), a 205 MMcf/d
ethane plus extraction facility, as well as approximately 350 km of
gathering pipelines. The Cutbank Complex is connected to Pembina's
Peace Pipeline system and serves an active exploration and
production area in the WCSB. Pembina has initiated construction on
and development of numerous projects in its Gas Services business
to meet the growing needs of producers in west central Alberta.
Financial Performance
Gas Services recorded an increase in revenue of 44 percent
during the first quarter of 2013, contributing $27.5 million compared to $19.1 million in the first quarter of 2012. This
increase primarily reflects higher processing volumes at Pembina's
Cutbank Complex and increased fees for additional capital invested.
Average processing volumes, net to Pembina, were 299.3 MMcf/d
during the first quarter of 2013, approximately 13 percent higher
than the 264.9 MMcf/d processed during the first quarter of the
previous year. The increase in volumes reflects producer's
sustained interest in the areas surrounding Pembina's Gas Services
assets and their focus on liquids-rich natural gas which continues
to attract higher commodity pricing relative to dry gas.
During the first quarter of 2013, operating expenses were
$8.9 million compared to $6.1 million incurred in the first quarter of
2012. The quarterly increase was mainly due to variable costs
incurred to process higher volumes at the Cutbank Complex as well
as additional costs associated with running the Musreau shallow cut
expansion and deep cut facility.
As a result of processing higher volumes at the Cutbank Complex,
an increase in fees for capital invested and additional processing
associated with the Musreau deep cut facility, Gas Services
realized operating margin of $18.6
million in the first quarter compared to $13 million during the same period of the prior
year.
Depreciation and amortization included in operations during the
first quarter of 2013 totalled $3.6
million, up from $3.2 million
during the same period of the prior year, primarily due to higher
in-service capital balances from additions to the Cutbank Complex
(including the Musreau deep cut facility and shallow cut
expansion).
For the three months ended March 31,
2013, gross profit was $15
million compared to $9.8
million in the same period of 2012. This increase reflects
higher operating margin during the period which was partially
offset by increased depreciation and amortization included in
operations as discussed above.
In the first quarter of 2013, capital expenditures within Gas
Services totalled $38.5 million
compared to $34 million during the
same period of 2012. This increase was because of spending to
progress the Saturn and Resthaven enhanced NGL extraction
facilities.
New Developments
Pembina's Gas Services business is constructing three new
facilities and associated infrastructure:
- Saturn I facility - a 200 MMcf/d enhanced NGL extraction
facility in the Berland area of west central Alberta, which is expected to cost
$165 million;
- Resthaven facility - a 200 MMcf/d (130 MMcf/d net to Pembina)
combined shallow cut and deep cut NGL extraction facility in the
Resthaven, Alberta area, which is
expected to cost $210 million;
and,
- Saturn II facility - a 200 MMcf/d 'twin' of the Saturn I
facility, which is expected to cost $170
million (as announced on March 5,
2013).
Pembina expects Saturn I and associated pipelines to be
in-service in the third quarter of 2013, one quarter ahead of
schedule. The Company has ordered all of the major equipment and
construction of the facility is 55 percent complete. Once
operational, Pembina expects Saturn I will have the capacity to
extract up to 13.5 mbpd of NGL.
For Resthaven, Pembina expects the facility and associated
pipelines to be in-service in the third quarter of 2014. Once
operational, Pembina expects the Resthaven facility will have the
capacity to extract up to 13 mbpd of NGL. Pembina has ordered all
of the major equipment for the plant and is progressing site
construction.
In the second quarter, Pembina plans to take over operatorship
of the existing 100 MMcf/d shallow cut plant at the Resthaven site
from Encana in order to streamline operation of the plant while the
Resthaven facility is under construction. When Pembina becomes the
'operator of record' at Resthaven, the Company will manage the
facility on behalf of the owners.
Saturn II will leverage the engineering work completed for the
Saturn I facility and is underpinned by a firm-service contract
with a third-party for 130 MMcf/d (approximately 65 percent of the
facility's total capacity) for a term of 10 years. Pembina expects
the project could be in-service by late 2015, subject to regulatory
and environmental approvals. Based on 100 percent capacity, Saturn
II is expected to extract approximately 13.5 mbpd of NGL which will
be transported on the same pipeline lateral Pembina is currently
constructing for Saturn I.
Pembina expects the expansions detailed above to bring the
Company's Gas Services processing capacity to 1,093 MMcf/d (net).
This includes enhanced NGL extraction capacity of approximately 735
MMcf/d (net). The volumes from Pembina's existing assets and those
under development would be processed largely on a contracted,
fee-for-service basis and are expected to result in approximately
55 mbpd of NGL to be transported for additional toll revenue on
Pembina's Conventional Pipelines by the end of 2015.
Midstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
Months Ended March 31(1) |
($ millions, except where noted) |
|
|
|
|
|
2013 |
2012 |
Revenue |
|
|
|
|
|
1,132.1 |
331.1 |
Operations |
|
|
|
|
|
21.8 |
2.4 |
Cost of goods sold, including product
purchases |
|
|
|
|
|
983.9 |
299.1 |
Realized gain (loss) on commodity-related
derivative financial instruments |
|
|
|
|
|
2.1 |
|
Operating margin(2) |
|
|
|
|
|
128.5 |
29.6 |
Depreciation and amortization included in
operations |
|
|
|
|
|
31.7 |
1.7 |
Unrealized gain (loss) on
commodity-related derivative financial instruments |
|
|
|
|
|
4.9 |
(0.5) |
Gross profit |
|
|
|
|
|
101.7 |
27.4 |
Capital expenditures |
|
|
|
|
|
23.9 |
2.3 |
|
|
(1) |
Share of profit
from equity accounted investees not included in these results. |
(2) |
Refer to "Non-GAAP
Measures." |
Business Overview
Pembina offers customers a comprehensive suite of midstream
products and services through its Midstream business as
follows:
- Crude oil midstream targets oil and diluent-related
opportunities from key sites across Pembina's network, which
comprise 15 truck terminals (including one capable of emulsion
treating and water disposal), terminalling at downstream hub
locations, storage, and the Pembina Nexus Terminal ("PNT"). PNT
includes: 21 inbound pipelines connections; 13 outbound pipelines
connections; in excess of 1.2 million bpd of crude oil and
condensate connected to the terminal; and, 310,000 barrels of
surface storage in and around the Edmonton, Alberta area.
- NGL midstream, which includes two NGL operating systems -
Redwater West and Empress East - is affected by the seasonal
demand for propane; inventory generally builds over the second and
third quarters of the year and is sold in the fourth quarter and
the first quarter of the following year during the winter heating
season.
-
- The Redwater West NGL system includes the Younger extraction
and fractionation facility in B.C.; the recently expanded 73 mbpd
Redwater NGL fractionator; 7.8
mmbbls of cavern storage and terminalling facilities at
Redwater, Alberta; and,
third-party fractionation capacity in Fort Saskatchewan, Alberta. Redwater West
purchases NGL mix from various natural gas and NGL producers and
fractionates it into finished products at fractionation facilities
near Fort Saskatchewan, Alberta.
Redwater West also includes NGL production from the Younger NGL
extraction and fractionation plant (Taylor, B.C.) that provides specification NGL
to B.C. markets. Also located at the Redwater facility is Pembina's
industry-leading rail-based terminal which services Pembina's
proprietary and customer needs.
- The Empress East NGL system includes a 2.1 bcf/d interest in
the straddle plants at Empress,
Alberta; 20 mbpd of fractionation capacity as well as 1.1
mmbbls of cavern storage in Sarnia,
Ontario; and, approximately 5 mmbbls of hydrocarbon storage
at Corunna, Ontario. Empress East
extracts NGL mix from natural gas at the Empress straddle plants and purchases NGL mix
from other producers/suppliers. Ethane and condensate are generally
fractionated out of the NGL mix at Empress and sold into Alberta markets. The remaining NGL mix is
transported by pipelines to Sarnia,
Ontario for fractionation and storage of specification
products. Propane and butane are sold into central Canadian and
eastern U.S. markets.
Financial Performance
In the Midstream business, revenue, net of cost of goods sold,
grew to $148.2 million during the
first quarter of 2013 from $32
million during the first quarter of 2012. This increase was
primarily due to the addition of the NGL assets acquired through
the Acquisition and increased terminalling activity on Pembina's
pipeline systems.
Operating expenses during the first quarter of 2013 were
$21.8 million compared to
$2.4 million in the first quarter of
2012. Operating expenses for the quarter were higher primarily due
to the increase in Midstream's asset base since the
Acquisition.
Operating margin was $128.5
million during the first quarter of 2013 compared to
$29.6 million during the first
quarter of 2012 with the increase due primarily to increased
revenue, as discussed above, partially offset by higher operating
expenses.
The Company's crude oil midstream operating margin increased to
$42.7 million compared to
$29.6 million during the first
quarter of 2012. The strong results were primarily due to higher
volumes and increased activity on Pembina's pipeline systems, wider
margins, as well as increased throughput at the crude oil midstream
truck terminals, which increased by nearly 20 percent compared to
the average during 2012 to exit the first quarter of 2013 at 80,000
bpd.
Operating margin for Pembina's NGL midstream activities was
$85.8 million for the first quarter,
including a $3.7 million year-to-date
realized gain on commodity-related derivative financial instruments
(see "Market Risk Management Program"). NGL sales volumes during
the first quarter of 2013 were 122.9 mbpd. Operating margin from
Redwater West during the first
quarter of 2013, excluding realized losses from commodity-related
derivative financial instruments, was $55.9
million. First quarter results in Redwater West were
supported by strong demand for propane and low AECO natural gas
prices. Overall, Redwater West NGL sales volumes averaged 70.3 mbpd
in the first quarter of 2013. Operating margin from Empress East
during the first quarter of 2013, excluding realized losses from
commodity-related derivative financial instruments, was
$26.1 million. First quarter results
in Empress East were positively impacted by strong propane prices
in eastern Canada. Overall,
Empress East NGL sales volumes averaged 52.6 mbpd in the first
quarter of 2013.
Depreciation and amortization included in operations during the
first quarter of 2013 totalled $31.7
million compared to $1.7
million during the same period of the prior year. This
increase reflects the additional Midstream assets in this business
since the closing of the Acquisition.
In the first quarter of 2013, unrealized gains on
commodity-related derivative financial instruments were
$4.9 million compared to a
$0.5 million loss for the three
months ended March 31, 2012. This
amount reflects fluctuations in the future NGL and natural gas
price indices during the period (see "Market Risk Management
Program" and Note 11 to the Interim Financial Statements).
For the three months ended March 31,
2013, gross profit in this business increased to
$101.7 million from $27.4 million during the same period in 2012.
This is due to the addition of assets acquired through the
Acquisition and higher operating margin generated by Pembina's
legacy midstream operations.
During the quarter ended March 31,
2013, capital expenditures within the Midstream business
totalled $23.9 million and were
primarily related to cavern development and associated
infrastructure. Capital expenditures were $2.3 million for the comparative period of
2012.
New Developments
Future prospects related to Midstream span across the crude oil
and NGL value chains. The capital being deployed in the Midstream
business is primarily directed towards fee-for-service projects
which are expected to continue to increase this businesses'
stability and predictability.
The most substantial project in this business unit is the
twinning of Pembina's existing Redwater fractionator in Redwater, Alberta ("RFS II"), which was
announced on March 5, 2013 and is
part of the Company's $1 billion NGL
infrastructure expansion. Subject to regulatory and environmental
approvals, Pembina expects RFS II to be in-service late in the
fourth quarter of 2015.
Under the agreements signed with producers, Pembina will receive
committed take-or-pay operating margin for an initial 10-year term
from the in-service date. Contracts for 97 percent of the
facility's operating capacity have been secured. Ethane produced at
RFS II will be sold under a long-term arrangement to NOVA Chemicals
Corporation.
During the first quarter of 2013, Pembina also completed and
commissioned a third-party tie-in to its Younger facility.
Pembina also continues to advance numerous other projects in
this business unit as follows:
- Pembina brought two fee-for-service hydrocarbon storage caverns
into service at its Redwater site
in April, 2013. Pembina expects to bring a third cavern into
service in the second quarter of 2013.
- Pembina expects to bring two new full-service terminal ("FST")
facilities into service in 2013. This includes a joint venture FST
in the Judy Creek area of Alberta
to serve the production from Beaverhill Lake and Swan Hills, which should be on-stream by the
end of the first half of 2013, and a second FST that serves
producers in the Cynthia area west of Drayton Valley, which is expected to be
in-service by year-end.
- During 2013, Pembina plans to enhance the connectivity of PNT,
both to third-party infrastructure and to the Company's own
facilities between Edmonton and
Fort Saskatchewan. In addition,
Pembina anticipates adding the ability to load crude oil by rail
during 2013.
- Pembina is also continuing to investigate offshore propane
export opportunities that would allow it to leverage its existing
assets and provide a potential solution for Canadian producers
impacted by weak North American pricing.
Market Risk Management Program
Pembina is exposed to frac spread risk, which is the difference
between the selling price for propane-plus liquids and the input
cost of natural gas required to produce respective NGL products.
Pembina has a risk management program and uses derivative financial
instruments to mitigate frac spread risk, when possible, to
safeguard a base level of operating cash flow that covers the input
cost of natural gas. Pembina has entered into derivative financial
swap contracts to protect the frac spread and product margin, and
to manage exposure to power costs, interest rates and foreign
exchange rates.
Pembina's credit policy mitigates risk of non-performance by
counterparties of its derivative financial instruments. Activities
undertaken to reduce risk include: regularly monitoring
counterparty exposure to approved credit limits; financial reviews
of all active counterparties; entering into International Swap
Dealers Association agreements; and, obtaining financial assurances
where warranted. In addition, Pembina has a diversified base of
available counterparties.
Management continues to actively monitor commodity price risk
and mitigate its impact through financial risk management
activities. For more information on financial instruments and
financial risk management, see Note 11 to the Interim Financial
Statements.
Non-Operating Expenses
G&A
Pembina incurred G&A (including corporate depreciation and
amortization) of $32.6 million during
the first quarter of 2013 compared to $17.6
million during the first quarter of 2012. The increase for
the period was mainly due to the addition of employees who joined
Pembina through the Acquisition and new employees who joined the
Company, as well as an increase in salaries and benefits for
existing employees, including increased share-based payment
accruals. In addition, every $1
change in share price is expected to change Pembina's annual
share-based incentive expense by approximately $1 million.
Depreciation & Amortization (operational)
Operational depreciation and amortization increased to
$41.8 million during the first
quarter of 2013 compared to $21.7
million during the same period in 2012 which reflects
depreciation on new property, plant and equipment and depreciable
intangibles including those assets acquired through the
Acquisition.
Net Finance Costs
Net finance costs in the first quarter of 2013 were $50.8 million compared to $19.5 million in the first quarter of 2012. The
increase primarily relates to a $22.4
million loss on revaluation of the conversion feature on
convertible debentures as a result of an increase in the market
price of Pembina shares and an increase in interest on convertible
debentures totalling $6 million due
to the debentures assumed on closing of the Acquisition (see Note 9
to the Interim Financial Statements). In 2012, the change in fair
value of commodity-related derivative financial instruments was
reclassified from net finance costs to gain/loss on
commodity-related derivative financial instruments and is included
in operational results.
Income Tax Expense
Income tax expense for the first quarter of 2013 includes
current taxes of $4.2 million and
deferred taxes of $26 million
compared to deferred taxes of $10.9
million in the same period of 2012. The current taxes arose
during the quarter primarily as a result of certain Pembina
subsidiary corporation's taxable income exceeding their losses
available for carry-over. Deferred income tax expense arises from
the difference between the accounting and tax basis of assets and
liabilities.
Liquidity & Capital Resources
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
|
|
|
|
March 31,
2013 |
|
|
|
December 31,
2012 |
Working capital |
|
|
|
|
|
42.8 |
|
|
|
62.8 |
Variable rate
debt(1)(2) |
|
|
|
|
|
|
|
|
|
|
|
Bank debt |
|
|
|
|
|
200.0 |
|
|
|
525.0 |
Total variable rate
debt outstanding (average rate of 2.80%)(2) |
|
|
|
|
|
200.0 |
|
|
|
525.0 |
Fixed rate debt(1) |
|
|
|
|
|
|
|
|
|
|
|
Senior unsecured notes |
|
|
|
|
|
642.0 |
|
|
|
642.0 |
|
Senior unsecured term debt |
|
|
|
|
|
75.0 |
|
|
|
75.0 |
|
Senior unsecured medium-term note 1 |
|
|
|
|
|
250.0 |
|
|
|
250.0 |
|
Senior unsecured medium-term note 2 |
|
|
|
|
|
450.0 |
|
|
|
450.0 |
|
Subsidiary debt |
|
|
|
|
|
9.7 |
|
|
|
9.3 |
Total fixed rate debt outstanding
(average of 5.03%)(2) |
|
|
|
|
|
1,426.7 |
|
|
|
1,426.3 |
Convertible
debentures(1) |
|
|
|
|
|
644.0 |
|
|
|
644.3 |
Finance lease liability |
|
|
|
|
|
5.7 |
|
|
|
5.8 |
Total debt and debentures
outstanding |
|
|
|
|
|
2,276.4 |
|
|
|
2,601.4 |
Cash and unutilized debt
facilities |
|
|
|
|
|
1,376.4 |
|
|
|
1,032.3 |
|
|
(1) |
Face value. |
(2) |
Pembina maintains
derivative financial instruments to manage exposure to variable
interest rates.
See Market Risk Management Program. |
Pembina anticipates cash flow from operating activities will be
more than sufficient to meet its short-term operating obligations
and fund its targeted dividend level. In the short-term, Pembina
expects to source funds required for capital projects from cash and
cash equivalents and unutilized debt facilities totalling
$1,376.4 million as at March 31, 2013. In addition, based on its
successful access to financing in the debt and equity markets
during the past several years, Pembina believes it would likely
continue to have access to funds at attractive rates. Management
remains satisfied that the leverage employed in Pembina's capital
structure is sufficient and appropriate given the characteristics
and operations of the underlying asset base.
Management may make adjustments to Pembina's capital structure
as a result of changes in economic conditions or the risk
characteristics of the underlying assets. To maintain or modify
Pembina's capital structure in the future, Pembina may renegotiate
new debt terms, repay existing debt, seek new borrowing and/or
issue equity.
Pembina's credit facilities at March 31,
2013 consisted of an unsecured $1.5
billion revolving credit facility due March 2018 and an operating facility of
$30 million due July 2014. During the quarter, Pembina's
revolving credit facility was extended by one year from
March 2017 to March 2018 and the operating facility was also
extended by one year from July 2013
to July 2014. Borrowings on the
revolving credit facility and the operating facility bear interest
at prime lending rates plus nil percent to 1.25 percent or Bankers'
Acceptances rates plus 1.00 percent to 2.25 percent. Margins on the
credit facilities are based on the credit rating of Pembina's
senior unsecured debt. There are no repayments due over the term of
these facilities. As at March 31,
2013, Pembina had $200 million
drawn on bank debt, $0.1 million in
letters of credit and $46.4 million
in cash, leaving $1,376.4 million of
unutilized debt facilities on the $1,530
million of established bank facilities. Pembina also had an
additional $18.1 million in letters
of credit issued in a separate demand letter of credit facility. At
March 31, 2013, Pembina had loans and
borrowing (excluding amortization, letters of credit and finance
lease liabilities) of $1,626.7
million. Pembina's senior debt to total capital at
March 31, 2013 was 23 percent.
Bought Deal Financing
On March 21, 2013, Pembina closed
its offering of 11,206,750 common shares at a price of $30.80 per share through a syndicate of
underwriters, which included 1,461,750 common shares issued at the
same price on the exercise in full of the over-allotment option
granted to the underwriters for aggregate gross proceeds of
$345.2 million.
Pembina used the net proceeds from the offering to reduce the
Company's revolving credit facility which was used to fund the
Company's capital program and for other general corporate
purposes.
The common shares were offered pursuant to a prospectus
supplement under the short form base shelf prospectus filed by the
Company on February 22, 2013 in each
of the provinces of Canada and in
the U.S. pursuant to applicable registration exemptions.
Debt Issue
On April 30, 2012, Pembina closed
the offering of $200 million of
senior unsecured, medium-term notes ("Notes"). The Notes have a
fixed interest rate of 4.75 percent per annum paid semi-annually,
and will mature on April 30, 2043.
The net proceeds from the offering of Notes were used to pay down
Pembina's existing credit facility.
Credit Ratings
The following information with respect to Pembina's credit
ratings is provided as it relates to Pembina's financing costs and
liquidity. Specifically, credit ratings affect Pembina's ability to
obtain short-term and long-term financing and the cost of such
financing. A reduction in the current ratings on Pembina's debt by
its rating agencies, particularly a downgrade below investment
grade ratings, could adversely affect Pembina's cost of financing
and its access to sources of liquidity and capital. In addition,
changes in credit ratings may affect Pembina's ability to, and the
associated costs of, entering into normal course derivative or
hedging transactions. Credit ratings are intended to provide
investors with an independent measure of credit quality of any
issues of securities. The credit ratings assigned by the rating
agencies are not recommendations to purchase, hold or sell the
securities nor do the ratings comment on market price or
suitability for a particular investor. Any rating may not remain in
effect for a given period of time or may be revised or withdrawn
entirely by a rating agency in the future if in its judgement
circumstances so warrant.
DBRS rates Pembina's senior unsecured notes 'BBB'. S&P's
long-term corporate credit rating on Pembina is 'BBB'.
Capital Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 Months
Ended
March 31 |
($ millions) |
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
|
2012 |
Development capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional Pipelines |
|
|
|
|
|
|
|
|
|
|
61.4 |
|
|
|
11.1 |
|
Oil Sands & Heavy Oil |
|
|
|
|
|
|
|
|
|
|
12.1 |
|
|
|
5.8 |
|
Gas Services |
|
|
|
|
|
|
|
|
|
|
38.5 |
|
|
|
34.0 |
|
Midstream |
|
|
|
|
|
|
|
|
|
|
23.9 |
|
|
|
2.3 |
Corporate/other projects |
|
|
|
|
|
|
|
|
|
|
1.2 |
|
|
|
1.7 |
Total development
capital |
|
|
|
|
|
|
|
|
|
|
137.1 |
|
|
|
54.9 |
During the first quarter of 2013, capital expenditures were
$137.1 million compared to
$54.9 million during the same three
month period of 2012.
The majority of the capital expenditures in the first quarter of
2013 were in Pembina's Conventional Pipelines, Gas Services and
Midstream businesses. Conventional Pipelines' capital was incurred
to progress its phase I and phase II crude oil, condensate and NGL
expansions and on various new connections. Gas Services' capital
was deployed to progress the Saturn I and Resthaven enhanced NGL
extraction facilities. Midstream's capital expenditures were
primarily directed towards cavern development and related
infrastructure.
Contractual Obligations at March 31,
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
|
|
|
|
Payments Due By Period |
Contractual
Obligations |
|
|
|
|
|
Total |
|
|
|
Less
than
1 year |
|
|
|
1 - 3
years |
|
|
|
3 - 5
years |
|
|
|
After
5 years |
Operating and finance leases |
|
|
|
|
|
294.6 |
|
|
|
10.0 |
|
|
|
57.9 |
|
|
|
62.9 |
|
|
|
163.8 |
Loans and borrowings(1) |
|
|
|
|
|
2,104.2 |
|
|
|
80.9 |
|
|
|
365.1 |
|
|
|
312.2 |
|
|
|
1,346.0 |
Convertible debentures(1) |
|
|
|
|
|
893.3 |
|
|
|
39.2 |
|
|
|
78.9 |
|
|
|
248.7 |
|
|
|
526.5 |
Construction commitments |
|
|
|
|
|
872.1 |
|
|
|
474.8 |
|
|
|
397.3 |
|
|
|
|
|
|
|
|
Provisions(2) |
|
|
|
|
|
344.2 |
|
|
|
0.3 |
|
|
|
5.7 |
|
|
|
25.8 |
|
|
|
312.4 |
Total contractual
obligations(3) |
|
|
|
|
|
4,508.4 |
|
|
|
605.2 |
|
|
|
904.9 |
|
|
|
649.6 |
|
|
|
2,348.7 |
|
|
(1) |
Excluding deferred
financing costs. |
(2) |
Includes
discounted constructive and legal obligations included in the
decommissioning provision. |
(3) |
Excluding
expansion rights and obligations associated with existing contracts
and which have not yet been triggered. |
Pembina is, subject to certain conditions, contractually
committed to the construction and operation of the Saturn and
Resthaven facilities, as well as RFS II. See "Forward-Looking
Statements & Information."
Changes in Accounting Principles and Practices
The following new standards, interpretations, amendments and
improvements to existing standards issued by the International
Accounting Standard Board ("IASB") or International Financial
Reporting Interpretations Committee ("IFRIC") were adopted as of
January 1, 2013 without any material
impact to Pembina's Financial Statements: IFRS 7 Financial
Instruments: Disclosures, IFRS 10 Consolidated Financial
Statements, IFRS 11 Joint Arrangements, IFRS 12
Disclosure of Interests in Other Entities, IFRS 13 Fair
Value Measurement, and IAS 19 Employee Future
Benefits.
Controls and Procedures
Changes in internal control over financial reporting
During the first quarter of 2013, there have been no changes to
the Company's internal control over financial reporting that have
materially affected, or are reasonably likely to materially affect,
the Company's Internal Control over Financial Reporting ("ICFR"),
except as noted below.
In accordance with the provisions of NI 52-109, management,
including the CEO and CFO, have limited the scope of their design
of the Company's disclosure controls and procedures ("DC&P")
and ICFR to exclude controls, policies and procedures of Provident.
Pembina acquired the assets of Provident and its subsidiaries on
April 2, 2012. Provident's
contribution to the Company's Interim Financial Statements for the
quarter ended March 31, 2013 was
approximately 39 percent of consolidated net revenue and
approximately 33 percent of consolidated gross profit.
Additionally, as at March 31,
2013, Provident's current assets and current liabilities
were approximately 56 percent and 43 percent of consolidated
current assets and current liabilities, respectively, and its
non-current assets and non-current liabilities were approximately
57 percent and 34 percent of consolidated non-current assets and
non-current liabilities, respectively.
The scope limitation is primarily based on the time required to
assess Provident's DC&P and ICFR in a manner consistent with
the Company's other operations.
Further details related to the Acquisition are disclosed in Note
4 in the Notes to the Company's Interim Financial Statements for
the first quarter of 2013.
Trading Activity and Total Enterprise
Value(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at and for the 3
months ended |
($ millions, except
where noted) |
|
|
|
|
|
May 7, 2013 |
(2) |
|
March 31,
2013 |
|
|
March 31,
2012 |
|
Trading volume and
value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total volume (shares) |
|
|
|
|
|
12,532,999 |
|
|
42,378,701 |
|
|
59,689,803 |
|
|
Average daily volume
(shares) |
|
|
|
|
|
464,185 |
|
|
694,733 |
|
|
947,601 |
|
|
Value traded |
|
|
|
|
|
401.6 |
|
|
1,270.0 |
|
|
1,648.0 |
|
Shares outstanding
(shares) |
|
|
|
|
|
307,832,800 |
|
|
306,992,777 |
|
|
169,029,860 |
|
Closing share price
(dollars) |
|
|
|
|
|
32.67 |
|
|
32.10 |
|
|
28.18 |
|
Market value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
10,056.9 |
|
|
9,854.5 |
|
|
4,763.3 |
|
|
5.75% convertible
debentures (PPL.DB.C) |
|
|
|
|
|
357.9 |
(3) |
|
353.6 |
(4) |
|
326.7 |
(5) |
|
5.75% convertible
debentures (PPL.DB.E) |
|
|
|
|
|
226.9 |
(6) |
|
221.9 |
(7) |
|
|
|
|
5.75% convertible
debentures (PPL.DB.F) |
|
|
|
|
|
202.6 |
(8) |
|
201.7 |
(9) |
|
|
|
Market
capitalization |
|
|
|
|
|
10,844.3 |
|
|
10,631.7 |
|
|
5,090.0 |
|
Senior debt |
|
|
|
|
|
1,672.0 |
|
|
1,617.0 |
|
|
1,402.9 |
|
Total enterprise
value(10) |
|
|
|
|
|
12,516.3 |
|
|
12,248.7 |
|
|
6,492.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Trading information in this table
reflects the activity of Pembina securities on the TSX only. |
(2) |
Based on 27 trading days from
April 1, 2013 to May 7, 2013, inclusive. |
(3) |
$299.5 million principal amount
outstanding at a market price of $119.49 at May 7, 2013 and with a
conversion price of $28.55. |
(4) |
$299.7 million principal amount
outstanding at a market price of $118.00 at March 31, 2013 and with
a conversion price of $28.55. |
(5) |
$299.8 million principal amount
outstanding at a market price of $109.00 at March 31, 2012 and with
a conversion price of $28.55. |
(6) |
$171.9 million principal amount
outstanding at a market price of $132.00 at May 7, 2013 and with a
conversion price of $24.94. |
(7) |
$172.0 million principal amount
outstanding at a market price of $129.02 at March 31, 2012 and with
a conversion price of $24.94. |
(8) |
$172.3 million principal amount
outstanding at a market price of $117.57 at May 7, 2013 and with a
conversion price of $29.53. |
(9) |
$172.4 million principal amount
outstanding at a market price of $117.00 at March 31, 2013 and with
a conversion price of $29.53. |
(10) |
Refer to "Non-GAAP Measures." |
As indicated in the previous table, Pembina's total enterprise
value was $12.2 billion at
March 31, 2013, and the Company's
issued and outstanding shares rose to 307 million by the end of the
first quarter 2013, compared to 169 million in the same period of
2012 primarily due to shares issued pursuant to the Acquisition and
on the closing of the bought deal financing as discussed under
"Liquidity & Capital Resources."
Dividends
Pembina pays monthly dividends at a rate of $0.135 per share per month (or $1.62 annualized). Pembina is committed to
providing increased shareholder returns over time by providing
stable dividends and, where appropriate, further increases in
Pembina's dividend, subject to compliance with applicable laws and
the approval of Pembina's Board of Directors. Pembina has a history
of delivering dividend increases once supportable over the
long-term by the underlying fundamentals of Pembina's businesses as
a result of, among other things, accretive growth projects or
acquisitions (see "Forward-Looking Statements &
Information").
Dividends are payable if, as, and when declared by Pembina's
Board of Directors. The amount and frequency of dividends declared
and payable is at the discretion of the Board of Directors which
will consider earnings, capital requirements, the financial
condition of Pembina and other relevant factors.
Eligible Canadian investors may benefit from an enhanced
dividend tax credit afforded to the receipt of dividends, depending
on individual circumstances. Dividends paid to eligible U.S.
investors should qualify for the reduced rate of tax applicable to
long-term capital gains but investors are encouraged to seek
independent tax advice in this regard.
DRIP
Eligible Pembina shareholders have the opportunity to receive,
by reinvesting the cash dividends declared payable by Pembina on
their shares, either (i) additional common shares at a discounted
subscription price equal to 95 percent of the Average Market Price
(as defined in the DRIP), pursuant to the "Dividend Reinvestment
Component" of the DRIP, or (ii) a premium cash payment (the
"Premium Dividend™") equal to 102 percent of the amount of
reinvested dividends, pursuant to the "Premium Dividend™ Component"
of the DRIP. Additional information about the terms and conditions
of the DRIP can be found at www.pembina.com.
Participation in the DRIP for the first quarter of 2013 was
approximately 56 percent of common shares outstanding for proceeds
of approximately $67 million.
As of the April 25, 2013 record
date, Pembina has made its DRIP available to its U.S. shareholders.
U.S. shareholders are only permitted to participate in the dividend
reinvestment component of Pembina's Premium Dividend™ and Dividend
Reinvestment Plan. Only Canadian resident shareholders are
currently permitted to participate in the Premium Dividend™
component of the plan. Shareholders who elect to enroll in the full
Dividend Reinvestment component are notified that the sale of the
common shares issued on reinvestment is being made pursuant to a
registration statement on Form F-3 filed by Pembina with the U.S.
Securities and Exchange Commission ("SEC").
Risk Factors
Management has identified the primary risk factors that could
potentially have a material impact on the financial results and
operations of Pembina. Such risk factors are presented in Pembina's
MD&A for the year ended December 31,
2012 and in Pembina's Annual Information Form ("AIF") for
the year ended December 31, 2012.
Pembina's MD&A and AIF are available at www.pembina.com, in
Canada under Pembina's company
profile on www.sedar.com and in the U.S. under the Company's
profile at www.sec.gov.
Selected Quarterly Operating Information
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2013 |
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2012 |
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2011 |
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Q1 |
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Q4 |
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Q3 |
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Q2 |
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Q1 |
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Q4 |
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Q3 |
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Q2 |
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Q1 |
Average volume
(mbpd unless stated otherwise) |
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Conventional Pipelines throughput |
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493.7 |
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480.2 |
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443.9 |
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433.9 |
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466.9 |
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422.8 |
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430.4 |
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411.4 |
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390.3 |
Oil Sands & Heavy Oil(1) |
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870.0 |
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870.0 |
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870.0 |
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870.0 |
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870.0 |
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870.0 |
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775.0 |
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|
775.0 |
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|
775.0 |
Gas Services processing
(mboe/d)(2) |
|
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49.9 |
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46.0 |
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45.8 |
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47.5 |
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44.1 |
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45.3 |
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43.6 |
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40.9 |
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39.4 |
NGL sales volume (mboe/d) |
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122.9 |
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115.8 |
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86.7 |
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90.4 |
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(1) |
Oil Sands & Heavy Oil
throughput refers to contracted capacity. |
(2) |
Net to Pembina. Converted to
mboe/d from MMcf/d at a 6:1 ratio. |
Selected Quarterly Financial Information
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2013 |
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2012 |
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|
2011 |
($ millions, except where
noted) |
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Q1 |
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Q4 |
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Q3 |
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Q2 |
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Q1 |
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Q4 |
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Q3 |
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Q2 |
|
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|
Q1 |
Revenue |
|
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1,285.7 |
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|
1,265.7 |
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|
|
815.3 |
|
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|
870.9 |
|
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475.5 |
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468.1 |
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300.6 |
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512.4 |
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394.9 |
Operations |
|
|
|
77.2 |
|
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86.0 |
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69.5 |
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67.7 |
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48.4 |
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55.1 |
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54.4 |
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37.6 |
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|
44.8 |
Cost of goods sold, including
product purchases |
|
|
|
970.8 |
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968.6 |
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|
565.5 |
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641.9 |
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299.1 |
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308.0 |
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145.8 |
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364.3 |
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254.2 |
Realized gain (loss)
on commodity-
related derivative financial
instruments |
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2.1 |
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11.0 |
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(2.8) |
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(12.4) |
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(0.3) |
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0.9 |
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3.2 |
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(0.2) |
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1.4 |
Operating margin(1) |
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239.8 |
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222.1 |
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177.5 |
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148.9 |
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127.7 |
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105.9 |
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103.6 |
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110.3 |
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97.3 |
Depreciation and amortization
included in operations |
|
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41.8 |
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47.8 |
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51.6 |
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52.5 |
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21.7 |
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19.6 |
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17.8 |
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15.8 |
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14.8 |
Unrealized gain (loss) on
commodity-related derivative
financial instruments |
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5.8 |
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(2.2) |
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(23.0) |
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64.8 |
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(3.5) |
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0.9 |
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0.7 |
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3.3 |
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0.3 |
Gross profit |
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203.8 |
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172.1 |
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102.9 |
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161.2 |
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102.5 |
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87.2 |
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86.5 |
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97.8 |
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82.8 |
Adjusted EBITDA(1) |
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210.2 |
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199.0 |
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153.8 |
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125.9 |
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111.4 |
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88.2 |
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89.9 |
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103.3 |
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87.2 |
Cash flow from
operating activities |
|
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229.0 |
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139.5 |
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130.9 |
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24.1 |
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65.3 |
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73.8 |
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87.7 |
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49.5 |
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74.5 |
Cash flow from
operating activities
per common share ($ per share) |
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0.77 |
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0.48 |
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0.45 |
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0.08 |
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0.39 |
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0.44 |
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0.52 |
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0.30 |
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0.45 |
Adjusted cash flow from operating
activities(1) |
|
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207.4 |
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172.3 |
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133.2 |
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89.5 |
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98.8 |
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66.0 |
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82.0 |
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81.8 |
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76.0 |
Adjusted cash flow from operating
activities per common share(1)
($ per share) |
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0.70 |
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0.59 |
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0.46 |
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0.31 |
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0.59 |
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0.39 |
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0.49 |
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0.49 |
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|
0.45 |
Earnings for the period |
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90.5 |
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81.3 |
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30.7 |
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80.4 |
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32.6 |
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45.0 |
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30.1 |
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48.0 |
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42.5 |
Earnings per common share
($ per share) |
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Basic and diluted |
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0.30 |
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0.28 |
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0.11 |
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0.28 |
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0.19 |
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0.27 |
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0.18 |
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0.29 |
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0.25 |
Common shares outstanding
(millions): |
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Weighted average (basic) |
|
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295.9 |
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291.9 |
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|
289.2 |
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|
285.3 |
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168.3 |
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|
167.4 |
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|
167.6 |
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|
167.3 |
|
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|
167.0 |
|
Weighted average (diluted) |
|
|
|
296.7 |
|
|
292.5 |
|
|
|
289.7 |
|
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|
286.0 |
|
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|
168.9 |
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|
168.2 |
|
|
|
168.2 |
|
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|
168.0 |
|
|
|
167.6 |
|
End of period |
|
|
|
307.0 |
|
|
293.2 |
|
|
|
290.5 |
|
|
|
287.8 |
|
|
|
169.0 |
|
|
|
167.9 |
|
|
|
167.7 |
|
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|
167.5 |
|
|
|
167.1 |
Dividends declared |
|
|
|
121.0 |
|
|
118.4 |
|
|
|
117.3 |
|
|
|
116.2 |
|
|
|
65.7 |
|
|
|
65.4 |
|
|
|
65.4 |
|
|
|
65.3 |
|
|
|
65.1 |
Dividends per common share
($ per share) |
|
|
|
0.405 |
|
|
0.405 |
|
|
|
0.405 |
|
|
|
0.405 |
|
|
|
0.390 |
|
|
|
0.390 |
|
|
|
0.390 |
|
|
|
0.390 |
|
|
|
0.390 |
|
|
(1) |
Refer to "Non-GAAP
measures." |
During the above periods, Pembina's results were influenced by
the following factors and trends:
- Increased oil production from customers operating in the
Cardium and Deep Basin Cretaceous formations of west central
Alberta, which has resulted in
increased service offerings in these areas, as well as new
connections and capacity expansions;
- Increased liquids-rich natural gas production from producers in
the WCBS (Deep Basin, Montney and
emerging Duvernay Shale plays), which has resulted in increased gas
gathering and processing at the Company's Gas Services assets and
additional associated NGL transported on its pipelines;
- The Acquisition, which closed on April
2, 2012 (see Note 4 of the Interim Financial
Statements).
- Increased shares outstanding due to: the Acquisition; the DRIP;
and, the bought deal equity financing in the first quarter of
2013.
Additional Information
Additional information about Pembina and legacy Provident filed
with Canadian securities commissions and the SEC, including
quarterly and annual reports, AIFs (filed with the SEC under Form
40-F), Management Information Circulars and financial statements
can be found online at www.sedar.com, www.sec.gov and Pembina's
website at www.pembina.com.
Non-GAAP Measures
Throughout this MD&A, Pembina has used the following terms
that are not defined by GAAP but are used by Management to evaluate
performance of Pembina and its business. Since certain Non-GAAP
financial measures may not have a standardized meaning, securities
regulations require that Non-GAAP financial measures are clearly
defined, qualified and reconciled to their nearest GAAP measure.
Except as otherwise indicated, 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.
Earnings before interest, taxes, depreciation and
amortization ("EBITDA")
EBITDA is commonly used by Management, investors and creditors
in the calculation of ratios for assessing leverage and financial
performance and is calculated as results from operating activities
plus share of profit from equity accounted investees (before tax)
plus depreciation and amortization (included in operations and
general and administrative expense) and unrealized gains or losses
on commodity-related derivative financial instruments.
Adjusted EBITDA is EBITDA excluding acquisition-related expenses
in connection with the Acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 Months
Ended
March 31 |
($ millions, except per share amounts) |
|
|
|
|
|
2013 |
|
|
|
2012 |
Results from operating activities |
|
|
|
|
|
171.8 |
|
|
|
62.8 |
Share of profit from equity
accounted investees (before tax, depreciation and
amortization) |
|
|
|
|
|
1.8 |
|
|
|
1.5 |
Depreciation and amortization |
|
|
|
|
|
43.1 |
|
|
|
22.5 |
Unrealized (gain) loss on commodity-related
derivative financial instruments |
|
|
|
|
|
(5.8) |
|
|
|
3.5 |
EBITDA |
|
|
|
|
|
210.9 |
|
|
|
90.3 |
Add: |
|
|
|
|
|
|
|
|
|
|
Acquisition-related expenses |
|
|
|
|
|
(0.7) |
|
|
|
21.1 |
Adjusted EBITDA |
|
|
|
|
|
210.2 |
|
|
|
111.4 |
EBITDA per common share - basic
(dollars) |
|
|
|
|
|
0.71 |
|
|
|
0.54 |
Adjusted EBITDA per common share - basic
(dollars) |
|
|
|
|
|
0.71 |
|
|
|
0.66 |
Adjusted cash flow from operating activities
Adjusted cash flow from operating activities is commonly used by
Management for assessing financial performance each reporting
period and is calculated as cash flow from operating activities
plus the change in non-cash working capital and excluding
acquisition-related expenses.
|
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|
|
|
|
|
|
|
|
|
|
|
3 Months Ended
March 31 |
($ millions, except per share amounts) |
|
|
|
|
|
2013 |
2012 |
Cash flow from operating activities |
|
|
|
|
|
229.0 |
65.3 |
Add (deduct): |
|
|
|
|
|
|
|
Change in non-cash working capital |
|
|
|
|
|
(20.9) |
12.4 |
Acquisition-related expenses |
|
|
|
|
|
(0.7) |
21.1 |
Adjusted cash flow from operating activities |
|
|
|
|
|
207.4 |
98.8 |
Adjusted cash flow from operating
activities per common share - basic (dollars) |
|
|
|
|
|
0.70 |
0.59 |
Operating margin
Operating margin is commonly used by Management for assessing
financial performance and is calculated as gross profit before
depreciation and amortization included in operations and unrealized
gain/loss on commodity-related derivative financial
instruments.
Reconciliation of operating margin to gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 Months Ended
March 31 |
($ millions) |
|
|
|
|
|
2013 |
2012 |
Revenue |
|
|
|
|
|
1,285.7 |
475.5 |
Cost of sales: |
|
|
|
|
|
|
|
|
Operations |
|
|
|
|
|
77.2 |
48.4 |
|
Cost of goods sold, including product
purchases |
|
|
|
|
|
970.8 |
299.1 |
|
Realized gain (loss) on
commodity-related derivative financial instruments |
|
|
|
|
|
2.1 |
(0.3) |
Operating margin |
|
|
|
|
|
239.8 |
127.7 |
Depreciation and amortization included
in operations |
|
|
|
|
|
41.8 |
21.7 |
Unrealized gain (loss)
on commodity-related derivative financial instruments |
|
|
|
|
|
5.8 |
(3.5) |
Gross profit |
|
|
|
|
|
203.8 |
102.5 |
Total enterprise value
Total enterprise value, in combination with other measures, is
used by Management and the investment community to assess the
overall market value of the business. Total enterprise value is
calculated based on the market value of common shares and
convertible debentures at a specific date plus senior debt.
Management believes these supplemental Non-GAAP measures
facilitate the understanding of Pembina's results from operations,
leverage, liquidity and financial positions. Investors should be
cautioned that EBITDA, adjusted EBITDA, adjusted cash flow from
operating activities, operating margin and total enterprise value
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. Furthermore, these Non-GAAP measures may not be
comparable to similar measures presented by other issuers.
Forward-Looking Statements & Information
In the interest of providing our securityholders and potential
investors with information regarding Pembina, including
Management's assessment of our future plans and operations, certain
statements contained in this MD&A constitute forward-looking
statements or information (collectively, "forward-looking
statements") within the meaning of the "safe harbour" provisions of
applicable securities legislation. Forward-looking statements are
typically identified by words such as "anticipate", "continue",
"estimate", "expect", "may", "will", "project", "should", "could",
"believe", "plan", "intend", "design", "target", "undertake",
"view", "indicate", "maintain", "explore", "entail", "schedule",
"objective", "strategy", "likely", "potential", "envision", "aim",
"outlook", "propose", "goal", "would", and similar expressions
suggesting future events or future performance.
By their nature, such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause
actual results or events to differ materially from those
anticipated in such forward-looking statements. Pembina believes
the expectations reflected in those forward-looking statements are
reasonable but no assurance can be given that these expectations
will prove to be correct and such forward-looking statements
included in this MD&A should not be unduly relied upon. These
statements speak only as of the date of the MD&A.
In particular, this MD&A contains forward-looking
statements, including certain financial outlook, pertaining to the
following:
- the future levels of cash dividends that Pembina intends to pay
to its shareholders;
- capital expenditure-estimates, plans, schedules, rights and
activities and the planning, development, construction, operations
and costs of pipelines, gas service facilities, terminalling,
storage and hub facilities and other facilities or energy
infrastructure, including, but not limited to, the Peace/Northern
NGL System, the LVP expansion between Fox
Creek and Edmonton,
Alberta, the Phase II LVP Expansion, the Phase II NGL
Expansion, the joint venture full-service terminal in the Judy
Creek area of Alberta area, the
development program in the Cynthia area west of Drayton Valley, offshore export opportunities
for propane, the Nipisi and Mitsue pipelines expansions, the Saturn
I and II facilities and associated pipelines, the Resthaven
facility and associated pipelines, the Pembina Nexus Terminal
expansion, and the Redwater
fractionator (RFS II) expansion;
- future expansion of Pembina's pipelines and other
infrastructure;
- pipeline, processing and storage facility and system operations
and throughput levels;
- oil and gas industry exploration and development activity
levels;
- Pembina's strategy and the development of new business
initiatives;
- growth opportunities;
- expectations regarding Pembina's ability to raise capital and
to carry out acquisition, expansion and growth plans;
- treatment under government regulatory regimes including
environmental regulations and related abandonment and reclamation
obligations;
- future G&A expenses at Pembina
- increased throughput potential due to increased activity and
new connections and other initiatives on Pembina's pipelines;
- future cash flows, potential revenue and cash flow enhancements
across Pembina's businesses and the maintenance of operating
margins;
- tolls and tariffs and transportation, storage and services
commitments and contracts;
- cash dividends and the tax treatment thereof;
- operating risks (including the amount of future liabilities
related to pipeline spills and other environmental incidents) and
related insurance coverage and inspection and integrity
programs;
- the expected capacity, incremental volumes and in-services
dates, as applicable, of proposed expansions and new developments,
including the Northern NGL System, the LVP expansion between
Fox Creek and Edmonton, Alberta, the Phase II LVP Expansion,
the Phase II NGL Expansion, the Nipisi and Mitsue pipeline
expansions, the Saturn I and II facilities, the Resthaven facility,
the Pembina Nexus Terminal expansion and the Redwater fractionator (RFS II) expansion;
- the possibility of offshore export opportunities for
propane;
- the possibility of renegotiating debt terms, repayment of
existing debt, seeking new borrowing and/or issuing equity;
- expectations regarding participation in Pembina's DRIP;
- the expected impact of changes in share price on annual
share-based incentive expense;
- inventory and pricing levels in the North American liquids
market;
- Pembina's discretion to hedge natural gas and NGL volumes and
power; and
- competitive conditions.
Various factors or assumptions are typically applied by Pembina
in drawing conclusions or making the forecasts, projections,
predictions or estimations set out in forward-looking statements
based on information currently available to Pembina. These factors
and assumptions include, but are not limited to:
- the success of Pembina's operations;
- 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, including but not limited
to future capital expenditures relating to expansion, upgrades and
maintenance shutdowns;
- future operating costs;
- geotechnical and integrity costs;
- in respect of the proposed Saturn I and II facilities and the
Resthaven facility and their estimated in-service dates; 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 such facilities; that such facilities will be fully
supported by long-term firm service agreements accounting for the
entire designed throughput at such facilities at the time of such
facilities' completion; that there are no unforeseen construction
costs related to the facilities; and that there are no unforeseen
material costs relating to the facilities which are not recoverable
from customers;
- in respect of the expansion of NGL throughput capacity on the
Peace/Northern NGL System and the crude throughput capacity on the
Peace crude system (in respect of the Phase I and II NGL and LVP
expansions) and the estimated in-service dates with respect to the
same; that Pembina will receive regulatory approval; that
counterparties will comply with contracts in a timely manner; that
there are no unforeseen events preventing the performance of
contracts by Pembina; that there are no unforeseen construction
costs related to the expansion; and that there are no unforeseen
material costs relating to the pipelines that are not recoverable
from customers;
- in respect of the proposed expansion of the Redwater fractionator (RFS II); that Pembina
will receive regulatory approval; that Pembina will reach
satisfactory long-term arrangements with customers; that
counterparties will comply with such contracts in a timely manner;
that there are no unforeseen events preventing the performance of
contracts by Pembina; that there are no unforeseen construction
costs; and that there are no unforeseen material costs relating to
the proposed fractionators that are not recoverable from
customers;
- in respect of other developments, expansions and capital
expenditures planned, including the proposed expansion of a number
of existing truck terminals and construction of new full-service
terminals, the expectation of additional NGL and crude volumes
being transported on the conventional pipelines, the installation
of the remaining pump station on the Mitsue pipeline, the
development of seven-fee-for-service storage facilities at
Redwater that counterparties will
comply with contracts in a timely manner; that there are no
unforeseen events preventing the performance of contracts by
Pembina; that there are no unforeseen construction costs; and that
there are no unforeseen material costs relating to the
developments, expansions and capital expenditures which are not
recoverable from customers;
- the future exploration for and production of oil, NGL and
natural gas in the capture area around Pembina's conventional and
midstream assets, the demand for gathering and processing of
hydrocarbons, and the corresponding utilization of Pembina's
assets;
- in respect of the stability of Pembina's dividend; prevailing
commodity prices, margins and exchange rates; that Pembina's future
results of operations will be consistent with past performance and
management expectations in relation thereto; the continued
availability of capital at attractive prices to fund future capital
requirements relating to existing assets and projects, including
but not limited to future capital expenditures relating to
expansion, upgrades and maintenance shutdowns; the success of
growth projects; future operating costs; that counterparties to
material agreements will continue to perform in a timely manner;
that there are no unforeseen events preventing the performance of
contracts; and that there are no unforeseen material construction
or other costs related to current growth projects or current
operations; and
- prevailing regulatory, tax and environmental laws and
regulations.
The actual results of Pembina could differ materially from those
anticipated in these forward-looking statements as a result of the
material risk factors set forth below:
- 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;
- the failure to realize the anticipated benefits of the
Acquisition;
- the failure to complete remaining integration of the businesses
of Pembina and Provident; and
- the other factors discussed under "Risk Factors" in Pembina's
AIF for the year ended December 31,
2012. Pembina's MD&A and AIF are available at
www.pembina.com and in Canada
under Pembina's company profile on www.sedar.com and in the U.S. on
the Company's profile at www.sec.gov.
These factors should not be construed as exhaustive. Unless
required by law, Pembina does not undertake any obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. Any
forward-looking statements contained herein are expressly qualified
by this cautionary statement.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL
POSITION
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($
millions) |
|
|
|
|
|
Note |
|
|
|
|
March 31
2013 |
|
|
|
December 31
2012 |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
46.4 |
|
|
|
27.3 |
|
Trade receivables and other |
|
|
|
|
|
|
|
|
|
|
368.4 |
|
|
|
331.7 |
|
Derivative financial instruments |
|
|
|
|
|
11 |
|
|
|
|
1.5 |
|
|
|
7.6 |
|
Inventory |
|
|
|
|
|
|
|
|
|
|
95.2 |
|
|
|
108.1 |
|
|
|
|
|
|
|
|
|
|
|
511.5 |
|
|
|
474.7 |
Non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
|
|
5 |
|
|
|
|
5,109.8 |
|
|
|
5,014.5 |
|
Intangible assets and goodwill |
|
|
|
|
|
|
|
|
|
|
2,606.5 |
|
|
|
2,622.7 |
|
Investments in equity accounted investees |
|
|
|
|
|
|
|
|
|
|
163.6 |
|
|
|
161.2 |
|
Derivative financial instruments |
|
|
|
|
|
11 |
|
|
|
|
0.2 |
|
|
|
0.3 |
|
Other receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
7,880.1 |
|
|
|
7,801.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
|
|
|
|
|
|
|
|
|
8,391.6 |
|
|
|
8,276.5 |
Liabilities and Shareholders'
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade payables and accrued liabilities |
|
|
|
|
|
|
|
|
|
|
407.9 |
|
|
|
344.7 |
|
Dividends payable |
|
|
|
|
|
|
|
|
|
|
41.4 |
|
|
|
39.6 |
|
Loans and borrowings |
|
|
|
|
|
6 |
|
|
|
|
12.1 |
|
|
|
11.7 |
|
Derivative financial instruments |
|
|
|
|
|
11 |
|
|
|
|
7.3 |
|
|
|
15.9 |
|
|
|
|
|
|
|
|
|
|
|
468.7 |
|
|
|
411.9 |
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and borrowings |
|
|
|
|
|
6 |
|
|
|
|
1,607.2 |
|
|
|
1,932.8 |
|
Convertible debentures |
|
|
|
|
|
|
|
|
|
|
611.1 |
|
|
|
610.0 |
|
Derivative financial instruments |
|
|
|
|
|
11 |
|
|
|
|
70.2 |
|
|
|
51.8 |
|
Employee benefits |
|
|
|
|
|
|
|
|
|
|
28.4 |
|
|
|
28.6 |
|
Share-based payments |
|
|
|
|
|
|
|
|
|
|
7.1 |
|
|
|
17.2 |
|
Deferred revenue |
|
|
|
|
|
|
|
|
|
|
4.1 |
|
|
|
3.1 |
|
Provisions |
|
|
|
|
|
7 |
|
|
|
|
343.9 |
|
|
|
361.2 |
|
Deferred tax liabilities |
|
|
|
|
|
|
|
|
|
|
606.8 |
|
|
|
584.5 |
|
|
|
|
|
|
|
|
|
|
|
3,278.8 |
|
|
|
3,589.2 |
Total Liabilities |
|
|
|
|
|
|
|
|
|
|
3,747.5 |
|
|
|
4,001.1 |
Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to
shareholders of the Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
|
|
|
8 |
|
|
|
|
5,723.2 |
|
|
|
5,324.0 |
|
Deficit |
|
|
|
|
|
|
|
|
|
|
(1,058.4) |
|
|
|
(1,027.7) |
|
Accumulated other comprehensive income |
|
|
|
|
|
|
|
|
|
|
(26.1) |
|
|
|
(26.1) |
|
|
|
|
|
|
|
|
|
|
|
4,638.7 |
|
|
|
4,270.2 |
Non-controlling interest |
|
|
|
|
|
|
|
|
|
|
5.4 |
|
|
|
5.2 |
Total Equity |
|
|
|
|
|
|
|
|
|
|
4,644.1 |
|
|
|
4,275.4 |
Total Liabilities and Shareholders'
Equity |
|
|
|
|
|
|
|
|
|
|
8,391.6 |
|
|
|
8,276.5 |
See accompanying notes to the condensed
consolidated interim financial statements
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE
INCOME
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 Months Ended March 31
($ millions, except per share amounts) |
|
|
|
|
Note |
|
|
|
|
2013 |
|
|
|
|
2012 |
Revenue |
|
|
|
|
|
|
|
|
|
1,285.7 |
|
|
|
|
475.5 |
Cost of sales |
|
|
|
|
|
|
|
|
|
1,089.8 |
|
|
|
|
369.2 |
Gain (loss) on commodity-related
derivative financial instruments |
|
|
|
|
11 |
|
|
|
|
7.9 |
|
|
|
|
(3.8) |
Gross profit |
|
|
|
|
|
|
|
|
|
203.8 |
|
|
|
|
102.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
|
32.6 |
|
|
|
|
17.6 |
|
Acquisition-related and other expense
(income) |
|
|
|
|
|
|
|
|
|
(0.6) |
|
|
|
|
22.1 |
|
|
|
|
|
|
|
|
|
|
32.0 |
|
|
|
|
39.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results from operating
activities |
|
|
|
|
|
|
|
|
|
171.8 |
|
|
|
|
62.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
|
|
|
|
|
|
|
(1.6) |
|
|
|
|
(3.1) |
|
Finance costs |
|
|
|
|
|
|
|
|
|
52.4 |
|
|
|
|
22.6 |
|
Net finance costs |
|
|
|
|
9 |
|
|
|
|
50.8 |
|
|
|
|
19.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax and
equity accounted investees |
|
|
|
|
|
|
|
|
|
121.0 |
|
|
|
|
43.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of loss (profit) of
investments in equity accounted investees, net of tax |
|
|
|
|
|
|
|
|
|
0.3 |
|
|
|
|
(0.2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current tax expense |
|
|
|
|
|
|
|
|
|
4.2 |
|
|
|
|
|
|
Deferred tax expense |
|
|
|
|
|
|
|
|
|
26.0 |
|
|
|
|
10.9 |
|
Income tax expense |
|
|
|
|
|
|
|
|
|
30.2 |
|
|
|
|
10.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings and total comprehensive
income for the period |
|
|
|
|
|
|
|
|
|
90.5 |
|
|
|
|
32.6 |
Earnings and total comprehensive
income attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders of the Company |
|
|
|
|
|
|
|
|
|
90.3 |
|
|
|
|
32.6 |
|
Non-controlling interest |
|
|
|
|
|
|
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90.5 |
|
|
|
|
32.6 |
Earnings per share attributable to
shareholders of the Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share
(dollars) |
|
|
|
|
|
|
|
|
|
0.30 |
|
|
|
|
0.19 |
See accompanying notes to the condensed
consolidated interim financial statements
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN
EQUITY
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to Shareholders of the Company |
|
|
|
|
|
|
|
($
millions) |
|
|
|
Note |
|
|
|
Share
Capital |
|
|
|
Deficit |
|
|
Accumulated
Other
Comprehensive
Income |
|
|
|
Total |
|
|
Non-controlling
Interest |
|
|
|
Total
Equity |
December 31, 2012 |
|
|
|
|
|
|
|
5,324.0 |
|
|
|
(1,027.7) |
|
|
(26.1) |
|
|
|
4,270.2 |
|
|
5.2 |
|
|
|
4,275.4 |
Earnings and total comprehensive
income for period |
|
|
|
|
|
|
|
|
|
|
|
90.3 |
|
|
|
|
|
|
90.3 |
|
|
0.2 |
|
|
|
90.5 |
Transactions with
shareholders of the Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payment transactions |
|
|
|
8 |
|
|
|
3.2 |
|
|
|
|
|
|
|
|
|
|
3.2 |
|
|
|
|
|
|
3.2 |
|
Dividends declared |
|
|
|
8 |
|
|
|
|
|
|
|
(121.0) |
|
|
|
|
|
|
(121.0) |
|
|
|
|
|
|
(121.0) |
|
Common shares issued, net of issue costs |
|
|
|
8 |
|
|
|
334.9 |
|
|
|
|
|
|
|
|
|
|
334.9 |
|
|
|
|
|
|
334.9 |
|
Dividend reinvestment plan |
|
|
|
8 |
|
|
|
67.0 |
|
|
|
|
|
|
|
|
|
|
67.0 |
|
|
|
|
|
|
67.0 |
|
Debenture conversions and other |
|
|
|
8 |
|
|
|
(5.9) |
|
|
|
|
|
|
|
|
|
|
(5.9) |
|
|
|
|
|
|
(5.9) |
Total transactions with shareholders
of the Company |
|
|
|
|
|
|
|
399.2 |
|
|
|
(121.0) |
|
|
|
|
|
|
278.2 |
|
|
|
|
|
|
278.2 |
March 31, 2013 |
|
|
|
|
|
|
|
5,723.2 |
|
|
|
(1,058.4) |
|
|
(26.1) |
|
|
|
4,638.7 |
|
|
5.4 |
|
|
|
4,644.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011 |
|
|
|
|
|
|
|
1,811.7 |
|
|
|
(834.9) |
|
|
(15.2) |
|
|
|
961.6 |
|
|
|
|
|
|
961.6 |
Earnings and total comprehensive
income for period |
|
|
|
|
|
|
|
|
|
|
|
32.6 |
|
|
|
|
|
|
32.6 |
|
|
|
|
|
|
32.6 |
Transactions with
shareholders of the Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payment transactions |
|
|
|
|
|
|
|
1.5 |
|
|
|
|
|
|
|
|
|
|
1.5 |
|
|
|
|
|
|
1.5 |
|
Dividends declared |
|
|
|
|
|
|
|
|
|
|
|
(65.7) |
|
|
|
|
|
|
(65.7) |
|
|
|
|
|
|
(65.7) |
|
Dividend reinvestment plan |
|
|
|
|
|
|
|
28.0 |
|
|
|
|
|
|
|
|
|
|
28.0 |
|
|
|
|
|
|
28.0 |
Total transactions with shareholders
of the Company |
|
|
|
|
|
|
|
29.5 |
|
|
|
(65.7) |
|
|
|
|
|
|
(36.2) |
|
|
|
|
|
|
(36.2) |
March 31, 2012 |
|
|
|
|
|
|
|
1,841.2 |
|
|
|
(868.0) |
|
|
(15.2) |
|
|
|
958.0 |
|
|
|
|
|
|
958.0 |
See accompanying notes to the condensed
consolidated interim financial statements
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH
FLOWS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 Months Ended March 31 ($
millions) |
|
|
|
|
Note |
|
|
|
|
2013 |
|
|
|
|
2012 |
Cash provided by (used
in): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings for the period |
|
|
|
|
|
|
|
|
|
90.5 |
|
|
|
|
32.6 |
Adjustments for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
43.1 |
|
|
|
|
22.5 |
|
Unrealized (gain) loss on commodity-related
derivative financial instruments |
|
|
|
|
11 |
|
|
|
|
(5.8) |
|
|
|
|
3.5 |
|
Net finance costs |
|
|
|
|
9 |
|
|
|
|
50.8 |
|
|
|
|
19.5 |
|
Share of loss (profit) of
investments in equity accounted investees, net of tax |
|
|
|
|
|
|
|
|
|
0.3 |
|
|
|
|
(0.2) |
|
Deferred income tax expense |
|
|
|
|
|
|
|
|
|
26.0 |
|
|
|
|
10.9 |
|
Share-based payments expense |
|
|
|
|
|
|
|
|
|
9.1 |
|
|
|
|
3.6 |
|
Employee future benefits expense |
|
|
|
|
|
|
|
|
|
2.7 |
|
|
|
|
1.4 |
|
Other |
|
|
|
|
|
|
|
|
|
0.4 |
|
|
|
|
0.6 |
|
Changes in non-cash working capital |
|
|
|
|
|
|
|
|
|
20.9 |
|
|
|
|
(12.4) |
|
Payments from equity accounted investees |
|
|
|
|
|
|
|
|
|
4.8 |
|
|
|
|
4.1 |
|
Decommissioning liability expenditures |
|
|
|
|
|
|
|
|
|
(0.3) |
|
|
|
|
(1.1) |
|
Employer future benefit contributions |
|
|
|
|
|
|
|
|
|
(3.2) |
|
|
|
|
(2.5) |
|
Net interest paid |
|
|
|
|
|
|
|
|
|
(10.3) |
|
|
|
|
(17.2) |
Cash flow from operating
activities |
|
|
|
|
|
|
|
|
|
229.0 |
|
|
|
|
65.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66.9 |
|
Repayment of loans and borrowings |
|
|
|
|
|
|
|
|
|
(325.3) |
|
|
|
|
(2.7) |
|
Issuance of equity |
|
|
|
|
|
|
|
|
|
345.2 |
|
|
|
|
|
|
Share issue costs |
|
|
|
|
|
|
|
|
|
(13.8) |
|
|
|
|
|
|
Financing fees |
|
|
|
|
|
|
|
|
|
(1.0) |
|
|
|
|
(2.8) |
|
Exercise of stock options |
|
|
|
|
|
|
|
|
|
2.6 |
|
|
|
|
1.0 |
|
Dividends paid (net of shares
issued under the Dividend Reinvestment Plan) |
|
|
|
|
|
|
|
|
|
(52.1) |
|
|
|
|
(37.6) |
Cash flow from financing
activities |
|
|
|
|
|
|
|
|
|
(44.4) |
|
|
|
|
24.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
(137.1) |
|
|
|
|
(54.9) |
|
Changes in non-cash investing working capital and
other |
|
|
|
|
|
|
|
|
|
(23.6) |
|
|
|
|
(32.3) |
|
Contributions to equity accounted investees |
|
|
|
|
|
|
|
|
|
(4.8) |
|
|
|
|
|
Cash flow used in investing
activities |
|
|
|
|
|
|
|
|
|
(165.5) |
|
|
|
|
(87.2) |
Change in cash |
|
|
|
|
|
|
|
|
|
19.1 |
|
|
|
|
2.9 |
Cash (bank indebtedness), beginning of
period |
|
|
|
|
|
|
|
|
|
27.3 |
|
|
|
|
(0.7) |
Cash and cash equivalents, end of
period |
|
|
|
|
|
|
|
|
|
46.4 |
|
|
|
|
2.2 |
See accompanying notes to the condensed
consolidated interim financial statements
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
1. REPORTING ENTITY
Pembina Pipeline Corporation ("Pembina" or the "Company") is an
energy transportation and service provider domiciled in
Canada. The condensed consolidated
unaudited interim financial statements ("Interim Financial
Statements") include the accounts of the Company, its subsidiary
companies, partnerships and any interests in associates and jointly
controlled entities as at and for the three months ended
March 31, 2013. These Interim
Financial Statements and the notes thereto have been prepared in
accordance with IAS 34 - Interim Financial Reporting. They do not
include all of the information required for full annual financial
statements and should be read in conjunction with the consolidated
financial statements of the Company as at and for the year ended
December 31, 2012. The interim
financial statements were authorized for issue by the Board of
Directors on May 9, 2013.
Pembina owns or has interests in pipelines that transport
conventional crude oil and natural gas liquids ("NGL"), oil sands
and heavy oil pipelines, gas gathering and processing facilities,
and an NGL infrastructure and logistics business. Facilities are
located in Canada and in the U.S.
Pembina also offers midstream services that span across its
operations.
2. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies are set out in the December 31, 2012 financial statements. Those
policies have been applied consistently to all periods presented in
these Interim Financial Statements.
New standards
The following new standards, interpretations, amendments and
improvements to existing standards issued by the IASB or
International Financial Reporting Interpretations Committee
("IFRIC") were adopted as of January 1,
2013 without any material impact to Pembina's Financial
Statements: IFRS 7 Financial Instruments: Disclosures, IFRS
10 Consolidated Financial Statements, IFRS 11 Joint
Arrangements, IFRS 12 Disclosure of interests in Other
Entities, IFRS 13 Fair Value Measurement, and IAS 19
Employee Future Benefits.
3. DETERMINATION OF FAIR VALUES
A number of the Company's accounting policies and disclosures
require the determination of fair value, for both financial and
non-financial assets and liabilities. Fair values have been
determined for measurement and/or disclosure purposes based on the
following methods. When applicable, further information about the
assumptions made in determining fair values is disclosed in the
notes specific to that asset or liability.
i) Property, plant and equipment
The fair value of property, plant and equipment recognized as a
result of a business combination is based on market values when
available and depreciated replacement cost when appropriate.
Depreciated replacement cost reflects adjustments for physical
deterioration as well as functional and economic obsolescence.
ii) Intangible assets
The fair value of intangible assets acquired in a business
combination is determined using the multi-period excess earnings
method, whereby the subject asset is valued after deducting a fair
return on all other assets that are part of creating the related
cash flows.
The fair value of other intangible assets is based on the
discounted cash flows expected to be derived from the use and
eventual sale of the assets.
iii) Derivatives
Fair value of derivatives, with the exception of the redemption
liability which is related to the acquisition of the Company's
subsidiary, are estimated by reference to independent monthly
forward settlement prices, interest rate yield curves, currency
rates, quoted market prices per share and volatility rates at the
period ends.
The redemption liability related to one of the Company's
subsidiaries represents a put option, held by the non-controlling
interest, to sell the remaining one-third of the business to the
Company after the third anniversary of the acquisition date
(October 3, 2014). The put price to
be paid by the Company for the residual interest upon exercise is
based on a multiple of the subsidiary's earnings during the three
year period prior to exercise, adjusted for associated capital
expenditures and debt based on management estimates (see Note 11
"Financial Instruments and Financial Risk Management").
Fair values reflect the credit risk of the instrument and
include adjustments to take account of the credit risk of the
Company entity and counterparty when appropriate.
iv) Non-derivative financial assets and
liabilities
Fair value, which is determined for disclosure purposes, is
calculated based on the present value of future principal and
interest cash flows, discounted at the market rate of interest at
the reporting date. In respect of the convertible debentures, the
fair value is determined by the market price of the convertible
debenture on the reporting date. For finance leases the market rate
of interest is determined by reference to similar lease agreements.
For disclosure purposes, carrying value is a reasonable
approximation for fair value for cash and cash equivalents, trade
receivables and other, trade payables and accrued liabilities,
finance lease liabilities and dividends payable.
v) Share-based payment transactions
The fair value of the employee share options is measured using
the Black-Scholes formula. Measurement inputs include share price
on measurement date, exercise price of the instrument, expected
volatility (based on weighted average historic volatility adjusted
for changes expected due to publicly available information),
weighted average expected life of the instruments (based on
historical experience and general option holder behaviour),
expected dividends, expected forfeitures and the risk-free interest
rate (based on government bonds). Service and non-market
performance conditions attached to the transactions are not taken
into account in determining fair value.
The fair value of the long-term share unit award incentive plan
and associated distribution units are measured based on the
reporting date market price of the Company's shares. Expected
dividends are not taken into account in determining fair value as
they are issued as additional distribution share units.
4. ACQUISITION
On April 2, 2012, Pembina acquired
all of the outstanding Provident Energy Ltd. ("Provident") common
shares (the "Provident Shares") in exchange for 116,535,750 Pembina
common shares valued at approximately $3.3
billion (the "Acquisition").
The purchase price equation, subject to finalization, is based
on assessed fair values and is estimated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
|
|
|
|
|
|
|
|
|
9 |
Trade receivables and other |
|
|
|
|
|
|
|
|
|
|
195 |
Inventory |
|
|
|
|
|
|
|
|
|
|
87 |
Property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
1,988 |
Intangible assets and goodwill
(including $1,747 goodwill) |
|
|
|
|
|
|
|
|
|
|
2,408 |
Trade payables and accrued liabilities |
|
|
|
|
|
|
|
|
|
|
(249) |
Derivative financial instruments - current |
|
|
|
|
|
|
|
|
|
|
(53) |
Derivative financial instruments -
non-current |
|
|
|
|
|
|
|
|
|
|
(36) |
Loans and borrowings |
|
|
|
|
|
|
|
|
|
|
(215) |
Convertible debentures |
|
|
|
|
|
|
|
|
|
|
(317) |
Provisions and other |
|
|
|
|
|
|
|
|
|
|
(128) |
Deferred tax liabilities |
|
|
|
|
|
|
|
|
|
|
(406) |
Other equity |
|
|
|
|
|
|
|
|
|
|
6 |
Non-controlling interest |
|
|
|
|
|
|
|
|
|
|
(5) |
|
|
|
|
|
|
|
|
|
|
|
3,284 |
Revenue generated by the Provident business for the quarter
ending March 31, 2013, before
intersegment eliminations was $506.3
million. Gross profit, before intersegment eliminations, for
the same period was $68.1
million.
For more information, please see Note 5 of the Consolidated
Financial Statements for the year ended December 31, 2012.
5. PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
|
|
|
Land and
Land
Rights |
|
|
Pipelines |
|
|
Facilities
and
Equipment |
|
|
|
Linefill
and
Other |
|
|
Assets
Under
Construction |
|
|
|
Total |
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2012 |
|
|
|
|
88.0 |
|
|
2,593.7 |
|
|
2,072.2 |
|
|
|
506.6 |
|
|
751.8 |
|
|
|
6,012.3 |
Additions |
|
|
|
|
|
|
|
0.2 |
|
|
3.1 |
|
|
|
4.1 |
|
|
129.7 |
|
|
|
137.1 |
Change in decommissioning
provision |
|
|
|
|
|
|
|
(5.7) |
|
|
(7.0) |
|
|
|
|
|
|
|
|
|
|
(12.7) |
Capitalized interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.4 |
|
|
|
7.4 |
Transfers |
|
|
|
|
|
|
|
2.9 |
|
|
2.3 |
|
|
|
(0.5) |
|
|
(4.7) |
|
|
|
|
Disposals and other |
|
|
|
|
|
|
|
(0.1) |
|
|
(0.1) |
|
|
|
0.9 |
|
|
|
|
|
|
0.7 |
Balance at March 31, 2013 |
|
|
|
|
88.0 |
|
|
2,591.0 |
|
|
2,070.5 |
|
|
|
511.1 |
|
|
884.2 |
|
|
|
6,144.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2012 |
|
|
|
|
4.4 |
|
|
776.7 |
|
|
171.9 |
|
|
|
44.8 |
|
|
|
|
|
|
997.8 |
Depreciation |
|
|
|
|
|
|
|
14.1 |
|
|
16.1 |
|
|
|
6.6 |
|
|
|
|
|
|
36.8 |
Disposals |
|
|
|
|
|
|
|
0.1 |
|
|
(0.1) |
|
|
|
0.4 |
|
|
|
|
|
|
0.4 |
Balance at March 31, 2013 |
|
|
|
|
4.4 |
|
|
790.9 |
|
|
187.9 |
|
|
|
51.8 |
|
|
|
|
|
|
1,035.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012 |
|
|
|
|
83.6 |
|
|
1,817.0 |
|
|
1,900.3 |
|
|
|
461.8 |
|
|
751.8 |
|
|
|
5,014.5 |
March 31, 2013 |
|
|
|
|
83.6 |
|
|
1,800.1 |
|
|
1,882.6 |
|
|
|
459.3 |
|
|
884.2 |
|
|
|
5,109.8 |
Commitments
At March 31, 2013, the Company has
contractual commitments for the acquisition and or construction of
property, plant and equipment of $872.1
million (December 31, 2012:
$362.8 million).
6. LOANS AND BORROWINGS
This note provides information about the contractual terms of
the Company's interest-bearing loans and borrowings, which are
measured at amortized cost.
Carrying value terms and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount(3) |
|
|
|
|
|
Available
facilities at
March 31,
2013 |
|
|
|
Nominal
interest rate |
|
|
|
Year
of
maturity |
|
|
|
March
31,
2013 |
|
|
December
31,
2012 |
Operating
facility(1) |
|
|
|
|
30.0 |
|
|
|
prime + 0.45
or BA(2) + 1.45 |
|
|
|
2014 |
|
|
|
|
|
|
|
Revolving unsecured credit
facility |
|
|
|
|
1,500.0 |
|
|
|
prime + 0.45
or BA(2) + 1.45 |
|
|
|
2018 |
|
|
|
195.0 |
|
|
520.7 |
Senior unsecured notes - Series
A |
|
|
|
|
175.0 |
|
|
|
5.99 |
|
|
|
2014 |
|
|
|
174.7 |
|
|
174.7 |
Senior unsecured notes - Series
C |
|
|
|
|
200.0 |
|
|
|
5.58 |
|
|
|
2021 |
|
|
|
197.1 |
|
|
197.0 |
Senior unsecured notes - Series
D |
|
|
|
|
267.0 |
|
|
|
5.91 |
|
|
|
2019 |
|
|
|
265.7 |
|
|
265.6 |
Senior unsecured term
facility |
|
|
|
|
75.0 |
|
|
|
6.16 |
|
|
|
2014 |
|
|
|
74.8 |
|
|
74.8 |
Senior unsecured
medium-term notes 1 |
|
|
|
|
250.0 |
|
|
|
4.89 |
|
|
|
2021 |
|
|
|
248.8 |
|
|
248.7 |
Senior unsecured
medium-term notes 2 |
|
|
|
|
450.0 |
|
|
|
3.77 |
|
|
|
2022 |
|
|
|
447.8 |
|
|
447.9 |
Subsidiary debt |
|
|
|
|
9.7 |
|
|
|
5.02 |
|
|
|
2014 |
|
|
|
9.7 |
|
|
9.3 |
Finance lease liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.7 |
|
|
5.8 |
Total interest bearing
liabilities |
|
|
|
|
2,956.7 |
|
|
|
|
|
|
|
|
|
|
|
1,619.3 |
|
|
1,944.5 |
Less current portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12.1) |
|
|
(11.7) |
Total non-current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,607.2 |
|
|
1,932.8 |
|
|
(1) |
Operating facility
expected to be renewed on an annual basis. |
(2) |
Bankers'
Acceptance. |
(3) |
Deferred financing
fees are all classified as non-current. Non-current carrying amount
of facilities are net of deferred financing fees. |
Pembina's $1.5 billion revolving
credit facility was extended by one year from March 2017 to March
2018 and the $30 million
operating facility was also extended by one year from July 2013 to July
2014.
7. PROVISIONS
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
|
|
|
|
|
|
|
|
|
Total |
Balance at December 31, 2012(1) |
|
|
|
|
|
|
|
|
|
|
361.7 |
Unwinding of discount rate |
|
|
|
|
|
|
|
|
|
|
2.1 |
Decommissioning liabilities
settled during the period |
|
|
|
|
|
|
|
|
|
|
(0.3) |
Change in estimates and other |
|
|
|
|
|
|
|
|
|
|
(19.3) |
Total |
|
|
|
|
|
|
|
|
|
|
344.2 |
Less current portion (included in accrued
liabilities) |
|
|
|
|
|
|
|
|
|
|
(0.3) |
Balance at March 31, 2013 |
|
|
|
|
|
|
|
|
|
|
343.9 |
|
|
(1) |
Includes current
portion of $0.5 million (included in accrued liabilities). |
The Company applied a 2 percent inflation rate per annum
(December 31, 2012: 2 percent) and a
risk free rate of 2.5 percent (December 31,
2012: 2.36 percent) to calculate the present value of the
decommissioning provision. The remeasured decommissioning provision
decreased property, plant and equipment and decommissioning
provision liability. Of the re-measurement reduction of the
decommissioning provision, $6.8
million was in excess of the carrying amount of the related
asset and is recognized as a credit to depreciation expense.
8. SHARE CAPITAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions, except share
amounts) |
|
|
|
|
|
|
|
|
|
|
Number of
Common Shares |
|
|
|
|
Share
Capital |
Balance December 31, 2012 |
|
|
|
|
|
|
|
|
|
|
293,226,473 |
|
|
|
|
5,324.0 |
Common shares
issued, net of issue costs |
|
|
|
|
|
|
|
|
|
|
11,206,750 |
|
|
|
|
334.9 |
Share-based payment
transactions |
|
|
|
|
|
|
|
|
|
|
154,447 |
|
|
|
|
3.2 |
Dividend reinvestment plan |
|
|
|
|
|
|
|
|
|
|
2,394,852 |
|
|
|
|
67.0 |
Debenture conversions and
other |
|
|
|
|
|
|
|
|
|
|
10,255 |
|
|
|
|
(5.9) |
Balance March 31, 2013 |
|
|
|
|
|
|
|
|
|
|
306,992,777(1) |
|
|
|
|
5,723.2 |
|
|
(1) |
Weighted average number of common shares
outstanding for the three months ended
March 31, 2013 is 295.9 million (2012: 168.3 million). On a fully
diluted basis, the weighted
average number of common shares outstanding for the three months
ended March 31,
2013 is 296.7 million (2012: 168.9 million). |
On March 21, 2013, Pembina closed
a bought deal offering of 11,206,750 shares at a price of
$30.80 per share for aggregate gross
proceeds of $345.2 million
($334.9 million, net of issue
costs).
Dividends
The following dividends were declared by the Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 Months Ended March 31 ($ millions) |
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
|
|
|
2012 |
$0.405 per qualifying common share
(2012: $0.39) |
|
|
|
|
|
|
|
|
|
|
121.0 |
|
|
|
|
|
65.7 |
On April 5, 2013 Pembina announced
that the Board of Directors declared a dividend for April of
$0.135 per qualifying common share
($1.62 annualized) in the total
amount of $41.6 million.
9. NET FINANCE COSTS
|
|
|
|
|
|
|
|
|
|
|
|
|
3 Months Ended March 31 ($
millions) |
|
|
|
|
|
2013 |
|
|
|
|
|
2012 |
Interest income from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Related parties |
|
|
|
|
|
|
|
|
|
|
|
(0.3) |
|
Bank deposits |
|
|
|
|
|
(0.6) |
|
|
|
|
|
|
Interest expense on financial
liabilities measured at amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and borrowings |
|
|
|
|
|
17.0 |
|
|
|
|
|
15.4 |
|
Convertible debentures |
|
|
|
|
|
10.6 |
|
|
|
|
|
4.6 |
|
Finance leases |
|
|
|
|
|
0.3 |
|
|
|
|
|
0.1 |
|
Unwinding of discount |
|
|
|
|
|
2.1 |
|
|
|
|
|
2.5 |
(Gain) loss in fair
value of non-commodity-related derivative financial
instruments |
|
|
|
|
|
(0.7) |
|
|
|
|
|
(2.8) |
Loss on revaluation of conversion
feature on convertible debentures |
|
|
|
|
|
22.4 |
|
|
|
|
|
|
Foreign exchange (gains) loss |
|
|
|
|
|
(0.3) |
|
|
|
|
|
|
Net finance costs |
|
|
|
|
|
50.8 |
|
|
|
|
|
19.5 |
10. OPERATING SEGMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 Months Ended
March 31, 2013 ($ millions) |
|
|
|
Conventional
Pipelines(1) |
|
|
Oil Sands
&
Heavy Oil |
|
|
|
Gas
Services |
|
|
Midstream(2) |
|
|
Corporate
&
Intersegment
Eliminations |
|
|
|
Total |
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pipeline transportation |
|
|
|
95.8 |
|
|
43.4 |
|
|
|
|
|
|
|
|
|
(13.1) |
|
|
|
126.1 |
|
Midstream services |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,132.1 |
|
|
|
|
|
|
1,132.1 |
|
Gas Services |
|
|
|
|
|
|
|
|
|
|
27.5 |
|
|
|
|
|
|
|
|
|
27.5 |
Total revenue |
|
|
|
95.8 |
|
|
43.4 |
|
|
|
27.5 |
|
|
1,132.1 |
|
|
(13.1) |
|
|
|
1,285.7 |
|
Operations |
|
|
|
35.3 |
|
|
11.9 |
|
|
|
8.9 |
|
|
21.8 |
|
|
(0.7) |
|
|
|
77.2 |
|
Cost of goods sold(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
983.9 |
|
|
(13.1) |
|
|
|
970.8 |
|
Realized gain (loss) on
commodity-related
derivative financial instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
2.1 |
|
|
|
|
|
|
2.1 |
Operating margin |
|
|
|
60.5 |
|
|
31.5 |
|
|
|
18.6 |
|
|
128.5 |
|
|
0.7 |
|
|
|
239.8 |
|
Depreciation and amortization (operational) |
|
|
|
1.6 |
|
|
4.9 |
|
|
|
3.6 |
|
|
31.7 |
|
|
|
|
|
|
41.8 |
|
Unrealized gain (loss) on
commodity-related
derivative financial instruments |
|
|
|
0.9 |
|
|
|
|
|
|
|
|
|
4.9 |
|
|
|
|
|
|
5.8 |
Gross profit |
|
|
|
59.8 |
|
|
26.6 |
|
|
|
15.0 |
|
|
101.7 |
|
|
0.7 |
|
|
|
203.8 |
|
Depreciation included in general
and
administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.3 |
|
|
|
1.3 |
|
Other general and administrative |
|
|
|
2.5 |
|
|
1.0 |
|
|
|
1.3 |
|
|
6.4 |
|
|
20.1 |
|
|
|
31.3 |
|
Acquisition-related and other expenses
(income) |
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1 |
|
|
(0.7) |
|
|
|
(0.6) |
Reportable segment
results from operating
activities |
|
|
|
57.3 |
|
|
25.6 |
|
|
|
13.7 |
|
|
95.2 |
|
|
(20.0) |
|
|
|
171.8 |
Net finance costs |
|
|
|
1.0 |
|
|
0.3 |
|
|
|
0.1 |
|
|
0.1 |
|
|
49.3 |
|
|
|
50.8 |
Reportable segment
earnings (loss) before tax
and income from equity accounted investees |
|
|
|
56.3 |
|
|
25.3 |
|
|
|
13.6 |
|
|
95.1 |
|
|
(69.3) |
|
|
|
121.0 |
Share of loss (profit)
of investments in equity
accounted investees, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
0.3 |
|
|
|
|
|
|
0.3 |
Capital expenditures |
|
|
|
61.4 |
|
|
12.1 |
|
|
|
38.5 |
|
|
23.9 |
|
|
1.2 |
|
|
|
137.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 Months Ended March 31, 2012
($ millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pipeline transportation |
|
|
|
82.2 |
|
|
43.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
125.3 |
|
Midstream services |
|
|
|
|
|
|
|
|
|
|
|
|
|
331.1 |
|
|
|
|
|
|
331.1 |
|
Gas Services |
|
|
|
|
|
|
|
|
|
|
19.1 |
|
|
|
|
|
|
|
|
|
19.1 |
Total revenue |
|
|
|
82.2 |
|
|
43.1 |
|
|
|
19.1 |
|
|
331.1 |
|
|
|
|
|
|
475.5 |
|
Operations |
|
|
|
27.5 |
|
|
13.0 |
|
|
|
6.1 |
|
|
2.4 |
|
|
(0.6) |
|
|
|
48.4 |
|
Cost of goods sold(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
299.1 |
|
|
|
|
|
|
299.1 |
|
Realized gain (loss) on
commodity-related derivative
financial instruments |
|
|
|
(0.3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.3) |
Operating margin |
|
|
|
54.4 |
|
|
30.1 |
|
|
|
13.0 |
|
|
29.6 |
|
|
0.6 |
|
|
|
127.7 |
|
Depreciation and amortization (operational) |
|
|
|
11.9 |
|
|
4.9 |
|
|
|
3.2 |
|
|
1.7 |
|
|
|
|
|
|
21.7 |
|
Unrealized loss on
commodity-related derivative
financial instruments |
|
|
|
(3.0) |
|
|
|
|
|
|
|
|
|
(0.5) |
|
|
|
|
|
|
(3.5) |
Gross profit |
|
|
|
39.5 |
|
|
25.2 |
|
|
|
9.8 |
|
|
27.4 |
|
|
0.6 |
|
|
|
102.5 |
|
Depreciation included in general and
administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.8 |
|
|
|
0.8 |
|
Other general and administrative |
|
|
|
0.9 |
|
|
1.0 |
|
|
|
0.5 |
|
|
1.3 |
|
|
13.1 |
|
|
|
16.8 |
|
Acquisition-related and other expenses
(income) |
|
|
|
1.2 |
|
|
(0.1) |
|
|
|
|
|
|
|
|
|
21.0 |
|
|
|
22.1 |
Reportable segment
results from operating
activities |
|
|
|
37.4 |
|
|
24.3 |
|
|
|
9.3 |
|
|
26.1 |
|
|
(34.3) |
|
|
|
62.8 |
Net finance costs |
|
|
|
1.6 |
|
|
0.5 |
|
|
|
0.1 |
|
|
|
|
|
17.3 |
|
|
|
19.5 |
Reportable segment
earnings (loss) before tax
and income from equity accounted investees |
|
|
|
35.8 |
|
|
23.8 |
|
|
|
9.2 |
|
|
26.1 |
|
|
(51.6) |
|
|
|
43.3 |
Share of loss (profit)
of investments in equity
accounted investees, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.2) |
|
|
|
|
|
|
(0.2) |
Capital expenditures |
|
|
|
11.1 |
|
|
5.8 |
|
|
|
34.0 |
|
|
2.3 |
|
|
1.7 |
|
|
|
54.9 |
|
|
(1) |
5.6 percent of
Conventional Pipelines revenue is under regulated tolling
arrangements (4.5 percent for quarter ending March 31, 2012). |
(2) |
Midstream services
revenue includes $50.5 million associated with U.S. midstream sales
(nil for quarter ending
March 31, 2012). |
(3) |
Including product purchases. |
11. FINANCIAL INSTRUMENTS AND FINANCIAL RISK
MANAGEMENT
Fair values
The fair values of financial assets and liabilities, together
with the carrying amounts shown in the statement of financial
position, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2013 |
|
|
|
|
December 31, 2012 |
($ millions) |
|
|
|
|
|
Carrying
Amount |
|
|
|
|
Fair
Value |
|
|
|
|
Carrying
Amount |
|
|
|
|
Fair
Value |
Financial assets carried at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments |
|
|
|
|
|
1.7 |
|
|
|
|
1.7 |
|
|
|
|
7.9 |
|
|
|
|
7.9 |
Financial liabilities carried at fair
value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments |
|
|
|
|
|
77.5 |
|
|
|
|
77.5 |
|
|
|
|
67.7 |
|
|
|
|
67.7 |
Financial liabilities carried
at amortized cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and borrowings |
|
|
|
|
|
1,619.3 |
|
|
|
|
1,780.8 |
|
|
|
|
1,944.5 |
|
|
|
|
2,089.7 |
Convertible debentures |
|
|
|
|
|
611.1 |
(1) |
|
|
|
777.2 |
|
|
|
|
610.0 |
(1) |
|
|
|
725.0 |
|
|
|
|
|
|
2,230.4 |
|
|
|
|
2,558.0 |
|
|
|
|
2,554.5 |
|
|
|
|
2,814.7 |
|
|
(1) |
Carrying amount
excludes conversion feature of convertible debentures. |
The basis for determining fair values is disclosed in Note
3.
Fair value hierarchy
The fair value of financial instruments carried at fair value is
classified according to the following hierarchy based on the amount
of observable inputs used to value the instruments.
Level 1: Unadjusted quoted prices are available in active
markets for identical assets or liabilities as the reporting date.
Pembina uses Level 1 inputs for the disclosed fair value
measurements of the convertible debentures.
Level 2: Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices). Level 2
valuations are based on inputs, including quoted forward prices for
commodities, time value and volatility factors, which can be
substantially observed or corroborated in the marketplace.
Instruments in this category include non-exchange traded
derivatives such as over-the-counter physical forwards and options,
including those that have prices similar to quoted market prices.
Pembina obtains quoted market prices for commodities, future power
contracts, interest rates and foreign exchange rates from
information sources including banks, Bloomberg Terminals and
Natural Gas Exchange (NGX). With the exception of one item
described under Level 3, all of Pembina's financial instruments
carried at fair value are valued using Level 2 inputs.
Level 3: Valuations in this level require the most significant
judgments and consist primarily of unobservable or non-market based
inputs. Level 3 inputs include longer-term transactions,
transactions in less active markets or transactions at locations
for which pricing information is not available. In these instances,
internally developed methodologies are used to determine fair
value. The redemption liability related to acquisition of
subsidiary is classified as a Level 3 instrument, as the fair value
is determined by using inputs that are not based on observable
market data. The liability represents a put option, held by the
non-controlling interest of Three Star Trucking Ltd. ("Three
Star"), to sell the remaining one-third of the business to Pembina
after the third anniversary of the original acquisition date
(October 3, 2014). The put price to
be paid by the Company for the residual interest upon exercise is
based on a multiple of Three Star's earnings during the three year
period prior to exercise, adjusted for associated capital
expenditures and debt based on management estimates. These
estimates are subject to measurement uncertainty and the effect on
the financial statements of future periods could be material.
Financial instruments classified as Level 3
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
|
|
|
|
|
|
|
|
|
2013 |
Redemption liability, January 1,
2013 |
|
|
|
|
|
|
|
|
|
|
5.3 |
Gain on revaluation |
|
|
|
|
|
|
|
|
|
|
(1.0) |
Redemption liability, March 31,
2013 |
|
|
|
|
|
|
|
|
|
|
4.3 |
The following table is a summary of the net derivative financial
instrument liability:
|
|
|
|
|
|
|
|
|
|
|
($
millions) |
|
|
|
|
|
March 31
2013 |
|
|
|
December 31
2012 |
Frac spread related |
|
|
|
|
|
(0.6) |
|
|
|
(3.1) |
Product margin |
|
|
|
|
|
0.7 |
|
|
|
(1.1) |
Corporate |
|
|
|
|
|
|
|
|
|
|
|
Power |
|
|
|
|
|
(5.7) |
|
|
|
(7.1) |
|
Interest rate |
|
|
|
|
|
(13.1) |
|
|
|
(14.3) |
|
Foreign exchange |
|
|
|
|
|
(0.8) |
|
|
|
0.7 |
Other derivative financial
instruments |
|
|
|
|
|
|
|
|
|
|
|
Conversion feature of convertible debentures |
|
|
|
|
|
(52.0) |
|
|
|
(29.6) |
|
Redemption liability related to
acquisition of subsidiary |
|
|
|
|
|
(4.3) |
|
|
|
(5.3) |
Net derivative financial
instruments liability |
|
|
|
|
|
(75.8) |
|
|
|
(59.8) |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity-Related Derivative
Financial Instruments |
|
|
|
|
|
3 Months
Ended
March 31 |
($ millions) |
|
|
|
|
|
2013 |
|
|
|
|
2012 |
Realized gain (loss) on commodity-related
derivative financial instruments |
|
|
|
|
|
|
|
|
|
|
|
Frac spread related |
|
|
|
|
|
0.6 |
|
|
|
|
|
Product margin |
|
|
|
|
|
1.5 |
|
|
|
|
|
Power |
|
|
|
|
|
|
|
|
|
|
(0.3) |
Realized gain (loss) on commodity-related
derivative financial instruments |
|
|
|
|
|
2.1 |
|
|
|
|
(0.3) |
Unrealized gain (loss) on
commodity-related derivative financial instruments |
|
|
|
|
|
5.8 |
|
|
|
|
(3.5) |
Gain (loss) on commodity-related derivative
financial instruments |
|
|
|
|
|
7.9 |
|
|
|
|
(3.8) |
For non-commodity-related derivative financial instruments see
Note 9, Net Finance Costs.
Sensitivity analysis
The following table shows the impact on earnings if the
underlying risk variables of the derivative financial instruments
changed by a specified amount, with other variables held
constant.
|
|
|
|
|
|
|
|
|
|
|
|
|
As at March 31, 2013 ($
millions) |
|
|
|
|
|
|
|
+ Change |
|
|
|
- Change |
Frac spread related |
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
|
|
|
(AECO +/- $1.00 per GJ) |
|
|
|
4.6 |
|
|
|
(4.6) |
|
NGL (includes propane, butane) |
|
|
|
(Belvieu +/- U.S. $0.10 per gal) |
|
|
|
(2.5) |
|
|
|
2.5 |
|
Foreign exchange (U.S.$ vs. Cdn$) |
|
|
|
(FX rate +/- $0.05) |
|
|
|
(1.8) |
|
|
|
1.8 |
Product margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil |
|
|
|
(WTI +/- $5.00 per bbl) |
|
|
|
(5.1) |
|
|
|
5.1 |
|
NGL (includes propane, butane and
condensate) |
|
|
|
(Belvieu +/- U.S. $0.10 per gal) |
|
|
|
3.1 |
|
|
|
(3.1) |
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
(Rate +/- 50 basis points) |
|
|
|
3.4 |
|
|
|
(3.4) |
|
Power |
|
|
|
(AESO +/- $5.00 per MW/h) |
|
|
|
3.4 |
|
|
|
(3.4) |
Conversion feature of convertible
debentures |
|
|
|
(Pembina share price
+/- $0.50 per share) |
|
|
|
(2.9) |
|
|
|
2.8 |
12. SUBSEQUENT EVENTS
On April 8, 2013, Pembina
announced the availability of its Dividend Reinvestment Plan
("DRIP") to U.S. shareholders effective immediately. The new common
shares purchased with reinvested dividends will be issued from
Pembina's treasury at a 5% discount to the average market price
(calculated under the DRIP).
On April 30, 2013, Pembina closed
the offering of $200 million of
senior unsecured, medium-term notes ("Notes"). The Notes have a
fixed interest rate of 4.75 percent per annum paid semi-annually,
and will mature on April 30, 2043.
The net proceeds from the offering of Notes were used to pay down
Pembina's existing credit facility.
CORPORATE INFORMATION
HEAD OFFICE
Pembina Pipeline Corporation
Suite 3800, 525 - 8th Avenue S.W.
Calgary, Alberta T2P 1G1
AUDITORS
KPMG LLP
Chartered Accountants
Calgary, Alberta
TRUSTEE, REGISTRAR & TRANSFER AGENT
Computershare Trust Company of Canada
Suite 600, 530 - 8th Avenue SW
Calgary, Alberta T2P 3S8
1-800-564-6253
STOCK EXCHANGE
Pembina Pipeline Corporation
TSX listing symbols for:
Common shares: PPL
Convertible debentures: PPL.DB.C, PPL.DB.E, PPL.DB.F
NYSE listing symbol for:
Common shares: PBA
INVESTOR INQUIRIES
Phone: (403) 231-3156
Fax: (403) 237-0254
Toll Free: 1-855-880-7404
Email: investor-relations@pembina.com
Website: www.pembina.com
SOURCE Pembina Pipeline Corporation