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AltaGas Reports Strong First Quarter 2022 Results

Press Release

Operating Performance Reflects AltaGas’ Continued Focus on Optimizing the Platform, Execution of its Strategic Plan and Drive to Deliver Positive Outcomes for all Stakeholders

CALGARY, AB, April 28, 2022 AltaGas Ltd. (“AltaGas” or the “Company”) (TSX: ALA) today reported first quarter 2022 financial results and provided an update on the Company’s operations.

HIGHLIGHTS

(all financial figures are unaudited and in Canadian dollars unless otherwise noted)

  • The Midstream segment delivered a strong first quarter of 2022, exporting a first quarter record of 87,967 Bbls/d of liquified petroleum gases (LPGs) to Asia.
  • The Utilities segment continues to focus on delivering clean and affordable energy for its customers, providing reliable and secure energy.
  • The Utilities segment achieved normalized EBITDA growth of approximately 10 percent on a year-over-year basis in the first quarter of 2022, driven by continued investment in the platform. This included Utilities rate base increasing by approximately 10 percent on a year-over-year basis in the first quarter of 2022.
  • Normalized EPS[1] of $1.02 and GAAP EPS2 of $1.27 in the first quarter of 2022 compared to $1.29 and $1.21 in the first quarter of 2021, respectively. First quarter results were reflective of strong operating results across the platform offset by $114 million of lost normalized EBITDA from the U.S. Transportation and Storage business, which had delivered outsized performance in the first quarter of 2021 and was subsequently sold in April 2021.
  • Normalized FFO per share1 of $1.65 and GAAP FFO3 per share of $2.44 in the first quarter of 2022 compared to $2.08 and $2.16 in the first quarter of 2021, respectively. Continued strong cash generation is providing the foundation to fund ongoing operations, organic growth and increase returns of capital to shareholders at a projected five to seven percent compounded annual growth rate through 2026.
  • Normalized EBITDA1 of $574 million and income before income taxes of $504 million in the first quarter of 2022 compared to $674 million and $473 million in the first quarter of 2021, respectively. Results reflect strong execution within Midstream and Utilities operations and leaves AltaGas well-positioned to deliver on its 2022 financial guidance.
  • The Midstream segment reported normalized EBITDA of $174 million and income before income taxes of $159 million in the first quarter of 2022 compared to $304 million and $237 million in the first quarter of 2021, respectively. Operating performance was in line with AltaGas’ expectations, reflected increasing Global Exports volumes as the quarter progressed, and the $114 million of lost normalized EBITDA contribution from the U.S. Transportation and Storage business that was divested in April 2021.
  • The Utilities segment reported normalized EBITDA of $408 million and income before income taxes of $426 million in the first quarter of 2022 compared to $371 million and $308 million in the first quarter of 2021, respectively. Results reflected the positive impact of continued investments across the Utilities networks, strong performance from the Retail business and asset optimization during the quarter.
  • Subsequent to the quarter-end, Washington Gas filed an application to increase rates in the District of Columbia (D.C.) by US$53 million. The requested rates include a revenue increase of US$5 million for costs currently collected through the PROJECTpipes surcharge and an incremental revenue request of approximately US$48 million driven primarily by infrastructure investments to continue to provide safe, reliable service to our customers.

1 Non-GAAP measure; see discussion and reconciliation to US GAAP financial measures in the advisories of this news release or in AltaGas’ Management’s Discussion and Analysis (MD&A) as at and for the period ended March 31, 2022, which is available on www.sedar.com. 2. GAAP EPS is equivalent to Net income applicable to common shares divided by shares outstanding. 3. GAAP FFO per share is equivalent to cash from operations divided by shares outstanding.

CEO MESSAGE

“AltaGas delivered solid results and continued to execute on our strategic plan during the first quarter of 2022, which positions the platform well to achieve the Company’s 2022 and longer-term growth plans,” said Randy Crawford, President and Chief Executive Officer. “Our diversified business model continues to provide the stable and predictable results that we expect while delivering long-term benefits to all of our stakeholders. We also continued to fulfill our mission of improving quality of life by safely and reliably connecting our customers to affordable sources of energy during the quarter; the importance of which is reiterated in the period of energy scarcity that we are currently living in.

“Our regulated Utilities performed well in the quarter, delivering strong customer service throughout the quarter while delivering the stable and predictable financial results that we expect from the platform, including growing normalized Utilities EBITDA by approximately 10 percent on a year-over-year basis. We continued to make ongoing investments into our network during the quarter that are focused on improving safety and reliability, reducing long-term operating costs, and delivering improved environmental outcomes; all of which drive better outcomes for our customers. This investment strategy is working as our incoming leak rates were down more than 25 percent on a year-over-year basis in the first quarter of 2022 and we have achieved annual operating and maintenance costs reductions of approximately $20 million since 2019. Our large storage position also partially sheltered our customers from some of the extreme winter gas pricing seen during the peak demand season as we seamlessly delivered our customers with the energy they needed.

“Our Midstream business continued to deliver reliable energy to end customers during the quarter through our integrated value chain, while providing AltaGas with strong financial results that were in line with our expectations. During the quarter we increased Global Exports volumes to approximately 88,000 Bbls/d of LPGs to Asia, spread across 14 Very Large Gas Carriers (VLGCs). Our solid first quarter performance, coupled with the upcoming seasonal availability of direct butane supply from the refineries in Washington State, leave AltaGas well-position to achieve the Company’s 2022 export target of approximately 97,000 Bbls/d.

“We remain focused on our de-leveraging strategy and maintaining our investment-grade credit rating, which was reaffirmed by Fitch at BBB with a Stable Rating Outlook, subsequent to quarter-end. Our 2022 capital plan of approximately $995 million remains intact as we continue to execute on our Utilities growth while advancing various growth initiatives within our Midstream platform. Given the strong first quarter, we are well-positioned to meet our 2022 guidance ranges, including normalized EPS guidance of $1.80$1.95 and normalized EBITDA guidance of $1.50 billion$1.55 billion.”

RESULTS BY SEGMENT

Normalized EBITDA1

Three Months Ended
March 31

($ millions)

2022

2021

Utilities

408

371

Midstream

174

304

Corporate/Other

(8)

(1)

Normalized EBITDA1

574

674

Income (Loss) Before Income Taxes

Three Months Ended
March 31

($ millions)

2022

2021

Utilities

426

308

Midstream

159

237

Corporate/Other

(81)

(72)

Income Before Income Taxes

504

473

(1)     Non‑GAAP financial measure; see discussion in the Non-GAAP Financial Measures advisories of this news release

BUSINESS PERFORMANCE

Utilities

The Utilities segment reported normalized EBITDA of $408 million in the first quarter of 2022 compared to $371 million in the first quarter of 2021, while income before taxes was $426 million in the first quarter of 2022 compared to $308 million in the first quarter of 2021. AltaGas continued to upgrade critical infrastructure with the deployment of $128 million of invested capital1 during the first quarter of 2022, including $62 million deployed on the Company’s various Accelerated Replacement Programs (ARPs) with a focus on improving the safety and reliability of the system, which also brings long-term operating costs and environmental benefits. This level of capital deployment was in line with scope and budget for the first quarter of 2022 and leaves AltaGas well-positioned to deliver on planned network upgrades with rate base increasing by approximately 10 percent over the same quarter last year.

On April 4, 2022, Washington Gas filed an application to increase rates in D.C. by US$53 million. The requested rates include a revenue increase of US$5 million for costs currently collected through the PROJECTpipes surcharge and an incremental revenue request of approximately US$48 million driven primarily by infrastructure investments to continue to provide safe, reliable service to our customers. Washington Gas has requested that new rates be implemented by February 2023.

The Retail business generated $21 million of normalized EBITDA in the first quarter of 2022 due to higher gas prices, favourable margins and the timing impact of swap gains between the first and second quarters of 2022. The latter has the effect of pulling profits into the first quarter of 2022 rather than the second quarter of 2022 and, as such, AltaGas expects some of these benefits to be reduced in the coming quarters as the year progresses within the Retail business.

Midstream

The Midstream segment reported normalized EBITDA of $174 million in the first quarter of 2022 compared to $304 million in the first quarter of 2021, while income before taxes was $159 million in the first quarter of 2022 compared to $237 million in the first quarter of 2021. Results were reflective of strong operating performance across the platform offset by the $114 million of lost normalized EBITDA contribution from the U.S. Transportation and Storage business, which had outsized performance in the first quarter of 2021 and was subsequently divested in April 2021.

Global Exports contributed $81 million of normalized EBITDA to the Midstream segment in the first quarter of 2022 compared to $70 million in the first quarter of 2021. AltaGas exported a first quarter record of 87,967 Bbls/d of cleaner burning LPGs to Asia, which was spread across 14 VLGCs in the first quarter of 2022 and included an average of 52,766 Bbls/d of propane being exported at RIPET across eight ships and an average of 35,201 Bbls/d of combined butane and propane being exported at Ferndale across six ships. Global Exports volumes were modestly impacted by the carry over effects associated with the extreme weather and flooding experienced on the west coast during the fourth quarter of 2021 that continued into the early part of the first quarter of 2022 with export volumes rising as the first quarter progressed. Export volumes were a record for the first quarter, despite these logistical challenges.

AltaGas’ realized frac spread averaged $23.92/Bbl, after transportation costs, with most of AltaGas’ frac exposed volumes financially hedged during the quarter. AltaGas is well hedged for 2022 with approximately 77 percent of the remaining 2022 expected frac exposed volumes hedged at approximately $34.58/Bbl, prior to transportation costs. In addition, approximately 41 percent of AltaGas’ remaining 2022 expected global export volumes are either tolled or financially hedged with an average FEI to North American financial hedge price of US$10.10/Bbl for non-tolled propane and butane volumes.

Read More: https://www.altagas.ca/newsroom/news-releases/altagas-reports-strong-first-quarter-2022-results

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