Pembina Pipeline Corporation Reports Results for the Third Quarter 2024 and Updates Full Year Guidance

Press Release

05 Nov 2024

CALGARY, Alberta– Pembina Pipeline Corporation (“Pembina” or the “Company”) (TSX: PPL; NYSE: PBA) announced today its financial and operating results for the third quarter of 2024.

Highlights

• Quarterly Results – reported quarterly earnings of $385 million, quarterly adjusted EBITDA of $1,019 million, and quarterly adjusted cash flow from operating activities of $724 million.
• Guidance – 2024 adjusted EBITDA guidance range has been narrowed to $4.225 billion to $4.325 billion (previously $4.2 billion to $4.35 billion).
• Recent Business Updates – developments during and following the third quarter included:
  • Effective August 1, 2024, Pembina acquired a 14.6 percent interest in Aux Sable’s U.S. operations thereby fully consolidating ownership of all Aux Sable assets.
  • Pembina Gas Infrastructure Inc. (“PGI”) announced a $420 million (gross) transaction (the “Whitecap Transaction”) with Whitecap Resources Inc. (“Whitecap”), including the acquisition of a 50 percent interest in Whitecap’s Kaybob Complex and an obligation to fund future infrastructure development. PGI also entered into agreements with Veren Inc. and certain affiliates thereof (“Veren”) that include the $400 million (gross) acquisition of Veren’s Gold Creek and Karr area oil batteries and support for future infrastructure development. Further to the agreement with Veren, PGI and Veren are progressing a new battery facility and associated pipelines in the Gold Creek area.
• Common Share Dividend Declared – the board of directors declared a common share cash dividend for the fourth quarter of 2024 of $0.69 per share to be paid, subject to applicable law, on December 31, 2024, to shareholders of record on December 16, 2024.
• Strong Balance Sheet – at September 30, 2024, the ratio of proportionately consolidated debt-to-adjusted EBITDA on a trailing twelve-month basis was 3.6 times, at the low end of the Company’s targeted range and reflecting only two quarters of contribution from the Alliance/Aux Sable Acquisition.

Financial and Operational Overview

	3 Months Ended September 30		9 Months Ended September 30
($ millions, except where noted)	2024	2023	2024	2023
Revenue (1)	1,844	1,455	5,239	4,495
Net revenue (1)(2)	1,259	989	3,393	2,831
Gross profit	747	659	2,292	1,990
Adjusted EBITDA (2)	1,019	1,021	3,154	2,791
Earnings	385	346	1,302	1,078
Earnings per common share – basic (dollars)	0.60	0.58	2.08	1.79
Earnings per common share – diluted (dollars)	0.60	0.57	2.08	1.78
Cash flow from operating activities	922	644	2,312	1,755
Cash flow from operating activities per common share – basic (dollars)	1.59	1.17	4.06	3.19
Adjusted cash flow from operating activities (2)	724	659	2,343	1,899
Adjusted cash flow from operating activities per common share – basic (dollars) (2)	1.25	1.20	4.11	3.45
Capital expenditures	262	169	713	429

⁽¹⁾Comparative 2023 period has been adjusted. See “Accounting Policies & Estimates – Change in Accounting Policies” in Pembina’s Management’s Discussion and Analysis dated November 5, 2024 for the three and nine months ended September 30, 2024 and Note 2 to the Interim Financial Statements for the three and nine months ended September 30, 2024.

⁽²⁾Refer to “Non-GAAP and Other Financial Measures”.

Financial and Operational Overview by Division

	3 Months Ended September 30						9 Months Ended September 30
	2024			2023			2024			2023
($ millions, except where noted)	Volumes (1)	Earnings (Loss)	Adjusted EBITDA (2)	Volumes (1)	Earnings (Loss)	Adjusted EBITDA (2)	Volumes (1)	Earnings (Loss)	Adjusted EBITDA (2)	Volumes (1)	Earnings (Loss)	Adjusted EBITDA (2)
Pipelines	2,738	433	593	2,595	437	591	2,684	1,373	1,847	2,500	1,163	1,617
Facilities	810	131	324	803	179	319	823	489	974	757	467	889
Marketing & New Ventures	344	125	159	255	(4)	159	319	324	490	261	231	424
Corporate	—	(215)	(57)	—	(170)	(48)	—	(1,210)	(157)	—	(487)	(139)
Income tax expense/recovery	—	(89)	—	—	(96)	—	—	326	—	—	(296)	—
Total		385	1,019		346	1,021		1,302	3,154		1,078	2,791

⁽¹⁾Volumes for the Pipelines and Facilities divisions are revenue volumes, which are physical volumes plus volumes recognized from take-or-pay commitments. Volumes are stated in mboe/d, with natural gas volumes converted to mboe/d from MMcf/d at a 6:1 ratio. Volumes for Marketing & New Ventures are marketed crude and NGL volumes.

⁽²⁾Refer to “Non-GAAP and Other Financial Measures”.

For further details on the Company’s significant assets, including definitions for capitalized terms used herein that are not otherwise defined, refer to Pembina’s Annual Information Form for the year ended December 31, 2023, and Pembina’s Management’s Discussion and Analysis dated November 5, 2024 for the three and nine months ended September 30, 2024, filed at www.sedarplus.ca (filed with the U.S. Securities and Exchange Commission at www.sec.gov under Form 40-F) and on Pembina’s website at www.pembina.com.

Financial & Operational Highlights

Adjusted EBITDA

Pembina reported third quarter adjusted EBITDA of $1,019 million, consistent with the same period in the prior year. As discussed further below, the positive impacts of increased ownership of Alliance and Aux Sable combined with growing volumes on certain systems, and higher natural gas liquids (“NGL”) margins, were offset predominantly by the impacts of lower recontracted tolls and lower volumes on Cochin Pipeline ($44 million), the earlier recognition of deferred take-or-pay revenue in the first half of 2024 compared to the prior period ($15 million), lower realized gains on derivatives ($21 million) and certain other one-time items, including an unplanned outage at Aux Sable in the current period ($13 million), and a gain on the recognition of a finance lease in the prior period ($16 million).

Pipelines reported adjusted EBITDA of $593 million for the third quarter, consistent with the same period in the prior year, reflecting the net impact of the following factors:

• higher contribution from Alliance due to increased ownership following the Alliance/Aux Sable Acquisition;
• higher contribution from Alliance due to higher demand on seasonal contracts;
• the reactivation of the Nipisi Pipeline in late 2023;
• lower contribution from Cochin Pipeline due to lower tolls on new long-term contracts, which replaced contracts that expired in mid-July 2024 ($21 million); lower volumes resulting from a contracting gap from mid-July to August 1 associated with the return of linefill to certain customers; lower interruptible demand resulting from a narrower condensate price differential between western Canada and the U.S. Gulf Coast; and higher integrity spending; and
• lower net revenue on the Peace Pipeline system due to the earlier recognition of take-or-pay deferred revenue in the first half of 2024 compared to 2023, which more than offset higher contracted volumes.

Facilities reported adjusted EBITDA of $324 million for the third quarter, representing a $5 million or two percent increase over the same period in the prior year, reflecting the net impact of the following factors:

• the inclusion within Facilities of adjusted EBITDA from Aux Sable following the Alliance/Aux Sable Acquisition; and
• a gain on the recognition of a finance lease in the third quarter of 2023.

Marketing & New Ventures reported adjusted EBITDA of $159 million for the third quarter, consistent with the same period in the prior year, reflecting the net impact of the following factors:

• higher net revenue from contracts with customers due to increased ownership interest in Aux Sable following the Alliance/Aux Sable Acquisition;
• higher NGL margins;
• the impact of a nine-day unplanned outage at Aux Sable; and
• lower realized gains on commodity-related derivatives.

Corporate reported adjusted EBITDA of negative $57 million for the third quarter, representing a $9 million or 19 percent decrease compared to the same period in the prior year, primarily reflecting higher long-term incentive costs driven by Pembina’s share price performance, partially offset by lower consulting fees.

Earnings

Pembina reported third quarter earnings of $385 million, representing a $39 million or eleven percent increase over the same period in the prior year.

Pipelines had earnings in the third quarter of $433 million, representing a $4 million or one percent decrease over the prior period. The decrease was primarily due to the same factors impacting adjusted EBITDA, as noted above, as well as higher depreciation and amortization expense largely due to the Alliance/Aux Sable Acquisition.

Facilities had earnings in the third quarter of $131 million, representing a $48 million or 27 percent decrease over the prior period. In addition to the factors impacting adjusted EBITDA, as noted above, the decrease was due to unrealized losses recognized by PGI on interest rate derivative financial instruments compared to gains in the third quarter of 2023, and higher depreciation and amortization expense largely due to the Alliance/Aux Sable Acquisition.

Marketing & New Ventures had earnings in the third quarter of $125 million, representing a $129 million increase over the prior period. In addition to the factors impacting adjusted EBITDA, as noted above, the increase was due to unrealized gains on NGL-based derivatives and crude-oil based derivatives compared to losses in the third quarter of 2023, larger unrealized losses on power purchase agreements, unrealized losses on interest rate derivative financial instruments recognized by Cedar LNG Partners LP (“Cedar LNG”) and a cost recovery related to a storage insurance settlement.

In addition to the factors impacting adjusted EBITDA in the Corporate segment, as noted above, the change in third quarter earnings compared to the prior period was primarily due to higher net finance costs, primarily as a result of additional debt associated with the Alliance/Aux Sable Acquisition.

Cash Flow From Operating Activities

Cash flow from operating activities of $922 million for the third quarter represents a 43 percent increase over the same period in the prior year. The increase was primarily driven by higher operating results, as discussed above, the change in non-cash working capital, an increase in payments collected through contract liabilities, and lower taxes paid, partially offset by lower distributions from equity accounted investees and higher net interest paid.

On a per share (basic) basis, cash flow from operating activities was $1.59 per share for the third quarter, representing an increase of 36 percent compared to the same period in the prior year, due to the same factors, as well as additional common shares issued in connection with the Alliance/Aux Sable Acquisition financing.

Adjusted Cash Flow From Operating Activities

Adjusted cash flow from operating activities of $724 million for the third quarter represents a ten percent increase over the same period in the prior year. The increase was primarily driven by the same items impacting cash flow from operating activities, discussed above, excluding the change in non-cash working capital and taxes paid, as well as lower current income tax expense, partially offset by higher accrued share-based payment expense.

On a per share (basic) basis, adjusted cash flow from operating activities was $1.25 per share for the third quarter representing a four percent increase over the same period in the prior year, due to the same factors, as well as additional common shares issued in connection with the Alliance/Aux Sable Acquisition financing.

Volumes

Pipelines volumes of 2,738 mboe/d in the third quarter represent a six percent increase compared to the same period in the prior year. The increase was primarily due to the increased ownership interest in Alliance and the reactivation of the Nipisi Pipeline. These factors were partially offset by lower volumes on the Peace Pipeline system, Cochin Pipeline, and the Drayton Valley Pipeline. Lower volumes on the Peace Pipeline system were a result of the earlier recognition of take-or-pay deferred revenue in the first half of 2024, compared to the first half of 2023, which more than offset higher contracted volumes. Lower volumes on the Cochin Pipeline were largely due to a contracting gap from mid-July to August 1 associated with the return of linefill to certain customers, and lower interruptible demand during the quarter resulting from a narrower condensate price differential between western Canada and the U.S. Gulf Coast.

Facilities volumes of 810 mboe/d in the third quarter represent a one percent increase compared to the same period in the prior year. The increase was primarily due to the recognition of Aux Sable volumes following the Alliance/Aux Sable Acquisition; lower volumes at the Redwater Complex and at Younger due to planned outages and a rail strike impacting the Redwater Complex resulting in volume curtailments; and lower volumes on certain PGI assets due to the earlier recognition of take-or-pay deferred revenue in the first half of 2024, which more than offset higher PGI interruptible volumes.

In Marketing & New Ventures, crude oil sales volumes of 117 mboe/d in the third quarter represent a 31 percent increase compared to the same period in the prior year, primarily due to higher blending opportunities due to favourable price differentials. NGL sales volumes of 227 mboe/d in the third quarter represent a 37 percent increase compared to the same period in the prior year, primarily due to higher ethane, propane, and butane sales as a result of the increased ownership interest in Aux Sable.

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