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Pembina Pipeline Corporation Reports Strong Results for the Second Quarter 2022, Raises Guidance and Provides Business and ESG Update

Press Release

All financial figures are in Canadian dollars unless otherwise noted. This news release refers to certain financial measures and ratios that are not specified, defined or determined in accordance with Generally Accepted Accounting Principles (“GAAP”), including net revenue; adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”); adjusted cash flow from operating activities; and adjusted cash flow from operating activities per common share. For more information see “Non-GAAP and Other Financial Measures” herein.

CALGARY, AB, Aug. 4, 2022  – Pembina Pipeline Corporation (“Pembina” or the “Company”) (TSX: PPL) (NYSE: PBA) announced today its financial and operating results for the second quarter 2022.

Highlights

  • Strong Quarterly Results – delivered earnings of $418 million and adjusted EBITDA of $849 million, the latter representing a record for a second quarter, reflecting higher natural gas liquids (“NGL”) and crude oil prices and margins, and rising volumes on key systems.
  • Guidance Raised – 2022 adjusted EBITDA guidance range has been increased to $3.575 to $3.675 billion (previously $3.45 to $3.6 billion).
  • NEBC Producer Commitment – Pembina has executed the previously referenced long-term agreements with a third leading Northeast British Columbia (“NEBC”) Montney producer, which include the commitment of significant volumes from another multi-phase NEBC Montney development.
  • Alliance Recontracting – open seasons conducted during the second quarter further strengthened Alliance’s contracting profile and continue to highlight the strong AECO-Chicago price differential and the value of Alliance’s reliable and highly competitive access to mid-western U.S. gas markets, and as a conduit to the Gulf Coast and its robust liquified natural gas (“LNG”) market.
  • ESG – Pembina continues to advance execution of its environmental, social, and governance (“ESG”) strategy with a $1 billion sustainability-linked revolving credit facility, a second renewable power purchase agreement (“PPA”), and meaningful progress on its equity, diversity, and inclusion (“EDI”) targets.

Financial and Operational Overview

3 Months Ended June 30

6 Months Ended June 30

($ millions, except where noted)

2022

2021

2022

2021

Revenue

3,095

1,902

6,133

3,918

Net revenue (1)

1,020

894

2,174

1,893

Gross profit

711

550

1,568

1,180

Earnings

418

254

899

574

Earnings per common share – basic (dollars)

0.70

0.39

1.51

0.91

Earnings per common share – diluted (dollars)

0.69

0.39

1.50

0.91

Cash flow from operating activities

604

584

1,259

1,040

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

1.09

1.06

2.28

1.89

Adjusted cash flow from operating activities (1)

683

538

1,383

1,120

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

1.23

0.98

2.50

2.04

Common share dividends declared

349

347

696

693

Dividends per common share (dollars)

0.63

0.63

1.26

1.26

Capital expenditures (3)

152

146

331

273

Total volumes (mboe/d) (2)

3,344

3,500

3,358

3,491

Adjusted EBITDA (1)

849

778

1,854

1,613

(1)

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

(2)

Total revenue volumes. Revenue volumes are physical volumes plus volumes recognized from take-or-pay commitments. Volumes are stated in thousand barrels of oil equivalent per day (“mboe/d”), with natural gas volumes converted to mboe/d from millions of cubic feet per day (“MMcf/d”) at a 6:1 ratio.

(3)

Includes capital expenditures related to assets held for sale of $6 million for the three and six months ended June 30, 2022.

Financial and Operational Overview by Division

3 Months Ended June 30

6 Months Ended June 30

2022

2021

2022

2021

($ millions, except where noted)

Volumes(1)

Reportable
Segment
Earnings
(Loss)
Before Tax

Adjusted
EBITDA(2)

Volumes(1)

Reportable
Segment
Earnings
(Loss)
Before Tax

Adjusted
EBITDA(2)

Volumes(1)

Reportable
Segment
Earnings
(Loss)
Before Tax

Adjusted
EBITDA(2)

Volumes(1)

Reportable
Segment
Earnings
(Loss)
Before Tax

Adjusted
EBITDA(2)

Pipelines

2,476

382

523

2,627

325

522

2,486

743

1,044

2,607

658

1,051

Facilities

868

143

277

873

161

270

872

389

558

884

348

539

Marketing & New Ventures(3)

139

103

9

38

360

370

76

128

Corporate

(149)

(54)

(167)

(52)

(344)

(118)

(331)

(105)

Total

3,344

515

849

3,500

328

778

3,358

1,148

1,854

3,491

751

1,613

(1)

Volumes for Pipelines and Facilities divisions are revenue volumes, which are physical volumes plus volumes recognized from take-or-pay commitments. Volumes are stated in mboe/d, with natural gas volumes converted to mboe/d from MMcf/d at a 6:1 ratio.

(2)

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

(3)

NGL volumes are excluded from Volumes to avoid double counting. Refer to “Marketing & New Ventures Division” in Pembina’s Management’s Discussion and Analysis dated August 4, 2022 for the three and six months ended June 30, 2022 for further information.

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, 2021 filed at www.sedar.com (filed with the U.S. Securities and Exchange Commission at www.sec.gov under Form 40-F) and on Pembina’s website at www.pembina.com.

Financial & Operational Highlights

Adjusted EBITDA

Change in Second Quarter Adjusted EBITDA ($ millions)(1)

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

In the second quarter, Pembina reported adjusted EBITDA of $849 million, representing a $71 million, or nine percent, increase over the same period in the prior year. Relative to the prior period, the second quarter was positively impacted by stronger marketing results due to higher margins on crude oil and NGL sales, a combination of higher volumes on the Peace Pipeline system and higher tolls due to inflation, and higher contributions from Aux Sable and Alliance. These positive factors were partially offset by a lower contribution from Ruby, due to Ruby Pipeline L.L.C. (“Ruby Pipeline”) filing for bankruptcy protection on March 31, 2022; higher realized losses on commodity-related derivatives; lower contracted volumes on the Nipisi and Mitsue pipeline systems, due to the expiration of contracts; and higher general and administrative costs, primarily due to higher long-term incentive costs driven by Pembina’s relative share price performance.

Earnings

Change in Second Quarter Earnings ($ millions)(1)(2)

(1)

Facilities results ex. commodity-related derivatives and Marketing & New Ventures results ex. commodity-related derivatives include gross profit less realized and unrealized losses on commodity-related derivative financial instruments.

(2)

Other includes other expenses and corporate.

Pembina recorded second quarter earnings of $418 million, representing a $164 million, or 65 percent, increase relative to the same period in the prior year. Relative to the prior period, in addition to the factors impacting adjusted EBITDA, as noted above, earnings in the second quarter were positively impacted by lower other expense and impairments and a higher unrealized gain on commodity-related derivatives. Second quarter earnings were negatively impacted by higher income tax expense, and higher net finance costs due to foreign exchange losses compared to gains in the second quarter of 2021.

Cash Flow From Operating Activities

Cash flow from operating activities of $604 million for the second quarter represents an increase of $20 million, or three percent, over the same period in the prior year. The increase was primarily driven by an increase in operating results after adjusting for non-cash items, higher distributions from equity accounted investees, and an increase in payments collected through contract liabilities, partially offset by changes in non-cash working capital, higher taxes paid, and higher net interest paid. On a per share (basic) basis, cash flow from operating activities increased by three percent due to the same factors.

Adjusted Cash Flow From Operating Activities

Adjusted cash flow from operating activities of $683 million represents a $145 million, or 27 percent, increase over the same period in the prior year. The increase was due to the factors impacting cash flow from operating activities, discussed above, excluding the impact of the change in non-cash working capital and taxes paid. On a per share (basic) basis, adjusted cash flow from operating activities increased by 26 percent due to the same factors.

Volumes

Total volumes of 3,344 mboe/d for the second quarter represent a decrease of approximately four percent over the same period in the prior year. The decrease was the result of lower volumes in both Pipelines and Facilities as discussed in Divisional Highlights below. Excluding the volume impact of contract expirations on the Nipisi and Mitsue pipeline systems and Ruby Pipeline entering bankruptcy protection, second quarter volumes would have increased approximately one percent over the same period in the prior year.

Divisional Highlights

  • Pipelines reported adjusted EBITDA for the second quarter of $523 million, consistent with $522 million in the same period in the prior year. The second quarter was positively impacted by higher volumes and higher tolls on certain pipeline systems, higher share of profit from Alliance due to higher volumes resulting from a wider AECO-Chicago natural gas price differential, in combination with the sale of linepack inventory, and higher recognition of deferred revenue volumes on the Vantage Pipeline. These positive factors were offset by a lower contribution from Ruby, due to Ruby Pipeline filing for bankruptcy protection on March 31, 2022, and the expiration of contracts on the Nipisi and Mitsue pipeline systems.Pipelines had reportable segment earnings before tax in the second quarter of $382 million, representing a $57 million, or 18 percent increase over the same period in the prior year. The increase was primarily due to the same items impacting adjusted EBITDA, discussed above, excluding the impact of a lower contribution from Ruby, as well as lower depreciation.Pipelines volumes of 2,476 mboe/d in the second quarter represent a six percent decrease compared to the same period in the prior year. The decrease was largely driven by Ruby Pipeline filing for bankruptcy protection and lower contracted volumes on the Nipisi and Mitsue pipeline systems, due to contract expirations, combined with lower volumes on the Alberta Ethane Gathering System due to third party outages. These factors were partially offset by higher volumes on the Peace Pipeline system, Vantage Pipeline, Drayton Valley Pipeline, and Cochin Pipeline. Excluding the volume impact of contract expirations on the Nipisi and Mitsue pipeline systems and Ruby Pipeline entering bankruptcy protection, second quarter volumes would have increased approximately one percent over the same period in the prior year.
  • Facilities reported adjusted EBITDA of $277 million for the second quarter, representing a $7 million, or three percent, increase over the same period in the prior year. The second quarter was positively impacted by a realized gain on commodity-related derivatives and higher contracted volumes at the Cutbank Complex.Facilities had reportable segment earnings before tax in the second quarter of $143 million, which represents an $18 million, or 11 percent, decrease over the same period in the prior year. In addition to the items impacting adjusted EBITDA, discussed above, the decrease is primarily due to an unrealized loss on commodity-related derivatives in the second quarter of 2022, compared to a gain in the same period in the prior year, related to certain gas processing fees that are tied to AECO prices, and higher depreciation, partially offset by a lower impairment charge.Facilities volumes of 868 mboe/d in the second quarter represent a one percent decrease compared to the same period in the prior year. The quarterly decrease is largely due to lower volumes at the Saturn Complex as a result of scheduled maintenance, partially offset by higher contracted volumes at the Cutbank Complex.
  • Marketing & New Ventures reported second quarter adjusted EBITDA of $103 million, which represents a $65 million, or 171 percent, increase compared to the second quarter of 2021. Higher margins on crude oil and NGL sales, partially offset by a higher realized loss on commodity-related derivatives, combined with a higher contribution from Aux Sable due to a wider AECO-Chicago natural gas price differential and higher NGL margins, contributed to a significant increase in results for the marketing business relative to the same period in the prior year.Marketing & New Ventures had second quarter reportable segment earnings before tax of $139 million, representing a $130 million increase over the same period in the prior year. In addition to the items impacting adjusted EBITDA, discussed above, the increase was due to an unrealized gain on commodity-related derivatives in the second quarter of 2022, compared to an unrealized loss on commodity-related derivatives in the same period in 2021.Marketed NGL volumes of 176 mboe/d in the second quarter were largely consistent with the same period in the prior year.

Read More: https://www.pembina.com/media-centre/news/details/135544/

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