Pembina Pipeline Corporation Announces $950 Million Public Note Offering

Rhea-AI Summary

Pembina Pipeline announced a $950 million public offering of senior unsecured medium-term notes. The offering will be in three tranches: $650 million of Series 23 Notes with a 5.22% coupon maturing on June 28, 2033; $150 million of Series 20 Notes with a 5.02% coupon maturing on January 12, 2032; and $150 million of Series 22 Notes with a 5.67% coupon maturing on January 12, 2054.

The closing is expected on June 28, 2024. Pembina plans to use the proceeds to repay existing debt, redeem $150 million of Series 19 Notes due in 2026, and for general corporate purposes. The notes are offered under a short form base shelf prospectus and relevant pricing supplements. This offering is not registered under the U.S. Securities Act of 1933 and cannot be sold in the U.S.

Positive

• $950 million raised through the offering.
• Proceeds to repay $1.5 billion revolving credit facility.
• Redemption of $150 million of Series 19 Notes, reducing future debt obligations.

Negative

• New notes issuance increases overall debt level.
• 5.22% to 5.67% coupon rates mean substantial interest payments.

Financial Analyst

Pembina Pipeline Corporation's issuance of $950 million in senior unsecured medium-term notes reflects strategic efforts to manage its debt and fund future operations. These notes are being issued in three tranches with varying maturity dates and interest rates:

• Series 23 Notes: $650 million at 5.22%, maturing in 2033
• Series 20 Notes (re-opening): $150 million at 5.02%, maturing in 2032
• Series 22 Notes (re-opening): $150 million at 5.67%, maturing in 2054

For investors, the issuance of these notes can be seen as a move to stabilize the company's balance sheet by refinancing existing debt and ensuring liquidity for ongoing operations. The attractive coupon rates suggest confidence in the company's creditworthiness despite the relatively high interest rates compared to historical norms. However, the decision to issue long-term debt at a high rate might reflect a concern about future interest rate increases, which could further affect borrowing costs.

Given the use of proceeds to repay existing debt and fund corporate purposes, this move can be seen as a conservative and prudent financial strategy. The repayment of the revolving credit facility reduces short-term financial strain and enhances the company's flexibility. However, long-term debt obligations add to the company's liability, which needs to be carefully managed to avoid over-leverage.

Retail investors should consider the implications of these debts on the company's future earnings and its ability to service the debt without straining operational profitability. The variance in maturity dates also spreads out the company’s liability, potentially mitigating the risk of refinancing at less favorable terms in the future.

Market Research Analyst

From a market perspective, Pembina Pipeline Corporation's offering aligns with strategies seen in the midstream energy sector where companies raise capital to manage debt and finance growth. The energy sector is capital-intensive and access to finance through debt markets allows companies like Pembina to maintain and expand their infrastructure without diluting shareholder value.

Investors should note the competitive coupon rates offered, which are reflective of the current interest rate environment. These rates, although higher compared to pre-pandemic levels, are relatively competitive given the credit risk associated with energy companies. The tranche structure also suggests Pembina's strategic planning in managing different maturity profiles to balance short-term and long-term financial commitments.

For retail investors, this move might signal Pembina's commitment to maintaining financial health and preparing for potential growth opportunities. However, the high interest payments associated with this debt issuance could impact the company’s net income, affecting dividend payouts in the long term.

The energy market's volatility and the ongoing transition to renewable energy sources are also essential factors to consider. Changes in regulatory policies and market dynamics can significantly affect Pembina's operations and financial performance, making it important for investors to keep an eye on broader market trends and company-specific developments.

CALGARY, Alberta--(BUSINESS WIRE)-- Pembina Pipeline Corporation ("Pembina" or the "Company") (TSX: PPL; NYSE: PBA) announced today that it has agreed to issue $950 million aggregate principal amount of senior unsecured medium-term notes (the "Offering"). The Offering will be conducted in three tranches consisting of: (i) $650 million principal amount of senior unsecured medium-term notes, series 23 (the "Series 23 Notes") having a fixed coupon of 5.22% per annum, paid semi-annually, and maturing on June 28, 2033; (ii) $150 million principal amount to be issued through a re-opening of the Company's senior unsecured medium-term notes, series 20 (the "Series 20 Notes") having a fixed coupon of 5.02% per annum, paid semi-annually, and maturing on January 12, 2032; and (iii) $150 million principal amount to be issued through a re-opening of the Company's senior unsecured medium-term notes, series 22 (the "Series 22 Notes") having a fixed coupon of 5.67% per annum, paid semi-annually, and maturing on January 12, 2054.

Closing of the Offering is expected to occur on June 28, 2024. Pembina intends to use the net proceeds of the Offering: (i) to repay indebtedness of the Company under its unsecured $1.5 billion revolving credit facility maturing in June 2029; (ii) to fund the previously announced redemption by the Company of $150 million aggregate principal amount of its $300 million aggregate principal amount of 5.72% Medium Term Notes, Series 19 (the "Series 19 Notes") due June 22, 2026; and (iii) for general corporate purposes.

The Series 23 Notes and the re-opened Series 20 Notes and Series 22 Notes are being offered through a syndicate of dealers under Pembina's short form base shelf prospectus dated December 20, 2023, as supplemented by related pricing supplements dated June 26, 2024.

This news release does not constitute an offer to sell or the solicitation of an offer to buy the notes in any jurisdiction. The notes being offered have not been approved or disapproved by any regulatory authority. The notes have not been and will not be registered under the United States Securities Act of 1933, as amended, or any state securities law, and may not be offered or sold within the United States.

About Pembina

Pembina Pipeline Corporation is a leading energy transportation and midstream service provider that has served North America's energy industry for 70 years. Pembina owns an integrated network of hydrocarbon liquids and natural gas pipelines, gas gathering and processing facilities, oil and natural gas liquids infrastructure and logistics services, and an export terminals business. Through our integrated value chain, we seek to provide safe and reliable energy solutions that connect producers and consumers across the world, support a more sustainable future and benefit our customers, investors, employees and communities. For more information, please visit www.pembina.com.

Purpose of Pembina: We deliver extraordinary energy solutions so the world can thrive.

Pembina is structured into three Divisions: Pipelines Division, Facilities Division and Marketing & New Ventures Division.

Pembina's common shares trade on the Toronto and New York stock exchanges under PPL and PBA, respectively. For more information, visit www.pembina.com.

Forward-Looking Statements and Information

This news release contains certain forward-looking statements and forward-looking information (collectively, "forward-looking statements"), including forward-looking statements within the meaning of the "safe harbor" provisions of applicable securities legislation that are based on Pembina's current expectations, estimates, projections and assumptions in light of its experience and its perception of historical trends. In some cases, forward-looking statements can be identified by terminology such as "expect", "intend", "will", "shall", and similar expressions suggesting future events or future performance.

In particular, this news release contains forward-looking statements relating to: the Offering, including the anticipated closing date of the Offering and the intended use of the net proceeds of the Offering; and the partial redemption of the Series 19 Notes, including the occurrence thereof. These forward-looking statements are based on certain assumptions that Pembina has made in respect thereof as at the date of this news release, including: oil and gas industry exploration and development activity levels and the geographic region of such activity; that favourable market conditions exist; the success of Pembina's operations; prevailing commodity prices, interest rates, carbon prices, tax rates and exchange rates; the ability of Pembina to maintain current credit ratings; the availability of capital to fund future capital requirements relating to existing assets and projects; future operating costs; geotechnical and integrity costs; that all required regulatory and environmental approvals can be obtained on the necessary terms in a timely manner; prevailing regulatory, tax and environmental laws and regulations; maintenance of operating margins; and certain other assumptions in respect of Pembina's forward-looking statements detailed in Pembina's Annual Information Form for the year ended December 31, 2023 (the "AIF") and Management's Discussion and Analysis for the year ended December 31, 2023 (the "Annual MD&A"), which were each filed on SEDAR+ on February 22, 2024, in Pembina's Management's Discussion and Analysis for the three months ended March 31, 2024 (the "Interim MD&A"), which was filed on SEDAR+ on May 9, 2024, and from time to time in Pembina's public disclosure documents available at www.sedarplus.ca, www.sec.gov and through Pembina's website at www.pembina.com.

These forward-looking statements are not guarantees of future performance and are subject to a number of known and unknown risks and uncertainties, including, but not limited to: the regulatory environment and decisions and Indigenous and landowner consultation requirements; the impact of competitive entities and pricing; reliance on third parties to successfully operate and maintain certain assets; the strength and operations of the oil and natural gas production industry and related commodity prices; non-performance or default by counterparties to agreements with Pembina or one or more of its affiliates; actions taken by governmental or regulatory authorities; the ability of Pembina to acquire or develop the necessary infrastructure in respect of future development projects; fluctuations in operating results; adverse general economic and market conditions in Canada, North America and worldwide; the ability to access various sources of debt and equity capital; changes in credit ratings; counterparty credit risk; and certain other risks and uncertainties detailed in the AIF, Annual MD&A, Interim MD&A and from time to time in Pembina's public disclosure documents available at www.sedarplus.ca, www.sec.gov and through Pembina's website at www.pembina.com. In addition, the closing of the Offering and the partial redemption of the Series 19 Notes may not be completed, or may be delayed, if the conditions to the completion thereof are not satisfied on the anticipated timeline or at all. Accordingly, there is a risk that the Offering will not be completed and the Series 19 Notes may not be redeemed within the anticipated time, on the terms currently proposed, or at all. The intended use of the net proceeds of the Offering by Pembina may change if the board of directors of Pembina determines that it would be in the best interests of Pembina to deploy the proceeds for some other purpose and there can be no guarantee as to how or when such proceeds may be used.

Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted, forecasted or projected. The forward-looking statements contained in this news release are expressly qualified by the above statements. Pembina does not undertake any obligation to publicly update or revise any forward-looking statements or information contained herein, except as required by applicable laws.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240626224564/en/

For further information:

Investor Relations

(403) 231-3156

1-855-880-7404

e-mail: investor-relations@pembina.com

www.pembina.com

Source: Pembina Pipeline Corporation

FAQ

What is the overall value of Pembina Pipeline 's public note offering?

The overall value of the offering is $950 million.

What are the details of the Series 23 Notes being issued by Pembina Pipeline ?

The Series 23 Notes have a principal amount of $650 million, a fixed coupon rate of 5.22% per annum, paid semi-annually, and will mature on June 28, 2033.

How will Pembina Pipeline use the proceeds from the $950 million public note offering?

Pembina plans to use the proceeds to repay indebtedness under its $1.5 billion revolving credit facility, redeem $150 million of its Series 19 Notes, and for general corporate purposes.

When is the closing date for Pembina Pipeline 's public note offering?

The closing date is expected to be June 28, 2024.

What are the coupon rates for the medium-term notes issued by Pembina Pipeline ?

The coupon rates are 5.22% for Series 23 Notes, 5.02% for Series 20 Notes, and 5.67% for Series 22 Notes.

What is the maturity date for Series 22 Notes issued by Pembina Pipeline ?

The maturity date for Series 22 Notes is January 12, 2054.