Pembina Pipeline Corporation Reports Record Results for the Fourth Quarter 2023, Provides Business Update, and Declares Quarterly Common Share Dividend
- Record full year earnings of $1,776 million and adjusted EBITDA of $3,824 million, exceeding guidance.
- Long-term agreements with Dow Chemical Canada for ethane supply and transportation.
- Incremental contract on Nipisi Pipeline and Wapiti Plant expansion approved.
- Reduction in Phase VIII Peace Pipeline Expansion project cost to $430 million.
- Declaration of common share cash dividend for Q1 2024 of $0.6675 per share.
- Proportionately consolidated debt-to-adjusted EBITDA ratio at 3.3 times, below targeted range.
- Total revenue of $9,125 million for 2023, with net revenue of $3,994 million.
- Reported fourth quarter earnings of $698 million and record quarterly adjusted EBITDA of $1,033 million.
- Cash flow from operating activities of $880 million for Q4 and $2,635 million for full year 2023.
- Adjusted cash flow from operating activities of $747 million for Q4 and $2,646 million for full year 2023.
- Total volumes of 3,453 mboe/d for Q4 and 3,306 mboe/d for full year 2023.
- None.
Insights
The financial results reported by Pembina Pipeline Corporation, including the record full-year earnings and adjusted EBITDA, are significant indicators of the company's performance and financial health. The reduction in estimated project costs for the Phase VIII Peace Pipeline Expansion and the strong balance sheet, as evidenced by the proportionately consolidated debt-to-adjusted EBITDA ratio, are particularly noteworthy. These factors suggest a disciplined approach to cost management and a robust financial structure, which can be appealing to investors and may influence the stock's attractiveness.
Moreover, the declaration of a common share cash dividend aligns with shareholder return strategies, which is often a key consideration for both current and potential investors. The financial and operational data provided, including year-over-year comparisons, offer a comprehensive view of the company's operational efficiency and market position. However, it is important to consider the broader industry context, including commodity price fluctuations and regulatory changes, which can affect future performance.
The long-term agreements with Dow Chemical Canada for ethane supply and transportation, as well as the contracting on the Nipisi Pipeline, underscore Pembina's strategic positioning within the energy infrastructure space. These developments not only secure future revenue streams but also demonstrate the company's ability to capitalize on industry trends, such as the growing demand for ethane as a feedstock in petrochemical production.
The expansion of the Wapiti Plant is another strategic investment that could enhance Pembina's competitive edge by increasing natural gas processing capacity. However, the success of such expansions hinges on the continued demand for natural gas and the company's ability to execute projects on time and within budget. Investors should also assess the potential risks associated with regulatory approvals and environmental concerns that could impact project timelines and costs.
Pembina's performance, as reflected in the record adjusted EBITDA and earnings, is a positive signal for the company's market position. The incremental contract on the Nipisi Pipeline and the Wapiti Plant expansion are likely to strengthen Pembina's service offerings and could potentially lead to increased market share. However, the decrease in full-year earnings compared to the previous year, despite higher adjusted EBITDA, warrants a closer examination of the underlying factors, such as non-operational items that may have influenced the earnings figures.
It's critical to analyze the impact of these financial results in the context of investor expectations and industry benchmarks. While the dividend increase may be seen as a positive development, it is essential to evaluate whether this is sustainable in the long term, given the capital expenditure commitments and potential volatility in energy markets.
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; adjusted cash flow from operating activities per common share; and proportionately consolidated debt-to-adjusted EBITDA. For more information see "Non-GAAP and Other Financial Measures" herein.
Highlights
-
Record Results - reported 2023 full year earnings of
$1,776 million $3,824 million $698 million $1,033 million
- Ethane Supply and Transportation Agreements - Pembina has entered into long-term agreements with Dow Chemical Canada ("Dow") to supply and transport up to 50,000 barrels per day ("bpd") of ethane to support their recently announced Path2Zero Project.
- Nipisi Pipeline Contracting - signed an incremental long-term contract on the recently reactivated Nipisi Pipeline, with line of sight to the asset being fully contracted by the end of 2024.
-
Wapiti Expansion - Pembina Gas Infrastructure ("PGI") has approved a
$140 million
-
Phase VIII Peace Pipeline Expansion - the estimated project cost has been further reduced to
$430 million $475 million $530 million
-
Common Share Dividend - the board of directors declared a common share cash dividend for the first quarter of 2024 of
$0.66 75
- Strong Balance Sheet - at December 31, 2023 the ratio of proportionately consolidated debt-to-adjusted EBITDA was 3.3 times, below the low end of the Company's targeted range.
Financial and Operational Overview
|
3 Months Ended December 31 |
12 Months Ended December 31 |
||
($ millions, except where noted) |
2023 |
2022 |
2023 |
2022 |
Revenue |
2,466 |
2,699 |
9,125 |
11,611 |
Net revenue(1) |
1,117 |
1,043 |
3,994 |
4,247 |
Gross profit |
850 |
681 |
2,840 |
3,123 |
Adjusted EBITDA(1) |
1,033 |
925 |
3,824 |
3,746 |
Earnings |
698 |
243 |
1,776 |
2,971 |
Earnings per common share – basic (dollars) |
1.21 |
0.39 |
3.00 |
5.14 |
Earnings per common share – diluted (dollars) |
1.21 |
0.39 |
2.99 |
5.12 |
Cash flow from operating activities |
880 |
947 |
2,635 |
2,929 |
Cash flow from operating activities per common share – basic (dollars) |
1.60 |
1.72 |
4.79 |
5.30 |
Adjusted cash flow from operating activities(1) |
747 |
690 |
2,646 |
2,661 |
Adjusted cash flow from operating activities per common share – basic (dollars)(1) |
1.36 |
1.25 |
4.81 |
4.82 |
Capital expenditures |
177 |
143 |
606 |
605 |
Total volumes (mboe/d)(2) |
3,453 |
3,392 |
3,306 |
3,383 |
(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, and also include revenue volumes from Pembina's equity accounted investees. |
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Financial and Operational Overview by Division
|
3 Months Ended December 31 |
12 Months Ended December 31 |
||||||||||
|
2023 |
2022 |
2023 |
2022 |
||||||||
($ 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 |
2,652 |
677 |
617 |
2,593 |
295 |
548 |
2,538 |
1,840 |
2,234 |
2,524 |
1,415 |
2,127 |
Facilities |
801 |
143 |
324 |
799 |
145 |
288 |
768 |
610 |
1,213 |
859 |
1,804 |
1,137 |
Marketing & New Ventures |
— |
204 |
173 |
— |
96 |
171 |
— |
435 |
597 |
— |
708 |
721 |
Corporate |
— |
(209) |
(81) |
— |
(206) |
(82) |
— |
(696) |
(220) |
— |
(708) |
(239) |
Total |
3,453 |
815 |
1,033 |
3,392 |
330 |
925 |
3,306 |
2,189 |
3,824 |
3,383 |
3,219 |
3,746 |
(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. Volumes do not include Empress processing capacity. Marketed natural gas liquids ("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 February 22, 2024 for the three and twelve months ended December 31, 2023 for further information. |
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(2) Refer to "Non-GAAP and Other Financial Measures". |
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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 filed at www.sedarplus.ca (filed with the
Financial & Operational Highlights
Adjusted EBITDA
Pembina reported record quarterly adjusted EBITDA of
Pipelines reported adjusted EBITDA of
- higher volumes on the Peace Pipeline system, Drayton Valley Pipeline, and on the recently reactivated Nipisi Pipeline;
- higher tolls primarily on the Cochin Pipeline and Peace Pipeline systems, largely related to contractual inflation adjustments; and
- lower contribution from the Alliance Pipeline, primarily due to lower interruptible tolls and volumes.
Pipelines reported adjusted EBITDA of
- higher contracted volumes and tolls on the Peace Pipeline system;
-
higher tolls and the impact of a higher
U.S. dollar exchange rate on the Cochin Pipeline;
- higher volumes on the Vantage Pipeline due to third party outages in 2022;
- reactivation of the Nipisi Pipeline;
-
lower volumes and higher operating costs due to the Northern Pipeline system outage and the
Alberta andBritish Columbia wildfires (the "Wildfires"); and
- lower contribution from the Alliance Pipeline, primarily due to the sale of linepack inventory in 2022, lower interruptible tolls and volumes, and seasonal contracts being replaced by firm contracts at lower regulated rates.
Facilities reported adjusted EBITDA of
- higher contribution from the PGI assets, primarily from the former Energy Transfer Canada plants, the Hythe Plant, and the Dawson Assets due to higher volumes; and
- higher revenue at Vancouver Wharves.
Facilities reported adjusted EBITDA of
- higher contribution from the PGI assets, due to higher volumes primarily at the former Energy Transfer Canada plants, the Hythe Plant, and the Dawson Assets;
- a gain on the recognition of a finance lease; and
- lower volumes at the Redwater Complex and at Younger primarily due to the Northern Pipeline system outage.
Marketing & New Ventures reported adjusted EBITDA of
- higher contribution from Aux Sable;
-
lower natural gas marketing margins due to the decrease in
Chicago natural gas prices, as well as lower crude oil margins resulting from the lower prices across the crude oil complex, largely offset by higher NGL margins, primarily due to lower input natural gas prices and higher marketed NGL volumes; and
- realized losses on commodity-related derivatives in the fourth quarter of 2023 compared to realized gains in the fourth quarter of 2022.
Marketing & New Ventures reported adjusted EBITDA of
- lower crude oil, NGL, and natural gas margins, resulting from a decrease in commodity prices;
- lower contribution from Aux Sable; and
- realized gains on commodity-related derivatives in 2023, compared to realized losses in 2022.
Corporate reported adjusted EBITDA of negative
Corporate reported adjusted EBITDA of negative
- lower general and administrative costs, net of increased shared service revenue; and
- lower long-term incentive costs.
Earnings
Pembina reported fourth quarter earnings of
Pipelines had reportable segment earnings before tax in the fourth quarter of
Pipelines had reportable segment earnings before tax for the full year of
Facilities had reportable segment earnings before tax in the fourth quarter of
Facilities had reportable segment earnings before tax for the full year of
Marketing & New Ventures had reportable segment earnings before tax in the fourth quarter of
Marketing & New Ventures had reportable segment earnings before tax for the full year of
In addition to the changes in reportable segment earnings before tax for each division discussed above, the change in fourth quarter earnings compared to the prior period was due to higher income tax expense due to higher earnings compared to the prior period, partially offset by the recognition of previously unrecognized deferred tax assets. The change in the full year earnings compared to the prior year was also primarily due to higher income tax expense due to the tax impact of the PGI Transaction in 2022.
Cash Flow From Operating Activities
Cash flow from operating activities of
The decrease in the fourth quarter was primarily driven by the change in non-cash working capital, higher taxes paid, and a decrease in payments collected through contract liabilities, partially offset by higher operating results.
The decrease in the full year was primarily driven by the change in non-cash working capital, lower operating results, a decrease in payments collected through contract liabilities, and higher share-based compensation payments, partially offset by higher distributions from equity accounted investees and lower taxes paid.
On a per share (basic) basis, cash flow from operating activities was
Adjusted Cash Flow From Operating Activities
Adjusted cash flow from operating activities of
The increase in the fourth quarter 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, partially offset by higher current income tax expense.
The decrease in the full year was primarily driven by the same items impacting cash flow from operating activities, discussed above, excluding the change in non-cash working capital, taxes paid, and share-based compensation payments, combined with higher current tax expense, partially offset by lower accrued share-based payment expense.
On a per share (basic) basis, adjusted cash flow from operating activities was
Volumes
Total volumes of 3,453 mboe/d for the fourth quarter and 3,306 mboe/d for the full year represent an increase of two percent and a decrease of two percent, respectively, over the same periods in the prior year.
Pipelines volumes of 2,652 mboe/d in the fourth quarter represent a two percent increase compared to the same period in the prior year, primarily reflecting the reactivation of the Nipisi Pipeline in the fourth quarter of 2023, higher contracted volumes on the Peace Pipeline system, as well as higher volumes on the Drayton Valley Pipeline.
Pipelines volumes of 2,538 mboe/d for the full year represent a one percent increase compared to the same period in the prior year, primarily reflecting higher contracted volumes on the Peace Pipeline system, the reactivation of the Nipisi Pipeline in the fourth quarter of 2023, and higher volumes on the Vantage Pipeline due to third-party outages in 2022, partially offset by lower volumes related to the Northern Pipeline system outage, and the impacts of the Wildfires.
Facilities volumes of 801 mboe/d in the fourth quarter were consistent with the same period in the prior year, reflecting higher volumes from PGI, primarily at the Hythe Gas Plant and at the Dawson Assets, largely offset by lower volumes at the Redwater Complex.
Facilities volumes of 768 mboe/d for the full year represent an 11 percent decrease compared to the same period in the prior year, reflecting the net impact of the following factors:
- the disposition of Pembina's interest in the E1 and E6 assets in exchange for a processing agreement that provides Pembina with the right to first priority for gas processing at all Plains Midstream-operated assets at Empress;
- lower volumes at the Redwater Complex and at Younger resulting from the Northern Pipeline system outage and planned outages in the third quarter of 2023; and
- higher volumes from PGI, primarily at the former Energy Transfer Canada plants and at the Dawson Assets.
Excluding the impact of the disposition of Pembina’s interest in the E1 and E6 assets at Empress, the Northern Pipeline system outage, and the Wildfires, Facilities volumes would have increased by five percent in 2023 compared to the same period in the prior year.
Marketed NGL volumes of 217 mboe/d in the fourth quarter represents a 12 percent increase compared to the same period in the prior year, reflecting higher propane, ethane, and butane sales.
Marketed NGL volumes of 185 mboe/d in the full year were largely consistent with the same period in the prior year.
Quarterly Common Share Dividend
Pembina's board of directors has declared a common share cash dividend for the first quarter of 2024 of
For shareholders receiving their common share dividends in
Quarterly dividend payments are expected to be made on the last business day of March, June, September and December to shareholders of record on the 15th day of the corresponding month, if, as and when declared by the board of directors. Should the record date fall on a weekend or on a statutory holiday, the record date will be the next succeeding business day following the weekend or statutory holiday.
Executive Overview
2023 results reflect the strength of Pembina's business and are highlighted by record annual adjusted EBITDA of
Progressing Pembina's Strategy
In early 2023, Pembina outlined a strategy designed to ensure it remains resilient into the future. Guided by this strategy, we are working every day to strengthen our existing business to ensure we help meet the energy needs of today and maximize the value of oil and gas products from
A highlight of the fourth quarter was the announcement of a
In 2023, Pembina further progressed its strategy by sustaining and enhancing our business through various previously disclosed accomplishments. These include signing new contracts on the Peace Pipeline system; signing new, or extending existing, contracts at the Redwater Complex; reactivating the Nipisi Pipeline; and approving new projects such as the 55,000 bpd RFS IV expansion, the expansion of the NEBC pipeline system, and a cogeneration facility at PGI's Kaybob 3 Plant.
In addition, Pembina is pleased to provide the following business updates:
-
PGI has approved an expansion (the "Wapiti Expansion") that will increase natural gas processing capacity at the Wapiti Plant by 115 mmcf/d (gross to PGI). The Wapiti Plant is fully integrated into Pembina’s value chain and the liquids processed at the plant are transported on the Peace Pipeline system. The Wapiti Expansion is being driven by strong customer demand supported by growing
Montney production and will be fully underpinned by long-term, take-or-pay contracts. The Wapiti Expansion, which includes a new sales gas pipeline and other related infrastructure, is expected to cost$140 million
-
In November, Dow announced it is proceeding with construction of a new integrated ethylene cracker and derivatives facility in
Fort Saskatchewan (the "Path2Zero Project"), which is scheduled be completed in two phases with in-service dates in 2027 and 2029, respectively. This is an important development for the WCSB, representing a significant increase to the current ethane market inAlberta . Given Pembina's existing leading ethane supply and transportation business and extensive and integrated value chain, there are multiple opportunities for the Company to benefit from this new development, through both the existing asset base and new investment opportunities.
First, Pembina is excited to announce that it has entered into long-term agreements with Dow to supply up to 50,000 bpd of ethane and for the associated transportation on the Alberta Ethane Gathering System ("AEGS").
Second, Pembina is a major supplier of ethane to the petrochemical industry. To expand its existing ethane supply portfolio, in support of the agreement with Dow, Pembina is evaluating several possible options to invest in new infrastructure, including incremental deep-cut processing capacity at certain PGI gas plants, de-ethanizer expansions at existing fractionation facilities, potential new straddle facilities, and smaller capital efficient expansion opportunities.
Finally, the Path2Zero Project will directly drive incremental ethane demand, the extraction of which should also increase the supply of other associated NGL - propane, butane and condensate. The resulting volume growth across the WCSB will benefit Pembina over a period of many years and support higher utilization and potential expansions of its assets, including gas processing facilities, theRedwater fractionation complex, the Peace and Northern pipeline systems, the AEGS, and storage facilities.
-
Pembina recently closed open seasons on the Cochin Pipeline for a total of 90,000 bpd with contracts expiring between 2027 and 2030, in respect of contracts previously expiring in July 2024. The open seasons were more than three times oversubscribed, highlighting strong customer interest and the value of Cochin Pipeline service. Cochin Pipeline, which spans from
Illinois toAlberta , supplies light condensate to fill a structural diluent shortfall in the WCSB. The desire of shippers to secure long-term capacity highlights the important role that Cochin Pipeline plays in supporting the Canadian oil industry's operations, development, and growth. While contracted tolls are lower than historic levels, Pembina has successfully increased daily volume throughput over the past two years by up to 25,000 bpd, or approximately 25 percent, through operational optimization and equipment upgrades.
-
Given rising production from the
Clearwater oil play, Pembina continues to experience strong demand for service on the Nipisi Pipeline, with current volumes of approximately 33,000 bpd. Including an incremental contract signed with an anchor customer in the fourth quarter, more than half of the capacity on the Nipisi Pipeline is now contracted, on a long-term basis, with line of sight to the asset being fully contracted by the end of 2024.
Looking Ahead to 2024 and Beyond
Momentum within our business is expected to continue and Pembina is well positioned to benefit from what it expects to be a transformational period in the Canadian energy industry.
In 2024, Pembina will focus on progressing its current growth projects – the Phase VIII Peace Pipeline expansion, RFS IV, the K3 Cogeneration Facility, the Wapiti Expansion and the NEBC MPS Expansion - and delivering them on time and on budget. We also look forward to progressing our other development opportunities, such as Cedar LNG, the Alberta Carbon Grid, and further expansions of assets in our core business. As well, upon closing of the Alliance/Aux Sable Acquisition, we will prioritize integrating those businesses and pursuing the near-term synergies we have identified to extract greater value from these exceptional assets.
In December, Pembina announced a 2024 adjusted EBITDA guidance range of
Throughout 2022 and 2023, Pembina has generated substantial free cash flow, which has been allocated to strengthening the balance sheet and returning capital to shareholders. During this time, Pembina has paid down debt, reducing leverage below the low end of its target range in anticipation of funding future capital projects. Pembina expects to remain firmly within its financial guardrails with ample liquidity and its leverage metrics are expected to remain well within the ranges for a strong 'BBB' credit rating.
Looking beyond 2024, over the next several years, Pembina sees the potential for mid-single digit annual volume growth across the WCSB, primarily from the northeast
Pembina is uniquely positioned to capture new volumes and benefit from the growth in the WCSB given the scope and reach of its assets, highly economic expansion opportunities, existing long-term contracts, and agreements with three premier NEBC producers. Consistent with our strategy, we will continue to invest in infrastructure to serve customers and enhance Pembina's integrated value chain, while also pursuing opportunities to enhance access to global markets and better align the Company's future with the transition to a lower-carbon economy.
Our investors have come to expect strong and consistent financial leadership from us, demonstrated by a secure and growing dividend, an unwavering commitment to our financial guardrails, a low-risk and primarily fee-based business with high take-or-pay or cost-of-service contributions, and strong balance sheet metrics. Investors can expect us to live up to our reputation and execute our strategy with the same financial discipline that has made Pembina successful to date.
Pembina's 2023 Annual Summary, including our messages to shareholders, is available at www.pembina.com/investors/investor-documents-filings.
Projects and New Developments(1)
Pipelines
-
The Phase VIII Peace Pipeline expansion will enable segregated pipeline service for ethane-plus and propane-plus NGL mix from Gordondale,
Alberta , which is centrally located within theMontney trend, into theEdmonton area for market delivery. The project includes new 10-inch and 16-inch pipelines, totaling approximately 150 kilometres, in the Gordondale toLa Glace corridor ofAlberta , as well as new mid-point pump stations and terminal upgrades located throughout the Peace Pipeline system. Phase VIII will add approximately 235,000 bpd of incremental capacity between Gordondale,Alberta andLa Glace, Alberta , as well as approximately 65,000 bpd of capacity betweenLa Glace, Alberta and theNamao hub nearEdmonton, Alberta . The estimated project cost has been revised lower to$430 million $475 million $530 million
-
The NEBC MPS Expansion includes a new mid-point pump station, terminal upgrades, and additional storage, which will support approximately 40,000 bpd of incremental capacity on the NEBC Pipeline system. This expansion is expected to cost
$90 million British Columbia , including new pipelines and terminal upgrades on the NEBC Pipeline and downstream systems betweenTaylor, British Columbia and Gordondale,Alberta . In 2023, Pembina filed its project notification with the Canada Energy Regulator in respect of the interprovincial portion of these expansions.
Facilities
-
Pembina is constructing a new 55,000 bpd propane-plus fractionator ("RFS IV") at its existing
Redwater fractionation and storage complex (the "Redwater Complex"). RFS IV is expected to cost approximately$460 million
-
PGI's Wapiti Expansion will increase natural gas processing capacity at the Wapiti Plant by 115 mmcf/d (gross to PGI). The project, which includes a new sales gas pipeline and other related infrastructure, is expected to cost
$230 million $140 million
-
PGI is developing a 28 MW cogeneration facility at its K3 Plant (the "K3 Cogeneration Facility"), which is expected to cost
$115 million $70 million
Marketing & New Ventures
-
Cedar LNG has substantially completed several key project deliverables, including obtaining material regulatory approvals; advancing inter-project agreements with Coastal GasLink and LNG Canada; signing a heads of agreement with Samsung Heavy Industries Co., Ltd. and Black & Veatch Corporation; and executing a lump sum engineering, procurement, and construction agreement (the "EPC Agreement") to provide Cedar LNG with the necessary services to construct the project. In order to achieve this momentum, as at December 31, 2023, Pembina had invested approximately
$200 million
Though numerous milestones have been achieved, the Cedar LNG project still faces a number of schedule driven interconnected elements that require resolution prior to making a final investment decision ("FID"), including binding commercial offtake, obtaining certain third-party consents, and project financing. On this basis, a final investment decision is now expected in the middle of 2024.
As a result of the revised FID timing, current year net contributions to Cedar LNG through to the middle of 2024 are expected to be approximately$200 $300 million
Further, in connection with, and following execution of, the EPC Agreement, Pembina was required to provide financial assurances to advance upstream infrastructure projects. In addition, to further progress the project, Pembina expects to take additional steps which will require providing additional financial assurances. Total financial assurances up to$230 million
- Pembina and TC Energy Corporation ("TC Energy") have formed a partnership to develop the Alberta Carbon Grid ("ACG"), a carbon transportation and sequestration platform. ACG is developing the Industrial Heartland project, which will have the potential to transport and store up to ten million tonnes of carbon dioxide annually. ACG completed the appraisal well drilling, logging and testing in December 2023. Preliminary data was consistent with ACG’s storage capacity expectations and further work is underway to confirm the initial results. Throughout 2024, ACG will continue to progress commercial conversations, refine the project scope, and advance project engineering, including facility design and work on the pipeline routing.
Fourth Quarter 2023 Conference Call & Webcast
Pembina will host a conference call on Friday, February 23, 2024 at 8:00 a.m. MT (10:00 a.m. ET) for interested investors, analysts, brokers and media representatives to discuss results for the fourth quarter of 2023. The conference call dial-in numbers for
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:
https://events.q4inc.com/attendee/659522994 in your web browser. Shortly after the call, an audio archive will be posted on the website for a minimum of 90 days.
About Pembina
Pembina Pipeline Corporation is a leading energy transportation and midstream service provider that has served
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
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 "continue", "anticipate", "will", "expects", "estimate", "potential", "planned", "future", "outlook", "strategy", "protect", "plan", "commit", "maintain", "focus", "ongoing", "believe" and similar expressions suggesting future events or future performance.
In particular, this news release contains forward-looking statements, including certain financial outlooks, pertaining to, without limitation, the following: future pipeline, processing, fractionation and storage facility and system operations and throughput levels; Pembina's strategy and the development of new business initiatives and growth opportunities, including the anticipated benefits therefrom and the expected timing thereof; expectations about industry activities and development opportunities, as well as the anticipated benefits thereof, including operating segment and general market conditions outlooks and industry developments for 2024 and thereafter; expectations about future demand for Pembina's infrastructure and services, including expectations in respect of customer contracts, future volume growth in the WCSB, increased utilization and future tolls and volumes; expectations relating to the development and anticipated benefits of Pembina's new projects and developments, including the Phase VIII Peace Pipeline expansion, Cedar LNG, RFS IV, ACG, the NEBC MPS Expansion, the Wapiti Expansion and the K3 Cogeneration Facility, including the timing thereof; expectations relating to the development and anticipated benefits of the Path2Zero Project, including the timing thereof; the Alliance/Aux Sable Acquisition, including the timing and anticipated benefits thereof; Pembina's previously announced 2024 adjusted EBITDA guidance range, and future revisions thereto; Pembina's future common share dividends, including the timing, amount and expected tax treatment thereof; planning, construction, locations, capital expenditure estimates, schedules, regulatory and environmental applications and anticipated approvals, expected capacity, incremental volumes, contractual arrangements, completion and in-service dates, rights, sources of product, activities, benefits and operations with respect to new construction of, repairs to or expansions on existing pipelines, systems, gas services facilities, processing and fractionation facilities, terminalling, storage and hub facilities and other facilities or energy infrastructure, as well as the impact of Pembina's new projects on its future financial performance and stakeholders; expectations regarding Pembina's financial strength and condition; expectations regarding Pembina's commercial agreements, including the expected timing and benefit thereof; statements and expectations related to Pembina's commitment to, and the effectiveness and impact of, its sustainability goals and targets; and the impact of current and expected market conditions on Pembina.
The forward-looking statements are based on certain factors and assumptions that Pembina has made in respect thereof as at the date of this news release regarding, among other things: oil and gas industry exploration and development activity levels and the geographic region of such activity; the success of Pembina's operations; prevailing commodity prices, interest rates, carbon prices, tax rates, exchange rates and inflation rates; the ability of Pembina to maintain current credit ratings; the availability and cost of capital to fund future capital requirements relating to existing assets, projects and the repayment or refinancing of existing debt as it becomes due; future operating costs; geotechnical and integrity costs; that any third-party projects relating to Pembina's growth projects will be sanctioned and completed as expected; the satisfaction of the conditions to closing of the Alliance/Aux Sable Acquisition in a timely manner, including receipt of all necessary approvals; that the Alliance/Aux Sable Acquisition will be completed on terms consistent with management's current expectations; assumptions with respect to our intention to complete share repurchases, including the funding thereof, existing and future market conditions, including with respect to Pembina's common share trading price, and compliance with respect to applicable securities laws and regulations and stock exchange policies; that any required commercial agreements can be reached in the manner and on the terms expected by Pembina; that all required regulatory and environmental approvals can be obtained on the necessary terms and 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 the relevant projects; prevailing regulatory, tax and environmental laws and regulations; maintenance of operating margins; the amount of future liabilities relating to lawsuits and environmental incidents; and the availability of coverage under Pembina's insurance policies (including in respect of Pembina's business interruption insurance policy).
Although Pembina believes the expectations and material factors and assumptions reflected in these forward-looking statements are reasonable as of the date hereof, there can be no assurance that these expectations, factors and assumptions will prove to be correct. 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; reliance on key relationships, joint venture partners and agreements; labour and material shortages; 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, changes in regulatory processes or increased environmental regulation; the ability of Pembina to acquire or develop the necessary infrastructure in respect of future development projects; the ability of Pembina and Enbridge to receive all necessary regulatory approvals and satisfy all other necessary conditions to closing of the Alliance/Aux Sable Acquisition on a timely basis or at all; Pembina's ability to realize the anticipated benefits of the Alliance/Aux Sable Acquisition; fluctuations in operating results; adverse general economic and market conditions, including potential recessions in
This list of risk factors should not be construed as exhaustive. Readers are cautioned that events or circumstances could cause results to differ materially from those predicted, forecasted or projected by forward-looking statements contained herein. The forward-looking statements contained in this news release speak only as of the date of this news release. 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. Management approved the 2024 adjusted EBITDA guidance contained herein on December 11, 2023. The purpose of the 2024 adjusted EBITDA guidance is to assist readers in understanding Pembina's expected and targeted financial results, and this information may not be appropriate for other purposes. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
Non-GAAP and Other Financial Measures
Throughout this news release, Pembina has disclosed certain financial measures and ratios that are not specified, defined or determined in accordance with GAAP and which are not disclosed in Pembina's financial statements. Non-GAAP financial measures either exclude an amount that is included in, or include an amount that is excluded from, the composition of the most directly comparable financial measure specified, defined and determined in accordance with GAAP. Non-GAAP ratios are financial measures that are in the form of a ratio, fraction, percentage or similar representation that has a non-GAAP financial measure as one or more of its components. These non-GAAP financial measures and non-GAAP ratios, together with financial measures and ratios specified, defined and determined in accordance with GAAP, are used by management to evaluate the performance and cash flows of Pembina and its businesses and to provide additional useful information respecting Pembina's financial performance and cash flows to investors and analysts.
In this news release, Pembina has disclosed the following non-GAAP financial measures and non-GAAP ratios: net revenue, adjusted EBITDA, adjusted EBITDA from equity accounted investees, adjusted EBITDA per common share, adjusted cash flow from operating activities, adjusted cash flow from operating activities per common share, and proportionately consolidated debt-to-adjusted EBITDA. The non-GAAP financial measures and non-GAAP ratios disclosed in this news release do not have any standardized meaning under International Financial Reporting Standards ("IFRS") and may not be comparable to similar financial measures or ratios disclosed by other issuers. Such financial measures and ratios should not, therefore, be considered in isolation or as a substitute for, or superior to, measures and ratios of Pembina's financial performance, or cash flows specified, defined or determined in accordance with IFRS, including revenue, earnings, cash flow from operating activities and cash flow from operating activities per share.
Except as otherwise described herein, these non-GAAP financial measures and non-GAAP ratios are calculated on a consistent basis from period to period. Specific reconciling items may only be relevant in certain periods.
Below is a description of each non-GAAP financial measure and non-GAAP ratio disclosed in this news release, together with, as applicable, disclosure of the most directly comparable financial measure that is determined in accordance with GAAP to which each non-GAAP financial measure relates and a quantitative reconciliation of each non-GAAP financial measure to such directly comparable GAAP financial measure. Additional information relating to such non-GAAP financial measures and non-GAAP ratios, including disclosure of the composition of each non-GAAP financial measure and non-GAAP ratio, an explanation of how each non-GAAP financial measure and non-GAAP ratio provides useful information to investors and the additional purposes, if any, for which management uses each non-GAAP financial measure and non-GAAP ratio; an explanation of the reason for any change in the label or composition of each non-GAAP financial measure and non-GAAP ratio from what was previously disclosed; and a description of any significant difference between forward-looking non-GAAP financial measures and the equivalent historical non-GAAP financial measures, is contained in the "Non-GAAP & Other Financial Measures" section of the management's discussion and analysis of Pembina dated February 22, 2024 for the year ended December 31, 2023 (the "MD&A"), which information is incorporated by reference in this news release. The MD&A is available on SEDAR+ at www.sedarplus.ca, EDGAR at www.sec.gov and Pembina's website at www.pembina.com.
Net Revenue
Net revenue is a non-GAAP financial measure which is defined as total revenue less cost of goods sold including product purchases. The most directly comparable financial measure to net revenue that is determined in accordance with GAAP and disclosed in Pembina's financial statements is revenue.
3 Months Ended December 31 |
Pipelines |
Facilities |
Marketing & New Ventures |
Corporate & Inter-segment Eliminations |
Total |
|||||
($ millions) |
||||||||||
|
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
Revenue |
737 |
686 |
248 |
237 |
1,660 |
1,921 |
(179) |
(145) |
2,466 |
2,699 |
Cost of goods sold, including product purchases |
11 |
— |
— |
— |
1,476 |
1,734 |
(138) |
(78) |
1,349 |
1,656 |
Net revenue |
726 |
686 |
248 |
237 |
184 |
187 |
(41) |
(67) |
1,117 |
1,043 |
12 Months Ended December 31 |
Pipelines |
Facilities |
Marketing & New Ventures |
Corporate & Inter-segment Eliminations |
Total |
|||||
($ millions) |
||||||||||
|
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
Revenue |
2,707 |
2,508 |
909 |
1,268 |
6,087 |
8,471 |
(578) |
(636) |
9,125 |
11,611 |
Cost of goods sold, including product purchases |
17 |
— |
— |
6 |
5,509 |
7,682 |
(395) |
(324) |
5,131 |
7,364 |
Net revenue |
2,690 |
2,508 |
909 |
1,262 |
578 |
789 |
(183) |
(312) |
3,994 |
4,247 |
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
Adjusted EBITDA is a non-GAAP financial measure and is calculated as earnings before net finance costs, income taxes, depreciation and amortization (included in operations and general and administrative expense) and unrealized gains or losses on commodity-related derivative financial instruments. The exclusion of unrealized gains or losses on commodity-related derivative financial instruments eliminates the non-cash impact of such gains or losses.
Adjusted EBITDA also includes adjustments to earnings for losses (gains) on disposal of assets, transaction costs incurred in respect of acquisitions, dispositions and restructuring, impairment charges or reversals in respect of goodwill, intangible assets, investments in equity accounted investees and property, plant and equipment, certain non-cash provisions and other amounts not reflective of ongoing operations. These additional adjustments are made to exclude various non-cash and other items that are not reflective of ongoing operations.
The equivalent historical non-GAAP financial measure to 2024 adjusted EBITDA guidance is adjusted EBITDA for the year ended December 31, 2023.
Adjusted EBITDA per common share is a non-GAAP ratio which is calculated by dividing adjusted EBITDA by the weighted average number of common shares outstanding.
3 Months Ended December 31 |
Pipelines |
Facilities |
Marketing & New Ventures |
Corporate & Inter-segment Eliminations |
Total |
|||||
($ millions, except per share amounts) |
||||||||||
|
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
Earnings (loss) before income tax |
677 |
295 |
143 |
145 |
204 |
96 |
(209) |
(206) |
815 |
330 |
Adjustments to share of profit from equity accounted investees and other |
45 |
41 |
135 |
107 |
6 |
— |
— |
— |
186 |
148 |
Net finance cost |
6 |
6 |
3 |
(8) |
(4) |
6 |
111 |
109 |
116 |
113 |
Depreciation and amortization |
109 |
104 |
46 |
34 |
12 |
10 |
11 |
14 |
178 |
162 |
Unrealized (gain) loss on commodity-related derivative financial instruments |
— |
— |
— |
(2) |
(46) |
61 |
— |
— |
(46) |
59 |
Impairment reversal |
(231) |
— |
— |
— |
— |
— |
— |
— |
(231) |
— |
Gain on disposal of assets, transaction costs incurred in respect of acquisitions and non-cash provisions |
11 |
102 |
(3) |
12 |
1 |
(2) |
6 |
1 |
15 |
113 |
Adjusted EBITDA |
617 |
548 |
324 |
288 |
173 |
171 |
(81) |
(82) |
1,033 |
925 |
Adjusted EBITDA per common share – basic (dollars) |
|
|
|
|
|
|
|
|
1.87 |
1.68 |
12 Months Ended December 31 |
Pipelines |
Facilities |
Marketing & New Ventures |
Corporate & Inter-segment Eliminations |
Total |
|||||
($ millions, except per share amounts) |
||||||||||
|
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
Earnings (loss) before income tax |
1,840 |
1,415 |
610 |
1,804 |
435 |
708 |
(696) |
(708) |
2,189 |
3,219 |
Adjustments to share of profit from equity accounted investees and other |
172 |
172 |
438 |
271 |
84 |
25 |
— |
— |
694 |
468 |
Net finance costs |
28 |
28 |
9 |
13 |
4 |
27 |
425 |
418 |
466 |
486 |
Depreciation and amortization |
414 |
396 |
159 |
196 |
46 |
44 |
44 |
47 |
663 |
683 |
Unrealized loss (gain) on commodity-related derivative financial instruments |
— |
— |
— |
(50) |
32 |
(83) |
— |
— |
32 |
(133) |
Gain on PGI Transaction |
— |
— |
— |
(1,110) |
— |
— |
— |
— |
— |
(1,110) |
Impairment reversal |
(231) |
— |
— |
— |
— |
— |
— |
— |
(231) |
— |
Transaction costs incurred in respect of acquisitions, transformation and restructuring costs, contract dispute settlement, gain on disposal of assets and non-cash provisions |
11 |
116 |
(3) |
13 |
(4) |
— |
7 |
4 |
11 |
133 |
Adjusted EBITDA |
2,234 |
2,127 |
1,213 |
1,137 |
597 |
721 |
(220) |
(239) |
3,824 |
3,746 |
Adjusted EBITDA per common share – basic (dollars) |
|
|
|
|
|
|
|
|
6.95 |
6.78 |
Adjusted EBITDA from Equity Accounted Investees
In accordance with IFRS, Pembina's jointly controlled investments are accounted for using equity accounting. Under equity accounting, the assets and liabilities of the investment are presented net in a single line item in the Consolidated Statement of Financial Position, "Investments in Equity Accounted Investees". Net earnings from investments in equity accounted investees are recognized in a single line item in the Consolidated Statement of Earnings and Comprehensive Income "Share of Profit from Equity Accounted Investees". The adjustments made to earnings, in adjusted EBITDA above, are also made to share of profit from investments in equity accounted investees. Cash contributions and distributions from investments in equity accounted investees represent Pembina's share paid and received in the period to and from the investments in equity accounted investees.
To assist in understanding and evaluating the performance of these investments, Pembina is supplementing the IFRS disclosure with non-GAAP proportionate consolidation of Pembina's interest in the investments in equity accounted investees. Pembina's proportionate interest in equity accounted investees has been included in adjusted EBITDA.
3 Months Ended December 31 |
Pipelines |
Facilities |
Marketing & New Ventures |
Total |
||||
($ millions) |
||||||||
|
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
Share of profit (loss) from equity accounted investees |
31 |
44 |
48 |
49 |
15 |
(14) |
94 |
79 |
Adjustments to share of profit from equity accounted investees: |
|
|
|
|
|
|
|
|
Net finance costs (income) |
7 |
5 |
84 |
37 |
— |
(1) |
91 |
41 |
Income tax (recovery) expense |
— |
— |
(13) |
13 |
— |
— |
(13) |
13 |
Depreciation and amortization |
38 |
36 |
60 |
39 |
6 |
7 |
104 |
82 |
Unrealized loss (gain) on commodity-related derivative financial instruments |
— |
— |
7 |
11 |
— |
(6) |
7 |
5 |
Transaction costs incurred in respect of acquisitions and non-cash provisions |
— |
— |
(3) |
7 |
— |
— |
(3) |
7 |
Total adjustments to share of profit from equity accounted investees |
45 |
41 |
135 |
107 |
6 |
— |
186 |
148 |
Adjusted EBITDA from equity accounted investees |
76 |
85 |
183 |
156 |
21 |
(14) |
280 |
227 |
12 Months Ended December 31 |
Pipelines |
Facilities |
Marketing & New Ventures |
Total |
||||
($ millions) |
||||||||
|
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
Share of profit (loss) from equity accounted investees |
109 |
171 |
233 |
108 |
(26) |
82 |
316 |
361 |
Adjustments to share of profit from equity accounted investees: |
|
|
|
|
|
|
|
|
Net finance costs |
22 |
23 |
160 |
79 |
1 |
— |
183 |
102 |
Income tax expense |
— |
— |
41 |
14 |
— |
— |
41 |
14 |
Depreciation and amortization |
150 |
149 |
207 |
138 |
25 |
25 |
382 |
312 |
Unrealized loss on commodity-related derivative financial instruments |
— |
— |
16 |
27 |
— |
— |
16 |
27 |
Transaction costs incurred in respect of acquisitions and non-cash provisions |
— |
— |
14 |
13 |
58 |
— |
72 |
13 |
Total adjustments to share of profit from equity accounted investees |
172 |
172 |
438 |
271 |
84 |
25 |
694 |
468 |
Adjusted EBITDA from equity accounted investees |
281 |
343 |
671 |
379 |
58 |
107 |
1,010 |
829 |
Adjusted Cash Flow from Operating Activities and Adjusted Cash Flow from Operating Activities per Common Share
Adjusted cash flow from operating activities is a non-GAAP financial measure which is defined as cash flow from operating activities adjusting for the change in non-cash operating working capital, adjusting for current tax and share-based compensation payment, and deducting preferred share dividends paid. Adjusted cash flow from operating activities deducts preferred share dividends paid because they are not attributable to common shareholders. The calculation has been modified to include current tax and share-based compensation payment as it allows management to better assess the obligations discussed below.
Management believes that adjusted cash flow from operating activities provides comparable information to investors for assessing financial performance during each reporting period. Management utilizes adjusted cash flow from operating activities to set objectives and as a key performance indicator of the Company's ability to meet interest obligations, dividend payments and other commitments.
Adjusted cash flow from operating activities per common share is a non-GAAP ratio which is calculated by dividing adjusted cash flow from operating activities by the weighted average number of common shares outstanding.
|
3 Months Ended
|
12 Months Ended December 31 |
||
($ millions, except per share amounts) |
2023 |
2022 |
2023 |
2022 |
Cash flow from operating activities |
880 |
947 |
2,635 |
2,929 |
Cash flow from operating activities per common share – basic (dollars) |
1.60 |
1.72 |
4.79 |
5.30 |
Add (deduct): |
|
|
|
|
Change in non-cash operating working capital |
(54) |
(220) |
210 |
(177) |
Current tax expense |
(54) |
18 |
(325) |
(227) |
Taxes paid, net of foreign exchange |
49 |
28 |
236 |
334 |
Accrued share-based payment expense |
(44) |
(51) |
(67) |
(117) |
Share-based compensation payment |
— |
— |
77 |
45 |
Preferred share dividends paid |
(30) |
(32) |
(120) |
(126) |
Adjusted cash flow from operating activities |
747 |
690 |
2,646 |
2,661 |
Adjusted cash flow from operating activities per common share – basic (dollars) |
1.36 |
1.25 |
4.81 |
4.82 |
Proportionately Consolidated Debt-to-Adjusted EBITDA
Proportionately Consolidated Debt-to-Adjusted EBITDA is a non-GAAP ratio that management believes is useful to investors and other users of Pembina’s financial information in the evaluation of the Company’s debt levels and creditworthiness.
As at December 31 |
|
|
($ millions, except as noted) |
2023 |
2022 |
Loans and borrowings (current) |
650 |
600 |
Loans and borrowings (non-current) |
9,253 |
9,405 |
Loans and borrowings of equity accounted investees |
2,805 |
3,366 |
Proportionately consolidated debt |
12,708 |
13,371 |
Adjusted EBITDA |
3,824 |
3,746 |
Proportionately consolidated debt-to-adjusted EBITDA (times) |
3.3 |
3.6 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240222955162/en/
Investor Relations
(403) 231-3156
1-855-880-7404
e-mail: investor-relations@pembina.com
www.pembina.com
Source: Pembina Pipeline Corporation
FAQ
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