Pembina Pipeline Corporation Reports Results for the Fourth Quarter and Full Year 2022, Provides Business Update, and Declares Quarterly Common Share Dividend

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, Alberta–(BUSINESS WIRE)–Pembina Pipeline Corporation (“Pembina” or the “Company”) (TSX: PPL; NYSE: PBA) announced today its financial and operating results for the fourth quarter and full year 2022.

Highlights

• Record Results – reported record 2022 full year earnings of $2,971 million and record full year adjusted EBITDA of $3,746 million, exceeding the high end of the Company’s revised guidance range. Reported fourth quarter earnings of $243 million and fourth quarter adjusted EBITDA of $925 million.

• Redwater Expansion – sanctioned a $460 million expansion at its Redwater Complex to service growing customer demand and high utilization rates across the industry.

• Strategy – Pembina outlines a renewed long-term strategy that continues to build upon its core business while capitalizing on opportunities arising from the transition to a lower-carbon economy.

• Board of Directors Appointment – Mr. Andy Mah has been selected by the board of directors to join the board effective February 24, 2023.

• Quarterly Common Share Dividend – the board of directors has declared a common share cash dividend for the first quarter of 2023 of $0.6525 per share to be paid, subject to applicable law, on March 31, 2023, to shareholders of record on March 15, 2023.

Financial and Operational Overview

	3 Months Ended December 31		12 Months Ended December 31
($ millions, except where noted)	2022	2021	2022	2021
Revenue	2,699	2,560	11,611	8,627
Net revenue(1)	1,043	1,084	4,247	3,938
Gross profit	681	785	3,123	2,647
Earnings	243	80	2,971	1,242
Earnings per common share – basic (dollars)	0.39	0.08	5.14	2.00
Earnings per common share – diluted (dollars)	0.39	0.08	5.12	1.99
Cash flow from operating activities	947	697	2,929	2,650
Cash flow from operating activities per common share – basic (dollars)	1.72	1.27	5.30	4.82
Adjusted cash flow from operating activities(1)	690	734	2,661	2,640
Adjusted cash flow from operating activities per common share – basic (dollars)(1)	1.25	1.33	4.82	4.80
Common share dividends declared	359	346	1,409	1,386
Dividends per common share (dollars)	0.65	0.63	2.55	2.52
Capital expenditures	143	176	605	658
Total volumes (mboe/d)(2)	3,392	3,437	3,383	3,456
Adjusted EBITDA(1)	925	970	3,746	3,433

(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.

Financial and Operational Overview by Division

		3 Months Ended December 31												12 Months Ended December 31
		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		2,593		295		548		2,571		(70)		548		2,524		1,415		2,127		2,586		917		2,102
Facilities		799		145		288		866		164		285		859		1,804		1,137		870		732		1,097
Marketing & New Ventures(3)		—		96		171		—		220		183		—		708		721		—		374		420
Corporate		—		(206)		(82)		—		(181)		(46)		—		(708)		(239)		—		(358)		(186)
Total		3,392		330		925		3,437		133		970		3,383		3,219		3,746		3,456		1,665		3,433

(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)		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 23, 2023 for the year ended December 31, 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, 2022 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

Pembina reported fourth quarter adjusted EBITDA of $925 million and record full year adjusted EBITDA of $3,746 million. This represents a $45 million or five percent decrease, and a $313 million or nine percent increase, respectively, over the same periods in the prior year.

For both the fourth quarter and full year, adjusted EBITDA was positively impacted by higher volumes on the Peace Pipeline system and Cochin Pipeline; higher tolls due to inflation; the joint venture transaction to create Pembina Gas Infrastructure Inc. (“PGI”) (the “PGI Transaction”); and stronger performance from certain gas processing assets, including the Hythe Gas Plant, the Dawson Assets, the Cutbank Complex, and the Resthaven Facility. Both periods were negatively impacted by a lower contribution from Ruby and higher integrity costs.

Fourth quarter adjusted EBITDA was also negatively impacted by lower margins on NGL sales, partially offset by higher margins on crude oil sales; a lower contribution from Aux Sable; lower revenue related to recoverable costs on the Horizon Pipeline system; and higher general and administrative expense, largely due to higher long-term incentive costs driven by the change in Pembina’s share price and its share price performance relative to a peer group, combined with higher consulting fees. The fourth quarter was positively impacted by a realized gain on commodity-related derivatives, compared to a loss in the fourth quarter of 2021, and the impact of a higher U.S. dollar exchange rate.

Full year adjusted EBITDA was also positively impacted by higher margins on crude oil and natural gas sales, partially offset by lower margins on NGL sales; lower realized losses on commodity-related derivatives; and higher contributions from Alliance and Aux Sable. The full year was negatively impacted by higher general and administrative expense, largely due to higher long-term incentive costs as described above, as well as higher consulting fees, salaries and wages, and legal fees. The full year was also negatively impacted by lower contracted volumes on the Nipisi and Mitsue Pipeline systems.

Earnings

Pembina reported fourth quarter earnings of $243 million and full year earnings of $2,971 million. This represents a $163 million or 204 percent increase, and a $1,729 million or 139 percent increase, respectively, over the same periods in the prior year.

In the fourth quarter, in addition to the factors impacting adjusted EBITDA, as noted above, earnings were positively impacted by lower impairment expense, lower restructuring costs, and a higher unrealized gain on commodity-related derivatives. These factors were partially offset by a Ruby Pipeline settlement provision.

For the full year, in addition to the factors impacting adjusted EBITDA, as noted above, earnings were positively impacted by the recognized $1.1 billion gain on the PGI Transaction compared to the receipt of the $350 million termination fee associated with Pembina’s proposed acquisition of Inter Pipeline Ltd. in 2021, net of related tax and associated expenses; a higher unrealized gain on commodity-related derivatives; lower impairment expense; and lower income tax expense, primarily as a result of the PGI Transaction, net of a deferred tax recovery related to prior year impairments. These factors were partially offset by increased finance costs due to foreign exchange losses compared to gains in 2021, higher interest on long-term debt, and lower interest income.

Cash Flow From Operating Activities

Cash flow from operating activities of $947 million for the fourth quarter and $2,929 million for the full year represent an increase of 36 percent and 11 percent, respectively, over the same periods in the prior year.

The increase in the fourth quarter was primarily driven by an increase in the change in non-cash working capital, higher distributions from equity accounted investees, and a decrease in taxes paid, partially offset by lower operating results and an increase in net interest paid.

The full year increase was primarily driven by an increase in the change in non-cash working capital, higher distributions from equity accounted investees, higher operating results net of the $350 million Arrangement Termination Payment received in the third quarter of 2021, and a decrease in taxes paid, partially offset by an increase in net interest paid and share-based compensation payments.

On a per share (basic) basis, cash flow from operating activities was $1.72 per share for the fourth quarter and $5.30 per share for the full year. This represents increases of 35 percent and 10 percent, respectively, compared to the same periods in the prior year.

Adjusted Cash Flow From Operating Activities

Fourth quarter and full year adjusted cash flow from operating activities of $690 million and $2,661 million, represent a six percent decrease and one percent increase, respectively, over the same periods in the prior year.

The fourth quarter decrease was largely due to lower operating results and an increase in accrued share-based payments, partially offset by higher distributions from equity accounted investees and lower current tax expense.

The full year increase was primarily due to the same items impacting cash flow from operating activities, discussed above, net of the change in non-cash working capital, taxes paid, and share-based compensation payments, combined with lower current tax expense and preferred share dividends paid, largely offset by an increase in accrued share-based payments.

On a per share (basic) basis, adjusted cash flow from operating activities was $1.25 per share for the fourth quarter and $4.82 per share for the full year. This represents a decrease of six percent and an increase of less than one percent, respectively, compared to the same periods in the prior year.

Volumes

Total volumes of 3,392 mboe/d for the fourth quarter and 3,383 mboe/d for the full year represent decreases of approximately one percent and two percent, respectively, over the same periods in the prior year. In both periods, volume decreases were attributable to both the Pipelines and Facilities divisions, including most notably the Nipisi and Mitsue pipeline system, the Ruby Pipeline, and the disposition of the E1 and E6 assets, as described below. Divisional volumes are discussed in further detail below.

Excluding the volume impact of the Nipisi and Mitsue pipelines, the disposition of the E1 and E6 assets, and the Ruby Pipeline fourth quarter and full year volumes would have increased approximately four percent and three percent, respectively, over the same periods in the prior year.

Divisional Highlights

• Pipelines reported adjusted EBITDA of $548 million for the fourth quarter, and $2,127 million for the full year 2022, which represent no change and a one percent increase, respectively, compared to the same periods in the prior year. Both periods were positively impacted by higher volumes on the Peace Pipeline and the Cochin Pipeline, higher tolls due to inflation, and the impact of the higher U.S. dollar exchange rate. Both periods were negatively impacted by a lower contribution from Ruby, higher general and administrative expense due to long-term incentives, and higher integrity costs. In addition, the fourth quarter was negatively impacted by lower revenue related to recoverable costs on the Horizon Pipeline system. The full year was also positively impacted by higher contributions from Alliance and negatively impacted by the expiration of contracts on the Nipisi and Mitsue Pipeline systems.

  Pipelines had fourth quarter reportable segment earnings before tax of $295 million compared to a loss of $70 million in the same period in the prior year. For the full year, Pipelines had reportable segment earnings before tax of $1,415 compared to $917 million in the same period in the prior year. In addition to the factors impacting adjusted EBITDA, as noted above, excluding the lower contribution from Ruby, the increase in both periods was largely due to a $437 million impairment recognized in the fourth quarter of 2021 associated with certain oil sands assets, partially offset by the Ruby settlement provision recognized in the fourth quarter of 2022. In addition, the full year was impacted by lower depreciation expense and higher legal costs.

  Pipelines volumes of 2,593 mboe/d in the fourth quarter and 2,524 mboe/d for the full year, represent a one percent increase and a two percent decrease, respectively, compared to the same periods in the prior year. Volumes for both the fourth quarter and full year were impacted by higher volumes on the Peace Pipeline system and Cochin Pipeline, partially offset by lower volumes on the Ruby Pipeline. In addition, the fourth quarter was positively impacted by higher recognition of deferred take-or-pay revenue volumes in the fourth quarter of 2022 compared to the prior period and higher volumes on AEGS due to third-party outages and planned turnarounds in the fourth quarter of 2021. The full year was also impacted by contract expirations on the Nipisi and Mitsue Pipeline systems, and higher volumes on the Drayton Valley Pipeline.

  Excluding the volume impact of the Nipisi and Mitsue pipeline systems and Ruby Pipeline, fourth quarter and full year Pipelines volumes would have increased approximately four percent and three percent, respectively, over the same periods in the prior year.

• Facilities reported adjusted EBITDA of $288 million for the fourth quarter and $1,137 million for the full year, which represent a one percent and four percent increase, respectively, over the same periods in the prior year.

  Both periods were positively impacted by the PGI Transaction and stronger performance from certain gas processing assets, including the Hythe Gas Plant, the Dawson Assets, the Cutbank Complex and the Resthaven Facility. In addition, full year adjusted EBITDA benefited from higher realized gains on commodity-related derivatives, partially offset by higher integrity costs.

  Facilities had reportable segment earnings before tax of $145 million for the fourth quarter and $1,804 million for the full year, representing a decrease of 12 percent and an increase of 146 percent, respectively, over the same periods in the prior year. In addition to the factors impacting adjusted EBITDA, as noted above, both periods were positively impacted by higher unrealized gains on commodity-related derivatives. In addition, in the fourth quarter, the positive impacts captured in the adjusted EBITDA from PGI were offset by interest expense on long-term debt, income tax expense, and depreciation resulting from the PGI assets recorded at fair value, and an unrealized loss on commodity-related derivatives, which are all included in share of profit from PGI following the PGI Transaction. Full year segment earnings before tax were positively impacted by the $1.1 billion gain recognized on the PGI Transaction in the third quarter of 2022, and lower impairments recognized in 2022 compared to the prior year.

  Facilities volumes of 799 mboe/d in the fourth quarter and 859 mboe/d for the full year, represent decreases of eight percent and one percent, respectively, compared to the same periods in the prior year. The quarterly and full year decreases were primarily due to the disposition of Pembina’s interest in the E1 and E6 assets at Empress, as described further below, partially offset by the impact of the PGI Transaction, higher volumes at the Hythe Gas Plant and Dawson Assets, and higher volumes at the Younger facility. The fourth quarter was also impacted by higher volumes at the Redwater Complex due to a third-party outage in the fourth quarter of 2021. Excluding the impact of the disposition of Pembina’s interest in the E1 and E6 assets, fourth quarter and full year Facilities volumes would have increased by five percent and two percent, respectively, compared to the same periods in the prior year.

• Marketing & New Ventures reported adjusted EBITDA of $171 million for the fourth quarter and $721 million for the full year, which represent a seven percent decrease and a 72 percent increase, respectively, compared to the same periods in the prior year. The fourth quarter was negatively impacted by a lower contribution from Aux Sable; lower margins on NGL sales, partially offset by higher margins on crude oil sales; and a realized gain on commodity-related derivatives, compared to a loss in the prior period. The full year was positively impacted by higher margins on crude oil and natural gas sales and a higher contribution from Aux Sable, partially offset by lower margins on NGL sales and lower realized losses on commodity-related derivatives.

  Marketing & New Ventures had reportable segment earnings before tax of $96 million for the fourth quarter and $708 million for the full year, representing a decrease of 56 percent and an increase of 89 percent, respectively, over the same periods in the prior year. In addition to the factors impacting adjusted EBITDA, as noted above, the fourth quarter was impacted by an unrealized loss on commodity-related derivatives compared to a gain in the prior period. The full year was impacted by a higher unrealized gain on commodity-related derivatives and higher net finance costs related to foreign exchange losses in the period compared to gains in 2021.

  Marketed NGL volumes of 193 mboe/d in the fourth quarter and 190 mboe/d for the full year, represent no change compared to the same periods 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 2023 of $0.6525 per share to be paid, subject to applicable law, on March 31, 2023, to shareholders of record on March 15, 2023. The common share dividends are designated as “eligible dividends” for Canadian income tax purposes. For non-resident shareholders, Pembina’s common share dividends should be considered “qualified dividends” and may be subject to Canadian withholding tax.

For shareholders receiving their common share dividends in U.S. funds, the cash dividend is expected to be approximately U.S. $0.4818 per share (before deduction of any applicable Canadian withholding tax) based on a currency exchange rate of 0.7384. The actual U.S. dollar dividend will depend on the Canadian/U.S. dollar exchange rate on the payment date and will be subject to applicable withholding taxes.

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.

Board of Directors Appointment

Pembina is pleased to announce that Mr. Andy Mah has been selected by the board of directors to join the board effective February 24, 2023.

Mr. Mah has over 40 years of experience in the oil and gas industry and was the Chief Executive Officer of Advantage Energy Ltd. (“Advantage”) from January 2009 until his retirement on December 31, 2021. Mr. Mah has developed and transformed corporations, led large successful capital investment programs and has completed numerous corporate and asset level mergers, acquisitions and divestments. He also energized excellence in operational, financial, safety and environmental performance throughout his career in multinational, intermediate and junior oil and gas companies. Prior to his career at Advantage, he held leadership positions at Ketch Resources Trust, Unocal Corporation, Northrock Resources Ltd., and BP Canada. Mr. Mah also serves on the board of Advantage.

“I am thrilled to welcome Andy to the board of directors and look forward to working with him. Given his extensive and relevant experience, he will make a meaningful contribution to the board and support Pembina’s continued success,” said Henry Sykes, Chair of the Board.

Executive Overview and Business Update

Strong 2022 Results

2022 was a record financial year with Pembina generating adjusted EBITDA of $3.746 billion, a nine percent increase over 2021, driven by growing volumes on key systems and a strong performance from the marketing business.

Benefiting from a post-COVID recovery and strong commodity prices, volumes on Pembina’s conventional pipeline systems, which generally serve as a good proxy for Pembina’s broader business and activity in the Western Canadian Sedimentary Basin (“WCSB”), were approximately six percent higher in 2022 than in 2021. As well, volumes on the Cochin Pipeline increased approximately nine percent over the prior year and the Alliance Pipeline was highly utilized given prevailing global energy supply/demand dynamics and the Chicago-AECO natural gas price differential.

Within the gas processing business, excluding the impact of changing ownership interests resulting from the PGI Transaction, Pembina benefited from stronger underlying performance throughout 2022 from a number of gas processing assets, including the Hythe Gas Plant, Dawson Assets, the Cutbank Complex, and the Resthaven Facility.

In the marketing business, Pembina benefited from a favorable crude oil price environment and certain price differentials, including a wider Chicago-AECO gas price differential and a wider condensate price differential between western Canada and the U.S. Gulf Coast.

Strong financial results allowed Pembina to generate substantial free cash flow, which was allocated to strengthening the balance sheet and returning capital to shareholders. In 2022, Pembina raised the common share dividend by 3.6 percent, reached its target to repurchase $350 million of common shares, redeemed $300 million of preferred shares, and reduced leverage to the low end of the target range.

Pembina Gas Infrastructure

A milestone achievement in 2022 was the creation of PGI. PGI brought together three complementary platforms to create a premier, highly competitive western Canadian gas processing entity with the ability to serve customers from north central Alberta to northeast British Columbia (“NEBC”) and to pursue future growth opportunities in a capital efficient manner.

Since closing the PGI transaction, integration activities have progressed well and operations have performed as expected, with no major interruptions to service. Commercially, we have successfully secured incremental volumes through fee-for-service, firm contracts with a number of existing customers at both the K3 and Wapiti facilities.

Contacts

Investor Relations

(403) 231-3156

1-855-880-7404

e-mail: investor-relations@pembina.com
www.pembina.com

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