Energy, Automobile, EV, Renewable News | Pembina Pipeline Corporation Reports Results for the Third Quarter 2024 and Updates Full Year Guidance

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

November 6, 2024

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.

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

Highlights

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

Financial and Operational Overview

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

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

Financial and Operational Overview by Division

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

⁽¹⁾		Volumes for the Pipelines and Facilities divisions are revenue volumes, which are physical volumes plus volumes recognized from take-or-pay commitments. Volumes are stated in mboe/d, with natural gas volumes converted to mboe/d from MMcf/d at a 6:1 ratio. Volumes for Marketing & New Ventures are marketed crude and NGL volumes.
⁽²⁾		Refer to “Non-GAAP and Other Financial Measures”.

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

Financial & Operational Highlights

Adjusted EBITDA

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

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

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

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

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

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

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

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

Earnings

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

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

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

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

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

Cash Flow From Operating Activities

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

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

Adjusted Cash Flow From Operating Activities

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

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

Volumes

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

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

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

Executive Overview

Following solid third quarter results, and based on the outlook for the remainder of 2024, Pembina is poised to deliver a record financial year reflecting the positive impact of recent acquisitions, growing volumes in the Western Canadian Sedimentary Basin (“WCSB”), and a strong contribution from the marketing business.

Pembina has narrowed its 2024 adjusted EBITDA guidance range to $4.225 billion to $4.325 billion (previously $4.2 billion to $4.35 billion). Pembina is currently trending towards the mid-point of the guidance range based on prevailing forward commodity prices and the outlook for fourth quarter volumes.

Year-to-date, conventional pipeline volumes have been modestly impacted by various Pembina and third-party outages and lower than expected interruptible volumes on certain systems, leading to slightly lower volume growth in 2024 than originally anticipated. However, the broader outlook for growth in the WCSB, and Pembina’s business, remains strong and the revised guidance is based on an expectation for the fourth quarter of higher interruptible volumes on certain systems and the impact of new contracts.

At September 30, 2024, the ratio of proportionately consolidated debt-to-adjusted EBITDA on a trailing twelve-month basis was 3.6 times, at the low end of the Company’s targeted range, and reflecting only two quarters of contribution from the Alliance/Aux Sable Acquisition. Pembina expects to exit the year with a ratio of 3.4 to 3.6 times.

Other highlights during, and subsequent to, the third quarter included:

Aux Sable Transaction

As previously announced, effective August 1, 2024, Pembina acquired a 14.6 percent interest in Aux Sable’s U.S. operations from certain subsidiaries of The Williams Companies, Inc. The Company is pleased to have fully consolidated ownership of all Aux Sable assets, thereby further simplifying corporate reporting and enhancing its ability to pursue long-term synergies.

PGI Transactions

As previously announced, during the quarter, PGI, jointly owned by Pembina and KKR, entered into two exciting transactions with growth-focused companies operating in the Montney and Duvernay.

The first was the $420 million (gross) Whitecap Transaction that included the acquisition of a 50 percent interest in Whitecap’s Kaybob Complex and an obligation to fund future Lator area infrastructure development. Closing of the Whitecap Transaction is pending final regulatory approval.

In the second transaction, PGI entered into agreements with Veren that include the $400 million (gross) acquisition of Veren’s Gold Creek and Karr area oil batteries and support for future infrastructure development. We are pleased to have closed this transaction, effective October 9, 2024, and look forward to growing alongside Veren in the years to come. Subsequent to the third quarter, further to the agreement with Veren, and PGI’s commitment to fund up to $300 million of future infrastructure, PGI and Veren are progressing a new battery and associated pipelines, representing more than half of the funding commitment.

Through these two transactions, we are realizing the vision set forth with the creation of PGI in 2022. PGI and Pembina have a compelling service offering and ability to provide tailored and value-added solutions to support the specific needs of our customers. PGI and Pembina have further aligned themselves with two strong growth companies, creating opportunities with attractive economics that are expected to enhance asset utilization, capture future volumes, and benefit Pembina’s full value chain.

Cedar LNG

Following the positive final investment decision last quarter with respect to the Cedar LNG Project, we reached an exciting early milestone with the start of the on-shore construction activities, including site clearing and other civil works. Detailed engineering is underway on the floating liquefied natural gas (“FLNG”) facility, with the EPC contractor reporting that progress on that workstream is on track. We are looking forward to the start of construction of the FLNG facility in mid-2025.

The process to assign Pembina’s capacity in Cedar LNG to a third party is ongoing. This represents the only capacity currently available for contracting from a sanctioned west coast LNG project, and as such, there is broad interest in the capacity. As a function of the interest from multiple counterparties, Pembina expects this process to extend into 2025.

Pembina occupies a strong and unique position within the Canadian energy industry. The Company’s extensive asset base and integrated value chain allow it to provide a full suite of transportation and midstream services across multiple hydrocarbons – natural gas, crude oil, condensate, and NGL. In combination with a strong financial position and fully funded business model, Pembina is positioned to benefit from a robust, multi-year growth outlook for the WCSB. This growth is being driven by transformational developments that include the recent completion of the Trans Mountain Pipeline expansion, new West Coast liquefied natural gas (“LNG”) and NGL export capacity, and the development of new petrochemical facilities creating significant demand for ethane and propane. Throughout the remainder of 2024 and into 2025, Pembina is focused on capitalizing on the opportunities arising from this growth and delivering long-term and sustainable value to our shareholders.

Projects and New Developments

Pipelines

The ongoing 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 will fulfill customer demand in light of growing production volumes from northeastern British Columbia (“NEBC”) and previously announced long-term midstream service agreements with three premier NEBC Montney producers. Terminal upgrades and additional storage were completed in October and the mid-point pump station is expected to be completed by the end of 2024. The NEBC MPS Expansion is trending on time and under the $90 million budget, adding to Pembina’s record of strong project execution.

On April 23, 2024, Pembina filed its project application for the Taylor to Gordondale Project (an expansion of the Pouce Coupe system) with the Canada Energy Regulator (“CER”). The CER has determined the application is complete and can proceed to the assessment phase of the regulatory process.

Pembina continues to advance further expansions to support volume growth in NEBC, including new pipelines and terminal upgrades.

Facilities

Pembina is constructing a new 55,000 bpd propane-plus fractionator (“RFS IV”) at its existing Redwater Complex. RFS IV will leverage the design, engineering and operating best practices of the existing facilities at the Redwater Complex. The project includes additional rail loading capacity at the Redwater Complex. With the addition of RFS IV, the fractionation capacity at the Redwater Complex will total 256,000 bpd.

As previously announced, the estimated project cost has been revised to $525 million (previously $460 million), reflecting project scope changes as well as higher equipment, material and labour costs in light of Alberta construction activity. Pembina has entered into a lump-sum engineering, procurement and construction agreement for more than 70 percent of the project cost. Site clearing activities have been completed, engineering and procurement activities and site construction continued in the third quarter of 2024. RFS IV is expected to be in-service in the first half of 2026, subject to regulatory and environmental approvals.

PGI is developing 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 is 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 $230 million ($140 million net to Pembina) with an estimated in-service date in the first half of 2026, subject to regulatory and environmental approval. All permits necessary to begin construction have been received.

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 net to Pembina). The K3 Cogeneration Facility is expected to reduce overall operating costs by providing power and heat to the gas processing facility, while reducing customers’ exposure to power prices. The K3 Cogeneration Facility is expected to fully supply the K3 Plant’s power requirements, with excess power sold to the grid at market rates. Further, through the utilization of the cogeneration waste heat and the low-emission power generated, the K3 Cogeneration Facility is expected to contribute to a reduction in annual emissions compliance costs at the K3 Plant. The K3 Cogeneration Facility is expected to be in-service in the first half of 2026, subject to regulatory and environmental approvals. The project is trending on time and on budget.

Marketing & New Ventures