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All financial figures are in Canadian dollars unless otherwise noted. This news release refers to certain financial measures and ratios that are not specified, defined or determined in accordance with Generally Accepted Accounting Principles ("GAAP"), including net revenue; adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA"); adjusted cash flow from operating activities; and adjusted cash flow from operating activities per common share. For more information see "Non-GAAP and Other Financial Measures" herein.
CALGARY, AB, Nov. 3, 2022 /PRNewswire/ - Pembina Pipeline Corporation ("Pembina" or the "Company") (TSX: PPL) (NYSE: PBA) announced today its financial and operating results for the third quarter 2022.
Highlights
Financial and Operational Overview
3 Months Ended September 30
9 Months Ended September 30
($ millions, except where noted)
2022
2021
2022
2021
Revenue
2,779
2,149
8,912
6,067
Net revenue (1)
1,030
961
3,204
2,854
Gross profit
874
682
2,442
1,862
Earnings
1,829
588
2,728
1,162
Earnings per common share – basic (dollars)
3.24
1.01
4.75
1.92
Earnings per common share – diluted (dollars)
3.23
1.01
4.73
1.91
Cash flow from operating activities
767
913
2,026
1,953
Cash flow from operating activities per common share – basic (dollars)
1.38
1.66
3.66
3.55
Adjusted cash flow from operating activities (1)
574
786
1,957
1,906
Adjusted cash flow from operating activities per common share – basic (dollars)(1)
1.04
1.43
3.54
3.47
Common share dividends declared
354
347
1,050
1,040
Dividends per common share (dollars)
0.64
0.63
1.90
1.89
Capital expenditures
131
209
462
482
Total volumes (mboe/d) (2)
3,424
3,411
3,379
3,464
Adjusted EBITDA (1)
967
850
2,821
2,463
(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 September 30
9 Months Ended September 30
2022
2021
2022
2021
($ millions, except where noted)
Volumes(1)
Reportable Segment Earnings (Loss) Before Tax
Adjusted EBITDA(2)
Volumes(1)
Reportable Segment Earnings Before Tax
Adjusted EBITDA(2)
Volumes(1)
Reportable Segment Earnings (Loss) Before Tax
Adjusted
EBITDA(2)
Volumes(1)
Reportable Segment Earnings Before Tax
Adjusted
EBITDA(2)
Pipelines
2,531
377
535
2,563
329
503
2,500
1,120
1,579
2,592
987
1,554
Facilities
893
1,270
291
848
207
273
879
1,659
849
872
555
812
Marketing & New Ventures(3)
—
252
180
—
91
109
—
612
550
—
167
237
Corporate
—
(158)
(39)
—
154
(35)
—
(502)
(157)
—
(177)
(140)
Total
3,424
1,741
967
3,411
781
850
3,379
2,889
2,821
3,464
1,532
2,463
(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 November 3, 2022 for the three and nine months ended September 30, 2022 for further information.
For further details on the Company's significant assets, including definitions for capitalized terms used herein that are not otherwise defined, refer to Pembina's Annual Information Form for the year ended December 31, 2021 filed at www.sedar.com (filed with the U.S. Securities and Exchange Commission at www.sec.gov under Form 40-F) and on Pembina's website at www.pembina.com.
Financial & Operational Highlights
Adjusted EBITDA
Change in Third Quarter Adjusted EBITDA ($ millions)(1)
(1) Refer to "Non-GAAP and Other Financial Measures".
In the third quarter, Pembina reported adjusted EBITDA of $967 million, representing a $117 million, or 14 percent, increase over the same period in the prior year. Relative to the prior period, the third quarter was positively impacted by stronger marketing results due to higher margins on crude oil and natural gas sales and a higher share of profit from Aux Sable, partially offset by lower NGL margins as a result of lower propane prices and higher input natural gas prices; a combination of higher volumes on the Peace Pipeline system and higher inflation adjusted tolls; a higher contribution from Alliance Pipeline; a higher contribution from the PGI assets; and a lower realized loss on commodity-related derivatives. These positive factors were partially offset by a lower contribution from Ruby, due to Ruby Pipeline L.L.C. ("Ruby Pipeline") filing for bankruptcy protection on March 31, 2022, and higher integrity costs.
Earnings
Change in Third Quarter Earnings ($ millions)(1)(2)
(1)
Facilities results ex. commodity-related derivatives and Marketing & New Ventures results ex. commodity-related derivatives include gross profit less realized and unrealized losses on commodity-related derivative financial instruments.
(2)
Other includes general & administrative, net finance costs, other expenses and corporate.
Pembina recorded third quarter earnings of $1,829 million, representing a $1,241 million, or 211 percent, increase relative to the same period in the prior year. Relative to the prior period, in addition to the factors impacting adjusted EBITDA as noted above, excluding the impact of a lower contribution from Ruby, earnings in the third quarter were positively impacted by a $1.1 billion gain on the PGI Transaction (as defined below), lower income tax expense as a result of the PGI Transaction, and a higher unrealized gain on commodity-related derivatives related to NGL and crude oil marketing. Facilities results were negatively impacted by higher depreciation, interest expense, and an unrealized loss on commodity-related derivatives, which are all included in share of profit from PGI following the PGI Transaction. Further, relative to the prior period, earnings in the third quarter were lower given the $350 million received from the termination of the arrangement agreement with Inter Pipeline Ltd. (the "Arrangement Termination Payment") in the third quarter of 2021, partially offset by higher income tax on that payment.
Cash Flow From Operating Activities
Cash flow from operating activities of $767 million for the third quarter represents a decrease of $146 million, or 16 percent, over the same period in the prior year. The decrease was primarily driven by the $350 million Arrangement Termination Payment received in the third quarter of 2021, partially offset by changes in non-cash working capital, lower net interest paid, and an increase in distributions from equity accounted investees. On a per share (basic) basis, cash flow from operating activities decreased by 17 percent due to the same factors.
Adjusted Cash Flow From Operating Activities
Adjusted cash flow from operating activities of $574 million for the third quarter represents a $212 million, or 27 percent, decrease over the same period in the prior year. The decrease was due to the factors impacting cash flow from operating activities, discussed above, excluding the impact of the change in non-cash working capital, partially offset by lower current tax expense and a decrease in accrued share-based payment expense. On a per share (basic) basis, adjusted cash flow from operating activities decreased by 27 percent due to the same factors.
Volumes
Total volumes of 3,424 mboe/d for the third quarter were consistent with the 3,411 mboe/d for the same period in the prior year. As discussed in more detail below, within Pipelines, rising volumes on the conventional systems were offset by decreased volumes on other systems, most notably on the Nipisi and Mitsue pipelines and Ruby Pipeline. Within Facilities, increased volumes were primarily due to higher volumes at the Redwater Complex and at Younger due to less outage days during the third quarter of 2022. Excluding the volume impact of contract expirations on the Nipisi and Mitsue pipeline systems and Ruby Pipeline entering bankruptcy protection, third quarter volumes would have increased approximately five percent over the same period in the prior year.
Divisional Highlights
Executive Overview
The third quarter was highlighted by the closing of the transaction to create PGI with our partner KKR. PGI brings 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. The integration of PGI is underway and going well. Upon closing, we were delighted to welcome former Energy Transfer Canada employees to our team and to increase Pembina's common share dividend by $0.0075 per share per month, or 3.6 percent.
The synergistic combination of three adjacently located, high-quality processing platforms will enable efficiencies and an enhanced customer service offering, while providing a wider suite of commercial opportunities. Based on industry activity levels and discussions with customers, top-line revenue prospects are looking better than expected and the PGI team is working diligently to realize those benefits. We see tremendous opportunities to enhance utilization across PGI's suite of assets, providing incremental revenue with minimal additional operating or capital costs. Further, the creation of PGI offers improved taxability at Pembina, which is expected to be realized in 2023 and beyond.
Consistent with the first two quarters of 2022, solid third quarter results were once again driven by growing volumes on key systems and strong performance within the marketing business. Notably, this quarter Pembina benefited from a favorable crude oil price environment and certain price differentials, including a wider Chicago-AECO gas price differential and wider condensate price differential between Western Canada and the U.S. Gulf Coast.
Volumes on Pembina's conventional pipeline systems continue to grow and serve as a good proxy for Pembina's broader business and the Western Canadian Sedimentary Basin ("WCSB") in general. For the full year, we expect that volumes on the conventional pipelines will be approximately five percent higher than in 2021. As well, full year volumes on the Cochin Pipeline are expected to increase five percent over the prior year and the Alliance Pipeline continues to be very highly utilized given the Chicago-AECO gas price differential.
Pembina has raised its 2022 adjusted EBITDA guidance range to $3.625 to $3.725 billion (previously $3.575 to $3.675 billion). Relative to Pembina's previous guidance, the revised outlook for 2022 primarily reflects stronger year-to-date results, while incorporating our expectation of a lower contribution from the marketing business in the fourth quarter, relative to the third quarter, given the outlook for lower commodity prices and narrowing price differentials in the fourth quarter to date and implied by prevailing forward price curves.
Tremendous year-to-date results are allowing Pembina to generate substantial free cash flow, which is being allocated to strengthening the balance sheet and returning capital to shareholders. During the third quarter, we raised the dividend by 3.6 percent, repurchased $155 million of common shares towards our target of $350 million, and repaid $540 million of debt. Additional incremental free cash flow generated in 2022 and 2023 is expected to be used to pay down additional debt, further strengthening our balance sheet and preparing the Company to fund future capital projects. As well, with rising interest rates, Pembina is well positioned with a very manageable debt profile, including $600 million of maturities in 2023. Currently, approximately 97 percent of Pembina's senior debt has fixed rates with an average tenor of over 13 years and a modest weighted average interest rate of approximately four percent.
Given our industry-leading midstream footprint, Pembina is uniquely positioned within the WCSB to gain valuable insight into industry dynamics. In addition to the current volume growth we are seeing on key systems, we continue to observe significant positive momentum that we expect will ultimately result in producers sanctioning new developments leading to significant additional volume growth in the basin. This growth hinges in part on resolution of the negotiations between the Blueberry River First Nation and the Government of British Columbia and while the timing is uncertain, we continue to have a favourable outlook in that regard. While negotiations continue, we have been pleased to see permits recently being issued in NEBC, supporting 2023 drilling programs for some of our customers. In addition to developments in the NEBC Montney, recent industry consolidation has allowed certain operators to increase activity and future development plans in the Duvernay, high-grading their inventory and improving efficiencies. As well, activity in the Clearwater is growing rapidly, reflecting the highly economic nature of that oil play. Overall, we observe several positive developments underway in the basin leading to our high degree of optimism regarding future activity.
Amidst growing volumes today and into the future, Pembina continues to have success signing new long-term contracts. In addition to the previously disclosed commercial agreements recently signed with three leading NEBC producers, Pembina has successfully contracted incremental volumes on its conventional pipelines and its fractionation facilities, the latter reflective of the broader trend of increased utilization and tightening of capacity across the industry. Further, the recontracting success we have had during the first half of 2022 on the Alliance Pipeline continued into the third quarter, albeit for smaller volumes. Additionally, with rising activity in the Clearwater oil play we are exploring options to reactivate the Nipisi Pipeline and are in active discussions with various customers regarding long-term contractual commitments.
In combination, the quality of the WCSB resource, the financial strength and development plans of our producing customers, incremental egress from third-party projects under construction and the continued strength in commodity prices are presenting growth opportunities for Pembina. Over the next 12-24 months, a key area of focus will be growing cash flow by increasing utilization on our existing assets – gas plants, pipelines and fractionation facilities. This is highly accretive growth given the modest capital spending required. Beyond that, the medium-term opportunities include two exciting projects currently in the development stage. The first is Cedar LNG, a three million tonne per annum floating west coast LNG facility, discussed further below in Projects and New Developments. The second is an additional fractionator at our Redwater Complex, which we believe is necessary given rising utilization at our facilities and across the industry. We currently envision the next fractionator as a 55,000 barrel per day, propane-plus facility. Existing storage and extensive rail facilities, including unit train capability, provide Pembina an advantage in being able to offer incremental fractionation capacity at a competitive cost. Additionally, the recently signed commercial agreements with three leading NEBC producers could provide significant volumes to underpin the construction of a fourth fractionator. We continue to work towards a final investment decision.
Year-to-date financial results have been outstanding and we are on track to deliver another record financial year. At the same time, positive industry momentum is leading to contracting success and providing growth opportunities that will benefit Pembina and its stakeholders in the coming years.
Projects and New Developments
Pipelines
Facilities
Marketing & New Ventures
ESG
Subsequent to the quarter, Pembina released its 2021 Sustainability Report, which enhances disclosure in certain key areas and includes greater alignment with SASB and TCFD requirements. Notably, the 2021 Sustainability Report includes updates on:
The report is available at www.pembina.com/sustainability.
Financing Activity
Dividends
Third Quarter 2022 Conference Call & Webcast
Pembina will host a conference call on Friday, November 4, 2022, at 8:00 a.m. MT (10:00 a.m. ET) for interested investors, analysts, brokers and media representatives to discuss results for the third quarter of 2022. The conference call dial-in numbers for Canada and the U.S. are 1-416-764-8650 or 1-888-664-6383. A recording of the conference call will be available for replay until November 11, 2022, at 11:59 p.m. ET. To access the replay, please dial either 1-416-764-8677 or 1-888-390-0541 and enter the password 470415#.
A live webcast of the conference call can be accessed on Pembina's website at www.pembina.com under Investors / Presentation & Events, or by entering:
https://app.webinar.net/q0WB2o1eNYp 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 North America's energy industry for more than 65 years. Pembina owns an integrated network of hydrocarbon liquids and natural gas pipelines, gas gathering and processing facilities, oil and natural gas liquids infrastructure and logistics services, and a growing export terminals business. Through our integrated value chain, we seek to provide safe and reliable infrastructure solutions which connect producers and consumers of energy across the world, support a more sustainable future and benefit our customers, investors, employees and communities. For more information, please visit www.pembina.com.
Purpose of Pembina:
To be the leader in delivering integrated infrastructure solutions connecting global markets:
Pembina is structured into three Divisions: Pipelines Division, Facilities Division and Marketing & New Ventures Division.
Pembina's common shares trade on the Toronto and New York stock exchanges under PPL and PBA, respectively. For more information, visit www.pembina.com.
Forward-Looking Statements and Information
This document 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", "schedule", "will", "expects", "estimate", "potential", "planned", "future", "outlook", "strategy", "protect", "trend", "commit", "maintain", "focus", "ongoing", "believe" and similar expressions suggesting future events or future performance.
In particular, this document contains forward-looking statements, including certain financial outlooks, pertaining to, without limitation, the following: Pembina's corporate 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, including operating segment outlooks and general market conditions for 2022 and thereafter; outlooks for commodity prices and the effect thereof on the business of the Company; expectations about future demand for Pembina's infrastructure and services; expectations relating to new infrastructure projects, including the benefits therefrom and timing thereof; Pembina's revised 2022 annual guidance, including the Company's expectations regarding its adjusted EBITDA; the Company's anticipated use of free cash flow generated in 2022 and 2023; expectations relating to PGI, including the anticipated integration, performance, and benefits thereof to Pembina; Pembina's future common share dividends, including Pembina's intention to transition from a monthly to a quarterly common share dividend and the anticipated timing thereof; planning, construction and capital expenditure estimates, schedules and locations; expected capacity, incremental volumes, completion and in-service dates; rights, activities and operations with respect to the construction of, 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 growth projects on its future financial performance and stakeholders; expectations regarding Pembina's commercial agreements, including the expected timing and benefit thereof; statements regarding the Company's intention to repurchase common shares, including the timing and amounts thereof; the redemption by Pembina of its Cumulative Redeemable Minimum Rate Reset Class A Preferred Shares, Series 23, including the timing thereof; expectations, decisions and activities related to the Company's projects and new developments; outlooks pertaining to negotiations between the Blueberry River First Nation and the Government of British Columbia; the impact of current and expected market conditions on Pembina; expectations regarding the Company's ability to return capital to shareholders; and statements regarding the Company's capital allocation strategy, including the 2022 capital expenditure program and expected future cash flows.
The forward-looking statements are based on certain 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 and exchange rates; the ability of Pembina to maintain current credit ratings; the availability of capital to fund future capital requirements relating to existing assets and projects; future operating costs; geotechnical and integrity costs; that any third-party projects relating to Pembina's growth projects will be sanctioned and completed as expected; the ability of Pembina to successfully integrate the operations of PGI and achieve the anticipated results of such operations; that the anticipated benefits of the PGI Transaction can be achieved in the manner expected by Pembina; expectations with respect to Pembina's common share trading price; that any required commercial agreements can be reached; 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; labour and material shortages; reliance on key relationships and agreements; the strength and operations of the oil and natural gas production industry and related commodity prices; the failure to realize the anticipated benefits and/or synergies of the PGI Transaction; expectations and assumptions concerning, among other things: customer demand for PGI's assets and services; 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; adverse actions by governmental or regulatory authorities, including changes in tax laws and treatment, changes in project assessment regulations, royalty rates, climate change initiatives or policies or increased environmental regulation; the ability of Pembina to acquire or develop the necessary infrastructure in respect of future development projects; fluctuations in operating results; adverse general economic and market conditions in Canada, North America and Internationally, including changes, or prolonged weaknesses, as applicable, in interest rates, foreign currency exchange rates, commodity prices, supply/demand trends and overall industry activity levels; risks related to the current and potential adverse impacts of the COVID-19 pandemic; constraints on the, or the unavailability of, adequate infrastructure; the political environment in North American and elsewhere, and public opinion; the ability to access various sources of debt and equity capital, and on acceptable terms; adverse changes in credit ratings; counterparty credit risk; technology and cyber security risks; natural catastrophes; the conflict between Ukraine and Russia and its potential impact on, among other things, global market conditions and supply and demand, energy and commodity prices; interest rates, supply chains and the global economy generally; and certain other risks detailed in Pembina's Annual Information Form and Management's Discussion and Analysis, each dated February 24, 2022 for the year ended December 31, 2021 and from time to time in Pembina's public disclosure documents available at www.sedar.com, www.sec.gov and through Pembina's website at www.pembina.com.
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 document speak only as of the date of this document. 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 revised 2022 adjusted EBITDA guidance contained herein as of the date of this news release. The purpose of the revised 2022 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 document 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 defined 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 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 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 cash flow from operating activities, and adjusted cash flow from operating activities per common share. These non-GAAP financial measures and 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. The measures and ratios should not, therefore, be considered in isolation or as a substitute for, or superior to, measures 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, including disclosure of the composition of each non-GAAP financial measure, an explanation of how each non-GAAP financial measure provides useful information to investors and the additional purposes, if any, for which management uses each non-GAAP financial measure; an explanation of the reason for any change in the label or composition of each non-GAAP financial measure 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 November 3, 2022 for the three and nine months ended September 30, 2022 (the "MD&A"), which information is incorporated by reference in this news release. The MD&A is available on SEDAR at www.sedar.com, 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 September 30
Pipelines
Facilities
Marketing &
New Ventures
Corporate &
Inter-segment
Eliminations
Total
($ millions)
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Revenue
645
566
314
341
1,979
1,393
(159)
(151)
2,779
2,149
Cost of goods sold, including product purchases
—
—
4
1
1,824
1,268
(79)
(81)
1,749
1,188
Net revenue
645
566
310
340
155
125
(80)
(70)
1,030
961
9 Months Ended September 30
Pipelines
Facilities
Marketing &
New Ventures
Corporate &
Inter-segment
Eliminations
Total
($ millions)
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Revenue
1,822
1,673
1,031
1,014
6,550
3,827
(491)
(447)
8,912
6,067
Cost of goods sold, including product purchases
—
—
6
7
5,948
3,463
(246)
(257)
5,708
3,213
Net revenue
1,822
1,673
1,025
1,007
602
364
(245)
(190)
3,204
2,854
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. In addition, Pembina's proportionate share of results from investments in equity accounted investees with a preferred interest is presented in adjusted EBITDA as a 50 percent common interest. These additional adjustments are made to exclude various non-cash and other items that are not reflective of ongoing operations.
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 September 30
Pipelines
Facilities
Marketing &
New Ventures
Corporate &
Inter-segment
Eliminations
Total
($ millions, except per share amounts)
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Earnings before income tax
377
329
1,270
207
252
91
(158)
154
1,741
781
Adjustments to share of profit from equity accounted investees and other
40
65
90
33
(12)
5
—
—
118
103
Net finance costs
7
8
4
12
20
2
109
122
140
144
Depreciation and amortization
97
100
27
56
12
13
10
11
146
180
Unrealized loss (gain) on commodity-related derivative financial instruments
—
—
3
(45)
(105)
(2)
—
—
(102)
(47)
Arrangement Termination Payment
—
—
—
—
—
—
—
(350)
—
(350)
Gain on Pembina Gas Infrastructure Transaction
—
—
(1,110)
—
—
—
—
—
(1,110)
—
Transaction costs incurred in respect of acquisitions
—
—
5
—
—
—
—
8
5
8
Transformation and restructuring costs, (gain) loss on disposal of assets and non-cash provisions
14
1
2
10
13
—
—
20
29
31
Adjusted EBITDA
535
503
291
273
180
109
(39)
(35)
967
850
Adjusted EBITDA per common share – basic (dollars)
1.74
1.55
9 Months Ended September 30
Pipelines
Facilities
Marketing &
New Ventures
Corporate &
Inter-segment Eliminations
Total
($ millions, except per share amounts)
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Earnings before income tax
1,120
987
1,659
555
612
167
(502)
(177)
2,889
1,532
Adjustments to share of profit from equity accounted investees and other
131
221
158
99
25
18
—
—
314
338
Net finance costs (income)
22
23
21
30
21
(7)
309
297
373
343
Depreciation and amortization
292
312
162
158
34
38
33
35
521
543
Unrealized (gain) loss on commodity-related derivative financial instruments
—
—
(48)
(62)
(144)
19
—
—
(192)
(43)
Arrangement Termination Payment
—
—
—
—
—
—
—
(350)
—
(350)
Gain on Pembina Gas Infrastructure Transaction
—
—
(1,110)
—
—
—
—
—
(1,110)
—
Transaction costs incurred in respect of acquisitions
—
—
5
—
—
—
—
26
5
26
Transformation and restructuring costs, impairment charges, contract dispute settlement, (gain) loss on disposal of assets and non-cash provisions
14
11
2
32
2
2
3
29
21
74
Adjusted EBITDA
1,579
1,554
849
812
550
237
(157)
(140)
2,821
2,463
Adjusted EBITDA per common share – basic (dollars)
5.10
4.48
2022 Adjusted EBITDA Guidance
The equivalent historical non-GAAP financial measure to 2022 adjusted EBITDA guidance is adjusted EBITDA for the year ended December 31, 2021.
12 Months Ended December 31, 2021
Pipelines
Facilities
Marketing &
New Ventures
Corporate &
Inter-segment
Eliminations
Total
($ millions, except per share amounts)
Earnings (loss) before income tax
917
715
391
(358)
1,665
Adjustments to share of profit from equity accounted investees and other
286
135
23
—
444
Net finance costs (income)
29
35
(8)
394
450
Depreciation and amortization
413
214
50
46
723
Unrealized gain on commodity-related derivative financial instruments
—
(38)
(35)
—
(73)
Canadian Emergency Wage Subsidy
—
—
—
3
3
Transformation and restructuring costs
—
—
—
47
47
Transaction costs incurred in respect of acquisitions
—
—
—
31
31
Arrangement Termination Payment
—
—
—
(350)
(350)
Impairment charges and non-cash provisions
457
36
(1)
1
493
Adjusted EBITDA
2,102
1,097
420
(186)
3,433
Adjusted EBITDA per common share – basic (dollars)
6.24
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 September 30
Pipelines
Facilities
Marketing &
New Ventures
Total
($ millions)
2022
2021
2022
2021
2022
2021
2022
2021
Share of profit from equity accounted investees
39
21
15
23
69
31
123
75
Adjustments to share of profit from equity accounted investees:
Net finance costs
2
13
23
9
2
1
27
23
Income tax expense
—
—
1
—
—
—
1
—
Depreciation and amortization
38
55
50
24
6
4
94
83
Unrealized loss (gain) on commodity-related derivative financial instruments
—
—
16
—
(20)
—
(4)
—
Share of earnings in excess of equity interest(1)
—
(3)
—
—
—
—
—
(3)
Total adjustments to share of profit from equity accounted investees
40
65
90
33
(12)
5
118
103
Adjusted EBITDA from equity accounted investees
79
86
105
56
57
36
241
178
(1) Pembina's proportionate share of results from investments in equity accounted investees with a preferred interest is presented in adjusted EBITDA as a 50 percent common interest.
9 Months Ended September 30
Pipelines
Facilities
Marketing &
New Ventures
Total
($ millions)
2022
2021
2022
2021
2022
2021
2022
2021
Share of profit from equity accounted investees
127
95
59
59
96
44
282
198
Adjustments to share of profit from equity accounted investees:
Net finance costs
16
46
42
24
1
2
59
72
Income tax expense
—
—
1
—
—
—
1
—
Depreciation and amortization
113
160
99
75
18
16
230
251
Unrealized loss on commodity-related derivative financial instruments
—
—
16
—
6
—
22
—
Share of earnings in excess of equity interest(1)
2
15
—
—
—
—
2
15
Total adjustments to share of profit from equity accounted investees
131
221
158
99
25
18
314
338
Adjusted EBITDA from equity accounted investees
258
316
217
158
121
62
596
536
(1) Pembina's proportionate share of results from investments in equity accounted investees with a preferred interest is presented in adjusted EBITDA as a 50 percent common interest.
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
September 30
9 Months Ended
September 30
($ millions, except per share amounts)
2022
2021
2022
2021
Cash flow from operating activities
767
913
2,026
1,953
Cash flow from operating activities per common share – basic (dollars)
1.38
1.66
3.66
3.55
Add (deduct):
Change in non-cash operating working capital
(157)
(7)
(15)
70
Current tax expense
(70)
(141)
(245)
(255)
Taxes paid, net of foreign exchange
68
68
306
265
Accrued share-based payment expense
(3)
(16)
(66)
(56)
Share-based compensation payment
—
—
45
32
Preferred share dividends paid
(31)
(31)
(94)
(103)
Adjusted cash flow from operating activities
574
786
1,957
1,906
Adjusted cash flow from operating activities per common share – basic (dollars)
1.04
1.43
3.54
3.47
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SOURCE Pembina Pipeline Corporation