Pembina Pipeline reports on successful third quarter

Pembina Pipeline Corporation has announced its Q3 2014 financial and operating results. "Pembina continues to achieve strong operational performance in all of its businesses, as evidenced by year-over-year improvements in operating margin, gross profit, earnings and cash flow from operating activities," said Mick Dilger, Pembina's President and Chief Executive Officer. "Providing safe, reliable and responsible operations while executing on our growth platform is of utmost importance to the company as we continue working towards adding shareholder value for the long-term."

Financial overview

• Revenue: Revenue increased by 11% in Q3 2014 to US$ 1.4 billion from US$ 1.3 billion in the same period of the prior year and by 29% to US$ 4.8 billion in the first nine months of 2014 compared to US$ 3.7 billion in the same period in 2013.
• Operating expenses: Operating expenses were US$ 98 million during Q3 2014 compared to US$ 87 million in Q3 2013. For the nine months ended 30 September 2014, operating expenses were US$ 284 million compared to US$ 255 million in the same period of 2013.
• Operating margin: Operating margin totalled US$ 264 million during Q3 2014, up 17% from the same period last year when operating margin totalled US$ 226 million. For the nine months ended 30 September 2014, operating margin was US$ 883 million compared to US$ 674 million for the same period of 2013.
• Gross profit: Increased revenue and operating margin contributed to gross profit of US$ 216 million during the third quarter and US$ 732 million during the first nine months of 2014 compared to US$ 177 million and US$ 558 million during the relative periods of the prior year. This represents a 22% and 31% increase, respectively.
• EBITDA: Pembina generated EBITDA of US$ 199 million during Q3 2014, consistent with US$ 201 million during Q3 2013. Increased gross profit since the same period last year was offset by increased general and administrative and other expenses. On a year-to-date basis in 2014, Pembina generated EBITDA of US$ 750 million compared to US$ 597 million during the first nine months of 2013.
• Earnings: The company's earnings increased to US$ 75 million (US$ 0.20 per common share) during Q3 2014 compared to US$ 72 million (US$ 0.22 per common share) during Q3 2013. Earnings were US$ 299 million (US$ 0.85 per common share) during the first nine months of 2014 compared to US$ 256 million (US$ 0.83 per common share) during the same period of the prior year.

Operating results

• For the three and nine months ended 30 September 2014, financial and operating results in the Conventional Pipelines business were higher than the comparable periods of 2013 primarily because of the Phase I Expansions being placed into service in December 2013, which allowed for increased volumes on the Company's Peace and Northern pipeline systems.
• In the Oil Sands & Heavy Oil business, the increases in net revenue and operating margin during the third quarter and first nine months of 2014 compared to the same periods of 2013 were primarily related to higher interruptible volumes on the Nipisi Pipeline. Additional flow-through operating expenses on the Horizon Pipeline further increased net revenue in this business during the 2014 periods compared to the three and nine months ended 30 September 2013.
• Gas Services' 2014 financial and operating results were higher in the third quarter and year-to-date compared to the same periods of 2013 primarily due to the 200 million ft³/d Saturn I Facility, which was placed into service in October 2013.
• In Midstream, improved 2014 third quarter and first nine months' results were largely due to higher throughput, more favourable pricing, a stronger year-over-year market for propane (particularly in the first quarter of 2014 at Empress East), as well as increased fee-for-service storage cavern revenue at Redwater West.

Acquisition of Vantage Pipeline

On 24 October 2014, Pembina closed its previously announced acquisition of the Vantage pipeline system and Mistral Midstream Inc.'s interest in the Saskatchewan Ethane Extraction Plant (SEEP) for total consideration of approximately US$ 650 million. To enact the purchase, Pembina acquired all of the issued and outstanding equity interests of Vantage Pipeline Canada ULC, Vantage Pipeline US LP and Mistral in exchange for US$ 413 million, including repayment of Vantage's bank indebtedness of approximately US$ 224 million at closing and approximately 5.61 million common shares (with an approximate value as at 24 October 2014 of US$ 237 million). Included in the consideration above was approximately US$ 23 million for SEEP construction costs that were incurred between the effective date of the transaction of 1 August 2014 and 24 October 2014.

Vantage is a recently constructed high vapour pressure pipeline that is approximately 700 km long with a capacity of approximately 40 000 bpd. This line originates in Tioga, North Dakota, and terminates near Empress, Alberta. Vantage provides long-term, fee-for-service cash flow and strategic access to the prolific and growing North Dakota Bakken play for future natural gas liquids (NGL) opportunities.

As part of the transaction, Pembina also acquired pipeline infrastructure from Mistral and Mistral's interest in SEEP, an under construction, 60 million ft³/d deep cut gas processing facility that is centrally located to service the southeast Saskatchewan Bakken region. SEEP, which is underpinned by both a long-term ethane sales agreement and a long-term, fee-for-service processing agreement, is expected to produce approximately 4500 bpd of ethane and will connect into Vantage through a pipeline lateral that is also currently under construction. Pembina expects SEEP and the associated pipeline lateral to be in-service in mid-2015. Pembina also acquired the remaining 10% interest in SEEP after the transaction closed. The company now owns 100% of the 60 million ft³/d deep cut processing facility.

Adapted from press release by Rosalie Starling

Read the article online at: https://www.worldpipelines.com/business-news/05112014/pembina-pipeline-reports-on-successful-third-quarter-981/