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Pembina reports solid second-quarter results as agreement with Veresen moves forward

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Company info

4000, 585 - 8th Avenue S.W.
Calgary, AB
CA, T2P 1G1

Website:
pembina.com

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Pembina Pipeline Corporation has announced its results for the second quarter of 2017, an eventful period for the company which joined with Veresen to create one of the largest energy infrastructure companies in Canada. The company reported $2.8 billion worth of new projects going into service by the end of the second quarter, under budget and either on time or ahead of schedule. Pembina generated second-quarter earnings of $124 million, a 10 percent increase over 2Q 2016, and has earned $339 million year-to-date, up 58 percent year over year.

"We've had solid operational and financial results over the first half of the year," said Mick Dilger, Pembina's President and Chief Executive Officer. "On a year-to-date basis, we've reached new volume records in our Conventional Pipelines and Gas Services businesses, which have contributed to beating records in almost all of our financial metrics including adjusted EBITDA, adjusted cash flow from operating activities and adjusted cash flow from operating activities per share. We've also continued to achieve safety and operational excellence with another quarter of zero lost time employee incidents." 

On May 1, 2017, Pembina and Veresen announced that they entered into an arrangement agreement where Pembina offered to acquire all the issued and outstanding shares of Veresen to create one of the largest energy infrastructure companies in Canada. The Transaction is valued at approximately $9.7 billion (including Veresen's debt and preferred shares) and the combined company will have a pro-forma total enterprise value of approximately $33 billion. On July 11, 2017, Veresen's common and preferred shareholders voted to approve the Transaction at a special meeting of Veresen shareholders. More than 99 percent of Veresen's outstanding common and preferred shares voted at the meeting were in favour of the Transaction. On July 12, 2017, the Court of Queen's Bench of Alberta approved the Transaction. Completion of the Transaction is subject to final acceptance of the Toronto Stock Exchange and approval under the Canadian Competition Act. Pembina and Veresen currently expect the Transaction will close late in the third quarter or early in the fourth quarter of 2017, subject to receipt of the remaining approvals.

Pembina's Phase III pipeline expansion was placed into service on June 30, 2017, ahead of schedule and under budget from the expected $2.4 billion capital cost. The Phase III expansion added an incremental 420 mbpd of capacity between Fox Creek and Namao, Alberta and allows Pembina to improve operational efficiencies by transporting four distinct hydrocarbons through segregated pipelines. 

The Company's third fractionator at Redwater was placed into service on June 30, 2017, aligning with the Phase III pipeline expansion. Pembina's Redwater complex now has an aggregate fractionation capacity of approximately 210,000 bpd. This project was brought into service ahead of schedule and under budget. 

At Pembina's Canadian Diluent Hub, on June 30, 2017, additional condensate connections were placed into service on time and under budget. The facility is capable of delivering approximately 400 mbpd of condensate to regional third-party diluent pipelines. By the end of 2017, Pembina will have 500,000 barrels of above ground storage in operation and additional third-party condensate connections. 

In May 2017, Pembina announced the execution of 50/50 joint venture agreements that include key binding commercial terms in support of the proposed propane dehydrogenation and polypropylene facility as well as the formation of a new entity, Canada Kuwait Petrochemical Corporation. The new entity is currently proceeding with front end engineering design and has also selected the technology for both the propane dehydrogenation and the polypropylene portions of the facility. In the event of project sanctioning, the facility would be constructed in close proximity to the Company's Redwater fractionation complex.

Pembina is continuing to progress its Phase IV and Phase V expansions of its pipeline infrastructure. Phase IV will add capacity between Fox Creek and Namao, Alberta and Phase V will add capacity between Lator and Fox Creek, Alberta.

Pembina is progressing infrastructure development in the Duvernay area. For Pembina's 100 MMcf/d Duvernay I plant, all major equipment has been set on site with significant mechanical and electrical field work now complete. For the associated field hub, the sales product pipelines have been installed with all equipment set on site and significant electrical field work now complete. Pembina also previously entered into a 20-year Duvernay infrastructure development and service agreement.

Pembina continues to advance construction of infrastructure in support of North West Redwater Partnership's refinery and has completed over 90 percent of the overall project.

In April 2017, Pembina signed a non-binding letter of intent identifying Watson Island, Prince Rupert, as a potential site for a west coast propane export terminal.

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