FortisBC has entered into its first term supply agreement to produce liquefied natural gas (LNG) for Top Speed Energy Corp. to export to China. This term supply agreement is an unprecedented development in Canada's LNG export industry and was made possible by the completion of the Tilbury LNG expansion project in Delta, B.C. earlier this year.
AltaGas announces strong first quarter 2019 results
Midstream and Utilities provide strong results as near-term priorities to enhance asset performance, de-lever and fund organic growth are on track
AltaGas Ltd. reported first quarter 2019 financial results and provided an update on its business, including the expansion of its integrated western Canadian midstream service offering to include global energy export capabilities, through its Ridley Island Propane Export Terminal (RIPET).
AltaGas also announced that its subsidiary WGL Midstream, Inc. (WGL Midstream) has reached an agreement for the sale of WGL Midstream's entire interest in the Stonewall Gas Gathering System (Stonewall) to a wholly-owned subsidiary of DTE Energy Company (DTE) for total gross proceeds of approximately $370 million (US $275.3 million). The transaction is subject to the execution of a definitive agreement following the satisfaction of certain third party notice and election periods. This sale forms part of the $1.5-$2.0 billion additional 2019 asset sale program and serves to advance AltaGas' overall strategy to de-lever the business and focus the Company on its core assets.
"We remain committed to restoring our financial strength and flexibility. The sale of our non-operating interest in the Stonewall gathering system and the significant progress we are making in other sales processes provides tangible proof that we are fulfilling the goals we set in December," said Mr. Randy Crawford, President and Chief Executive Officer of AltaGas. "In addition to having a strong first quarter, we reduced our net debt1 balance by $1.7 billion in Q1, we are on target to unlock considerable value with our game changing RIPET project, and we continue to improve the return on our assets. 2019 will be a defining year for our Company, as we continue to unlock the true value of our assets."
AltaGas achieved normalized EBITDA1 of $466 million, a 109 percent increase over first quarter 2018 normalized EBITDA of $223 million. The year-over-year increase reflects strong contributions from WGL Holdings Inc. (WGL) which were partially offset by asset sales. Normalized funds from operations (FFO)1 were $376 million, an increase of approximately 122 percent over the first quarter of 2018.
Other Q1 2019 Highlights Included:
(all financial figures are unaudited and in Canadian dollars unless otherwise noted)
- Net income applicable to common shares was $809 million ($2.93 per share) in the first quarter compared to $49 million ($0.28 per share) in the first quarter of 2018. Normalized net income1 was $202 million ($0.73 per share) in the first quarter compared to $70 million ($0.40 per share) in the first quarter of 2018.
- Normalized utility adjusted FFO (UAFFO) was $301 million ($1.09 per share) in the first quarter compared to $140 million ($0.79 per share) in the first quarter of 2018.
- AltaGas' 2019 funding and deleveraging strategy is progressing as expected. In the first quarter AltaGas reduced net debt by approximately $1.7 billion.
- AltaGas' business outlook remains unchanged, with expected normalized EBITDA in the range of $1.2 - $1.3 billion and normalized FFO of $850 - $950 million.
- On April 22, 2019, Washington Gas filed an application with the Maryland Public Service Commission (MPSC) to increase base rates and charges.
Midstream and Utilities Performance
Delivered on-time and on budget, RIPET began introducing feedstock to fill the LPG tank, significantly expanding AltaGas' western Canadian midstream service offering. RIPET is Canada's first propane export facility, and is the cornerstone of the Company's integrated strategy in western Canada, leveraging AltaGas' existing gathering, processing and fractionation assets, while providing higher netbacks and market optionality to customers.
"This is an important and historic milestone for AltaGas, our project partners, western Canadian natural gas producers and our customers in Asia," continued Mr. Crawford. "RIPET has come online at a crucial time for the Canadian energy industry, providing domestic natural gas producers with much-needed access to tidewater and more attractive global pricing," concluded Mr. Crawford.
On April 22, 2019, Washington Gas filed an application with the MPSC to increase base rates and charges for natural gas service for its Maryland customers. The filing addresses rate relief necessary for Washington Gas to recover its costs of providing safe, reliable natural gas service in its Maryland service territory; continue delivering improved service to customers; and permit Washington Gas to earn its allowed rate of return. The change in proposed rates and charges includes an increase in base rates of US $35.9 million, partially offset by a reduction of US $5.1 million in surcharges currently paid by customers for system upgrades.
In the first quarter of 2019, normalized EBITDA was positively impacted by contributions from WGL, higher equity earnings from Petrogas Energy Corp. (Petrogas), and the impact of the stronger U.S. dollar on reported results from U.S. assets. These were partially offset by the impact of asset sales, the initial public offering (IPO) of AltaGas Canada Inc. (ACI) in 2018, and an extended planned maintenance outage at the Blythe facility.
Utilities segment normalized EBITDA was higher year-over-year mainly due to WGL contributions of $254 million, the favorable impact of the stronger U.S. dollar, lower operating expenses, and colder weather in Michigan. The increase was partially offset by the impact of the ACI IPO in 2018, the 2019 revenue impact related to the federal tax reduction at the U.S. utilities, and warmer weather in Alaska.
Midstream segment normalized EBITDA was higher year-over-year mainly due to contributions from WGL's Midstream assets of $35 million, higher equity earnings from Petrogas, the acquisition of 50 percent ownership in Black Swan's Aitken Creek North gas processing facility in the fourth quarter of 2018, and additional volumes at the Townsend complex. These positive contributions were partly offset by lower frac exposed volumes at the Younger Extraction Plant due to outages at upstream facilities and reduced ownership, lower frac spreads, the sale of non-core gas processing facilities, and lower NGL marketing margins.
During the first quarter of 2019, AltaGas recorded equity earnings of $22 million from Petrogas, compared to $10 million in the same quarter of 2018. The increase in equity earnings from Petrogas was mainly due to higher pricing and activity levels.
Power segment normalized EBITDA decreased primarily as a result of asset sales, including the San Joaquin facilities in November 2018, the ACI IPO, and non-core Canadian Power assets in February 2019, as well as the extended planned spring outage at the Blythe facility in the first quarter of 2019. These decreases were partially offset by earnings from WGL's Power assets of $14 million.
Normalized FFO and normalized Adjusted FFO (AFFO) were impacted by the same drivers impacting normalized EBITDA which was partially offset by higher interest expense. In the first quarter, AltaGas received $3 million of dividend income from the Petrogas preferred shares (2018 - $3 million) and $1 million of common share dividends from Petrogas (2018 - $1 million). AFFO was positively impacted by higher net cash received from to non-controlling interests and negatively impacted by higher Midstream and Power maintenance capital, and higher preferred share dividends paid of $17 million (2018 - $16 million).
Normalized utility adjusted FFO (UAFFO) for the first quarter was impacted by the same drivers as normalized AFFO along with higher utility depreciation. Depreciation and amortization expenses for the first quarter of 2019 were $118 million, compared to $73 million for the same quarter in 2018, mainly due to the acquisition of WGL, partially offset by the impact of asset sales.
Normalized net income increased mainly due to higher normalized EBITDA, partially offset by higher income tax expense, higher interest expense, and higher depreciation and amortization expense.
Net income applicable to common shares for the first quarter of 2019 was impacted by higher EBITDA, a pre-tax gain of $688 million on the sale of AltaGas' remaining interest in Northwest Hydro, and lower losses on investments, partially offset by higher income tax expense, higher interest expense, higher depreciation and amortization expense, and higher net income applicable to non-controlling interests.
Interest expense for the first quarter of 2019 was $93 million, compared to $43 million for the same quarter in 2018. The increase was predominantly due to interest on debt assumed in the WGL acquisition and higher average debt balances.
AltaGas recorded income tax expense of $127 million for the first quarter of 2019 compared to $18 million in the same quarter of 2018. The increase in tax expense was mainly due to tax on the sale of the remaining interest in the Northwest Hydro facilities as well as tax adjustments related to the WGL acquisition. Current tax expense was $7 million for the first quarter of 2019 compared to $13 million in the same quarter of 2018.
Guidance and Funding
AltaGas' previously announced balanced funding plan is designed to de-lever the balance sheet, fund the approximately $1.3 billion 2019 capital program and optimize per share cash flow and earnings growth. During the first quarter, AltaGas completed the sale of its remaining interest of approximately 55 percent in the Northwest Hydro facilities in British Columbia for net cash proceeds of approximately $1.3 billion. AltaGas also completed the sale of certain non-core Midstream and Power assets in Canada for net cash proceeds of approximately $88 million. Proceeds from the asset sales were used to reduce net debt by approximately $1.7 billion, bringing the net debt balance to approximately $8.4 billion as at March 31, 2019, down from $10.1 billion as at December 31, 2018.
AltaGas remains on-track to monetize $1.5 - $2.0 billion in non-core assets through the remainder of 2019 and announced today an agreement for the sale of WGL Midstream's 30 percent indirect equity interest in Stonewall to DTE, for total proceeds of approximately $370 million (US $275.3 million). DTE is the operator of Stonewall, and currently holds a 55 percent interest.
The terms of the agreement include a contingent payment to AltaGas if a future expansion of Stonewall occurs. The transaction is subject to execution of a definitive agreement, which is expected to contain customary closing conditions.
Stonewall is a 67-mile, 36-inch diameter natural gas gathering system that transports natural gas from the Marcellus region in West Virginia, and connects with an interstate pipeline system that serves markets in the mid-Atlantic region.
AltaGas reiterates its outlook for 2019, with anticipated normalized EBITDA in the range of $1.2 - $1.3 billion and normalized FFO of $850 - $950 million. Year-over-year growth is underpinned by a full-year of earnings from WGL, including the Central Penn Pipeline, and projects coming into service, including RIPET; the Townsend 2B Facility and Nig Creek Gas Plant - both expected to come online in the fourth quarter of 2019. These projects will attract additional natural gas liquids to AltaGas' integrated system, increase utilization of AltaGas' existing liquids pipelines, underpin the expansion of the North Pine Fractionation facility, and provide additional propane supply to RIPET.
In the Utilities segment, the Marquette Connector Pipeline is expected to be in service in the fourth quarter of 2019. While it is not a driver of EBITDA growth in 2019, this project will improve system reliability and supply and allow for the connection of new customers to existing facilities. This investment is aligned with the timing of SEMCO Energy Gas Company's rate case and will start generating timely returns and recovery of capital in 2020.
The 2019 investment plan remains unchanged and includes prudent capital allocation of approximately $1.3 billion to projects with strong risk-adjusted returns, near-term contributions to normalized FFO per share and normalized earnings per share (EPS), and secure commercial underpinnings.
More from Industry News
The Canadian Environmental Assessment Agency (the Agency) must decide whether a federal environmental assessment is required for the proposed Kitimat LNG Expansion Project, located at Bish Cove, near Kitimat, British Columbia.
Canada's Oil Sands Innovation Alliance (COSIA) is pleased to announce the appointment of Wes Jickling as the organization's next Chief Executive, effective August 6, 2019. The appointment aligns with COSIA's updated strategic plan, focused on accelerating environmental performance through collaborative action and innovation, while sharing its story with Canadians and beyond.
Encana Corporation wholly owned subsidiary Newfield Exploration Mid-Continent Inc. has signed an agreement to sell its natural gas assets in Oklahoma's Arkoma Basin to an undisclosed buyer. Total cash consideration to Encana under the transaction is $165 million. The agreement is subject to ordinary closing conditions, regulatory approvals and other adjustments and is expected to close in the third quarter of 2019.
Campaigns that attack Alberta's energy interests will be investigated through a public inquiry launched by the provincial government.
The Canadian Environmental Assessment Agency (the Agency) has commenced a federal environmental assessment for the proposed Central Ridge Exploration Drilling Project, located approximately 375 kilometres east of St. John's, Newfoundland and Labrador, in the Atlantic Ocean.
A few days after signing a foundation agreement with a key customer, Woodfibre LNG has received a major permit needed to move forward with construction on its site near Squamish, B.C.
TC Energy Corporation has entered into an agreement to sell its U.S. midstream assets held by its subsidiary, Columbia Midstream Group, to UGI Energy Services, LLC, a subsidiary of UGI Corporation, for approximately US$1.275 billion (Cdn$1.7 billion). The transaction is expected to close in the third quarter of 2019 subject to closing adjustments and customary regulatory approvals.
TAG Oil Ltd. is pleased to report the annual and fourth quarter results for the fiscal year ending March 31, 2019. Notably, the Company was successful in increasing its revenue by 40% to $33.2 million along with a 33% increase in operating netbacks to $40.90 per boe for FY2019.
ValvTechnologies, Inc., a leader in the design and manufacturing of zero-leakage severe service isolation valve solutions, announced that it has met the requirements of American Petroleum Institute (API) 641 through third party witnessed testing.
Shell announced that it has sold its Foothills sour gas assets to Pieridae Energy Limited, an experienced Canadian operator. The assets include three distinct sour gas plants (Waterton, Jumping Pound and Caroline) and the gas fields which feed them. Combined, they produce approximately 29,000 barrels per day of natural gas, natural gas liquids and condensate.
Pacific Oil & Gas Limited wholly-owned subsidiary Woodfibre LNG has signed a binding LNG Sales and Purchase Agreement (SPA) with BP Gas Marketing Limited, a wholly-owned indirect subsidiary of BP Plc, for the delivery of liquefied natural gas (LNG) from PO&G's Woodfibre LNG export facility in Squamish, British Columbia.
Siemens Water Solutions successfully installed and started up a Zimpro wet air oxidation (WAO) system at a global petrochemical company's olefins plant in the Southern U.S.
Water conservation, efficient tailings management and responsible mine reclamation are becoming increasingly important for mines to ensure their license to operate. Spearheaded by the launch of the new Metso VPX filter for tailings dewatering, Metso introduces its comprehensive tailings management concept to enable and support environmentally and economically sustainable mining.
NETZSCH Pumps North America, LLC, experts in solutions designed specifically for difficult pumping applications, announces it is celebrating its 50th anniversary in business. As a mid-sized, family-owned German company, NETZSCH manufactures machinery and instrumentation with worldwide production, sales, and service. The global company began its North America operations as a one-person office 50 years ago, and has since grown to more than 180 employees, with over $75 M in revenue for its three North American business units, Analyzing & Testing; Grinding & Dispersing; and Pumps & Systems. NETZSCH marked the milestone year with a gala celebration, held May 11, 2019 at the historic SunnyBrook Ballroom in Pottstown, PA.
Fluor Corporation announced that Stork, part of Fluor's Diversified Services segment, together with its consortium partners, was awarded a 4-year framework agreement for plant turnaround services by Ecopetrol S.A. for its Barrancabermeja and Cartagena refineries in Colombia. The Colombia-based consortium includes Stork as the international lead partner, Rampint as the local partner in Barrancabermeja and Servimant as the local partner in Cartagena. The agreement also includes two extension options for an additional two years each. Both refineries supply fuel to meet Colombia's national and export product needs. Fluor booked the undisclosed contract value in the second quarter of 2019.
Ritchie Bros. has conducted its third Edmonton, AB auction of the year, selling 7,400+ equipment items and trucks for CA$72+ million (US$54+ million).
LNG Canada and its prime contractor, JGC Fluor BC LNG JV, announced the launch of YOUR PLACE, a province-wide workforce development program aimed at attracting, recruiting, training, supporting and employing women to work in the construction trades on the LNG Canada Project.
Ritchie Bros., the world largest industrial auctioneer, will host one of the largest pipeline construction equipment auctions ever, selling more than 4,700 items over two days at its site in Columbus, OH. Every single item in the auction will be sold without reserve.
As electrical machinery evolves and matures at an exponential pace - alongside increasingly available power grids to supply them - the oil and gas (O&G) landscape is witnessing major change. This is a positive shift as electrification not only meets ever tougher demands for lower global emissions, but also ticks boxes for improving O&G's availability and reliability. What's more, alongside greater productivity for operators, it adds up to greater safety for plant workers and the wider public too.
The Explorers and Producers Association of Canada (EPAC) is disheartened with the federal government's rejection of the proposed Senate amendments to Bill C-69.
Canada's oil sector is missing a significant opportunity to benefit from the global commodity price and finally receive fair market value for Canadian resources, according to the Canadian Association of Petroleum Producers' (CAPP) 2019 Crude Oil Forecast, Markets and Transportation report.
The Petroleum Services Association of Canada (PSAC) is expressing extreme disappointment with the decision by the Trudeau government to not accept the full slate of amendments for Bill C-69 proposed by the Senate following lengthy consultation with Canadians.
The Government of Canada is committed to protecting the health, safety, and environment of Canadians. The Government enforces laws that protect Canada's air, water, and natural environment, and we take this responsibility very seriously.
It is now clear the federal government is ignoring the Senate and the will of Canadians, damaging the country's economic future by not accepting the package of amendments the Senate proposed to Bill C-69, the Impact Assessment Act, according to the Canadian Association of Petroleum Producers (CAPP).
A landmark gift from Pembina Pipeline Corporation is ensuring working landscapes across the Canadian Prairies also work for conservation. Its $1-million investment in Ducks Unlimited Canada's (DUC) Revolving Land Conservation Program will protect approximately 2,000 acres (809 hectares) of important wetland habitat. At the same time, communities across Alberta and Saskatchewan will benefit from a host of environmental benefits. The joint announcement was made and celebrated by Pembina and DUC at a ceremony held at one of DUC's conservation project sites located east of Camrose.
CIRCOR Industrial Valves, a leader in designing and manufacturing flow control technology, features its commitment to ONE CIRCOR, ONE Solution, an initiative to provide the right solution for each customer by effectively drawing on the technical capabilities of CIRCOR's trusted brands, like Leslie Controls, Spence, RTK, Nicholson, and more. With a broad range of products to match to requirements and the technical expertise to design optimized systems for specific customer applications, CIRCOR engineers and provides integrated critical steam solutions for process industry, oil and gas, district energy and power systems.
Newly released estimates from satellite data show global gas flaring increased by 3 percent in 2018 to 145 billion cubic meters (bcm), which is equivalent to the total annual gas consumption of Central and South America.
Pulse Oil Corp. is pleased to announce the key findings of Pulse's enhanced oil recovery ("EOR") study.
Encana Corporation has provided an update on its share buyback program and disclosed its intention to execute a substantial issuer bid (SIB) to fulfill its previously announced 2019 share buyback. In addition, the Company signed an agreement to exit China, strengthened its production outlook for the second quarter of 2019 and reiterated its original capital investment plan.
Canadian oil sands production is set to enter a period of slower annual production growth compared to previous years. Nevertheless, total production is expected to reach nearly four million barrels per day (mbd) by 2030 - nearly one million more than today, according to a new 10-year production forecast by business information provider IHS Markit.
Canada's next federal government has an opportunity to help define a strategic, long-term vision for the growth of Canada's oil and natural gas sector, one that promotes jobs and a healthy economy for all Canadians, while being part of the solution to meet growing global energy demand with responsibly developed energy, according to the Canadian Association of Petroleum Producers (CAPP).
Parliamentarians need to support Bill C-69, as it was amended by the Senate Standing Committee on Energy, the Environment and Natural Resources, according to the leaders of the Canadian Manufacturers and Exporters (CME), Canadian Association of Oilwell Drilling Contractors (CAODC), and the Canadian Association of Petroleum Producers (CAPP).
nVent Electric plc has introduced a new standardized design for its nVent RAYCHEM Mineral Insulated (MI) heating units; industry-leading equipment designed to provide superior freeze protection and process temperature maintenance for high-power, high-exposure industrial heat-tracing applications. The new heating units ensure greater operational reliability and corrosion resistance in harsh environments.
Canadian Natural Resources Limited has entered into an agreement, subject to regulatory approval, to acquire substantially all of the assets of Devon Canada Corporation , for a cash purchase price of C$3.775 billion (subject to closing adjustments), with an effective date of January 1, 2019 and a targeted closing date of June 27, 2019.
AltaGas Ltd. has celebrated the grand opening of its Ridley Island Propane Export Terminal (RIPET), located in Prince Rupert, British Columbia - the first marine export facility for propane in Canada. The facility began introducing propane feedstock in mid-April, and the first shipment departed the terminal on May 23, 2019 bound for Asia.
Capital spending shifts and increased free cash flow generation included in Husky five-year plan update
With a focus on generating increased free cash flow, the updated Husky Energy five-year plan shows reduced capital spending to achieve an annual average of $3.15 billion for 2019 - 2023 versus the previously planned 2018 - 2022 annual average of $3.5 billion. Total capital spending over the 2019 - 2023 five-year period is reduced by about $1.7 billion, with total free cash flow before dividends expected to reach $8.7 billion at a flat $60 US WTI planning price.
The Canadian Environmental Assessment Agency (the Agency) must decide whether a federal environmental assessment is required for the proposed Tilt Cove Exploration Drilling Project, located 300 kilometres southeast of St. John's, Newfoundland and Labrador.
PetroShale announces financial and operating results for first quarter 2019 and provides operational update
PetroShale Inc. has announced its results for the first quarter of 2019, including a production rate averaging 5,036 boe/d, up by 52 percent from 2018, and increased revenue from year to year.