Energia
Pembina Pipeline Corporation Reports Results for the Fourth Quarter and Full Year 2020
CALGARY, AB , Feb. 25, 2021 /PRNewswire/ -- Pembina Pipeline Corporation ("Pembina" or the "Company") (TSX: PPL) (NYSE: PBA) announced today its financial and operating results for the fourth quarter and full year 2020.
Change in Full Year Adjusted EBITDA
Pembina reported record fourth quarter adjusted EBITDA of $866 million and record full year adjusted EBITDA of $3,281 million , representing a ten percent and seven percent increase, respectively, over the same periods in the prior year and within its original guidance range.
Fourth quarter and annual adjusted EBITDA were positively impacted primarily by contributions from the assets acquired in the Kinder Acquisition; Duvernay II, Phase VI Expansion and Empress infrastructure coming into service in November 2019 , June 2020 and October 2020 , respectively; lower operating expenses in Pipelines; and lower general & administrative expenses. In addition, relative to the prior year, both periods were negatively impacted by lower margins on crude oil sales and a lower contribution from Alliance Pipeline due to a narrower AECO-Chicago natural gas price differential.
Fourth quarter adjusted EBITDA also was positively impacted by higher deferred revenue recognized on the Peace Pipeline system and from monetizing a portion of storage positions built up during the second and third quarters of 2020 in Marketing & New Ventures.
Full year adjusted EBITDA was negatively impacted by lower margins on NGL sales, a lower contribution from Aux Sable as a result of lower NGL margins, offset by higher realized gains on commodity-related derivatives.
Change in Full Year Earnings
Pembina recorded a loss in the fourth quarter of $1,216 million and a loss for the full year of $316 million compared to earnings of $150 million and $1,507 million , respectively, in the same periods in the prior year.��
In addition to the factors impacting adjusted EBITDA, as noted above, earnings in both periods were negatively impacted by $1.6 billion of non-cash after-tax impairments recognized in the CKPC joint venture, as well as investments in Ruby and Jordan Cove . Both periods were also negatively impacted by higher unrealized losses on commodity-related derivatives.
Full year earnings also were positively impacted by other income associated with the Canadian Emergency Wage Subsidy and negatively impacted by increased net finance costs due to higher interest expense, driven by higher average debt levels from the Kinder Acquisition, and foreign exchange losses on the repayment of U.S. dollar denominated debt.
Excluding impairments and the associated deferred tax recovery, earnings for the fourth quarter and full year would have been $338 million and $1,238 million , respectively.
Cash flow from operating activities of $766 million for the fourth quarter and $2,252 million for the full year were an increase of five percent and a decrease of 11 percent, respectively, over the same periods in the prior year.
The increase in the fourth quarter was primarily driven by an increase in operating results after adjusting for non-cash items, largely due to the Kinder Acquisition, and a decrease in taxes paid, partially offset by higher net interest paid, changes in non-cash working capital and lower distributions from equity accounted investees.
The full year decrease was due primarily to a change in non-cash working capital, an increase in taxes paid, a decrease in distributions from equity accounted investees and an increase in net interest paid, partially offset by the increase in operating results after adjusting for non-cash items.
On a per share (basic) basis, cash flow from operating activities for the fourth quarter and full year 2020 decreased by one percent and 17 percent, respectively, compared to the same periods in the prior year due to the same factors, as well as the additional common shares issued pursuant to the Kinder Acquisition.
Record quarterly and record full year adjusted cash flow from operating activities of $603 million and $2,289 million , respectively, represent five percent and two percent increases, respectively, over the same periods in the prior year. The increases are due to the factors impacting cash flow from operating activities, discussed above, net of the change in non-cash working capital, taxes paid and accrued share-based payments. In addition, the fourth quarter impact was partially offset by higher current tax expense and the full year impact was partially offset by an increase in preferred share dividends following the Kinder Acquisition. On a per share (basic) basis, adjusted cash flow from operating activities for the fourth quarter and full year decreased by one percent and five percent, respectively, compared to the same periods in the prior year due to the same factors, as well as the additional common shares issued pursuant to the Kinder Acquisition.
Total volume of 3,614 mboe/d for the fourth quarter and 3,500 mboe/d for the full year represent approximately one percent increases over the same periods in the prior year. As discussed in further detail below, the positive contributions from assets acquired in the Kinder Acquisition and new assets coming into service were partially offset by lower interruptible volumes on certain Pipelines assets, as a result of a lower commodity price environment, and lower volumes in certain Facilities assets due to lower supply volumes, scheduled turnarounds and COVID-19 related factors.
Pembina entered 2020 with a great deal of momentum and enthusiasm as we had recently completed a strategic value chain acquisition, were successfully executing our strategy to access global markets, and had $5.8 billion of secured growth projects underway. Like many other companies, Pembina was soon faced with the challenge of responding to the COVID-19 pandemic and the decline in global energy prices. Given the tremendous uncertainty and potential risks, it was incumbent on Pembina to react quickly and decisively, and we did just that. Our response included permanently reducing our operating and administrative cost structure by $100 million annually as well as reducing our capital investment budget by $1 billion . We were steadfast in our assertion that we would remain within our pre-pandemic guidance range, albeit near the low end. It would turn out that these targets were all exceeded by year end. Pembina takes great pride in consistently doing what it says it will do.
Our commitment to our four stakeholder groups – employees, customers, investors and communities - was never more important than it was in 2020 and our response to the pandemic focused on protecting each of their interests:
If there is a silver lining to be found in 2020, it would be a clear validation of our long-term strategy, diversification efforts and steadfast commitment to the Company's financial guardrails. The resilience, stability and predictability of Pembina's business, were once again proven, as they were during the 2009 financial crisis and 2015 commodity price downturn. In each of these challenging years, Pembina continued to grow adjusted EBITDA. In 2020, the COVID-19 pandemic drove commodity prices lower and prompted unprecedented defensive actions by our producer customers. However, given the ingenuity of our customers and the exceptional geology they sit upon; the highly diversified nature of our Company across commodities, geographies, and customers; the highly contracted nature of our assets; our frac spread hedging program; as well as substantial cost savings achieved throughout the business, Pembina delivered adjusted EBITDA of approximately $3.3 billion , which is within our pre-pandemic guidance range and at 97 percent of the midpoint of that range.
Some of the challenges we faced in 2020 were related to asset impairments. We were forced to acknowledge that due to COVID-19, alongside changing commodity price dynamics, combined with evolving political priorities, Pembina recognized an impairment in the value of certain assets, including our investments in Ruby,
Jordan Cove , and our CKPC petrochemical investment. We believe these opportunities remain in strategy, make economic sense when de-risked, and are aligned with Pembina's ESG priorities. We believe the time for these projects may come; however, we can sadly no longer predict with certainty when that time will be and hence were compelled to reflect their impairments in our 2020 financial statements through a non-cash charge.
Having successfully navigated 2020 and emerged in a position of strength, our focus turns to 2021 and beyond. While COVID-19 is still an urgent global concern and much uncertainty remains, there has been significant progress made on understanding and mitigating the threat, and there is a growing expectation of a return to some normalcy and associated rising energy demand at some point this year. In 2020, Pembina effectively 'hit the pause button', but in 2021 renewed optimism gives us the confidence to 'hit play' once again. This view is informed by the following:
Pembina acknowledges the need to contribute to reducing global emissions, part of the 'E' in ESG. We have committed to reducing the carbon intensity of each business we operate. By the end of 2021, Pembina will have taken concrete action in this area and published 5-year emission targets. That said, ESG is more than the 'E'. We are on track to continuously improve in the areas of the 'S' and the 'G' also. We recently published a comprehensive ESG update and will continue to move methodically forward on all fronts in the year to come. As an example, at our Prince Rupert Terminal, Pembina invested heavily and together with the City of Prince Rupert removed a toxic and abandoned pulp mill, replacing it with a new propane export terminal.
Safety led to operational reliability, and together with prudent financial stewardship through 2020 this put Pembina in a strong financial position and set the groundwork for 2021 and a return to accretive growth. Following the pandemic-related project deferrals earlier in the year, we were delighted in December to announce the reactivation of the improved Phase VII Expansion of the Peace Pipeline system and Empress Co-generation Facility. The other Peace Pipeline expansion projects, namely the Phase VIII Expansion and Phase IX Expansion, remain deferred, during which time we are also improving them. The initial contracts supporting the projects are still in place and there are ongoing negotiations for incremental capacity. We are also carefully evaluating our deferred Prince Rupert Terminal Expansion project. We are making good use of the deferral period and are now considering a larger expansion of the facility and the use of larger vessels, which will provide even greater value to customers by improving economies of scale and lowering per unit lifting and vessel transport costs to premium markets. Pembina expects to make a decision in the second half of 2021 to re-activate all three projects. Taken together they are indicative of the growth opportunities afforded by Pembina's industry-leading footprint, even during a period of more moderated industry growth.
We are very excited about the start-up of our propane export facility, the Prince Rupert Terminal, which will come into service near the end of the first quarter. This project is important as it represents our first export facility and will provide customers with improved access to more international markets and attract higher pricing for their propane. Pembina remains committed to its global market access strategy and helping to ensure that hydrocarbons produced in the WCSB, and the other basins where the Company operates, can reach the highest value markets throughout the world. The combination of Pembina's integrated value chain and the west coast of North America's proximity to Asian markets and that continent's growing energy demand means we are well positioned to deliver value to both our producer customers and end users.
In addition to our announced projects, we are working on an extensive portfolio of unsecured opportunities, which are all accretive and collectively comprise over $4 billion of potential capital investment, including both brownfield and greenfield projects. Momentum with customers behind these opportunities continues to build and we are confident in the trajectory.
At the low end of the our $3.2 to $3.4 billion 2021 adjusted EBITDA guidance range, Pembina's capital program is fully funded by cash flow after dividends. Towards the middle and upper end of the guidance range, we expect to generate excess discretionary cash flow. Pembina has a history of disciplined and strategic capital allocation. This includes a strong track record of generating long-term shareholder value through capital investment and we will continue to prioritize growth projects with attractive risk-adjusted returns. Investing in growth projects enhances our capabilities, extends the longevity of Pembina's long-term, stable cash flow streams and increases our efficiency through economies of scale, which can be shared with customers. When we grow, either organically or by acquisition, we invariably improve the 'goods available in the Pembina Store'. Absent those growth opportunities, excess cash flow will be available for debt reduction, opportunistic common share repurchases, or dividend increases, depending on market circumstances.
In 2020, Pembina proved once again that we are resilient, agile and capable of safely and reliably delivering services which are vital to the world and which we are proud to supply. While much uncertainty remains, Pembina's track record across all stakeholder groups speaks for itself, and we are well positioned to navigate 2021. Pembina led our industry with a decade-long run of outperformance prior to 2020. Following a pandemic-driven pause, we are ready to begin again and are working hard for another 10-year run. We anticipate 2021 to be a turn-around year with a return to a more traditional growth trajectory in 2022. We will not waver in our commitment to long-term value creation that benefits each of our stakeholder groups and we are optimistic about the future and the many opportunities in front of us.
Pipelines:
Facilities:
Pembina will host a conference call on Friday, February 26, 2021 at 8:00 a.m. MT ( 10:00 a.m. ET ) for interested investors, analysts, brokers and media representatives to discuss results for the fourth quarter of 2020. The conference call dial-in numbers for Canada and the U.S. are 647-427-7450 or 888-231-8191. A recording of the conference call will be available for replay until March 5, 2021 at 11:59 p.m. ET . To access the replay, please dial either 416-849-0833 or 855-859-2056 and enter the password 9683262.
A live webcast of the conference call can be accessed on Pembina's website at pembina.com under Investor Centre/ Presentation & Events, or by entering:
https://produceredition.webcasts.com/starthere.jsp?ei=1354433&tp_key=5d1cdd55ec in your web browser. Shortly after the call, an audio archive will be posted on the website for a minimum of 90 days.
Pembina is a leading transportation and midstream service provider that has been serving North America's energy industry for more than 65 years. Pembina owns an integrated system of pipelines that transport various hydrocarbon liquids and natural gas products produced primarily in western Canada . The Company also owns gas gathering and processing facilities; an oil and natural gas liquids infrastructure and logistics business; and is growing an export terminals business. Pembina's integrated assets and commercial operations along the majority of the hydrocarbon value chain allow it to offer a full spectrum of midstream and marketing services to the energy sector. Pembina is committed to identifying additional opportunities to connect hydrocarbon production to new demand locations through the development of infrastructure that would extend Pembina's service offering even further along the hydrocarbon value chain. These new developments will contribute to ensuring that hydrocarbons produced in the Western Canadian Sedimentary Basin and the other basins where Pembina operates can reach the highest value markets throughout the world.
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.
Investor Relations, Scott Arnold , Manager Investor Relations, (403) 231-3156, 1-855-880-7404, E-mail: investor-relations@pembina.com, www.pembina.com
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