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; adjusted cash flow from operating activities per common share; and proportionately consolidated debt-to-adjusted EBITDA. For more information see “Non-GAAP and Other Financial Measures” herein.
CALGARY, Alberta–(BUSINESS WIRE)–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 2023.
Highlights
Financial and Operational Overview
3 Months Ended December 31 | 12 Months Ended December 31 | |||
($ millions, except where noted) | 2023 | 2022 | 2023 | 2022 |
Revenue | 2,466 | 2,699 | 9,125 | 11,611 |
Net revenue(1) | 1,117 | 1,043 | 3,994 | 4,247 |
Gross profit | 850 | 681 | 2,840 | 3,123 |
Adjusted EBITDA(1) | 1,033 | 925 | 3,824 | 3,746 |
Earnings | 698 | 243 | 1,776 | 2,971 |
Earnings per common share – basic (dollars) | 1.21 | 0.39 | 3.00 | 5.14 |
Earnings per common share – diluted (dollars) | 1.21 | 0.39 | 2.99 | 5.12 |
Cash flow from operating activities | 880 | 947 | 2,635 | 2,929 |
Cash flow from operating activities per common share – basic (dollars) | 1.60 | 1.72 | 4.79 | 5.30 |
Adjusted cash flow from operating activities(1) | 747 | 690 | 2,646 | 2,661 |
Adjusted cash flow from operating activities per common share – basic (dollars)(1) | 1.36 | 1.25 | 4.81 | 4.82 |
Capital expenditures | 177 | 143 | 606 | 605 |
Total volumes (mboe/d)(2) | 3,453 | 3,392 | 3,306 | 3,383 |
(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, and also include revenue volumes from Pembina’s equity accounted investees. |
Financial and Operational Overview by Division
3 Months Ended December 31 | 12 Months Ended December 31 | |||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||
($ millions, except where noted) | Volumes(1) | Reportable Segment Earnings (Loss) Before Tax | Adjusted EBITDA(2) | Volumes(1) | Reportable Segment Earnings (Loss) Before Tax | Adjusted EBITDA(2) | Volumes(1) | Reportable Segment Earnings (Loss) Before Tax | Adjusted EBITDA(2) | Volumes(1) | Reportable Segment Earnings (Loss) Before Tax | Adjusted EBITDA(2) |
Pipelines | 2,652 | 677 | 617 | 2,593 | 295 | 548 | 2,538 | 1,840 | 2,234 | 2,524 | 1,415 | 2,127 |
Facilities | 801 | 143 | 324 | 799 | 145 | 288 | 768 | 610 | 1,213 | 859 | 1,804 | 1,137 |
Marketing & New Ventures | — | 204 | 173 | — | 96 | 171 | — | 435 | 597 | — | 708 | 721 |
Corporate | — | (209) | (81) | — | (206) | (82) | — | (696) | (220) | — | (708) | (239) |
Total | 3,453 | 815 | 1,033 | 3,392 | 330 | 925 | 3,306 | 2,189 | 3,824 | 3,383 | 3,219 | 3,746 |
(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. Volumes do not include Empress processing capacity. 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 February 22, 2024 for the three and twelve months ended December 31, 2023 for further information. | ||||||||||||
(2) Refer to “Non-GAAP and Other Financial Measures”. |
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, 2023 filed at www.sedarplus.ca (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
Pembina reported record quarterly adjusted EBITDA of $1,033 million in the fourth quarter and record full year adjusted EBITDA of $3,824 million. This represents a $108 million or 12 percent increase, and a $78 million or two percent increase, respectively, over the same periods in the prior year. For both the fourth quarter and full year, reported adjusted EBITDA reflects strong performance in the Pipelines and Facilities divisions as Pembina continues to benefit from growing volumes and higher tolls on certain systems, as well as continued strong results from the marketing business.
Pipelines reported adjusted EBITDA of $617 million for the fourth quarter, representing a $69 million or 13 percent increase compared to the same period in the prior year, reflecting the net impact of the following factors:
Pipelines reported adjusted EBITDA of $2,234 million for the full year, representing a $107 million or five percent increase compared to the same period in the prior year, reflecting the net impact of the following factors:
Facilities reported adjusted EBITDA of $324 million for the fourth quarter, representing a $36 million or 13 percent increase over the same period in the prior year, reflecting the net impact of the following factors:
Facilities reported adjusted EBITDA of $1,213 million for the full year, representing a $76 million or seven percent increase over the same period in the prior year, reflecting the net impact of the following factors:
Marketing & New Ventures reported adjusted EBITDA of $173 million for the fourth quarter, representing a $2 million or one percent increase compared to the same period in the prior year, reflecting the net impact of the following factors:
Marketing & New Ventures reported adjusted EBITDA of $597 million for the full year, representing a $124 million or 17 percent decrease compared to the same period in the prior year, reflecting the net impact of the following factors:
Corporate reported adjusted EBITDA of negative $81 million for the fourth quarter, which was largely consistent with the same period in the prior year. Results were impacted by higher incentive costs driven by Pembina’s share price performance and increased shared service revenue.
Corporate reported adjusted EBITDA of negative $220 million for the full year, representing an $19 million or eight percent increase over the same period in the prior year, reflecting the net impact of the following factors:
Earnings
Pembina reported fourth quarter earnings of $698 million and full year earnings of $1,776 million. This represents a $455 million or 187 percent increase, and a $1,195 million or 40 percent decrease, respectively, over the same periods in the prior year.
Pipelines had reportable segment earnings before tax in the fourth quarter of $677 million, representing a $382 million or 129 percent increase over the prior period. In addition to the factors impacting adjusted EBITDA, as noted above, the change in reportable segment earnings before tax in the fourth quarter was due to the reversal of a previous impairment related to the Nipisi Pipeline, as well as the Ruby settlement provision and associated legal fees incurred in the fourth quarter of 2022.
Pipelines had reportable segment earnings before tax for the full year of $1,840 million, representing a $425 million or 30 percent increase over the prior year. In addition to the factors impacting adjusted EBITDA and the factors impacting fourth quarter reportable segment earnings before tax, as noted above, the change in reportable segment earnings before tax for the full year was due to higher depreciation.
Facilities had reportable segment earnings before tax in the fourth quarter of $143 million representing a $2 million or one percent decrease over the prior year. In addition to the factors impacting adjusted EBITDA, as noted above, the change in reportable segment earnings before tax in the fourth quarter was due to lower project write-offs recognized in the quarter, largely offset by higher depreciation.
Facilities had reportable segment earnings before tax for the full year of $610 million representing a $1,194 million or 66 percent decrease over the prior year. In addition to the factors impacting adjusted EBITDA, as noted above, the change in reportable segment earnings before tax for the full year was due to the $1.1 billion gain recognized on the PGI Transaction during the third quarter of 2022, partially offset by lower depreciation and lower project write-offs.
Marketing & New Ventures had reportable segment earnings before tax in the fourth quarter of $204 million representing a $108 million or 113 percent increase over the prior year. In addition to the factors impacting adjusted EBITDA, as noted above, the change in reportable segment earnings before tax in the fourth quarter was due to an unrealized gain on commodity-related derivatives compared to a loss in the fourth quarter of 2022, lower net finance costs due to decreased foreign exchange losses, and a change in the insurance contract provision in the period.
Marketing & New Ventures had reportable segment earnings before tax for the full year of $435 million representing a $273 million or 39 percent decrease, over the prior year. In addition to the factors impacting adjusted EBITDA, as noted above, the change in reportable segment earnings before tax in the full year was due to an unrealized loss on commodity-related derivatives compared to a gain in 2022, partially offset by lower net finance costs due to gains recognized on non-commodity related derivatives compared to losses in 2022.
In addition to the changes in reportable segment earnings before tax for each division discussed above, the change in fourth quarter earnings compared to the prior period was due to higher income tax expense due to higher earnings compared to the prior period, partially offset by the recognition of previously unrecognized deferred tax assets. The change in the full year earnings compared to the prior year was also primarily due to higher income tax expense due to the tax impact of the PGI Transaction in 2022.
Cash Flow From Operating Activities
Cash flow from operating activities of $880 million for the fourth quarter and $2,635 million for the full year represent a seven percent and ten percent decrease, respectively, over the same periods in the prior year.
The decrease in the fourth quarter was primarily driven by the change in non-cash working capital, higher taxes paid, and a decrease in payments collected through contract liabilities, partially offset by higher operating results.
The decrease in the full year was primarily driven by the change in non-cash working capital, lower operating results, a decrease in payments collected through contract liabilities, and higher share-based compensation payments, partially offset by higher distributions from equity accounted investees and lower taxes paid.
On a per share (basic) basis, cash flow from operating activities was $1.60 per share for the fourth quarter and $4.79 per share for the full year. This represents decreases of seven percent and ten percent, respectively, compared to the same periods in the prior year.
Adjusted Cash Flow From Operating Activities
Adjusted cash flow from operating activities of $747 million for the fourth quarter and $2,646 million for the full year, represent an eight percent increase and one percent decrease, respectively, over the same periods in the prior year.
The increase in the fourth quarter was primarily driven by the same items impacting cash flow from operating activities, discussed above, excluding the change in non-cash working capital and taxes paid, partially offset by higher current income tax expense.
The decrease in the full year was primarily driven by the same items impacting cash flow from operating activities, discussed above, excluding the change in non-cash working capital, taxes paid, and share-based compensation payments, combined with higher current tax expense, partially offset by lower accrued share-based payment expense.
On a per share (basic) basis, adjusted cash flow from operating activities was $1.36 per share for the fourth quarter and $4.81 per share for the full year. This represents an increase of nine percent and no change, respectively, compared to the same periods in the prior year.
Volumes
Total volumes of 3,453 mboe/d for the fourth quarter and 3,306 mboe/d for the full year represent an increase of two percent and a decrease of two percent, respectively, over the same periods in the prior year.
Pipelines volumes of 2,652 mboe/d in the fourth quarter represent a two percent increase compared to the same period in the prior year, primarily reflecting the reactivation of the Nipisi Pipeline in the fourth quarter of 2023, higher contracted volumes on the Peace Pipeline system, as well as higher volumes on the Drayton Valley Pipeline.
Pipelines volumes of 2,538 mboe/d for the full year represent a one percent increase compared to the same period in the prior year, primarily reflecting higher contracted volumes on the Peace Pipeline system, the reactivation of the Nipisi Pipeline in the fourth quarter of 2023, and higher volumes on the Vantage Pipeline due to third-party outages in 2022, partially offset by lower volumes related to the Northern Pipeline system outage, and the impacts of the Wildfires.
Facilities volumes of 801 mboe/d in the fourth quarter were consistent with the same period in the prior year, reflecting higher volumes from PGI, primarily at the Hythe Gas Plant and at the Dawson Assets, largely offset by lower volumes at the Redwater Complex.
Facilities volumes of 768 mboe/d for the full year represent an 11 percent decrease compared to the same period in the prior year, reflecting the net impact of the following factors:
Excluding the impact of the disposition of Pembina’s interest in the E1 and E6 assets at Empress, the Northern Pipeline system outage, and the Wildfires, Facilities volumes would have increased by five percent in 2023 compared to the same period in the prior year.
Marketed NGL volumes of 217 mboe/d in the fourth quarter represents a 12 percent increase compared to the same period in the prior year, reflecting higher propane, ethane, and butane sales.
Marketed NGL volumes of 185 mboe/d in the full year were largely consistent with the same period in the prior year.
Quarterly Common Share Dividend
Pembina’s board of directors has declared a common share cash dividend for the first quarter of 2024 of $0.6675 per share, to be paid, subject to applicable law, on March 28, 2024, to shareholders of record on March 15, 2024. The common share dividends are designated as “eligible dividends” for Canadian income tax purposes. For non-resident shareholders, Pembina’s common share dividends should be considered “qualified dividends” and may be subject to Canadian withholding tax.
For shareholders receiving their common share dividends in U.S. funds, the cash dividend is expected to be approximately U.S. $0.4940 per share (before deduction of any applicable Canadian withholding tax) based on a currency exchange rate of 0.7401. The actual U.S. dollar dividend will depend on the Canadian/U.S. dollar exchange rate on the payment date and will be subject to applicable withholding taxes.
Quarterly dividend payments are expected to be made on the last business day of March, June, September and December to shareholders of record on the 15th day of the corresponding month, if, as and when declared by the board of directors. Should the record date fall on a weekend or on a statutory holiday, the record date will be the next succeeding business day following the weekend or statutory holiday.
Executive Overview
2023 results reflect the strength of Pembina’s business and are highlighted by record annual adjusted EBITDA of $3.8 billion that exceeded the high end of our original guidance range. These results reflect growing volumes across many systems and a strong contribution from the marketing business. While operations in the first half of the year were impacted by the Wildfires and the Northern Pipeline system outage, the second half of the year more accurately reflected the underlying positive momentum in the Western Canadian Sedimentary Basin (the “WCSB”). This is demonstrated most notably by the more than four percent year-over-year increase in second half volumes in the conventional pipelines business.
Progressing Pembina’s Strategy
In early 2023, Pembina outlined a strategy designed to ensure it remains resilient into the future. Guided by this strategy, we are working every day to strengthen our existing business to ensure we help meet the energy needs of today and maximize the value of oil and gas products from Western Canada by getting them to the best markets in the world. We also recognize that the future of energy will require lower emissions and new energy solutions – there is a tremendous opportunity for Pembina to leverage its existing core business to help meet that challenge. Furthermore, our strategy demonstrates the value we place on doing this important work in a way that benefits everyone that has a stake in Pembina’s business – our investors, customers, employees, and communities.
A highlight of the fourth quarter was the announcement of a $3.1 billion acquisition of Enbridge’s interests in Alliance, Aux Sable, and NRGreen joint ventures (the “Alliance/Aux Sable Acquisition”). Pembina’s business is built around integrated, difficult-to-replicate assets that provide an enduring competitive advantage and unequaled market access for customers. Alliance Pipeline and Aux Sable are world-class energy infrastructure assets and increasing our existing ownership in them will further strengthen our growing franchise. The Alliance/Aux Sable Acquisition complements Pembina’s strategy of providing access for world-class, long-life resources from the WCSB to premium end markets and increases exposure to lighter hydrocarbons, including natural gas and natural gas liquids. The Alliance/Aux Sable Acquisition is subject to the satisfaction or waiver of customary closing conditions, including the receipt of required regulatory approvals. The 30-day waiting period under U.S. Hart-Scott-Rodino Act has expired without any further queries from the applicable regulators. Pembina continues to expect the Alliance/Aux Sable Acquisition to close in the first half of 2024.
In 2023, Pembina further progressed its strategy by sustaining and enhancing our business through various previously disclosed accomplishments. These include signing new contracts on the Peace Pipeline system; signing new, or extending existing, contracts at the Redwater Complex; reactivating the Nipisi Pipeline; and approving new projects such as the 55,000 bpd RFS IV expansion, the expansion of the NEBC pipeline system, and a cogeneration facility at PGI’s Kaybob 3 Plant.
In addition, Pembina is pleased to provide the following business updates:
Contacts
Investor Relations
(403) 231-3156
1-855-880-7404
e-mail: investor-relations@pembina.com
www.pembina.com