Pembina Pipeline Corporation Reports Record Results for the Second Quarter 2024 and Raises Full Year Guidance

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 second quarter of 2024.

Highlights

• Record Quarterly Results – reported quarterly earnings of $479 million, record quarterly adjusted EBITDA of $1,091 million, and record quarterly adjusted cash flow from operating activities of $837 million ($1.44 per share).
• Recent Business Updates – developments during and following the second quarter included:
  • closing the $3.1 billion acquisition of additional interests in Alliance and Aux Sable (the “Alliance/Aux Sable Acquisition”) on April 1, 2024. Further, subsequent to the second quarter, Pembina acquired the remaining 14.6 percent interest in Aux Sable’s U.S. operations from certain subsidiaries of The Williams Companies, Inc. and now has fully consolidated ownership of all Aux Sable assets.
  • Pembina and the Haisla Nation, partners in Cedar LNG Partners LP (“Cedar LNG”), announced a positive final investment decision on the US$4 billion Cedar LNG Project on June 25, 2024; and
  • Pembina Gas Infrastructure Inc. (“PGI”) announced a $420 million (gross) transaction (the “Whitecap Transaction”) with Whitecap Resources Inc. (“Whitecap”) on July 2, 2024, including the acquisition of a 50 percent interest in Whitecap’s Kaybob Complex and an obligation to fund future infrastructure development.
• Phase VIII Peace Pipeline Expansion – during the second quarter, the Phase VIII Peace Pipeline Expansion (“Phase VIII”) entered service, on-time and significantly under the original budget, marking the culmination of a more than 10 year and $4 billion multi-phase expansion to meet growing customer demand for transportation services to support development in the Western Canadian Sedimentary Basin (“WCSB”).
• 2024 Guidance: Pembina has raised its adjusted EBITDA guidance range to $4.20 billion to $4.35 billion (previously $4.05 billion to $4.30 billion); in addition, the 2024 capital investment program has been revised to $1.3 billion, including approximately $0.3 billion of contributions to equity accounted investees.
• Common Share Dividend Declared – the board of directors declared a common share cash dividend for the third quarter of 2024 of $0.69 per share to be paid, subject to applicable law, on September 27, 2024, to shareholders of record on September 16, 2024.
• Strong Balance Sheet – at June 30, 2024, the ratio of proportionately consolidated debt-to-adjusted EBITDA was 3.6 times, at the low end of the Company’s targeted range.

Financial and Operational Overview

	3 Months Ended June 30		6 Months Ended June 30
($ millions, except where noted)	2024	2023	2024	2023
Revenue(1)	1,855	1,422	3,395	3,040
Net revenue(1)(2)	1,222	906	2,134	1,842
Gross profit	815	659	1,545	1,331
Adjusted EBITDA(2)	1,091	823	2,135	1,770
Earnings	479	363	917	732
Earnings per common share – basic (dollars)	0.75	0.60	1.49	1.21
Earnings per common share – diluted (dollars)	0.75	0.60	1.48	1.21
Cash flow from operating activities	954	653	1,390	1,111
Cash flow from operating activities per common share – basic (dollars)	1.64	1.19	2.46	2.02
Adjusted cash flow from operating activities(2)	837	606	1,619	1,240
Adjusted cash flow from operating activities per common share – basic (dollars)(2)	1.44	1.10	2.87	2.25
Capital expenditures	265	123	451	260

(1)		Comparative 2023 period has been adjusted. See “Accounting Policies & Estimates – Change in Accounting Policies” in Pembina’s Management’s Discussion and Analysis dated August 8, 2024 for the three and six months ended June 30, 2024 and Note 2 to the Interim Financial Statements for the three and six months ended June 30, 2024.
(2)		Refer to “Non-GAAP and Other Financial Measures”.

Financial and Operational Overview by Division

	3 Months Ended June 30						6 Months Ended June 30
	2024			2023			2024			2023
($ millions, except where noted)	Volumes(1)	Earnings (Loss)	Adjusted EBITDA(2)	Volumes(1)	Earnings (Loss)	Adjusted EBITDA(2)	Volumes(1)	Earnings (Loss)	Adjusted EBITDA(2)	Volumes(1)	Earnings (Loss)	Adjusted EBITDA(2)
Pipelines	2,716	485	655	2,438	350	501	2,657	940	1,254	2,452	726	1,026
Facilities	855	181	340	749	153	272	830	358	650	734	288	570
Marketing & New Ventures	319	135	143	261	115	96	307	199	331	264	235	265
Corporate	—	(828)	(47)	—	(161)	(46)	—	(995)	(100)	—	(317)	(91)
Income Tax Expense	—	506	—	—	(94)	—	—	415	—	—	(200)	—
Total		479	1,091		363	823		917	2,135		732	1,770

(1)		Volumes for the 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 for Marketing & New Ventures are marketed crude and NGL volumes.
(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 second quarter adjusted EBITDA of $1,091 million, representing a $268 million or 33 percent increase over the same period in the prior year.

Pipelines reported adjusted EBITDA of $655 million for the second quarter, representing a $154 million or 31 percent increase compared to the same period in the prior year, reflecting the net impact of the following factors:

• higher adjusted EBITDA from Alliance due to stronger asset performance combined with increased ownership following the Alliance/Aux Sable Acquisition;
• the Northern Pipeline system outage and wildfires in the second quarter of 2023, which had an impact of $29 million, with no similar impacts in the second quarter of 2024;
• contractual inflation adjustments on tolls and the earlier recognition of take-or-pay deferred revenue on the Peace Pipeline system; and
• the reactivation of the Nipisi Pipeline in the third quarter of 2023.

Facilities reported adjusted EBITDA of $340 million for the second quarter, representing a $68 million or 25 percent increase over the same period in the prior year, reflecting the net impact of the following factors:

• the inclusion within Facilities of adjusted EBITDA from Aux Sable following the Alliance/Aux Sable Acquisition;
• the Northern Pipeline system outage and wildfires in the second quarter of 2023, which had an impact of $18 million, with no similar impacts in the second quarter of 2024; and
• higher interruptible volumes at certain PGI assets.

Marketing & New Ventures reported adjusted EBITDA of $143 million for the second quarter, representing a $47 million or 49 percent increase compared to the same period in the prior year, reflecting the net impact of the following factors:

• increased ownership interest in Aux Sable following the Alliance/Aux Sable Acquisition, as well as higher NGL margins at Aux Sable;
• higher margins from the western Canadian NGL marketing business due to higher marketed volumes, lower natural gas prices, and higher propane, butane, and condensate prices;
• realized losses on NGL-based derivatives compared to gains in the second quarter of 2023, partially offset by higher realized gains on crude oil-based commodity-related derivatives; and
• higher general and administrative expense.

Corporate reported adjusted EBITDA of negative $47 million for the second quarter, representing a $1 million or two percent decrease compared to the same period in the prior year.

Earnings

Pembina reported second quarter earnings of $479 million, representing a $116 million or 32 percent increase over the same period in the prior year.

Pipelines had earnings in the second quarter of $485 million, representing a $135 million or 39 percent increase over the prior period. The increase in Pipelines earnings over the prior period was largely due to the same factors impacting adjusted EBITDA, as noted above, partially offset by higher depreciation and amortization expense.

Facilities had earnings in the second quarter of $181 million, representing a $28 million or 18 percent increase over the prior period. The increase in Facilities earnings was largely due to the same factors impacting adjusted EBITDA, as noted above, partially offset by losses recognized by PGI on interest rate derivative financial instruments compared to gains in the second quarter of 2023.

Marketing & New Ventures had earnings in the second quarter of $135 million, representing a $20 million or 17 percent increase over the prior period. In addition to the factors impacting adjusted EBITDA, as noted above, the change over the prior period was due to gains associated with the de-recognition of the provisions related to financial assurances provided by Pembina, which were transferred to Cedar LNG following the positive final investment decision on the Cedar LNG Project in June 2024, an unrealized loss on NGL-based derivatives compared to a gain in the second quarter of 2023, and larger unrealized losses on power purchase agreements.

In addition to the changes in earnings for each division discussed above, the increase in second quarter earnings compared to the prior period was due to a deferred tax recovery recognized from the Alliance/Aux Sable Acquisition, partially offset by a loss recognized on the Alliance/Aux Sable Acquisition, higher net finance costs, and higher acquisition fees and integration costs related to the Alliance/Aux Sable Acquisition.

Cash Flow From Operating Activities

Cash flow from operating activities of $954 million for the second quarter represents a 46 percent increase over the same period in the prior year. The increase was primarily driven by higher operating results, as discussed above, and the change in non-cash working capital, partially offset by lower distributions from equity accounted investees, higher taxes paid, and a decrease in payments collected through contract liabilities.

On a per share (basic) basis, cash flow from operating activities was $1.64 per share for the second quarter, representing an increase of 38 percent compared to the same period in the prior year, due to the same factors, as well as additional common shares issued in connection with the Alliance/Aux Sable Acquisition.

Adjusted Cash Flow From Operating Activities

Record adjusted cash flow from operating activities of $837 million for the second quarter represents a 38 percent increase over the same period in the prior year. The increase 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, combined with lower current income tax expense, partially offset by higher accrued share-based payment expense.

On a per share (basic) basis, adjusted cash flow from operating activities was $1.44 per share for the second quarter, representing an increase of 31 percent compared to the same period in the prior year. The increase was due to the same factors, as well as additional common shares issued in connection with the Alliance/Aux Sable Acquisition.

Volumes

Pipelines volumes of 2,716 mboe/d in the second quarter represent an 11 percent increase compared to the same period in the prior year. The increase was primarily due to the increase in ownership interest in Alliance, the impact of the Northern Pipeline system outage and the wildfires in the second quarter of 2023, higher volumes on the Peace Pipeline system resulting from earlier recognition of take-or-pay deferred revenue, and the reactivation of the Nipisi Pipeline. In the second quarter of 2023, the impact of the Northern Pipeline system outage and the wildfires on Pipelines volumes was approximately 60 mboe/d.

Facilities volumes of 855 mboe/d in the second quarter represent a 14 percent increase compared to the same period in the prior year. The increase was primarily due to Aux Sable volume recognition following the Alliance/Aux Sable Acquisition, higher volumes at Younger as the second quarter of 2023 was impacted by the Northern Pipeline system outage and the wildfires, and higher interruptible volumes at certain PGI assets. In the second quarter of 2023, the impact of the Northern Pipeline system outage and the wildfires on Facilities volumes was approximately 55 mboe/d at the Redwater Complex and Younger.

In Marketing & New Ventures, crude oil sales volumes of 100 mboe/d in the second quarter represent a two percent increase, largely consistent with the same period in the prior year. NGL sales volumes of 219 mboe/d in the second quarter represent a 34 percent increase compared to the same period in the prior year, primarily due to higher ethane, propane, and butane sales due to the increase in ownership interest in Aux Sable and the impact of lower supply volumes from the Redwater Complex in the second quarter of 2023 due to the impacts of the Northern Pipeline system outage.

Quarterly Common Share Dividend

Pembina’s board of directors has declared a common share cash dividend for the third quarter of 2024 of $0.69 per share to be paid, subject to applicable law, on September 27, 2024, to shareholders of record on September 16, 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 US$0.5023 per share (before deduction of any applicable Canadian withholding tax) based on a currency exchange rate of 0.7279. 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

We are delighted to have delivered another record quarter, driven by a resilient and growing base business and continued strength in Pembina’s marketing business. Momentum across the Canadian energy industry remains strong and we continue to observe robust year-over-year volume growth in the WCSB, which is reflected in our expectation for annual growth of approximately six percent in Pembina’s conventional pipelines volumes and four percent in gas processing volumes.

Beyond 2024, Pembina’s core business, at the centre of the western Canadian energy industry, positions the Company to benefit from multi-year volume growth expected through the balance of the decade driven by transformational developments that include the recent completion of the Trans Mountain Pipeline expansion, new West Coast liquefied natural gas (“LNG”) and natural gas liquids (“NGL”) export capacity, and new petrochemical facilities creating significant demand for ethane and propane.

Pembina’s strategy is underpinned by investing and growing the core business in response to growing energy demand and the important role Canada plays in ensuring global energy supply and security. In addition to strong financial and operational results, 2024 to date has been marked by several accomplishments that highlight the successful execution of this strategy and our focus on strengthening Pembina’s existing franchise, increasing our exposure to resilient end-use markets, and accessing global market pricing for Canadian energy products. Highlights during, and subsequent to, the second quarter include:

• Alliance / Aux Sable Acquisition – closing the Alliance/Aux Sable Acquisition on April 1, 2024 provided a full quarter of financial contribution. In addition, we were excited to welcome new employees to the Pembina team and are focused on integrating these businesses and pursuing near-term synergies we have identified to extract greater value from these unique assets.

• Aux Sable U.S. – subsequent to the second quarter, on August 1, 2024, Pembina acquired the remaining 14.6 percent interest in Aux Sable’s U.S. operations from certain subsidiaries of The Williams Companies, Inc. (the “Williams Acquisition”) for US$160 million. Since the Alliance/Aux Sable Acquisition, the Aux Sable U.S. assets have been outperforming Pembina’s expectations and the Company is pleased to now have fully consolidated ownership of all Aux Sable assets, thereby further simplifying corporate reporting and enhancing the ability to pursue long-term synergies. The Williams Acquisition was funded by amounts drawn under Pembina’s existing credit facilities and cash on hand.

• Cedar LNG – a positive final investment decision on the US$4 billion (gross) Cedar LNG Project was a historic moment for Pembina and our partner, the Haisla Nation. We are excited to be moving forward with a project that will deliver industry-leading, low-carbon, cost-competitive Canadian LNG to overseas markets and contribute to global energy security, while delivering jobs and economic prosperity to the local region. The Cedar LNG Project aligns squarely with Pembina’s strategy, offers attractive economics, and is supported by a contracting strategy that prudently mitigates cost risk.

• Whitecap Transaction – PGI’s transaction with Whitecap, including the acquisition of a 50 percent interest in Whitecap’s Kaybob Complex and an obligation to fund future Lator area infrastructure development is another example of PGI and Pembina’s ability to provide unique and value-added solutions to support the growth demands of our customers. Through the Whitecap Transaction and related agreements, PGI and Pembina have further aligned themselves with a strong growth company, creating opportunities with attractive economics that are expected to enhance asset utilization, capture future volumes, and benefit Pembina’s full value chain.

• Phase VIII – Phase VIII was brought into service during the second quarter. The completion of Phase VIII is the culmination of an orderly, capital efficient, and economic investment program that began with the announcement in 2013 of the Phase III expansion from Fox Creek, Alberta to Namao, Alberta, which was completed in 2017, followed by several upstream expansions (Phases IV, V, VI, VII, VIII and IX). Executed over more than 10 years and totaling more than $4 billion, the scaled intra-Alberta expansion of the Peace Pipeline system was driven by growing customer demand for transportation services to support development in the WCSB, including the Montney, Duvernay, and other resource plays.

  The current total capacity of the Peace Pipeline and Northern Pipeline systems is approximately 1.1 million barrels per day (“bpd”) and Pembina has the ability to add approximately 200,000 bpd of additional capacity to its market delivery pipelines from Fox Creek to Namao through the relatively low-cost addition of pump stations on these mainlines, bringing the total capacity of the Peace Pipeline and Northern Pipeline systems to 1.3 million bpd.

  With the completion of Phase VIII, Pembina has largely completed its objective to achieve unequaled segregated liquids transportation service for ethane-plus, propane-plus, crude oil, and condensate across multiple pipeline systems between Gordondale, Alberta and the Edmonton, Alberta area. Pembina is now focused on enabling further system optimization opportunities due to the reduction of batching and need for quality management. Optimization, along with other continuous improvement activities, will create material incremental capacity with minimal capital spending.

  The Peace Pipeline system plays an important role within Pembina’s extensive and integrated value chain. As a result of the multi-phase expansions and ongoing optimization efforts, Pembina is confident that its extensive and highly connected pipeline systems are best positioned to capture future volume growth and allow the Company to continue to offer customers unparalleled advantages through safe, reliable, flexible, and cost-competitive service together with differentiated market access.

2024 Guidance Update

Pembina has updated its 2024 adjusted EBITDA guidance range to $4.20 billion to $4.35 billion (previously $4.05 billion to $4.30 billion). Relative to Pembina’s previous guidance, the revised outlook for 2024 primarily reflects a higher contribution from the NGL marketing business, an incremental contribution from Aux Sable following the Williams Acquisition, a higher contribution from PGI, higher volumes on Nipisi, and lower corporate segment costs.

The 2024 capital investment program has been revised to $1.3 billion, including approximately $1.0 billion of capital expenditures and approximately $0.3 billion of contributions to equity accounted investees. The revised outlook reflects an approximate $140 million net increase when compared to our original 2024 budget of $1.16 billion, inclusive of then unsanctioned additional growth capital of $70 million and Cedar pre-FID contributions of $210 million.

Key drivers of the revised outlook are the sanctioning of PGI’s Wapiti Expansion and K3 Cogeneration Facility; other increases in revenue generating capital within Pipelines; and additional non-recoverable sustaining capital as detailed below. The 2024 capital investment program is expected to be funded with cash flow from operating activities, net of dividends.

The revised outlook for contributions to equity accounted investees is inclusive of $240 million of equity contributions to Cedar LNG incurred in the first half of 2024. No further equity contributions to Cedar LNG are expected in 2024.

The revised 2024 capital program includes approximately $200 million of non-recoverable sustaining capital to support safe and reliable operations. Relative to Pembina’s previous guidance, the revised outlook for 2024 sustaining capital includes the impacts of a $60 million increase due to increased ownership interests and presentation differences for sustaining capital at Alliance and Aux Sable following the Alliance/Aux Sable Acquisition and incremental expenditures at certain jointly-owned assets.

Projects and New Developments

Pipelines

• The ongoing NEBC MPS Expansion includes a new mid-point pump station, terminal upgrades, and additional storage, which will support approximately 40,000 bpd of incremental capacity on the NEBC Pipeline system. This expansion is expected to cost $90 million and will fulfill customer demand in light of growing production volumes from northeastern British Columbia (“NEBC”) and previously announced long-term midstream service agreements with three premier NEBC Montney producers.

Contacts

For further information:

Investor Relations

(403) 231-3156

1-855-880-7404

e-mail: investor-relations@pembina.com
www.pembina.com

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