Pembina Pipeline Corporation 2011 fourth quarter and annual results

Strong performance; pending Provident Energy Ltd. acquisition propels future growth and shareholder value

The following information is supplementary to and should be read in conjunction with Pembina's audited consolidated financial statements for the years ended December 31, 2011 and 2010, and the accompanying management's discussion and analysis ("MD&A"). These documents are available at www.sedar.com and at www.pembina.com. All financial figures are in Canadian dollars unless noted otherwise. This report contains forward-looking statements and information that are based on Pembina Pipeline Corporation's current expectations, estimates, projections and assumptions in light of its experience and its perception of historical trends. Actual results may differ materially from those expressed or implied by these forward-looking statements. Please see "Forward-Looking Statements and Information". This report also refers to financial measures that are not defined by Canadian Generally Accepted Accounting Principles, which have been revised effective January 1, 2010 to converge with International Financial Reporting Standards. For more information about the measures which are not part of Canadian Generally Accepted Accounting Principles ("Non-GAAP Measures") please see Non-GAAP Measures.

CALGARY, Feb. 15, 2012 /CNW/ - Pembina Pipeline Corporation  (TSX: PPL, PPL.DB.C) ("Pembina" or the "Company") announced that it achieved strong fourth quarter and annual 2011 results which were driven by consistent performance in each of the Company's four business units.

On January 16, 2012, subsequent to the Company's 2011 year-end, Pembina announced having entered into an agreement (the "Arrangement Agreement") with Provident Energy Ltd. ("Provident") for Pembina to acquire all of the issued and outstanding common shares of Provident by way of a plan of arrangement under the Business Corporations Act (Alberta) (the "Arrangement"). This transaction will create a vertically integrated company that provides a more complete line of complementary services to its customers, and is a leading player in the North American energy infrastructure sector with an estimated enterprise value of approximately $10 billion. Pending shareholder and regulatory approval of the acquisition, Pembina expects to increase its monthly dividend from $0.13 per share per month ($1.56 annualized) to $0.135 per share per month ($1.62 annualized), representing a 3.8 percent increase and reflecting management's confidence in the significant operational and financial strength of the combined entity going forward (see "Forward-Looking Statements and Information").

Fourth Quarter Financial Highlights

• Earnings were $45.1 million ($0.27 per share) during the fourth quarter of 2011 compared to $55.2 million ($0.34 per share) for the same period in 2010.
  
  
• Adjusted earnings were $43.8 million ($0.26 per share) during the fourth quarter of 2011 compared to $44.8 million ($0.27 per share) in the fourth quarter of 2010 (adjusted earnings is a non-GAAP measure, see "Non-GAAP Measures").
  
  
• Cash flow from operating activities was $74.3 million ($0.44 per share) during the fourth quarter of 2011 compared to $54.6 million ($0.33 per share) during the fourth quarter of 2010.
  
  
• Adjusted cash flow from operating activities was $66.8 million ($0.40 per share) for the fourth quarter of 2011 compared to $64.9 million ($0.39 per share) for the same period in 2010 (adjusted cash flow from operating activities is a non-GAAP measure, see "Non-GAAP Measures").
  
  
• Earnings before interest, taxes, depreciation and amortization ("EBITDA") was $87.0 million ($0.52 per share) in the fourth quarter of 2011 compared to $79.1 million ($0.48 per share) in the fourth quarter of 2010 (EBITDA is a non-GAAP measure, see "Non-GAAP Measures").
  
  
• Dividends paid were $65.4 million during the fourth quarter of 2011, representing $0.39 per share ($0.13 per share monthly), compared to $64.6 million in the fourth quarter of 2010 (no change in per share dividend payments).

Year-End Financial Highlights

• Earnings totaled $165.7 million ($0.99 per share) for 2011 compared to $175.8 million ($1.08 per share) in 2010.
  
  
• Adjusted earnings increased 20 percent to $208.9 million ($1.25 per share) in 2011 from $173.5 million ($1.06 per share) in 2010.
  
  
• Cash flow from operating activities increased 11.6 percent to $287.1 million ($1.72 per share) during 2011 compared to $257.2 million ($1.58 per share) in 2010.
  
  
• Adjusted cash flow from operating activities increased 17.8 percent to $297.5 million ($1.78 per share) during 2011 compared to $252.7 million ($1.54 per share) during 2010.
  
  
• EBITDA was $364.3 million ($2.18 per share) during 2011 compared to $310.8 million ($1.90 per share) during 2010.

Revenue, net of product purchases, during the fourth quarter of 2011 was $159.8 million compared to $128.5 million during the fourth quarter of 2010. Revenue, net of product purchases, for the full year of 2011 was $604.6 million compared to $497 million during 2010.

Operating margin totaled $104.7 million during the fourth quarter of 2011 compared to $86.2 million during the fourth quarter of 2010 (operating margin is a non-GAAP measure, see "Non-GAAP Measures"). Operating margin was $412.7 million for 2011 compared to $341.2 million during 2010.

Strong results from the Company's Midstream & Marketing business played a role in Pembina's fourth quarter and annual 2011 financial results, contributing $23.7 million during the fourth quarter and $93.3 million during the full year to operating margin compared to $12.4 million during the fourth quarter of 2010 and $50.8 million during the full year of 2010. This increase was primarily due to higher volumes and activity on Pembina's Peace Pipeline and Drayton Valley Pipeline systems, stronger commodity prices for the majority of liquid hydrocarbon products, and wider margins.

The Company's Oil Sands & Heavy Oil business also generated strong operating margin of $27.2 million in the fourth quarter and $90.8 million during the full year of 2011 compared to $19.9 million in the fourth quarter and $78.2 million during the full year of 2010, respectively. This increase was largely due to contribution from the new Nipisi and Mitsue Pipelines, which began generating returns in the third quarter of 2011.

The Company's Conventional Pipelines business realized operating margin for the fourth quarter of 2011 of $40.3 million and $177.1 million for the year ended December 31, 2011. This compares to $42.5 million and $169.1 million, respectively, during the same periods of 2010. Higher operating expenses during the quarter, which impacted operating margin, were primarily due to increased integrity work completed in anticipation of higher forecasted future volumes. Higher power costs associated with increased throughput during the fourth quarter also negatively impacted operating margin during the period. Realized gains or losses on power derivatives recorded in this business unit, which provide a hedge for the majority of the power supply, are recognized under finance income. Improved annual results in this business were primarily due to higher volumes on the majority of Pembina's largest systems. During the fourth quarter of 2011, Conventional Pipelines' throughput averaged 422,800 barrels per day ("bpd"), approximately 12.7 percent higher than the same period in 2010 when average throughput was 375,000 bpd. Full year 2011 throughput averaged 413,900 bpd, approximately 11 percent higher than the 374,000 bpd average volume during 2010. Throughput during the fourth quarter and full year 2011 was substantially higher than the same periods in the previous year due to increased industry activity on all of Pembina's major pipeline systems, as well as incremental volumes of approximately 15,000 bpd due to an operational outage on a third party crude oil pipeline from May to September of 2011.

In addition, operating margin was positively impacted by the Company's Gas Services business due to an increase in volumes at Pembina's Cutbank Complex. Average processing volume, net to Pembina, was 263.9 million cubic feet per day ("MMcf/d") during the fourth quarter of 2011, approximately 16 percent higher than the 227.8 MMcf/d processed during the fourth quarter of 2010. Average processing volume for the full year 2011 was 244.5 MMcf/d, representing an 11 percent increase over full year 2010 average processing volume of 220.5 MMcf/d. As a result, this business unit contributed $13.0 million during the fourth quarter and $49.1 million during the full year to operating margin, compared to $11.4 million during the fourth quarter of 2010 and $43.1 million during the full year 2010.

Growth Strategy Highlights

• Capital spending during 2011 totaled $526 million, the majority of which was directed towards the Nipisi heavy oil and Mitsue diluent pipeline projects, a $57 million acquisition of a midstream terminal facility, various expansions on Pembina's conventional pipelines, purchase of the linefill for the Peace Pipeline, and expenditures related to the Musreau Deep Cut Facility and the shallow cut expansion at the Cutbank Complex.
  
  
• In June and July of 2011, Pembina completed its Nipisi and Mitsue Pipelines to service the Pelican and Peace River heavy oil regions of Alberta. The Company's Oil Sands & Heavy Oil team is assessing the feasibility of expanding these pipelines and is in active conversations with existing and potential customers regarding various expansion scenarios to accommodate growing production from these regions (see "Forward-Looking Statements and Information").
  
  
• Throughout 2011, Pembina's Gas Services team progressed two projects at its existing Cutbank Complex and began development of two new projects, the Resthaven and Saturn gas plants, to expand its footprint in areas of high industry activity in the Western Canadian Sedimentary Basin ("WCSB"). These plants are expected to bring Pembina's net enhanced natural gas liquids ("NGL") extraction capacity to approximately 600 MMcf/d, which would be processed largely on a contracted, fee-for-service basis and result in approximately 45,000 bpd of incremental NGL to be transported for additional toll revenue on Pembina's conventional pipelines by the end of 2013, subject to regulatory approval. Pembina expects these expansions could contribute $75 million to $90 million of EBITDA annually, once fully operational (see "Forward-Looking Statements and Information").
  
  
• Pembina's Conventional Pipelines invested approximately $71.3 million during 2011, about 40 percent of which was spent to increase the capacity of its Drayton Valley system and to reactivate an existing lateral off of the Peace Pipeline system into the Edson area. This investment will allow Pembina to offer much-needed capacity for producers in these areas of the WCSB (see "Forward-Looking Statements and Information").
  
  
• The Company's Midstream & Marketing business unit began 2011 with a $57 million acquisition of land and storage assets in the Edmonton area. Acquiring these strategically located terminalling and storage facilities (called the Pembina Nexus Terminal) forms an important piece of Pembina's growth strategy by increasing its ability to provide new, customer-focused services while expanding its overall capabilities. Pembina is developing plans to further increase the interconnectivity of the terminal to enhance its offering to both upstream and downstream customers (see "Forward-Looking Statements and Information").
  
  
• Pembina's Board of Directors approved a $550 million capital spending plan for 2012, the largest in the Company's history. Pembina expects to target the majority of planned expenditures to its Gas Services and Conventional Pipelines businesses, including the previously announced expansion to its Northern NGL system as well as the Resthaven and Saturn gas plants (see "Forward-Looking Statements and Information").

"At Pembina, we believe in going the distance for our stakeholders by delivering on our promises - including generating value through accretive growth and providing a sustainable dividend over the long-term," said Bob Michaleski, Pembina's Chief Executive Officer. "Over the past few years, our team has gone above and beyond to unlock the full potential of our asset base by enhancing our service offering for our customers and, in turn, we have been able to generate substantial value for our shareholders. In 2011, our four business units demonstrated their ability to manage ongoing operations, improve operating margin and keep costs to customers competitive while aggressively pursuing new avenues for growth. This resulted in strong annual results for Pembina and more growth projects on the books than ever before. That, combined with Pembina's proposed acquisition of Provident - a successful and very well-managed company whose assets are complementary to our own - positions Pembina as a leader in the North American energy infrastructure sector. Pending completion of the acquisition, we plan on increasing our monthly dividend rate from $0.13 per share per month (or $1.56 annualized) to $0.135 per share per month (or $1.62 annualized) representing a 3.8 percent increase and reflecting our confidence in the significant operational and financial strength of the combined entity going forward."

Conference Call and Webcast

Pembina has scheduled a conference call and webcast to discuss its results today, February 15, 2012, at 3:00 p.m. MT (5:00 p.m. ET) for interested investors, analysts, brokers and media representatives.

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 February 22, 2012 at 11:59 p.m. ET.  To access the replay, please dial either 416-849-0833 or 855-859-2056 and enter the password 49667149.

A live webcast of the conference call can be accessed on Pembina's website at www.pembina.com under Investor Centre, Presentation & Events, or by entering http://event.on24.com/r.htm?e=402940&s=1&k=9D8E6A4149216A67A840C111A3B9CB07 in your web browser.  Shortly after the call, an audio archive will be posted on the website for 90 days.

Pembina Pipeline Corporation transports crude oil and natural gas liquids produced in Western Canada, owns and operates oil sands pipelines and has a growing presence in midstream & marketing and gas services sectors. Pembina's common shares and convertible debentures are traded on the TSX under the symbols PPL and PPL.DB.C respectively.

Non-GAAP Measures

Throughout this press release Pembina use the terms "adjusted earnings" (earnings before tax excluding hedging activities plus share of profit from equity accounted investees (before tax)), "EBITDA" (earnings before interest, taxes, depreciation and amortization), "adjusted cash flow from operating activities" (cash flow from operating activities plus employee future benefit contributions, change in non-cash working capital less employee future benefit expense, share-based payments, and an adjustment to accrual basis for interest and financing fees), and "operating margin" (gross profit less operating expense and product purchases) which are not recognized under Canadian GAAP. Management believes that in addition to earnings, EBITDA, adjusted earnings, adjusted cash flow from operating activities and operating margin are useful measures. They provide an indication of the results generated by Pembina's business activities prior to consideration of how activities were financed, how the results are taxed and measured. Investors should be cautioned, however, that EBITDA, adjusted earnings, adjusted cash flow from operating activities and operating margin should not be construed as an alternative to earnings, cash flows from operating activities or other measures of financial performance determined in accordance with GAAP as an indicator of Pembina's performance. Furthermore, these measures may not be comparable to similar measures presented by other issuers. For more information in respect to non-GAAP measures, see the section entitled "Non-GAAP Measures" in Pembina's management's discussion and analysis for the year ending December 31, 2011, which has been filed on Pembina's SEDAR profile at www.sedar.com and posted on Pembina's website at www.pembina.com.

Forward-Looking Statements & Information

The information contained in this press release contains certain forward-looking statements and information ("forward-looking statements") that are based on Pembina's current expectations, estimates, projections and assumptions in light of its experience and its perception of historical trends. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expects", "projects", "plans", "believes", "estimates", "maintain", "would", "strategy", "proposed", "pending", "potential", and similar expressions.

In particular, this press release contains forward-looking statements, including certain financial outlooks, regarding (i) the future levels of cash dividends that Pembina intends to pay to its shareholders, including Pembina's projections regarding an increase in the level of cash dividends pending successful closing of the Arrangement with Provident; (ii) the estimated future EBITDA contributions from the development of the proposed Resthaven Facility and the proposed Saturn Facility, once such projects are completed and fully operational; (iii) capital expenditure estimates, plans, schedules, rights and activities and the planning, development, construction, operations and costs of pipelines, gas service facilities, terminalling, storage and hub facilities and other facilities or energy infrastructure, including, but not limited to, in relation to the Pembina Nexus Terminal, the expansions at the Cutbank Complex's Musreau Gas Plant, the proposed Resthaven Facility and the proposed Saturn Facility, the expansion of throughput capacity on the Northern NGL System, potential expansion scenarios to accommodate production from the Pelican and Peace River heavy oil regions of Alberta, development plans to further increase the interconnectivity of the Pembina Nexus Terminal and Pembina's capital spending plan for 2012; (iv) the impact of Pembina's investment to increase the capacity of its Drayton Valley system and to reactivate an existing lateral off of the Peace Pipeline system into the Edson area; (v) the expected capacity of the proposed Resthaven Facility and the proposed Saturn Facility; (vi) expectations regarding in-service dates for new developments, including the Resthaven Facility and the Saturn Facility; and (vii) the Arrangement, including the requirements for shareholder and regulatory approvals, the obligations of Pembina in connection with the Arrangement, the anticipated benefits of the Arrangement and the anticipated characteristics of the company that will result from the Arrangement.

With respect to forward-looking statements and information contained in this document, Pembina has made assumptions regarding, among other things: ongoing utilization and future expansion, development, growth and performance of Pembina's business and asset base; future demand for oil sands transportation services; future levels of oil and natural gas development in proximity to Pembina's pipelines and other assets (which could be affected by, among other things, possible changes to applicable royalty and tax regimes); the amount of future liabilities related to environmental incidents; the availability of coverage under Pembina's insurance policies (including in respect of Pembina's business interruption insurance policy); capital expenditure estimates, plans, schedules, rights and activities and the planning, development, construction, operations and costs of pipelines and facilities, including in relation to the Musreau Deep Cut Facility, the shallow cut expansion, the Resthaven Facility and the Saturn Facility; expected project start-up and construction dates; the future levels of cash dividends that Pembina intends to pay to its shareholders, including the ability of Pembina to raise its cash dividends to equity holders pending successful closing of the Arrangement with Provident; future financing capability and sources; negative credit rating adjustments; the expansion of Midstream & Marketing services;  the success of Pembina's operations; prevailing commodity prices and exchange rates;  the availability of capital to fund future capital requirements relating to existing assets and projects, including but not limited to future capital expenditures relating to expansion, upgrades and maintenance shutdowns; future operating costs; in respect of the estimated future EBITDA contribution from Pembina's proposed Resthaven Facility and the proposed Saturn Facility and their estimated in-service dates: that all required regulatory and environmental approvals can be obtained on the necessary terms in a timely manner, that counterparties will comply with contracts in a timely manner, that there are no unforeseen events preventing the performance of contracts or the completion of such facilities, that such facilities will be fully supported by long-term firm service agreements accounting for the entire designed throughput at such facilities at the time of such facilities' completion, that there are no unforeseen construction costs related to the facilities, and that there are no unforeseen material costs relating to the facilities which are not recoverable from customers; in respect of the expansion of the Northern NGL System: that Pembina will receive regulatory approval, that Pembina will reach satisfactory long-term arrangements with customers with respect to the Northern NGL System, that counterparties will comply with contracts in a timely manner, that there are no unforeseen events preventing the performance of contracts by Pembina, that there are no unforeseen construction costs related to the expansion, and that there are no unforeseen material costs relating to the pipelines that are not recoverable from customers; in respect of the potential increase in Pembina's dividend following completion of the Arrangement: prevailing commodity prices, margins and exchange rates, that Pembina's and Provident's future results of operations will be consistent with past performance and management expectations in relation thereto, the continued availability of capital at attractive prices to fund future capital requirements relating to existing assets and projects, including but not limited to future capital expenditures relating to expansion, upgrades and maintenance shutdowns; the success of growth projects, future operating costs, that counterparties to material agreements will continue to perform in a timely manner, that there are no unforeseen events preventing the performance of contracts, and that there are no unforeseen material construction or other costs related to current growth projects or current operations; in respect of other developments, expansions and capital expenditures planned: that there are no unforeseen events preventing the performance of contracts by Pembina, that there are no unforeseen construction costs, and that there are no unforeseen material costs relating to the developments, expansions and capital expenditures which are not recoverable from customers, prevailing regulatory, tax and environmental laws and regulations; the receipt, in a timely manner, of regulatory, shareholder, Court and third party approvals in respect of the Arrangement; the satisfaction of conditions to closing of the Arrangement; and that the Arrangement Agreement will not be terminated prior to closing of the Arrangement.

Although Pembina believes the expectations and material factors and assumptions reflected in these forward-looking statements and information are reasonable as of the date hereof, there can be no assurance that these expectations, factors and assumptions will prove to be correct. Readers are cautioned that events or circumstances could cause results to differ materially from those predicted, forecasted or projected. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements and information.

None of the forward-looking statements contained in this press release are guarantees of future performance and are subject to a number of known and unknown risks and uncertainties, including, but not limited to: the regulatory environment and decisions and inability to obtain required regulatory approvals; the impact of competitive entities and pricing; labour and material shortages; reliance on key alliances and agreements; the strength and operations of the oil and natural gas production industry and related commodity prices; non-performance or default by counterparties to agreements which Pembina or one or more of its affiliates has entered into in respect of its business; actions by governmental or regulatory authorities including changes in tax laws and treatment, changes in royalty rates or increased environmental regulation; fluctuations in operating results; adverse general economic and market conditions in Canada, North America and elsewhere, including changes in interest rates, foreign currency exchange rates and commodity prices; the ability of Pembina to raise sufficient capital (or raise capital on favourable terms) to complete future projects and satisfy future commitments; constructions costs and construction delays; termination of the Arrangement Agreement prior to the closing of the Arrangement; that one or more conditions precedent to completion of the Arrangement, including regulatory, shareholder and Court approval, will not be satisfied; the failure to realize the anticipated benefits of the Arrangement; the failure to integrate the businesses of Pembina and Provident following closing of the Arrangement; and certain other risks detailed from time to time in Pembina's public disclosure documents available at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

The forward-looking statements and information contained in this document speak only as of the date of this document. Pembina does not undertake any obligation to publicly update or revise any forward-looking statements or information contained herein, except as required by applicable laws. The forward-looking statements and information contained in this document are expressly qualified by this cautionary statement.

Management of Pembina approved the financial outlook contained herein as of the date of this press release. The purpose of the financial outlook contained herein is to give the reader an indication of the value to Pembina of its future business opportunities, growth projects and acquisitions. Readers should be aware that the information contained in the financial outlook contained herein may not be appropriate for other purposes. 

Glenys Hermanutz, Vice President, Corporate Affairs
[phone]
1-888-428-3222
E-mail: [email protected]