Pembina Pipeline Corporation growth plan achieves major milestones

Year-over-year financial gains support future expansion

All financial figures are in Canadian dollars unless noted otherwise. This news release 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 page 6 for more information. This news release also refers to financial measures that are not defined by Canadian generally accepted accounting principles ("GAAP"). For more information about these non-GAAP measures please see page 5.

Pembina Pipeline Corporation's common shares and 7.35 percent convertible debentures commenced trading on the Toronto Stock Exchange ("TSX") on October 5, 2010 under the symbols PPL and PPL.DB.B respectively. From September 4, 1997 to September 30, 2010, Pembina Pipeline Corporation was wholly-owned by the Pembina Pipeline Income Fund (the "Fund"); (collectively, Pembina Pipeline Corporation and the Fund are referred to as "Pembina"). This news release reflects the financial and operating performance for the three and nine months ending September 30, 2010, and as such references made in this document primarily reflect the Fund. The Fund's Trust Units and convertible debentures were previously traded on the TSX under the symbols PIF.UN and PIF.DB.B respectively.

CALGARY, Nov. 3 /CNW/ - Pembina Pipeline Corporation ("Pembina") announced today that it had achieved several important growth milestones during the third quarter of 2010, making significant progress on projects that are expected to boost net earnings and cash flow from operating activities next year. In addition, the company's year-to-date financial performance provides a strong foundation for future growth projects that Pembina is actively pursuing.

"Pembina is a hub of activity right now. All our growth projects are on budget, on schedule and on track to deliver long-term investor value," said Bob Michaleski, President and Chief Executive Officer. "Just as importantly, our businesses are delivering the financial returns that enable us to pursue our existing, and future, growth plans with confidence."

Revenue, net of product purchases, during the third quarter of 2010 was $123.7 million, compared to $131.1 million during the same period in 2009, a result of tighter margins in Pembina's Midstream & Marketing business. This was offset by gains generated by each of Pembina's other three business units. Conventional Pipelines, Oil Sands & Heavy Oil, and Gas Services all realized modest improvements in revenue during the third quarter of 2010 over the third quarter of 2009. During the first nine months of 2010, Pembina generated revenue, net of product purchases, of $385.1 million, compared to $368.2 million in the first nine months of 2009.

"Our Conventional Pipelines and Gas Services businesses realized improved revenues despite being challenged by continued commodity price volatility, wet weather that impacted our customers' production levels and pipeline apportionments that restricted transportation volumes," said Michaleski. "Going forward, I expect the fourth quarter will produce results that will approximate those generated during the first half of the year. Oil prices appear to be stabilizing in the $80 US/barrel range, there's an increase in drilling activity in the Western Canadian Sedimentary Basin from this time last year and a strong demand for natural gas liquids that benefits our integrated operations."

Operating expenses were $38.7 million during the third quarter of 2010, compared to $39.6 million during the same period in 2009. During the first nine months of 2010, operating expenses were $116 million, compared to $119.5 million during the first nine months of 2009. Lower operating expenses during the quarter partially offset the decline in revenues, bringing net operating income to $85 million during the third quarter of 2010, compared to $91.5 million during the same time period in 2009. Year-to-date net operating income totaled $269.1 million, compared to $248.7 million generated during the nine months ended September 30, 2009.

Net earnings were $42.9 million ($0.26 per Trust Unit) in the third quarter of 2010, compared to $44.7 million ($0.29 per Trust Unit) during the third quarter of 2009. For the nine months ended September 30, 2010, net earnings totaled $135.2 million ($0.83 per Trust Unit), compared to $109.2 million ($0.75 per Trust Unit) during the same period in 2009.

Cash flow from operating activities during the third quarter of 2010 was $65.7 million ($0.40 per Trust Unit), compared to $62.2 million ($0.40 per Trust Unit) during the same time period the year before. Year-to-date cash flow from operating activities was $201.2 million ($1.23 per Trust Unit), compared to $152.6 million ($1.04 per Trust Unit) during the same nine months in 2009.

Distributed cash was $64.0 million during the third quarter of 2010, representing a quarterly payment of $0.39 per Trust Unit ($0.13 per Trust Unit monthly), compared to $60.2 million in the third quarter of 2009 (no change in per Trust Unit payments). Distributed cash year-to-date totaled $190.6 million, compared to $170.9 million during the first nine months of 2009.

Pembina's payout ratio for the third quarter 2010 was 108.3 percent, compared to 90.9 percent during the same period in 2009. On a year-to-date basis, the payout ratio was 99.6 percent in 2010, compared to 96.5 percent during the same nine month period in 2009. The increase in the third quarter of 2010 was due to increased Trust Units outstanding and the overall increase in distributions, and was in line with management's expectations. Pembina calculates the payout ratio as the percentage of distributable cash (prior to distribution reserve adjustments) that is distributed to unitholders. See "Non-GAAP Measures" and "Forward-Looking Statements & Information" on pages 5 and 6.

Growth Strategy Update

Nipisi & Mitsue Pipeline Projects

With engineering on both projects complete, construction on the Nipisi and Mitsue Pipeline projects is well underway. Right-of-way clearing for the Mitsue Pipeline between Whitecourt and Judy Creek, Alberta is complete, pipeline grading and stringing is more than 50 percent complete and contractors are in the final stages of a horizontal directional drill on the Athabasca River.

While the bulk of the Nipisi Pipeline construction will begin after freeze up, all construction contracts for the project have been awarded and work crews are mobilizing. Pump station construction is also progressing, with 40 percent of the fabrication complete and civil and mechanical work expected to be done before year end.

"We've identified several opportunities to advance construction, which allows us to keep our schedules on track and reduce some of the potential challenges winter weather can create," said Michaleski. "Both projects remain within budget and on schedule and we expect to see the pipelines placed into service mid-2011."

When complete, the pipeline projects are estimated to cost a combined total of $440 million. Based on certain assumptions, Pembina's internal projections estimate the two pipelines together will generate approximately $45 million per annum in net operating income once fully operational (see "Forward-Looking Statements & Information" on page 6).

This expected rate of return reflects the base case for both pipeline projects. "Further value," said Michaleski, "is expected through expansion."

The Nipisi Pipeline can be expanded to 200,000 barrels per day ("bpd") from its current design rate of 100,000 bpd while the Mitsue Pipeline can be expanded to 45,000 bpd from its current design rate of 20,000 bpd. Long-term contracts that would support expansion are being negotiated with potential customers and investment decisions by Pembina are pending. Expansion plans would require regulatory approval, which Pembina will pursue once customer support has been solidified.

"Both Nipisi and Mitsue utilize existing infrastructure and our customers know this can provide them with significant benefits," said Michaleski. "A combination of new construction and reutilizing existing infrastructure helps keep capital costs down and enables us to deliver additional transportation options in a very reasonable time frame."

The Nipisi Pipeline, which transports diluted heavy oil, will run from north of the Town of Slave Lake, Alberta to Judy Creek, Alberta. From there it will connect to an existing pipeline system that delivers products to the Edmonton, Alberta, area. The Mitsue Pipeline is being built to transport condensate (a light hydrocarbon used to dilute heavy oil) from Whitecourt, Alberta to producers operating north of the Town of Slave Lake, Alberta.

Enhanced NGL Extraction

Subsequent to the end of the third quarter, Pembina initiated construction of an enhanced natural gas liquids ("NGL") extraction facility at its Cutbank Complex as well as a 10-kilometre pipeline to deliver the incremental NGL to Pembina's Peace Pipeline. Pembina expects all of the facility's 14,400 bpd extraction capacity will be contracted under terms designed to provide Pembina with cash flow certainty, which reduces the company's exposure to commodity price risk. To date, Pembina has secured an anchor contract with a customer for the majority of the planned capacity at the facility. Further contracts for the remaining capacity are expected to be in place by the facility's mid-2011 in-service date.

"The low natural gas price environment has put a renewed spotlight on the value of natural gas liquids," said Michaleski. "Pembina is structured to extract these liquids and cost-effectively transport them to the marketplace. Other projects like this one are expected in the future. We're receiving lots of interest about potential gathering, processing and pipeline connections that our integrated business model is well suited to serve."

Pembina's priority is to pursue investments that are located near long-life economic hydrocarbon reserves that generate strong returns for the long-term. "This region (Deep Basin, Alberta) has significant supply potential and new technologies are driving production costs down and recovery rates up while the high liquids content creates significant value for customers and integration opportunities for Pembina," said Michaleski. "Our Conventional Pipelines business can transport the NGL, while there's opportunity for our Midstream & Marketing operations to provide additional services for the new volumes."

Cardium Development

Subject to receiving regulatory approval, Pembina plans to spend approximately $40 million over the next 18 months on projects to strengthen the transportation service options it provides producers developing the Cardium oil formation located in central Alberta.

Expansion plans include spending approximately $23 million to increase the capacity of an existing 42 kilometre section of pipeline that transports crude oil between Willesden Green and Buck Creek, Alberta. This expansion is expected to enable Pembina to add an incremental 25,000 bpd to the current capacity of 12,000 bpd by mid-2011. In addition, Pembina plans to spend approximately $6 million to extend segments of its Drayton Valley trunk line and approximately $11 million to debottleneck existing pipeline systems and construct truck terminals in the region.

"We see significant, long-term opportunities associated with the Cardium oil formation," said Michaleski. "We've been talking to area producers about their current and future transportation needs and we've conducted our own third-party assessment of the geology to help determine where the promising locations for production may be. This is definitely an area where we expect to see increased demand for our services."

Capacity additions, tie-ins, connections and most upgrades can be achieved with modest investments, enabling Pembina to cost-effectively transport new production to market for its customers. Pembina is actively marketing its competitive advantages and is working with producers to assess the transportation needs that are expected to arise from these opportunities.

Pembina has been operating in the Cardium area since the 1950s and its Drayton Valley pipeline system, much of its Midstream & Marketing business, and segments of its Peace Pipeline System overlay much of this formation. The company is named after the Pembina Oil Field. Discovered in 1953, the Pembina field is, according to various industry and government sources, estimated to contain 10 billion barrels of oil. Only 1.5 billion barrels have been produced to date because resource plays were, in the past, cost prohibitive. New horizontal drilling, multi-stage fracturing technology has the potential to cost-effectively unlock a substantial amount of incremental oil production with estimates ranging from 1.5 billion to 2.5 billion barrels.

"New technologies are changing the outlook for the conventional oil industry and creating new prospects for Pembina," said Michaleski. "Our strategically located assets enable us to provide transportation service with relatively little incremental capital investment. It may take some time for that production to ramp up, but by readying ourselves now, we expect to maximize the opportunity the Cardium presents."

Corporate Conversion

Effective October 1, 2010, Pembina converted to a dividend-paying corporate entity. Pembina's common shares and convertible debentures commenced trading on the TSX on October 5, 2010 under the symbols "PPL" and "PPL.DB.B", respectively. The Fund's Trust Units and convertible debentures ("PIF.UN", "PIF.DB.B") were de-listed by the TSX that same day. By converting to a corporation, Pembina has avoided the imposition of specified-investment flow through ("SIFT") tax applicable beginning in 2011. Pembina expects conversion to also provide greater access to capital markets, improved liquidity and greater flexibility to pursue growth and expansion.

"Completing corporate conversion is a key step in Pembina's growth strategy and our plans to strengthen our financial performance, maintain our highly competitive dividend and build the long-term value of our shares," said Michaleski. Based on certain assumptions and expectations, Pembina expects to maintain its current level of cash distributions as a dividend of $1.56 per share per year (payable monthly at $0.13 per share) through 2013 (see "Forward-Looking Statements & Information" on page 6).

Conference Call & Webcast

Pembina will host a conference call and webcast on Wednesday, November 3rd at 2 p.m. MT (4 p.m. ET) for interested investors, analysts, brokers and media representatives to discuss the third quarter financial and operating results.

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 November 9, 2010 at 11:59 p.m. ET. To access the replay, please dial either 416-849-0833 or 800-642-1687 and enter the password 89681013.

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=247970&s=1&k=F8CEE25E1867785FC6C9AF77F7F5D652 in your web browser. Shortly after the call, an audio archive will be posted on the website for 90 days.

MD&A, Financial Statements & Notes

Pembina's management's discussion and analysis, consolidated financial statements and notes for the period ended September 30, 2010 provide a detailed explanation of Pembina's operating results for the three and nine month period ended September 30, 2010 as compared to the three and nine month period ended September 30, 2009. These documents are available at www.pembina.com and at www.sedar.com.

Non-GAAP Measures

Throughout this news release Pembina use the terms "net operating income" (revenue less operating expenses and product purchases), "distributed cash" (the amount of cash that has been or is to be distributed to unitholders), "distributable cash per trust unit" (cash flow from operating activities less pension and post retirement benefit expense net of contributions, net changes in non-cash working capital, trust unit based compensation expense and amortization of financing fees on a per trust unit level), and "payout ratio" (distributed cash to unitholders divided by its distributable cash at the end of a period) which are not recognized under Canadian generally accepted accounting principles ("GAAP"). Management believes that, in addition to earnings, net operating income is a useful measure as it is used to assess the performance of specific business units before general and administrative expenses and other non-operating expenses. Distributed cash is a measure Pembina uses to manage its business and is commonly used by management, along with other measures, to determine payout ratio. Distributable cash is a non-GAAP measure Pembina uses to manage its business and to assess future cash requirements that impact the determination of future distributions to unitholders. Payout ratio is a measure, in combination with other measures, used by management and the investment community to assess the sustainability of cash distributions. These measures, together with other measures, are also used by management and the investment community to assess the source and sustainability of cash distributions. Investors should be cautioned, however, that net operating income, distributed cash, distributable cash per trust unit and payout ratio should not be construed as an alternative to net 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 further information about Pembina's use of non-GAAP measures, see the third quarter report available on www.pembina.com and www.sedar.com.

Forward-Looking Statements & Information

Certain statements contained in this news release constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation (collectively, "forward-looking statements").

All forward-looking statements are based on Pembina's current expectations, estimates, projections, beliefs and assumptions based on information available at the time the statement was made and in light of its experience and its perception of historical trends. The use of any of the words "estimate", "expect", "may", "will", "believe", "plan", "anticipate", "design", "maintain", "schedule", "potential" and similar expressions are intended to identify forward-looking statements.

By their nature, such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Pembina believes the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of the news release.

In particular, this news release contains forward-looking statements, including certain financial outlook, pertaining to the following:

    
    -   the ability of Pembina to maintain its current level of cash dividends
to
        equity holders through 2013;
    -   the estimated future net operating income contributions from the
Nipisi and
        Mitsue Pipelines, once such projects are completed;
    -   capital expenditure estimates, plans, schedules, rights and activities
and the
        planning, development, construction, operations and costs of
pipelines,
        including in relation to the Nipisi and Mitsue Pipeline projects, the
proposed
        NGL extraction facility at the Cutbank complex, facilities and other
energy
        infrastructure;
    -   pipeline system operations and throughput levels;
    -   oil and gas industry exploration and development activity levels;
    -   Pembina's strategy and the development of new business initiatives;
and
    -   expectations regarding Pembina's ability to raise capital and to carry
out
        acquisition, expansion and growth plans.
    

These forward-looking statements are being made by Pembina based on certain assumptions that Pembina has made in respect thereof as at the date of this document including those discussed under the section entitled "Forward-Looking Statements and Information" in the Q3 2010 MD&A.

None of the forward-looking statements described above are guarantees of future performance and they are all subject to a number of known and unknown risks and uncertainties, including but not limited to:

    
    -   the regulatory environment and decisions;
    -   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;
    -   continued adverse general economic and market conditions and further
changes
        thereto in Canada, North America and elsewhere, including changes in
interest
        rates, foreign currency exchange rates and commodity prices; and
    -   other factors discussed under "Risk Factors" in Pembina's Management's
        Discussion and Analysis for the year ended December 31, 2009 and in
Pembina's
        current Annual Information Form available under Pembina's profile at
        www.sedar.com.
    

Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted, forecasted or projected. Such forward-looking statements are expressly qualified by the above statement. Unless required by law, Pembina does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

For additional detail and information, please see Pembina's public disclosure documents, including Pembina's annual information form for the year ended December 31, 2009 and Pembina's MD&A for the year ended December 31, 2009, each of which can be found under Pembina's SEDAR profile at www.sedar.com.

For further information: Glenys Hermanutz, Vice President, Corporate Affairs, Pembina Pipeline Corporation, [phone], 1-888-428-3222, e-mail: [email protected]