An anonymous director reports

PEMBINA PIPELINE CORPORATION REPORTS RESULTS FOR THE FIRST QUARTER 2023 AND RAISES QUARTERLY COMMON SHARE DIVIDEND

Pembina Pipeline Corp. today released its financial and operating results for the first quarter of 2023.

Highlights

• First quarter results -- reported earnings of $369-million and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $947-million;
• Common share dividend increase -- the board of directors declared a common share cash dividend for the second quarter of 2023 of 66.75 cents per share, representing an increase of 2.3 per cent, to be paid, subject to applicable law, on June 30, 2023, to shareholders of record on June 15, 2023;
• KAPS -- the sale of Pembina Gas Infrastructure's (PGI) interest in the Key Access Pipeline System (KAPS) was completed on April 26, 2023;
• Cedar LNG -- during the quarter, Cedar LNG received its environmental assessment certificate from the British Columbia Environmental Assessment Office and a positive decision statement from the federal Minister of Environment and Climate Change;
• Guidance -- reiterated 2023 adjusted EBITDA guidance range of $3.5-billion to $3.8-billion;
• Strong balance sheet -- at March 31, 2023, the ratio of proportionately consolidated debt-to-adjusted EBITDA was 3.6 times and Pembina expects to exit the year with a ratio of 3.3 to 3.6 times.

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 Dec. 31, 2022, filed at SEDAR (filed with the U.S. Securities and Exchange Commission under Form 40-F) and on Pembina's website

Financial and operational highlights

Adjusted EBITDA

Pembina reported first quarter adjusted EBITDA of $947-million, representing a $58-million or 6-per-cent decrease over the same period in the prior year.

Pipelines reported adjusted EBITDA of $525-million for the first quarter, representing a $4-million or 1-per-cent increase compared with the same period in the prior year, reflecting the net impact of the following factors:

• Higher volumes and higher recoverable project costs on the Peace Pipeline system;
• Higher revenues from Cochin Pipeline, Vantage Pipeline and AEGS;
• Lower revenues and higher operating expenses resulting from the Northern Pipeline system outage;
• Lower adjusted EBITDA contribution from Ruby;
• Lower revenue related to recoverable costs on the Horizon Pipeline system in the first quarter of 2022.

Facilities reported adjusted EBITDA of $298-million for the first quarter, representing a $17-million or 6-per-cent increase over the same period in the prior year, reflecting the net impact of the following factors:

• The creation of PGI on Aug. 15, 2022, and stronger performance from certain gas processing assets, including the former Energy Transfer Canada (ETC) plants and the Dawson assets;
• Lower supply volumes at the Redwater complex as a result of the Northern Pipeline system outage.

The combined impact across pipelines and facilities from the Northern Pipeline system outage was approximately $54-million in the first quarter.

Marketing and new ventures reported adjusted EBITDA of $169-million for the first quarter, representing a $98-million or 37-per-cent decrease compared with the same period in the prior year, reflecting the net impact of the following factors:

• Lower NGL margins as a result of lower propane and butane prices and lower margins on crude oil resulting from the lower prices across the crude oil complex, coupled with lower marketed NGL volumes;
• Realized gains on commodity-related derivatives for the quarter compared with losses recognized during the first quarter of 2022;
• Lower contribution from Aux Sable as a result of lower NGL prices and recontracting in the fourth quarter of 2022.

Corporate reported adjusted EBITDA of negative $45-million for the first quarter, representing a $19-million or 30-per-cent increase compared with the same period in the prior year. The change over the prior period was the result of lower corporate general and administrative expense primarily due to lower long-term incentive costs, partially offset by higher information technology-related maintenance costs.

Earnings

Pembina reported first quarter earnings of $369-million, representing a $112-million or 23-per-cent decrease over the same period in the prior year.

Pipelines had reportable segment earnings before tax of $376-million, representing a $15-million or 4-per-cent increase compared with the same period in the prior year. The increase was attributable to the factors impacting adjusted EBITDA, as noted herein, excluding the lower contribution from Ruby.

Facilities had reportable segment earnings before tax of $135-million, representing a $115-million or 46-per-cent decrease over the same period in the prior year. In addition to the factors impacting adjusted EBITDA, as noted herein, the first quarter was negatively impacted by lower unrealized gains on commodity-related derivatives. Further, in the first quarter, the positive impacts captured in adjusted EBITDA from PGI were offset by interest expense on long-term debt, income tax expense and depreciation resulting from the PGI assets recorded at fair value, which are all included in share of profit from PGI following the PGI transaction.

Marketing and new ventures had reportable segment earnings before tax of $120-million, representing a $97-million or 45-per-cent decrease over the same period in the prior year. The decrease was largely due to the same items impacting adjusted EBITDA, discussed herein.

In addition to the changes in reportable segment earnings for each division discussed herein, the change in first quarter earnings compared with the prior period was due to the net impact of the following factors:

• Lower other expense largely as a result of lower acquisition fees incurred during the period;
• Lower income tax expense due to lower current period earnings and the tax impact of the PGI transaction.

Cash flow from operating activities

Cash flow from operating activities of $458-million for the first quarter represents a $197-million or 30-per-cent decrease compared with the same period in the prior year. The decrease was primarily driven by a decrease in the change in non-cash working capital due mainly to the Ruby settlement, lower operating results and higher share-based compensation payments, partially offset by a decrease in taxes paid and higher distributions from equity accounted investees.

On a per-share (basic) basis, cash flow from operating activities was 83 cents, representing a decrease of 30 per cent compared with the same period in the prior year.

Adjusted cash flow from operating activities

Adjusted cash flow from operating activities of $634-million for the first quarter represents a $66-million or 9-per-cent decrease compared with the same period in the prior year. The decrease was largely due to the same items impacting cash flow from operating activities, discussed herein, excluding the change in non-cash working capital, taxes paid and share-based compensation payments, partially offset by lower current tax expense and lower accrued share-based payments.

On a per-share (basic) basis, adjusted cash flow from operating activities was $1.15 per share, representing a decrease of 9 per cent compared 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 second quarter of 2023 of 66.75 cents per share, representing an increase of 2.3 per cent, to be paid, subject to applicable law, on June 30, 2023, to shareholders of record on June 15, 2023. 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 49.02 U.S. cents per share (before deduction of any applicable Canadian withholding tax) based on a currency exchange rate of 0.7344. 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 and business update

First quarter results and 2023 outlook

First quarter results reflect continued strength in the Western Canadian sedimentary basin (WCSB) and growing demand for services from customers.

First quarter volumes across the conventional pipelines were consistent with the same period in the prior year as volume growth from rising industry activity sufficiently offset the impact of the Northern Pipeline system outage. For the full year 2023, Pembina is forecasting approximately four to 6-per-cent growth in conventional pipelines volumes, with the volume profile building quarterly throughout the year.

Based on first quarter results and the outlook for the remainder of the year, Pembina is reiterating its 2023 adjusted EBITDA guidance range of $3.5-billion to $3.8-billion. Excluding the contribution from the marketing and new ventures segment, the mid-point of the guidance range reflects an approximately 4-per-cent increase in adjusted EBITDA relative to 2022. Pembina's fee-based business is expected to benefit from growing volumes and increasing utilization across its assets in the WCSB, and higher tolls. The reiterated guidance range includes the impact of the Northern Pipeline system outage and widening frac spreads due to lower natural gas prices.

In 2023, cash flow from operating activities is expected to exceed dividends and capital expenditures. Pembina regularly evaluates the merits of debt repayment relative to share repurchases over the course of the year, taking into account prevailing market conditions and risk-adjusted returns. Pembina currently expects excess free cash flow in 2023 to be used to pay down debt, further strengthening the balance sheet and preparing the company to finance future capital projects. In support of maintaining flexibility to optimize capital allocation, the Toronto Stock Exchange accepted Pembina's renewal of its normal course issuer bid during the quarter. At March 31, 2023, the ratio of proportionately consolidated debt-to-adjusted EBITDA was 3.6 times and Pembina expects to exit the year with a ratio of 3.3 to 3.6 times, supporting a strong BBB credit rating.

About Pembina Pipeline Corp.

Pembina is a leading energy transportation and mid-stream service provider that has served North America's energy industry for more than 65 years. Pembina owns an integrated network of hydrocarbon liquids and natural gas pipelines, gas gathering and processing facilities, oil and natural gas liquids infrastructure and logistics services, and a growing export terminals business. Through its integrated value chain, Pembina seeks to provide safe and reliable infrastructure solutions that connect producers and consumers of energy across the world, support a more sustainable future, and benefit its customers, investors, employees and communities.

Pembina's common shares trade on the Toronto Stock Exchange and New York Stock Exchange under PPL and PBA, respectively.