An anonymous director reports

PEMBINA PIPELINE CORPORATION REPORTS RESULTS FOR THE SECOND QUARTER 2023 AND DECLARES QUARTERLY COMMON SHARE DIVIDEND

Pembina Pipeline Corp. has released its financial and operating results for the second quarter of 2023.

Highlights

• Second quarter results -- reported earnings of $363-million and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $823-million;
• Guidance -- 2023 adjusted EBITDA guidance range has been narrowed to $3.55-billion to $3.75-billion (previously $3.5-billion to $3.8-billion);
• Cedar LNG -- Cedar LNG has received its LNG facility permit from the British Columbia energy regulator. In addition, Cedar LNG has signed incremental non-binding memorandums of understanding and is fully subscribed in relation to the project's total capacity. A final investment decision is now expected in the fourth quarter of 2023;
• Environmental, social and governance (ESG) -- in June, Pembina released its 2022 sustainability report, which provides updates on key ESG focus areas and its continued progress toward ESG targets;
• Common share dividend -- the board of directors declared a common share cash dividend for the third quarter of 2023 of 66.75 cents per share, to be paid, subject to applicable law, on Sept. 29, 2023, to shareholders of record on Sept. 15, 2023;
• Common share repurchases -- during the second quarter, Pembina repurchased approximately 1.2 million common shares at a total cost of $50-million;
• Strong balance sheet -- at June 30, 2023, the ratio of proportionately consolidated debt-to-adjusted EBITDA was 3.5 times and Pembina expects to exit the year with a ratio of 3.4 to 3.6 times. During the quarter, Pembina paid down approximately $450-million of proportionately consolidated debt, using proceeds from the sale of PGI's interest in the Key Access Pipeline System (KAPS) and cash flow from operating activities.

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 website under Form 40-F) and on Pembina's website.

Financial and operational highlights

Adjusted EBITDA

Pembina reported second quarter adjusted EBITDA of $823-million, representing a $26-million or 3 per cent decrease over the same period in the prior year.

Second quarter results reflect the resilience of Pembina's business, the benefit of continued growth in volumes and higher tolls on certain systems, and a solid contribution from the crude oil marketing business, offset by the typical seasonality in Pembina's NGL (natural gas liquid) marketing business and lower NGL prices in the quarter. In addition, second quarter results reflect the impact of wildfires in Alberta and British Columbia on Pembina's and its customer's operations; the impact of third party outages; and reduced operating pressure on the Northern Pipeline system until mid-May. The impacts to second quarter adjusted EBITDA from the reduced operating pressure on the Northern Pipeline system and wildfires were approximately $23-million and $24-million, respectively. Finally, second quarter results also include various other revenue deferrals and costs with an aggregate impact of $21-million to adjusted EBITDA.

Earnings

Pembina reported second quarter earnings of $363-million, representing a $55-million or 13-per-cent decrease over the same period in the prior year.

Pipelines had reportable segment earnings before tax of $350-million, representing a $32-million or 8-per-cent decrease compared to the same period in the prior year. The decrease was attributable to the factors impacting adjusted EBITDA, as noted herein.

Facilities had reportable segment earnings before tax of $153-million, representing a $6-million or 4-per-cent increase over the same period in the prior year. In addition to the factors impacting adjusted EBITDA, as noted herein, the second quarter was positively impacted by lower depreciation, including the impact of the PGI transaction.

Marketing and new ventures had reportable segment earnings before tax of $115-million, representing a $20-million or 15-per-cent decrease over the same period in the prior year. In addition to the items impacting adjusted EBITDA discussed herein, the decrease was related to the lower unrealized gain on commodity-related derivatives and lower net finance costs.

In addition to the changes in reportable segment earnings for each division discussed herein, the change in second quarter earnings compared with the prior period was due to the net impact of higher other expenses and higher shared service revenue related to shared service agreements with joint ventures following the PGI transaction.

Cash flow from operating activities

Cash flow from operating activities of $653-million for the second quarter represents a $49-million or 8-per-cent increase compared to the same period in the prior year. The increase was primarily driven by an increase in the change in non-cash working capital, higher distributions from equity accounted investees and lower taxes paid, partially offset by lower operating results and a decrease in payments collected through contract liabilities.

On a per-share (basic) basis, cash flow from operating activities was $1.19 per share, representing an increase of 9 per cent compared to the same period in the prior year.

Adjusted cash flow from operating activities

Adjusted cash flow from operating activities of $606-million for the second quarter represents a $77-million or 11-per-cent decrease compared to the same period in the prior year. The decrease was largely due to the same items impacting cash flow from operating activities, discussed earlier, excluding the change in non-cash working capital and taxes paid, combined with higher current tax expense, partially offset by lower accrued share-based compensation payments.

On a per-share (basic) basis, adjusted cash flow from operating activities was $1.10 per share, representing a decrease of 11 per cent compared with the same period in the prior year.

Volumes

Total volumes of 3,187 mboe/d (thousand barrels of oil equivalent per day) for the second quarter represent a decrease of approximately 5 per cent over 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 third quarter of 2023 of 66.75 cents per share, to be paid, subject to applicable law, on Sept. 29, 2023, to shareholders of record on Sept. 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.

Executive overview

In the second quarter, Pembina faced challenges associated with wildfires throughout Alberta and British Columbia. The impact was felt across the industry as roughly two billion cubic feet per day of natural gas production was temporarily shut in. The company is pleased not to have incurred any material fire-related damage to its assets and all employees and contractors in the affected areas were kept safe while the company worked to ensure they received the personal and professional support they needed. Pembina extends its sincere thanks to its staff and emergency response teams, customers and industry partners, as well as all emergency personnel for their diligent response to the wildfires.

In addition, in mid-May, following approval from the Alberta energy regulator, Pembina safely resumed normal service on the Northern Pipeline system at full operating rates.

Notwithstanding the short-term impacts of the wildfires and the Northern Pipeline system outage on Pembina and the broader industry, the outlook for the Western Canadian sedimentary basin (WCSB) remains promising. Pembina's operations have returned to normal and through the first month of the third quarter volumes have been strong, reflecting levels from earlier in the year, prior to the Northern Pipeline system outage and the wildfires. The company expects continued volume growth throughout the second half of 2023, including in the conventional pipelines business where full year volumes are expected to be 4-per-cent higher than the prior year. Further, volume growth is expected to continue through the rest of the decade based on certain industry-wide developments, including most notably additional egress through various West Coast LNG projects and the TransMountain Pipeline expansion; production growth in the Montney, Duvernay and Clearwater; and an expansion of Alberta's petrochemical industry. Given its existing asset base, integrated value chain, contractual agreements and deep customer relationships, Pembina is poised to capture new volumes and benefit from increasing asset utilization and growth projects.

Pembina has narrowed its 2023 adjusted EBITDA guidance range to $3.55-billion to $3.75-billion (previously $3.5-billion to $3.8-billion).The revised range reflects year-to-date results, an expectation of stronger volumes in the second half of the year and the current outlook for commodity prices.

During the second quarter, consistent with the company's record of disciplined capital allocation, Pembina paid down approximately $450-million of proportionately consolidated debt, using proceeds from the sale of PGI's interest in the KAPS and cash flow from operating activities. Pembina also repurchased approximately 1.2 million common shares at a total cost of $50-million.

Full year 2023 cash flow from operating activities is expected to exceed dividend payments and capital expenditures and the common share repurchases to date. Pembina will continue to evaluate the merits of debt repayment relative to additional share repurchases, taking into account prevailing market conditions and risk-adjusted returns, as well as the need to finance future capital projects.

At June 30, 2023, the ratio of proportionately consolidated debt-to-adjusted EBITDA was 3.5 times and Pembina expects to exit the year with a ratio of 3.4 to 3.6 times, supporting a strong BBB credit rating.

Environmental, social and governance

During the quarter, Pembina released its 2022 sustainability report, which provides updates on the advances made in the ESG focus areas of Governance, Energy Transition & Climate, Employee Well-being & Culture, Health & Safety, Responsible Asset Management, and Indigenous & Community Engagement.

Second quarter 2023 conference call and webcast

Pembina will host a conference call on Friday, Aug. 4, 2023, at 8 a.m. MT (10 a.m. ET) for interested investors, analysts, brokers and media representatives to discuss results for the second quarter of 2023. The conference call dial-in numbers for Canada and the U.S. are 416-764-8658 or 888-886-7786. A recording of the conference call will be available for replay until Friday, Aug. 11, 2023, at 11:59 p.m. ET. To access the replay, please dial either 416-764-8692 or 877-674-7070 and enter the password 170209 followed by the pound key.

A live webcast of the conference call can be accessed on Pembina's website under investor centre/ presentation and events. Shortly after the call, an audio archive will be posted on the website for a minimum of 90 days.

About Pembina Pipeline Corp.

Pembina Pipeline 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 an export terminals business. Through its integrated value chain, the company seeks to provide safe and reliable energy solutions that connect producers and consumers across the world, support a more sustainable future, and benefit the company's customers, investors, employees and communities.

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