Pembina Pipeline Corporation Reports Record Results for the Fourth Quarter 2023, Provides Business Update, and Declares Quarterly Common Share Dividend

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 fourth quarter and full year 2023.

Highlights

• Record Results – reported 2023 full year earnings of $1,776 million and record full year adjusted EBITDA of $3,824 million that exceeded the high-end of the Company’s original 2023 guidance range. Reported fourth quarter earnings of $698 million and record quarterly adjusted EBITDA of $1,033 million.

• Ethane Supply and Transportation Agreements – Pembina has entered into long-term agreements with Dow Chemical Canada (“Dow”) to supply and transport up to 50,000 barrels per day (“bpd”) of ethane to support their recently announced Path2Zero Project.

• Nipisi Pipeline Contracting – signed an incremental long-term contract on the recently reactivated Nipisi Pipeline, with line of sight to the asset being fully contracted by the end of 2024.

• Wapiti Expansion – Pembina Gas Infrastructure (“PGI”) has approved a $140 million (net to Pembina) expansion of the Wapiti Plant that will increase natural gas processing capacity by 115 million cubic feet per day (“mmcf/d”) (gross to PGI).

• Phase VIII Peace Pipeline Expansion – the estimated project cost has been further reduced to $430 million (previously $475 million; original budget of $530 million).

• Common Share Dividend – the board of directors declared a common share cash dividend for the first quarter of 2024 of $0.6675 per share, to be paid, subject to applicable law, on March 28, 2024, to shareholders of record on March 15, 2024.

• Strong Balance Sheet – at December 31, 2023 the ratio of proportionately consolidated debt-to-adjusted EBITDA was 3.3 times, below the low end of the Company’s targeted range.

Financial and Operational Overview

Financial and Operational Overview by Division

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 quarterly adjusted EBITDA of $1,033 million in the fourth quarter and record full year adjusted EBITDA of $3,824 million. This represents a $108 million or 12 percent increase, and a $78 million or two percent increase, respectively, over the same periods in the prior year. For both the fourth quarter and full year, reported adjusted EBITDA reflects strong performance in the Pipelines and Facilities divisions as Pembina continues to benefit from growing volumes and higher tolls on certain systems, as well as continued strong results from the marketing business.

Pipelines reported adjusted EBITDA of $617 million for the fourth quarter, representing a $69 million or 13 percent increase compared to the same period in the prior year, reflecting the net impact of the following factors:

• higher volumes on the Peace Pipeline system, Drayton Valley Pipeline, and on the recently reactivated Nipisi Pipeline;

• higher tolls primarily on the Cochin Pipeline and Peace Pipeline systems, largely related to contractual inflation adjustments; and

• lower contribution from the Alliance Pipeline, primarily due to lower interruptible tolls and volumes.

Pipelines reported adjusted EBITDA of $2,234 million for the full year, representing a $107 million or five percent increase compared to the same period in the prior year, reflecting the net impact of the following factors:

• higher contracted volumes and tolls on the Peace Pipeline system;

• higher tolls and the impact of a higher U.S. dollar exchange rate on the Cochin Pipeline;

• higher volumes on the Vantage Pipeline due to third party outages in 2022;

• reactivation of the Nipisi Pipeline;

• lower volumes and higher operating costs due to the Northern Pipeline system outage and the Alberta and British Columbia wildfires (the “Wildfires”); and

• lower contribution from the Alliance Pipeline, primarily due to the sale of linepack inventory in 2022, lower interruptible tolls and volumes, and seasonal contracts being replaced by firm contracts at lower regulated rates.

Facilities reported adjusted EBITDA of $324 million for the fourth quarter, representing a $36 million or 13 percent increase over the same period in the prior year, reflecting the net impact of the following factors:

• higher contribution from the PGI assets, primarily from the former Energy Transfer Canada plants, the Hythe Plant, and the Dawson Assets due to higher volumes; and

• higher revenue at Vancouver Wharves.

Facilities reported adjusted EBITDA of $1,213 million for the full year, representing a $76 million or seven percent increase over the same period in the prior year, reflecting the net impact of the following factors:

• higher contribution from the PGI assets, due to higher volumes primarily at the former Energy Transfer Canada plants, the Hythe Plant, and the Dawson Assets;

• a gain on the recognition of a finance lease; and

• lower volumes at the Redwater Complex and at Younger primarily due to the Northern Pipeline system outage.

Marketing & New Ventures reported adjusted EBITDA of $173 million for the fourth quarter, representing a $2 million or one percent increase compared to the same period in the prior year, reflecting the net impact of the following factors:

• higher contribution from Aux Sable;

• lower natural gas marketing margins due to the decrease in Chicago natural gas prices, as well as lower crude oil margins resulting from the lower prices across the crude oil complex, largely offset by higher NGL margins, primarily due to lower input natural gas prices and higher marketed NGL volumes; and

• realized losses on commodity-related derivatives in the fourth quarter of 2023 compared to realized gains in the fourth quarter of 2022.

Marketing & New Ventures reported adjusted EBITDA of $597 million for the full year, representing a $124 million or 17 percent decrease compared to the same period in the prior year, reflecting the net impact of the following factors:

• lower crude oil, NGL, and natural gas margins, resulting from a decrease in commodity prices;

• lower contribution from Aux Sable; and

• realized gains on commodity-related derivatives in 2023, compared to realized losses in 2022.

Corporate reported adjusted EBITDA of negative $81 million for the fourth quarter, which was largely consistent with the same period in the prior year. Results were impacted by higher incentive costs driven by Pembina’s share price performance and increased shared service revenue.

Corporate reported adjusted EBITDA of negative $220 million for the full year, representing an $19 million or eight percent increase over the same period in the prior year, reflecting the net impact of the following factors:

• lower general and administrative costs, net of increased shared service revenue; and

• lower long-term incentive costs.

Earnings

Pembina reported fourth quarter earnings of $698 million and full year earnings of $1,776 million. This represents a $455 million or 187 percent increase, and a $1,195 million or 40 percent decrease, respectively, over the same periods in the prior year.

Pipelines had reportable segment earnings before tax in the fourth quarter of $677 million, representing a $382 million or 129 percent increase over the prior period. In addition to the factors impacting adjusted EBITDA, as noted above, the change in reportable segment earnings before tax in the fourth quarter was due to the reversal of a previous impairment related to the Nipisi Pipeline, as well as the Ruby settlement provision and associated legal fees incurred in the fourth quarter of 2022.

Pipelines had reportable segment earnings before tax for the full year of $1,840 million, representing a $425 million or 30 percent increase over the prior year. In addition to the factors impacting adjusted EBITDA and the factors impacting fourth quarter reportable segment earnings before tax, as noted above, the change in reportable segment earnings before tax for the full year was due to higher depreciation.

Facilities had reportable segment earnings before tax in the fourth quarter of $143 million representing a $2 million or one percent decrease over the prior year. In addition to the factors impacting adjusted EBITDA, as noted above, the change in reportable segment earnings before tax in the fourth quarter was due to lower project write-offs recognized in the quarter, largely offset by higher depreciation.

Facilities had reportable segment earnings before tax for the full year of $610 million representing a $1,194 million or 66 percent decrease over the prior year. In addition to the factors impacting adjusted EBITDA, as noted above, the change in reportable segment earnings before tax for the full year was due to the $1.1 billion gain recognized on the PGI Transaction during the third quarter of 2022, partially offset by lower depreciation and lower project write-offs.

Marketing & New Ventures had reportable segment earnings before tax in the fourth quarter of $204 million representing a $108 million or 113 percent increase over the prior year. In addition to the factors impacting adjusted EBITDA, as noted above, the change in reportable segment earnings before tax in the fourth quarter was due to an unrealized gain on commodity-related derivatives compared to a loss in the fourth quarter of 2022, lower net finance costs due to decreased foreign exchange losses, and a change in the insurance contract provision in the period.

Marketing & New Ventures had reportable segment earnings before tax for the full year of $435 million representing a $273 million or 39 percent decrease, over the prior year. In addition to the factors impacting adjusted EBITDA, as noted above, the change in reportable segment earnings before tax in the full year was due to an unrealized loss on commodity-related derivatives compared to a gain in 2022, partially offset by lower net finance costs due to gains recognized on non-commodity related derivatives compared to losses in 2022.

In addition to the changes in reportable segment earnings before tax for each division discussed above, the change in fourth quarter earnings compared to the prior period was due to higher income tax expense due to higher earnings compared to the prior period, partially offset by the recognition of previously unrecognized deferred tax assets. The change in the full year earnings compared to the prior year was also primarily due to higher income tax expense due to the tax impact of the PGI Transaction in 2022.

Cash Flow From Operating Activities

Cash flow from operating activities of $880 million for the fourth quarter and $2,635 million for the full year represent a seven percent and ten percent decrease, respectively, over the same periods in the prior year.

The decrease in the fourth quarter was primarily driven by the change in non-cash working capital, higher taxes paid, and a decrease in payments collected through contract liabilities, partially offset by higher operating results.

The decrease in the full year was primarily driven by the change in non-cash working capital, lower operating results, a decrease in payments collected through contract liabilities, and higher share-based compensation payments, partially offset by higher distributions from equity accounted investees and lower taxes paid.

On a per share (basic) basis, cash flow from operating activities was $1.60 per share for the fourth quarter and $4.79 per share for the full year. This represents decreases of seven percent and ten percent, respectively, compared to the same periods in the prior year.

Adjusted Cash Flow From Operating Activities

Adjusted cash flow from operating activities of $747 million for the fourth quarter and $2,646 million for the full year, represent an eight percent increase and one percent decrease, respectively, over the same periods in the prior year.

The increase in the fourth quarter 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, partially offset by higher current income tax expense.

The decrease in the full year was primarily driven by the same items impacting cash flow from operating activities, discussed above, excluding the change in non-cash working capital, taxes paid, and share-based compensation payments, combined with higher current tax expense, partially offset by lower accrued share-based payment expense.

On a per share (basic) basis, adjusted cash flow from operating activities was $1.36 per share for the fourth quarter and $4.81 per share for the full year. This represents an increase of nine percent and no change, respectively, compared to the same periods in the prior year.

Volumes

Total volumes of 3,453 mboe/d for the fourth quarter and 3,306 mboe/d for the full year represent an increase of two percent and a decrease of two percent, respectively, over the same periods in the prior year.

Pipelines volumes of 2,652 mboe/d in the fourth quarter represent a two percent increase compared to the same period in the prior year, primarily reflecting the reactivation of the Nipisi Pipeline in the fourth quarter of 2023, higher contracted volumes on the Peace Pipeline system, as well as higher volumes on the Drayton Valley Pipeline.

Pipelines volumes of 2,538 mboe/d for the full year represent a one percent increase compared to the same period in the prior year, primarily reflecting higher contracted volumes on the Peace Pipeline system, the reactivation of the Nipisi Pipeline in the fourth quarter of 2023, and higher volumes on the Vantage Pipeline due to third-party outages in 2022, partially offset by lower volumes related to the Northern Pipeline system outage, and the impacts of the Wildfires.

Facilities volumes of 801 mboe/d in the fourth quarter were consistent with the same period in the prior year, reflecting higher volumes from PGI, primarily at the Hythe Gas Plant and at the Dawson Assets, largely offset by lower volumes at the Redwater Complex.

Facilities volumes of 768 mboe/d for the full year represent an 11 percent decrease compared to the same period in the prior year, reflecting the net impact of the following factors:

• the disposition of Pembina’s interest in the E1 and E6 assets in exchange for a processing agreement that provides Pembina with the right to first priority for gas processing at all Plains Midstream-operated assets at Empress;

• lower volumes at the Redwater Complex and at Younger resulting from the Northern Pipeline system outage and planned outages in the third quarter of 2023; and

• higher volumes from PGI, primarily at the former Energy Transfer Canada plants and at the Dawson Assets.

Excluding the impact of the disposition of Pembina’s interest in the E1 and E6 assets at Empress, the Northern Pipeline system outage, and the Wildfires, Facilities volumes would have increased by five percent in 2023 compared to the same period in the prior year.

Marketed NGL volumes of 217 mboe/d in the fourth quarter represents a 12 percent increase compared to the same period in the prior year, reflecting higher propane, ethane, and butane sales.

Marketed NGL volumes of 185 mboe/d in the full year were largely consistent 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 first quarter of 2024 of $0.6675 per share, to be paid, subject to applicable law, on March 28, 2024, to shareholders of record on March 15, 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 U.S. $0.4940 per share (before deduction of any applicable Canadian withholding tax) based on a currency exchange rate of 0.7401. 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

2023 results reflect the strength of Pembina’s business and are highlighted by record annual adjusted EBITDA of $3.8 billion that exceeded the high end of our original guidance range. These results reflect growing volumes across many systems and a strong contribution from the marketing business. While operations in the first half of the year were impacted by the Wildfires and the Northern Pipeline system outage, the second half of the year more accurately reflected the underlying positive momentum in the Western Canadian Sedimentary Basin (the “WCSB”). This is demonstrated most notably by the more than four percent year-over-year increase in second half volumes in the conventional pipelines business.

Progressing Pembina’s Strategy

In early 2023, Pembina outlined a strategy designed to ensure it remains resilient into the future. Guided by this strategy, we are working every day to strengthen our existing business to ensure we help meet the energy needs of today and maximize the value of oil and gas products from Western Canada by getting them to the best markets in the world. We also recognize that the future of energy will require lower emissions and new energy solutions – there is a tremendous opportunity for Pembina to leverage its existing core business to help meet that challenge. Furthermore, our strategy demonstrates the value we place on doing this important work in a way that benefits everyone that has a stake in Pembina’s business – our investors, customers, employees, and communities.

A highlight of the fourth quarter was the announcement of a $3.1 billion acquisition of Enbridge’s interests in Alliance, Aux Sable, and NRGreen joint ventures (the “Alliance/Aux Sable Acquisition”). Pembina’s business is built around integrated, difficult-to-replicate assets that provide an enduring competitive advantage and unequaled market access for customers. Alliance Pipeline and Aux Sable are world-class energy infrastructure assets and increasing our existing ownership in them will further strengthen our growing franchise. The Alliance/Aux Sable Acquisition complements Pembina’s strategy of providing access for world-class, long-life resources from the WCSB to premium end markets and increases exposure to lighter hydrocarbons, including natural gas and natural gas liquids. The Alliance/Aux Sable Acquisition is subject to the satisfaction or waiver of customary closing conditions, including the receipt of required regulatory approvals. The 30-day waiting period under U.S. Hart-Scott-Rodino Act has expired without any further queries from the applicable regulators. Pembina continues to expect the Alliance/Aux Sable Acquisition to close in the first half of 2024.

In 2023, Pembina further progressed its strategy by sustaining and enhancing our business through various previously disclosed accomplishments. These include signing new contracts on the Peace Pipeline system; signing new, or extending existing, contracts at the Redwater Complex; reactivating the Nipisi Pipeline; and approving new projects such as the 55,000 bpd RFS IV expansion, the expansion of the NEBC pipeline system, and a cogeneration facility at PGI’s Kaybob 3 Plant.

In addition, Pembina is pleased to provide the following business updates:

• PGI has approved an expansion (the “Wapiti Expansion”) that will increase natural gas processing capacity at the Wapiti Plant by 115 mmcf/d (gross to PGI). The Wapiti Plant is fully integrated into Pembina’s value chain and the liquids processed at the plant are transported on the Peace Pipeline system.

Contacts

Investor Relations

(403) 231-3156

1-855-880-7404

e-mail: [email protected]
www.pembina.com

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