2017 was a very successful year for Pembina. We continued to deliver stable and growing financial and operational performance, setting new records for volumes and key financial performance metrics. We also set in motion plans to secure our next phase of growth, operated safely and reliably and further enhanced our already strong relationships with the communities where we live, work and play.

We invite you to learn more by exploring this page and downloading our annual documents.

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2017 Highlights

Messages to Shareholders

Read what Randy Findlay, Pembina's Chairman of the Board and Mick Dilger, Pembina's President & CEO have to say about our 2017 results and the future of our Company.  

Read the Letters Now

 

2017 Financial Highlights


The table below summarizes the financial performance of Pembina during 2017 compared to 2016. For a detailed description and analysis of Pembina's financial and operating results, please see the PDF files posted at the bottom of this page.

 
($ millions, except where noted) 2017 2016
Revenue 5,408 4,265
Net revenue(1) 2,246 1,764
Operating margin(1) 1,930 1,357
Gross profit 1,482 1,002
Earnings 891 466
Adjusted EBITDA(1) 1,705 1,189
Cash flow from operating activities 1,513 1,077
Adjusted cash flow from operating activities(1) 1,396 986
Common share dividends declared 873 737
Preferred share dividends declared 83 69
Capital expenditures 1,839 1,745
Acquisition 6,400 566
 

Per share metrics
 
  2017 2016
Earnings per common share – basic (dollars) 1.89 1.02
Cash flow from operating activities per common share – basic (dollars)(1) 3.55 2.78
Adjusted cash flow from operating activities per common share – basic (dollars)(1) 3.27 2.54
Dividends per common share (dollars) 2.04 1.90
(1)  Refer to "Non-GAAP Measures" in the PDF of Pembina's 2017 Annual Report.
 

Business Overview

12 Months Ended
December 31
  2017 2016
Conventional Pipelines revenue volumes (mbpd)(1) 757 650
Oil Sands & Heavy Oil contracted capacity (mbpd) 1,060 975
Gas Services revenue volumes net to Pembina (mboe/d) (1)(2) 176 139
Midstream NGL sales volumes (mbpd) 145 143
Veresen (mboe/d)(2)(3) 162 -
Total volume (mboe/d) 2,300 1,907
 

12 Months Ended
December 31
  2017   2016  
($ millions, except where noted) Revenue(5)(6) Operating Margin(3) Revenue (4) Operating Margin (3)
Conventional Pipelines 884 656 719 494
Oil Sands & Heavy Oil 210 144 202 140
Gas Services(5) 365 276 271 195
Midstream(5) 772 631 572 518
Veresen(4)(6) 116 214
Corporate 9 10
Total 2,347 1,930 1,764 1,357
 
(1)  Revenue volumes are equal to contracted and interruptible volumes.
(2)  Gas Services revenue volumes converted to mboe/d from MMcf/d at 6:1 ratio.
(3)  Refer to "Non-GAAP Measures."

(4)  Pembina's operational and financial results do not include the operating and financial results of the Veresen Acquisition for the first nine months ended September 30, 2017 and for the year ending December 31, 2016, since the Acquisition was completed following the end of the third quarter of 2017, on October 2, 2017.
(5)  The amounts presented for Midstream and Gas Services consist of net revenue (revenue less cost of goods sold including product purchases). Refer to "Non-GAAP Measures."
(6)  The figure presented in the table above represents the share of profit of investments in equity accounted investees.

Conventional Pipelines

Pembina's Conventional Pipelines business comprises a strategically located pipeline network of approximately 10,000 kilometers, inclusive of expansion projects discussed below that are currently under development. This network transports hydrocarbon liquids and extends across much of Alberta and parts of B.C., Saskatchewan and North Dakota. The primary objectives of this business are to provide safe, responsible, reliable and cost-effective transportation services for customers, pursue opportunities for increased throughput, and maintain and/or grow sustainable operating margin on invested capital by capturing incremental volumes, expanding the Company's pipeline systems, managing revenue and following a disciplined approach to operating expenses.
12 Months Ended
December 31
($ millions, except where noted) 2017 2016
Revenue volumes (mbpd)(1) 757 650
Revenue 884 719
Operating expenses 227 222
Realized loss on commodity-related derivative financial instruments 1 3
Operating Margin(2) 656 494
Depreciation and amortization included in operations 157 103
Unrealized gain on commodity-related derivative financial instruments (1) (2)
Gross profit 500 393
Capital Expenditures 1,150 957
(1)  Revenue volumes are equal to contracted and interruptible volumes
(2)  
Refer to "Non-GAAP Measures."
Highlights

2017 revenue volumes averaged 757 mbpd compared to 650 mbpd in 2016. Higher volumes as a result of system expansions were realized on Pembina's Peace and Northern pipeline systems, namely the Phase III pipeline expansion as well as the Vantage pipeline system.

On a full-year basis for 2017, operating margin was $656 million, $162 million higher than the $494 million recorded in 2016. This increase was a result of higher revenues, driven by higher volumes, combined with lower operating expenses.

Capital expenditures for 2017 were $1,150 million in our Conventional Pipelines business compared to $957 million in 2016.

New Developments

Pembina placed its NEBC expansion and its Altares Lateral pipeline into service at the end of October 2017. The NEBC Expansion is centrally located to accommodate further incremental transportation demands for the majority of producers in the liquids-rich Montney resource play. With continued development in the Montney, the NEBC Expansion offers producers a transportation solution and access to Pembina’s existing infrastructure at Taylor, B.C.

The Company has now received regulatory and environmental approval for the Phase IV expansion and is continuing to progress design, engineering and civil work. Phase IV is expected to be placed into service in late 2018 and will add approximately 180 mbpd of capacity between Fox Creek and Namao, Alberta. Pembina has the ability to further expand capacity between Fox Creek and Namao to approximately 1,200 mbpd by adding additional pump stations.

Pembina is adding infrastructure to its Phase V expansion, which will add approximately 260 mbpd of capacity between Lator and Fox Creek, Alberta. In addition to accommodating further customer demand, Pembina will improve operational efficiencies and offer more optionality, which will ultimately provide a better service offering for our customers. The incremental cost for the additional infrastructure is $135 million for a total project capital cost of $385 million. Clearing work is now complete and pipeline construction is underway, with the expectation of bringing Phase V into service in late 2018.

As with all Pembina construction projects, the safety of our communities, contractors, employees and the environment is our top priority. We’re committed to ensuring our pipelines and facilities are designed, constructed and operated in a safe and environmentally responsible manner.

Oil Sands & Heavy Oil

Pembina plays an important role in supporting Alberta's oil sands and heavy oil industry. This business operates approximately 1,650 km of pipelines and has approximately 1,060 mbpd of contracted capacity, under long-term, extendible contracts, which provide for the flow-through of eligible operating expenses to customers. 
 
12 Months Ended
December 31
($ millions, except where noted) 2017 2016
Contracted capacity (mbpd) 1,060 975
Revenue 210 202
Operating expenses 66 62
Operating margin(1) 144 140
Depreciation and amortization included in operations 18 17
Gross profit 126 123
Capital expenditures 15 124
(1)  Refer to "Non-GAAP Measures."
Highlights

Operating margin was $144 million for the full year in Oil Sands & Heavy Oil, consistent with $140 million for 2016 largely due to the contracted nature of this business.

Capital expenditures during the year were $15 million, which related to the expansion of the Horizon Pipeline as well as an expansion of the Cheecham Lateral and other sustainment activities. 

Gas Services

Pembina's operations include a natural gas gathering and processing business, which is strategically positioned in an active condensate and NGL-rich area of western Canada and is integrated with Pembina's other businesses. Gas Services provides gas gathering, compression, condensate stabilization shallow cut processing and both sweet and sour deep cut processing services for its customers, primarily on a fee-for-service basis under long-term contracts. The condensate and NGL extracted through the facilities in this business are transported by Pembina's Conventional Pipelines business on its Peace and Vantage pipeline systems. A portion of the volumes are further processed at Pembina's fractionation facilities. 


12 Months Ended
December 31
($ millions, except where noted) 2017 2016
Revenue volumes (MMcf/d) net to Pembina(1)(2) 1,056 836
Revenue volumes (mboe/d)(3) net to Pembina(1) 176 139
Net Revenue(4) 365 271
Operating expenses 89 76
Operating margin(4) 276 195
Depreciation and amortization included in operations 59 52
Gross profit 217 143
Capital expenditures 243 146
Acquisition 566
(1)  Revenue volumes are equal to contracted and interruptible volumes.
(2)  Volumes at the Musreau Gas Plant exclude deep cut processing as those volumes are counted when they are processed through the shallow cut portion of the plant.
(3)  Revenue volumes converted to mboe/d from MMcf/d at a 6:1 ratio.
(4)  Refer to "Non-GAAP Measures."
Highlights

In 2017, Gas Services' revenue volumes, net to Pembina, increased 26 percent to 1,056 MMcf/d compared to 836 MMcf/d in 2016. Revenue volumes in 2017 were positively impacted by a full year contribution from the Kakwa River Facility, Musreau III and the Resthaven Expansion, higher realized revenue volumes at the Saturn Complex and the startup of the Duvernay I Gas Plant in late 2017. In addition, revenue volumes in 2016 at Resthaven and the Saturn Complex were negatively impacted by extended facility outages in that year.

As a result of new assets driving higher volumes, Gas Services generated operating margin of $276 million for the full year of 2017 compared to $195 million during the prior year.

Capital expenditures in 2017 were $243 million compared to $146 million for 2016. Capital spending in 2017 was largely to complete the Duvernay Complex, as well as add producer-requested modifications, including a water disposal system at the Kakwa River facility.

New Developments

Pembina placed its Duvernay Complex into service in November 2017, ahead of schedule and under budget. The Duvernay Complex represents Pembina’s first large-scale processing plant and infrastructure that was specifically designed to handle the liquids-rich Duvernay production.

In early 2017, Pembina entered into a 20-year infrastructure development and service agreement with a multinational, investment grade customer, which includes an area of dedication in the Duvernay resource play near Fox Creek, Alberta. On November 6, 2017, Pembina announced that it had executed further agreements to develop and construct Duvernay infrastructure at the Company’s Duvernay Complex for a capital cost of approximately $290 million. The Duvernay infrastructure includes: raw product separation and water removal infrastructure; a 30 mbpd of raw inlet condensate stabilization facility; a 100 MMcf/d sweet gas shallow cut processing facility ("Duvernay II" a replica of Pembina's Duvernay I facility); and a 10-inch condensate pipeline lateral that will connect to the Company's Peace Pipeline system. The facilities will have a 20-year contractual life and would be back-stopped by a combination of fee-for-service and fixed-return arrangements with an expected in-service date of mid-to-late 2019, subject to regulatory and environmental approvals. Detailed engineering for Duvernay II is progressing with some long lead equipment now ordered. Additionally, agreements were executed for NGL and condensate transportation on Pembina's Peace Pipeline system and NGL fractionation at the Company's Redwater Fractionation complex.

Midstream

Pembina offers customers a comprehensive suite of midstream products and services through its Midstream business, which includes both Crude Oil Midstream and NGL Midstream. Crude Oil Midstream assets include truck terminals, above ground storage and pipeline-connected terminals/hubs. NGL Midstream includes two vertically integrated NGL operating systems – Redwater West and Empress East – which feature extraction and fractionation facilities, finished product cavern storage as well as rail connectivity.


12 Months Ended(1)
December 31
($ millions, except where noted) 2017 2016
NGL sales volumes (mbpd) 145 143
Revenue 4,034 3,183
Cost of goods sold 3,262 2,611
Net revenue(2) 772 572
Operating expenses 69 69
Realized loss (gain) on commodity-related derivative financial instruments 93 7
Operating margin(2) 631 518
Unrealized loss on commodity-related derivative financial instruments (22) 63
Gross profit 516 333
Capital expenditures 395 504
(1)  Share of profit or loss of investment in equity accounted investees not included in these results.
(2)  Refer to "Non-GAAP Measures."
Highlights

Operating margin was $631 million during 2017 compared to $518 million in 2016. This increase was primarily driven by the start-up of RFS III on July 1, 2017 and improvements in commodity prices in the current year as well as increased storage opportunities in the first half of 2017 as compared to the prior year.

Capital expenditures for the full twelve months of 2017 totaled $395 million compared to $504 million for 2016. Capital spending in this business in 2017 was primarily directed towards the completion of RFS III, as well as infrastructure in support of the North West refinery and at our Canadian Diluent Hub and our Edmonton North Terminal.

New Developments

Pembina’s Board of Directors has approved the construction of fractionation and terminalling facilities at the Company’s Empress, Alberta extraction plant. The new facilities will add approximately 30,000 bpd of propane plus fractionation capacity to the Company’s Empress East NGL system. For the fractionation infrastructure, Pembina will repurpose existing assets for depropanization and will construct a new debutanizer and a finished product treating facility. Pembina will also add propane rail loading and butane truck terminalling services to the site. The total expected capital cost for this project is approximately $120 million and is anticipated to be placed into service in late 2020, subject to environmental and regulatory approval. These facilities will provide the Company with increased NGL volumes and market optionality, as well as enhanced propane supply access which could further support the Company's Prince Rupert Terminal and proposed PDH/PP facilities

On November 29, 2017, Pembina announced approval for the development of its proposed liquefied petroleum gas export terminal in Prince Rupert, B.C. The Prince Rupert Terminal is expected to have a permitted capacity of approximately 25,000 barrels per day of LPG with the LPG supply primarily being sourced from Pembina’s Redwater fractionation complex. The Company continues to progress stakeholder consultation and detailed engineering work to support facility design and various permit applications expected to be submitted throughout 2018. The expected capital cost is approximately $250 million and the project is anticipated to be in service mid-2020, subject to regulatory and environmental approvals.

Canada Kuwait Petrochemical Company continues to progress front end engineering design for a proposed PDH/PP facility. These activities are expected to be completed by late 2018, followed by a final investment decision.

Pembina’s Canadian Diluent Hub is capable of delivering approximately 400 mbpd of condensate to regional third-party diluent pipelines and has 500 mbbls of above ground storage. In February 2018, Pembina placed a fifth third-party condensate connection into service at CDH. Condensate deliveries to CDH continue to increase as volumes on the Phase III Expansion ramp up, with condensate receipts exceeding 145 mbpd in December 2017.

Pembina has completed several initiatives to further support operations and improve customer service offerings at ENT. The Pembina Edmonton Delivery System, which was previously placed into service, connects the Company's Namao hub to large-scale, third-party infrastructure in the Edmonton area. PEDS also accommodates increased volumes from the Phase III Expansion and improves access of commodities into ENT.

Effective April 1, 2018, Pembina will become the operator of the Company's Younger facility, which has been previously operated by its joint interest partner. Given Pembina's extensive experience as an operator and its ability to leverage and integrate with its current operational systems, the Company expects to realize efficiencies going forward.
 

Veresen

Pembina acquired assets and investments through the Veresen Acquisition that include:
  • 100 percent interest in the Alberta Ethane Gathering System with capacity of 330 mbpd;
  • 50 percent interest in the Alliance Pipeline with capacity of 1,600 MMcf/d gross (800 MMcf/d net);
  • 50 percent convertible preferred interest in the Ruby Pipeline with capacity of 1,500 MMcf/d gross (750 MMcf/d net) which entitles Pembina to a USD$91 million distribution per year;
  • 46.3 percent interest (as of December 31, 2017) in Veresen Midstream ("Veresen Midstream"), which owns assets in western Canada serving the Montney geological play in northwestern Alberta and northeastern B.C. including: gas processing plants with capacity of approximately 1,516 MMcf/d gross (702 MMcf/d net), as well as gas gathering pipelines and compression; and
  • An ownership interest in Aux Sable (approximately 42.7 percent in Aux Sable U.S. and 50 percent in Aux Sable Canada) ("Aux Sable"), which includes a 131 mbpd gross (56 mbpd net) NGL fractionation facility and gas processing capacity of 2.1 bcf/d gross (0.897 bcf/d net) near Chicago, Illinois and other natural gas and NGL processing facilities, logistics and distribution assets in the U.S. and Canada, as well as transportation contracts on Alliance;
  • A wholly-owned 1 mmbbls ethane storage facility under construction near Burstall, Saskatchewan. 

12 Months Ended(1)
December 31
($ millions, except where noted) 2017 2016
Financial Highlights
Revenue 15
Operating expenses 8
Share of profit of investments in equity accounted investees 116
Gross profit 114
Capital expenditures 24
Contributions to equity accounted investees 7
Distributions from equity accounted investees(2)(3) 141
Proportionately Consolidated
Total Revenue and Sales Volumes (mboe/d) (4)(5)(6) 643
Operating Margin(1) 214
Adjusted EBITDA(1) 195
(1)  Refer to "Non-GAAP Measures."
(2)  Pembina's operational and financial results do not include the operating and financial results of Veresen for the first nine months ended September 30, 2017 and for the year ending December 31, 2016, since the Acquisition was completed following the end of the third quarter of 2017, on October 2, 2017.
(3) Net of amortization of debt held within the equity accounted investees.
(4) Includes Pembina's share of results from investments in equity accounted investees. See Proportionately Consolidated Overview.
(5)  Million cubic feet per day ("MMcf/d") coverted to mboe/d (thousands of barrels of oil equivalent per day) at 6:1 ratio.
(6) The figure presented in the above table represents the revenue and sales volumes for the 3 months ended December 31, 2017. Revenue and sales volumes for the 12 month period ended December 31, 2017 were 162 mboe/d.
Highlights

During the fourth quarter of 2017, AEGS operations, which are fully consolidated, met expectations with revenue volumes remaining stable at 295 mbpd. During the period AEGS generated revenue of $15 million, operating expenses of $8 million and operating margin of $7 million.  During September 2017, new 20-year take-or-pay agreements were entered into for approximately 95 percent of the existing capacity, effective January 1, 2019. 

Share of profit of investments in equity accounted investees totaled $116 million for the period and the year ended December 31, 2017. Share of profit of investments in equity accounted investees represents the net earnings of the investees adjusted for incremental amortization of purchase price allocation adjustments from the Acquisition and interest and amortization from equity investee level debt. The $116 million share of profit of investments in equity accounted investees is comprised of $40 million attributable to Alliance, $29 million attributable to Ruby, $22 million attributable to Veresen Midstream, $22 million attributable to Aux Sable and $3 million derived from other investments in equity accounted investees.

New Developments

On November 29, 2017, the Board of Directors approved Pembina’s investment in Veresen Midstream’s development of the North Central Liquids Hub which supports operations for the Cutbank Ridge Partnership, a partnership between Encana Corporation and Cutbank Dawson Resources Ltd., an investment grade subsidiary of Mitsubishi Corporation, within the world class Montney formation. The estimated capital cost for this project is $320 million ($150 million net) and is expected to be placed into service in late 2018 and is currently trending under budget and ahead of schedule. The North Central Liquids Hub will provide separation and stabilization of increased condensate volumes from CRP to support the recently-in service Sunrise and Saturn gas plants.

On January 23, 2018, Veresen Midstream placed its second 200 MMcf/d gross (93 MMcf/d net) gas processing Saturn facility into service ahead of schedule and under budget. Previously, in September 2017, Veresen Midstream placed 200 MMcf/d (gross) of gas processing capacity at the Tower facility and 400 MMcf/d gross (185 MMcf/d net) of gas processing capacity at the Sunrise facility into service; and in November 2017, it placed the first 200 MMcf/d gross (93 MMcf/d net) of gas processing capacity at the Saturn facility into service. In support of the development of the liquids-rich Montney resource play, Veresen Midstream has now placed 1 bcf/d (gross) of gas processing capacity into service over late 2017 and early 2018.

Pembina continues to progress its proposed liquefied natural gas export terminal in Coos Bay, Oregon, and the related Pacific Connector Gas Pipeline that will transport natural gas from the Malin Hub in southern Oregon to the export terminal. In September 2017, the Company filed applications with the United States Federal Energy Regulatory Commission for the construction and operation of Jordan Cove and is positioned to receive a FERC decision in late 2018. Pembina has committed a 2018 capital budget of $135 million to progress Jordan Cove to a final investment decision, pending the receipt of the necessary regulatory approvals and other requirements.

The Company continues to advance the construction of a 1 mmbbls barrel ethane storage facility located near Burstall, Saskatchewan for a total expected capital cost of approximately $180 million. The Burstall Ethane Storage is underpinned by a 20-year agreement and is expected to be placed into service in late 2018.
 

2017 Safety Performance

Safety continues to be an important priority that transcends our business. In the third quarter of 2017, Pembina experienced one employee lost time incident. Up until that point, Pembina employees had worked 14 consecutive quarters totaling 9.7 million hours without any lost time incidents. Pembina remains committed to maintaining industry leading safety performance, and continues to remain diligently focused and committed to the safety culture that is integral to Pembina’s operations. 

 

Documents

The PDF documents linked below provide a detailed analysis of Pembina's results during 2017 compared to prior years and other relevant information.

Disclaimer

Forward-Looking Statements & Information
 
This online annual review contains certain forward-looking statements and information that are based on Pembina's expectations, estimates, projections and assumptions in light of its experience and its perception of historical trends as well as current market conditions and perceived business opportunities.
 
In some cases, forward-looking information can be identified by terminology such as "estimates", "expects", "anticipates", "plans", "forecast", "potential", "will", "could", "continue", "subject to", "contingent" and similar expressions suggesting future events or future performance. In particular, this online annual review contains forward-looking statements pertaining to corporate strategy, capital expenditures, schedules, expected capacity, regulatory and environmental approvals and contracting expectations with respect to current and potential projects, expansion and diversification opportunities, and expectations regarding future supply and demand. Undue reliance should not be placed on these forward-looking statements and information as they are based on assumptions made by Pembina regarding, among other things: industry conditions; the availability and sources of capital; operating costs; the ability to reach required commercial agreements; and the ability to obtain required regulatory and environmental approvals.
 
While Pembina believes the expectations and assumptions reflected in these forward-looking statements are reasonable as of the date hereof, there can be no assurance that they will prove to be correct. Forward-looking statements are subject to known and unknown risks and uncertainties which may cause actual performance and financial results to differ materially from the results expressed or implied, including but not limited to: the impact of competitive entities and pricing; reliance on key relationships and agreements and the outcome of stakeholder engagement; the strength and operations of the oil and natural gas industry and related commodity prices; changes to existing legislation and the regulatory environment; fluctuations in operating results; the availability and cost of labour and other materials; the ability to access various sources of debt, equity and capital; and tax laws and tax treatment.
 
Additional information on these factors as well as other factors that could impact Pembina's operational and financial results are contained in Pembina's Annual Information Form and Management's Discussion and Analysis, and described in our public filings available in Canada at www.sedar.com and in the United States at www.sec.gov. Readers are cautioned that this list of risk factors should not be construed as exhaustive.
 
This online annual review was prepared as of February 22, 2018 and the forward-looking statements and information contained herein speak only as of that date. Except as expressly required by applicable securities laws, Pembina and its subsidiaries assume no obligation to update forward-looking statements and information should circumstances or management's expectations, estimates, projections or assumptions change. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.