Veresen Announces 2015 First Quarter Results and Updated Guidance
(firmenpresse) - CALGARY, ALBERTA -- (Marketwired) -- 05/06/15 -- Veresen Inc. ("Veresen" or the "Company") (TSX: VSN) announced today financial and operating results for the three months ended March 31, 2015.
Highlights
"Our first quarter results underscore the strength of our business model and the quality of our assets that perform well regardless of the commodity cycle," said Don Althoff, President and CEO.
"During the quarter, we closed a material transaction which transforms our Midstream business and, in doing so, we have created a powerful platform for growth. Veresen Midstream is well-positioned to provide producers with innovative solutions to address their infrastructure needs."
Financial Performance
Veresen has presented adjusted net income attributable to Common Shares to enhance the comparability of its earnings. Adjusted net income represents net income adjusted for specific significant items which do not reflect the Company''s underlying operations.
For the quarter ended March 31, 2015, Veresen generated adjusted net income attributable to Common Shares of $26.3 million or $0.09 per Common Share compared to $24.3 million or $0.12 per Common Share for 2014. Earnings reflect increases in Veresen''s Pipeline and Power segments, and lower earnings from Veresen''s Midstream business, relative to the same period last year. Veresen''s 50% interest in the Ruby Pipeline contributed an incremental $27.8 million, while Alliance also contributed higher adjusted earnings. Adjusted earnings from Veresen''s Power business reflect increases across the majority of the Company''s facilities.
In the first quarter of 2015, adjusted earnings from the Midstream segment were lower compared to the same period last year, when Midstream earnings reflected the unprecedented and significant widening of the Chicago - AECO natural gas price differential caused by the extreme cold weather in the U.S. Midwest. While Hythe/Steeprock generated increased adjusted earnings in the first quarter, Aux Sable''s first quarter results continued to be negatively impacted by weak natural gas liquids ("NGLs") margins.
A key project within Veresen''s portfolio of growth opportunities is Jordan Cove LNG and the associated Pacific Connector Gas Pipeline. The increase in Corporate costs primarily reflects development spending to continue advancing the key work streams related to this project.
For the three months ended March 31, 2015, Veresen generated net income attributable to Common Shares of $49.6 million or $0.17 per Common Share compared to $31.3 million or $0.16 per Common Share for the same period last year.
In the first quarter, Veresen recognized a $37.2 million pre-tax gain on sale relating to the monetary portion of the transaction involving the sale of its Hythe/Steeprock assets to Veresen Midstream.
Veresen and its jointly-controlled businesses periodically enter into interest rate hedges to manage interest rate exposures. In the first quarter of 2015, equity income from York Energy Centre includes a $5.4 million unrealized mark-to-market loss ($4.0 million after tax), associated with an interest rate hedge. For the same period last year, equity income from York Energy Centre includes a $4.3 million unrealized mark-to market loss ($3.2 million after tax).
In the first quarter of 2015, Veresen Midstream entered into cross currency swaps to manage interest rate and foreign exchange rate exposures on its US$575 million drawn Term Loan B. For the three months ended March 31, 2015, equity income from Veresen Midstream includes a $5.3 million unrealized foreign exchange loss ($4.0 million after tax) on the revaluation of the Term Loan B, partially offset by a $4.6 million unrealized mark-to-market gain ($3.5 million after tax), associated with the cross currency swaps.
In the first quarter of 2015, Veresen generated distributable cash of $81.2 million or $0.28 per Common Share compared to $65.6 million or $0.33 Common Share for the same period in 2014. Increased cash flows generated by Veresen''s Pipeline and Power businesses were partially offset by reduced cash flows from the Aux Sable Midstream business.
First quarter Pipeline distributable cash includes $27.8 million in preferred share dividends from the Ruby pipeline. Alliance generated an additional $1.7 million, largely driven by the effects of a weaker Canadian dollar.
Distributable cash from Hythe/Steeprock increased by $1.7 million compared to the same period last year due to higher revenues attributed to the recovery of maintenance capital expenditures from Encana and annual fee escalation. Distributions from Aux Sable decreased by $15.5 million due to the impact of weaker NGL market conditions during the quarter and the impact of a significantly narrower Chicago - AECO natural gas price differential relative to the same period last year.
Current tax is higher in the first quarter of 2015, primarily due to the impact of a weaker Canadian dollar on U.S.-based taxes.
Business Segment Highlights
Pipelines
Interest in contracting on the Alliance pipeline has been strong, with Alliance executing binding precedent agreements for 100% of total targeted capacity, representing a combination of receipt and full path, with an average contract length of five years. Alliance Canada''s hearing with the National Energy Board ("NEB") regarding its toll and service framework concluded on April 14, 2015 with an oral final argument. A decision by the NEB is expected in mid-2015. When Alliance has received final regulatory approvals, it will begin to offer interruptible transport on the pipeline. This capacity will be a key element of Alliance''s new business model since it can account for as much as 20 percent of the total throughput on the pipeline.
Alliance U.S. plans submit its application to the Federal Energy Regulatory Commission ("FERC") for regulatory approval of its U.S. services and rates in mid-2015.
Midstream
Veresen Midstream Veresen Midstream is a newly created entity, owned equally by Veresen and affiliates of Kohlberg Kravis Roberts & Co. L.P. ("KKR").
On March 31, 2015, Veresen Midstream closed the acquisition of certain natural gas gathering and compression assets supporting Montney development in the Dawson area of northeastern British Columbia from Encana and CRP. As part of this transaction, Veresen Midstream has agreed to undertake up to $5 billion of new midstream expansion for Encana and CRP in the Montney region.
With the closing of this transaction, Veresen Midstream becomes a leading independent natural gas gathering and processing business in Western Canada, processing today approximately 20 percent of Montney gas production.
The aggregate purchase price of the acquisition was approximately $760 million, based on a reimbursement of Encana''s and CRP''s actual costs to date associated with the acquired infrastructure. All infrastructure acquired and to be developed associated with this transaction is supported by 30-year fee-for-service arrangements with Encana and CRP.
Construction of the 200 million cubic feet per day ("MMcf/d") Saturn compression station is nearing completion, with the facility expected to be operational in mid-2015. The 400 MMcf/d Sunrise gas plant and the 200 MMcf/d Tower gas plant are in advanced development, with construction expected to commence in the second half of 2015 and in-service dates anticipated in the second half of 2017.
Aux Sable Construction of the expansion at the Channahon Facility has commenced and it is expected to be completed in mid-2016. The expansion will allow for approximately 24,500 barrels per day of fractionation capacity above the current nameplate capacity of 107,000 barrels per day. With a capital cost of approximately US$130 million (gross), this expansion will increase propane and butane processing capacity at Aux Sable. The additional capacity has been underpinned by Rich Gas Premium agreements.
Power
The Power business performed in line with the Company''s expectations in the first quarter. Veresen''s facilities benefitted from high demand for electricity and steam driven by cold winter weather in eastern Canada and the northeastern parts of the United States. Veresen''s run-of-river hydro facilities in British Columbia experienced higher water flows in the first quarter of 2015 due to above average winter temperatures.
Construction of the Dasque-Middle run-of-river project in northwest British Columbia was completed in the fourth quarter of 2014. Under the terms of the power purchase agreement with its customer, BC Hydro, the facility will be placed into commercial service after successfully completing a 72-hour performance and reliability test. Flow rates have not been high enough to complete this test to date. Veresen expects to complete testing in the coming weeks when adequate water flows resume.
Construction of the 33 MW St. Columban wind project is progressing, with commercial in-service expected in the first half of 2015. The 40 MW Grand Valley III wind project received its Renewable Energy Approval from the Ontario Minister of Environment and Climate Change in October 2014. Long lead time equipment for Grand Valley IIII has been ordered and construction is expected to commence in the second quarter, with commercial in-service expected in late 2015.
Jordan Cove LNG Development Project
In the first quarter of 2015, the FERC advised that the final Environmental Impact Statement for Jordan Cove LNG and Pacific Connector Gas Pipeline ("Pacific Connector") would be issued on June 12, 2015, versus their earlier posted date of February 27, 2015. As regulatory permitting is critical path for the project, based on the new FERC schedule, Veresen expects that Jordan Cove LNG and Pacific Connecter will receive all of its environmental permits and approvals by the end of 2015, leading to a final investment decision thereafter.
With the revision to the FERC schedule, Veresen is taking advantage of the additional time to revisit the capital cost estimate for the project. The Jordan Cove LNG team is evaluating what impact the current downturn in commodity pricing could have on overall capital costs for the project. While Veresen works through the details of the EPC contract, commercial negotiations with potential off-take customers continue. Negotiations are proceeding well, with one off-take agreement expected in mid-2015.
EFG Update
Veresen has appealed a portion of the decision issued earlier this year by an Ontario court that requires the Company to provide information to Energy Fundamentals Group Inc. ("EFG") in connection with the exercise of an option to acquire up to 20 percent of Veresen''s equity interest in Jordan Cove LNG. The appeal is scheduled to be heard by the Court of Appeal for Ontario during the second quarter.
Corporate
On April 1, 2015, Veresen closed an offering of 8 million Cumulative Redeemable, Preferred Shares at a price of $25.00, for aggregate gross proceeds of $200,000,000. The net proceeds from the offering were used to repay amounts outstanding under the credit facility that Veresen entered into to finance its acquisition of a 50% convertible preferred interest in Ruby Pipeline Holding Company, L.L.C., the entity which indirectly owns the Ruby pipeline system.
2015 Guidance Update
Veresen updated its 2015 distributable cash to be in the range of $0.93 per Common Share to $1.16. Expected lower fractionation margins at Aux Sable are largely offset by the effect of the weaker Canadian dollar. Further details concerning 2015 guidance can be found on the home page of Veresen''s web site at .
Conference Call and Webcast
Veresen will host a conference call and webcast on May 7, 2015 at 7:00 am MT (9:00 am ET) to discuss its results.
Dial-in: 1 (877) 291-4570 or 1 (647) 788-4919 Conference ID 31800311
The link to the conference call webcast is available on Veresen''s website.
A replay of the call will be available at approximately 10:00 am MT (12 pm ET) on May 7, 2015 by dialing 1-800-585-8367 and 1-416-6214642. The access code is 31800311, followed by the pound sign. The replay will expire at midnight (ET) on May 21, 2015.
MD&A, Financial Statements and Notes
Management''s Discussion and Analysis ("MD&A") and consolidated financial statements provide a detailed explanation of Veresen''s financial results for the first quarter ended March 31, 2015 compared to the first quarter ended March 31, 2014 and should be read in conjunction with this news release. These documents are available at and at .
About Veresen Inc.
Veresen is a publicly-traded dividend paying corporation based in Calgary, Alberta that owns and operates energy infrastructure assets across North America. Veresen is engaged in three principal businesses: a pipeline transportation business comprised of interests in the Alliance Pipeline, the Ruby Pipeline and the Alberta Ethane Gathering System; a midstream business which includes a partnership interest in Veresen Midstream Limited Partnership which owns assets in western Canada, an ownership interest in Aux Sable, a world-class natural gas liquids (NGL) extraction facility near Chicago, and other natural gas and NGL processing energy infrastructure; and a power business comprised of a portfolio of assets in Canada. Veresen is also developing Jordan Cove LNG, a six million tonne per annum natural gas liquefaction facility proposed to be constructed in Coos Bay, Oregon, and the associated Pacific Connector Gas Pipeline. In the normal course of business, Veresen regularly evaluates and pursues acquisition and development opportunities.
Veresen''s Common Shares, Cumulative Redeemable Preferred Shares, Series A, Cumulative Redeemable Preferred Shares, Series C and Cumulative Redeemable Preferred Shares, Series E trade on the Toronto Stock Exchange under the symbols "VSN", "VSN.PR.A", "VSN.PR.C" and "VSN.PR.E", respectively. For further information, please visit .
Forward-Looking Information
Certain information contained herein relating to, but not limited to, Veresen and its businesses constitutes forward-looking information under applicable securities laws. All statements, other than statements of historical fact, which address activities, events or developments that Veresen expects or anticipates may or will occur in the future, are forward-looking information. Forward-looking information typically contains statements with words such as "may", "estimate", "anticipate", "believe", "expect", "plan", "intend", "target", "project", "forecast" or similar words suggesting future outcomes or outlook. Forward-looking statements in this news release include, but are not limited to, statements with respect to: the ability of Alliance to implement, and the financial impact of new service offerings; the timing of completion and the capital cost of the Aux Sable expansion; the timing of the commercial service of the Dasque-Middle hydro project and the St. Columban and Grand Valley Phase III wind projects; the timing for regulatory approvals, an updated capital cost estimate and final investment decision for Jordan Cove LNG and Pacific Connector Gas Pipeline, Veresen''s ability to negotiate long term service agreements with off-take customers for LNG, Veresen''s ability to realize its growth objectives; the availability of financing for current capital projects and new investment opportunities; and the ability of each of its businesses to generate distributable cash in 2015. The risks and uncertainties that may affect the operations, performance, development and results of Veresen''s businesses include, but are not limited to, the following factors: the ability of Veresen to successfully implement its strategic initiatives and achieve expected benefits; levels of oil and gas exploration and development activity; the status, credit risk and continued existence of contracted customers; the availability and price of capital; the availability and price of energy commodities; the availability of construction services and materials; fluctuations in foreign exchange and interest rates; Veresen''s ability to successfully obtain regulatory approvals; changes in tax, regulatory, environmental, and other laws and regulations; competitive factors in the pipeline, midstream and power industries; operational breakdowns, failures, or other disruptions; and the prevailing economic conditions in North America.
Additional information on these and other risks, uncertainties and factors that could affect Veresen''s operations or financial results are included in its filings with the securities commissions or similar authorities in each of the provinces of Canada, as may be updated from time to time. Readers are also cautioned that the foregoing list of factors and risks is not exhaustive. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these factors are independent and management''s future course of action would depend on its assessment of all information at that time. Although Veresen believes that the expectations conveyed by the forward-looking information are reasonable based on information available on the date of preparation, no assurances can be given as to future results, levels of activity and achievements. Undue reliance should not be placed on the information contained herein, as actual result achieved will vary from the information provided herein and the variations may be material. Veresen makes no representation that actual results achieved will be the same in whole or in part as those set out in the forward-looking information. Furthermore, the forward-looking statements contained herein are made as of the date hereof, and Veresen does not undertake any obligation to update publicly or to revise any forward-looking information, whether as a result of new information, future events or otherwise. Any forward-looking information contained herein is expressly qualified by this cautionary statement.
Certain financial information contained in this news release may not be standard measures under Generally Accepted Accounting Principles ("GAAP") in the United States and may not be comparable to similar measures presented by other entities. These measures are considered to be important measures used by the investment community and should be used to supplement other performance measures prepared in accordance with GAAP in the United States. For further information on non-GAAP financial measures used by Veresen see Management''s Discussion and Analysis, in particular, the section entitled "Non-GAAP Financial Measures" contained in the annual Management Discussion and Analysis, filed by Veresen with Canadian securities regulators.
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Consolidated Statement of Financial Position
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Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
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Consolidated Statement of Cash Flows
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Distributable Cash
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Reconciliation of Distributable Cash to Cash from Operating Activities
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Reconciliation of Net Income to Adjusted Net Income Attributable to Common Shares
Net income attributable to Common Shares includes the following items which are non-operating in nature and/or unusual items and which we do not expect to recur:
Contacts:
Dorreen Miller, Director, Investor Relations
(403) 213-3633
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Datum: 06.05.2015 - 14:06 Uhr
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