Veresen Announces 2013 Third Quarter Results and Increases Guidance /NOT FOR DISTRIBUTION TOUNITED STATESNEWSWIRE SERVICES OR FOR DISSEMINATION INTHE UNITED STATES./ CALGARY, Nov. 5, 2013 /CNW/ - Veresen Inc. ("Veresen" or the "Company") (TSX: VSN) announced today its financial and operating results for the three months ended September 30, 2013. Highlights: -- Distributable cash(1) of $69.3 million or $0.35 per Common Share. -- Net income attributable to Common Shares of $27.9 million or $0.14 per Common Share. -- Cash from operating activities of $44.0 million. -- Alliance placed its 127-km Tioga Lateral Pipeline into service, resulting in a new stream of contracted earnings and cash flows for Alliance, and enhancing the supply diversity of liquids-rich natural gas available for processing at Aux Sable's Channahon facility. -- The Company's Jordan Cove Energy Project executed non-binding arrangements, referred to as Heads of Agreement ("HOA"), with three, large-scale prospective customers located in various countries in Asia. FINANCIAL HIGHLIGHTS Three months ended Nine months ended September 30 September 30 ($ Millions, except per 2012 ((1)(2)) 2012 ((1) (2)) Common Share amounts) 2013 2013 Net income (loss) before tax and non-controlling interest Pipeline 27.8 23.8 80.1 71.9 Midstream 33.6 21.9 60.6 56.4 Power 6.2 (2.7) 16.7 3.2 Veresen - Corporate (29.9) (24.2) (83.4) (71.4) 37.7 24.2 74.0 60.1 Tax expense (7.6) (9.5) (26.8) (24.0) Net income attributable to - (0.1) non-controlling interest - - Net income 30.1 14.7 47.2 36.0 Preferred Share dividends (2.2) (2.2) (6.6) (5.5) Net income attributable to 12.5 30.5 Common Shares 27.9 40.6 Per Common Share ($) 0.14 0.06 0.20 0.15 ((1)) Effective January 1, 2013, certain costs have been reclassified between Power and Veresen - Corporate. As a result, comparative results for Power and Veresen - Corporate have been restated. ((2)) Certain comparative figures for the three and nine months ended September 30, 2012 have been revised. See Veresen's September 30, 2013 consolidated financial statements. ____________________________ (1 This is not a standard measure under GAAP and may not be comparable to similar measures used by other entities. See the reconciliation of distributable cash to cash from operating activities in the tables attached to this news release.) "Our businesses are performing as we expected and delivered solid results from operations as reflected by our third quarter distributable cash and net income," commented Don Althoff, President and CEO. "Maintaining our safe, efficient operations will continue to be a focus as we advance our significant commercial opportunities related to the recontracting of the Alliance Pipeline and the development of our Jordan Cove LNG project." Financial Performance For the third quarter of 2013, Veresen generated net income attributable to Common Shares of $27.9 million or $0.14 per Common Share, compared to $12.5 million or $0.06 per Common Share for the same period in 2012. Each of Veresen's operating segments generated increased third quarter earnings relative to the same period last year, most notably in the Midstream business. Aux Sable recorded stronger propane sales in the third quarter of 2013, driven by higher heat content natural gas which resulted in increased propane sales volumes. The propane pricing environment in the third quarter was consistent with the same period last year and has strengthened somewhat from the weaker pricing environment experienced in the first half of 2013. Market fundamentals for ethane continued to be challenging in the third quarter. Midstream earnings from Hythe/Steeprock also increased in the third quarter reflecting a contractual step up in volume commitments and processing fees relative to the same period last year. The increase in Pipeline earnings includes a contribution from Alliance's Tioga Lateral Pipeline, which was placed into service on September 1, 2013. As Veresen continues to support the regulatory process related to its Jordan Cove LNG project, the Company incurred higher corporate costs compared to the prior year period. Distributable Cash Three months ended Nine months ended September 30 September 30 ($ Millions, except per Common 2013 2012 2013 2012 Share amounts) Pipeline 39.9 37.0 116.3 110.3 Midstream 43.4 33.7 94.3 88.0 Power 12.2 13.3 29.1 23.1 Veresen - Corporate (18.1) (17.0) (52.4) (48.8) Current tax (5.9) (3.4) (7.6) (12.2) Preferred Share dividends (2.2) (2.2) (6.6) (5.5) Distributable Cash ((1)) 69.3 61.4 173.1 154.9 Per Common Share ($) 0.35 0.31 0.87 0.80 ((1)) See the reconciliation of distributable cash to cash from operating activities in the tables attached to this news release. In the third quarter of 2013, Veresen generated distributable cash of $69.3 million or $0.35 per Common Share, representing a 13% increase compared to the same period last year. This primarily reflects increased distributions from Aux Sable, driven by higher propane sales, and increased fees earned by Hythe/Steeprock under its long-term processing agreement, partially offset by higher taxes. Business Segment Overview Pipelines Alliance has completed construction and commissioned the 127-km (80-mile) Tioga Lateral Pipeline and associated facilities in North Dakota. The pipeline extends from an existing Hess Corporation gas processing facility and interconnects with the Alliance mainline, facilitating the onward shipment of natural gas to Aux Sable'sChannahon facility. The 12-inch diameter pipeline provides the transportation infrastructure to move 126 million cubic feet per day of rich natural gas. Hess is the anchor shipper for the pipeline. Alliance Pipeline continues to work through the recontracting process. Midstream Veresen completed key tie-ins during a turnaround at its Hythe processing facility in the second quarter of 2013 to facilitate a future debottleneck project to expand the plant's processing capacity. Veresen's Midstream team is actively soliciting producer interest to support such an expansion. In addition to identifying growth opportunities by leveraging Veresen's existing midstream assets, the Company continues to explore new opportunities to grow its midstream footprint in the Western Canadian Sedimentary Basin. Veresen believes that additional infrastructure will be required to support the growing Montney and Duvernay resource plays, and that the Company is well-positioned to meet the needs of producers. Aux Sable is working with producers within an economic radius of the Alliance pipeline to provide options and value for natural gas and NGLs to reach large and liquid U.S. markets. Power Veresen's power portfolio performed well in the third quarter. The York Energy Centre and Glen Park run-of-river facility realized higher margins due to successful pricing strategies. With respect to the Dasque-Middle run-of-river hydro facility under construction in northwest British Columbia, Veresen has secured the necessary contractors to continue with construction after the project's previous primary sub-contractor was placed into receivership. Commercial in-service is expected to be in mid-2014. Veresen is also pursuing the early stage development of gas-fired opportunities. LNG Development Project In September 2013, Veresen filed an application with the National Energy Board ("NEB") for a long-term license to export natural gas from Canada to the United States. The exported natural gas is intended to supply Veresen's proposed Jordan Cove LNG export project located in Coos Bay, Oregon. The NEB application requests an export volume of 1.5 billion cubic feet per day (Bcf/d) for 25 years, translating into nine million tonnes per year (MMt/y) of export capacity from the Jordan Cove terminal. While the initial liquefaction design capacity is six MMt/y, the facility can be expanded to accommodate nine MMt/y. Jordan Cove also recently filed an application with the U.S. Department of Energy ("DOE") for authorization to import 1.5 Bcf/d of natural gas from Canada to the United States for a 25-year term, matching the terms of the NEB application. Commercially, Veresen has gained traction in its ongoing discussions to secure long-term arrangements to produce LNG for international customers. Jordan Cove has executed non-binding HOAs with three, large-scale prospective customers headquartered in various Asian countries. The volume of LNG capacity requested under each HOA either meets or exceeds a minimum 25% capacity threshold amount, under the initial six MMt/y LNG development offering by Jordan Cove and Pacific Connector. The contract term under each agreement is proposed to be 25 years, with extension rights. On the regulatory front, Veresen is awaiting a response from the DOE regarding Jordan Cove's application for a license to export natural gas to non-Free Trade Agreement countries. Jordan Cove's application is currently third in the queue for processing by the DOE. Jordan Cove continues to work through the regulatory process with the Federal Energy Regulatory Commission. Based on the current schedule, Veresen expects to be in a position to make a final investment decision regarding its LNG export project by the end of 2014. 2013 Guidance On the strength of its third quarter performance, and based on its outlook for the remainder of 2013, Veresen has raised its distributable cash guidance to be in the range of $1.06 to $1.16 per Common Share, with a midpoint of $1.11 per Common Share. This reflects a $0.06 and $0.03 per Common share increase in the low end and midpoint, respectively, of the range relative to guidance issued August 7, 2013. The increased range is primarily driven by an improved pricing outlook for propane and higher heat content natural gas, resulting in increased propane sale volumes for Aux Sable. Further details concerning 2013 guidance can be found in the "Invest" section of Veresen's web site at www.vereseninc.com. Conference Call and Webcast Veresen will host a conference call and webcast at 2:00 pm MT (4:00 pm ET) on November 6, 2013 to discuss its third quarter results. To participate in the call please dial: 1 (888) 231-8191 or 1 (647) 427-7450 and enter Conference ID: 91638770. A live audio webcast of the conference call will also available on Veresen's website at www.vereseninc.com. MD&A, Financial Statements and Notes Management's Discussion and Analysis and consolidated financial statements provide a detailed explanation of Veresen's financial results for the third quarter ended September 30, 2013 compared to the third quarter ended September 30, 2012 and should be read in conjunction with this news release. These documents are available at www.vereseninc.com and at www.sedar.com. 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 two pipeline systems, the Alliance Pipeline and the Alberta Ethane Gathering System; a midstream business which includes ownership interests in a world-class natural gas liquids extraction facility near Chicago, the Hythe/Steeprock gas gathering and processing complex, and other natural gas and NGL processing energy infrastructure; and a power business with renewable and gas-fired facilities and development projects in Canada and the United States, and district energy systems in Ontario and Prince Edward Island. Veresen is also actively developing a number of greenfield projects and, in the normal course of its business, regularly evaluates and pursues acquisition and development opportunities. Veresen's Common Shares, Series A Preferred Shares, Series C Preferred Shares, and 5.75% convertible unsecured subordinated debentures, Series C due July 31, 2017 are listed on the Toronto Stock Exchange under the symbols "VSN", "VSN.PR.A", "VSN.PR.C" and "VSN.DB.C", respectively. For further information, please visit www.vereseninc.com. 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 timing of completion of construction and start-up of the Dasque-Middle hydro project; Veresen's ability to realize its growth objectives; the timing under which Veresen will make a final investment decision regarding the Jordan Cove Energy Project, and the ability of each of its businesses to generate distributable cash in 2013. 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 byVeresen with Canadian securities regulators. Veresen Inc. Consolidated Statement of Financial Position (Canadian $ Millions; number of shares in December 31, 2012 ( Millions; unaudited) September 30, 2013 (1)) Assets Current assets Cash and short-term 25.5 16.1 investments Restricted cash 4.5 5.8 Distributions receivable 47.1 39.9 Receivables 77.1 72.6 Other 11.3 11.5 165.5 145.9 Investments in 844.2 807.0 jointly-controlled businesses Rate-regulated asset 36.0 43.8 Pipeline, plant and other 1,440.9 1,443.8 capital assets Intangible assets 436.2 455.0 Other assets 62.5 65.5 2,985.3 2,961.0 Liabilities Current liabilities Payables 49.3 63.4 Dividends payable 12.9 12.9 Current portion of 212.3 11.7 long-term senior debt 274.5 88.0 Long-term senior debt 1,132.2 1,247.6 Subordinated convertible 86.2 86.2 debentures Deferred tax liability 275.8 262.0 Other long-term liabilities 46.5 46.2 1,815.2 1,730.0 Shareholders' Equity Share capital Preferred shares 195.2 195.2 Common shares (200.6 and 1,837.5 1,804.3 197.8 outstanding at September 30, 2013 and December 31, 2012, respectively) Additional paid-in capital 4.3 4.3 Cumulative other (150.1) (164.8) comprehensive loss Accumulated deficit (716.9) (608.1) 1,170.0 1,230.9 Non-controlling interest 0.1 0.1 1,170.1 1,231.0 2,985.3 2,961.0 (1) Certain comparative figures as at December 31, 2012 have been revised. See Note 1 in Veresen's September 30, 2013 consolidated financial statements. Veresen Inc. Consolidated Statement of Income Three months ended Nine months ended September 30 September 30 (Canadian $ Millions, except per Common Share amounts; unaudited) 2013 2012 ((1)) 2013 2012 ((1)) Equity income 50.6 35.0 120.2 103.1 Operating revenues 84.5 71.5 245.9 196.5 Operations and maintenance (38.2) (27.6) (116.9) (81.4) General, administrative and project development (19.8) (16.6) (61.6) (52.0) Depreciation and amortization (22.8) (21.7) (67.5) (61.6) Interest and other finance (15.7) (15.4) (46.8) (43.4) Foreign exchange and other (0.9) (1.0) 0.7 (1.1) Net income before tax and non-controlling interest 37.7 24.2 74.0 60.1 Current tax (6.8) (3.4) (10.2) (12.2) Deferred tax (0.8) (6.1) (16.6) (11.8) Net income before non-controlling interest 30.1 14.7 47.2 36.1 Non-controlling interest - - - (0.1) Net income 30.1 14.7 47.2 36.0 Preferred Share dividends (2.2) (2.2) (6.6) (5.5) Net income attributable to Common Shares 27.9 12.5 40.6 30.5 Net income per Common Share Basic and diluted 0.14 0.06 0.20 0.15 (1) Certain comparative figures for the three and nine months ended September 30, 2012 have been revised. See Note 1 in Veresen's September 30, 2013 consolidated financial statements. Consolidated Statement of Comprehensive Income Three months ended Nine months ended September 30 September 30 (Canadian $ Millions; unaudited) 2013 2012 ((1)) 2013 2012 ((1)) Net income before non-controlling interest 30.1 14.7 47.2 36.1 Other comprehensive income (loss) Cumulative translation adjustment Unrealized foreign exchange gain (loss) on translation (10.0) (16.2) 14.7 (10.9) Other comprehensive income (loss) (10.0) (16.2) 14.7 (10.9) Comprehensive income (loss) before non-controlling interest 20.1 (1.5) 61.9 25.2 Comprehensive income attributable to non-controlling interest - - - (0.1) Comprehensive income (loss) 20.1 (1.5) 61.9 25.1 Preferred Share dividends (2.2) (2.2) (6.6) (5.5) Comprehensive income (loss) attributable to Common Shares 17.9 (3.7) 55.3 19.6 (1) Certain comparative figures for the three and nine months ended September 30, 2012 have been revised. See Note 1 in Veresen's September 30, 2013 consolidated financial statements. Veresen Inc. Consolidated Statement of Cash Flows Three months ended Nine months ended September 30 September 30 (Canadian $ Millions; unaudited) 2013 2012 ((1)) 2013 2012 ((1)) Operating Net income before non-controlling interest 30.1 14.7 47.2 36.1 Equity income (50.6) (35.0) (120.2) (103.1) Distributions from jointly-controlled businesses 51.0 53.6 143.0 150.9 Depreciation and amortization 22.8 21.7 67.5 61.6 Foreign exchange and other non-cash items 2.4 2.9 1.6 0.6 Deferred tax 0.8 6.1 16.6 11.8 Changes in non-cash working capital (12.5) (15.5) (19.3) (43.1) 44.0 48.5 136.4 114.8 Investing Acquisitions, net of cash acquired - (1.3) - (890.5) Investments in jointly-controlled businesses (17.3) (34.0) (53.2) (63.0) Return of capital from jointly-controlled businesses - 8.5 - 8.5 Pipeline, plant and other capital assets (14.4) (18.5) (38.5) (52.0) Restricted cash 0.3 - (2.6) 0.4 Other - (0.4) 0.1 (0.7) (31.4) (45.7) (94.2) (997.3) Financing Restricted cash - 1.6 3.9 348.6 Short-term debt issued, net of issue costs - - - 249.1 Short-term debt repaid - - - (250.0) Long-term debt issued, net of issue costs - - - 347.8 Long-term debt repaid (2.1) (2.0) (7.9) (7.6) Net change in credit facilities 26.0 49.0 93.0 113.0 Preferred Shares issued, net of issue costs - - - 193.7 Common Share dividends paid (38.6) (38.4) (116.2) (65.5) Preferred Share dividends paid (2.2) (2.2) (6.6) (5.5) Repayments from (advances to) jointly-controlled businesses 0.4 0.7 1.1 (20.8) Other 1.7 (0.4) (0.2) (3.0) (14.8) 8.3 (32.9) 899.8 Increase (decrease) in cash and short-term investments (2.2) 11.1 9.3 17.3 Effect of foreign exchange rate changes on cash and short-term investments (0.1) (0.1) 0.1 0.1 Cash and short-term investments at the beginning of the period 27.8 28.3 16.1 21.9 Cash and short-term investments at the end of the period 25.5 39.3 25.5 39.3 (1) Certain comparative figures for the three and nine months ended September 30, 2012 have been revised. See Note 1 in Veresen's September 30, 2013 consolidated financial statements. Veresen Inc. Distributable Cash Three months ended Nine months ended September 30 September 30 (Canadian $ Millions, 2013 2012 2013 2012 except where noted; unaudited) Alliance distributions, prior to withholdings for capital expenditures and net of debt service 35.2 32.7 102.8 98.2 AEGS distributable cash, after non-recoverable capital expenditures and debt service 4.7 4.3 13.5 12.1 Hythe/Steeprock distributable cash, after non-recoverable maintenance capital expenditures 19.8 17.3 55.1 43.7 Aux Sable distributions, net of support payments, non-recoverable maintenance capital expenditures and debt service 23.6 16.4 39.2 44.3 Power distributable cash, after maintenance capital expenditures and debt service 12.2 13.3 29.1 23.1 95.5 84.0 239.7 221.4 Corporate General and administrative (7.8) (7.1) (22.0) (21.3) Interest and other finance (10.3) (9.9) (30.4) (27.5) (18.1) (17.0) (52.4) (48.8) Current tax (5.9) (3.4) (7.6) (12.2) Preferred Share dividends (2.2) (2.2) (6.6) (5.5) (26.2) (22.6) (66.6) (66.5) Distributable cash ( (2)) 69.3 61.4 173.1 154.9 Distributable cash per Common Share ($) ((3)) 0.35 0.31 0.87 0.80 Dividends paid/payable( (4)) 50.0 49.1 149.4 144.1 Dividends paid/payable per Common Share ($) 0.25 0.25 0.75 0.75 (2) Distributable cash is not a standard measure under generally accepted accounting principles in the United States and may not be comparable to similar measures presented by other entities. Distributable cash represents the cash available to Veresen for distribution to common shareholders after providing for debt service obligations, Preferred Share dividends, and any maintenance and sustaining capital expenditures. Distributable cash does not include distribution reserves, if any, available in jointly-controlled businesses, project development costs, or transaction costs incurred in conjunction with acquisitions. Project development costs are discretionary, non-recoverable costs incurred to assess the commercial viability of greenfield business initiatives unrelated to the Company's operating businesses. The Company considers transaction costs to be part of the consideration paid for an acquired business and, as such, are unrelated to the Company's operating businesses. Distributable cash is an important measure used by the investment community to assess the source and sustainability of Veresen's cash distributions and should be used to supplement other performance measures prepared in accordance with generally accepted accounting principles in the United States. See the following table for the reconciliation of distributable cash to cash from operating activities. (3) The number of Common Shares used to calculate distributable cash per Common Share is based on the average number of Common Shares outstanding at each record date. For the three months ended September 30, 2013 the average number of Common Shares outstanding for this calculation was 200,230,641 (2012 - 196,614,501) and 206,137,149 (2012 - 202,521,009) on a basic and diluted basis, respectively. For the nine months ended September 30, 2013 the average number of Common Shares outstanding for this calculation was 199,306,345 (2012 - 192,248,429) and 205,212,853 (2012 - 198,155,103) on a basic and diluted basis, respectively. The number of Common Shares outstanding would increase by 5,906,508 (2012 - 5,906,508) Common Shares if the outstanding Convertible Debentures on September 30, 2013 were converted into Common Shares. (4) Includes $11.4 million and $33.2 million of dividends for the three and nine months ended September 30, 2013, respectively (2012 - $10.7 million and $68.5 million) satisfied through the issuance of Common Shares under the Company's Premium Dividend(TM) and Dividend Reinvestment Plan (trademark of Canaccord Genuity Corp.). Veresen Inc. Reconciliation of Distributable Cash to Cash from Operating Activities Three months ended Nine months ended September 30 September 30 (Canadian $ Millions; 2013 2012 2013 2012 unaudited) Cash from operating activities 44.0 48.5 136.4 114.8 Add (deduct): Project development costs ((5)) 8.1 4.7 23.9 16.7 Change in non-cash working capital 12.0 18.9 20.3 50.0 Principal repayments on senior notes (2.9) (2.8) (8.7) (8.4) Maintenance capital expenditures (1.2) (1.4) (5.0) (4.8) Distributions earned greater (less) than distributions received ((6)) 10.6 (4.3) 10.3 (7.9) Preferred Share dividends (2.2) (2.2) (6.6) (5.5) Current tax on Preferred Share dividends 0.9 - 2.5 - Distributable cash 69.3 61.4 173.1 154.9 (5) Represents costs incurred by the Company in relation to projects where the recoverability of such costs has not yet been established. Amounts incurred for the three and nine months ended September 30, 2013 relate primarily to the Jordan Cove LNG terminal project, the Pacific Connector Gas Pipeline project, and various power development projects. (6) Represents the difference between distributions declared by jointly-controlled businesses and distributions received. SOURCE Veresen Inc. Dorreen Miller, Director, Investor Relations Phone: (403) 213-3633 Email:email@example.com To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/November2013/05/c4345.html CO: Veresen Inc. ST: Alberta NI: OIL -0- Nov/05/2013 22:02 GMT
Veresen Announces 2013 Third Quarter Results and Increases Guidance
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