Stillwater Critical Minerals Corp. press release
ALTAGAS ANNOUNCES SECOND QUARTER 2022 RESULTS
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AltaGas Delivers Solid Second Quarter Results; Strategic Initiatives and Continued Execution of its Long-term Plan Drive Shareholder Value Creation
CALGARY, AB , July 28, 2022 /CNW/ - AltaGas Ltd. ("AltaGas" or the "Company") (TSX: ALA) today reported second quarter 2022 financial results and provided an update on the Company's operations.
HIGHLIGHTS
(all financial figures are unaudited and in Canadian dollars unless otherwise noted)
Normalized EPS 1 of $0.08 and GAAP EPS 2 of $0.12 in the second quarter of 2022 compared to $0.08 and $0.09 in the second quarter of 2021, respectively. Normalized FFO per share 1 of $0.60 and GAAP FFO per share 3 of $1.88 in the second quarter of 2022 compared to $0.56 and $0.29 in the second quarter of 2021, respectively. Strong ongoing FFO per share growth continues to provide the foundation for increased returns of capital and to fund accretive expansion. Normalized EBITDA 1 of $246 million and income before income taxes of $85 million in the second quarter of 2022 compared to $230 million and $47 million in the second quarter of 2021, respectively. Results were underpinned by stable and predictable results in the Utilities segment and strong export volumes in the Midstream segment. The Midstream segment reported normalized EBITDA of $133 million and income before income taxes of $181 million in the second quarter of 2022 compared to $142 million and $54 million in the second quarter of 2021, respectively. Performance included record Global Exports volumes that averaged 110,845 Bbls/d of liquified petroleum gases (LPGs) to Asia , with volume strength offset by hedge timing impacts on export volumes that were loaded in the first quarter of 2022, as well as lower margins and commodity price volatility that impacted LPG spreads on export volumes in the quarter. The Utilities segment reported normalized EBITDA of $116 million and loss before income taxes 4 of $9 million in the second quarter of 2022 compared to $99 million and income before income taxes of $68 million in the second quarter of 2021, respectively. Growth was driven by continued capital investments into the platform, the impact of recent rate cases and strong performance from the Retail business. On May 26, 2022 , AltaGas announced an agreement to sell its Alaskan Utilities to TriSummit Utilities Inc. ("TriSummit") for US$800 million (approximately CAD$1.03 billion ). Cash proceeds will be used to fund long-term growth opportunities and continue to strengthen the Company's balance sheet, while concentrating AltaGas' Utilities platform in the high growth Eastern U.S. region. On May 26, 2022 , the Virginia State Corporation Commission (SCC) approved the amendment for Washington Gas' 2023 to 2027 Steps to Advance Virginia's Energy (SAVE) Accelerated Replacement Program (ARP), which is focused on replacing higher risk pipelines and facilities with resilient infrastructure that is focused on benefiting Washington Gas' customers over the long-term. The approved program is the largest in Virginia's history and includes a new five-year spending cap of approximately US$878 million . On June 23, 2022 , the Canada Energy Regulator issued AltaGas a 25-year export license for an additional 46,000 Bbls/d of butane. The license will allow AltaGas to export additional Canadian butane volumes through non-seaborne exports into the U.S. via rail, including deliveries to the Company's Ferndale export terminal in Washington State , and seaborne exports from Ridley Island in British Columbia over the long-term. On June 29, 2022 , Washington Gas filed an application with the Virginia regulator to increase rates by an incremental US$48 million and requested to transfer US$39 million of costs that are currently being collected through the SAVE ARP surcharge into base rates. Proposed rates may be implemented on an interim basis (subject to refund) in November 2022 . On July 5, 2022 , AltaGas purchased the remaining 25.97 percent of Petrogas Energy Corp. ("Petrogas") from Idemitsu Canada Corporation ("Idemitsu"), for total cash consideration of $285 million . The acquisition provides AltaGas the ability to further integrate and optimize the west coast LPG export platform and solidifies the Company's position as the leading provider of North American LPGs from the west coast. Year-to-date, AltaGas has experienced many of the same inflationary pressures that are being seen across the global economy. Although the Company is well-protected against these inflationary pressures through its cost-of-service operating model in the Utilities and take-or-pay and fee-for-service contracts within its Midstream operations, AltaGas has an acute focus on judiciously managing all controllable costs to protect its customers and deliver the lowest costs possible.
| | | (1) Non-GAAP measure; see discussion and reconciliation to US GAAP financial measures in the advisories of this news release or in AltaGas' Management's Discussion and Analysis (MD&A) as at and for the period ended June 30, 2022, which is available on www.sedar.com . (2) GAAP EPS is equivalent to Net income applicable to common shares divided by shares outstanding. (3) GAAP FFO per share is equivalent to cash from operations divided by shares outstanding. (4) The largest drivers behind the reduction in Utilities income (loss) before taxes in Q2 2022 relative to Q2 2021 was mark-to-market on unrealized hedging losses. |
CEO MESSAGE
"AltaGas delivered sound results as we continued to execute on our strategic plan during the second quarter of 2022" said Randy Crawford , President and Chief Executive Officer. "The acquisition of the remaining equity ownership of Petrogas and our agreement to divest our Alaskan Utilities, enhances our energy infrastructure platform and positions AltaGas for continued long-term value creation. Our ability to recycle capital into strategic growth opportunities and further improve our balance sheet will ensure that AltaGas is well-positioned to deliver sustainable future value for our stakeholders.
"Our Utilities segment delivered strong results in the quarter with Normalized EBITDA increasing by approximately 17 percent year-over-year. This reflected the benefit of enhanced investment across our network, ongoing customer growth and strong contribution from our Retail business. The approval of an US$878 million extension to our five-year ARP in Virginia and the filing of rate cases in the District of Columbia (D.C.) and Virginia during the second quarter, will help ensure that AltaGas remains well-positioned to make continued investments into our network and provide our customers with safe and reliable service, while minimizing regulatory lag.
"Our Midstream platform continued to perform well in the second quarter as we expanded our assets operational performance, which included Global Exports shipping a record volume of approximately 111,000 Bbls/d of combined propane and butane to Asia . Although financial performance within the Global Exports business was below our expectations due to hedge timing and certain inflationary cost pressures in the quarter, our demonstrated ability to increase throughput at our two west coast terminals, focus on improving the performance of our supply chain, and commitment to addressing inflationary impacts, will provide AltaGas the opportunity to further enhance our financial results as we continue to connect our upstream and downstream customers for the best industry outcomes.
"Looking ahead, we remain focused on advancing our corporate strategy as a leading North American energy infrastructure company. This includes safely connecting customers to reliable and affordable sources of energy, for today and tomorrow, and executing our near-, medium- and long-term strategic priorities, including our strong environmental, social and governance practices."
RESULTS BY SEGMENT
| | | | | Normalized EBITDA 1 | Three Months Ended
June 30 | | | ($ millions) | 2022 | 2021 | | Utilities | 116 | 99 | | Midstream | 133 | 142 | | Corporate/Other | (3) | (11) | | Normalized EBITDA 1 | $246 | $230 | | (1) Non‑GAAP financial measure; see discussion in the Non-GAAP Financial Measures advisories of this news release | | | | | | | | | | | | Income (Loss) Before Income Taxes | Three Months Ended
June 30 | | | ($ millions) | 2022 | 2021 | | Utilities | (9) | 68 | | Midstream | 181 | 54 | | Corporate/Other | (87) | (75) | | Income Before Income Taxes | $85 | $47 |
BUSINESS PERFORMANCE
Utilities
The Utilities segment reported normalized EBITDA of $116 million in the second quarter of 2022 compared to $99 million in the second quarter of 2021, while loss before taxes was $9 million in the second quarter of 2022 compared to income before taxes of $68 million in the second quarter of 2021. Strong year-over-year growth in normalized EBITDA of 17 percent was driven by the combination of the ongoing capital investments that AltaGas has made across its network through ARP programs, the impact of recent rate cases, strong performance from the Retail business and favorable foreign exchange. The decrease in income before taxes was principally related to unrealized mark-to-market hedging losses within Washington Gas and the Retail business.
AltaGas continued to upgrade critical infrastructure with the deployment of $190 million of invested capital 1 during the second quarter of 2022 that was focused on driving better long-term outcomes for its customers, including $94 million deployed on the Company's various ARPs, the latter of which are focused on improving the safety and reliability of the system, while delivering long-term operating cost and environmental benefits. This level of capital deployment was in line with expectations for the second quarter of 2022 and leaves AltaGas well-positioned to deliver on planned network upgrades with rate base expected to increase by approximately 8-10 percent year-over-year in 2022.
On May 26, 2022 the Virginia SCC approved an extension of Washington Gas' ARP program with a total five-year spending plan of US$878 million that is earmarked to be invested from 2023 to 2027. This program is designed to replace higher risk pipeline and facilities that improve the safety and reliability of the network while reducing leak rates. On June 29, 2022 , Washington Gas filed an application to increase rates in Virginia by US$48 million and requested to transfer US$39 million of costs that are currently being collected through the Virginia SAVE surcharge into base rates. Proposed rates may be implemented on an interim basis (subject to refund) in November 2022 .
The Retail business generated $16 million of normalized EBITDA in the second quarter of 2022 compared to $10 million in the second quarter of 2021, which included stronger optimization margins, favourable timing of gas swap impacts, and lower than budgeted gas costs, which was partially offset by higher PJM costs. Some of this strong performance is expected to be reduced in future quarters as a portion of the outperformance is timing related.
Midstream
The Midstream segment reported normalized EBITDA of $133 million in the second quarter of 2022 compared to $142 million in the second quarter of 2021, while income before taxes was $181 million in the second quarter of 2022 compared to $54 million in the second quarter of 2021. Results were reflective of strong operating performance across the platform offset by hedge timing and lower-than-expected performance from the Global Exports platform due to tighter Far East Index (FEI) to North America butane spreads and commodity price volatility on unhedged volumes.
AltaGas exported a new Global Exports volume record of 110,845 Bbls/d of cleaner burning LPGs to Asia in the second quarter of 2022, which was spread across 18 full and one partially loaded Very Large Gas Carriers (VLGCs). This included an average of 63,520 Bbls/d of propane exported at RIPET and an average of 47,325 Bbls/d of combined butane and propane exported at Ferndale . Strong Global Exports volume growth was offset by a number of factors, including: 1) a $19 million negative impact from hedge timing on Global Exports volumes that were loaded at the end of the first quarter of 2022 with the corresponding hedge loss not recognized until delivery in the second quarter of 2022; 2) lower margins due to tighter FEI to North America spreads, particularly butane; and 3) increased logistical costs due to higher rail and ocean freight.
AltaGas continues with its strategy to grow and optimize its Global Export operations at the RIPET and Ferndale export terminals. The Company is working with its partners to improve efficiencies and drive down costs, including optimizing rail schedules and debottlenecking capacity constraints. This is expected to reduce transport times, usage and rail costs, as well as provide greater operational flexibility to grow throughput. AltaGas is also expecting the delivery of two dual-fuel VLGCs in late 2023 and early 2024 that are expected to reduce total shipping costs to Asia by approximately 25 percent compared to a standard VLGC. The new vessel deployments are also expected to reduce pricing volatility for AltaGas and its customers on a longer-term basis.
Strong underlying fundamentals and commodity prices continue to underpin AltaGas' Midstream business, with realized frac spreads up nearly 150 percent year-over-year, offset by slightly lower volumes due to planned turnarounds. AltaGas' realized frac spread averaged $28.70 /Bbl, after transportation costs, with most of AltaGas' frac exposed volumes financially hedged during the quarter. AltaGas is well hedged for 2022 with approximately 75 percent of the remaining 2022 expected frac exposed volumes hedged at approximately $34.68 /Bbl, prior to transportation costs. In addition, approximately 51 percent of AltaGas' remaining 2022 expected global export volumes are either tolled or financially hedged with an average FEI to North American financial hedge price of US$12.66 /Bbl for non-tolled propane and butane volumes.
2022 Midstream Hedge Program
| | | | | | | | Q3 2022 | Q4 2022 | H2 2022 | | | Global Exports volumes hedged (%) (1) | 75 | 23 | 51 | | | Average propane/butane FEI to North America Average hedge (US$/Bbl) (2) | 13.00 | 8.47 | 12.66 | | | Fractionation volume hedged (%) (3) | 78 | 72 | 75 | | | Frac spread hedge rate - (CAD$/Bbl) (3) | 34.33 | 35.01 | 34.68 | | | | | | | |
| (1) | Approximate expected volumes hedged, includes contracted tolling volumes and financial hedges; based on the assumption of average exports of 97 MBbls/d. | | (2) | Approximate average for the period. Does not include physical differential to FSK for C3 volumes. Butane is hedged as a percentage of WTI. | | (3) | Approximate average for the period. |
Corporate/Other
The Corporate/Other segment reported a normalized EBITDA loss of $3 million in the second quarter of 2022 compared to an $11 million loss in the same quarter of 2021, while loss before income taxes was $87 million in the second quarter of 2022 compared to $75 million in the second quarter of 2021. The $8 million year-over-year increase in normalized EBITDA was driven by a decrease in corporate expenses, primarily related to higher employee incentive plan costs in the second quarter of 2021 due to AltaGas' strong operating performance and rising share price in 2021.
CONSOLIDATED FINANCIAL RESULTS
| | | | | | | | Three Months Ended
June 30 | | | | | ($ millions) | 2022 | 2021 | | | | Normalized EBITDA (1) | $ | 246 | $ | 230 | | Add (deduct): | | | | | | Depreciation and amortization | (108) | (108) | | | | Interest expense | (76) | (69) | | | | Normalized income tax expense | (15) | (11) | | | | Preferred share dividends | (10) | (13) | | | | Other (2) | (14) | (6) | | | | Normalized net income (1) | $ | 23 | $ | 23 | | | | | | | | Net income applicable to common shares | $ | 35 | $ | 24 | | Normalized funds from operations (1) | $ | 170 | $ | 157 | | | | | | | | ($ per share except shares outstanding) | | | | | | Shares outstanding - basic (millions) | | | | | | During the period (3) | 281 | 280 | | | | End of period | 281 | 280 | | | | | | | | | | Normalized net income - basic (1) | 0.08 | 0.08 | | | | Normalized net income - diluted (1) | 0.08 | 0.08 | | | | | | | | | | Net income per common share - basic | 0.12 | 0.09 | | | | Net income per common share - diluted | 0.12 | 0.09 | | | | | | | | |
| (1) | Non-GAAP financial measure; see discussion in Non-GAAP Financial Measures section at the end of this news release. | | (2) | "Other" includes accretion expense, net income applicable to non-controlling interests, foreign exchange gains, and NCI portion of non-GAAP adjustments. The portion of non-GAAP adjustments applicable to non-controlling interests are excluded in the computation of normalized net income to ensure consistency of normalizations applied to controlling and non-controlling interests. These amounts are included in the "net income applicable to non-controlling interests" line item on the Consolidated Statements of Income. | | (3) | Weighted average. |
Normalized EBITDA for the second quarter of 2022 was $246 million compared to $230 million for the same quarter in 2021. The largest factors leading to the variance are described in the Business Performance sections above.
For the second quarter of 2022, the average Canadian/U.S. dollar exchange rate increased to 1.28 from an average of 1.23 in the same period of 2021, resulting in a $4 million increase to normalized EBITDA.
Income before income taxes was $85 million for the second quarter of 2022 compared to $47 million for the same quarter in 2021. Net income applicable to common shares was $35 million or $0.12 per share for the second quarter of 2022, compared to $24 million or $0.09 per share for the same quarter in 2021. Please refer to the Three Months Ended June 30 Section of the MD&A for further details on the variance in income before income taxes and net income applicable to common shareholders.
Normalized net income was $23 million or $0.08 per share for the second quarter of 2022, consistent with normalized net income of $23 million or $0.08 per share reported for the same quarter of 2021. Factors impacting normalized net income include higher net income applicable to non-controlling interests, higher interest expense and higher normalized income tax expense, partially offset by the same factors impacting normalized EBITDA.
Normalized FFO was $170 million or $0.60 per share for the second quarter of 2022, compared to $157 million or $0.56 per share for the same quarter in 2021. The increase was mainly due to the same previously referenced factors impacting normalized EBITDA and lower current income tax expense, partially offset by higher interest expense, which included the costs of subordinated hybrid notes issued in January with proceeds used to redeem the outstanding Series K cumulative redeemable five-year rate reset preferred shares.
Cash from operations in the second quarter of 2022 was $527 million or $1.88 per share, compared to $81 million or $0.29 per share for the same quarter in 2021. Please refer to the Liquidity Section of the MD&A for further details on the variance in cash used by operations .
Depreciation and amortization expense was $108 million for the second quarter of 2022, consistent with the same quarter in 2021. Factors impacting depreciation and amortization expense include the new assets placed in-service and the stronger U.S. dollar, offset by the impact of the pending sale of the Alaskan Utilities.
Interest expense for the second quarter of 2022 was $76 million , compared to $69 million for the same quarter in 2021. The increase in interest expense was partially due to $4 million of interest on the subordinated hybrid notes issued in January.
Income tax expense was $17 million for the second quarter of 2022, compared to an income tax expense of $3 million for the same quarter of 2021. The increase was mainly due to higher income before taxes compared to the second quarter of 2021. Current tax recovery of $2 million was recorded in the second quarter of 2022, compared to current tax expense of $27 million recorded in the same quarter of 2021. The reduction in current tax expense was mainly due to a decrease in current tax expense on asset sales compared to the same quarter in 2021.