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AltaGas Announces Second Quarter Results

Press Release

AltaGas continues to execute on defined strategy and delivers resilient second quarter results with guidance reaffirmed; remains focused on maintaining safe and reliable operations for its employees, customers and the communities it serves.

CALGARY, AB, July 30, 2020 – AltaGas Ltd. (AltaGas or the Company) (TSX: ALA) today reported second quarter 2020 financial results and provided an update on its operations and outlook, inclusive of COVID-19 considerations.

“Although the second quarter included large economic disruptions due to the global pandemic that has impacted us all, we continue to be encouraged with the resiliency and performance of our operations during a period of extraordinary challenge and duress,” said Randy Crawford, AltaGas’ President and Chief Executive Officer. “We were able to maintain safe and reliable operations, continue to deliver critical energy to end users, and honor our social and moral contract that we have in the communities where we serve. This feat was only possible through the tireless efforts and adaptability of our committed workforce and our valued vendor partners. As we look to the second half of the year, we remain steadfast about the goals we laid out coming into 2020.”

HIGHLIGHTS

(all financial figures are unaudited and in Canadian dollars unless otherwise noted)

  • Normalized EBITDA1 was $206 million for the second quarter. Excluding the $29 million reduction in normalized EBITDA as a result of the asset sales in 2019, second quarter normalized EBITDA would have increased 13 percent as compared to the second quarter of 2019.
  • Normalized net income1 was $17 million ($0.06 per share) compared to $1 million ($0.01 per share) in the second quarter of 2019.
  • Net income applicable to common shares was $21 million ($0.08 per share) compared to $41 million ($0.15 per share) in the second quarter of 2019.
  • Net debt decreased to $6.8 billion as at June 30, 2020, compared to $7.2 billion at December 31, 2019.
  • Strong Midstream segment performance was underpinned by record volumes at the Ridley Island Propane Export Terminal (RIPET), which continues to see strong operating performance with exports of 41,460 Bbls/d (seven ships) of Canadian propane to Asia during the quarter.
  • Utilities segment results were representative of the lower demand spring and summer months. Growth in each of the regulated utilities underpinned by 2019 rate cases and accelerated pipe replacement program (ARP) spending was more than offset by lower realized margins in the retail business and COVID-19 related impacts in the quarter.
  • During the quarter, AltaGas successfully refinanced all its remaining 2020 debt maturities across the platform through two debt financings. This included SEMCO completing a private placement of US$450 million of first mortgage bonds on April 21, 2020 and AltaGas closing a $500 million issuance of senior unsecured medium-term notes on June 10, 2020.
  • On June 15, 2020, AltaGas entered into a stock purchase agreement with Clarion Energy LLC to sell a 49.5 MW gas fired facility in Ripon, California. The transaction is expected to close in the third quarter. On July 20, 2020, AltaGas closed the disposition of AltaGas Pomona Energy Storage Inc. and land related to a gas fired power generation facility in the U.S. The effective date of the sale was January 1, 2020, and gross proceeds, before working capital and other adjustments, were approximately $63 million (US$47 million). Although these transactions were smaller relative to the overall size of AltaGas, they are a continuation of our efforts to focus the platform and are expected to be credit accretive.
  • Although there were headwinds in the quarter, the platform continues to show strong resilience and durability. At this stage, the Company expects to land within its previously stated guidance range and is maintaining its 2020 outlook for expected normalized EBITDA in the range of $1.275$1.325 billion and normalized net income1 of $1.20$1.30 per share.
  • AltaGas remains committed to protecting the health and safety of its employees while providing essential services to its customers and communities. The Company continues to closely monitor developments related to COVID-19, including the existing and potential impact on global and local economies in the jurisdictions where it operates.

1.

Non-GAAP measure; see discussion in the advisories of this news release and reconciliation to US GAAP financial measures shown in AltaGas’ Management’s Discussion and Analysis (MD&A) as at and for the period ended June 30, 2020, which is available on www.sedar.com.

CEO MESSAGE

Randy Crawford, President and Chief Executive Officer commented, “As a provider of essential services we are committed to providing the much-needed energy to homes and businesses of our Utilities customers and ensuring access to global markets for our Midstream customers.  We are clearly living in unprecedented times as COVID-19 has impacted us all and continues to pose a significant challenge globally. We continue to closely monitor regional developments and we remain focused on maintaining the safety of our employees, stakeholders, and the communities we serve.

“I am extremely proud of our employees for the work they continue to do to refocus this great Company and I would like to thank them for their dedication, adaptability and hard work during this pandemic.  Our people are the heart of this Company and their spirit and resilience ensures my confidence that we will continue to execute our strategy and maintain our commitment to safety and operational excellence.

“Apart from the specific actions we have taken in response to COVID-19, our strategy and focus remains unchanged.  We continue to execute on our near-term priorities while operating our businesses in a safe and reliable manner. The measures we took in 2019 to focus the business on our core capabilities and strengthen our balance sheet leave us well positioned to manage the headwinds facing the global economy. We are operating a diversified and enduring business with approximately 85 percent of earnings underpinned by rate-regulated utilities or contracted midstream operations that we believe will demonstrate strong durability through this challenging landscape.

“Our second quarter financial results reflect the stability and resiliency of our diversified business mix which continue to provide predictable and reliable earnings.  Our Utilities strategy is centered around providing safe and reliable service to our customers.  We maintain a disciplined approach to growing the rate base through our accelerated replacement programs and we continue to make strong progress towards achieving operational excellence and attaining our target returns.  Approximately 70 percent of the Utilities earnings is protected through decoupling and fixed-billing charges. All of the jurisdictions where our Utilities operate have allowed us to create regulatory assets to facilitate the recovery of any incremental costs related to COVID-19.

“Our Midstream strategy is designed to leverage our industry leading export capability to access premium pricing in Asia to support our customers.  We believe in the long-term fundamentals of the Montney and we continue to see strong and stable demand for Canadian propane within Asia.

“Performance at RIPET remains strong. We continue to deliver on our goals, setting a record in the second quarter with 41,460 Bbls/d of Canadian propane exported to Asia on seven ships. We are pleased with the progress we continue to make at RIPET and we remain on track to hit 50,000 Bbls/d before year-end.

“Our self-funded capital plan of approximately $900 million is more than three-quarters directed towards low-risk Utilities investment where we earn more immediate returns with roughly 80% of that amount invested through accelerated replacement programs and maintenance spending that is calibrated to match depreciation.

“We recently expanded our integrated Midstream service offering with the completion of the North Pine and Townsend 2B expansions and will look to further expand our footprint through the Petrogas put option. Through this we will expand our Midstream value proposition through increased exposure to assets at Ferndale and Fort Saskatchewan, and continue towards our goal of operating an integrated logistics network.

“We are well positioned to have significant organic growth opportunities within both of our businesses.  We will remain focused on maintaining a strong balance sheet, continuing to de-lever our capital structure and operating with acute capital discipline, which is critical to our long-term strategy.

“We continue to monitor the macro environment and assess the potential impacts that COVID-19 could have on our business.  We have seen strong resilience in our business to date and we believe that will endure through the years to come.

“The work we completed in 2019 to focus the business and strengthen our balance sheet provides us with the stability and financial flexibility required to navigate challenging economic environments, like the one that we are in.  Despite the headwinds, the platform we developed continues to show resilience, and at this stage we expect to land within our previously stated guidance range and we are maintaining our 2020 outlook for expected normalized EBITDA in the range of $1.275$1.325 billion and normalized net income of $1.20$1.30 per share.  We believe this is a testament to the resiliency of our diversified businesses and the purposeful actions we have taken over the past 12-18 months.”

BUSINESS PERFORMANCE

Second quarter Utilities segment results were representative of the lower demand spring and summer months.  Growth in each of the regulated Utilities underpinned by 2019 rate cases and ARP spending was more than offset by lower realized margins in the retail business and COVID-19 related impacts.  AltaGas’ low-risk Utilities business continues to provide stable and predictable earnings. More than 70 percent of Utilities customers are residential and approximately 70 percent of Utilities earnings are protected through decoupling and fixed-billing charges.  In addition, all of AltaGas’ Utilities jurisdictions (Washington DC, Maryland, Virginia, Alaska and Michigan) have approved the creation of regulatory assets for the recovery of incremental costs related to COVID-19.

In the Midstream segment, RIPET contributed $30 million of normalized EBITDA in the second quarter on exports of 41,460 Bbls/d (seven ships) delivered to Asian markets at an EBITDA contribution of approximately $8/Bbl. During the second quarter of 2020, AltaGas hedged approximately 29,585 Bbls/d of propane export volumes at an average FEI to Mont Belvieu spread of approximately US$9/Bbl. AltaGas remains on track to hit its 50,000 Bbls/d export target through RIPET by year end. The Company has secured 50,000 Bbls/d of supply as at April 1, 2020, with approximately 33 percent under long-term tolling agreements.

Fractionation volumes in the second quarter increased compared to the second quarter 2019 as the result of the North Pine expansion and additional volumes at Townsend 2B, which were partially offset by lower volumes at Harmattan and Younger. Higher gas processing volumes at Nig Creek and the new Townsend 2B facility and higher interruptible volumes at Gordondale were more than offset by lower processed volumes at the Blair Creek and Townsend Shallow Cut facilities and lower volumes at the extraction facility due to producer shut ins.  During the second quarter of 2020, AltaGas hedged 10,068 Bbls/d of natural gas liquids (NGLs) at an average price of approximately $28/Bbl excluding basis differentials. The average indicative spot NGL frac spread for the second quarter of 2020 was approximately $4/Bbl, however due to our hedging program and other factors AltaGas’ realized frac spread averaged approximately $17/Bbl in the second quarter of 2020.

Read More: https://www.altagas.ca/newsroom/news-releases/altagas-announces-second-quarter-results

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