First Half of 2023 Results in Line with Expectations; Second Quarter Negatively Impacted by Wildfires and Hedge and Ship Timing Impacts; Reiterating 2023 Full-year Guidance

CALGARY, AB, July 28, 2023 /CNW/ - AltaGas Ltd. ("AltaGas" or the "Company") (TSX: ALA) today reported second quarter 2023 financial results and provided an update on the Company's operations and other corporate developments.

HIGHLIGHTS

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

  • Normalized EPS1 was $0.06 in the second quarter of 2023 compared to $0.14 in the second quarter of 2022, while GAAP EPS2 was $0.47 in the second quarter of 2023 compared $0.12 in the second quarter of 2022. Results were inclusive of approximately $7 million of wildfire impacts and approximately $12 million of negative hedge and ship timing impacts. These combined factors reduced normalized EPS by an approximately $0.05 in the second quarter of 2023, with the hedge and ship timing normalized EPS impact of approximately $0.03 expected to reverse in the coming quarters.
  • Normalized EBITDA1 was $239 million in the second quarter of 2023 compared to $276 million in the second quarter of 2022, while income before income taxes was $182 million in the second quarter of 2023 compared to $85 million in the second quarter of 2022. Results were inclusive of the wildfire, hedge, and ship timing impacts previously mentioned, with the approximate $12 million hedge and ship timing impacts expected to reverse in the coming quarters.
  • Normalized FFO per share1 was $0.53 in the second quarter of 2023 compared to $0.71 in the second quarter of 2022, while Cash from Operations per share3 was $1.32 in the second quarter of 2023 compared to $1.88 in the second quarter of 2022. The decrease in normalized FFO per share was mainly due to lower normalized EBITDA and higher interest expense, including hybrid debt which replaced previous preferred shares. Results were inclusive of the wildfire, hedge, and ship timing impacts with the combined factors having a $0.07 negative normalized FFO per share impact in the second quarter of 2023, with the hedge and ship timing impacts of approximate $0.04 normalized FFO per share expected to reverse in the coming quarters.
  • The Utilities segment reported normalized EBITDA of $102 million in the second quarter of 2023 compared to $116 million in the second quarter of 2022, while income before taxes was $105 million in the second quarter of 2023 compared to a loss before income taxes of $9 million in the same quarter of 2022. The largest driver of the year-over-year variances was the lack of contribution from the Alaskan Utilities during the second of quarter of 2023, which had contributed $15 million in the second quarter of 2022 and was subsequently divested during the first quarter of 2023. Warmer weather also had a $4 million negative impact in the second quarter of 2023 relative to the second quarter of 2022.
  • The Midstream segment reported normalized EBITDA of $134 million in the second quarter of 2023 compared to $163 million in the second quarter of 2022, while income before taxes in the segment was $181 million in the second quarter of 2023 consistent with income before taxes of $181 million in the second quarter of 2022. Drivers of the year-over-year variances included the previously mentioned wildfires, hedge and ship timing impacts, with the hedge and ship timing impacts expected to reverse in the coming quarters, as well as the lost contribution from the Aitken Creek gas processing facility that was sold in the second quarter 2022, which had an $11 million negative year-over-year variance in the quarter.
  • Effective July 1, 2023, Vern Yu joined as AltaGas' President and Chief Executive Officer and was appointed to the Board of Directors. Mr. Yu has over three decades of experience in energy infrastructure, including the Utilities and Midstream sectors, across North America.
  • AltaGas exited the second quarter of 2023 with net debt of $7.7 billion, excluding hybrid notes and preferred shares, compared to net debt of $9.3 billion at 2022 year-end, excluding hybrid notes and preferred shares. On a trailing basis AltaGas' Net Debt1 to normalized EBITDA was approximately 5.1x at the end of the second quarter of 2023, excluding hybrid notes and preferred shares. AltaGas remains committed to further reducing its financial leverage and achieving its medium-term Net Debt to normalized EBITDA target of below 5.0x and long-term target of approximately 4.5x, excluding hybrid notes and preferred shares.
  • During the second quarter of 2023, Fitch affirmed AltaGas' credit rating at 'BBB'/'F3' with a Stable Outlook and S&P affirmed AltaGas' credit rating at 'BBB-' with a Stable Outlook.
  • AltaGas is pleased with the progress shown on removing the remaining milestones to complete the Mountain Valley Pipeline over the past few months, including receipt of all remaining permits to both finish construction and operate the pipeline. The pathway to completion was reinforced by the July 27, 2023 U.S. Supreme Court's ruling to vacate the stays that were placed on the pipeline by the Fourth Circuit.
  • On April 4, 2023, AltaGas and Royal Vopak (Vopak) entered a 50/50 joint venture to develop the Ridley Island Energy Export Facility (REEF), a large-scale LPG and bulk liquids terminal and marine infrastructure on Ridley Island. REEF further bolsters AltaGas' industry-leading liquified petroleum gases (LPG) export business, adding additional egress for domestic customers to premium global downstream markets.
  • In April 2023, AltaGas entered into a seven-year time charter agreement with two one-year optional extensions for a new 86,700 cubic meter dual-fuel Very Large Gas Carrier (VLGC) with delivery expected in the first half of 2026. The agreement further reduces AltaGas' maritime shipping costs by approximately 25 percent relative to normal Baltic freight forward pricing while lowering pricing volatility.
  • On May 15, 2023, AltaGas closed its offering of $400 million senior unsecured medium-term notes with a coupon rate of 4.638 percent, due on May 15, 2026. The net proceeds were used to pay down existing indebtedness under AltaGas' credit facility and to refinance the senior unsecured medium-term note that matured in June 2023.
  • On May 18, 2023, Washington Gas filed an application for authority to increase rates in Maryland. The requested rates are designated to collect an incremental US$28 million in revenues, net of approximately US$21 million of costs currently collected through its Accelerated Replacement Programs (ARP) modernization program, the Strategic Infrastructure Development Enhancement Plan (STRIDE) surcharge. The Maryland Public Service Commission (PSC of MD) has 210 days to consider the application and a decision is expected around mid-December 2023.
  • On June 16, 2023, Washington Gas filed an application with the PSC of MD for the third phase of its ARP modernization program, seeking approval for approximately US$495 million of modernization investments on behalf of our customers over the five-year period from January 1, 2024 to December 31, 2028.
  • On April 23, 2023, Washington Gas, State Corporation Commission (SCC) of Virginia Staff and the Office of the Attorney General filed a proposed stipulation for a settlement that includes a revenue increase of US$73 million and return on equity of 9.65 percent. On July 17, 2023, the Hearing Examiner report was issued recommending the SCC of Virginia approve the proposed stipulation with certain recommendations. Remaining process steps on the rate case are expected to be concluded in the coming months.

_____________________________________

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, 2023, which is available on www.sedar.com. (2) GAAP EPS is equivalent to Net income applicable to common shares divided by shares outstanding.  (3) Cash from Operations per share is equivalent to cash from operations divided by shares outstanding.

 

CEO MESSAGE

"I'm excited to have joined AltaGas. I've already had the opportunity to immerse myself into the business, visit offices and operations, and connect with employees, customers, partners, and shareholders. My enthusiasm towards the opportunity has only grown since starting, and I'm excited to leverage the Company's exceptional assets in the months and years ahead.

"I came to AltaGas because I saw an opportunity to create a resilient and growing infrastructure platform with a robust investment proposition. The Company is positioned to deliver industry-leading dividend growth through stable and increasing cashflows, improving our risk-profile through low-risk commercial frameworks, and ongoing balance sheet de-leveraging. AltaGas has a visible multi-year growth profile through large modernization programs and ongoing customer additions at the Utilities as well as continued global export volume growth and value chain investment opportunities across the Midstream platform.

"The long-term fundamentals for AltaGas' business are robust. The Canadian upstream industry will deliver robust growth in natural gas and associated natural gas liquids (NGLs) production in the coming years, as feedstock for LNG Canada is brought online. These growing NGL volumes are best suited to be delivered to key Asian demand markets, with AltaGas and our customers positioned to benefit from the structural west coast pricing advantage relative to other LPG supply sources in the U.S. Gulf Coast or Arabian Gulf. Our Utilities have a bright future with natural gas remaining the largest home energy source across our jurisdictions and electrical substitution costs being more than three times the cost of natural gas on a delivered basis. In the years ahead, we will be acutely focused on balancing the critical needs of energy affordability and reliability with regional and national climate goals.

"You can expect AltaGas to continue its commitment towards strong community partnerships and engagement with Indigenous right holders and stakeholders in the coming years. These values align with my own principles, and I believe are the foundation for long-term sustainability. As we complete a quarter that included impacts to our Canadian Midstream operations due to the devastating wildfires across Alberta and B.C., our thoughts are with the people and communities affected by these ongoing tragic events. I want to thank our dedicated employees who were involved in the wildfire relief and helped the recovery efforts across the communities where we live and serve. Their actions are a direct reflection of the organization's culture and resolve to come together in times like these.

"Despite the negative wildfire and hedge timing impacts present in the second quarter of 2023, our first half of 2023 results are in line with our expectations, and we are reiterating our 2023 full-year guidance, including normalized EPS of $1.85 - $2.05 and normalized EBITDA of $1.5 billion - $1.6 billion."

RESULTS BY SEGMENT

Normalized EBITDA (1) (2)

Three Months Ended

June 30

($ millions)

2023

2022

Utilities

102

116

Midstream

134

163

Sub-total: Operating Segments

236

279

Corporate/Other

3

(3)


$                   239

$                   276

(1)

Non‑GAAP financial measure; see discussion in NonGAAP Financial Measures section of this new release.

(2)

In the third quarter of 2022, Management changed AltaGas' non-GAAP policy to remove normalization adjustments relating to acquired contingencies. Prior periods have been restated to reflect this change. Please refer to the Non-GAAP Financial Measures section of this news release for additional details.

 

Income (Loss) Before Income Taxes


Three Months Ended

June 30

($ millions)

2023

2022

Utilities

105

(9)

Midstream

181

181

Sub-total: Operating Segments

286

172

Corporate/Other

(104)

(87)


$                  182

$                    85

 

BUSINESS PERFORMANCE

Utilities

The Utilities segment reported normalized EBITDA of $102 million in the second quarter of 2023, compared to $116 million in the same quarter of 2022. Income before income taxes was $105 million in the second quarter of 2023, compared to a loss before income taxes of $9 million in the same quarter of 2022.  The largest driver of the year-over-year variances in normalized EBITDA was the lack of contribution from the Alaskan Utilities during the second quarter of 2023, which had contributed $15 million in the second quarter of 2022 and was subsequently divested during the first quarter of 2023.

Positive factors impacting second quarter results on a year-over-year basis in 2023 included contribution from ongoing asset investments on behalf of our customers across the network through various ARP modernization programs, interim rates being in place in Virginia as part of the rate case, and favorable foreign exchange rates. These positive factors were offset by higher operating and administrative expenses, warmer weather in Michigan and the District of Columbia, which had a $4 million negative year-over-year variance in the quarter, and modestly lower contribution from the Retail energy business.

AltaGas continued to upgrade critical infrastructure and make ongoing investments on behalf of its customers during the second quarter of 2023 with the deployment of $198 million of invested capital1, including $125 million deployed on the Company's various modernization programs. These investments continue to be directed towards improving the safety and reliability of the system and connecting new customers to the critical energy they require to carry out everyday life. These investments should also bring long-term operating cost benefits to our customers. AltaGas will continue to make these critical modernization investments on behalf of our customers in the years ahead, while balancing the need for ongoing customer affordability. This latter focus is particularly important during the current economic environment of higher interest rates and inflation across the broader economy. AltaGas continues to be acutely focused on judicious cost management across the Utilities platform and driving the best outcomes for its customers and stakeholders.

On April 23, 2023, Washington Gas, SCC of Virginia (VA) Staff and the Office of the Attorney General filed a proposed stipulation for a settlement that includes a revenue increase of US$73 million and return on equity of 9.65 percent. The proposed stipulation is pending the Commission review. The evidentiary hearing was held on May 2, 2023, and letters in lieu of briefs were filed on June 9, 2023. On July 17, 2023, the Hearing Examiner report was issued and recommended the SCC of Virginia approve the proposed stipulation with certain recommendations. Remaining process steps on the rate case are expected to be concluded in the coming months.

On May 18, 2023, Washington Gas filed an application for authority to increase rates in Maryland. The requested rates are designated to collect an incremental US$28 million in revenues, net of approximately US$21 million of costs currently collected through the STRIDE modernization surcharge. The PSC of MD has 210 days to consider the application and a decision is expected around mid-December 2023. On June 16, 2023, Washington Gas also filed an application with the PSC of MD for the third phase of its STRIDE modernization program, seeking approval for approximately US$495 million of modernization investments over the five-year period on behalf of our customers from January 1, 2024, to December 31, 2028. These applications are focused on providing Washington with the capacity to make ongoing modernization investments across Maryland, with timely rate recovery mechanisms, and continue to provide the vital energy required to carry out everyday life in the jurisdiction.

Midstream

The Midstream segment reported normalized EBITDA of $134 million in the second quarter of 2023 compared to $163 million in the same quarter of 2022. Income before income taxes was $181 million in the second quarter of 2023, consistent with the $181 million in the same quarter of 2022. One-time items impacting year-over-year results included the Canadian wildfires with the North Pine fractionation facility declaring force majeure for 12.5 days plus other one-time costs associated with the wildfires that aggregated to an approximate $7 million impact across the platform, and the lost contribution from the Aitken Creek gas processing facility, which had an $11 million negative year-over-year variance in the second quarter of 2023.

Second quarter 2023 results included strong operations and year-over-year volume growth across the Midstream segment that was more than offset by the impact of wildfires, lower marketing profits, a lower contribution from a favourable resolution of certain contingencies that was present in the second quarter of 2022, lower realized butane margins in the global export business and the continued impact from previous decisions around not hedging butane inventories as have been discussed during the past three quarters, the lost contribution from the Aitken Creek gas processing facility that was sold in the second quarter of 2022, and lower realized pricing on fractionation volumes. Other positive factors impacting normalized EBITDA included the benefit of the Allowance for Funds Used During Construction (AFUDC) at MVP as a result of the resumption of construction activities in June 2023, higher power revenue at Harmattan primarily due to stronger power prices and the facility selling excess power not needed for operations to the Alberta grid, and the sale of greenhouse gas credits at the processing facilities due to AltaGas' net credit position.

AltaGas remains focused on partnering with Western Canadian producers and aggregators to increase direct global market access through long-term tolling arrangements that can drive the best collective outcomes for all parties, while also having an active hedging program to proactively lock in structural margins and de-risk cashflows for merchant exports. AltaGas exported 115,589 Bbls/d of LPGs to Asia during the second quarter of 2023, including 11 full and one partially loaded VLGC at RIPET, and eight VLGCs loaded at Ferndale. Higher export volumes were driven by continued improvement in AltaGas and its partner's operating and logistical capabilities, strong ongoing customer demand in Asia, and higher available LPG supply.

Gas processing volumes in the second quarter of 2023 increased 12 percent year-over-year and were in line with the Company's expectations. The increase was primarily due to higher producer volumes at the Townsend facility, higher volumes at the Harmattan raw gas and co-stream facilities, and strong contribution from the Younger facility due to higher seasonal demand, partially offset by the impact of the Aitken Creek sale in the second quarter of 2022.  

Fractionation volumes for the second quarter of 2023 increased by 9,420 Bbls/d (33%) compared to the same quarter of 2022. Higher fractionation volumes were a result of higher North Pine volumes and utilization, higher Harmattan trucked-in NGL mix and raw gas volumes, and higher volumes and utilization at the Younger facility.

AltaGas' realized frac spread averaged $23.87/Bbl, after transportation costs, as most of AltaGas' frac exposed volumes were hedged at approximately $26.83/Bbl in the second quarter of 2023, prior to transportation costs. AltaGas is well hedged for 2023 with approximately 85 percent of its remaining 2023 expected frac exposed volumes hedged at approximately US$27/Bbl, prior to transportation costs. In addition, approximately 77 percent of AltaGas' remaining 2023 expected global export volumes are either tolled or financially hedged with an average Far East Index (FEI) to North American financial hedge price of approximately US$15.32/Bbl for non-tolled propane and butane volumes.

2023 Midstream Hedge Program






Q3 2023

Q4 2023

Remainder 2023

Global Exports volumes hedged (%) (1)

93

59

77

Average propane/butane FEI to North America average hedge (US$/Bbl) (2)

13.80

16.84

15.32

Fractionation volumes hedged (%) (3)

92

76

85

Frac spread hedge rate (US$/Bbl) (3)

27.33

26.83

27.08

1)

Approximate expected volumes hedged. Includes contracted tolling volumes and financial hedges. Based on AltaGas' internally assumed export volumes. AltaGas is hedged at a higher percentage for firmly committed volumes.

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 normalized EBITDA for the second quarter of 2023 was $3 million, compared to a loss of $3 million in the same quarter of 2022. Loss before income taxes in the Corporate/Other segment was $104 million in the second quarter of 2023, compared to a loss of $87 million in the same quarter of 2022. The year-over-year increase in normalized EBITDA was mainly due to lower expenses related to employee incentive plans.

Mountain Valley Pipeline Approval

On June 3, 2023, the U.S. Fiscal Responsibility Act (FRA) was signed into law, which included legislation that approved and authorized all permits necessary to complete construction of MVP and commence and continue operations post completion. The legislation also changed the court of jurisdiction to review agency actions on approvals necessary for MVP construction and ongoing operations. On June 8, 2023, the West Virginia Department of Environmental Protection re-issued a Section 401 water quality certification that was previously vacated by the U.S. Fourth Circuit Court of Appeals. On June 23, 2023, the U.S. Army Corps of Engineers issued a 404 individual water permit, authorizing all remaining open-cut water body crossings. On June 28, 2023, FERC approved MVP's request to move forward with all remaining construction activities.

On July 10, 2023, and July 11, 2023, the U.S. Fourth Circuit Court of Appeals issued two stays halting the construction of the pipeline while it considers the arguments of petitions, which are scheduled for July 27, 2023.

Given the passing of FRA legislation, MVP does not view the U.S. Fourth Circuit Court of Appeals as having jurisdiction to issue these orders. On July 14, 2023 MVP filed a petition for emergency relief to the Supreme Court of the United States ("SCOTUS"). On July 27, 2023 SCOTUS vacated the stays that were issued by the U.S. Court of Appeals for the 4th Circuit clearing the way to complete construction.

AltaGas has always believed in the fundamentals of MVP and the benefit of transporting Marcellus/Utica gas by pipeline to the U.S. east coast utilities and consumers. The pipeline's initial 2.0 Bcf/d capacity is fully subscribed, and it is further expandable by up to an additional 500MMcf/d, including firm and interruptible service. As of June 30, 2023, approximately 94 percent of the project is complete, which includes construction of all original interconnects and compressor stations. AltaGas' exposure is contractually capped to the original estimated contributions of approximately US$352 million. The total project costs are expected to be US$6.6 billion, however, AltaGas 10% interest has a capital cost cap, which was met in 2019.

CONSOLIDATED FINANCIAL RESULTS



Three Months Ended

June 30

($ millions)


2023


2022

Normalized EBITDA (1)(2)

$

239

$

276

Add (deduct):





Depreciation and amortization


(112)


(108)

Interest expense


(93)


(76)

Income tax expense


(38)


(17)

Normalizing items impacting income taxes (1)(2)


33


(4)

Accretion expenses


(2)


(2)

Foreign exchange gains



3

Non-controlling interest portion of non-GAAP adjustments (2)



1

Net income applicable to non-controlling interests


(4)


(23)

Preferred share dividends


(7)


(10)

Normalized net income (1)(2)

$

16

$

$               40

Net income applicable to common shares

$

133

$

$               35

Normalized funds from operations (1)(2)

$

150

$

$             200






($ per share, except shares outstanding)





Shares outstanding - basic (millions)





During the period (4)


282


281

End of period


282


281






Normalized net income - basic (1) (2)


0.06


0.14

Normalized net income - diluted (1) (2)


0.06


0.14






Net income per common share - basic


0.47


0.12

Net income per common share - diluted


0.47


0.12

(1)

Non‑GAAP financial measure; see discussion in NonGAAP Financial Measures section of this new release.

(2)

In the third quarter of 2022 AltaGas changed its non-GAAP policy to remove the normalization of acquisition related contingencies. The amounts presented in this table reflect the restated figures to align with the revised policy.

(3)

Represents the income tax impact related to the normalizing items included in the calculation of Normalized EBITDA.

(4)

Weighted average

 

Normalized EBITDA for the second quarter of 2023 was $239 million compared to $276 million for the same quarter in 2022. The largest factors leading to the variance are described in the Business Performance sections above.

For the second quarter of 2023, the average Canadian/U.S. dollar exchange rate increased to 1.34 from an average of 1.28 in the same period of 2022.

Income before income taxes for the second quarter of 2023 was $182 million, compared to $85 million for the same quarter in 2022. Net income applicable to common shares for the second quarter of 2023 was $133 million ($0.47 per share), compared to $35 million ($0.12 per share) for the same quarter in 2022. 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 $16 million ($0.06 per share) for the second quarter of 2023, compared to $40 million ($0.14 per share) for the same quarter of 2022. The decrease was mainly due to the same previously referenced factors impacting normalized EBITDA, higher interest expense, higher depreciation expense, and lower foreign exchange gains, partially offset by lower net income applicable to non-controlling interests, lower normalized income tax expense, and lower preferred share dividends. Please refer to the Non-GAAP Financial Measures section of the Q2 2023 MD&A for further details on normalization adjustments.

Normalized funds from operations for the second quarter of 2023 was $150 million ($0.53 per share), compared to $200 million ($0.71 per share) for the same quarter in 2022. The decrease was mainly due to the same factors impacting normalized EBITDA and higher interest expense.

Depreciation and amortization expense for the second quarter of 2023 was $112 million, compared to $108 million for the same quarter in 2022. The slight increase was mainly due to new assets placed in-service, partially offset by the impact of the Alaska Utilities Disposition.

Interest expense for the second quarter of 2023 was $93 million, compared to $76 million for the same quarter in 2022. The increase was mainly due to $4 million of interest relating to the subordinated hybrid notes issued in August 2022, higher average interest rates, higher average debt balances, and a higher average Canadian/U.S. dollar exchange rate.

Income tax expense was $38 million for the second quarter of 2023, compared to income tax expense of $17 million for the same quarter of 2022. The increase was mainly due to higher income before income taxes. Current tax recovery of $14 million was recorded in the second quarter of 2023, compared to current tax recovery of $2 million recorded in the same quarter of 2022. The increase in current tax recovery was mainly due to the composition of income before income taxes.

FORWARD FOCUS, GUIDANCE AND FUNDING

AltaGas continues to focus on executing on its long-term corporate strategy of building a diversified platform that operates long-life energy infrastructure assets that connect customers and markets and are positioned to provide resilient and growing value for the Company's stakeholders.

Following the second quarter results, AltaGas expects to achieve guidance ranges that were previously disclosed in December 2022, including:

  • 2023 Normalized EPS guidance of $1.85 - $2.05 per share, compared to actual normalized EPS of $1.89 and GAAP EPS of $1.42 in 2022; and
  • 2023 Normalized EBITDA guidance of $1.5 billion - $1.6 billion, compared to actual normalized EBITDA of $1.54 billion and income before taxes of $716 million in 2022.

AltaGas continues to focus on delivering resilient and growing normalized EPS and FFO per share while targeting lowering leverage ratios. This strategy should support steady dividend growth and provide the opportunity for ongoing capital appreciation for its long-term shareholders. This includes AltaGas having announced plans to deliver regular, sustainable, and annual dividend increases that compound in the years ahead with an anticipated five to seven percent compounded annual growth rate through 2026. Annual dividend increases will be a function of financial performance and determined by the Board on an annual basis.

AltaGas is maintaining a disciplined, self-funded capital program of approximately $930 million in 2023, excluding asset retirement obligations. The Company also expects approximately $90 million of capital investments that were approved in 2022 to rollover and be deployed in 2023. The 2023 capital program includes continued strong investments in the Utilities and Midstream businesses that are focused on ensuring long-term safety and reliability of the asset base and position AltaGas to meet its customers long-term needs and drive the best collective outcomes for all stakeholders.

QUARTERLY COMMON SHARE DIVIDEND AND PREFERRED SHARE DIVIDENDS

The Board of Directors approved the following schedule of Dividends:

Type

Dividend

(per share)

Period

Payment Date

Record

Common Shares1

$0.28

n.a.

29-Sept-23

15-Sept-23

Series A Preferred Shares

$0.19125

30-June-23 to

29-Sept-23

29-Sept-23

15-Sept-23

Series B Preferred Shares

$0.45515

30-June-23 to

29-Sept-23

29-Sept-23

15-Sept-23

Series E Preferred Shares

$0.337063

30-June-23 to

29-Sept-23

29-Sept-23

15-Sept-23

Series G Preferred Shares

$0.265125

30-June-23 to

29-Sept-23

29-Sept-23

15-Sept-23

Series H Preferred Shares

$0.48035

30-June-23 to

29-Sept-23

29-Sept-23

15-Sept-23

1.

Dividends on common shares and preferred shares are eligible dividends for Canadian income tax purposes.

 

CONFERENCE CALL AND WEBCAST DETAILS

AltaGas will hold a conference call today, July 28, at 9:00 a.m. MT (11:00 a.m. ET) to discuss second quarter 2023 results and other corporate developments.

Date:                              Friday, July 28, 2023
Time:                              9:00 a.m. MT (11:00 a.m. ET)
Dial-in (Audio only):       1-416-764-8659 or toll free at 1-888-664-6392 or Click to Join
Webcast:                        https://www.altagas.ca/invest/events-and-presentations

Shortly after the conclusion of the call a replay will be available on the Company's website or by dialing 416-764-8677 or toll free 1-888-390-0541, passcode 454646#.

AltaGas' Consolidated Financial Statements and accompanying notes for the second quarter 2023, as well as its related Management's Discussion and Analysis, are now available online at www.altagas.ca. All documents will be filed with the Canadian securities regulatory authorities and will be posted under AltaGas' SEDAR profile at www.sedar.com.

NON-GAAP MEASURES

This news release contains references to certain financial measures that do not have a standardized meaning prescribed by US GAAP and may not be comparable to similar measures presented by other entities. The non-GAAP measures and their reconciliation to US GAAP financial measures are shown below and within AltaGas' Management's Discussion and Analysis (MD&A) as at and for the period ended June 30, 2023. These non-GAAP measures provide additional information that management believes is meaningful regarding AltaGas' operational performance, liquidity and capacity to fund dividends, capital expenditures, and other investing activities. Readers are cautioned that these non-GAAP measures should not be construed as alternatives to other measures of financial performance calculated in accordance with US GAAP.

Normalized EBITDA


Three Months Ended

June 30

Six Months Ended

June 30

($ millions)

2023

2022

2023

2022

Income before income taxes (GAAP financial measure)

$            182

$              85

$            802

$            590

Add:





Depreciation and amortization

112

108

223

221

Interest expense

93

76

198

146

EBITDA

$            387

$            269

$         1,223

$            957

Add (deduct):





Transaction costs related to acquisitions and dispositions (1)

4

2

20

2

Unrealized losses (gains) on risk management contracts (2)

(150)

5

(115)

(104)

Losses (gains) on sale of assets (3)

(11)

1

(319)

(6)

CEO Transition (4)

5

5

Settlement of pension plan (5)

2

2

Accretion expenses

2

2

5

3

Foreign exchange gains

(3)

(2)

Normalized EBITDA

$            239

$            276

$            821

$            850

(1)

Comprised of transaction costs related to acquisitions and dispositions of assets and/or equity investments in the period. These costs are included in the "cost of sales" and "operating and administrative" line items on the Consolidated Statements of Income. Transaction costs include expenses, such as legal fees, which are directly attributable to the acquisition or disposition. As noted in the second quarter 2023 MD&A, in the third quarter of 2022 AltaGas changed its non-GAAP policy to remove the normalization of acquisition related contingencies. The amounts presented in this table reflect the restated figures to align with the revised policy. Please refer to Note 3 of the unaudited condensed interim Consolidated Financial Statements as at and for the three and six months ended June 30, 2023 for further details regarding AltaGas' disposition of assets in the period.

(2)

Included in the "revenue" and "cost of sales" line items on the Consolidated Statements of Income. Please refer to Note 13 of the unaudited condensed interim Consolidated Financial Statements as at and for the three and six months ended June 30, 2023 for further details regarding AltaGas' risk management activities.

(3)

Included in the "other income" line item on the Consolidated Statements of Income. Please refer to Note 3 of the unaudited condensed interim Consolidated Financial Statements as at and for the three and six months ended June 30, 2023 for further details regarding AltaGas' disposition of assets in the period. 

(4)

Comprised of costs related to the transition of AltaGas' CEO. These costs are included in the "operating and administrative" line items on the Consolidated Statements of Income.

(5)

Relates to the completion of the wind-up of the Canadian defined benefit pension plan in the second quarter of 2023. The settlement charge is included in the "other income" line on the Consolidated Statements of Income. Please refer to Note 18 of the unaudited condensed interim Consolidated Financial Statements as at and for the three and six months ended June 30, 2023 for further details regarding the wind-up of the pension plan.

 

EBITDA is a measure of AltaGas' operating profitability prior to how business activities are financed, assets are amortized, or earnings are taxed. EBITDA is calculated from the Consolidated Statements of Income using income before income taxes adjusted for pre‑tax depreciation and amortization, interest expense.

AltaGas presents normalized EBITDA as a supplemental measure. Normalized EBITDA is used by Management to enhance the understanding of AltaGas' earnings over periods, as well as for budgeting and compensation related purposes. The metric is frequently used by analysts and investors in the evaluation of entities within the industry as it excludes items that can vary substantially between entities depending on the accounting policies chosen, the book value of assets, and the capital structure.

Normalized Net Income


Three Months Ended

June 30

Six Months Ended

June 30

($ millions)

2023

2022

2023

2022

Net income applicable to common shares (GAAP financial measure)

$            133

$              35

$            578

$            393

Add (deduct) after-tax:





Transaction costs related to acquisitions and dispositions (1)

2

1

15

1

Unrealized losses (gains) on risk management contracts (2)

(116)

5

(89)

(76)

Non-controlling interest portion of non-GAAP adjustments (3)

1

4

Gains on sale of assets (4)

(9)

(2)

(217)

(7)

Restructuring costs (5)

4

4

Loss on redemption of preferred shares (6)

10

Settlement of pension plan (7)

2

2

Normalized net income

$              16

$              40

$            293

$            325

(1)

Comprised of transaction costs related to acquisitions and dispositions of assets and/or equity investments in the period. The pre-tax costs are included in the "cost of sales" and "operating and administrative" line items on the Consolidated Statements of Income. Transaction costs include expenses, such as legal fees, which are directly attributable to the acquisition or disposition. As noted in the second quarter 2023 MD&A, in the third quarter of 2022 AltaGas changed its non-GAAP policy to remove the normalization of acquisition related contingencies. The amounts presented in this table reflect the restated figures to align with the revised policy. Please refer to Note 3 of the unaudited condensed interim Consolidated Financial Statements as at and for the three and six months ended June 30, 2023 for further details regarding AltaGas' disposition of assets in the period.

(2)

The pre-tax amounts are included in the "revenue" and "cost of sales" line items on the Consolidated Statements of Income. Please refer to Note 13 of the unaudited condensed interim Consolidated Financial Statements as at and for the three and six months ended June 30, 2023 for further details regarding AltaGas' risk management activities.

(3)

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. As noted on page 16 of this MD&A, in the third quarter of 2022 AltaGas changed its non-GAAP policy to remove the normalization of acquisition related contingencies. This includes the associated impact to the portion applicable to non-controlling interests. The amounts presented in this table reflect the restated figures to align with the revised policy.

(4)

The pre-tax amounts are included in the "other income" line item on the Consolidated Statements of Income. Please refer to Note 3 of the unaudited condensed interim Consolidated Financial Statements as at and for the three and six months ended June 30, 2023 for further details regarding AltaGas' disposition of assets in the period.

(5)

Comprised of costs related to the transition of AltaGas' CEO. The pre-tax costs are included in the "operating and administrative" line items on the Consolidated Statements of Income.

(6)

Comprised of the loss on the redemption of Series K Preferred Shares on March 31, 2022. The loss on redemption of preferred shares is recorded on the "loss of redemption of preferred shares" line on the Consolidated Statements of Income.

(7)

Relates to the completion of the wind-up of the Canadian defined benefit pension plan in the second quarter of 2023. The settlement charge is included in the "other income" line on the Consolidated Statements of Income. Please refer to Note 18 of the unaudited condensed interim Consolidated Financial Statements as at and for the three and six months ended June 30, 2023 for further details regarding the wind-up of the pension plan.

 

Normalized net income and normalized net income per share are used by Management to enhance the comparability of AltaGas' earnings, as these metrics reflect the underlying performance of AltaGas' business activities. 

Normalized Funds From Operations


Three Months Ended

June 30

Six Months Ended

June 30

($ millions)

2023

2022

2023

2022

Cash from operations (GAAP financial measure)

$             373

$             527

$             964

$         1,211

Add (deduct):





Net change in operating assets and liabilities

(231)

(328)

(422)

(553)

Asset retirement obligations settled

3

1

5

3

Funds from operations

$             145

$             200

$             547

$             661

Add (deduct):





Transaction costs related to acquisitions and dispositions (1)

4

2

20

2

Restructuring costs (2)

5

5

 Current tax expense (recovery) on asset sales (3)

(4)

(2)

38

(1)

Normalized funds from operations

$             150

$             200

$             610

$             662

(1)

Comprised of costs related to acquisitions and dispositions of assets and/or equity investments in the period. These costs exclude any non-cash amounts and are included in the "cost of sales" and "operating and administrative" line items on the Consolidated Statements of Income.  Transaction costs include expenses, such as legal fees, which are directly attributable to the acquisition or disposition. As noted in the second quarter 2023 MD&A, in the third quarter of 2022 AltaGas changed its non-GAAP policy to remove the normalization of acquisition related contingencies. The amounts presented in this table reflect the restated figures to align with the revised policy. Please refer to Note 3 of the unaudited condensed interim Consolidated Financial Statements as at and for the three and six months ended June 30, 2023 for further details regarding AltaGas' disposition of assets in the period.

(2)

Comprised of costs related to the transition of AltaGas' CEO. These costs are included in the "operating and administrative" line items on the Consolidated Statements of Income.

(3)

Included in the "current income tax expense" line item on the Consolidated Statements of Income.

 

Normalized funds from operations and funds from operations are used to assist Management and investors in analyzing the liquidity of the Corporation. Management uses these measures to understand the ability to generate funds for capital investments, debt repayment, dividend payments, and other investing activities.

Funds from operations and normalized funds from operations as presented should not be viewed as an alternative to cash from operations or other cash flow measures calculated in accordance with GAAP. 

Invested Capital and Net Invested Capital


Three Months Ended

June 30

Six Months Ended

June 30

($ millions)

2023

2022

2023

2022

Cash used in (from) investing activities (GAAP financial measure)

$             231

$              (31)

$           (638)

$             128

Add (deduct):





Net change in non-cash capital expenditures (1)

(7)

40

(35)

3

Net invested capital

$             224

$                  9

$           (673)

$             131

Asset dispositions

225

1,072

245

Invested capital

$             224

$             234

$             399

$             376

(1)

Comprised of non-cash capital expenditures included in the "accounts payable and accrued liabilities" line item on the Consolidated Balance Sheets. Please refer to Note 19 of the unaudited condensed interim Consolidated Financial Statements as at and for the three and six months ended June 30, 2023 for further details.

 

Invested capital is a measure of AltaGas' use of funds for capital expenditure activities. It includes expenditures relating to property, plant, and equipment and intangible assets, capital contributed to long term investments, and contributions from non-controlling interests. Invested capital is used by Management, investors, and analysts to enhance the understanding of AltaGas' capital expenditures from period to period and provide additional detail on the Company's use of capital. 

CONSOLIDATED FINANCIAL REVIEW


Three Months Ended

June 30

Six Months Ended

June 30

($ millions, except effective income tax rates)

2023

2022

2023

2022

Revenue

2,631

3,241

6,679

7,133

Normalized EBITDA (1) (2)

239

276

821

850

Income before income taxes

182

85

802

590

Net income applicable to common shares

133

35

578

393

Normalized net income (1) (2)

16

40

293

325

Total assets

21,336

22,206

21,336

22,206

Total long-term liabilities

11,196

10,753

11,196

10,753

Invested capital (1)

224

234

399

376

Cash from (used in) investing activities

(231)

31

638

(128)

Dividends declared (3)

79

74

158

149

Cash from operations

373

527

964

1,211

Normalized funds from operations (1) (2)

150

200

610

662

Normalized effective income tax rate (%) (1) (2)

15.6

22.6

20.3

20.3

Effective income tax rate (%)

21.2

20.5

25.2

21.0

 


Three Months Ended

June 30

Six Months Ended

June 30

($ per share, except shares outstanding)

2023

2022

2023

2022

Net income per common share - basic

0.47

0.12

2.05

1.40

Net income per common share - diluted

0.47

0.12

2.04

1.39

Normalized net income - basic (1) (2)

0.06

0.14

1.04

1.16

Normalized net income - diluted (1) (2)

0.06

0.14

1.04

1.15

Dividends declared (3)

0.28

0.27

0.56

0.53

Cash from operations

1.32

1.88

3.42

4.31

Normalized funds from operations (1) (2)

0.53

0.71

2.16

2.36

Shares outstanding - basic (millions)





During the period (4)

282

281

282

281

End of period

282

281

282

281

1)

Non‑GAAP financial measure or non-GAAP financial ratio; see discussion in Non-GAAP Financial Measures section of this MD&A.

2)

In the third quarter of 2022, Management changed AltaGas' non-GAAP policy to remove normalization adjustments relating to acquired contingencies. Prior periods have been restated to reflect this change. Please refer to the Non-GAAP Financial Measures section of this MD&A for additional details.

3)

Dividend declared per common share per quarter: $0.265 per share beginning March 2022, increased to $0.28 per share effective March 31, 2023.

4)

Weighted average.

 

ABOUT ALTAGAS

AltaGas is a leading North American infrastructure company that connects customers and markets to affordable and reliable sources of energy. The Company operates a diversified, lower-risk, high-growth Utilities and Midstream business that is focused on delivering resilient and durable value for its stakeholders.

For more information visit www.altagas.ca or reach out to one of the following:

Jon Morrison
Senior Vice President, Corporate Development and Investor Relations
Jon.Morrison@altagas.ca

Adam McKnight
Director, Investor Relations
Adam.McKnight@altagas.ca

Investor Inquiries
1-877-691-7199
investor.relations@altagas.ca

Media Inquiries
1-403-206-2841
media.relations@altagas.ca

FORWARD-LOOKING INFORMATION

This news release contains forward-looking information (forward-looking statements). Words such as "may", "can", "would", "could", "should", "likely", "will", "intend", "plan", "anticipate", "believe", "aim", "seek", "future", "commit", "propose", "contemplate", "estimate", "focus", "strive", "forecast", "expect", "project", "potential", "target", "guarantee", "potential", "objective", "continue", "outlook", "guidance", "growth", "long-term", "vision", "opportunity" and similar expressions suggesting future events or future performance, as they relate to the Corporation or any affiliate of the Corporation, are intended to identify forward-looking statements. In particular, this news release contains forward-looking statements with respect to, among other things, business objectives, expected growth, results of operations, performance, business projects and opportunities and financial results. Specifically, such forward-looking statements included in this document include, but are not limited to, statements with respect to the following: expected reductions in negative hedge and ship timing and the corresponding effect on AltaGas' financial results, including between different quarters; AltaGas' ability to de-risk its global export business and operate in strong partnership with its customers; anticipated construction, impacts on maritime shipping costs and in-service date of a new VLGC; expected 2023 normalized EBITDA guidance of $1.5 to $1.6 billion; expected 2023 normalized EPS guidance of $1.85 to $2.05; AltaGas' focus on growing normalized EPS and FFO while targeting lowering leverage debt ratios; expectation for ongoing dividend, capital appreciation and cash flow growth, including 5 to 7 percent compounded annual growth rate through 2026; AltaGas' ability to execute its strategic priorities and achieve its 2023 and longer-term growth plans; AltaGas' Utilities' ability to execute its regulatory strategy and achieve favourable rates commensurate with cost of capital;  AltaGas' ability to reduce its financial leverage and achieve its medium-term 5x net debt-to-normalized EBITDA target and long-term target of 4.5x; the impact of AltaGas' network upgrades on long-term operating costs, the environment, and customer affordability; AltaGas' ability to increase long-term tolling arrangements and maintaining an active hedging program and the expected results therefrom; AltaGas' belief in the long-term demand and growth opportunities in the Canadian upstream industry the expected impacts therefrom; AltaGas' ability to collaborate with First Nations and stakeholders on sustainable resource development and its belief and role in the growing global demand for responsibly developed energy sources; expectation for an active hedging program in 2023 and the expected outcomes therefrom; the percentage of AltaGas' expected 2023 frac exposed volumes that are hedged; the percentage of AltaGas' expected 2023 export volumes that are tolled or financially hedged; anticipation of successful collaboration with First Nations and other key stakeholders; AltaGas' belief in the benefit of transporting gas on the MVP pipeline to the U.S. east coast utilities and consumers; the expected project costs of the MVP pipeline, its progress and the remaining milestones; the potential development of REEF and expected project activities, deliverables and timing thereof; anticipated timing, results and impacts of applications, hearings, and decisions of rate cases before Utilities regulators; AltaGas' long-term objectives for managing capital; expected self-funded capital program of $930 million in 2023 including rollover of $90 million capital investments from 2022, excluding asset retirement obligations; and the utility of certain non-GAAP measures; the ability of investors to compare certain financial measures used by AltaGas to similar measures presented by other entities.

These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events, and achievements to differ materially from those expressed or implied by such statements. Such statements reflect AltaGas' current expectations, estimates, and projections based on certain material factors and assumptions at the time the statement was made. Material assumptions include: anticipated timing of asset sale closings, effective tax rates, financing initiatives, degree day variance from normal, pension discount rate, the performance of the businesses underlying each sector, impacts of the hedging program, expected commodity supply, demand and pricing, volumes and rates, exchange rates, inflation, interest rates, credit ratings, regulatory approvals and policies, future operating and capital costs, capacity expectations, weather, frac spread, access to capital, planned and unplanned plant outages, timing of in-service dates of new projects and acquisition and divestiture activities, returns on investments, and dividend levels.

 AltaGas' forward-looking statements are subject to certain risks and uncertainties which could cause results or events to differ from current expectations, including, without limitation: risks related to conflict in Eastern Europe; health and safety risks; operating risks; infrastructure; natural gas supply risks; volume throughput; service interruptions; transportation of petroleum products; market risk; inflation; general economic conditions; cyber security, information, and control systems; climate-related risks; environmental regulation risks; regulatory risks; litigation; changes in law; Indigenous and treaty rights; dependence on certain partners; political uncertainty and civil unrest; decommissioning, abandonment and reclamation costs; reputation risk; weather data; capital market and liquidity risks; interest rates; internal credit risk; foreign exchange risk; debt financing, refinancing, and debt service risk; counterparty and supplier risk; technical systems and processes incidents; growth strategy risk; construction and development; underinsured and uninsured losses; impact of competition in AltaGas' businesses; counterparty credit risk; composition risk; collateral; rep agreements; market value of common shares and other securities; variability of dividends; potential sales of additional shares; labor relations; key personnel; risk management costs and limitations; commitments associated with regulatory approvals for the acquisition of WGL; cost of providing retirement plan benefits; failure of service providers; risks related to pandemics, epidemics or disease outbreaks, including COVID-19; and the other factors discussed under the heading "Risk Factors" in the Corporation's Annual Information Form for the year ended December 31, 2022 and set out in AltaGas' other continuous disclosure documents.

Many factors could cause AltaGas' or any particular business segment's actual results, performance or achievements to vary from those described in this press release, including, without limitation, those listed above and the assumptions upon which they are based proving incorrect. These factors should not be construed as exhaustive. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this news release as intended, planned, anticipated, believed, sought, proposed, estimated, forecasted, expected, projected or targeted and such forward-looking statements included in this news release, should not be unduly relied upon. The impact of any one assumption, risk, uncertainty, or other factor on a particular forward-looking statement cannot be determined with certainty because they are interdependent and AltaGas' future decisions and actions will depend on management's assessment of all information at the relevant time. Such statements speak only as of the date of this news release. AltaGas does not intend, and does not assume any obligation, to update these forward-looking statements except as required by law. The forward-looking statements contained in this news release are expressly qualified by these cautionary statements.

Financial outlook information contained in this news release about prospective financial performance, financial position, or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on AltaGas management's (Management) assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this news release should not be used for purposes other than for which it is disclosed herein.

Additional information relating to AltaGas, including its quarterly and annual MD&A and Consolidated Financial Statements, AIF, and press releases are available through AltaGas' website at www.altagas.ca or through SEDAR at www.sedar.com

SOURCE AltaGas Ltd.

Copyright 2023 Canada NewsWire

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