Exhibit 99.3



Pembina
Pipeline Corporation



MANAGEMENT'S
REPORT



The audited Consolidated Financial Statements
of Pembina Pipeline Corporation (the "Company" or "Pembina") are the responsibility of Pembina's management.
The financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board, using management's best estimates and judgments, where appropriate.



Management is responsible for the reliability
and integrity of the financial statements, the notes to the financial statements and other financial information contained in this
report. In the preparation of these financial statements, estimates are sometimes necessary because a precise determination of
certain assets and liabilities is dependent on future events. Management believes such estimates have been based on careful judgments
and have been properly reflected in the accompanying financial statements.



Management's Assessment of Internal Controls
over Financial Reporting



Management is responsible for
establishing and maintaining adequateinternal control over financial reporting, as defined
in Rules 13a – 15(f) and 15d – 15(f) under the United States Securities Exchange Act of 1934, as amended (the "Exchange
Act") and under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings ("NI 52-109").



Management, including the Chief Executive Officer ("CEO")
and the Chief Financial Officer ("CFO"), has conducted an evaluation of Pembina's internal control over financial reporting
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).



Further, there has been no change in the Company's internal
control over financial reporting that occurred during the year covered by this Annual Report that has materially affected, or are
reasonably likely to materially affect, Pembina's internal control over financial reporting.



Based on management's assessment as at December 31, 2014, management
has concluded that Pembina's internal control over financial reporting is effective.



Due to its inherent limitations,
internal control over financial reporting is not intended to provide absolute assurance
that a misstatement of Pembina's financial statements would be prevented or detected. Further,
the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued
effectiveness in future periods is subject to the risks that controls may become inadequate.



The Board of Directors of the Company (the
"Board") is responsible for ensuring management fulfils its responsibilities for financial reporting and internal control.
The Board is assisted in exercising its responsibilities through the Audit Committee, which consists of four non-management directors.
The Audit Committee meets periodically with management and the auditors to satisfy itself that management's responsibilities are
properly discharged, to review the financial statements and to recommend approval of the financial statements to the Board.



38









Pembina
Pipeline Corporation



KPMG LLP, the independent auditors, have audited
the Company's financial statements in accordance with Canadian generally accepted auditing standards and the standards of the Public
Company Accounting Oversight Board (United States), and have also audited the effectiveness of Pembina's internal control over
financial reporting as of December 31, 2014 and has included an attestation report on management's assessment in their reports
which follow. The independent auditors have full and unrestricted access to the Audit Committee to discuss their audit and their
related findings.



|                                      |                                                    
|------------------------------------- | ---------------------------------------------------
|/s/ M. H. Dilger                      | /s/ J. Scott Burrows                               
|M. H. Dilger                          | J. Scott Burrows                                   
|President and Chief Executive Officer | Vice President, Finance and Chief Financial Officer
|Pembina Pipeline Corporation          | Pembina Pipeline Corporation                       
|                                      |                                                    
|February 26, 2015                     |                                                    



39









Pembina
Pipeline Corporation







| | kpmgLLP                         | Telephone   | (403) 691-8000
| | ------------------------------- | ----------- | --------------
| | 205 - 5th Avenue SW             | Fax         | (403) 691-8008
| | Suite 3100, Bow Valley Square 2 | www.kpmg.ca
| | Calgary AB                      |             |               
| | T2P 4B9                         |             |               



INDEPENDENT
AUDITORS' REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM



To the Shareholders and Board of Directors of
Pembina Pipeline Corporation



We have audited the accompanying consolidated
financial statements of Pembina Pipeline Corporation, which comprise the consolidated statements of financial position as at December
31, 2014 and December 31, 2013, the consolidated statements of earnings and comprehensive income, changes in equity and cash
flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.



Management's Responsibility for the Consolidated Financial
Statements

Management is responsible for the preparation
and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.



Auditors' Responsibility

Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted
auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.



An audit involves performing procedures to obtain
audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our
judgment, including the assessment of the risks of material misstatement of the consolidatedfinancial statements, whether
due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation and
fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements.



We believe that the audit evidence we have obtained
in our audits is sufficient and appropriate to provide a basis for our audit opinion.



Opinion

In our opinion, the consolidated financial statements present fairly,
in all material respects, the consolidated financial position of Pembina Pipeline Corporation as at December 31, 2014 and December
31, 2013, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board.



KPMG LLP is a Canadian limited
liability partnership and a member firm of the KPMG

network of independent member
firms affiliated with KPMG International Cooperative

("KPMG International"),
a Swiss entity. KPMG Canada provides services to KPMG LLP.



KPMG Confidential



40







Pembina
Pipeline Corporation







Other Matter

We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), Pembina Pipeline Corporation's internal control over financial reporting
as of December 31, 2014, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 26, 2015 expressed an unmodified
(unqualified) opinion on the effectiveness of Pembina Pipeline Corporation's internal control over financial reporting.









Chartered Accountants

Calgary, Canada



February 26, 2015



KPMG LLP is a Canadian limited
liability partnership and a member firm of the KPMG

network of independent member
firms affiliated with KPMG International Cooperative

("KPMG International"),
a Swiss entity. KPMG Canada provides services to KPMG LLP.



KPMG Confidential



41









Pembina
Pipeline Corporation







| | kpmgLLP                         | Telephone   | (403) 691-8000
| | ------------------------------- | ----------- | --------------
| | 205 - 5th Avenue SW             | Fax         | (403) 691-8008
| | Suite 3100, Bow Valley Square 2 | www.kpmg.ca
| | Calgary AB                      |             |               
| | T2P 4B9                         |             |               



Report of
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Shareholders and Board of Directors of Pembina Pipeline Corporation



We have audited Pembina Pipeline Corporation
(the "Corporation") internal control over financial reporting as at December 31, 2014, based on the criteria established
in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Corporation's management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report.
Our responsibility is to express an opinion on the Corporation's internal control over financial reporting based on our audit.



We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.



An entity's internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles. An entity's internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the entity are being made only in accordance with
authorizations of management and directors of the entity; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the entity's assets that could have a material effect on the financial
statements.



Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.



In our opinion, the Corporation maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).



KPMG LLP is a Canadian limited
liability partnership and a member firm of the KPMG

network of independent member
firms affiliated with KPMG International Cooperative

("KPMG International"),
a Swiss entity. KPMG Canada provides services to KPMG LLP.



KPMG Confidential



42









Pembina
Pipeline Corporation







We also have audited, in accordance with Canadian generally
accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), the consolidated
statements of financial position of the Corporation as of December 31, 2014 and December 31, 2013, and the related consolidated
statements of earnings and comprehensive income, changes in equity and cash flows for the years then ended, and our report dated
February 26, 2015 expressed an unmodified (unqualified) opinion on those consolidated financial statements.









Chartered Accountants

Calgary, Canada



February 26, 2015



43









Pembina
Pipeline Corporation



CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION



|As at December 31
        ($ millions)             | Note | 2014    | 2013   
|-------------------------------------------------- | ---- | ------- | -------
|Assets                                             |      |         |        
|Current assets                                     |      |         |        
|Cash and cash equivalents                          |      | 53      | 51     
|Trade receivables and other                        | 7    | 447     | 434    
|Derivative financial instruments                   | 24   | 51      | 4      
|Inventory                                          |      | 137     | 159    
|                                                   |      | 688     | 648    
|Non-current assets                                 |      |         |        
|Property, plant and equipment                      | 8    | 7,560   | 5,750  
|Intangible assets and goodwill                     | 9    | 2,841   | 2,564  
|Investments in equity accounted investees          | 10   | 153     | 165    
|Derivative financial instruments                   | 24   | 1       |        
|Deferred tax assets                                | 11   | 19      | 15     
|                                                   |      | 10,574  | 8,494  
|Total Assets                                       |      | 11,262  | 9,142  
|                                                   |      |         |        
|Liabilities and Equity                             |      |         |        
|Current liabilities                                |      |         |        
|Trade payables and accrued liabilities             | 12   | 550     | 461    
|Tax payable                                        |      | 58      | 38     
|Dividends payable                                  |      | 49      | 44     
|Loans and borrowings                               | 13   | 4       | 262    
|Derivative financial instruments                   | 24   | 44      | 13     
|                                                   |      | 705     | 818    
|Non-current liabilities                            |      |         |        
|Loans and borrowings                               | 13   | 2,466   | 1,409  
|Convertible debentures                             | 14   | 391     | 604    
|Derivative financial instruments                   | 24   | 73      | 107    
|Employee benefits and share-based payments         |      | 44      | 20     
|Deferred revenue                                   | 17   | 44      | 5      
|Provisions                                         | 15   | 410     | 309    
|Deferred tax liabilities                           | 11   | 793     | 699    
|                                                   |      | 4,221   | 3,153  
|Total Liabilities                                  |      | 4,926   | 3,971  
|Equity                                             |      |         |        
|Equity attributable to shareholders of the Company |      |         |        
|Common share capital                               | 16   | 6,876   | 5,972  
|Preferred share capital                            | 16   | 880     | 391    
|Deficit                                            |      | (1,400) | (1,189)
|Accumulated other comprehensive income             |      | (20)    | (8)    
|                                                   |      | 6,336   | 5,166  
|Non-controlling interest                           |      |         | 5      
|Total Equity                                       |      | 6,336   | 5,171  
|Total Liabilities and Equity                       |      | 11,262  | 9,142  



See accompanying notes to the consolidated
financial statements



44









Pembina
Pipeline Corporation



CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE
INCOME



|Year Ended December 31
        ($ millions, except per share amounts) | Note | 2014  | 2013 
|--------------------------------------------------------------------- | ---- | ----- | -----
|Revenue                                                               | 20   | 6,069 | 5,006
|Cost of sales                                                         |      | 5,217 | 4,219
|Gain on commodity-related derivative financial instruments            |      | 24    | 6    
|Gross profit                                                          | 20   | 876   | 793  
|                                                                      |      |       |      
|General and administrative                                            |      | 156   | 132  
|Other expense                                                         |      | 18    | 1    
|                                                                      |      | 174   | 133  
|Results from operating activities                                     |      | 702   | 660  
|Net finance costs                                                     | 19   | 130   | 166  
|Earnings before income tax and equity accounted investees             |      | 572   | 494  
|                                                                      |      |       |      
|Share of loss of investment in equity accounted investees, net of tax |      | 22    |      
|Current tax expense                                                   | 11   | 103   | 38   
|Deferred tax expense                                                  | 11   | 64    | 105  
|Income tax expense                                                    |      | 167   | 143  
|                                                                      |      |       |      
|Earnings for the year attributable to shareholders                    |      | 383   | 351  
|Other comprehensive income (loss)                                     |      |       |      
|Remeasurements of defined benefit liability, net of tax               | 22   | (14)  | 18   
|Items that will not be reclassified into earnings, net of tax         |      | (14)  | 18   
|Exchange differences on translation of foreign operations             |      | 2     |      
|Other comprehensive income (loss), net of tax                         |      | (12)  | 18   
|Total comprehensive income attributable to shareholders               |      | 371   | 369  
|                                                                      |      |       |      
|Earnings per common share – basic (dollars)                           | 21   | 1.07  | 1.12 
|Earnings per common share –diluted(dollars)                           | 21   | 1.06  | 1.12 
|                                                                      |      |       |      
|Weighted average number of common shares(millions)                    |      |       |      
|Basic                                                                 | 21   | 326   | 307  
|Diluted                                                               | 21   | 328   | 308  



See accompanying notes to the consolidated
financial statements



45









Pembina
Pipeline Corporation



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY



|                                                                  |       | Attributable to Shareholders of the Company |                          |        
|----------------------------------------------------------------- | ----- | ------------------------------------------- | ------------------------ | -------
|($ millions)                                                      | Note  | Common
        Shares                       | Preferred
        Shares | Deficit
|December 31, 2012                                                 |       | 5,324                                       |                          | (1,028)
|Total comprehensive income                                        |       |                                             |                          |        
|Earnings                                                          |       |                                             |                          | 351    
|Other comprehensive income                                        |       |                                             |                          |        
|Defined benefit plan actuarial gains, net of tax of $6            | 22    |                                             |                          |        
|Total comprehensive income                                        |       |                                             |                          | 351    
|Transactions with shareholders of the Company                     |       |                                             |                          |        
|Common shares issued, net of issue costs                          | 16    | 335                                         |                          |        
|Preferred shares issued, net of issue costs                       | 16    |                                             | 391                      |        
|Dividend reinvestment plan                                        | 16    | 286                                         |                          |        
|Share-based payment transactions, debenture conversions and other | 16    | 27                                          |                          |        
|Dividends declared – common                                       | 16    |                                             |                          | (507)  
|Dividends declared – preferred                                    | 16    |                                             |                          | (5)    
|Total transactions with shareholders of the Company               |       | 648                                         | 391                      | (512)  
|December 31, 2013                                                 |       | 5,972                                       | 391                      | (1,189)
|                                                                  |       |                                             |                          |        
|Total comprehensive income                                        |       |                                             |                          |        
|Earnings                                                          |       |                                             |                          | 383    
|Other comprehensive income                                        |       |                                             |                          |        
|Defined benefit plan actuarial losses, net of tax of ($5)         | 22    |                                             |                          |        
|Exchange differences on translation of foreign operations         |       |                                             |                          |        
|Total comprehensive income                                        |       |                                             |                          | 383    
|Transactions with shareholders of the Company                     |       |                                             |                          |        
|Common shares issued, net of issue costs                          | 6, 16 | 265                                         |                          |        
|Preferred shares issued, net of issue costs                       | 16    |                                             | 489                      |        
|Dividend reinvestment plan                                        | 16    | 321                                         |                          |        
|Debenture conversions                                             | 16    | 293                                         |                          |        
|Share-based payment transactions and other                        | 16    | 25                                          |                          |        
|Dividends declared – common                                       | 16    |                                             |                          | (563)  
|Dividends declared – preferred                                    | 16    |                                             |                          | (31)   
|Total transactions with shareholders of the Company               |       | 904                                         | 489                      | (594)  
|Disposal of subsidiary                                            |       |                                             |                          |        
|December 31, 2014                                                 |       | 6,876                                       | 880                      | (1,400)



See accompanying notes to the consolidated
financial statements



46









Pembina
Pipeline Corporation



CONSOLIDATED STATEMENTS OF CASH FLOWS



|Year Ended December 31 ($ millions)                                        | Note | 2014    | 2013 
|-------------------------------------------------------------------------- | ---- | ------- | -----
|Cash provided by (used in)                                                 |      |         |      
|Operating activities                                                       |      |         |      
|Earnings                                                                   |      | 383     | 351  
|Adjustments for                                                            |      |         |      
|Depreciation and amortization                                              |      | 226     | 171  
|Net finance costs                                                          | 19   | 130     | 166  
|Share of loss of investment in equity accounted investees, net of tax      |      | 22      |      
|Income tax expense                                                         | 11   | 167     | 143  
|Share-based compensation expense                                           | 23   | 39      | 34   
|Unrealized gain on commodity-related derivative financial instruments      | 20   | (14)    | (7)  
|Net impairment – non-recoverable costs                                     |      | 6       |      
|Inventory write-down                                                       | 20   | 38      |      
|Change in non-cash operating working capital                               |      | (33)    | (96) 
|Payments from equity accounted investees and other                         |      | 23      | 20   
|Share-based compensation payment                                           |      | (30)    | (17) 
|Net interest paid                                                          | 19   | (76)    | (80) 
|Tax paid                                                                   | 11   | (81)    |      
|Cash flow from operating activities                                        |      | 800     | 685  
|                                                                           |      |         |      
|Financing activities                                                       |      |         |      
|Bank borrowings and issuance of debt                                       |      | 1,113   | 370  
|Repayment of loans and borrowings                                          |      | (304)   | (649)
|Issuance of common shares                                                  |      |         | 345  
|Issuance of preferred shares                                               |      | 500     | 400  
|Issue costs and financing fees                                             |      | (21)    | (29) 
|Exercise of stock options                                                  |      | 20      | 17   
|Dividends paid (net of shares issued under the dividend reinvestment plan) |      | (269)   | (221)
|Cash flow from financing activities                                        |      | 1,039   | 233  
|Investing activities                                                       |      |         |      
|Capital expenditures                                                       |      | (1,412) | (880)
|Changes in non-cash investing working capital and other                    |      | 84      | 34   
|Interest paid during construction                                          | 19   | (44)    | (35) 
|Contributions to equity accounted investees                                |      | (8)     | (13) 
|Acquisition                                                                | 6    | (457)   |      
|Cash flow used in investing activities                                     |      | (1,837) | (894)
|Change in cash                                                             |      | 2       | 24   
|Cash, beginning of year                                                    |      | 51      | 27   
|Cash and cash equivalents, end of year                                     |      | 53      | 51   



See accompanying notes to the consolidated
financial statements



47









Pembina
Pipeline Corporation





NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



|    |                                                     | Page
|--- | --------------------------------------------------- | ----
|    |                                                     |     
|1.  | REPORTING ENTITY                                    | 49  
|2.  | BASIS OF PREPARATION                                | 49  
|3.  | CHANGES IN ACCOUNTING POLICIES                      | 51  
|4.  | SIGNIFICANT ACCOUNTING POLICIES                     | 51  
|5.  | DETERMINATION OF FAIR VALUES                        | 63  
|6.  | ACQUISITION                                         | 65  
|7.  | TRADE RECEIVABLES AND OTHER                         | 66  
|8.  | PROPERTY, PLANT AND EQUIPMENT                       | 66  
|9.  | INTANGIBLE ASSETS AND GOODWILL                      | 67  
|10. | INVESTMENTS IN EQUITY ACCOUNTED INVESTEES           | 68  
|11. | INCOME TAXES                                        | 69  
|12. | TRADE PAYABLES AND ACCRUED LIABILITIES              | 71  
|13. | LOANS AND BORROWINGS                                | 71  
|14. | CONVERTIBLE DEBENTURES                              | 73  
|15. | PROVISIONS                                          | 74  
|16. | SHARE CAPITAL                                       | 74  
|17. | DEFERRED REVENUE                                    | 77  
|18. | PERSONNEL EXPENSES                                  | 77  
|19. | NET FINANCE COSTS                                   | 78  
|20. | OPERATING SEGMENTS                                  | 78  
|21. | EARNINGS PER COMMON SHARE                           | 80  
|22. | PENSION PLAN                                        | 81  
|23. | SHARE-BASED PAYMENTS                                | 84  
|24. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT | 86  
|25. | OPERATING LEASES                                    | 91  
|26. | CAPITAL MANAGEMENT                                  | 91  
|27. | GROUP ENTITIES                                      | 92  
|28. | RELATED PARTIES                                     | 92  
|29. | SUBSEQUENT EVENTS                                   | 93  



48







Pembina
Pipeline Corporation





NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



| | 1. | REPORTING ENTITY
| | -- | ----------------



Pembina Pipeline Corporation ("Pembina" or the "Company")
is an energy transportation and service provider domiciled in Canada. The consolidated financial statements ("Financial Statements")
include the accounts of the Company, its subsidiary companies, partnerships and any interests in associates and joint arrangements
as at and for the year ended December 31, 2014. These Financial Statements present fairly the financial position, financial performance
and cash flows of the Company.



Pembina owns or has interests in conventional crude oil, condensate
and natural gas liquids ("NGL") pipelines, oil sands and heavy oil pipelines, gas gathering and processing facilities,
an NGL infrastructure and logistics business and midstream services that span across its operations. The Company's assets are located
in Canada and in the United States.



| | 2. | BASIS OF PREPARATION
| | -- | --------------------



| | a. | Basis of measurement and statement of compliance
| | -- | ------------------------------------------------



The Financial Statements have been prepared on a historical
cost basis with some exceptions, as detailed the accounting policies set out below in accordance with International Financial Reporting
Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB"). These accounting policies
have been applied consistently for all periods presented in these financial statements.



Certain insignificant comparative amounts have been reclassified
to conform to the presentation adopted in the current year.



The Financial Statements were authorized for issue by the Board
of Directors on February 26, 2015.



| | b. | Functional and presentation currency
| | -- | ------------------------------------



The Financial Statements are presented in Canadian dollars.
All financial information presented in Canadian dollars has been disclosed in millions, except where noted. The
assets and liabilities of subsidiaries whose functional currencies are other than Canadian dollars are translated into Canadian
dollars at the foreign exchange rate at the balance sheet date, while revenues and expenses of such subsidiaries are translated
using average monthly foreign exchange rates, which approximate the foreign exchange rates on the dates of the transactions. Foreign
exchange differences arising on translation are included in Other Comprehensive Income.



| | c. | Use of estimates and judgments
| | -- | ------------------------------



The preparation of the Financial Statements in conformity with
IFRS requires management to make judgments, estimates and assumptions that are based on the circumstances and estimates at the
date of the financial statements and affect the application of accounting policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these estimates.



Judgments, estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any
future periods affected.



The following judgment and estimation uncertainties are those
management considers material to the Company's financial statements:

49







Pembina
Pipeline Corporation



Judgments



| | (i) | Business combinations
| | --- | ---------------------



Business combinations are accounted for using the acquisition
method of accounting. The determination of fair value often requires management to make judgments about future possible events.
The assumptions with respect to determining the fair value of property, plant and equipment and intangible assets acquired generally
require the most judgment.



| | (ii) | Depreciation and amortization
| | ---- | -----------------------------



Depreciation and amortization of property, plant and equipment
and intangible assets are based on management's judgment of the most appropriate method to reflect the pattern of an asset's future
economic benefit expected to be consumed by the Company. Among other factors, these judgments are based on industry standards and
historical experience.



| | (iii) | Functional currency
| | ----- | -------------------



The determination of the Company’s and its subsidiaries’
functional currency requires assessing several factors, including the currency that predominantly influences sales price, operational
and other costs, and to a lesser extent financing of the operations. Management has determined the functional currency of certain
Conventional Pipelines operations to be the U.S. dollar. The functional currency of all other entities was determined to be the
Canadian dollar.



| | (iv) | Impairment
| | ---- | ----------



Assessment of impairment is based on management's judgment of
whether there are sufficient internal and external factors that would indicate that an asset, or cash generating unit ("CGU"),
or group of CGU's are impaired. The determination of a CGU is also based on management's judgment and is an assessment of the smallest
group of assets that generate cash inflows independently of other assets. The asset composition of a CGU can directly impact the
recoverability of the assets included therein. In assessing the recoverability, each CGU's carrying value is compared to its recoverable
amount, defined as the greater of fair value less costs to sell and value in use.



Estimates



| | (i) | Business Combinations
| | --- | ---------------------



Estimates of future cash flows, forecast prices, interest rates
and discount rates are made in determining the fair value of assets acquired and liabilities assumed. Changes in any of the assumptions
or estimates used in determining the fair value of acquired assets and liabilities could impact the amounts assigned to assets,
liabilities, intangible assets and goodwill in the purchase price equation. Future earnings can be affected as a result of changes
in future depreciation and amortization, asset or goodwill impairment.



| | (ii) | Provisions and contingencies
| | ---- | ----------------------------



Provisions recognized are based on management's judgment about
assessing contingent liabilities and timing, scope and amount of assets and liabilities. Management uses judgment in determining
the likelihood of realization of contingent assets and liabilities to determine the outcome of contingencies.



Based on the long-term nature of the decommissioning provision,
the most significant uncertainties in estimating the provision are the discount rates used, the costs that will be incurred and
the timing of when these costs will occur. In addition, in determining the provision it is assumed that the Company will utilize
technology and materials that are currently available.



50







Pembina
Pipeline Corporation



| | (iii) | Deferred taxes
| | ----- | --------------



The calculation of the deferred tax asset or liability is based
on assumptions about the timing of many taxable events and the enacted or substantively enacted rates anticipated to be applicable
to income in the years in which temporary differences are expected to be realized or reversed.



| | (iv) | Depreciation and amortization
| | ---- | -----------------------------



Estimated useful lives of property, plant and equipment and
intangible assets are based on management's assumptions and estimates of the physical useful lives of the assets, the economic
lives, which may be associated with the reserve lives and commodity type of the production area, in addition to the estimated residual
value.



| | (v) | Impairment tests
| | --- | ----------------



Impairment tests include management's best estimates of future
cash flows and discount rates.



| | 3. | CHANGES IN ACCOUNTING POLICIES
| | -- | ------------------------------



Except for the changes below, accounting policies as disclosed
in Note 4 have been applied to all periods consistently.



The following new standards, interpretations, amendments and
improvements to existing standards issued by the IASB or International Financial Reporting Standards Interpretations Committee
("IFRIC") were adopted as of January 1, 2014 without any material impact to Pembina's Financial Statements: IAS 32 Financial
Instruments and IFRIC 21 Levies.



| | 4. | SIGNIFICANT ACCOUNTING POLICIES
| | -- | -------------------------------



The accounting policies as set out below have been applied consistently
to all periods presented in these Financial Statements.



| | a. | Basis of consolidation
| | -- | ----------------------



| | i) | Business combinations
| | -- | ---------------------



The Company measures goodwill as the fair value of
the consideration transferred including the recognized amount of any non-controlling interest in the acquiree, less the net recognized
amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date.
When the excess is negative, a bargain purchase gain is recognized immediately in earnings.



The Company elects on a transaction-by-transaction
basis whether to measure non-controlling interest at its fair value, or at its proportionate share of the recognized amount of
the identifiable net assets, at the acquisition date.



Non-controlling interests represent equity interests
in subsidiaries owned by outside parties. The share of net assets of subsidiaries attributable to non-controlling interests is
presented as a separate component of equity. Their share of net income and other comprehensive income is also recognized in this
separate component of equity. Changes in the Company's ownership interest in subsidiaries that do not result in a loss of control
are accounted for as equity transactions. Adjustments to non-controlling interests are based on a proportionate amount of the net
assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognized in earnings.



51







Pembina
Pipeline Corporation





Transaction costs, other than those associated with
the issue of debt or equity securities, that the Company incurs in connection with a business combination are expensed as incurred.



| | ii) | Subsidiaries
| | --- | ------------



Subsidiaries are entities, including unincorporated
entities such as partnerships, controlled by the Company. The financial statements of subsidiaries are included in the Financial
Statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries are
aligned with the policies adopted by the Company.



| | iii) | Investments in associates
| | ---- | -------------------------



Associates are those entities in which the Company
has significant influence and thereby has the power to participate in the financial and operational decisions, but does not control
or jointly control the investee. Significant influence is presumed to exist when the Company holds between 20 and 50 percent of
the voting power of another entity.



The Financial Statements include the Company's share
of the earnings and other comprehensive income, after adjustments to align the accounting policies with those of the Company, from
the date that significant influence commences until the date that significant influence ceases. The Company's investments in associates
are accounted for using the equity method and are recognized initially at cost, including transaction costs.



When the Company's share of losses exceeds its interest
in an equity accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to nil,
and the recognition of further losses is discontinued except to the extent that the Company has an obligation or has made payments
on behalf of the investee.



| | iv) | Joint arrangements
| | --- | ------------------



Joint arrangements represent activities where the
Company has joint control established by a contractual agreement. Joint control requires unanimous consent for the relevant financial
and operational decisions. A joint arrangement is either a joint operation, whereby the parties have rights to the assets and obligations
for the liabilities, or a joint venture, whereby the parties have rights to the net assets.



For a joint operation the consolidated financial
statements include the Company's proportionate share of the assets, liabilities, revenues, expenses and cash flows of the arrangement
with items of a similar nature on a line-by-line basis, from the date that joint control commences until the date that joint control
ceases.



Joint ventures are accounted for using the equity
method of accounting and recognized at cost and adjusted thereafter for the post acquisition change in the Company's share of the
joint venture's net assets. The Company's consolidated financial statements include its share of the joint venture's profit or
loss and other comprehensive income included in investment in joint ventures, until the date that joint control ceases.



Determining the type of joint arrangement as either
joint operation or joint venture is based on management's assumptions of whether it has joint control over another entity. The
considerations include, but are not limited to, determining if the arrangement is structured through a separate vehicle and whether
the legal form and contractual arrangements give the entity direct rights to the assets and obligations for the liabilities within
the normal course of business. Other facts and circumstances are also assessed by management, including the entity's rights to
the economic benefits of assets and its involvement and responsibility for settling liabilities associated with the arrangement.



52







Pembina
Pipeline Corporation



| | v) | Transactions eliminated on consolidation
| | -- | ----------------------------------------



Intra-group balances and transactions, and any unrealized
revenue and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.
Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent
of the Company's interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the
extent that there is no evidence of impairment.



| | vi) | Foreign currency
| | --- | ----------------



Transactions in foreign currencies are translated
to the Company's functional currency at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated
in foreign currencies at the reporting date are retranslated to the Company's functional currency at the exchange rate at that
date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at
the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign
currency translated at the exchange rate at the end of the reporting period.



Non-monetary assets and liabilities denominated in
foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date
that the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rate at the date of the transaction.



Foreign currency differences arising on retranslation
are recognized in earnings.



| | b. | Inventories
| | -- | -----------



Inventories are measured at the lower of cost and net realizable
value and consist primarily of crude oil and NGL. The cost of inventories is determined using the weighted average costing method
and includes direct purchase costs and when applicable, costs of production, extraction, fractionation costs, and transportation
costs. Net realizable value is the estimated selling price in the ordinary course of business less the estimated selling costs.
All changes in the value of the inventories are reflected in inventories and cost of sales.



| | c. | Financial instruments
| | -- | ---------------------



Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends
either to settle on a net basis or to realize the asset and settle the liability simultaneously.



| | i) | Non-derivative financial assets
| | -- | -------------------------------



The Company initially recognizes loans and receivables
and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through
earnings) are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the
instrument.



The Company derecognizes a financial asset when the
contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on
the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred.
Any interest in transferred financial assets that is created or retained by the Company is recognized as a separate asset or liability.



53







Pembina
Pipeline Corporation





The Company classifies non-derivative financial assets
into the following categories:



Cash and cash equivalents



Cash and cash equivalents comprise cash balances,
call deposits and short-term investments with original maturities of ninety days or less that are subject to an insignificant risk
of changes in their fair value, and are used by the Company in the management of its short-term commitments.



Trade and other receivables



Trade and other receivables are financial assets
with fixed or determinable payments that are not quoted in an active market.



Such assets are recognized initially at fair value
plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized
cost using the effective interest method less any impairment losses.



| | ii) | Non-derivative financial liabilities
| | --- | ------------------------------------



The Company initially recognizes debt securities
issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities
designated at fair value through earnings) are recognized initially on the trade date at which the Company becomes a party to the
contractual provisions of the instrument.



The Company derecognizes a financial liability when
its contractual obligations are discharged, cancelled or expire.



The Company's non-derivative financial liabilities
are comprised of the following: bank overdrafts, trade payables and accrued liabilities, tax payable, dividends payable, loans
and borrowings including finance lease obligations and the liability component of convertible debentures.



Such financial liabilities are recognized initially
at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are
measured at amortized cost using the effective interest method.



Bank overdrafts that are repayable on demand and
form an integral part of the Company's cash management are included as a component of cash and cash equivalents for the purpose
of the statement of cash flows.



| | iii) | Common share capital
| | ---- | --------------------



Common shares are classified as equity. Incremental
costs directly attributable to the issue of common shares and share options are recognized as a deduction from equity, net of any
tax effects.



| | iv) | Preferred share capital
| | --- | -----------------------



Preferred shares are classified as equity because
they bear discretionary dividends and do not contain any obligations to deliver cash or other financial assets. Discretionary dividends
are recognized as equity distributions on approval by the Company's Board of Directors. Incremental costs directly attributable
to the issue of preferred shares are recognized as a deduction from equity, net of any tax effects.



| | v) | Compound financial instruments
| | -- | ------------------------------



The Company's convertible debentures are compound
financial instruments consisting of a financial liability and an embedded conversion feature. In accordance with IAS 39, the embedded
derivatives are required to be separated from the host contracts and accounted for as stand-alone instruments.



54







Pembina
Pipeline Corporation





Debentures containing a cash conversion option allow
Pembina to pay cash to the converting holder of the debentures, at the option of the Company. As such, the conversion feature is
presented as a financial derivative liability within long-term derivative financial instruments. Debentures without a cash conversion
option are settled in shares on conversion, and therefore the conversion feature is presented within equity, in accordance with
its contractual substance.



On initial recognition and at each reporting date,
the embedded conversion feature is measured using a method whereby the fair value is measured using an option pricing model. Subsequent
to initial recognition, any unrealized gains or losses arising from fair value changes are recognized through earnings in the statement
of earnings and comprehensive income at each reporting date. If the conversion feature is included in equity, it is not remeasured
subsequent to initial recognition. On initial recognition, the debt component, net of issue costs, is recorded as a financial liability
and accounted for at amortized cost. Subsequent to initial recognition, the debt component is accreted to the face value of the
debentures using the effective interest rate method. Upon conversion, the corresponding portions of the debt and equity are removed
from those captions and transferred to share capital.



| | vi) | Derivative financial instruments
| | --- | --------------------------------



The Company holds derivative financial instruments
to manage its interest rate, commodity, power costs and foreign exchange risk exposures as well as cash conversion features on
convertible debentures and a redemption liability. Embedded derivatives are separated from the host contract and accounted for
separately if the economic characteristics and risks of the host contract and the embedded derivative meet the definition of a
derivative, and the combined instrument is not measured at fair value through earnings. Derivatives are recognized initially at
fair value with attributable transaction costs recognized in earnings as incurred. Subsequent to initial recognition, derivatives
are measured at fair value and changes in non-commodity-related derivatives are recognized immediately in earnings in net finance
costs and changes in commodity-related derivatives are recognized immediately in earnings in operating activities.



| | d. | Property, plant and equipment
| | -- | -----------------------------



| | i) | Recognition and measurement
| | -- | ---------------------------



Items of property, plant and equipment are measured
at cost less accumulated depreciation and accumulated impairment losses.



Cost includes expenditures that are directly attributable
to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other
costs directly attributable to bringing the assets to a working condition for their intended use, estimated decommissioning provisions
and borrowing costs on qualifying assets.



Cost also may include any gain or loss realized on
foreign currency transactions directly attributable to the purchase or construction of property, plant and equipment. Purchased
software that is integral to the functionality of the related equipment is capitalized as part of that equipment.



When parts of an item of property, plant and equipment
have different useful lives, they are accounted for as separate components of property, plant and equipment.



The gain or loss on disposal of an item of property,
plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment,
and are recognized within other expense (income) in earnings.



55







Pembina
Pipeline Corporation



| | ii) | Subsequent costs
| | --- | ----------------



The cost of replacing a part of an item of property,
plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied
within the part will flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized.
The cost of maintenance and repair expenses of the property, plant and equipment are recognized in earnings as incurred.



| | iii) | Depreciation
| | ---- | ------------



Depreciation is based on the cost of an asset less
its residual value. Significant components of individual assets, other than land, are assessed and if a component has a useful
life that is different from the remainder of the asset, that component is depreciated separately.



Depreciation is recognized in earnings on a straight
line or declining balance basis, which most closely reflects the expected pattern of consumption of the future economic benefits
embodied in the asset. Pipeline assets and facilities are generally depreciated using the straight line method over 6 to 75 years
(an average of 33 years) or declining balance method at rates ranging from 7 percent to 37 percent per annum (an average rate of
6 percent per annum). Facilities and equipment are depreciated using straight line method over 4 to 40 years (at an average rate
of 34 years) or declining balance method at rates ranging from 10 to 20 percent (at an average rate of 6 percent per annum). Other
assets are depreciated using the straight line method over 2 to 60 years (an average of 37 years) or declining balance method at
rates ranging from 7 percent to 21 percent (at an average rate of 6 percent per annum). These rates are established to depreciate
remaining net book value over the shorter of their useful lives, economic lives or contractual duration of the related assets.



Leased assets are depreciated over the shorter of
the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the
lease term.



Depreciation methods, useful lives, economic lives
and residual values are reviewed annually and adjusted if appropriate.



| | e. | Intangible assets
| | -- | -----------------



| | i) | Goodwill
| | -- | --------



Goodwill that arises upon acquisitions is included
in intangible assets. See Note 4(a)(i) for the policy on measurement of goodwill at initial recognition.



Subsequent measurement



Goodwill is measured at cost less accumulated impairment
losses.



In respect of equity accounted investees, the carrying
amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such an investment is allocated
to the investment and not to any asset, including goodwill, that forms the carrying amount of the equity accounted investee.



| | ii) | Other intangible assets
| | --- | -----------------------



Other intangible assets acquired individually by
the Company and have finite useful lives are recognized and measured at cost less accumulated amortization and accumulated impairment
losses.



56







Pembina
Pipeline Corporation



| | iii) | Subsequent expenditures
| | ---- | -----------------------



Subsequent expenditures are capitalized only when
it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditures are recognized
in earnings as incurred.



| | iv) | Amortization
| | --- | ------------



Amortization is based on the cost of an asset less
its residual value.



Amortization is recognized in earnings on a straight-line
basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.
The estimated useful lives of other intangible assets with finite useful lives range from 2 to 33 years (at an average of 15 years)
or declining balance method at 9 percent per annum.



Amortization methods, useful lives and residual values
are reviewed annually and adjusted if appropriate.



| | f. | Leased assets
| | -- | -------------



Leases which the Company assumes substantially all the risks
and rewards of ownership are classified as finance leases. The leased asset is initially recognized at an amount equal to the lower
of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted
for in accordance with the accounting policy applicable to that asset.



Other leases are operating leases and are not recognized in
the Company's statement of financial position.



| | g. | Lease payments
| | -- | --------------



Payments made under operating leases are recognized in earnings
on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total
lease expense, over the term of the lease.



Minimum lease payments made under finance leases are apportioned
between the finance cost and the reduction of the outstanding liability. The finance cost is allocated to each period during the
lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments
are accounted for by revising the minimum lease payments over the remaining life.



| | i) | Determining whether an arrangement contains a lease
| | -- | ---------------------------------------------------



At inception of an arrangement, the Company determines
whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfilment of the arrangement
is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to
a lessee the right to control the use of the underlying asset.



At inception or upon reassessment of the arrangement,
the Company separates payments and other consideration required by such an arrangement into those for the lease and those for other
elements on the basis of their relative fair values. If the Company concludes, for a finance lease, that it is impracticable to
separate the payments reliably, an asset and liability are recognized at an amount equal to the fair value of the underlying asset.
Subsequently, the liability is reduced as payments are made and an imputed finance cost on the liability is recognized using the
Company's incremental borrowing rate.



57







Pembina
Pipeline Corporation



| | h. | Impairment
| | -- | ----------



| | i) | Non-derivative financial assets
| | -- | -------------------------------



A financial asset not carried at fair value through
earnings is assessed at each reporting date to determine whether it is impaired. A financial asset is impaired if there is objective
evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset and that loss
event has a negative impact on the estimated future cash flows of that asset that can be estimated reliably.



Objective evidence that financial assets are impaired
can include default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not
consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers
or issuers in the Company, economic conditions that correlate with defaults or the disappearance of an active market for a security
or a significant or prolonged decline in the fair value below cost.



Trade receivables ("Receivables")



The Company considers evidence of impairment for
Receivables at both a specific asset and collective level. All individually significant Receivables are assessed for specific impairment.
All individually significant Receivables found not to be specifically impaired are then collectively assessed for any impairment
that has been incurred but not yet identified. Receivables that are not individually significant are collectively assessed for
impairment by grouping together Receivables with similar risk characteristics.



In assessing collective impairment, the Company uses
historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management's
judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less
than suggested by historical trends.



An impairment loss in respect of a financial asset
measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future
cash flows discounted at the asset's original effective interest rate. Losses are recognized in earnings and reflected in an allowance
account against Receivables. Interest on the impaired asset continues to be recognized through the unwinding of the discount. When
a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through earnings.



| | ii) | Non-financial assets
| | --- | --------------------



The carrying amounts of the Company's non-financial
assets, other than inventory, assets arising from employee benefits and deferred tax assets, are reviewed at each reporting date
to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated.



For goodwill and intangible assets that have indefinite
useful lives or that are not yet available for use, the recoverable amount is estimated at December 31st of each year.
An impairment loss is recognized if the carrying amount of an asset or its related CGU exceeds its estimated recoverable amount.



The recoverable amount of an asset or CGU is the
greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are
grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent
of the cash inflows of other assets or CGUs. For the purpose of goodwill impairment testing, CGUs are aggregated so that the level
at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal purposes. Goodwill
acquired in a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the
combination.



58







Pembina
Pipeline Corporation





The Company's corporate assets do not generate separate
cash inflows and are utilized by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis
and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated. If there is an indication
that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.



Impairment losses are recognized in earnings. An
impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment
losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group
of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.



An impairment loss in respect of goodwill is not
reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any
indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates
used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does
not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had
been recognized.



Goodwill that forms part of the carrying amount of
an equity-accounted investee is not recognized separately, and therefore is not tested for impairment separately. Instead, the
entire amount of the investment is tested for impairment as a single asset when there is objective evidence that the equity-accounted
investee may be impaired.



| | i. | Employee benefits
| | -- | -----------------



| | i) | Defined contribution plans
| | -- | --------------------------



A defined contribution plan is a post-employment
benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation
to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit
expense in earnings in the periods during which services are rendered by employees. Prepaid contributions are recognized as an
asset to the extent that a cash refund or a reduction in future payments is available. Contributions to a defined contribution
plan due more than 12 months after the end of the period in which the employees render the service are discounted to their present
value.



| | ii) | Defined benefit pension plans
| | --- | -----------------------------



A defined benefit pension plan is a post-employment
benefit plan other than a defined contribution plan. The Company's net obligation in respect of Defined Benefit Pension Plans is
calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service
in the current and prior periods, discounted to determine its present value, less the fair value of any plan assets. The discount
rate used to determine the present value is established by referencing market yields on high-quality corporate bonds on the measurement
date with cash flows that match the timing and amount of expected benefits.



59







Pembina
Pipeline Corporation





The calculation is performed, at a minimum, every
three years by a qualified actuary using the actuarial cost method. When the calculation results in a benefit to the Company, the
recognized asset is limited to the present value of economic benefits available in the form of future expenses payable from the
plan, any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value
of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Company. An economic
benefit is available to the Company if it is realizable during the life of the plan or on settlement of the plan liabilities.



When the benefits of a plan are improved, the portion
of the increased benefit relating to past service by employees is recognized in earnings immediately.



The Company recognizes all actuarial gains and losses
arising from defined benefit plans in other comprehensive income and expenses related to defined benefit plans in personnel expenses
in earnings.



The Company recognizes gains or losses on the curtailment
or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any
resulting change in the fair value of plan assets, change in the present value of defined benefit obligation and any related actuarial
gains or losses and past service cost that had not previously been recognized.



| | iii) | Short-term employee benefits
| | ---- | ----------------------------



Short-term employee benefit obligations are measured
on an undiscounted basis and are expensed as the related service is provided.



A liability is recognized for the amount expected
to be paid under short-term cash bonus if the Company has a present legal or constructive obligation to pay this amount as a result
of past service provided by the employee, and the obligation can be estimated reliably.



| | iv) | Share-based payment transactions
| | --- | --------------------------------



For equity settled share-based payment plans, the
fair value of the share-based payment at grant date is recognized as an expense, with a corresponding increase in equity, over
the period that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to
reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that
the amount ultimately recognized as an expense is based on the number of awards that meet the related service conditions at the
vesting date.



For cash settled share-based payment plans, the fair
value of the amount payable to employees is recognized as an expense with a corresponding increase in liabilities, over the period
that the employees unconditionally become entitled to payment. The liability is remeasured at each reporting date and at settlement
date. Any changes in the fair value of the liability are recognized as an expense in earnings.



| | j. | Provisions
| | -- | ----------



A provision is recognized if, as a result of a past event, the
Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic
benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at
a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Provisions
are remeasured at each reporting date based on the best estimate of the settlement amount. The unwinding of the discount rate is
recognized as a finance cost.



60







Pembina
Pipeline Corporation



Decommissioning obligation



The Company's activities give rise to dismantling, decommissioning
and site disturbance remediation activities. A provision is made for the estimated cost of site restoration and capitalized in
the relevant asset category.



Decommissioning obligations are measured at the present value,
based on a risk free rate, of management's best estimate of expenditure required to settle the obligation at the balance sheet
date. Subsequent to the initial measurement, the obligation is adjusted at the end of each period to reflect the passage of time,
changes in the risk free rate and changes in the estimated future cash flows underlying the obligation. The increase in the provision
due to the passage of time is recognized as finance costs whereas increases or decreases due to changes in the estimated future
cash flows or risk free rate are added to or deducted from the cost of the related asset.



| | k. | Revenue
| | -- | -------



Revenue in the course of ordinary activities is measured at
the fair value of the consideration received or receivable. Revenue is recognized when persuasive evidence exists that the significant
risks and rewards of ownership have been transferred to the customer or the service has been provided, recovery of the consideration
is probable, the associated costs can be estimated reliably, there is no continuing management involvement with the goods, and
the amount of revenue can be measured reliably.



The timing of the transfer of significant risks and rewards
varies depending on the individual terms of the sales or service agreement. For product sales, usually transfer of significant
risks and rewards occurs when the product is delivered to a customer. For pipeline transportation revenues and storage revenue,
transfer of significant risks and rewards usually occurs when the service is provided as per the contract with the customer. For
rate or contractually regulated pipeline operations, revenue is recognized in a manner that is consistent with the underlying rate
design as mandated by agreement or regulatory authority.



Certain commodity buy/sell arrangements where the risks and
rewards of ownership have not transferred are recognized on a net basis in earnings.



| | l. | Finance income and finance costs
| | -- | --------------------------------



Finance income comprises interest income on funds deposited
and invested, gains on non-commodity-related derivatives measured at fair value through earnings and foreign exchange gains. Interest
income is recognized as it accrues in earnings, using the effective interest method.



Finance costs comprise interest expense on loans and borrowings
and convertible debentures, unwinding of discount rate on provisions, losses on disposal of available for sale financial assets,
losses on non-commodity-related derivatives, impairment losses recognized on financial assets (other than trade and other receivables)
and foreign exchange losses.



Borrowing costs that are not directly attributable to the acquisition
or construction of a qualifying asset are recognized in earnings using the effective interest method.



| | m. | Income tax
| | -- | ----------



Income tax expense comprises current and deferred tax. Current
and deferred taxes are recognized in earnings except to the extent that it relates to a business combination, or items are recognized
directly in equity or in other comprehensive income.



61







Pembina
Pipeline Corporation



Current tax is the expected tax payable or receivable on the taxable
income or loss for the period, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax
payable in respect of previous years.



Deferred tax is recognized in respect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognized for:



| | · | temporary differences on the initial recognition of assets or liabilities
in a transaction that is not a business combination and that affects neither accounting nor taxable earnings;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | temporary differences relating to investments in subsidiaries and joint
arrangements to the extent that it is probable that they will not reverse in the foreseeable future; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | taxable temporary differences arising on the initial recognition of
goodwill.
| | - | -----------------------------------------------------------------------------



The measurement of deferred tax reflects the tax consequences
that would follow the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying
amount of its assets and liabilities.



Deferred tax is measured at the tax rates that are expected
to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by
the reporting date.



Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax
authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets
on a net basis or their tax assets and liabilities will be realized simultaneously.



A deferred tax asset is recognized for unused tax losses, tax
credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against
which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realized.



In determining the amount of current and deferred tax, the Company
takes into account income tax exposures and whether additional taxes and interest may be due. This assessment relies on estimates
and assumptions and may involve a series of judgments about future events. New information may become available that causes the
Company to change its judgment regarding the adequacy of existing tax liabilities, such changes to tax liabilities will impact
tax expense in the period that such a determination is made.



| | n. | Earnings per common share
| | -- | -------------------------



The Company presents basic and diluted earnings per common share
("EPS") data for its common shares. Basic EPS is calculated by dividing the earnings attributable to common shareholders
of the Company by the weighted average number of common shares outstanding during the period. Earnings attributable to shareholders
are adjusted for accumulated preferred dividends. Diluted EPS is determined by adjusting the earnings attributable to common shareholders
and the weighted average number of common shares outstanding, for the effects of all potentially dilutive common shares, which
comprise convertible debentures and share options granted to employees ("Convertible Instruments"). Only outstanding
and Convertible Instruments that will have a dilutive effect are included in fully diluted calculations.



62







Pembina
Pipeline Corporation



The dilutive effect of Convertible Instruments is determined whereby
outstanding Convertible Instruments at the end of the period are assumed to have been converted at the beginning of the period
or at the time issued if issued during the year. Amounts charged to earnings relating to the outstanding Convertible Instruments
are added back to earnings for the diluted calculations. The shares issued upon conversion are included in the denominator of
per share basic calculations for the date of issue.



| | o. | Segment reporting
| | -- | -----------------



An operating segment is a component of the Company that engages
in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions
with any of the Company's other components. All operating segments' operating results are reviewed regularly by the Company's Chief
Executive Officer ("CEO"), Chief Financial Officer ("CFO") and Senior Vice Presidents ("SVPs") to
make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information
is available.



Segment results that are reported to the CEO, CFO and SVPs include
items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise
mainly corporate assets, corporate general and administrative expenses, finance income and costs and income tax assets and liabilities.



Segment capital expenditure is the total cost incurred during
the period to acquire property, plant and equipment, and intangible assets other than goodwill.



| | p. | Cash flow statements
| | -- | --------------------



The cash flow statement is prepared using the indirect method
for calculating cash flow from operating activities. Changes in balance sheet items that have not resulted in cash flows such as
share-based payment expense, unwinding of discount rates, unrealized gains and losses, depreciation and amortization, employee
future benefit expenses, deferred income tax expense, share of profit from equity accounted investees, among others, have been
eliminated for the purpose of preparing this statement. Dividends paid to ordinary shareholders, among other expenditures, are
included in financing activities. Interest paid is included in operating activities, with the exception of interest paid during
construction, which is included in investing activities.



| | q. | New standards and interpretations not yet adopted
| | -- | -------------------------------------------------



Certain new standards, interpretations, amendments and improvements
to existing standards were issued by the IASB or IFRIC and are effective for accounting periods beginning on or after January 1,
2015. These standards have not been applied in preparing these Financial Statements. Those which may be relevant to Pembina are
described below:



IFRS 9 Financial Instruments (2014) is effective January 1,
2018 and is available for early adoption. The Company is currently evaluating the impact that the standard will have on its results
of operations and financial position and is assessing when adoption will occur.



IFRS 15 Revenue from Contracts with Customers is effective for
annual periods beginning on or after January 1, 2017. The Company intends to adopt IFRS 15 for the annual period beginning on January
1, 2017. The Company is currently evaluating the impact that the standard will have on its results of operations and financial
position.



| | 5. | DETERMINATION OF FAIR VALUES
| | -- | ----------------------------



A number of the Company's accounting policies and disclosures
require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined
for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions
made in determining fair values is disclosed in the notes specific to that asset or liability.



63







Pembina
Pipeline Corporation



| | i) | Property, plant and equipment
| | -- | -----------------------------



The fair value of property, plant and equipment recognized as
a result of a business combination is based on market values when available and depreciated replacement cost when appropriate.
Depreciated replacement cost reflects adjustments for physical deterioration as well as functional and economic obsolescence.



| | ii) | Intangible assets
| | --- | -----------------



The fair value of intangible assets acquired in a business combination
is determined using the multi-period excess earnings method, whereby the subject asset is valued after deducting a fair return
on all other assets that are part of creating the related cash flows.



The fair value of other intangible assets is based on the discounted
cash flows expected to be derived from the use and eventual sale of the assets.



| | iii) | Derivatives
| | ---- | -----------



Fair value of derivatives are estimated by reference to independent
monthly forward prices, interest rate yield curves, currency rates, quoted market prices per share and volatility rates at the
period ends.



Fair values reflect the credit risk of the instrument and include
adjustments to take account of the credit risk of the company, entity and counterparty when appropriate.



| | iv) | Non-derivative financial assets and liabilities
| | --- | -----------------------------------------------



Fair value, which is determined for disclosure purposes, is
calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at
the reporting date. In respect of the convertible debentures, the fair value is determined by the market price of the convertible
debenture on the reporting date. For finance leases the market rate of interest is determined by reference to similar lease agreements.



| | v) | Share-based payment transactions
| | -- | --------------------------------



The fair value of the employee share options is measured using
the Black-Scholes formula. Measurement inputs include share price on measurement date, exercise price of the instrument, expected
volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information),
weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected
dividends, expected forfeitures and the risk-free interest rate (based on government bonds). Service and non-market performance
conditions attached to the transactions are not taken into account in determining fair value.



The fair value of the long-term share unit award incentive plan
and associated distribution units are measured based on the reporting date market price of the Company's shares. Expected dividends
are not taken into account in determining fair value as they are issued as additional distribution share units.



| | vi) | Inventories
| | --- | -----------



The net realizable value of inventories is determined based
on the estimated selling price in the ordinary course of business less estimated cost to sell.



| | vii) | Finance lease assets
| | ---- | --------------------



The fair value of finance lease assets is based on market values
at the inception date.



64







Pembina
Pipeline Corporation



| | 6. | ACQUISITION
| | -- | -----------



On October 24, 2014, the acquisition date, Pembina acquired the Vantage pipeline system ("Vantage")
and Mistral Midstream Inc.'s ("Mistral") interest in the Saskatchewan Ethane Extraction Plant ("SEEP") for
total consideration of $733 million (U.S.$653 million). To enact the purchase, Pembina acquired all of the issued and outstanding
equity interests of Vantage Pipeline Canada ULC, Vantage Pipeline US LP and Mistral. Consideration for the transaction consisted
of cash of $217 million (U.S.$193 million), the issuance of 5,610, 317 common shares of the Company valued at $266 million (U.S.$237
million), and repayment of Vantage's bank indebtedness of $250 million (U.S.$223 million) at closing (the "Acquisition). The
fair value of the common shares issued was based on the Toronto Stock Exchange listed share price on the date of acquisition.



Vantage is a recently constructed, 700 kilometre, 40 thousand
barrel per day ("mbpd"), high vapour pressure pipeline that originates in Tioga, North Dakota and terminates near Empress,
Alberta. Vantage provides long-term, fee-for-service cash flow and strategic access to the prolific and growing North Dakota Bakken
play for future natural gas liquids opportunities.



SEEP is an under construction 60 million cubic feet per day
deep cut gas processing facility that is centrally located to service the southeast Saskatchewan Bakken region. The facility is
underpined by both a long-term ethane sales agreement and a long-term, fee-for-service processing agreement.



The purchase price equation, subject to finalization of property,
plant and equipment and deferred tax liabilities, is based on assessed fair values and is as follows:



|($ millions)                           |     
|-------------------------------------- | ----
|Cash                                   | 10  
|Trade receivables and other            | 4   
|Property, plant and equipment          | 447 
|Intangible assets                      | 204 
|Goodwill                               | 130 
|Other long-term assets                 | 2   
|Trade payables and accrued liabilities | (23)
|Deferred tax liabilities               | (41)
|                                       | 733 



The determination of fair values and the purchase price equation
are based upon an independent valuation. The primary drivers that generate goodwill are synergies and business opportunities from
the integration of Pembina and Vantage. Of the recognized goodwill, $2 million is expected to be deductible for tax purposes.



The Company has recognized $2 million in acquisition-related
expenses. These expenses are included in Other expenses in the Financial Statements. With the exception of share issue costs, which
have been capitalized, all acquisition-related expenses have been expensed as incurred.



Revenue generated by the Vantage business for the period from
the Acquisition date of October 24, 2014 to December 31, 2014, before intersegment eliminations, was $6 million. Net earnings,
before intersegment eliminations, for the same period were $1 million. If the acquisition had occurred on January 1, 2014, management
estimates that consolidated revenue would have increased an additional $24 million, and consolidated profit for the year would
have been $3 million. In determining these amounts, management has assumed that the fair value adjustments that arose on the date
of acquisition would have been the same if the acquisition had occurred on January 1, 2014. In addition, no corporate allocations
of general and administrative expenses have been considered as these are assumed to be insignificant.



65







Pembina
Pipeline Corporation



| | 7. | TRADE RECEIVABLES AND OTHER
| | -- | ---------------------------



|December 31 ($ millions)                  | 2014 | 2013
|----------------------------------------- | ---- | ----
|Trade accounts receivable from customers  | 429  | 419 
|Prepayments                               | 18   | 15  
|Total current trade and other receivables | 447  | 434 



| | 8. | PROPERTY, PLANT AND EQUIPMENT
| | -- | -----------------------------



|($ millions)                        | Land andLandRights | Pipelines | FacilitiesandEquipment | LinefillandOther | AssetsUnderConstruction | Total
|----------------------------------- | ------------------ | --------- | ---------------------- | ---------------- | ----------------------- | -----
|Cost                                |                    |           |                        |                  |                         |      
|Balance at December 31, 2012        | 88                 | 2,594     | 2,072                  | 506              | 752                     | 6,012
|Additions                           | 7                  | 104       | 285                    | 59               | 425                     | 880  
|Change in decommissioning provision |                    | (19)      | (8)                    |                  |                         | (27) 
|Capitalized interest                |                    | 5         | 5                      |                  | 25                      | 35   
|Transfers                           | 11                 | 105       | 320                    | 130              | (566)                   |      
|Disposals and other                 |                    | (6)       | (4)                    | 2                |                         | (8)  
|Balance at December 31, 2013        | 106                | 2,783     | 2,670                  | 697              | 636                     | 6,892
|Acquisition (Note 6)                | 38                 | 345       | 18                     |                  | 46                      | 447  
|Additions                           | 4                  | 129       | 282                    | 85               | 912                     | 1,412
|Change in decommissioning provision |                    | 52        | 48                     |                  |                         | 100  
|Capitalized interest                |                    | 4         | 11                     |                  | 31                      | 46   
|Transfers                           |                    | 85        | 256                    | 43               | (384)                   |      
|Disposals and other                 |                    | 21        | (9)                    | (30)             | (30)                    | (48) 
|Balance at December 31, 2014        | 148                | 3,419     | 3,276                  | 795              | 1,211                   | 8,849
|                                    |                    |           |                        |                  |                         |      
|Depreciation                        |                    |           |                        |                  |                         |      
|Balance at December 31, 2012        | 4                  | 777       | 172                    | 45               |                         | 998  
|Depreciation                        | 1                  | 52        | 73                     | 27               |                         | 153  
|Transfers                           |                    |           |                        |                  |                         |      
|Disposals and other                 |                    | (5)       | (4)                    |                  |                         | (9)  
|Balance at December 31, 2013        | 5                  | 824       | 241                    | 72               |                         | 1,142
|Depreciation                        |                    | 49        | 88                     | 45               |                         | 182  
|Transfers                           |                    |           |                        |                  |                         |      
|Disposals and other                 |                    | (1)       | (9)                    | (25)             |                         | (35) 
|Balance at December 31, 2014        | 5                  | 872       | 320                    | 92               |                         | 1,289
|                                    |                    |           |                        |                  |                         |      
|Carrying amounts                    |                    |           |                        |                  |                         |      
|December 31, 2013                   | 101                | 1,959     | 2,429                  | 625              | 636                     | 5,750
|December 31, 2014                   | 143                | 2,547     | 2,956                  | 703              | 1,211                   | 7,560



66







Pembina
Pipeline Corporation



Property, plant and equipment under construction



Costs of assets under construction at December 31, 2014 totalled
$1,211 million (2013: $636 million) including capitalized borrowing costs.



For the year ended December 31, 2014, capitalized borrowing
costs related to the construction of new pipelines or facilities amounted to $46 million (2013: $35 million), with capitalization
rates ranging from 4.57 percent to 5.06 percent (2013: 4.4 percent to 5.0 percent).



Commitments



At December 31, 2014, the Company has contractual construction
commitments for property, plant and equipment of $1,978 million (December 31, 2013: $1,322 million), excluding significant projects
awaiting regulatory approval.



| | 9. | INTANGIBLE ASSETS AND GOODWILL
| | -- | ------------------------------



|                                              |          | Intangible Assets          |                      
|--------------------------------------------- | -------- | -------------------------- | ---------------------
|($ millions)                                  | Goodwill | Purchase andSale Contracts | CustomerRelationships
|Cost                                          |          |                            |                      
|Balance at December 31, 2012                  | 1,976    | 185                        | 227                  
|Additions and other                           | (10)     | 3                          |                      
|Balance at December 31, 2013                  | 1,966    | 188                        | 227                  
|Acquisition (Note 6)                          | 130      |                            | 204                  
|Additions and other                           | (6)      |                            | 1                    
|Balance at December 31, 2014                  | 2,090    | 188                        | 432                  
|                                              |          |                            |                      
|Amortization                                  |          |                            |                      
|Accumulated amortization at December 31, 2012 |          | 27                         | 15                   
|Amortization                                  |          | 33                         | 19                   
|Balance at December 31, 2013                  |          | 60                         | 34                   
|Amortization                                  |          | 32                         | 20                   
|Balance at December 31, 2014                  |          | 92                         | 54                   
|                                              |          |                            |                      
|Carrying amounts                              |          |                            |                      
|December 31, 2013                             | 1,966    | 128                        | 193                  
|December 31, 2014                             | 2,090    | 96                         | 378                  



The purchase option of $277 million to acquire property, plant
and equipment is not being amortized because it is not exercisable until 2018.



The aggregate carrying amount of intangible assets and goodwill
allocated to each operating segment is as follows:



|December 31 ($ millions) | 2014     | 2013            
|------------------------ | -------- | ----------------
|                         | Goodwill | IntangibleAssets
|Conventional Pipelines   | 440      | 187             
|Oil Sands & Heavy Oil    | 28       | 5               
|Gas Services             | 182      | 35              
|Midstream                | 1,440    | 524             
|                         | 2,090    | 751             



67







Pembina
Pipeline Corporation



Impairment testing



For the purpose of impairment testing, goodwill is allocated
to the Company's operating segments which represent the lowest level within the Company at which the goodwill is monitored for
internal management purposes. Impairment testing for goodwill was performed at December 31, 2014. The recoverable amounts were
based on their value in use and were determined to be higher than their carrying amounts.



Value in use was determined by discounting the future cash flows
generated from the continuing use of each operating segment. The calculation of the value in use was based on the following key
assumptions:



Cash flows were projected based on past experience, actual operating
results and the first 4 years of the business plan approved by management. Cash flows for periods up to 75 years (2013: 75 years)
were extrapolated using a constant medium-term inflation rate of 2 percent (2013: 2 percent), except where contracted, long-term
cash flows indicated that no inflation should be applied or a specific reduction in cash flows was more appropriate. Pre-tax discount
rates between 7.2 percent and 8.9 percent were applied in determining the recoverable amount of the operating segments. (2013:
8.6 and 9.4 percent). The discount rates were estimated based on past experience, the Company's risk free rate and average cost
of debt, targeted debt to equity ratio, in addition to estimates of the specific operating segment's equity risk premium, size
premium, small capitalization premium, projection risk, betas and tax rate.



| | 10. | INVESTMENTS IN EQUITY ACCOUNTED INVESTEES
| | --- | -----------------------------------------



The Company has a 50 percent interest in two joint ventures
(Fort Saskatchewan Ethylene Storage Corporation and Fort Saskatchewan Ethylene Storage Limited Partnership) that are reported using
the equity method of accounting. The carrying value of the investments at December 31, 2014 is $153 million (2013: $165 million).



At December 31, 2014, the Company has contractual commitments
for additional investment in its equity accounted investees of $5 million (December 31, 2013: $24 million).



68







Pembina
Pipeline Corporation



| | 11. | INCOME TAXES
| | --- | ------------



The movements of the components of the deferred tax assets and
deferred tax liabilities are as follows:



|($ millions)                                | Balance atDecember 31, 
2013 | Recognizedin Earnings | Recognized inOtherComprehensiveIncome | Acquisition | Equity | Other | Balance atDecember 31,2014
|------------------------------------------- | ---------------------------- | --------------------- | ------------------------------------- | ----------- | ------ | ----- | --------------------------
|Deferred income tax assets                  |                              |                       |                                       |             |        |       |                           
|Derivative financial instruments            | 6                            | (3)                   |                                       |             |        |       | 3                         
|Employee benefits                           |                              |                       | 5                                     |             |        |       | 5                         
|Share-based payments                        |                              | 13                    |                                       |             |        |       | 13                        
|Provisions                                  | 78                           | 26                    |                                       |             |        |       | 104                       
|Benefit of loss carryforwards               | 14                           | (1)                   |                                       | 9           |        |       | 22                        
|Other deductible temporary differences      | 22                           | (1)                   |                                       | 1           | 3      | (2)   | 23                        
|                                            |                              |                       |                                       |             |        |       |                           
|Deferred income tax liabilities             |                              |                       |                                       |             |        |       |                           
|Property, plant and equipment               | (588)                        | (115)                 | (1)                                   | 2           |        | 3     | (699)                     
|Intangible assets                           | (124)                        | 6                     |                                       | (53)        |        |       | (171)                     
|Investments in equity accounted investees   | (17)                         | 3                     |                                       |             |        | 7     | (7)                       
|Taxable limited partnership income deferral | (64)                         | 16                    |                                       |             |        |       | (48)                      
|Other taxable temporary differences         | (11)                         | (8)                   |                                       |             |        |       | (19)                      
|Total deferred tax liabilities(1)           | (684)                        | (64)                  | 4                                     | (41)        | 3      | 8     | (774)                     



| | (1) | The
                                         Company has recognized a net deferred tax asset of $19 million (December 31, 2013: $15
                                         million) relating to its U.S. subsidiaries. The Company has determined that it is probable
                                         that future taxable profits will be sufficient to utilize the deferred tax asset.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



69







Pembina
Pipeline Corporation





|($ millions)                                | Balance atDecember 31, 
2012 | Recognizedin Earnings | Recognized inOtherComprehensiveIncome | Acquisition | Equity | Other | Balance atDecember 31,2013
|------------------------------------------- | ---------------------------- | --------------------- | ------------------------------------- | ----------- | ------ | ----- | --------------------------
|Deferred income tax assets                  |                              |                       |                                       |             |        |       |                           
|Derivative financial instruments            | 23                           | (18)                  |                                       | 1           |        |       | 6                         
|Employee benefits                           | 7                            | (1)                   | (6)                                   |             |        |       |                           
|Share-based payments                        | 8                            | (8)                   |                                       |             |        |       |                           
|Provisions                                  | 115                          | (37)                  |                                       |             |        |       | 78                        
|Benefit of loss carryforwards               | 77                           | (63)                  |                                       |             |        |       | 14                        
|Other deductible temporary differences      | 2                            | 12                    |                                       |             | 7      | 1     | 22                        
|Deferred income tax liabilities             |                              |                       |                                       |             |        |       |                           
|Property, plant and equipment               | (590)                        |                       |                                       | 2           |        |       | (588)                     
|Intangible assets                           | (127)                        | 3                     |                                       |             |        |       | (124)                     
|Investments in equity accounted investees   | (22)                         | 5                     |                                       |             |        |       | (17)                      
|Taxable limited partnership income deferral | (75)                         | 11                    |                                       |             |        |       | (64)                      
|Other taxable temporary differences         | (2)                          | (9)                   |                                       |             |        |       | (11)                      
|Total deferred tax liabilities(1)           | (584)                        | (105)                 | (6)                                   | 3           | 7      | 1     | (684)                     



| | (1) | The
                                         Company has recognized a net deferred tax asset of $15 million at December 31, 2013 (December
                                         31, 2012: $8 million) relating to its U.S. subsidiaries. The Company has determined that
                                         it is probable that future taxable profits will be sufficient to utilize the deferred
                                         tax asset.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company's consolidated statutory tax rate for the year ended
December 31, 2014 was 25 percent (2013: 25 percent).



Reconciliation of effective tax rate



|Year Ended December 31 ($ millions, except as noted) | 2014 | 2013
|---------------------------------------------------- | ---- | ----
|Earnings before income tax                           | 572  | 494 
|                                                     |      |     
|Statutory tax rate (percent)                         | 25   | 25  
|                                                     |      |     
|Income tax at statutory rate                         | 143  | 124 
|Tax rate changes on deferred income tax balances     | 2    | 1   
|Changes in estimate and other                        | 8    | 5   
|Permanent items                                      | 14   | 13  
|Income tax expense                                   | 167  | 143 



70







Pembina
Pipeline Corporation



Income tax expense



|Year Ended December 31($ millions)                | 2014 | 2013
|------------------------------------------------- | ---- | ----
|Current tax expense                               | 103  | 38  
|Deferred tax expense                              |      |     
|Origination and reversal of temporary differences | 57   | 51  
|Tax rate changes on deferred tax balances         | 2    | 1   
|Decrease in tax loss carry forward                | 5    | 53  
|Total deferred tax expense                        | 64   | 105 
|Total income tax expense                          | 167  | 143 



The movement of the net deferred tax liability is as follows:



|($ millions)                                               | 2014 | 2013
|---------------------------------------------------------- | ---- | ----
|Balance at January 1                                       | 684  | 584 
|Deferred income tax expense                                | 64   | 105 
|Income tax expense (benefit) in other comprehensive income | (4)  | 6   
|Acquisition                                                | 41   | (3) 
|Preferred share issue costs                                | (3)  | (7) 
|Other                                                      | (8)  | (1) 
|Balance at December 31                                     | 774  | 684 



Deferred tax items recovered directly in equity



|Year Ended December 31 ($ millions)             | 2014 | 2013
|----------------------------------------------- | ---- | ----
|Preferred share issue costs                     | 3    | 7   
|Other comprehensive (income) loss               | 4    | (6) 
|Deferred tax items recovered directly in equity | 7    | 1   



Cash taxes paid during the year were $81 million (2013: nil).



The Company has temporary differences associated with its investments
in foreign subsidiaries, branches, and interests in joint arrangements. At December 31, 2014, the Company has not recorded a deferred
tax asset or liability for these temporary differences (December 31, 2013: nil) as the Company controls the timing of the reversal
and it is not probable that the temporary differences will reverse in the foreseeable future.



At December 31, 2014, the Company had $34 million (December
31, 2013: $37 million) of U.S. tax losses that will expire after 2030. The Company has recorded deferred tax assets in respect
of these losses, as it has been determined that it is probable that future taxable profits will be sufficient to utilize these
losses.



| | 12. | TRADE PAYABLES AND ACCRUED LIABILITIES
| | --- | --------------------------------------



|December 31 ($ millions)                 | 2014 | 2013
|---------------------------------------- | ---- | ----
|Trade payables                           | 444  | 359 
|Non-trade payables & accrued liabilities | 106  | 102 
|Total current trade and other payables   | 550  | 461 



| | 13. | LOANS AND BORROWINGS
| | --- | --------------------



This note provides information about the contractual terms of
the Company's interest-bearing loans and borrowings, which are measured at amortized cost.



71







Pembina
Pipeline Corporation



Carrying value, terms and conditions, and debt maturity schedule



|                                       |                                          |                                      |                 | Carrying value
|-------------------------------------- | ---------------------------------------- | ------------------------------------ | --------------- | --------------
|December 31 ($ millions)               | Available facilities atDecember 31, 2014 | Nominal
interest rate                | Year ofmaturity | 2014          
|Operating facility(1)                  | 30                                       | prime + 0.45
        or BA(2)+ 1.45  | 2015(3)         |               
|Revolving unsecured credit facility(1) | 1,500                                    | prime + 0.45
        or BA(2) + 1.45 | 2019            | 506           
|Senior unsecured notes – Series A      |                                          | 5.99                                 | 2014            |               
|Senior unsecured notes – Series C      | 200                                      | 5.58                                 | 2021            | 197           
|Senior unsecured notes – Series D      | 267                                      | 5.91                                 | 2019            | 266           
|Senior unsecured term facility         |                                          | 6.16                                 | 2014            |               
|Senior unsecured medium-term notes 1   | 250                                      | 4.89                                 | 2021            | 249           
|Senior unsecured medium-term notes 2   | 450                                      | 3.77                                 | 2022            | 448           
|Senior unsecured medium-term notes 3   | 200                                      | 4.75                                 | 2043            | 198           
|Senior unsecured medium-term notes 4   | 600                                      | 4.81                                 | 2044            | 596           
|Subsidiary debt                        |                                          | 5.04                                 | 2014            |               
|Finance lease liabilities              |                                          |                                      |                 | 10            
|Total interest bearing liabilities     | 3,497                                    |                                      |                 | 2,470         
|Less current portion                   |                                          |                                      |                 | (4)           
|Total non-current                      |                                          |                                      |                 | 2,466         



| | (1) | The
                                         nominal interest rate is based on the Company's credit rating at December 31, 2014.
| | --- | --------------------------------------------------------------------------------------------------------------------------------

| | (2) | Bankers'
                                         Acceptance.
| | --- | -------------------------------------------------------------

| | (3) | Operating
                                         facility expected to be renewed on an annual basis.
| | --- | ------------------------------------------------------------------------------------------------------



Pembina's $1.5 billion revolving unsecured credit facility was
extended by one year from March 2018 to March 2019 and the $30 million operating facility was also extended by one year from July
2014 to July 2015.



On April 4, 2014, the Company issued $600 million senior unsecured
medium-term notes and subsequently repaid the $75 million senior unsecured term facility on April 7, 2014 and the $175 million
senior unsecured notes (Series A) on June 16, 2014.



Subsequent to the year-end, Pembina closed an offering of $600
million of senior unsecured medium-term notes. See Note 29 regarding subsequent events.



All facilities are governed by specific debt covenants which
Pembina has been in compliance with during the years ended December 31, 2014 and 2013.



For more information about the Company's exposure to interest
rate, foreign currency and liquidity risk, see financial instruments and financial risk management Note 24.



72







Pembina
Pipeline Corporation



| | 14. | CONVERTIBLE DEBENTURES
| | --- | ----------------------



|($ millions, except as noted)                 | Series C – 5.75%       | Series E – 5.75%                | Series F – 5.75%                | Total
|--------------------------------------------- | ---------------------- | ------------------------------- | ------------------------------- | -----
|Conversion price (dollars)                    | $28.55                 | $24.94                          | $29.53                          |      
|Interest payable semi-annually in arrears on: | May 31 and November 30 | June 30 and
        December 31 | June 30 and
        December 31 |      
|Maturity date                                 | November 30, 2020      | December 31, 2017               | December 31, 2018               |      
|Balance at December 31, 2012                  | 290                    | 160                             | 160                             | 610  
|Conversions                                   | (1)                    | (9)                             | (1)                             | (11) 
|Unwinding of discount rate                    |                        | 1                               | 1                               | 2    
|Deferred financing fees (net of amortization) | 1                      | 1                               | 1                               | 3    
|Balance at December 31, 2013                  | 290                    | 153                             | 161                             | 604  
|Conversions                                   | (62)                   | (134)                           | (21)                            | (217)
|Unwinding of discount rate                    |                        |                                 | 1                               | 1    
|Deferred financing fee (net of amortization)  | 1                      | 1                               | 1                               | 3    
|Balance at December 31, 2014                  | 229                    | 20                              | 142                             | 391  



The Series C debentures may be converted at the option of the
holder at a conversion price of $28.55 per common share at any time prior to maturity and may be redeemed by the Company. The Company
may, at its option prior to November 30, 2016, elect to redeem the Series C debentures in whole or in part, provided that the volume
weighted average trading price of the common shares on the TSX during the 20 consecutive trading days ending on the fifth trading
day preceding the date on which the notice of redemption is given is not less than 125 percent of the conversion price of the Series
C debentures. On or after November 30, 2016, the Series C debentures may be redeemed in whole or in part at the option of the Company
at a price equal to their principal amount plus accrued and unpaid interest. The Company may also elect to pay interest on the
debentures by issuing shares.



The Series E debentures may be converted at the option of the
holder at a conversion price of $24.94 per common share at any time prior to maturity and may be redeemed by the Company. The Company
may, at its option prior to December 31, 2015, elect to redeem the Series E debentures in whole or in part, provided that the volume
weighted average trading price of the common shares on the TSX during the 20 consecutive trading days ending on the fifth trading
day preceding the date on which the notice of redemption is given is not less than 125 percent of the conversion price of the Series
E debentures. On or after December 31, 2015, the Series E debentures may be redeemed in whole or in part at the option of the Company
at a price equal to their principal amount plus accrued and unpaid interest. Any accrued unpaid interest will be paid in cash.



The Series F debentures may be converted at the option of the
holder at a conversion price of $29.53 per common share at any time prior to maturity and may be redeemed by the Company. The Company
may, at its option prior to December 31, 2016, elect to redeem the Series F debentures in whole or in part, provided that the volume
weighted average trading price of the common shares on the TSX during the 20 consecutive trading days ending on the fifth trading
day preceding the date on which the notice of redemption is given is not less than 125 percent of the conversion price of the Series
F debentures. On or after December 31, 2016, the Series F debentures may be redeemed in whole or in part at the option of the Company
at a price equal to their principal amount plus accrued and unpaid interest. Any accrued unpaid interest will be paid in cash.



The Company retains a cash conversion option on the Series E
and F convertible debentures, allowing the Company to pay cash to the converting holder of the debentures, at the option of the
Company. For convertible debentures with a cash conversion option, the conversion feature is recognized as an embedded derivative
and accounted for as a derivative financial instrument, measured at fair value using an option pricing model.



73







Pembina
Pipeline Corporation



| | 15. | PROVISIONS
| | --- | ----------



The Company has estimated the net present value of its total
decommissioning obligations based on a total future liability of $410 million (2013: $309 million). The estimate has applied a
medium-term inflation rate and current discount rate and includes a revision in the decommissioning assumptions and associated
costs and timing of payments. The obligations are expected to be paid over the next 75 years (2013: 75 years) with majority being
paid between 30 and 40 years. The Company applied a 2 percent inflation rate per annum (2013: 2 percent) and a risk free rate of
2.3 percent (2013: 3.2 percent) to calculate the present value of the decommissioning provision. Changes in the measurement of
the decommissioning provision were added to, or deducted from, the cost of the related asset in property, plant and equipment.
Of the re-measurement reduction of the decommissioning provision, $8 million (2013: $33 million) was in excess of the carrying
amount of the related asset and was credited to depreciation expense.



The property, plant and equipment of the Company consist primarily
of underground pipelines, above ground equipment facilities and storage assets. No amount has been recorded relating to the removal
of the underground pipelines or for the storage assets as the potential obligations relating to these assets cannot be reasonably
estimated due to the indeterminate timing or scope of the asset retirement. As the timing and scope of retirement become determinable
for these assets, a provision for the cost of retirement will be recorded.



|($ millions)                                          | 2014 | 2013
|----------------------------------------------------- | ---- | ----
|Balance at January 1                                  | 309  | 361 
|Unwinding of discount rate                            | 9    | 9   
|Decommissioning liabilities settled during the period | (1)  | (1) 
|Change in rates                                       | 111  | (88)
|Additions                                             | 41   | 4   
|Change in estimates and other                         | (59) | 24  
|Balance at December 31                                | 410  | 309 



| | 16. | SHARE CAPITAL
| | --- | -------------



Pembina is authorized to issue an unlimited number of common
shares and an unlimited number of a class of preferred shares designated as Preferred Shares, Series A. The holders of the common
shares are entitled to receive notice of, attend at and vote at any meeting of the shareholders of the Company, receive dividends
declared and share in the remaining property of the Company upon distribution of the assets of the Company among its shareholders
for the purpose of winding-up its affairs.



Pembina has adopted a shareholder rights plan ("Plan")
as a mechanism designed to assist the board in ensuring the fair and equal treatment of all shareholders in the face of an actual
or contemplated unsolicited bid to take control of the Company. Take-over bids may be structured in such a way as to be coercive
or discriminatory in effect, or may be initiated at a time when it will be difficult for the board to prepare an adequate response.
Such offers may result in shareholders receiving unequal or unfair treatment, or not realizing the full or maximum value of their
investment in Pembina. The Plan discourages the making of any such offers by creating the potential of significant dilution to
any offeror who does so.



74







Pembina
Pipeline Corporation



Common Share Capital



|($ millions, except as noted)                                     | Number ofCommon Shares(thousands) | CommonShare Capital
|----------------------------------------------------------------- | --------------------------------- | -------------------
|Balance at December 31, 2012                                      | 293,226                           | 5,324              
|Issued, net of issue costs                                        | 11,207                            | 335                
|Dividend reinvestment plan                                        | 9,384                             | 286                
|Share-based payment transactions, debenture conversions and other | 1,327                             | 27                 
|Balance at December 31, 2013                                      | 315,144                           | 5,972              
|Issued
    on Acquisition, net of issue costs (Note 6)            | 5,610                             | 265                
|Dividend reinvestment plan                                        | 7,878                             | 321                
|Debenture conversion                                              | 8,500                             | 293                
|Share-based payment transactions and other                        | 792                               | 25                 
|Balance at December 31, 2014                                      | 337,924                           | 6,876              



Preferred Share Capital



|($ millions, except as noted)                                 | Number ofPreferred Shares(thousands) | PreferredShare Capital
|------------------------------------------------------------- | ------------------------------------ | ----------------------
|Balance at December 31, 2012                                  |                                      |                       
|Class A, Series 1 Preferred shares issued, net of issue costs | 10,000                               | 244                   
|Class A, Series 3 Preferred shares issued, net of issue costs | 6,000                                | 147                   
|Balance at December 31, 2013                                  | 16,000                               | 391                   
|Class A, Series 5 Preferred shares issued, net of issue costs | 10,000                               | 244                   
|Class A, Series 7 Preferred shares issued, net of issue costs | 10,000                               | 245                   
|Balance at December 31, 2014                                  | 36,000                               | 880                   



On July 26, 2013, Pembina issued 10 million cumulative redeemable
5-year rate reset Class A Preferred shares, Series 1 ("Series 1 Preferred Shares") at a price of $25.00 per Series 1
Preferred Share for aggregate proceeds of $250 million. The holders of Series 1 Preferred Shares are entitled to receive fixed
cumulative dividends at an annual rate of $1.0625 per share when declared by the Board of Directors. The dividend rate will reset
on December 1, 2018 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond
yield plus 2.47 percent. The Series 1 Preferred Shares are redeemable by the Company at the Company's option on December 1, 2018
and on December 1 of every fifth year thereafter.



Holders of the Series 1 Preferred Shares have the right to convert
all or any part of their shares into cumulative redeemable floating rate Class A Preferred shares, Series 2 ("Series 2 Preferred
Shares"), subject to certain conditions, on December 1, 2018 and on December 1 of every fifth year thereafter. Holders of
Series 2 Preferred Shares will be entitled to receive cumulative quarterly floating dividends at a rate equal to the sum of the
then 90-day Government of Canada Treasury Bill yield plus 2.47 percent, if, as and when declared by the Board of Directors of Pembina.



On October 2, 2013, Pembina closed its offering of 6 million
cumulative redeemable rate reset Class A Preferred shares, Series 3 (the "Series 3 Preferred Shares") at a price of $25.00
per share for aggregate proceeds of $150 million. The holders of Series 3 Preferred Shares are entitled to receive fixed cumulative
dividends at an annual rate of $1.1750 per share, if, as and when declared by the Board of Directors. The dividend rate will reset
on March 1, 2019 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield
plus 2.60 percent. The Series 3 Preferred Shares are redeemable by the Company at its option on March 1, 2019 and on March 1 of
every fifth year thereafter.



75







Pembina
Pipeline Corporation



Holders of the Series 3 Preferred Shares have the right to convert
their shares into cumulative redeemable floating rate Class A Preferred shares, Series 4 ("Series 4 Preferred Shares"),
subject to certain conditions, on March 1, 2019 and on March 1 of every fifth year thereafter. Holders of Series 4 Preferred Shares
will be entitled to receive a cumulative quarterly floating dividend at a rate equal to the sum of the then 90-day Government
of Canada Treasury Bill yield plus 2.60 percent, if, as and when declared by the Board of Directors of Pembina.



On January 16, 2014, Pembina closed its offering of 10 million
cumulative redeemable rate reset Class A Preferred shares, Series 5 (the "Series 5 Preferred Shares") at a price of $25.00
per share for aggregate proceeds of $250 million. The holders of Series 5 Preferred Shares are
entitled to receive fixed cumulative dividends at an annual rate of $1.25 per share, if, as and when declared by the Board of Directors.
The dividend rate will reset on June 1, 2019and every five years thereafter at a rate equal to the sum of the then five-year
Government of Canada bond yield plus 3.00 percent. The Series 5 Preferred Shares are redeemable by the Company at its option on
June 1, 2019and on June 1 of every fifth year thereafter.



Holders of the Series 5 Preferred Shares have the right to convert
their shares into cumulative redeemable floating rate Class A Preferred shares, Series 6 ("Series 6 Preferred Shares"),
subject to certain conditions, on June 1, 2019 and on June 1 of every fifth year thereafter. Holders of Series 5 Preferred Shares
will be entitled to receive a cumulative quarterly floating dividend at a rate equal to the sum of the then 90-day Government of
Canada Treasury Bill yield plus 3.00 percent, if, as and when declared by the Board of Directors of Pembina.



On September 11, 2014, Pembina closed its offering of
10 million cumulative redeemable rate reset Class A Preferred shares, Series 7 (the "Series 7 Preferred Shares") at
a price of $25.00 per share for aggregate proceeds of $250 million. The holders of Series 7 Preferred Shares are entitled to
receive fixed cumulative dividends at an annual rate of $1.125 per share, if, as and when declared by the Board of Directors.
The dividend rate will reset on December 1, 2019 and every five years thereafter at a rate equal to the sum of the then
five-year Government of Canada bond yield plus 2.94 percent. The Series 7 Preferred Shares are redeemable by the Company at
its option on December 1, 2019 and on December 1 of every fifth year thereafter.



Holders of the Series 7 Preferred Shares have the right to convert
their shares into cumulative redeemable floating rate Class A Preferred shares, Series 8 ("Series 8 Preferred Shares"),
subject to certain conditions, on December 1, 2019 and on December 1 of every fifth year thereafter. Holders of Series 7 Preferred
Shares will be entitled to receive a cumulative quarterly floating dividend at a rate equal to the sum of the then 90-day Government
of Canada Treasury Bill yield plus 2.94 percent, if, as and when declared by the Board of Directors of Pembina.



Dividends



The Company has a Premium DividendTM and Dividend Reinvestment
Plan. Eligible common shareholders have the opportunity to receive additional common shares by reinvesting the cash dividends declared
payable by the Company on its common shares.



76







Pembina
Pipeline Corporation



The following dividends were declared by the Company:



|Year Ended December 31 ($ millions)                   | 2014 | 2013
|----------------------------------------------------- | ---- | ----
|Common shares                                         |      |     
|$1.72 per qualifying share (2013: $1.65)              | 563  | 507 
|Preferred shares                                      |      |     
|$1.06250 per qualifying Series 1 share (2013: $.3726) | 11   | 4   
|$1.17500 per qualifying Series 3 share (2013: $.1932) | 7    | 1   
|$1.08820 per qualifying Series 5 share (2013: nil)    | 11   |     
|$0.24970 per qualifying Series 7 share (2013: nil)    | 2    |     
|                                                      | 31   | 5   



On January 12, 2015, Pembina announced that the Board of Directors
declared a dividend for January of $0.145 per qualifying common share ($1.74 annualized) in the total amount of $49
million. This dividend was paid on February 13, 2015 to shareholders of record on January 25, 2015.



On February 6, 2015, Pembina announced that the Board of Directors
declared a dividend for February of $0.145 per qualifying common share ($1.74 annualized) payable on March 13, 2015 to shareholders
of record on February 25, 2015.



On January 12, 2015, Pembina announced that the Board of Directors
had declared a quarterly dividend of $0.265625 per qualifying Series 1 preferred share, $0.29375 per qualifying Series 3 preferred
share, $0.3125 per qualifying Series 5 preferred share and $0.28125 per qualifying Series 7 preferred share in the total amount
of $10 million payable on March 1, 2015.



| | 17. | DEFERRED REVENUE
| | --- | ----------------



Deferred revenue consists of asset purchases that occurred
at a nominal value in exchange for future toll reductions which is amortized to revenue over the life of the asset. Deferred revenue
also includes other payments received from customers related to capital expenditures which are amortized over the lease or contract
terms.



| | 18. | PERSONNEL EXPENSES
| | --- | ------------------



|Year Ended December 31 ($ millions)     | 2014 | 2013
|--------------------------------------- | ---- | ----
|Salaries and wages                      | 177  | 133 
|Share-based payment transactions        | 39   | 34  
|Short-term incentive plan               | 28   | 26  
|Pension plan expense                    | 13   | 12  
|Health, savings plan and other benefits | 14   | 10  
|                                        | 271  | 215 



77







Pembina
Pipeline Corporation





| | 19. | NET FINANCE COSTS
| | --- | -----------------



|Year Ended December 31 ($ millions)                                                 | 2014 | 2013
|----------------------------------------------------------------------------------- | ---- | ----
|Interest income from:                                                               |      |     
|Bank deposits and other                                                             | (5)  | (5) 
|Interest expense on financial liabilities measured at amortized cost:               |      |     
|Loans and borrowings                                                                | 57   | 55  
|Convertible debentures                                                              | 33   | 42  
|Unwinding of discount rates                                                         | 9    | 9   
|Loss (gain) on fair value of non-commodity-related derivative financial instruments | 2    | (6) 
|Loss on revaluation of conversion feature of series E and F convertible debentures  | 41   | 71  
|Foreign exchange gains and other                                                    | (7)  |     
|                                                                                    | 130  | 166 



Net interest paid of $120 million (2013: $115 million)
includes interest paid during construction of $44 million (2013: $35 million).



| | 20. | OPERATING SEGMENTS
| | --- | ------------------



The Company determines its reportable segments based on the
nature of operations and includes four operating segments: Conventional Pipelines, Oil Sands & Heavy Oil, Gas Services and
Midstream.



Conventional
Pipelines consists of the tariff based operations of pipelines and related facilities to deliver crude oil, condensate and NGL
in Alberta, British Columbia, Saskatchewan, and
North Dakota, United States.



Oil Sands & Heavy Oil consists of the Syncrude, Horizon,
Nipisi and Mitsue Pipelines, and the Cheecham Lateral. These pipelines and related facilities deliver synthetic crude oil produced
from oil sands under long-term cost-of-service arrangements.



Gas Services consists of natural gas gathering and processing
facilities, including 7 gas plants, 12 compressor stations and over 375 kilometres of gathering systems.



Midstream consists of the Company's interests in extraction
and fractionation facilities, terminalling and storage hub services under a mixture of short, medium and long-term contractual
arrangements.



The financial results of the business segments are included below. Performance is measured based on results
from operating activities, net of depreciation and amortization, as included in the internal management reports that are reviewed
by the Company's CEO, CFO and Senior Vice Presidents. The segments results from operating activities, before depreciation and amortization,
is used to measure performance as management believes that such information is the most relevant in evaluating results of certain
segments relative to other entities that operate within these industries. Intersegment transactions are recorded at market value
and eliminated under corporate and intersegment eliminations.



78







Pembina
Pipeline Corporation





|Year Ended December 31, 2014 ($ millions)                              | ConventionalPipelines(1)(4) | Oil Sands &Heavy Oil | GasServices | Midstream(2) | Corporate &IntersegmentEliminations | Total
|---------------------------------------------------------------------- | --------------------------- | -------------------- | ----------- | ------------ | ----------------------------------- | -----
|Revenue:                                                               |                             |                      |             |              |                                     |      
|Pipeline transportation                                                | 513                         | 204                  |             |              | (72)                                | 645  
|Terminalling, storage and hub services                                 |                             |                      |             | 5,259        |                                     | 5,259
|Gas Services                                                           |                             |                      | 165         |              |                                     | 165  
|Total revenue                                                          | 513                         | 204                  | 165         | 5,259        | (72)                                | 6,069
|Operating expenses                                                     | 211                         | 68                   | 58          | 69           | (5)                                 | 401  
|Cost
    of goods sold, including product purchases(3)                 |                             |                      |             | 4,672        | (72)                                | 4,600
|Realized gain on commodity-related derivative financial instruments    |                             |                      |             | 10           |                                     | 10   
|Operating margin                                                       | 302                         | 136                  | 107         | 528          | 5                                   | 1,078
|Depreciation and amortization included in operations                   | 42                          | 17                   | 22          | 135          |                                     | 216  
|Unrealized gain on commodity-related derivative financial instruments  |                             |                      |             | 14           |                                     | 14   
|Gross profit                                                           | 260                         | 119                  | 85          | 407          | 5                                   | 876  
|Depreciation included in general and administrative                    |                             |                      |             |              | 10                                  | 10   
|Other general and administrative                                       | 9                           | 3                    | 6           | 24           | 104                                 | 146  
|Other expenses                                                         | 2                           | 12                   | 1           | 1            | 2                                   | 18   
|Reportable segment results from operating activities                   | 249                         | 104                  | 78          | 382          | (111)                               | 702  
|Net finance costs (income)                                             | 5                           | 3                    | 1           | (1)          | 122                                 | 130  
|Reportable segment earnings (loss) before tax                          | 244                         | 101                  | 77          | 383          | (233)                               | 572  
|Share of loss of investments in equity accounted investees, net of tax |                             |                      |             | 22           |                                     | 22   
|Capital expenditures                                                   | 628                         | 41                   | 295         | 390          | 58                                  | 1,412



| | (1) | 5
                                         percent of Conventional Pipelines revenue is under regulated tolling arrangements.
| | --- | -----------------------------------------------------------------------------------------------------------------------------

| | (2) | NGL
                                         product and services, terminalling, storage and hub services revenue includes $209 million
                                         associated with U.S. midstream sales.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Includes
                                         inventory write-down to net realizable value of $38 million.
| | --- | --------------------------------------------------------------------------------------------------------------

| | (4) | Conventional
                                         Pipelines revenue includes $1 million associated with U.S. pipeline sales.
| | --- | --------------------------------------------------------------------------------------------------------------------------------



79







Pembina
Pipeline Corporation





|Year Ended December 31, 2013 ($ millions)                                  | ConventionalPipelines(1) | Oil Sands &Heavy Oil | GasServices | Midstream(2) | Corporate &IntersegmentEliminations | Total
|-------------------------------------------------------------------------- | ------------------------ | -------------------- | ----------- | ------------ | ----------------------------------- | -----
|Revenue:                                                                   |                          |                      |             |              |                                     |      
|Pipeline transportation                                                    | 411                      | 195                  |             |              | (67)                                | 539  
|Terminalling, storage and hub services                                     |                          |                      |             | 4,346        |                                     | 4,346
|Gas Services                                                               |                          |                      | 121         |              |                                     | 121  
|Total revenue                                                              | 411                      | 195                  | 121         | 4,346        | (67)                                | 5,006
|Operating expenses                                                         | 162                      | 64                   | 43          | 91           | (4)                                 | 356  
|Cost of goods sold, including product purchases                            |                          |                      |             | 3,766        | (66)                                | 3,700
|Realized gain (loss) on commodity-related derivative financial instruments | 2                        |                      |             | (3)          |                                     | (1)  
|Operating margin                                                           | 251                      | 131                  | 78          | 486          | 3                                   | 949  
|Depreciation and amortization included in operations                       | 12                       | 17                   | 20          | 114          |                                     | 163  
|Unrealized gain on commodity-related derivative financial instruments      | 1                        |                      |             | 6            |                                     | 7    
|Gross profit                                                               | 240                      | 114                  | 58          | 378          | 3                                   | 793  
|Depreciation included in general and administrative                        |                          |                      |             |              | 8                                   | 8    
|Other general and administrative                                           | 9                        | 3                    | 6           | 25           | 81                                  | 124  
|Acquisition-related and other expenses (income)                            | 2                        |                      |             | 1            | (2)                                 | 1    
|Reportable segment results from operating activities                       | 229                      | 111                  | 52          | 352          | (84)                                | 660  
|Net finance costs (income)                                                 | 5                        | 1                    | 1           | (4)          | 163                                 | 166  
|Reportable segment earnings (loss) before tax                              | 224                      | 110                  | 51          | 356          | (247)                               | 494  
|Capital expenditures                                                       | 325                      | 38                   | 258         | 254          | 5                                   | 880  



| | (1) | 5
                                         percent of Conventional Pipelines revenue is under regulated tolling arrangements.
| | --- | -----------------------------------------------------------------------------------------------------------------------------

| | (2) | NGL
                                         product and services, terminalling, storage and hub services revenue includes $158 million
                                         associated with U.S. midstream sales.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 21. | EARNINGS PER COMMON SHARE
| | --- | -------------------------



Basic earnings per common share



The calculation of basic earnings per common share at December
31, 2014 was based on the earnings attributable to common shareholders of $348 million (2013: $344 million) and a weighted average
number of common shares outstanding of 326 million (2013: 307 million).



Diluted earnings per common share



The calculation of diluted earnings per common share at December
31, 2014 was based on earnings attributable to common shareholders of $348 million (December 31, 2013: $344 million), and weighted
average number of common shares outstanding after adjustment for the effects of all dilutive potential common shares of 328 million
(2013: 308 million).



Earnings attributable to common shareholders



|Year Ended December 31 ($ millions)                               | 2014 | 2013
|----------------------------------------------------------------- | ---- | ----
|Earnings                                                          | 383  | 351 
|Dividends on preferred shares                                     | (31) | (5) 
|Cumulative dividends on preferred shares, not yet declared        | (4)  | (2) 
|Earnings contributable to common shareholders (basic and diluted) | 348  | 344 



80







Pembina
Pipeline Corporation



Weighted average number of common shares



|(In thousands of shares, except as noted)                         | 2014    | 2013   
|----------------------------------------------------------------- | ------- | -------
|Issued common shares at January 1                                 | 315,144 | 293,226
|Effect of shares issued                                           | 1,061   | 8,781  
|Effect of share options exercised                                 | 392     | 350    
|Effect of conversion of convertible debentures                    | 5,622   | 83     
|Effect of shares issued under dividend reinvestment plan          | 4,047   | 4,771  
|Weighted average number of common shares at December 31 (basic)   | 326,266 | 307,211
|                                                                  |         |        
|Dilutive effect of share options on issue                         | 1,390   | 870    
|Weighted average number of common shares at December 31 (diluted) | 327,656 | 308,081
|                                                                  |         |        
|Basic earnings per common share (dollars)                         | $1.07   | $1.12  
|Diluted earnings per common share (dollars)                       | $1.06   | $1.12  



At December 31, 2014, the effect of the
conversion of the convertible debentures was excluded from the diluted earnings per common share calculation as the impact was
anti-dilutive. If the convertible debentures were included, an additional 17 million (2013: 23 million) common shares would be
added to the weighted average number of common shares and $25 million (2013: $32 million) would be added to earnings, representing
after tax interest expense of the convertible debentures.



The average market value of the Company's shares for purposes
of calculating the dilutive effect of share options was based on quoted market prices for the period during which the options were
outstanding.



| | 22. | PENSION PLAN
| | --- | ------------



|December 31 ($ millions)                      | 2014 | 2013
|--------------------------------------------- | ---- | ----
|Registered defined benefit (asset) obligation | 12   | (5) 
|Supplemental defined benefit obligation       | 8    | 7   
|Other accrued benefit obligations             | 1    | 1   
|Net employee benefit obligations              | 21   | 3   



The Company maintains a defined contribution plan and non-contributory
defined benefit pension plans covering its employees. The Company contributes 5 to 10 percent of an employee's earnings to the
defined contribution plan until the employee's age plus years of service equals 50, at which time they become eligible for the
defined benefit plans. The defined benefit plans include a funded registered plan for all employees and an unfunded supplemental
retirement plan for those employees affected by the Canada Revenue Agency maximum pension limits. The Company also has other accrued
benefit obligations which include a non-contribution unfunded post employment extended health and dental plan provided to a few
remaining retired employees. The defined benefit plans are administered by a single pension fund that is legally separated from
the Company. Benefits under the plans are based on the length of service and the annual average best three years of earnings during
the last ten years of service of the employee. Benefits paid out of the plans are not indexed. The Company measures its accrued
benefit obligations and the fair value of plan assets for accounting purposes as at December 31 of each year. The most recent actuarial
valuation was at December 31, 2014. The defined benefit plans expose the Company to actuarial risks such as longevity risk, interest
rate risk, and market (investment) risk.



81







Pembina
Pipeline Corporation



Defined benefit obligations



|December 31                                                  | 2014           | 2013            
|------------------------------------------------------------ | -------------- | ----------------
|($ millions)                                                 | RegisteredPlan | SupplementalPlan
|Present value of unfunded obligations                        |                | 8               
|Present value of funded obligations                          | 149            |                 
|Total present value of obligations                           | 149            | 8               
|Fair value of plan assets                                    | 137            |                 
|Recognized (liability) asset for defined benefit obligations | (12)           | (8)             



The Company funds the defined benefit obligation plans in accordance
with government regulations by contributing to trust funds administered by an independent trustee. The funds are invested primarily
in equities and bonds. Defined benefit plan contributions totalled $10 million for the year ended December 31, 2014 (2013: $13
million).



The Company has determined that, in accordance with the terms
and conditions of the defined benefit plans, and in accordance with statutory requirements of the plans, the present value of refunds
or reductions in future contributions is not lower than the balance of the total fair value of the plan assets less the total present
value of obligations. As such, no decrease in the defined benefit asset is necessary at December 31, 2014 and December 31, 2013.



Registered defined benefit pension plan assets comprise



|December 31 (percentages) | 2014 | 2013
|------------------------- | ---- | ----
|Equity securities         | 60   | 64  
|Debt                      | 38   | 35  
|Other                     | 2    | 1   
|                          | 100  | 100 



Movement in the present value of the defined benefit pension
obligation



|Year Ended December 31                                 | 2014           | 2013            
|------------------------------------------------------ | -------------- | ----------------
|($ millions)                                           | RegisteredPlan | SupplementalPlan
|Defined benefits obligations at January 1              | 119            | 7               
|Benefits paid by the plan                              | (6)            |                 
|Current service costs                                  | 8              |                 
|Interest expense                                       | 6              |                 
|Actuarial losses (gains) in other comprehensive income | 22             | 1               
|Defined benefit obligations at December 31             | 149            | 8               



Movement in the present value of registered defined benefit
pension plan assets



|Year Ended December 31 ($ millions)                 | 2014 | 2013
|--------------------------------------------------- | ---- | ----
|Fair value of plan assets at January 1              | 124  | 100 
|Contributions paid into the plan                    | 10   | 13  
|Benefits paid by the plan                           | (6)  | (6) 
|Return on plan assets                               | 4    | 12  
|Interest income                                     | 6    | 5   
|Fair value of registered plan assets at December 31 | 138  | 124 



82







Pembina
Pipeline Corporation



Expense recognition in earnings



|Year Ended December 31($ millions) | 2014 | 2013
|---------------------------------- | ---- | ----
|Registered Plan                    |      |     
|Current service costs              | 8    | 9   
|Interest on obligation             | 6    | 5   
|Expected return on plan assets     | (5)  | (4) 
|                                   | 9    | 10  



The expense is recognized in the following line items in the
statement of comprehensive income:



|Year Ended December 31($ millions) | 2014 | 2013
|---------------------------------- | ---- | ----
|Registered Plan                    |      |     
|Operating expenses                 | 5    | 5   
|General and administrative expense | 4    | 5   
|                                   | 9    | 10  



Expense recognized for the Supplemental Plan was less than $1
million for each of the years ended December 31, 2014 and 2013.



Actuarial gains and losses recognized in other comprehensive
income



|                                                | 2014                    | 2013                     
|----------------------------------------------- | ----------------------- | -------------------------
|($ millions)                                    | Registered
        Plan | Supplemental
        Plan
|Balance at January 1                            | (7)                     | (1)                      
|Remeasurements gain:                            |                         |                          
|Actuarial gain (loss) arising from              |                         |                          
|Demographic assumptions                         |                         |                          
|Financial assumptions                           | (15)                    |                          
|Experience adjustments                          | (2)                     |                          
|Return on plan assets excluding interest income | 3                       |                          
|Recognized during the period after tax          | (14)                    |                          
|Balance at December 31                          | (21)                    | (1)                      



Principal actuarial assumptions used:



|December 31 (weighted average percent) | 2014 | 2013
|-------------------------------------- | ---- | ----
|Discount rate                          | 4.0% | 4.9%
|Future pension earning increases       | 4.0% | 4.0%



Assumptions regarding future mortality are based on published
statistics and mortality tables. The current longevities underlying the values of the liabilities in the defined plans are as follows:



|December 31 (years)                            | 2014 | 2013
|---------------------------------------------- | ---- | ----
|Longevity at age 65 for current pensioners     |      |     
|Males                                          | 21.4 | 21.3
|Females                                        | 23.9 | 23.5
|Longevity at age 65 for current member aged 45 |      |     
|Males                                          | 22.6 | 22.4
|Females                                        | 24.9 | 24.2



The calculation of the defined benefit obligation is sensitive
to the discount rate, compensation increases, retirements and termination rates as set out above. An increase or decrease of the
estimated discount rate of 4.0 percent by 100 basis points at December 31, 2014 is considered reasonably possible in the next financial
year but would not have a material impact on the obligation.



83







Pembina
Pipeline Corporation



The Company expects to contribute $9 million to the defined benefit
plans in 2015.



| | 23. | SHARE-BASED PAYMENTS
| | --- | --------------------



At December 31, 2014, the Company has the following share-based
payment arrangements:



Share option plan (equity settled)



The Company has a share option plan under which employees are
eligible to receive options to purchase shares in the Company.



Long-term share unit award incentive (cash-settled) plan



In 2005, the Company established a long-term share unit award
incentive plan. Under the share-based compensation plan, awards of restricted (RSU) and performance (PSU) share units are made
to officers, non-officers and directors. The plan results in participants receiving cash compensation based on the value of the
underlying notional shares granted under the plan. Payments are based on a trading value of the Company's common shares plus notional
dividends and performance of the Company.



Terms and conditions of share option plan and share unit
award incentive plan



The terms and conditions relating to the grants of the share
option program and the long-term share unit award incentive plans are listed in the tables below:



|Grant date share options granted to employees(thousands of options, except as noted) | Number of options | Contractual life ofoptions
|------------------------------------------------------------------------------------ | ----------------- | --------------------------
|January 2, 2013                                                                      | 61                | 7 years                   
|April 1, 2013                                                                        | 52                | 7 years                   
|August 9, 2013                                                                       | 1,605             | 7 years                   
|October 1, 2013                                                                      | 70                | 7 years                   
|January 2, 2014                                                                      | 101               | 7 years                   
|March 12, 2014                                                                       | 409               | 7 years                   
|April 1, 2014                                                                        | 91                | 7 years                   
|September 18, 2014                                                                   | 2,985             | 7 years                   
|November 20, 2014                                                                    | 3,110             | 7 years                   



One-third vest on the first anniversary of the grant date, one-third
vest on the second anniversary of the grant date, and one-third vest on the third anniversary of the grant date.



Long-term share unit award incentive plan(1)



|Grant date PSUs to Officers, Non-Officers(2) and Directors(thousands of units, except as noted) | Units | Contractual lifeof PSU
|----------------------------------------------------------------------------------------------- | ----- | ----------------------
|January 1, 2013                                                                                 | 292   | 3 years               
|January 1, 2014                                                                                 | 227   | 3 years               



PSUs vest on the third anniversary of the grant date. Actual
PSUs awarded based on the trading value of the shares and performance of the Company.



84







Pembina
Pipeline Corporation





|Grant date RSUs to Officers, Non-Officers(2) and Directors
        (thousands of units, except as noted) | Units | Contractual life of RSU
|-------------------------------------------------------------------------------------------------------- | ----- | -----------------------
|January 1, 2013                                                                                          | 285   | 3 years                
|January 1, 2014                                                                                          | 256   | 3 years                



One-third vest on the first anniversary of the grant date, one-third
vest on the second anniversary of the grant date, and one-third vest on the third anniversary of the grant date.

| | (1) | Distribution Units are
                                         granted in addition to RSU and PSU grants based on notional accrued dividends from RSU
                                         and PSU granted but not paid.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Non-Officers defined as
                                         senior selected positions within the Company.
| | --- | --------------------------------------------------------------------------------------------------------------



Disclosure of share option
plan



The number and weighted average
exercise prices of share options as follows:



|(thousands of options, except as noted) | Number of Options | Weighted Average Exercise Price (dollars)
|--------------------------------------- | ----------------- | -----------------------------------------
|Outstanding at December 31, 2012        | 3,532             | $23.11                                   
|Granted                                 | 1,787             | $32.17                                   
|Exercised                               | (887)             | $19.08                                   
|Forfeited                               | (233)             | $26.14                                   
|Outstanding at December 31, 2013        | 4,199             | $27.65                                   
|Granted                                 | 6,696             | $46.83                                   
|Exercised                               | (792)             | $25.11                                   
|Forfeited                               | (343)             | $39.23                                   
|Outstanding as at December 31, 2014     | 9,760             | $40.60                                   



As of December 31, 2014, the
following options are outstanding:



|(thousands of options, except as noted)
        Exercise Price (dollars) | Number outstanding
        at December 31, 2014 | Options Exercisable | Weighted average
        remaining life
|------------------------------------------------------------------------ | ----------------------------------------------- | ------------------- | ---------------------------------------
|$14.84 – $19.99                                                          | 322                                             | 322                 | 2.41 years                             
|$20.00 – $29.99                                                          | 1,473                                           | 1,038               | 4.26 years                             
|$30.00 – $39.99                                                          | 1,942                                           | 402                 | 5.61 years                             
|$40.00 – $52.01                                                          | 6,023                                           |                     | 6.79 years                             
|                                                                         | 9,760                                           | 1,762               |                                        



The weighted average share price at the date of exercise for
share options exercised in the year ended December 31, 2014 was $45.32(December 31, 2013:
$33.12).



Expected volatility is estimated by considering historic average
share price volatility. The weighted average inputs used in the measurement of the fair values at grant date of share options are
the following:



Share options granted



|Year Ended December 31(dollars, except as noted)             | 2014  | 2013 
|------------------------------------------------------------ | ----- | -----
|Weighted average                                             |       |      
|Fair value at grant date                                     | 4.77  | 2.59 
|Share price at grant date                                    | 47.32 | 31.60
|Exercise price                                               | 46.83 | 32.17
|Expected volatility (percent)                                | 19.1  | 20.6 
|Expected option life (years)                                 | 3.67  | 3.67 
|Expected annual dividends per option                         | 1.74  | 1.65 
|Expected forfeitures (percent)                               | 7.8   | 7.9  
|Risk-free interest rate (based on government bonds)(percent) | 1.3   | 1.4  



85







Pembina
Pipeline Corporation



Disclosure of long-term share unit award incentive plan



The long-term share unit award incentive plan was valued using
the reporting date market price of the Company's shares of $39.47 (December 31, 2013: $37.42). Actual payment may differ from amount
valued based on market price and company performance.



Long-term share unit award incentive units granted



|Year Ended December 31
        (thousands of share units) | 2014 | 2013
|--------------------------------------------------------- | ---- | ----
|Number of share units granted                             | 482  | 577 



Employee expenses



|Year Ended December 31
        ($ millions)                        | 2014 | 2013
|------------------------------------------------------------------ | ---- | ----
|Share option plan, equity settled                                  | 6    | 3   
|Long-term share unit award incentive plan                          | 33   | 31  
|Share-based payment expense                                        | 39   | 34  
|                                                                   |      |     
|Total carrying amount of liabilities for cash settled arrangements | 52   | 48  
|Total intrinsic value of liability for vested benefits             | 29   | 30  



| | 24. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
| | --- | ---------------------------------------------------



Financial Risk Management



Pembina has exposure to counterparty credit risk, liquidity
risk and market risk. Pembina recognizes that effective management of these risks is a critical success factor in managing organization
and shareholder value.



Risk management strategies, policies and limits ensure risks
and exposures are aligned to Pembina's business strategy and risk tolerance. The Company's Board of Directors is responsible for
providing risk management oversight at Pembina. The Company's Audit Committee oversees how management monitors compliance with
the Company's risk management policies and procedures and reviews the adequacy of this risk framework in relation to the risks
faced by the Company. Internal audit personnel assist the Audit Committee in its oversight role by monitoring and evaluating the
effectiveness of the organization's risk management system.



Counterparty credit risk



Counterparty credit risk represents the financial loss the Company
would experience if a counterparty to a financial instrument failed to meet its contractual obligations in accordance with the
terms and conditions of the financial instruments with the Company. Counterparty credit risk arises primarily from the Company's
cash and cash equivalents, trade and other receivables, and from counterparties to its derivative financial instruments. The carrying
amount of the Company's cash and cash equivalents, trade and other receivables and derivative financial instruments represents
the maximum counterparty credit exposure, without taking into account security held.



The Company manages counterparty credit risk through established
credit management techniques, including conducting comprehensive financial and other assessments for all new counterparties and
regular reviews of existing counterparties to establish and monitor a counterparty's creditworthiness, setting exposure limits,
monitoring exposures against these limits and obtaining financial assurances where warranted. The Company utilizes various sources
of financial, credit and business information in assessing the creditworthiness of a counterparty including external credit ratings,
where available, and in other cases, detailed financial statement analysis in order to generate an internal credit rating based
on quantitative and qualitative factors. The establishment of counterparty exposure limits is governed by a Board of Directors
designated counterparty exposure limit matrix which represents the maximum dollar amounts of counterparty exposure by debt rating
that can be approved for a counterparty. The Company continues to closely monitor and reassess the creditworthiness of its counterparties,
which has resulted in the Company reducing or mitigating its exposure to certain counterparties where it was deemed warranted and
permitted under contractual terms.



86







Pembina
Pipeline Corporation



Financial assurances may include guarantees, letters of credit and
cash. Letters of credit are held on $41 million (December 31, 2013: $51 million) of the receivables balance.



Typically, the Company has collected its receivables in full
and at December 31, 2014, 85 percent were current (2013: 86 percent). The Company has a general lien and a continuing
and first priority security interest in, and a secured charge on, all of a shipper's petroleum in its custody. The risk of non-collection
is considered to be low and no impairment of trade and other receivables has been made.



The Company monitors and manages its concentration of counterparty
credit risk on an ongoing basis. The Company believes these measures minimize its counterparty credit risk but there is no certainty
that they will protect it against all material losses. As part of its ongoing operations, the Company must balance its market and
counterparty credit risks when making business decisions.



Liquidity risk



Liquidity risk is the risk the Company will not be able to meet
its financial obligations as they come due. The following are the contractual maturities of financial liabilities, including estimated
interest payments.



|                                       | Outstanding balances due by period
|-------------------------------------- | ----------------------------------
|December 31, 2014
        ($ millions) | Carrying
        Amount           
|Trade payables and accrued liabilities | 550                               
|Taxes payable                          | 58                                
|Loans and borrowings                   | 2,470                             
|Convertible debentures                 | 391                               
|Dividends payable                      | 49                                
|Derivative financial liabilities       | 117                               
|Operating and finance leases           | 745                               
|Construction commitments               | 1,983                             



The Company manages its liquidity risk by forecasting cash flows
over a 12 month rolling time period to identify financing requirements. These financing requirements are then addressed through
a combination of credit facilities and through access to capital markets, if required.



Market risk



Pembina's results are subject to movements in commodity prices,
foreign exchange and interest rates. A formal Risk Management Program including policies and procedures has been designed to mitigate
these risks.



| | a. | Commodity price risk
| | -- | --------------------



Pembina's Midstream business includes product storage, terminalling,
hub services, and cross-commodity and product quality trading activities. These activities expose Pembina to certain risks including
that Pembina may experience volatility in revenue due to fluctuations in commodity prices. Primarily, Pembina enters into contracts
to purchase and sell crude oil at floating market prices. The prices of products that are marketed by Pembina are subject to volatility
as a result of such factors as seasonal demand changes, extreme weather conditions, general economic conditions, changes in crude
oil markets and other factors. Pembina manages its risk exposure by balancing purchases and sales to lock-in margins. Notwithstanding
Pembina's management of price and quality risk, marketing margins for crude oil can vary and have varied significantly from period
to period. This variability could have an adverse effect on the results of Pembina's commercial Midstream business and its overall
results of operations. To assist in effectively smoothing that variability inherent in this business, Midstream is investing in
assets that have a fee-based revenue component, and is looking to expand this area going forward.



87







Pembina
Pipeline Corporation



The Midstream business is also exposed to possible price declines
between the time Pembina purchases NGL feedstock and sells NGL products, and to decreasing frac spreads. Frac spread is the difference
between the selling prices for NGL products and the cost of NGL sourced from natural gas and acquired at natural gas related prices.
Frac spreads can change significantly from period to period depending on the relationship between crude oil and natural gas prices
(the "frac spread ratio"), absolute commodity prices, and changes in the Canadian to U.S. dollar foreign exchange rate.
There is also a differential between NGL product prices and crude oil prices which can change margins realized for midstream products
separate from frac spread ratio changes. The amount of profit or loss made on the extraction portion of the NGL midstream business
will generally increase or decrease with frac spreads. This exposure could result in variability of cash flow generated by the
NGL midstream business, which could affect Pembina and the cash dividends of Pembina.



Pembina responds to commodity price risk by using an active
Risk Management Program to fix revenues on a minimum of 50 percent of the committed term natural gas supply costs. Pembina's Midstream
business is also exposed to variability in quality, time and location differentials. The Company utilizes financial derivative
instruments as part of its overall risk management strategy to assist in managing the exposure to commodity price risk as a result
of these activities. The Company does not trade financial instruments for speculative purposes.



| | b. | Foreign exchange risk
| | -- | ---------------------



Pembina's commodity-related cash flows are subject to currency
risk, primarily arising from the denomination of specific cash flows in U.S. dollars. Pembina responds to this risk using an active
Risk Management Program to exchange foreign currency for domestic currency at a fixed rate.



| | c. | Interest rate risk
| | -- | ------------------



Pembina has floating interest rate debt which subjects the Company
to interest rate risk. Pembina responds to this risk under the active Risk Management Program to enter into financial derivative
contracts to fix interest rates.



At the reporting date, the interest rate profile of the Company's
interest-bearing financial instruments was:



|                          | Carrying Amounts of Financial Liability
|------------------------- | ---------------------------------------
|December 31 ($ millions)  | 2014                                   
|Fixed rate instruments    | (1,964)                                
|Variable rate instruments | (506)                                  
|                          | (2,470)                                



88







Pembina
Pipeline Corporation



Cash flow sensitivity analysis for variable rate instruments



A change of 100 basis points in interest rates at the reporting
date would have (increased) decreased earnings by the amounts shown below. This analysis assumes that all other variables remain
constant.



|December 31 ($ millions)   | 2014     | 2013    
|-------------------------- | -------- | --------
|                           | ± 100 bp | ± 100 bp
|Variable rate instruments  | + 5      | ± 1     
|Interest rate swap         | + 1      |         
|Earnings sensitivity (net) | + 6      | ± 1     



Fair values



The fair values of financial assets and liabilities, together
with the carrying amounts shown in the statement of financial position, are as follows:



|December 31                                     | 2014                    | 2013              
|----------------------------------------------- | ----------------------- | ------------------
|($ millions)                                    | Carrying
        Amount | Fair
        Value
|Financial assets carried at fair value          |                         |                   
|Derivative financial instruments                | 52                      | 52                
|                                                |                         |                   
|Financial assets carried at amortized cost      |                         |                   
|Cash and cash equivalents                       | 53                      | 53                
|Trade and other receivables                     | 447                     | 447               
|                                                | 500                     | 500               
|                                                |                         |                   
|Financial liabilities carried at fair value     |                         |                   
|Derivative financial instruments                | 117                     | 117               
|                                                |                         |                   
|Financial liabilities carried at amortized cost |                         |                   
|Trade payables and accrued liabilities          | 550                     | 550               
|Taxes payable                                   | 58                      | 58                
|Dividends payable                               | 49                      | 49                
|Loans and borrowings                            | 2,470                   | 2,590             
|Convertible debentures                          | 391(1)                  | 592               
|                                                | 3,518                   | 3,839             



| | (1) | Carrying
                                         amount excludes conversion feature of convertible debentures.
| | --- | ---------------------------------------------------------------------------------------------------------------

| | (2) | The
                                         fair value of convertible debentures at December 31, 2013 was $859 million and not $633
                                         million as previously disclosed.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The basis for determining fair values is disclosed in Note 5.



Interest rates used for determining fair value



The interest rates used to discount estimated cash flows, when
applicable, are based on the government yield curve at the reporting date plus and adequate credit spread, and were as follows:



|December 31 (percents) | 2014        | 2013       
|---------------------- | ----------- | -----------
|Derivatives            | 1.3% - 2.1% | 1.2% - 2.4%
|Loans and borrowings   | 2.7% - 4.8% | 1.7% - 5.0%



Fair value of power derivatives are based on market rates reflecting
forward curves.



89







Pembina
Pipeline Corporation



Fair value hierarchy



The fair value of financial instruments carried at fair value
is classified according to the following hierarchy based on the amount of observable inputs used to value the instruments.



Level 1: Unadjusted quoted prices are available in active markets
for identical assets or liabilities as the reporting date. Pembina does not use Level 1 inputs for any of its fair value measurements.



Level 2: Inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level
2 valuations are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which can
be substantially observed or corroborated in the marketplace. Instruments in this category include non-exchange traded derivatives
such as over-the-counter physical forwards and options, including those that have prices similar to quoted market prices. Pembina
obtains quoted market prices for its inputs from information sources including banks, Bloomberg Terminals and Natural Gas Exchange.
All of Pembina's significant financial instruments carried at fair value are valued using Level 2 inputs.



The following table is a summary
of the net derivative financial instrument liability:



|                                                          | 2014         | 2013            
|--------------------------------------------------------- | ------------ | ----------------
|December 31($ millions)                                   | CurrentAsset | Non-CurrentAsset
|Net derivative financial instrumentsliability             | 51           | 1               
|Interest rate                                             |              |                 
|Foreign exchange                                          |              |                 
|Conversion feature of convertible debentures (Note 14)    |              |                 
|Redemption liability related to acquisition of subsidiary |              |                 
|Net derivative financial instruments (liability)          | 51           | 1               



Sensitivity analysis



The following table shows the impact on earnings if the underlying
risk variables of the derivative financial instruments changed by a specified amount, with other variables held constant.



|December 31, 2014 ($ millions)                |                                                  | + Change | - Change
|--------------------------------------------- | ------------------------------------------------ | -------- | --------
|Frac spread related                           |                                                  |          |         
|Natural gas                                   | (AECO +/- $0.25 per GJ)                          | 1        | (1)     
|NGL (includes propane, butane and condensate) | (Belvieu +/- U.S. $0.10 per gal)                 | (3)      | 3       
|Foreign exchange (U.S.$ vs. Cdn$)             | (FX rate +/- $0.05)                              | (2)      | 2       
|Product margin                                |                                                  |          |         
|Crude oil                                     | (WTI +/- $2.50 per bbl)                          | (4)      | 4       
|NGL (includes condensate)                     | (Belvieu +/- U.S. $0.10 per gal)                 | 6        | (6)     
|Corporate                                     |                                                  |          |         
|Interest rate                                 | (Rate +/- 50 basis points)                       | 2        | (2)     
|Power                                         | (AESO +/- $5.00 per MW/h)                        | 3        | (3)     
|Conversion feature of convertible debentures  | (Pembina share price +/- $0.50 per common share) | (2)      | 2       



90







Pembina
Pipeline Corporation



| | 25. | OPERATING LEASES
| | --- | ----------------



Leases as lessee



Operating lease rentals are payable as follows:

|December 31 ($ millions) | 2014 | 2013
|------------------------ | ---- | ----
|Less than 1 year         | 50   | 26  
|Between 1 and 5 years    | 291  | 206 
|More than 5 years        | 392  | 306 
|                         | 733  | 538 



The Company leases a number of offices, warehouses, vehicles
and rail cars under operating leases. The leases run for a period of one to fifteen years, with an option to renew the lease after
that date. The Company has sublet office space up to 2022 and has contracted sub-lease payments, shown net in the table above, of $56 million over the term.



| | 26. | CAPITAL MANAGEMENT
| | --- | ------------------



The Company's objective when managing capital is to safeguard
the Company's ability to provide a stable stream of dividends to shareholders that is sustainable over the long-term. The Company
manages its capital structure and makes adjustments to it in light of changes in economic conditions and risk characteristics of
its underlying asset base and based on requirements arising from significant capital development activities. Pembina manages and
monitors its capital structure and short-term financing requirements using Non-GAAP measures; the ratios of debt to EBITDA, debt
to total enterprise value, adjusted cash flow to debt and debt to equity. The metrics are used to measure the Company's overall
debt position and measure the strength of the Company's balance sheet. The Company remains satisfied that the leverage currently
employed in the Company's capital structure is sufficient and appropriate given the characteristics and operations of the underlying
asset base. The Company, upon approval from its Board of Directors, will balance its overall capital structure through new equity
or debt issuances, as required.



The Company maintains a conservative capital structure that
allows it to finance its day-to-day cash requirements through its operations, without requiring external sources of capital. The
Company funds its operating commitments, short-term capital spending as well as its dividends to shareholders through this cash
flow, while new borrowing and equity issuances are primarily reserved for the support of specific significant development activities.
The capital structure of the Company consists of shareholder's equity plus long-term liabilities. Long-term debt is comprised of
bank credit facilities, unsecured notes, finance lease obligations and convertible debentures.



Pembina is subject to certain financial covenants in its credit
facility agreements and is in compliance with all financial covenants as of December 31, 2014.



Note 16 of these financial statements shows the change in Share
Capital for the year ended December 31, 2014.



91







Pembina
Pipeline Corporation



| | 27. | GROUP ENTITIES
| | --- | --------------



Significant subsidiaries

|                                         | Ownership Interest
|---------------------------------------- | ------------------
|December 31 (percentages)                | 2014              
|Pembina Pipeline                         | 100               
|Pembina Gas Services Limited Partnership | 100               
|Pembina Oil Sands Pipeline LP            | 100               
|Pembina Midstream Limited Partnership    | 100               
|Pembina NGL Corporation                  | 100               
|Pembina Facilities NGL LP                | 100               
|Pembina Midstream Inc.                   | 100               
|Pembina Infrastructure and Logistics LP  | 100               
|Pembina Empress NGL Partnership          | 100               
|Pembina Resource Services Canada         | 100               
|Pembina Resource Services (U.S.A.)       | 100               
|Pembina Prairie Facilities Ltd.(1)       | 100               



| | (1) | Incorporated
                                         upon the acquisition of Vantage.
| | --- | --------------------------------------------------------------------------------------



| | 28. | RELATED PARTIES
| | --- | ---------------



All transactions with related parties were made on terms equivalent
to those that prevail in arm's length transactions.



Key management personnel and director compensation



Key management consists of the Company's directors and certain
key officers.



Compensation



In addition to short-term employee benefits – including
salaries, director fees and bonuses – the Company also provides key management personnel with share-based compensation, contributes
to post employment pension plans and provides car allowances, parking and business club memberships.



Key management personnel compensation comprised:



|Year Ended December 31 ($ millions)  | 2014 | 2013
|------------------------------------ | ---- | ----
|Short-term employee benefits         | 5    | 4   
|Share-based compensation and other   | 8    | 7   
|Total compensation of key management | 13   | 11  



Transactions



Key management personnel and directors of the Company control
less than one percent of the voting common shares of the Company (consistent with the prior year). Certain directors and key management
personnel also hold Pembina convertible debentures and preferred shares. Dividend and interest payments received for the common
shares and debentures held are commensurate with other non-related holders of those instruments.



Certain officers are subject to employment agreements in the
event of termination without just cause or change of control.



Post-employment benefit plans



Pembina has significant influence over the pension plans for
the benefit of their respective employees.



92







Pembina
Pipeline Corporation



Transactions



|($ millions)                         |             | Transaction ValueYear Ended December 31 | Balance OutstandingAs At December 31
|------------------------------------ | ----------- | --------------------------------------- | ------------------------------------
|Post-employment
        benefit plan | Transaction | 2014                                    | 2013                                
|Defined benefit plan                 | Funding     | 10                                      | 13                                  



| | 29. | SUBSEQUENT EVENTS
| | --- | -----------------



Subsequent to the year-end,
on February 2, 2015, Pembina closed an offering of $600 million of senior unsecured medium-term notes (the "Offering").
The Offering was conducted in two tranches consisting of $450 million in senior unsecured medium-term notes, series 5 having a
fixed coupon of 3.54 percent per annum, paid semi-annually, and maturing on February 3, 2025, and $150 million through the re-opening
of its 4.75 percent medium-term notes, series 3, due April 30, 2043. Net proceeds were used to reduce short-term indebtedness of
the Company under its credit facilities, and will also be used to fund Pembina's capital program and for other general corporate
purposes.



Subsequent to the Vantage Acquisition and year end, on February
10, 2015, the Company announced that it has entered into agreements to expand the Vantage pipeline system (the "Vantage Expansion")
for an estimated capital cost of $85 million.



The Vantage Expansion entails increasing the Vantage Pipeline's
mainline capacity from 40 mbpd to 68 mbpd through the addition of mainline pump stations and the construction of
a new 80 km, 8-inch gathering lateral. The Vantage Expansion is supported by a long-term, fee-for-service agreement, with a substantial
take-or-pay component, and the gathering lateral is underpinned by a fixed return on invested capital agreement. Subject toregulatory and environmental approvals, the Vantage Expansion is expected to be in-service in early-2016.



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CORPORATE
INFORMATION



HEAD OFFICE



Pembina Pipeline Corporation

Suite 4000, 585 – 8th Avenue SW

Calgary, Alberta T2P 1G1



AUDITORS



KPMG LLP

Chartered Accountants

Calgary, Alberta



TRUSTEE, REGISTRAR & TRANSFER AGENT



Computershare Trust Company of Canada

Suite 600, 530 – 8th Avenue SW

Calgary, Alberta T2P 3S8

1-800-564-6253



STOCK EXCHANGE



Pembina Pipeline Corporation

Toronto Stock Exchange listing symbols for:

Common shares: PPL

Convertible debentures: PPL.DB.C, PPL.DB.E, PPL.DB.F

Preferred shares: PPL.PR.A, PPL.PR.C, PPL.PR.E, PPL.PR.G



New York Stock Exchange listing symbol for:

Common shares: PBA



INVESTOR INQUIRIES



|Phone:     | (403) 231-3156                
|---------- | ------------------------------
|Fax:       | (403) 237-0254                
|Toll Free: | 1-855-880-7404                
|Email:     | investor-relations@pembina.com
|Website:   | www.pembina.com               



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