Inter Pipeline Fund Announces Acquisition of 85% Interest in Cactus Lake Pipeline System and New Terminalling Agreement
CALGARY, ALBERTA, February 7, 2006: Inter Pipeline Fund (Inter Pipeline) (TSX: IPL.UN) announced today that it has entered into an agreement to purchase an 85% interest in the Cactus Lake Pipeline System from Nexen Marketing - the marketing division of Nexen Inc. The cash consideration for this transaction is $20 million.
Funding for the acquisition will be provided from existing bank credit facilities.
The acquisition is subject to certain closing conditions including the waiver or expiry of certain rights of first refusal by the current owners of the Cactus Lake System. Assuming such rights of first refusal are waived or not exercised, it is anticipated that closing will take place on or about March 1, 2006.
Cactus Lake Pipeline System
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The Cactus Lake System is a crude oil pipeline system located in southwestern Saskatchewan, comprised of 170 kilometers of crude oil and condensate pipelines and 26,000 barrels of storage. The system, which has a capacity of 50,000 barrels per day, currently transports approximately 17,000 barrels per day from regional heavy oil production sites to the market hub at Kerrobert, Saskatchewan.
As a result of the acquisition, combined throughput volumes on Inter Pipeline's conventional oil gathering systems are expected to increase by 8% to approximately 225,000 barrels per day.
"The Cactus Lake acquisition is a highly complementary addition to our existing transportation and terminalling operations at the Kerrobert market hub", commented David Fesyk, President and Chief Executive Officer. "It also expands our strategic infrastructure alliance with Nexen Marketing." |
Integration with Kerrobert Terminal |
The acquisition of the Cactus Lake System forms part of Inter Pipeline's broader strategy to expand its existing oil storage, product transfer and blending operations at the Kerrobert market hub. Inter Pipeline has recently signed commercial agreements with shippers on the Cactus Lake System to provide oil storage services and access condensate supplies used to blend with heavy oil.
In support of these commercial agreements, Inter Pipeline will invest approximately $3.5 million to construct new metering and interconnection facilities at its Kerrobert terminal. These accretive, stand-alone investments are independent of the acquisition of the Cactus Lake System. |
Contract Based Cash Flow
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Cash flow from the anticipated pipeline acquisition is supported by a 20-year transportation agreement for the shipment of Nexen's oil production volumes. Nexen currently ships approximately 70% of throughput volumes on the Cactus Lake System.
Shipping agreements with Nexen have been structured under a cost-of-service contract, whereby cash flow is not directly dependent on throughput volumes. The contract also includes recovery of operating costs.
Inter Pipeline's purchase of the Cactus Lake System and related facility investments will be immediately accretive to cash flow. On a combined basis, these investments are expected to generate an average EBITDA of approximately $4.4 million per year over the next 5 years. The facility investments are expected to generate approximately 40% of this amount. |
Inter Pipeline
Fund |
Inter Pipeline is a major petroleum transportation, bulk liquid storage and natural gas liquids extraction business based in Calgary, Alberta, Canada. Structured as a publicly traded limited partnership, Inter Pipeline owns and operates energy infrastructure assets in western Canada, the United Kingdom, Germany and Ireland.
Inter Pipeline is a member of the S&P/TSX Composite Index. Class A Units trade on the Toronto Stock Exchange under the symbol IPL.UN. |
Eligible
Investors
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| Only persons who are residents of Canada, or if partnerships, are Canadian partnerships, in each case for purposes of the Income Tax Act (Canada) are entitled to purchase and own Class A Units and debentures of Inter Pipeline. |
Disclaimer
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Certain information contained herein may constitute forward-looking statements that involve risks and uncertainties. Readers are cautioned not to place undue reliance on forward-looking statements. Such information, although considered reasonable by the General Partner of Inter Pipeline at the time of preparation, may later prove to be incorrect and actual results may differ materially from those anticipated in the statements made. For this purpose, any statements that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements often contain terms such as "may", "will", "should", "anticipate", "expects" and similar expressions. Such risks and uncertainties include, but are not limited to, risks associated with operations, such as loss of markets, regulatory matters, environmental risks, industry competition and the ability to access sufficient capital from internal and external sources. You can find a discussion of those risks and uncertainties in Inter Pipeline’s securities filings at www.sedar.com. Except to the extent required by applicable securities laws and regulations, Inter Pipeline assumes no obligation to update or revise forward-looking statements made herein or otherwise, whether as a result of new information, future events, or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary note.
All dollar values are expressed in Canadian dollars unless otherwise noted. |
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