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Inter Pipeline Fund Announces Third Quarter 2005 Results
CALGARY, ALBERTA, February 23, 2006: Inter Pipeline Fund (Inter Pipeline) (TSX: IPL.UN) announced today its financial and operating results for the three and twelve month periods ended December 31, 2005. Please click HERE for the MD&A and Financial Statements.
| Highlights |
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Funds from operations* of $153.0 million, up $3.0 million over last year
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Cash distributions to unitholders increased 19% to $137.7 million
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Annual payout ratio* of 90.0%
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Cash distributions increased by $0.03 per unit, on an annualized basis, to $0.78 per unit
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Net income increased $8.2 million to $89.3 million
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Completed acquisition of Simon Storage for approximately $250 million
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Record volumes transported on the Cold Lake pipeline system, up 29,200 barrels per day (b/d) from 2004
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Fourth Quarter Highlights |
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Quarterly payout ratio of 91.8%
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Transported 509,700 b/d on the Cold Lake and conventional oil pipeline systems
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Inter Pipeline added to the S&P/TSX Composite Index
* Please refer to the "Non-GAPP Financial Measures" section of the MD&A.
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Funds From Operations
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In 2005, Inter Pipeline's funds from operations of $153.0 million were stable as compared to $150.0 million in the prior year. During the fourth quarter of 2005, funds from operations decreased to $38.1 million from $55.8 million in the same period of 2004. This decline is primarily due to exceptional fourth quarter 2004 results that were positively influenced by strong frac-spread prices on propane plus volumes, and high inlet volumes at Inter Pipeline's natural gas liquid (NGL) extraction business.
During 2005, Inter Pipeline's NGL extraction, conventional oil pipeline, oil sands transportation and bulk liquid storage business segments contributed $75.8 million, $79.1 million, $45.0 million and $9.2 million, respectively to funds from operations. Corporate charges, including interest and general and administrative expenses totaled $56.1 million. |
Cash Distributions |
Cash distributions to unitholders during the year totaled $137.7 million, or $0.7525 per unit, representing 90.0% of funds from operations. These distributions are up from $115.6 million or $0.73 per unit in 2004. For the three month period ended December 31, 2005, Inter Pipeline declared total cash distributions of $0.19 per unit representing 91.8% of funds from operations.
"Inter Pipeline has been able to successfully acquire and optimize long-life energy infrastructure assets with superior growth opportunities," commented David Fesyk, President and Chief Executive Officer. "This strategic approach has enabled Inter Pipeline to increase cash distributions to unitholders over the last three consecutive years."
In December 2005, following the Simon Storage acquisition, Inter Pipeline increased its annualized distribution rate by $0.03 per unit to $0.78 per unit. The regular monthly cash distribution of $0.065 per unit is expected to be maintained subject to review from time to time by the Board of Directors of Inter Pipeline's general partner, Pipeline Management Inc. |
Oil Sands Transportation
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| Throughput volumes on the Cold Lake pipeline system averaged 289,100 b/d during 2005, up 29,200 b/d compared to volumes transported in 2004. In the fourth quarter, Cold Lake volumes averaged 306,800 b/d, representing an increase of approximately 11,900 b/d over the same period in 2004. The three producers on the Cold Lake system, Imperial Oil, Canadian Natural Resources and EnCana each achieved volume increases during the year as a result of further development of their oil sands projects in the Cold Lake region. Throughput volumes on the Cold Lake system are expected to continue to improve during 2006 as producer activity in the region is anticipated to remain strong. |
Conventional
Oil Pipelines
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Inter Pipeline's four conventional oil pipeline systems transported an average of 201,400 b/d during 2005, compared to 213,800 b/d in 2004. For the three month period ending December 31, 2005, throughput volumes averaged 202,900 b/d, down from 213,200 b/d transported in the same period last year. In 2005, conventional oil pipeline operating margins increased to $1.08 per barrel, up from $1.01 per barrel in 2004.
In November 2005, the initial phase of the Bow River South mainline expansion project was completed, adding roughly 17,000 b/d of additional throughput capacity. Southbound delivery volumes on the Bow River system, from Hardisty, Alberta to refining markets in the United States, averaged 17,300 b/d during the fourth quarter, representing an increase of approximately 120% over volumes shipped during the same period in 2004. The second phase of the southbound mainline expansion is scheduled to be complete by mid 2006. |
NGL Extraction
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For the year ended December 31, 2005, Inter Pipeline's NGL extraction facilities processed 4.0 billion cubic feet per day (bcf/d) of natural gas, producing an average of 143,400 b/d of NGLs, comprised of 91,800 b/d of ethane and 51,600 b/d of propane plus. In the fourth quarter, the extraction facilities processed 4.0 bcf/d of natural gas producing 134,200 b/d of NGLs, comprised of 86,100 b/d of ethane and 48,100 b/d of propane plus.
Inter Pipeline's 100% owned and operated Cochrane extraction facility processed 1.6 bcf/d of natural gas during the fourth quarter, compared to 2.0 bcf/d in the same period last year. The decrease in volume is primarily the result of reduced demand for natural gas along the US west coast and California as a result of warmer seasonal temperatures. |
Bulk Liquid Storage |
Inter Pipeline successfully completed its first international acquisition in 2005 with the purchase of Simon Storage (Simon) for approximately $250 million. Simon is the largest independent petroleum and petrochemical storage business in the United Kingdom with a combined bulk liquid storage capacity of approximately six million barrels. Since being acquired by Inter Pipeline on October 4, 2005, Simon has contributed over $30 million in revenue and more than $9 million to funds from operations.
In the fourth quarter, Inter Pipeline announced its second western European transaction with the acquisition of Tanklager-Gesellschaft Hoyer mbH (TLG) for approximately $38 million. TLG is an independent bulk liquid storage business based in Germany and operates 134 petroleum and petrochemical storage tanks with a combined capacity of 1.9 million barrels. The acquisition of TLG closed on January 1, 2006. |
Financing Activity
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| At December 31, 2005, Inter Pipeline's outstanding debt balance, including convertible debentures, was $821.7 million. Subsequent to year end, on January 31, 2006, Inter Pipeline raised gross proceeds of $150 million in a "bought deal" equity financing. Net proceeds of $142.5 million were used to reduce bank indebtedness incurred to fund the recent acquisitions of Simon and TLG. Had this offering closed on December 31, 2005, Inter Pipeline's total debt to total capitalization ratio would have been approximately 37%. |
Unit Appreciation Rights Plan |
| Inter Pipeline has suspended the granting of incentive options under its previously approved Unit Incentive Option Plan. In its place, Inter Pipeline has implemented a Unit Appreciation Rights Plan, which compensates directors, officers and employees by issuing Unit Appreciation Rights (UAR). The UARs vest over a three-year period, with one third of the award vesting per year. The maximum number of UARs granted will be limited to 2.5% of the aggregate number of Class A units that are then issued and outstanding. |
Conference Call
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Inter Pipeline will hold a conference call today at 2:30 p.m. (Mountain Time) / 4:30 p.m. (Eastern Time) to discuss its 2005 financial and operating results.
To participate in the conference call, please dial 888-280-8771 or 416-695-7848. A recording of the call will be available for replay until March 2, 2006, by dialing 888-509-0081 or 416-695-5275. Pass codes are not required. |
Selected Financial and Operating Highlights1,2
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(millions of dollars, except where noted) |
Three Months Ended |
Twelve Months Ended |
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December 31, |
December 31, |
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2005 |
2004 |
2005 |
2004 |
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Extraction Production3 (000 b/d) |
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Ethane |
86.1 |
95.2 |
91.8 |
90.2 |
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Propane Plus |
48.1 |
56.0 |
51.6 |
53.1 |
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Total Extraction |
134.2 |
151.2 |
143.4 |
143.3 |
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Pipeline Volumes (000 b/d) |
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Conventional |
202.9 |
213.2 |
201.4 |
213.8 |
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Cold Lake Pipeline3 |
306.8 |
294.9 |
289.1 |
259.9 |
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Total Pipeline |
509.7 |
508.1 |
490.5 |
473.7 |
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Revenue |
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NGL Extraction |
$233.8 |
$185.5 |
$724.0 |
$300.3 |
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Conventional Oil Pipeline |
$28.2 |
$27.9 |
$109.9 |
$108.5 |
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Oil Sands Transportation |
$17.2 |
$18.6 |
$62.7 |
$73.3 |
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Bulk Liquid Storage |
$30.4 |
n/a |
$30.4 |
n/a |
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Net Income4 |
$20.9 |
$33.5 |
$89.3 |
$81.1 |
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Funds From Operations5 |
$38.1 |
$55.8 |
$153.0 |
$150.0 |
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Cash Distributions5 |
$35.0 |
$33.7 |
$137.7 |
$115.6 |
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Per Unit |
$0.1900 |
$0.1875 |
$0.7525 |
$0.7300 |
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Payout Ratio5 |
91.8% |
60.4% |
90.0% |
77.0% |
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Capital Expenditures5 |
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Growth |
$9.8 |
$3.0 |
$15.5 |
$18.3 |
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Sustaining |
$3.6 |
$0.8 |
$6.8 |
$2.7 |
- Results for the bulk liquid storage business are for the period October 4, 2005 to December 31, 2005.
- Extraction business was acquired by Inter Pipeline on July 28, 2004. Therefore, the comparable 2004 annual figures include only 157 days of NGL extraction operations.
- Volumes reported on a 100% basis.
- Restated comparative period due to change in accounting policy.
- Please refer to the "Non-GAAP Financial Measures" section of the MD&A.
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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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