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Inter Pipeline Fund Announces Record 2006 Financial and Operational Results
CALGARY, ALBERTA, February 22, 2007: Inter Pipeline Fund (Inter Pipeline) (TSX: IPL.UN) announced today its financial and operating results for the three and twelve month period ended December 31, 2006. Please click HERE for the MD&A and Financial Statements.
| 2006 Highlights |
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Fourth Quarter
Highlights |
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* Please refer to the "Non-GAPP Financial Measures" section of the MD&A. |
Funds From Operations
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In 2006, Inter Pipeline generated funds from operations of $205.4 million, representing an increase of 34% over $153.0 million in the prior year. This increase is primarily the result of strong average 2006 frac-spread prices on propane plus volumes at the Cochrane natural gas liquids (NGL) extraction plant, incorporation of Simon Storage’s results for the full year and the acquisition of TLG in January 2006.
During 2006, Inter Pipeline’s NGL extraction, conventional oil pipeline, bulk liquid storage and oil sands transportation business segments contributed $111.3 million, $81.1 million, $38.4 million and $37.5 million, respectively to funds from operations. Corporate charges, including interest and general and administrative expenses totaled $62.9 million.
Funds from operations during the fourth quarter of 2006, totalled $47.2 million, up $9.1 million from the comparable period in 2005. The improvement is the result of stronger realized frac spread prices and higher propane plus volumes produced at the Cochrane NGL plant.
During the 4th quarter, Inter Pipeline’s NGL extraction, conventional oil pipeline, bulk liquid storage and oil sands transportation business segments contributed $25.6 million, $20.8 million, $9.9 million and $8.1 million, respectively to funds from operations. This was offset by corporate charges totaling $17.2 million. |
Cash Distributions
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Cash distributions to unitholders during the year totaled $160.8 million, or $0.80 per unit. In September 2006, Inter Pipeline increased its annualized distribution rate by $0.06 per unit to $0.84 per unit. The distribution increase was predicated on the development and completion of several key organic projects within Inter Pipeline’s four business segments.
For the three month period ended December 31, 2006, Inter Pipeline declared total cash distributions of $0.21 per unit. Inter Pipeline currently distributes to unitholders $0.07 per unit on monthly basis. |
NGL Extraction
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Record financial results from Inter Pipeline’s NGL extraction business in 2006 were underpinned by strong commodity prices and high natural gas volumes. During the year, Inter Pipeline realized a frac spread of approximately US$0.46/US gallon, which is almost 70% higher than the $0.27 frac spread realized in 2005. Also in 2006, Inter Pipeline’s three NGL extraction facilities processed 4.2 billion cubic feet per day (bcf/d) of natural gas, producing an average of 142,100 b/d of NGLs, comprised of 89,200 b/d of ethane and 52,900 b/d of propane plus.
In the fourth quarter, the extraction facilities processed 4.2 bcf/d of natural gas producing 142,500 b/d of NGLs, comprised of 88,900 b/d of ethane and 53,600 b/d of propane plus. In October 2006, Inter Pipeline announced that it will participate in a $36 million project at the Empress V extraction facility to increase ethane production. Approximately 7,000 b/d of incremental ethane is expected to be produced by late 2008. Inter Pipeline will invest $18 million for its 50% proportionate ownership interest in the Empress V plant. |
Conventional Oil Pipeline
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Throughput volumes on Inter Pipeline’s Bow River, Central Alberta, Mid-Saskatchewan and Valley conventional oil pipeline systems transported an average of 211,900 b/d during 2006, compared to 201,400 b/d in 2005. The 10,500 b/d increase is primarily the result of increased southbound volumes on the Bow River system from Hardisty, Alberta to refining markets in the northwest United States. Compared to 2005, southbound volumes sourced at Hardisty increased by 17,600 b/d or 172% to average 27,900 b/d in 2006. For 2006, the average revenue per barrel from the conventional oil pipeline business was $1.51 versus $1.49 per barrel in 2005.
During the fourth quarter, throughput volumes averaged 223,100 b/d, up 10% from the 202,900 b/d transported in the fourth quarter of 2005. The average revenue per barrel from the conventional oil pipeline business was $1.49 during the quarter versus $1.51 per barrel in comparable period in 2005. |
Bulk Liquid
Storage
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Inter Pipeline completed its second successful international acquisition in 2006 with the purchase of TLG for approximately $38 million. TLG is an independent petroleum and petrochemical storage business based in Mannheim, Germany. In 2006, the bulk liquid storage business operated at a tank utilization rate of approximately 95%, which contributed to its strong contribution of $144 million in revenue and $38.4 million to funds from operations.
During the fourth quarter, the bulk liquids storage business generated approximately $44 million of revenue and $9.9 million to funds from operations. |
Oil Sands
Transportation |
The Cold Lake pipeline system achieved significant volume growth during the year. Throughput volumes on the Cold Lake system averaged 329,900 b/d in 2006, up more than 14% or 40,800 b/d compared to volumes transported in 2005. The three founding shippers on the Cold Lake system, Imperial Oil, Canadian Natural Resources and EnCana each achieved major volume increases during the year as a result of further development of their oil sands projects in the Cold Lake region.
In the fourth quarter, Cold Lake volumes averaged 337,600 b/d, representing an increase of approximately 30,800 b/d over the same period in 2005. Throughput volumes on the Cold Lake system are expected to remain strong during 2007 as activity by the founding shippers continues. |
Financing Activity |
In January 2006, Inter Pipeline successfully raised gross proceeds of $150 million by issuing 15 million Class A units. Net proceeds of $142.2 million were used to reduce bank indebtedness related to the acquisition of two European bulk liquids storage businesses.
At December 31, 2006, Inter Pipeline’s outstanding debt balance was $686.5 million, resulting in a conservative total debt to total capitalization ratio of 36.4%. Inter Pipeline’s strong balance sheet provides strong financial flexibility to pursue additional organic growth projects |
Conference
Call
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Inter Pipeline will hold a conference call and webcast on February 23, 2007 at 9:00 a.m. (Mountain Time) / 11:00 a.m. (Eastern Time) to discuss fourth quarter and 2006 annual financial and operating results.
To participate in the conference call, please dial 888-334-7880 or 416-641-6116. A recording of the call will be available for replay until March 1, 2007, by dialing 888-509-0081 or 416-695-5275. The pass code for the replay is 639864.
A webcast of the conference call can be accessed on Inter Pipeline’s website at www.interpipelinefund.com under Investor Relations / Webcasts. A rebroadcast of the conference call will be available on the website for approximately 90 days. |
Selected Financial and Operating Highlights
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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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2006 |
2005 |
2006 |
2005 |
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Extraction Production1, (000 b/d) |
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Ethane |
88.9 |
86.1 |
89.2 |
91.8 |
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Propane Plus |
53.6 |
48.1 |
52.9 |
51.6 |
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Total Extraction |
142.5 |
134.2 |
142.1 |
143.4 |
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Pipeline Volumes (000 b/d) |
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Conventional Oil |
223.1 |
202.9 |
211.9 |
201.4 |
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Cold Lake Pipeline1 |
337.6 |
306.8 |
329.9 |
289.1 |
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Total Pipeline |
560.7 |
509.7 |
541.8 |
490.5 |
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Revenue |
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NGL Extraction |
$186.1 |
$233.8 |
$691.8 |
$724.0 |
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Conventional Oil Pipelines |
$30.7 |
$28.2 |
$116.7 |
$109.9 |
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Oil Sands Transportation |
$14.7 |
$17.2 |
$58.8 |
$62.7 |
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Bulk Liquid Storage2 |
$43.7 |
$30.4 |
$143.7 |
$30.4 |
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Net Income |
$28.3 |
$20.9 |
$130.6 |
$89.3 |
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Per Unit (basic) |
$0.14 |
$0.11 |
$0.65 |
$0.49 |
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Funds From Operations3 |
$47.2 |
$38.1 |
$205.4 |
$153.0 |
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Per Unit |
$0.24 |
$0.21 |
$1.03 |
$0.84 |
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Cash Distributions |
$42.3 |
$35.0 |
$160.8 |
$137.7 |
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Per Unit |
$0.2100 |
$0.1900 |
$0.0800 |
$0.7525 |
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Payout Ratio before sustaining capital3 |
89.7% |
91.8% |
78.3% |
90.0% |
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Payout Ratio after sustaining capital3 |
101.7% |
101.3% |
83.8% |
94.2% |
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Capital Expenditures3 |
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Growth |
$14.8 |
$9.8 |
$52.0 |
$15.5 |
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Sustaining |
$5.6 |
$3.6 |
$13.6 |
$6.8 |
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1. Volumes reported on a 100% basis.
2. Simon Storage was acquired on October 4, 2005 and TLG was acquired on
January 1, 2006.
3. 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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