News Releases - 2007

• Completed acquisition of the Corridor pipeline system from an affiliate of Kinder Morgan Inc. for approximately $1.1 billion, including the assumption of debt. Inter Pipeline is now the largest oil sands gathering business in Canada transporting more than 40% of Canada’s oil sands production
  
• Generated funds from operations* of $45.0 million during the second quarter. Excluding a $10.9 million acquisition fee associated with the Corridor acquisition, funds from operations would have increased by $7.1 million or 14.5% to $55.9 million over the same period of 2006
• Quarterly and year-to-date payout ratio before sustaining capital* of 94.5%, and 85.1%, respectively
• Due to the substantive enactment of Bill C-52 Budget Implementation Act, 2007, associated with the Federal Government’s Tax Fairness Plan, Inter Pipeline recorded a $236.2 million, non-cash, future income tax expense in the quarter. This contributed to a net loss of $207.9 million, down from net income of $30.8 million in the same quarter a year ago
• Cash distributions* to unitholders during the quarter totalled $42.6 million, or $0.210 per unit compared to $39.2 million or $0.195 per unit in Q2 2006
• Transportation volumes on the oil sands transportation and conventional oil pipeline systems averaged approximately 800,000 barrels per day (b/d) during the quarter 
• Announced agreement to connect Shell Canada Energy’s Orion oil sands project to the Cold Lake pipeline system under a 10-year ship-or-pay contract
  
  * Please refer to the "Non-GAPP Financial Measures" section of the MD&A.

During the second quarter of 2007, Inter Pipeline generated funds from operations of $45.0 million, representing a decrease of 7.8% or $3.8 million over the comparable period in 2006.  This decrease is primarily due to a $10.9 million acquisition fee payable to the general partner pursuant to the Limited Partnership Agreement. Increased volumes transported on the conventional oil pipeline systems, strong frac-spread prices on higher propane plus volumes produced at the Cochrane natural gas liquids (NGL) extraction facility, and higher bulk liquid storage utilization rates partially offset the reduction in cash flow. Excluding the acquisition fee, funds from operations would have increased by $7.1 million or 14.5% to $55.9 million over the same period in 2006.     

During the second quarter, Inter Pipeline’s NGL extraction, conventional oil pipeline, bulk liquid storage and oil sands transportation businesses contributed $29.7 million, $20.5 million, $11.4 million and $11.0 million, respectively to funds from operations.  Corporate costs, including general and administrative, interest expense and the acquisition fee, totalled $27.6 million.

“The substantively enacted Bill C-52 has no immediate cash impact to our funds from operations,” commented David Fesyk, President and Chief Executive Officer. “Inter Pipeline’s business fundamentals remain strong and each of our business units continue to perform well.  Furthermore, we expect the future cash impact of Bill C-52 will be largely mitigated by new contributions to cash available for distribution from future growth projects such as the Corridor expansion.”  

Cash distributions to unitholders during the quarter totalled $42.6 million, or $0.21 per unit, resulting in a payout ratio before sustaining capital of 94.5% of funds from operations.  For the six month period ended June 30, 2007, the payout ratio before sustaining capital was 85.1%. Adjusting for the general partner acquisition fee, the implied payout ratio, before sustaining capital, would have been 76.2% for the second quarter. 

Inter Pipeline’s monthly cash distributions are currently $0.07 per unit, or $0.84 per unit on an annualized basis basis.

Inter Pipeline’s NGL extraction business generated strong results during the second quarter as a result of strong commodity prices and high natural gas volumes. The NGL extraction business segment contributed over $178 million to revenue and $29.7 million to funds from operations.  On a combined basis, Inter Pipeline’s three NGL extraction facilities processed 4.3 billion cubic feet per day of natural gas, producing an average of 150,400 b/d of NGLs, comprised of 93,100 b/d of ethane and 57,300 b/d of propane plus.

On June 5, 2007, the Alberta Energy and Utilities Board (AEUB) approved Inter Pipeline’s application for the Cochrane Ethane Recovery Project (CERP). This project is expected to increase the ethane extraction capacity of the Cochrane NGL plant by approximately 15,000 b/d.  Inter Pipeline will likely defer a decision on constructing CERP until the AEUB determines the outcome of a broader NGL policy inquiry that is scheduled to occur during the first quarter of 2008.

Throughput volumes on Inter Pipeline’s Bow River, Central Alberta, Mid Saskatchewan and Valley conventional oil pipeline systems averaged 211,400 b/d during the second quarter, compared to 200,300 b/d during the same period in 2006.  The 11,100 b/d increase is primarily the result of higher Bow River southbound volumes sourced at Hardisty, Alberta to major US refining markets and new Cactus Lake interconnection facilities on the Mid Saskatchewan system.  During the second quarter 2007, volumes initiated at Hardisty averaged 31,200 b/d, representing an increase of approximately 7,200 b/d or 30% over the comparable volumes transported in 2006. 

The average revenue from the conventional pipelines during the second quarter of 2007 was $1.55 per barrel compared to $1.49 per barrel in 2006.

Throughput volumes on the Cold Lake pipeline system remained consistent year-over-year, averaging 336,900 b/d during the second quarter of 2007, compared to 334,000 during Q2 2006.  This minor volume increase is primarily the result of greater oil sands production from EnCana’s Foster Creek and Canadian Natural Resources’ Wolf Lake oil sands developments.

On May 7, 2007, Inter Pipeline announced the addition of a new third party shipper to the Cold Lake pipeline system.  The Cold Lake Pipeline Limited Partnership will invest approximately $11 million to provide transportation service to Shell Canada Energy’s Orion oil sands project.  Located in east central Alberta, new pipeline and related facilities will transport approximately 13,500 b/d of blended bitumen from the first phase of the Orion project. Cash flow from the Orion connection is supported by a 10-year ship-or-pay contract that includes provisions for the flow through of all material operating costs.

On June 15, 2007, Inter Pipeline announced that it had completed the acquisition of the Corridor pipeline system (Corridor) from an affiliate of Kinder Morgan Inc. and assumed responsibility for the completion of an estimated $1.8 billion expansion of the pipeline system.  Corridor is the sole transporter of diluted bitumen (Dilbit) and related products produced by the Athabasca Oil Sands Project (AOSP), which is owned by Shell Canada Energy, Chevron Canada Limited and Western Oil Sands.  Corridor provides the transportation link between AOSP’s Muskeg River bitumen mining operation near Fort McMurray, Alberta and its Scotford upgrading facility near Edmonton, Alberta.  Cash flow from the Corridor is supported by a 25-year ship-or-pay contract that includes provisions for the flow through of all operating costs, depreciation, taxes and interests charges, and provides a structured return on equity.

During the 15-day period since acquiring Corridor, transportation volumes have averaged approximately 252,800 b/d.

During the second quarter, Inter Pipeline’s bulk liquid storage business contributed $11.4 million to funds from operations, which is 21% higher than the comparable period in 2006.  This increase was largely the result of higher bulk liquid tank utilization rates, strong demand for biofuel storage facilities in the United Kingdom and favourable foreign exchange translation.  During the quarter, tank utilization rates averaged 96.3%, compared to 94.3% in 2006.

To partially finance the acquisition of Corridor, Inter Pipeline expanded the size of its revolving credit facility by $250 million to $750 million. To finance Corridor’s $1.8 billion expansion, Inter Pipeline has been in negotiations with a syndicate of lenders to raise sufficient debt funding to complete the expansion. This Corridor expansion financing is expected to close in the third quarter.

At June 30, 2007, Inter Pipeline’s consolidated debt balance, including non-recourse debt, was $1,774 million, resulting in a total debt to total capitalization ratio of 66.1%. Removing the impact of Corridor’s non-recourse debt, Inter Pipeline’s adjusted debt to adjusted capitalization ratio is 52.1%.

Inter Pipeline will hold a conference call and webcast today at 2:30 p.m. (Mountain Time) / 4:30 p.m. (Eastern Time) to discuss second quarter 2007 financial and operating results. 

To participate in the conference call, please dial 866-226-1792 or 416-641-6133. A recording of the call will be available for replay until August 17, 2007, by dialling 800-408-3053 or 416-695-5800. The pass code for the replay is 3230548.

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.

Eligible Investors

Disclaimer

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.