Inter Pipeline Announces Strong Second Quarter 2014 Financial and Operating Results

Inter Pipeline Announces Strong Second Quarter 2014 Financial and Operating 
CALGARY, ALBERTA -- (Marketwired) -- 08/07/14 --   Inter Pipeline
Ltd. ("Inter Pipeline") (TSX: IPL) announced today financial and
operating results for the three and six month periods ended June 30,
Second Quarter Highlights      

--  Generated funds from operations(i) (FFO) of $132 million, a 25 percent
    increase over second quarter 2013 
--  Declared cash dividends of $104 million or $0.3225 per share 
--  Attractive quarterly payout ratio(i) of 82 percent 
--  Generated net income of $85 million, a gain of $18 million over second
    quarter 2013 normalized results 
--  Incurred growth capital expenditures(i) of $235 million, primarily
    related to Inter Pipeline's $2.9 billion expansion program on the Cold
    Lake and Polaris systems 
--  Total pipeline throughput volumes averaged 1,058,900 barrels per day
--  Conventional oil pipeline throughput volumes increased 30,000 b/d or 18%
    over second quarter 2013 levels to 200,900 b/d 
--  Announced a long-term agreement to provide diluent transportation
    service to the JACOS-Nexen Hangingstone project on the Polaris pipeline
--  Issued $900 million of 30-year fixed and 3-year floating rate notes at
    attractive interest rates 

Subsequent Events      

--  Announced $100 million expansion of Mid-Saskatchewan pipeline system to
    accommodate strong producer demand 
--  The first $1.1 billion phase of the Polaris pipeline expansion was
    successfully completed as a new 290 kilometre mainline and associated
    pipeline laterals were placed into commercial service 
--  Construction of the Canexus unit train rail loading connection to the
    Cold Lake pipeline system was completed on schedule and placed into
    commercial service 

(i) Please refer to the "Non-GAAP and additional GAAP Financial
Measures" section of the MD&A.  
Financial Performance   
Inter Pipeline's financial results were very strong in the second
quarter.  Funds from operations increased to $131.6 million or $0.41
per share, a gain of $26.2 million over second quarter 2013 results.
Pipeline operations performed well in the quarter, with new oil sands
transportation contracts and increased throughput levels on the
conventional oil gathering systems contributing to the strong cash
flow growth. The NGL extraction business segment recorded financial
gains on higher propane-plus extraction levels at the Cochrane NGL
extraction facility, while the European bulk liquid storage segment
performed steadily despite challenging market conditions.  
By business segment, Inter Pipeline's oil sands transportation,
conventional oil pipelines, NGL extraction and bulk liquid storage
businesses contributed $63.0 million, $49.6 million, $34.7 million
and $18.2 million, respectively, to funds from operations.  Corporate
costs, including interest, income tax and general and administrative
charges totaled $33.9 million in the second quarter.  
Cash Dividends    
Dividends to shareholders in the second quarter increased 33% to
$103.9 million compared to the second quarter of 2013. The large
increase is primarily attributable to two dividend increases in 2013
and a greater number of shares outstanding.  Inter Pipeline's payout
ratio for the second quarter remained conservative at 81.5%.  
Over the past 5 years, Inter Pipeline has increased payments to
shareholders six consecutive times resulting in a compound annual
growth rate of approximately 9%.  This represents one of the highest
dividend growth rates in our Canadian peer group.  
Oil Sands Transportation    
The oil sands transportation segment transported 858,000 b/d during
the quarter, a gain of 11 percent over second quarter 2013 levels as
producers successfully increased production levels. The Polaris
pipeline system increased throughput by 28,100 b/d over the second
quarter of 2013 as new oil sands production sites came on-stream over
the past year. The Cold Lake, Corridor and Polaris pipeline systems
transported 497,300 b/d, 330,000 b/d, and 30,700 b/d, respectively.  
Second quarter 2014 funds from operations totaled $63.0 million, an
increase of 29% over the comparable quarter of 2013. Higher results
were primarily due to new transportation contracts commencing on the
Cold Lake and Polaris pipeline systems over the past 12 months. Cash
flow in this segment is not materially impacted by pipeline volume
fluctuations due to the cost-of-service structure of transportation
agreements with third party shippers.  
The Cold Lake and Polaris pipeline systems are being expanded under a
$2.9(ii) billion development program anchored by long-term contracts
with the FCCL Partnership, a business venture between Cenovus Energy
and ConocoPhillips. Under these contracts, Inter Pipeline will
provide 850,000 b/d of bitumen blend and diluent capacity for the
Foster Creek, Christina Lake and Narrows Lake projects through the
installation of approximately 840 kilometres of new pipeline and
associated facilities. The first phase of the development program, a
290 kilometre mainline on the Polaris pipeline system, entered
commercial service in July 2014 and began generating EBITDA of
approximately $90 million per year.  The remaining phases of the
expansion program are on schedule and should enter commercial service
in stages between late 2014 and mid 2017. In aggregate, this
development program is expected to generate up to $330 million in
long-term annual EBITDA once fully in service.  
Subsequent to quarter end, a new connection between the Cold Lake
pipeline system and Canexus Corporation's unit train rail loading
facility at Bruderheim, Alberta entered commercial service. The $60
million project included construction of a 13 kilometre 24-inch
diameter pipeline lateral with a throughput capacity of 320,000 b/d,
of which Canexus has contracted for 100,000 b/d.  Under the terms of
the 10-year ship-or pay contract, Inter Pipeline expects to generate
approximately $12 million in annual EBITDA.  
In total, Inter Pipeline's $3 billion oil sands transportation
investment program will generate approximately $400 million in
incremental, long-term annual EBITDA once all phases of the program
enter commercial service. These investments are supported by long
term, ship-or-pay contracts signed with FCCL, Imperial Oil, Canexus,
Athabasca Oil Sands, JACOS and Nexen.  
As part of the current expansion program, Inter Pipeline has
constructed significant incremental mainline capacity in excess of
existing shipper requirements.  This excess capacity can be marketed
to third party shippers and is expected to be a major growth platform
for Inter Pipeline for the next several years.  
Conventional Oil Pipelines    
The conventional oil gathering business segment generated record
quarterly cash flow in the second quarter, continuing to benefit from
very strong drilling activity in the Viking and other light oil
plays. Second quarter funds from operations totaled $49.6 million, a
gain of 14 percent over second quarter 2013 results. The increase
resulted from higher throughput levels and increased tolls as well as
strong margins from Inter Pipeline's midstream marketing activities.
Average revenue per barrel increased slightly in the second quarter
to $2.95 from $2.91 in the second quarter of 2013.  
Throughput volumes grew significantly in the quarter compared to the
prior year period. Producers continue to aggressively develop their
reserves within the region served by the Mid-Saskatchewan pipeline
system, and increased drilling activity has also benefitted the
Central Alberta system. Together, the Bow River, Central Alberta, and
Mid-Saskatchewan systems transported 200,900 b/d in the second
quarter, a gain of 30,000 b/d over second quarter 2013 levels.  
Subsequent to quarter end, Inter Pipeline announced a major $100
million expansion of the Mid-Saskatchewan pipeline system to
accommodate the strong volume growth. The expansion is supported by
contracts with five oil producers that will generate in aggregate an
incremental $25-$30 million in annual EBITDA once the expansion is
fully in service. The expansion includes construction of 50
kilometres of new mainline pipe and 40 kilometres of laterals and
associated facilities. In total, 95,000 b/d of new capacity will be
added to the system and will provide capacity for future third party
connections. The expansion will be completed in phases beginning in
late 2014 with full completion expected by mid 2015. This investment
program is the largest in the history of Inter Pipeline's
conventional oil transportation business segment.  
NGL Extraction    
The NGL extraction business segment generated funds from operations
of $34.7 million in the second quarter, a gain of 12 percent over the
second quarter of 2013. Higher results were primarily a function of
increases in propane-plus liquids volumes extracted at the Cochrane
NGL extraction facility.  Propane-plus production was negatively
impacted in the second quarter of 2013 due to an 18-day scheduled
plant turnaround at Cochrane. Overall, throughput levels at the
Cochrane and Empress facilities were 2.2 billion cubic feet per day
(bcf/d) in the second quarter, which yielded 96,800 b/d of ethane and
propane-plus production.  
Second quarter realized frac-spread pricing on propane-plus sales at
the Cochrane facility averaged US$0.78 per US gallon, down from
second quarter 2013 pricing that averaged US$0.89 per US gallon.   
Bulk Liquid Storage    
Inter Pipeline's bulk liquid storage business generated funds from
operations of $18.2 million in the second quarter, down marginally
from second quarter 2013 results. Revenue increases due to foreign
currency translation adjustments were offset by the impacts of lower
utilization rates at the Gulfhavn terminal in Denmark, which
continues to be impacted by the lack of contango in futures markets
for certain petroleum products.  The overall utilization rate for
Inter Terminals' Danish facilities dropped to 65% compared to 77% in
the second quarter of 2013 while Simon Storage's terminals maintained
utilization rates fairly consistent with the prior year period at
During the quarter, construction began on 6 new stainless steel
storage tanks with 57,000 barrels of total capacity at Inter
Pipeline's terminal located near Mannheim, Germany.  This $9 million
expansion is in response to strong demand for specialty chemical
storage service from the adjacent BASF Ludwigshafen plant, one of the
largest chemical production complexes in the world.  
Total growth capital expenditures in the bulk liquid storage segment
for the quarter were $3.8 million.   
Financing Activity    
In the second quarter, Inter Pipeline continued its program of
prudent balance sheet management by successfully accessing public
capital markets. In May, Inter Pipeline successfully issued $900
million in medium-term notes at attractive interest rates. Of the
total, $500 million were 30-year notes issued at a fixed interest
rate of 4.637 percent, and $400 million were 3-year notes priced at
floating rates. Net proceeds were used to reduce outstanding
indebtedness on Inter Pipeline's revolving credit facility and for
general corporate purposes.  
Through the first half of 2014, Inter Pipeline has raised over $1.3
billion in capital through debt and equity offerings, and remains on
track to successfully finance the current capital investment program. 
At June 30, Inter Pipeline's recourse debt to capitalization ratio
was 51.7 percent compared to 52.8 percent at December 31, 2013.   
Conference Call & Webcast   
Inter Pipeline will hold a conference call and webcast on August 7th
at 2:30 p.m. (Mountain Time) / 4:30 p.m. (Eastern Time) to discuss
its second quarter 2014 financial and operating results.   
To participate in the conference call, please dial 866-225-0198 or
416-340-2218. A pass code is not required. A recording of the call
will be available for replay until August 14, 2014, by dialling
800-408-3053 or 905-694-9451. The pass code for the replay is
A webcast of the conference call can be accessed on Inter Pipeline's
website at by selecting "Investor Relations"
then "Events & Webcasts/Conference Calls". An archived version of the
webcast will be available for approximately 90 days.   
(ii) Represents Inter Pipeline's share of capital expenditures. 

                 Select Financial and Operating Highlights                  
(millions of dollars, except per                                            
 share and percent amounts where                                            
 noted)                              Three Months Ended   Six Months Ended  
                                          June 30,            June 30,      
Throughput and Production                2014      2013      2014      2013 
 Pipeline volumes (000 b/d)                                                 
  Oil sands transportation1             858.0     771.8     841.5     830.6 
  Conventional oil pipelines            200.9     170.9     202.4     178.1 
                                    --------- --------- --------- --------- 
  Total pipeline volumes              1,058.9     942.7   1,043.9   1,008.7 
 Extraction production(1) (000 b/d)                                         
  Ethane                                 64.1      67.6      68.4      73.0 
  Propane plus                           32.7      30.0      34.6      33.3 
                                    --------- --------- --------- --------- 
  Total extraction production            96.8      97.6     103.0     106.3 
Financial Results(3)                                                        
 Revenue                               $375.9    $320.3    $786.6    $648.0 
 Funds from operations(2)                                                   
  Oil sands transportation              $63.0     $49.0    $126.4     $99.8 
  Conventional oil pipelines            $49.6     $43.5     $95.6     $83.9 
  NGL extraction                        $34.7     $31.1     $83.2     $74.1 
  Bulk liquid storage                   $18.2     $19.5     $39.8     $39.9 
  Corporate costs                      $(33.9)   $(37.7)   $(81.7)   $(82.9)
                                    --------- --------- --------- --------- 
  Total funds from operations(2)       $131.6    $105.4    $263.3    $214.8 
  Per share(2)                          $0.41     $0.37     $0.84     $0.77 
 Net Income (loss)                      $85.3   $(281.6)   $174.9   $(209.4)
Supplemental Financial Information                                          
 Net income (loss) attributable to                                          
  shareholders                          $81.7   $(283.9)   $167.8   $(214.2)
   Per share - basic                    $0.25    $(1.02)    $0.53    $(0.77)
   - diluted                            $0.25    $(1.02)    $0.52    $(0.77)
 Cash dividends declared               $103.9     $78.2    $203.5    $155.0 
  Per share                           $0.3225   $0.2800   $0.6450   $0.5575 
 Payout ratio(2)                        81.5%     76.1%     79.7%     74.1% 
 Capital expenditures(2,3)                                                  
  Growth                               $243.8    $395.8    $788.5    $803.4 
  Sustaining                            $10.2      $5.8     $16.4     $11.7 
                                    --------- --------- --------- --------- 
 Total capital expenditures            $254.0    $401.6    $804.9    $815.1 
1. Empress V NGL production and Cold Lake volumes reported on a 100% basis; 
2013 Polaris volumes represent initial shipments that were prorated for the 
6 month period.                                                             
2. Please refer to the "Non-GAAP Financial Measures" section of the MD&A.   
3. Amounts reported on a 100% basis that includes non-controlling interest. 

MD&A, Financial Statements & Notes   
The Management's Discussion and Analysis ("MD&A") and consolidated
financial statements provide a detailed explanation of Inter
Pipeline's operating results for the three and six month periods
ended June 30, 2014 as compared to the three and six month periods
ended June 30, 2013. These documents are available at and at 
Inter Pipeline Ltd.    
Inter Pipeline is a major petroleum transportation, bulk liquid
storage and natural gas liquids extraction business based in Calgary,
Alberta, Canada. Inter Pipeline owns and operates energy
infrastructure assets in western Canada and northern Europe.
Additional information about Inter Pipeline can be found at  
Inter Pipeline shares trade on the Toronto Stock Exchange under the
symbol IPL.       
Certain information contained herein may constitute forward-looking
statements that involve known and unknown risks, assumptions,
uncertainties and other factors.  Forward-looking statements in this
news release include, but are not limited to, statements regarding
timing and completion of, and EBITDA Inter Pipeline expects to
generate from, the Polaris, Cold Lake and Mid-Saskatchewan pipeline
and other projects and possible future Cold Lake and Polaris pipeline
expansions. Readers are cautioned not to place undue reliance on
forward-looking statements, as such statements are not guarantees of
future performance.  Inter Pipeline in no manner represents that
actual results, levels of activity and achievements will be the same
in whole or in part as those set out in the forward-looking
statements herein.  Such information, although considered reasonable
by 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 assumptions, risks, uncertainties and
other factors include, but are not limited to, assumptions, risks and
uncertainties associated with: operations, such as loss of markets,
regulatory matters, environmental matters, industry competition,
potential delays and cost overruns of construction projects,
including the Polaris, Cold Lake and Mid-Saskatchewan pipeline system
projects, the status, credit risk and continued existence of
customers having contracts with Inter Pipeline and its subsidiaries,
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  The forward-looking statements contained in this news
release are made as of the date of this document, and, 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.  
Effective September 1, 2013, Inter Pipeline completed a plan of
arrangement that resulted in the reorganization of Inter Pipeline
Fund, a limited partnership, into Inter Pipeline, a dividend paying
corporation. Pursuant to the arrangement, among other things, each
outstanding Class A unit of Inter Pipeline Fund was exchanged for one
common share of Inter Pipeline. Accordingly, any references to Inter
Pipeline for any period prior to September 1, 2013 refer to Inter
Pipeline Fund and its consolidated subsidiaries, as applicable, and
any references to Inter Pipeline subsequent to September 1, 2013
refer to Inter Pipeline Ltd. and its consolidated subsidiaries, as
applicable. Similarly, any references to common shares, shareholders
or dividends for any period prior to September 1, 2013, refer to
Class A units, unitholders and distributions of the former Inter
Pipeline Fund, and any references to common shares, shareholders or
dividends for any period on or after September 1, 2013 refer to
common shares, shareholders and dividends of Inter Pipeline Ltd.  
All dollar values are expressed in Canadian dollars unless otherwise
Non-GAAP Financial Measures    
Certain financial measures referred to in this news release are not
measures recognized by GAAP. These non-GAAP financial measures do not
have standardized meanings prescribed by GAAP and therefore may not
be comparable to similar measures presented by other entities. 
Investors are cautioned that these non-GAAP financial measures should
not be construed as alternatives to other measures of financial
performance calculated in accordance with GAAP. 
Investor Relations:
Jeremy Roberge
Vice President, Capital Markets
403-290-6015 or 1-866-716-7473 
Media Relations:
Tony Mate
Director, Corporate and Investor Communications
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