Inter Pipeline Announces Strong Second Quarter 2014 Financial and Operating Results

Inter Pipeline Announces Strong Second Quarter 2014 Financial and Operating 
FOR: Inter Pipeline Ltd. 
AUGUST 7, 2014 
Inter Pipeline Announces Strong Second Quarter 2014 Financial and Operating
CALGARY, ALBERTA--(Marketwired - Aug. 7, 2014) - Inter Pipeline Ltd.
("Inter Pipeline") (TSX:IPL) announced today financial and operating
results for the three and six month periods ended June 30, 2014.  
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,
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 90%.  
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
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 2223184.  
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
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 noted. 
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
INDUSTRY:  Energy and Utilities - Oil and Gas , Energy and Utilities -
-0- Aug/07/2014 15:34 GMT
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