Inter Pipeline Announces Strong First Quarter 2018 Financial and Operating Results

CALGARY, May 7, 2018 /CNW/ - Inter Pipeline Ltd. ("Inter Pipeline") (TSX: IPL) announced strong financial and operating results for the three month period ended March 31, 2018.

First Quarter Highlights

• Funds from operations (FFO) totalled $254 million, a three percent increase over first quarter 2017
  
  
• Net income for the quarter was a record $143 million
  
  
• Declared cash dividends of $160 million, or $0.42 per share
  
  
• Attractive quarterly payout ratio* of 63 percent
  
  
• NGL processing business segment generated record quarterly FFO of $99 million, up 20 percent from first quarter 2017
  
  
• Record total pipeline throughput volumes averaged 1,488,400 barrels per day (b/d)
  
  
• Continued to advance construction activities at the Heartland Petrochemical Complex site in Strathcona County, Alberta

Financial Performance

Inter Pipeline generated positive financial results in the first quarter of 2018, with funds from operations of $254.2 million, or $0.67 per share. This three percent gain in funds from operations compared to the first quarter 2017 was largely driven by the strong performance of the NGL processing business, which continued to benefit from rising commodity pricing.

For the first quarter of 2018, Inter Pipeline's four business segments generated funds from operations as follows:

Funds from operations (millions)	Three Months Ended March 31, 2018
Oil sands transportation	$148.9
NGL processing	$98.6
Conventional oil pipelines	$50.7
Bulk liquid storage	$18.7

Corporate costs, including employee, financing and tax expenses, were $62.7 million in the first quarter of 2018 compared to $63 million the first quarter of 2017.

Cash Dividends

Dividend payments to shareholders increased $10.7 million to $160.4 million, or $0.42 per share in the first quarter of 2018 when compared to the same period in 2017. Inter Pipeline's current monthly dividend rate is $0.14 per share, or $1.68 per share on an annualized basis.

Inter Pipeline's payout ratio for the quarter was an attractive 63.1 percent.

Oil Sands Transportation

The oil sands transportation segment continued to generate stable operating and financial results. Funds from operations in the first quarter of 2018 were $148.9 million, consistent with $148.4 million in the first quarter of 2017. 

Average throughput volumes grew by two percent over the first quarter of 2017 to a record 1,279,000 b/d. Volumes on the Cold Lake pipeline system declined compared to the same period a year ago, averaging 595,100 b/d during the quarter primarily as a result of lower volumes transported from Canadian Natural's Wolf Lake oil sands project. This was offset by record volumes on both the Corridor and Polaris pipeline systems. Volumes on the Corridor pipeline grew by 9,700 b/d to 425,300 b/d in the first quarter of 2018 on higher production from the Jackpine and Muskeg River mines. Diluent deliveries on the Polaris pipeline system increased by 47,500 b/d, or 23 percent, to 258,600 b/d as a result of increased deliveries to Cenovus' Christina Lake and Foster Creek oil sands projects as well as Imperial's Kearl project.

Volumes (000 b/d)	Three Months Ended March 31, 2018
Cold Lake	595.1
Corridor	425.3
Polaris	258.6

NGL Processing

The NGL processing business generated record funds from operations of $98.6 million in the first quarter of 2018, up 20 percent or $16.7 million, compared to the first quarter of 2017. These results were driven by a higher financial contribution from the offgas processing business and increased frac-spread pricing.

Average propane-plus realized frac-spread pricing at the Cochrane straddle plant was $0.74 USD per US gallon, a 23 percent increase over the first quarter of 2017. Olefinic and paraffinic realized frac-spreads from offgas processing operations also increased significantly, with quarterly averages of $1.53 USD per US gallon and $0.45 USD per US gallon respectively.

Natural gas flows to the Cochrane and Empress straddle plants were strong during the quarter. In aggregate, 3.5 billion cubic feet per day of gas was processed, extracting 110,500 b/d of ethane and propane-plus. Average sales volumes from the Redwater Olefinic Fractionator increased approximately four percent to average 33,000 b/d during the quarter.

Heartland Petrochemical Complex

Civil construction and fabrication activities are ongoing at the Heartland Petrochemical Complex, Inter Pipeline's integrated propane dehydrogenation and polypropylene complex. In the first quarter of 2018, significant construction activities commenced including the installation of support structures and foundation work. The fabrication of numerous vessels including the 800-tonne propane/propylene splitter are also well underway at off-site locations around Edmonton, Alberta, and large number of key components have been procured including major compression equipment, turbines, valving and a polypropylene extruder and pelletizer package.

These facilities are estimated to cost $3.5 billion and will be located in Strathcona County, Alberta near Inter Pipeline's Redwater Olefinic Fractionator. The Heartland Complex will convert low-cost, locally sourced propane into 525,000 tonnes of high value polypropylene per year.

In the quarter, approximately $125 million of capital was invested on this project with a total 2018 capital plan of approximately $700 million. Once the Heartland Complex is operational in late 2021, Inter Pipeline expects to earn approximately $450 million to $500 million per year in long-term average annual EBITDA.

Conventional Oil Pipelines

Funds from operations for Inter Pipeline's conventional oil pipelines business segment was $50.7 million during the first quarter of 2018, a decrease of $2.7 million compared to the same period in 2017. Transportation revenue remained consistent period over period, while midstream marketing activities decreased slightly.

Volumes on Inter Pipeline's three conventional gathering systems averaged 209,400 b/d for the first quarter of 2018, consistent year over year. Volumes on the Mid-Saskatchewan pipeline system increased by 4,300 b/d, or five percent, to a new quarterly record of 97,200 b/d on strong regional production from the Viking light oil play. This increase was partially offset by lower throughput volumes on both the Central Alberta and Bow River pipeline systems.

Bulk Liquid Storage

Inter Pipeline's bulk liquid storage segment generated funds from operations of $18.7 million in the quarter, compared to $26.2 million in Q1 2017. Storage demand for certain petroleum products in Europe is slowing due to a backwardated commodity pricing environment.

As such, average storage utilization rates during the first quarter were 82 percent compared to 99 percent for the same period a year ago. Subsequent to the quarter, several new storage contracts commenced and utilization rates improved to 87 percent in April.

Financing Activity

Inter Pipeline continues to maintain a strong balance sheet with significant liquidity available on its committed revolving credit facility. As at March 31, 2018, Inter Pipeline had approximately $1.1 billion of capacity on its $1.5 billion revolving credit facility and a consolidated net debt to total capitalization ratio* of 52.5 percent. 

Inter Pipeline also maintains strong investment grade credit ratings. Standard & Poor's and DBRS Limited have assigned Inter Pipeline credit ratings of BBB+ and BBB (high), respectively.

Conference Call and Webcast

Inter Pipeline will hold its first quarter 2018 financial and operating results conference call and webcast on May 8 at 9:00 a.m. MT (11:00 a.m. ET) for interested shareholders, analysts and media representatives.

To participate in the conference call, please dial 1 [phone]. A replay of the conference call will be available until May 18, 2018 by calling 1 [phone]. The code for the replay is 3494907. A link to the webcast is accessible on Inter Pipeline's website.

Annual Meeting of Shareholders

Inter Pipeline will hold its Annual Meeting of Shareholders today, May 7, 2018, at 2:00 p.m. MT (4:00 p.m. ET) at the Metropolitan Conference Centre, 333, 4th Avenue S.W. in Calgary, Alberta. The meeting will be webcast live with a link accessible on Inter Pipeline's website under "Investor Information" then "2018 Annual Meeting."

Select Financial and Operating Highlights
(millions of dollars, except per share and percent amounts where noted)					Three Months Ended
					March 31,
Operating Results					2018	2017
	Pipeline volumes (000 b/d)
		Oil sands transportation			1,279.0	1,251.4
		Conventional oil pipelines			209.4	209.9
		Total pipeline			1,488.4	1,461.3
	NGL processing volumes^1(000 b/d)
		Ethane			64.2	61.1
		Propane-plus			46.3	42.9
		Redwater Olefinic Fractionator sales volume			33.0	31.6
		Total processing volumes			143.5	135.6
	Bulk liquid storage capacity utilization				82%	99%
Financial Results
	Revenue				$646.0	$578.7
	Funds from operations^2
		Oil sands transportation^2			$148.9	$148.2
		NGL processing			$98.6	$81.9
		Conventional oil pipelines			$50.7	$53.4
		Bulk liquid storage			$18.7	$26.2
		Corporate costs			$(62.7)	$(62.8)
		Total funds from operations			$254.2	$246.9
		Per share^2			$0.67	$0.67
	Net income				$142.7	$140.0
Supplemental Financial Information
	Net income attributable to shareholders				$142.7	$140.0
		Per share -  basic & diluted			$0.37	$0.38
	Cash dividends declared				$160.4	$149.7
		Per share^3			$0.4200	$0.4050
	Payout ratio^2				63.1%	60.6%
	Capital expenditures^2
		Growth^2			$146.1	$52.7
		Sustaining^2			$6.1	$10.3
	Total capital expenditures				$152.2	$63.0
1.      Empress V NGL production reported on a 100% basis. 2.      Please refer to the NON-GAAP FINANCIAL MEASURES section. 3.      Dividends to shareholders per share are calculated based on the number of common shares outstanding at each record date.

SOURCE Inter Pipeline Ltd.

Related Links

http://www.interpipeline.com