Parkland reports third quarter and announces intention to pay year end special distribution



    
    Performance Highlights

        -  Record nine month EBITDA
        -  Record fuel sales volumes
        -  Announced joint refinery feasibility study
        -  Special distribution to be paid after year end
    

    RED DEER, AB, Oct. 30 /CNW/ - Parkland Income Fund today announced its
business performance for the third quarter and for the nine months ended
September 30, 2007. Volumes, revenue and EBITDA for the nine month period were
all at record levels.
    For the third quarter, EBITDA was $26.6 million compared to $27.7 million
in 2006. Although fuel volumes increased 40 percent for the quarter compared
to 2006, fuel margins were 3 cents per litre lower. Net sales and operating
revenue was $482.9 million compared to $359.3 million in the third quarter of
2006. Net earnings in the third quarter of 2007 were $32.2 million ($0.66 per
unit) compared to $16.7 million ($0.44 per unit) in 2006.
    "We are excited with the growth in the business this year as nine month
EBITDA is up by more than one half over 2006 as we see the impact of the
acquisitions and strong year to date margins" said Mike Chorlton, President
and CEO.

    
    Consolidated Operating and Financial Highlights

    ($ millions
     except volume        For The Three Months           For The Nine Months
     and per unit                Ended Sept 30,                Ended Sept 30,
     amounts)         2007      2006      2005      2007      2006      2005
    -------------------------------------------------------------------------
    Fuel volume
     (millions of
     litres)           578       412       322     1,489     1,115       880
    Net sales and
     operating
     revenue     $   482.9 $   359.3 $   258.9 $ 1,241.5 $   921.0 $   644.2
    EBITDA       $    26.6 $    27.7 $    12.5 $    93.3 $    60.2 $    25.2
    Net earnings $    32.2 $    16.7 $     9.6 $    66.6 $    44.2 $    17.4
      Per unit
       - basic   $    0.66 $    0.44 $    0.26 $    1.38 $    1.18 $    0.47
       - diluted $    0.66 $    0.44 $    0.26 $    1.37 $    1.18 $    0.47

    -------------------------------------------------------------------------
    

    After considering the strength of the financial performance and after due
consideration of the sustainability of the regular monthly distributions, the
Board of Directors has determined that Parkland will declare a special
distribution for the 2007 fiscal year. The distribution will have a record
date of December 31, 2007 and will be paid in January 2008. Prior to the year
end the directors will determine the amount of the special distribution and
whether a portion will be paid in units.
    The amount of the special distribution will be guided by the estimate of
taxable income at the year end with potential adjustments for unusual items or
major acquisitions. As of September 30, 2007, the undistributed taxable income
was approximately $37 million. The final amount will vary based on actual and
anticipated earnings in the fourth quarter. It is anticipated that the details
of the distribution will be announced in December. Current units outstanding
total 48.5 million.

    THIRD QUARTER RESULTS

    Third quarter fuel sales volumes were 578 million litres, up
significantly from 412 million litres in 2006. Higher volumes reflect the
propane volume acquired through the acquisitions of Neufeld Petroleum and
Propane Ltd. and Neufeld Holdings Ltd. ("Neufeld") and Joy Propane Ltd.
("Joy") earlier in 2007 as well as the wholesale, industrial and cardlock
volumes of diesel and gasoline acquired through Neufeld and United Petroleum
Products Inc. ("UPPI"). Fuel volumes sold under the Esso retail branded
distributorship ("RBD") program also increased relative to the third quarter
of 2006 with the addition of the new territory in British Columbia in the last
quarter of 2006.
    Average fuel margin per litre declined to 6.5 cents per litre in the
third quarter of 2007 from 9.7 cents per litre in 2006 as the volumes added in
2007 were primarily commercial and RBD sales with product purchased at
standard wholesale prices which yielded lower margins. With the increase in
operating and direct costs and marketing, general and administrative costs,
EBITDA was slightly lower than the prior year. For 2007, the peak in fuel
margins occurred in the second quarter and the third quarter margins were
lower, although strong by historical comparison. In 2006, the peak in fuel
margins occurred in the third quarter.
    During the quarter Parkland announced that it would participate as a
25 percent joint venturer in a study to determine the feasibility of building
a $300 million processing facility to refine condensate into petroleum
products and other products. Parkland's contribution to the feasibility study
is $2.0 million. Parkland would exclusively market the gasoline and diesel
output. If the study yields positive results, commercial production would be
targeted for 2010.
    The Commercial segment of Parkland's operations consists of sales of
fertilizer, lubricants, other agriculture inputs and industrial products and
services. Most of this business was added through the recent acquisitions. The
$9.8 million of gross profit in the third quarter of 2007 was higher than
previous quarters as Parkland did not have significant operations in this
segment in 2006.
    Parkland had recorded a provision for income taxes in the second quarter
to reflect the fact that taxable income exceeded the amounts distributed to
unitholders. With the decision to declare a special distribution for 2007, the
provision for current income tax of $11.2 million was reversed in the third
quarter.

    Outlook

    Parkland maintains a positive outlook for the fourth quarter of 2007.
Retail fuel volumes are expected to experience normal seasonal declines now
that the busy summer driving season has ended, however, the commercial and
propane segments are entering their traditionally more active fall and winter
seasons.
    We are concerned about the overall economic impact of weaker oilfield
drilling activity from low natural gas prices and the uncertainty relating to
potential royalty changes. With respect to fuel margins, management's policy
is to give no guidance. Fuel margins are inherently volatile and are
influenced by supply and demand factors within Parkland's regional market and
the broader North American market. Gross profits on transportation fuels have
exceeded historic norms for the year to date.

    MANAGEMENT'S DISCUSSION AND ANALYSIS

    The following discussion and analysis of the results of operations and
financial condition of Parkland Income Fund (the "Fund" or "Parkland") should
be read in conjunction with the unaudited interim financial statements for the
nine month period ended September 30, 2007, Management's Discussion and
Analysis and the audited financial statements for the year ended December 31,
2006 and the Fund's Annual Information Form dated March 16, 2007.

    Non-GAAP Financial Measures

    In this document there are references to non-GAAP financial measures such
as EBITDA and Cash Available for Distribution. EBITDA refers to Earnings
Before Interest Expense, Income Taxes, Depreciation and Amortization and
(Gain)/Loss on Disposal of Capital Assets and can be calculated from the GAAP
amounts included in the Fund's financial statements. Management believes that
EBITDA is a relevant measure to users of its financial information as it
provides an indication of pre-tax earnings available to distribute to debt and
equity holders in the Fund. The Fund's definition of EBITDA may not be
consistent with other providers of financial information and therefore may not
be comparable.
    Cash Available for Distribution is defined in the Fund's Deed of Trust
and related documents and generally represents the cash available to be
distributed to the Fund's Unitholders. Cash Available for Distribution is
calculated as funds flow from operations adjusted for non cash unit incentive
compensation and accretion expense, less maintenance capital expenditures.
Maintenance capital represents capital expenditures made by the Fund to
maintain its current business operations. This differs from growth capital,
which represents capital used to expand the Fund's business operations.

    THREE MONTHS ENDED SEPTEMBER 30, 2007

    Higher fuel volumes, increased convenience store sales and margins and
the addition of profits from the acquired businesses all contributed to higher
overall gross profits in the quarter. EBITDA decreased slightly to
$26.6 million from $27.7 million for the same period in 2006. Net earnings
were $32.2 million compared to $16.7 million reported in the third quarter of
2006. Current earnings were affected by tax charges that are more fully
described under "Future Income Taxes" and "Current Tax Provision". The Current
Tax recovery reflects the intention to declare a special distribution that
would approximate Parkland's taxable income.

    Fuel Volumes

    Gasoline and diesel volumes increased by 147 million litres in the third
quarter of 2007 to 559 million litres, an increase of 35 percent. In addition,
another 19 million litres of propane fuel were sold by the commercial
operations during the quarter. The station upgrade program, addition of RBD
sites and fuel sales from the Neufeld, Joy and UPPI businesses continue to
generate increased volumes for the Fund over comparative quarters.

    Sales and Cost of Sales

    Net sales and operating revenue for the quarter ended September 30, 2007
was $482.9 million, an increase of 34 percent over the same period in 2006.
Fuel sales revenue increased to $446.6 million from $342.8 million in the
prior year as a result of volume increases and higher prices. Convenience
store merchandise sales also increased with sales during the third quarter of
$18.3 million in 2007 as compared to $16.5 million in 2006. With the
acquisitions, the Fund now also sells fertilizer, lubes and other agricultural
and industrial products and services. These sales are included in the
Commercial segment in Note 4 to the Interim Consolidated Financial Statements
and totaled $18.0 million for the quarter.
    Fuel cost of sales increased to $406.0 million in 2007 as compared to
$300.8 million in 2006. Cost of sales increased as a result of higher volumes
of fuel products. Convenience store merchandise cost of sales increased to
$13.6 million in 2007 from $12.1 million in 2006, consistent with the increase
in merchandise sales. Cost of sales related to fertilizer, lubes and other
agricultural and industrial products and services for the quarter came to
$8.2 million.

    Gross Profit

    These factors led to gross profit of $55.1 million for the third quarter
of 2007, which was $8.8 million higher than the $46.3 million achieved in the
third quarter of 2006. The largest single contribution to the increase in
gross profit was the increase in volume sold and contributions from the
Commercial segment, however, this was offset somewhat by average fuel margins
declining to 6.5 cents per litre compared to 9.7 cents per litre in the same
period in 2006.
    The current results reflect a reallocation of $3.8 million second quarter
costs of sales from the Commercial segment to the Fuel Marketing segment. The
effect of this adjustment is to increase the gross profit of the Commercial
segment and decrease the Fuel Marketing segment gross profit for the nine
month period ended September 30, 2007.

    Operating Expenses

    Operating expenses increased primarily as a result of the acquisitions.
Site operating costs are sensitive to changes in fuel sales volume and, as a
result, total costs were higher than the prior year. Also affecting site
operating costs is the continued upward pressure on wages that is being
experienced in western Canada due to a robust economy and tight labor supply,
specifically for convenience store personnel.
    Marketing, general and administrative expenses were $10.9 million for the
quarter ended September 30, 2007 compared to $5.8 million in 2006. Significant
drivers of increased costs were the inclusion of overhead costs of the
acquired businesses and provision for higher variable compensation costs
arising from strong profits. Staffing levels increased as a result of the
acquisitions.

    Future Income Taxes

    During the third quarter of 2007, Parkland reduced the future income tax
liability by $0.9 million as a result of adjustments made during the quarter
to the purchase price allocation of Neufeld.

    Current Tax Provision

    A current tax recovery of $11.2 million was recorded in the third
quarter. This reflects the intention to minimize taxable income through a
special distribution at year end.

    Earnings

    Net earnings were $32.2 million in 2007 compared to $16.7 million in
2006. The fuels segment of Parkland's business contributed increased earnings
as a result of the acquisitions and internal volume and margin growth and the
non-fuel commercial segment came with the acquired businesses. These increases
were offset by higher operating and direct costs and marketing, general and
administrative costs. There were significant recoveries for current income
taxes as well as the non-cash booking of future income taxes.

    Capital Investments

    During the third quarter the Fund expended $7.3 million net in capital
investments, of which $5.6 million was classified as maintenance capital and
$1.7 million was classified as growth capital.
    Amortization for capital assets acquired in 2007 plus amortization on
intangible assets accounted for most of the increase compared to the third
quarter of 2006. During the third quarter Parkland conducted valuations of the
various asset classes included in the purchase of UPPI and Joy. This resulted
in adjustments to the amounts recorded in the different asset categories.

    Long-Term Debt and Cash Balances

    For the quarter ended September 30, 2007 interest on long-term debt was
$0.4 million. Most of the Fund's long-term debt bears interest at variable
rates linked to prime.
    On August 1, 2007, the Fund entered into a syndicated financing
arrangement with HSBC Bank Canada and Bank of Montreal. The new financing
arrangement has a three year term and provides for credit facilities totaling
$128.1 million, comprised of $32.0 million for operating debt, $30.0 million
for letters of credit and the remainder for term debt.
    The cash balance at September 30, 2007 of $13.9 million decreased from
the December 31, 2006 balance of $36.5 million due to the payment of the cash
portion of the special distributions declared for Unitholders of record on
December 29, 2006 and paid during the first quarter, cash consideration paid
for the acquisitions and repayment of debt associated with the acquisitions.
    The Fund's excess cash balances are invested in an interest bearing
treasury account at a chartered Canadian bank. The Fund does not invest in or
have any exposure to asset backed securities or other similar investment
products.

    Nine Months Ended September 30, 2007

    Sales volumes of refined products increased 34 percent to 1,489 million
litres over the nine months ended September 30, 2006 driven by acquisitions,
additional RBD sites and internal growth. Net sales and operating revenue
increased by $320.5 million or 35 percent through higher volume and average
sales prices for fuel, higher merchandise sales and commercial operations.
    Gross profits were $166.8 million compared to $109.1 million in 2006, an
increase of 53 percent year-over-year. Operating and direct costs increased to
$45.2 million from $34.9 million in 2006, as a result of acquisitions,
additional RBD sites and internal growth. Marketing, general and
administrative costs were $28.3 million, compared to $13.9 million in 2006.
These factors contributed to an increase in EBITDA to $93.3 million as
compared to $60.2 million in the first nine months of 2006.
    The increase in EBITDA in 2007 compared to 2006 was driven by
improvements in each area of the enterprise. Fuel margins increased as
Parkland was able to optimize its product costs through its supply contracts.
Fuel volumes increased as additional sites were brought on stream through its
RBD program. Retail fuel marketing volumes increased as upgraded sites reached
maturity and sales initiatives were targeted at specific markets. Convenience
store contribution increased as several sites were converted to the company
operated model. The acquisition of new business introduced a new, non-fuel
commercial segment to Parkland's customer offering. This consists of
lubricants, fertilizer, other agricultural inputs and industrial products and
services.

    Future Income Taxes

    Parkland has recorded a non-cash tax expense in the amount of
$6.7 million for the nine month period compared to $0.1 million for the same
period in 2006. This followed the substantive enactment of federal legislation
in 2007 to levy a new income tax on income trusts at the rate of 31.5 percent
beginning in 2011.
    The future income tax adjustment represents the taxable temporary
differences of the Fund tax affected at 31.5 percent, which is the rate that
will be applicable in 2011 under the current legislation and the Fund's
current corporate structure.

    Current Tax Provision

    During the first nine months of 2007, Parkland's taxable income
significantly exceeded distributions to unitholders. In 2006 we recorded a tax
provision of $8.6 million in the third quarter. The 2006 provision was
reversed at year end as the special distribution declared in December 2006
transferred most of the taxable income to the unitholders. With the directors'
decision to declare a special distribution at year end, there is no provision
for current income taxes as of September 30, 2007.

    Equity Financing

    In January 2007, Parkland completed the issuance of 1,360,000 (4,080,000
post split) Fund units for net proceeds of $47.1 million on a bought deal
basis through a syndicate of investment dealers. The proceeds were used in
part to fund the purchase of Neufeld in January 2007 and to repay
approximately $10 million of Parkland's term debt.

    Accounting Estimates

    The financial statements include accounting estimates, the nature of
which are described in the 2006 Annual Report.

    Distributions and Income Tax

    The Fund is a mutual fund trust for income tax purposes. As such, the
Fund is only taxed on any amount not allocated to unitholders.
    The Fund makes monthly distribution payments to its unitholders. As of
the beginning of 2007, after adjusting for the three for one unit split,
monthly distributions were $0.0733 per unit. This was increased on
February 15, 2007 to $0.08 per unit and on June 15, 2007 to $0.0967 per unit.
Estimated regular distributions in 2007, assuming continued $0.0967 payments
for the duration of the year, would be approximately $53 million.
    Although it is typical for the Fund's cash flow to have seasonal
fluctuations, it is management's current intention to pay consistent regular
monthly distributions throughout the year based on estimated annual cash
flows.
    The Directors review distributions quarterly giving consideration to
current performance, historical trends in the business and the expected
sustainability or change in those trends, as well as maintenance capital
requirements to sustain performance. As a result, the directors announced
their intention to declare a special distribution at year end. The amount will
be determined in December after considering the expectation of earnings in the
fourth quarter.

    Supplementary Information

    Parkland seeks to provide relevant information to allow investors to
evaluate its operations. The nature of this information is limited by
competitive sensitivities, confidentiality terms in written agreements and
Parkland's policy not to provide guidance regarding future earnings. We have
developed a template of supplementary information that is published with each
quarterly financial report. For persons seeking information regarding fuel
margins we refer to outside sources: Bloomberg's Oil Buyers Guide, Nymex
contracts for gasoline and crude oil as well as Government of Canada,
Department of Finance reports. Data from these sources will not be sufficient
to calculate Parkland's fuel margin given that it does not correlate directly
with our market region and supply contracts, but should indicate margin
trends.

    
    Cash Available for Distribution

                                                 For the three  For the nine
                                                  months ended  months ended
                                                  September 30, September 30,
    (000's)                                               2007          2007
    -------------------------------------------------------------------------

    Cash from operating activities                   $  22,837     $  82,035
    Net changes in non-cash working capital             14,865        11,340
                                                      ----------   ----------
    Funds flow from operations                          37,702        93,375
    Add back (deduct):
      Interest on long-term debt                           426         1,207
      Unit incentive compensation                         (364)       (1,294)
      Accretion expense                                    (15)          (45)
      Current taxes                                    (11,190)           16
                                                     ----------    ----------
                                                        26,559        93,259
    Maintenance capital expended                        (5,627)       (7,267)
    Current taxes and interest                          10,764        (1,223)
                                                     ----------    ----------
    Cash available for distribution                  $  31,696     $  84,769
                                                     ----------    ----------
    Cash distributed                                 $  14,047     $  38,521
                                                     ----------    ----------
                                                     ----------    ----------
    


    Distribution Reinvestment Plan

    Parkland has a Distribution Reinvestment Plan administered by Valiant
Trust Company. Details are available from the Fund or from Valiant Trust
Company.

    Internal Controls

    Parkland has completed the initial phases of a review and enhancement of
internal controls as well as system documentation. A program has been
developed to test the key internal controls. No major controls gaps have been
identified. The same process is currently underway at the recently acquired
businesses. The Fund believes that it will be able to continue to comply with
regulations as required.

    Accounting Policies

    As a result of the recent acquisitions, the Fund has updated the
following significant accounting policies and practices:

    
        -   Goodwill
        -   Intangible Assets
        -   Deferred Revenue
    

    All of these updated accounting policies are described in more detail in
Note 1 to the Interim Consolidated Financial Statements. The adoption of these
new standards has had no impact on the Fund's net earnings or cash flows.

    NEW ACCOUNTING STANDARDS ADOPTED

    On January 1, 2007, the Fund adopted the Canadian Institute of Chartered
Accountants (CICA) handbook sections 1530 "Comprehensive Income", section 3251
"Equity" and section 3855 "Financial Instruments - Recognition and
Measurement". These standards result in changes in the accounting for
financial instruments as well as introduce comprehensive income as a separate
component of unitholders' capital. As required, these standards have been
adopted prospectively and comparative amounts for the prior periods have not
been restated.
    The adoption of these new standards is explained more fully in Note 2 to
the Interim Consolidated Financial Statements.

    Quarterly Financial Information

    
    ($ millions except volume and per unit amounts)

                       2005                        2006                 2007
    For the three
     months ended    Dec 31 Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 Sept 30
    -------------------------------------------------------------------------
    Fuel volume
     (millions of
     litres)            297    329    374    412    386    440    471    578
    Net sales and
     operating
     revenue         $231.4 $241.6 $320.2 $359.3 $278.9 $334.0 $424.6 $482.9
    Net earnings     $  7.6 $  5.6 $ 21.9 $ 16.7 $ 14.4 $ 13.2 $ 21.2 $ 32.2
    EBITDA           $ 11.5 $  8.2 $ 24.4 $ 27.7 $  9.4 $ 19.2 $ 47.5 $ 26.6
    Net earnings per
     unit (restated)
      - basic        $ 0.20 $ 0.15 $ 0.59 $ 0.44 $ 0.37 $ 0.28 $ 0.44 $ 0.66
      - diluted      $ 0.20 $ 0.14 $ 0.58 $ 0.44 $ 0.37 $ 0.27 $ 0.44 $ 0.66

    -------------------------------------------------------------------------

    Contractual Obligations

    The Fund has contracted obligations under various debt agreements as well
as under operating and capital leases for land, building and equipment.
Minimum lease and principal payments ($000's) under the existing terms are as
follows:

                                       Mortgages, bank
    Year ending,                       loans and notes  Operating    Capital
    September 30                               payable     leases     leases
    -------------------------------------------------------------------------
    2008                                     $   2,621  $   2,407  $   1,563
    2009                                         2,961      1,794         91
    2010                                         2,889        922        201
    2011                                         3,064        546         38
    2012                                         3,216        346        142
    Thereafter                                     637        644        713
                                             ---------- ---------- ----------
                                             $  15,388  $   6,659  $   2,748
                                             ---------- ---------- ----------
    

    The Fund also has purchase commitments under its fuel supply contracts
that require the purchase of approximately 1.3 billion litres of product over
the next year.

    Fund Description

    Parkland Income Fund operates retail and wholesale fuels and convenience
store businesses under its Fas Gas Plus, Fas Gas, Race Trac Fuels and Short
Stop Food Stores brands and through independent branded dealers, and
transports fuel through its Petrohaul division. With approximately 558
locations, Parkland has developed a strong market niche in western and
northern Canadian non-urban markets. Through Neufeld and Joy the Fund markets
propane, gasoline, diesel, lubricants, industrial fluids, agricultural inputs
and delivery services to commercial and industrial customers in northern
Alberta, northeastern British Columbia and the Northwest Territories. Through
UPPI the Fund markets wholesale and commercial fuels and lubricants throughout
southern British Columbia. To maximize value for its unitholders, the Fund is
focused on the continuous refinement of its retail portfolio, increased
revenue diversification through growth in non-fuel revenues and active supply
chain management. Parkland operates the Bowden refinery near Red Deer, Alberta
producing drilling fluids on a contract basis.
    The Fund's units trade on the Toronto Stock Exchange (TSX) under the
symbol PKI.UN. For more information, visit www.parkland.ca.

    Certain information included herein is forward-looking. Forward-looking
statements include, without limitation, statements regarding the future
financial position, business strategy, budgets, projected costs, capital
expenditures, financial results, taxes and plans and objectives of or
involving Parkland. Many of these statements can be identified by looking for
words such as "believe", "expects", "expected", "will", "intends", "projects",
"projected", "anticipates", "estimates", "continues", or similar words and
include but are not limited to, statements regarding the accretive effects of
the acquisition and the anticipated benefits of the acquisition. Parkland
believes the expectations reflected in such forward-looking statements are
reasonable but no assurance can be given that these expectations will prove to
be correct and such forward-looking statements should not be unduly relied
upon. Forward-looking statements are not guarantees of future performance and
involve a number of risks and uncertainties some of which are described in the
Fund's annual report, annual information form and other continuous disclosure
documents. Such forward-looking statements necessarily involve known and
unknown risks and uncertainties and other factors, which may cause the Fund's
actual performance and financial results in future periods to differ
materially from any projections of future performance or results expressed or
implied by such forward-looking statements. Such factors include, but are not
limited to: general economic, market and business conditions; industry
capacity; competitive action by other companies; refining and marketing
margins; the ability of suppliers to meet commitments; actions by governmental
authorities including increases in taxes; changes in environmental and other
regulations; and other factors, many of which are beyond the control of
Parkland. Any forward-looking statements are made as of the date hereof and
the Fund does not undertake any obligation, except as required under
applicable law, to publicly update or revise such statements to reflect new
information, subsequent or otherwise.

    Conference Call
    ---------------
    Parkland will hold a conference call for Analysts, Brokers and Investors
to discuss third quarter results as follows:

    
        Wednesday, October 31, 2007, 9:00 a.m. (11:00 a.m. Eastern Time)
        Direct: 416-644-3426
        Toll-free: 800-733-7560

        The replay will be available as follows:

        From Wednesday, October 31, 2007, 9:00 a.m. (11:00 a.m. Eastern Time)
        To Wednesday, November 14, 2007 at 9:59 p.m. (11:59 p.m. Eastern
        Time)
        Direct: 416-640-1917
        Toll-free: 877-289-8525
        Passcode: 21251183 followed by the number sign

    Webcast
    -------
    http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=12057220


    Consolidated Balance Sheet

                                                  September 30,  December 31,
    ($000's) (Unaudited)                                  2007          2006
    -------------------------------------------------------------------------
    Assets
      Current Assets
        Cash and cash equivalents                    $  13,928     $  36,462
        Accounts receivable                             91,269        40,294
        Inventories                                     32,346        20,351
        Prepaid expenses and other                      10,532         3,874
    -------------------------------------------------------------------------
                                                       148,075       100,981
      Capital assets                                   164,270        68,541
      Other                                              1,253         1,499
      Future income taxes                                    -         1,438
      Goodwill (Note 6, 7)                              11,594             -
      Intangible assets (Note 5, 7)                     14,624             -
    -------------------------------------------------------------------------
                                                     $ 339,816     $ 172,459
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
      Current Liabilities
        Accounts payable and accrued liabilities     $  91,427     $  62,124
        Distributions declared and payable               4,686        15,842
        Income tax payable                                 505           459
        Deferred revenue                                   391             -
        Long-term debt - current portion                 4,184        10,145
    -------------------------------------------------------------------------
                                                       101,193        88,570
      Long-term debt                                    13,952         1,651
      Refinery remediation accrual                       3,038         3,038
      Asset retirement obligations                       1,185         1,140
      Future income taxes (Note 10)                      5,284             -
    -------------------------------------------------------------------------
                                                       124,652        94,399
    -------------------------------------------------------------------------

    Unitholders' Capital (Note 3)
      Class B Limited Partners' Capital                 17,277        12,310
      Class C Limited Partners' Capital                 58,143             -
      Unitholders' Capital                             139,744        65,750
    -------------------------------------------------------------------------
                                                       215,164        78,060
    -------------------------------------------------------------------------
                                                     $ 339,816     $ 172,459
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Earnings and Other Comprehensive Income,
    Accumulated Other Comprehensive Income and Retained Earnings

    (000's except
     per unit             For the three months           For the nine months
     amounts)               ended September 30            ended September 30
    (Unaudited)       2007      2006      2005       2007     2006      2005
    -------------------------------------------------------------------------

    Net sales and
     operating
     revenue      $482,895  $359,272  $258,901 $1,241,529 $920,990  $644,159
    Cost of sales
     and operating
     expenses      427,812   312,922   231,185  1,074,736  811,942   579,047
    -------------------------------------------------------------------------
    Gross profit    55,083    46,350    27,716    166,793  109,048    65,112
    -------------------------------------------------------------------------
    Expenses
      Operating
       and direct
       costs        17,600    12,892    10,875     45,214   34,958    29,729
      Marketing,
       general
       and admin-
       istrative    10,924     5,775     4,295     28,320   13,864    10,170
      Amortization   5,955     2,140     2,024     18,811    6,266     6,050
      Interest on
       long-term
       debt            426       218       210      1,207      710       624
      (Gain) loss
       on disposal
       of capital
       assets           (8)      (26)      169       (138)     359       355
    -------------------------------------------------------------------------
                    34,897    20,999    17,573     93,414   56,157    46,928
    -------------------------------------------------------------------------
    Earnings
     before income
     taxes          20,186    25,351    10,143     73,379   52,891    18,184
    -------------------------------------------------------------------------
    Income tax
     (recovery)
     expense
      Current      (11,190)    8,523       433         16    8,561       592
      Future
      (Note 10)       (869)       93        76      6,722      140       186
    -------------------------------------------------------------------------
                   (12,059)    8,616       509      6,738    8,701       778
    -------------------------------------------------------------------------
    Net earnings    32,245    16,735     9,634     66,641   44,190    17,406
    Other
     comprehensive
     income              -         -         -          -        -         -
    -------------------------------------------------------------------------
    Comprehensive
     income       $ 32,245  $ 16,735  $  9,634  $  66,641 $ 44,190  $ 17,406
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated
     other
     comprehensive
     income,
     beginning of
     year         $      -  $      -  $      -  $       - $      -  $      -
    Comprehensive
     income              -         -         -          -        -         -
    -------------------------------------------------------------------------
    Accumulated
     other
     comprehensive
     income, end
     of period    $      -  $      -  $      -  $       - $      -  $      -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Retained
     earnings,
     beginning of
     year         $      -  $      -  $      -  $       - $      -  $      -
    Allocation of
     net earnings
     to Class B
     Limited
     Partners       (5,700)   (3,891)   (2,698)   (11,867) (10,319)   (5,074)
    Allocation of
     net earnings
     to Class C
     Limited
     Partners       (2,924)        -         -     (7,128)       -         -
    Allocation of
     net earnings
     to Unit-
     holders       (23,621)  (12,844)   (6,936)   (47,646) (33,871)  (12,332)
    -------------------------------------------------------------------------
    Retained
     earnings, end
     of period    $      -  $      -  $      -  $       - $      -  $      -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings
     per unit
      - basic     $   0.66  $   0.44  $   0.26  $    1.38 $   1.18  $   0.47
      - diluted   $   0.66  $   0.44  $   0.26  $    1.37 $   1.18  $   0.47
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statement of Cash Flows

                                                        For the three months
                                                          ended September 30
    ($000's) (Unaudited)                            2007      2006      2005
    -------------------------------------------------------------------------

    Cash Provided By Operations
      Net earnings                              $ 32,245  $ 16,735  $  9,634
        Add back non-cash items
          Amortization                             5,955     2,140     2,024
          (Gain) loss on disposal of capital
           assets                                     (8)      (26)      169
          Accretion expense                           15        15        16
          Asset retirement obligation
           expenditures                                -       (40)        -
          Non-cash unit based incentive
           compensation                              364       101        45
          Future taxes                              (869)       93        76
    -------------------------------------------------------------------------
      Funds flow from operations                  37,702    19,018    11,964
      Net changes in non-cash working capital
       (Note 8)                                  (14,865)   32,066    (3,752)
    -------------------------------------------------------------------------
      Cash from operating activities              22,837    51,084     8,212
    -------------------------------------------------------------------------

    Financing Activities
      Proceeds from long-term debt                15,000         -         -
      Long-term debt repayments                  (16,022)   (1,170)   (1,070)
      Distributions to Class B Limited Partners   (2,483)   (1,656)   (1,553)
      Distributions to Class C Limited Partners   (1,499)        -         -
      Distributions to Unitholders               (10,065)   (5,567)   (3,995)
      Fund units issued, net of issue costs          588       313       386
      Net changes in non-cash working capital
       (Note 8)                                       25       252         6
    -------------------------------------------------------------------------
      Cash used for financing activities         (14,456)   (7,828)   (6,226)
    -------------------------------------------------------------------------

    Investing Activities
      Acquisition of Neufeld Petroleum (Note 5)      297         -         -
      Acquisition of Joy Propane Ltd. (Note 6)         -         -         -
      Acquisition of United Petroleum
       Products Inc. (Note 7)                          -         -         -
      Change in other assets                          67       108       147
      Purchase of capital assets                  (7,403)   (3,513)   (2,083)
      Proceeds on sale of capital assets              77       833       169
      Refinery remediation expenditures                -         -       (33)
    -------------------------------------------------------------------------
      Cash used for investing activities          (6,962)   (2,572)   (1,800)
    -------------------------------------------------------------------------

    Increase (decrease) in cash                    1,419    40,684       186
    Cash and cash equivalents, beginning
     of period                                    12,509    26,612     6,673
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period    $ 13,928  $ 67,296  $  6,859
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash interest paid                          $    426 $     218  $    210
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash taxes paid                             $  1,965 $      23  $    433
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                         For the nine months
                                                          ended September 30
    ($000's) (Unaudited)                            2007      2006      2005
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash Provided By Operations
      Net earnings                              $ 66,641  $ 44,190  $ 17,406
        Add back non-cash items
          Amortization                            18,811     6,266     6,050
          (Gain) loss on disposal of capital
           assets                                   (138)      359       355
          Accretion expense                           45        45        46
          Asset retirement obligation
           expenditures                                -       (40)        -
          Non-cash unit based incentive
           compensation                            1,294       242       133
          Future taxes                             6,722       140       186
    -------------------------------------------------------------------------
      Funds flow from operations                  93,375    51,202    24,176
      Net changes in non-cash working capital
       (Note 8)                                  (11,340)   38,594     2,891
    -------------------------------------------------------------------------
      Cash from operating activities              82,035    89,796    27,067
    -------------------------------------------------------------------------

    Financing Activities
      Proceeds from long-term debt                43,003         -       158
      Long-term debt repayments                  (66,210)   (3,718)   (3,298)
      Distributions to Class B Limited Partners   (6,880)   (4,681)   (5,044)
      Distributions to Class C Limited Partners   (4,100)        -         -
      Distributions to Unitholders               (27,541)  (15,452)  (11,549)
      Fund units issued, net of issue costs       48,736     1,976     1,592
      Net changes in non-cash working capital
       (Note 8)                                  (11,156)     (840)   (3,666)
    -------------------------------------------------------------------------
      Cash used for financing activities         (24,148)  (22,715)  (21,807)
    -------------------------------------------------------------------------

    Investing Activities
      Acquisition of Neufeld Petroleum (Note 5)  (47,610)        -         -
      Acquisition of Joy Propane Ltd. (Note 6)    (9,872)        -         -
      Acquisition of United Petroleum
       Products Inc. (Note 7)                    (10,425)        -         -
      Change in other assets                         246       385       109
      Purchase of capital assets                 (14,095)   (9,734)   (3,970)
      Proceeds on sale of capital assets           1,335     1,274       250
      Refinery remediation expenditures                -         -       (76)
    -------------------------------------------------------------------------
      Cash used for investing activities         (80,421)   (8,075)   (3,687)
    -------------------------------------------------------------------------

    Increase (decrease) in cash                  (22,534)   59,006     1,573
    Cash and cash equivalents, beginning
     of period                                    36,462     8,290     5,286
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period    $ 13,928  $ 67,296  $  6,859
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash interest paid                          $  1,207  $    710  $    624
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash taxes paid                             $  2,174  $  1,199  $    592
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Notes to Consolidated Financial Statements

    1.  Update to Accounting Policies

    The consolidated interim financial statements have been prepared
    following the same accounting policies and methods of computation as the
    most recent annual financial statements dated December 31, 2006, except
    as noted below. These financial statements should be read in conjunction
    with the annual financial statements and notes.

        Goodwill

    The Fund must record goodwill relating to a corporate acquisition when
    the total purchase price exceeds the fair value for accounting purposes
    of the net identifiable assets and liabilities of the acquired company.
    The goodwill balance is assessed for impairment annually at year-end or
    as events occur that could result in an impairment. Impairment is
    recognized based on the fair value of the reporting entity compared to
    the book value of the reporting entity. If the fair value of the Fund is
    less than the book value, impairment is measured by allocating the fair
    value of the Fund to the identifiable assets and liabilities as if the
    Fund has been acquired in a business combination for a purchase price
    equal to its fair value. Any excess of the book value of goodwill over
    the implied value of goodwill is the impairment amount. Impairment is
    charged to earnings and is not tax affected, in the year in which it
    occurs. Goodwill is stated at cost less impairment and is not amortized.

        Intangible Assets

    Customer relationships and tradenames acquired during the acquisition of
    Neufeld Petroleum are recorded at estimated fair value and will be
    amortized using the straight-line method over their estimated useful
    lives of 5 years. The value of the non-compete agreement acquired during
    the acquisition of Neufeld Petroleum was recorded at estimated fair value
    and will be amortized using the straight-line method over the term of the
    agreement. Intangible assets are tested for impairment when conditions
    exist which may indicate that the estimated future net cash flows from
    the asset will be insufficient to cover its carrying value.

        Deferred Revenue

    Deferred revenue consists of deposits and prepayments by customers for
    the purchase of product not yet delivered and not recorded as revenue by
    the Fund.

    2.  Changes in Accounting Policies

    On January 1, 2007, the Fund adopted the Canadian Institute of Chartered
    Accountants (CICA) handbook sections 1530 "Comprehensive Income",
    section 3251 "Equity" and section 3855 "Financial Instruments -
    Recognition and Measurement". These standards result in changes in the
    accounting for financial instruments as well as introduction of
    comprehensive income as a separate component of unitholders' capital. As
    required, these standards have been adopted prospectively and comparative
    amounts for the prior periods have not been restated.

     a) Comprehensive Income

        Comprehensive income is comprised of net earnings or loss and other
        comprehensive income ("OCI"). OCI represents the change in capital
        for a period that arises from unrealized gains and losses on
        available for sale securities and changes in the fair value of
        derivative instruments designated as cash flow hedges. The Fund does
        not currently have any OCI.

     b) Equity

        This section establishes the standards for presentation of capital
        and changes in capital during the period. It requires separate
        presentation of changes in unitholders' capital for the period
        arising from net income, OCI, contributed surplus, retained earnings,
        unitholders' capital and reserves. Accumulated OCI would be included
        in the consolidated balance sheet as a separate component of
        unitholders' capital.

     c) Financial Instruments

        This section establishes standards for the recognition and
        measurement of financial instruments which is comprised of: financial
        assets, financial liabilities, derivatives and non-financial
        derivatives.

        A financial asset is cash or a contractual right to receive cash or
        another financial asset, including equity, from another party. A
        financial liability is the contractual obligation to deliver cash or
        another financial asset to another party.

        A derivative is a financial instrument whose value changes in
        response to a specified variable, requires little or no net
        investment and it is settled at a future date. An embedded derivative
        is a derivative that is a part of a non-derivative contract and not
        directly related to that contract. Under this standard, embedded
        derivatives must be accounted for as a separate financial instrument.
        A non-financial derivative is a contract that can be settled net in
        cash or another financial instrument.

        Under this standard, all financial instruments are initially recorded
        at fair value and are subsequently accounted for based on one of four
        classifications: held for trading, held-to-maturity, loans and
        receivables or available-for-sale. The classification of a financial
        instrument depends on its characteristics and the purpose for which
        it was acquired. Fair values are based upon quoted market prices
        available from active markets or are otherwise determined using a
        variety of valuation techniques and models.

        Under this standard, all guarantees upon inception are required to be
        recognized on the balance sheet at their fair value. No subsequent
        re-measurement is required to fair value each guarantee at each
        subsequent balance sheet date unless the guarantee is considered a
        derivative.

           i) Held for trading

              Held for trading financial instruments are financial assets or
              financial liabilities that are purchased with the intention of
              selling or repurchasing in the near term. Any financial
              instrument can be designated as held for trading as long as its
              fair value can be reliably measured. A derivative is classified
              as held for trading, unless designated as and considered an
              effective hedge. Held for trading instruments are recorded at
              fair value with any subsequent gains or losses from changes in
              the fair value recorded directly into earnings.

              All of the Fund's cash and cash equivalents, accounts
              receivable, accounts payable and accrued liabilities and
              distributions declared and payable are designated as held for
              trading and are recorded at fair value.

          ii) Held-to-maturity

              Held-to-maturity investments are financial assets with fixed or
              determinable payments and a fixed maturity that the Fund has
              the intent and ability to hold to maturity. These financial
              assets are measured at amortized cost using the effective
              interest method. Any gains or losses arising from the sale of a
              held-to-maturity investment are recorded directly into
              earnings.

              The Fund has not designated any financial instruments as held-
              to-maturity.

         iii) Loans and receivables and other financial liabilities

              Loans and receivables and other financial liabilities are
              accounted for at amortized cost using the effective interest
              method of amortization.

              The fair value of other assets and long-term debt approximate
              their carrying values due to their floating interest rates.

          iv) Available-for-sale

              Available-for-sale assets are those assets that are not
              classified as held for trading, held-to-maturity or loans and
              receivables. Available-for-sale instruments are recorded at
              fair value. Any gains or losses arising from the change in fair
              value is recorded in OCI and upon the sales of the instrument
              or other-than-temporary impairment, the cumulative gain or loss
              is transferred into earnings.

              The Fund has not designated any financial instruments as
              available-for-sale.

        The methods used by the Fund in determining fair value of financial
        instruments are unchanged as a result of implementing the new
        standard.


    3.  Unitholders' Capital

                                     Nine months ended            Year ended
                                         Sept 30, 2007     December 31, 2006
                                      Units                 Units
                                     (000's)   ($000's)    (000's)   ($000's)
    -------------------------------------------------------------------------
    Class B Limited Partnership Units
      Balance, beginning of period    8,566  $  12,310      8,724  $  13,055
      Allocation of retained
       earnings                           -     11,867          -     13,581
      Distribution to partners            -     (6,880)         -    (12,934)
      Exchanged for Fund units           (9)       (20)      (158)    (1,392)
    -------------------------------------------------------------------------
    Balance, end of period            8,557  $  17,277      8,566  $  12,310
    -------------------------------------------------------------------------

    Class C Limited Partnership Units
      Balance, beginning of period        -  $       -          -  $       -
      Issued on capital acquisition,
       net of issue costs             5,519     58,954          -          -
      Allocation of retained
       earnings                           -      7,128          -          -
      Exchanged for fund units         (354)    (3,839)
      Distribution to partners            -     (4,100)         -          -
    -------------------------------------------------------------------------
    Balance, end of period            5,165  $  58,143          -  $       -
    -------------------------------------------------------------------------

    Fund Units
      Balance, beginning of period   30,014  $  65,750     28,288  $  45,046
      Allocation of retained
       earnings                           -     47,646          -     45,010
      Issued on vesting of
       restricted units                  26          -          -          -
      Unit incentive compensation         -      1,294          -        341
      Issued for cash, net of issue
       costs                          4,080     47,085          -          -
      Issued pursuant to the
       distribution reinvestment plan    34        480         63        491
      Issued under unit option plan     217      1,171        339      1,744
      To be issued pursuant to
       special distribution               -          -      1,165     14,963
      Distribution to unitholders         -    (27,541)         -    (43,237)
      Exchange of Limited
       Partnership units                363      3,859        159      1,392
    -------------------------------------------------------------------------
    Balance, end of period           34,734  $ 139,744     30,014  $  65,750
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                     48,456  $ 215,164     38,580  $  78,060
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    On May 4, 2007 the Directors passed a resolution authorizing the Fund to
    provide for a division of its units on a three-for-one unit basis. The
    unit split did not change the rights of the holders of units and each
    unit outstanding after the split is entitled to one vote. These financial
    statements have been adjusted retroactively for the three-for-one split.

    Unit Option Plan

    The table below represents the status of the Fund's Unit Options Plan as
    at September 30, 2007 and the changes therein for the period then ended:

                                     Nine months ended            Year ended
                                         Sept 30, 2007     December 31, 2006
                                  Number of   Weighted  Number of   Weighted
                                    Options    average    Options    average
                                      Units   exercise      Units   exercise
                                     (000's)     price     (000's)     price
    -------------------------------------------------------------------------
    Balance, beginning of period      1,228  $    6.20      1,650  $    6.03
    Cancelled                             -          -        (84) $    7.01
    Exercised                          (216)      5.74       (338) $    5.18
    -------------------------------------------------------------------------
    Balance, end of period            1,012  $    6.29      1,228  $    6.20
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Exercisable options, end of
     period                             832  $    6.13        813  $    5.58
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Exercise prices for outstanding options at September 30, 2007 have the
    following ranges: 250,302 from $4.15 - $5.87, 258,003 from $6.32 - $6.68
    and 504,016 from $6.73 - $7.27. These issue prices represent the market
    value at the time of issue.

    The corresponding remaining contractual life for these options ranges
    from 5 - 8 years.

    The Fund accounts for its grants of options using the fair value based
    method of accounting for stock based compensation. The total cost to be
    reported is $0.5 million. The compensation cost that has been charged
    against income for the nine months ended September 30, 2007 is
    $0.1 million (September 30, 2006 - $0.1 million, September 30, 2005 -
    $0.1 million).

    Restricted Unit Plan

    Effective January 1, 2006, the Fund adopted a Restricted Units Plan to
    complement the Option Plan and Unit Distribution Rights Plan. Under the
    Plan the units vest over a five year period and are subject to entity
    performance criteria.

    Details of the Plan are set out in the Notice of Annual and Special
    Meeting of Unitholders dated March 16, 2007.

    The table below represents the status of the Fund's Restricted Unit Plan
    as at September 30, 2007 and the changes therein for the period then
    ended:

                                     Nine months ended            Year ended
                                         Sept 30, 2007     December 31, 2006
                                              Weighted              Weighted
                                               Average               Average
                                  Number of       Unit  Number of       Unit
                                      Units      Price      Units      Price
                                     (000's)   ($/unit)    (000's)   ($/unit)
    -------------------------------------------------------------------------
    Balance, beginning of period        131  $    6.60          -  $       -
    Granted                             189      12.80        137       6.60
    Issued                              (26)      6.60          -          -
    Cancelled                            (2)     12.38         (6)      6.55
    -------------------------------------------------------------------------
    Balance, end of period              292  $   10.58        131  $    6.60
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Fund accounts for its grants of restricted units over the graded
    vesting schedule of each grant. Each grant of restricted units is treated
    as if the grant were a series of awards rather than a single award. The
    fair value of the award is determined based on the different expected
    lives for the restricted units that vest each year. The total cost to be
    reported for the restricted units granted in 2007 is $2.4 million. The
    compensation cost that has been included in marketing, general and
    administrative expenses for the nine months ended September 30, 2007 is
    $1.2 million (September 30, 2006 - $0.1 million).

    4.  Segmented Information

    The Fund's operations have been predominantly in fuel marketing and
    convenience store sales in western Canada. With the acquisitions of
    Neufeld Petroleum, Joy Propane Ltd. and United Petroleum Products Inc.,
    the Fund now sells propane, fertilizer, lubes, other agricultural inputs
    and industrial products and services. The Fund's operating segments have
    been adjusted to reflect these changes.

    Fuel Marketing includes sales of gasoline, diesel, heating oil, propane
    fuel and variable rents derived from service station sites. Convenience
    Store Merchandise continues to include the operations of the Fund owned
    and operated convenience stores that are integrated into fuel marketing
    sites and bear common operating costs. Commercial includes primarily the
    non-fuel components of the acquired businesses as noted in the previous
    paragraph.

    Due to the amount of common operating and property costs it is not
    practical to report these segments below their respective gross profits.
    The segregation of capital expenditures and total assets is not practical
    as the reportable segments represent product sales that are generated
    from common locations.

                                                  For the three months ended
                                          Convenience
                                    Fuel        Store
    ($ 000's) (Unaudited)      Marketing  Merchandise  Commercial      Total
    -------------------------------------------------------------------------

    September 30, 2007
      Net sales and
       operating revenue      $  446,558  $   18,307  $   18,030  $  482,895
      Cost of sales              405,999      13,609       8,204     427,812
    -------------------------------------------------------------------------
      Gross profit            $   40,559  $    4,698  $    9,826  $   55,083
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    September 30, 2006
      Net sales and
       operating revenue      $  342,784  $   16,488  $        -  $  359,272
      Cost of sales              300,820      12,102           -     312,922
    -------------------------------------------------------------------------
      Gross profit            $   41,964  $    4,386  $        -  $   46,350
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    September 30, 2005
      Net sales and
       operating revenue      $  246,445  $   12,456  $        -  $  258,901
      Cost of sales              221,897       9,288           -     231,185
    -------------------------------------------------------------------------
      Gross profit            $   24,548  $    3,168  $        -  $   27,716
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                   For the nine months ended
                                          Convenience
                                    Fuel        Store
    ($ 000's) (Unaudited)      Marketing  Merchandise  Commercial      Total
    -------------------------------------------------------------------------

    September 30, 2007
      Net sales and
       operating revenue      $1,144,052  $   48,921  $   48,556  $1,241,529
      Cost of sales            1,009,604      36,339      28,793   1,074,736
    -------------------------------------------------------------------------
      Gross profit            $  134,448  $   12,582  $   19,763  $  166,793
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    September 30, 2006
      Net sales and
       operating revenue      $  876,545  $   44,445  $        -  $  920,990
      Cost of sales              779,171      32,771           -     811,942
    -------------------------------------------------------------------------
      Gross profit            $   97,374  $   11,674  $        -  $  109,048
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    September 30, 2005
      Net sales and
       operating revenue      $  610,729  $   33,430  $        -  $  644,159
      Cost of sales              554,450      24,597           -     579,047
    -------------------------------------------------------------------------
      Gross profit            $   56,279  $    8,833  $        -  $   65,112
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    5.  Acquisition of Neufeld Petroleum and Propane Ltd. and Neufeld
        Holdings Ltd.

    On January 24, 2007, the Fund acquired all of the outstanding shares of
    Neufeld Petroleum & Propane Ltd. and Neufeld Holdings Ltd. ("Neufeld
    Petroleum"). The transaction was accounted for using the purchase method
    with the allocation of the purchase price as follows:

                                                                     ($000's)
    Estimated fair value of net assets acquired:
      Capital assets                                              $ 87,405.2
      Working capital, net (excluding bank indebtedness)            25,250.0
      Intangible asset - customer relationships                      6,264.1
      Intangible asset - tradenames                                  4,581.2
      Intangible asset - non compete agreement                         561.0
    -------------------------------------------------------------------------
                                                                  $124,061.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration:
      Cash paid to vendor                                         $ 23,468.0
      Class C Limited Partnership Units                             47,620.1
      Acquisition costs                                              1,982.5
      Bank indebtedness assumed                                      2,137.8
      Shareholder loans paid out                                    17,828.0
      Management bonus paid out                                      4,331.1
      Long-term debt assumed                                        26,694.0
    -------------------------------------------------------------------------
                                                                  $124,061.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The effective date of the transaction was November 1, 2006. The interim
    period net earnings after tax to January 24, 2007 of $3 million have been
    credited to the purchase price. The above purchase price allocation is
    subject to change. The value of the Class C Limited Partnership units was
    adjusted to reflect a discount calculated due to the restrictions on
    conversion to publicly tradeable units.

    6.  Acquisition of Joy Propane Ltd.

    On April 24, 2007, the Fund acquired all of the outstanding shares of Joy
    Propane Ltd. The transaction was accounted for using the purchase method
    with the allocation of the purchase price as follows:

                                                                     ($000's)
    Estimated fair value of net assets acquired:
      Capital assets                                              $  9,716.7
      Working capital, other                                         1,056.0
      Cash                                                           1,414.0
      Goodwill                                                       4,488.9
    -------------------------------------------------------------------------
                                                                  $ 16,675.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration:
      Cash paid to vendor                                         $ 11,201.5
      Acquisition costs                                                 84.6
      Class C Limited Partnership Units                              5,389.5
    -------------------------------------------------------------------------
                                                                  $ 16,675.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The effective date of the transaction was February 28, 2007. The interim
    period net earnings after tax to April 24, 2007 of $168,500 have been
    credited to the purchase price. The above purchase price allocation is
    subject to change pending completion of the valuation of the intangible
    assets.

    7.  Acquisition of United Petroleum Products Inc.

    On May 28, 2007, the Fund acquired all of the outstanding shares of
    United Petroleum Products Inc. The transaction was accounted for using
    the purchase method with the allocation of the purchase price as follows:

                                                                     ($000's)
    Estimated fair value of net assets acquired:
      Capital assets                                              $  2,538.4
      Working capital, net                                           2,240.6
      Intangible asset - customer relationships                      5,000.0
      Intangible asset - non compete agreement                         200.0
      Goodwill                                                       7,105.4
    -------------------------------------------------------------------------
                                                                  $ 17,084.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration:
      Cash paid to vendor                                         $ 10,382.9
      Acquisition costs                                                 41.7
      Class C Limited Partnership Units                              5,944.7
      Bank debt assumed                                                715.1
    -------------------------------------------------------------------------
                                                                  $ 17,084.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The effective date of the transaction was May 1, 2007. The interim period
    net earnings after tax to May 28, 2007 of $247,000 have been credited to
    the purchase price. The above purchase price allocation is subject to
    change pending completion of the valuation of the intangible assets.

    8.  Net Changes in Non-Cash Working Capital

                          For the three months           For the nine months
                            ended September 30            ended September 30
    ($000's)
     (Unaudited)      2007      2006      2005      2007      2006      2005
    -------------------------------------------------------------------------

    Accounts
     receivable   $    279  $  2,866  $ (4,796) $ (7,301) $ (3,908) $(12,236)
    Inventories      1,658    (1,603)     (745)     (760)   (1,086)     (646)
    Prepaid
     expenses
     and other      (7,072)       98      (375)   (6,507)      181      (149)
    Accounts
     payable         5,553    22,205     2,164     6,061    36,045    15,922
    Deferred
     revenue          (199)        -         -       249         -         -
    Income taxes
     payable       (15,084)    8,500         -    (3,082)    7,362         -
    -------------------------------------------------------------------------
      Subtotal for
       operating
       activities $(14,865) $ 32,066  $ (3,752) $(11,340) $ 38,594  $  2,891
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Distributions
     declared
     and payable  $     25  $    252  $      6  $(11,156) $   (840) $ (3,666)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    9.  Financial Instruments

    The Fund's exposure under its financial instruments is limited to
    financial assets and liabilities, all of which are included in the
    financial statements. The fair values of financial assets and liabilities
    that are included in the balance sheet approximate their carrying
    amounts.

    The Fund's accounts receivables are subject to normal credit risks.

    The Fund is exposed to interest rate risk to the extent that bank debt is
    at a floating rate of interest.

    10.  Future Income Taxes

    On June 12, 2007, Bill C-52 Budget Implementation Act, 2007 was
    substantively enacted by the Canadian federal government, which contains
    legislation to tax publicly traded trusts in Canada. As a result, a new
    31.5 percent tax will be applied to distributions from Canadian public
    income trusts. The new tax is not expected to apply to the Fund until
    2011 as a transition period applies to publicly traded trusts that
    existed prior to November 1, 2006. As a result of this substantive
    enactment of trust taxation, the Fund recorded a $6.7 million future
    income tax expense and increased its future income tax liability. The
    future income tax adjustment represents the taxable temporary differences
    of the Fund tax affected at 31.5 percent, which is the rate that will be
    applicable in 2011 under the current legislation and the Fund's current
    corporate structure.

    11.  Related Party Transactions

    During the third quarter of fiscal 2007, Parkland paid $91,450 for legal
    services to Bennett Jones LLP where David Spencer, a Parkland director,
    is a partner. The majority of services received related to documentation
    for the acquisitions and a new credit facility.

    Parkland provides management, labor, accounting and delivery services to
    Neufeld Petroleum and Propane (High Level) Ltd. (NPPHL). NPPHL is owned
    by Abe Neufeld, Parkland's Vice President, Commercial Business
    Development and consists of a small scale Petro-Canada bulk fuel agency
    in High Level, Alberta. The services are provided by Parkland on a cost
    recovery basis and totaled $87,500 in the third quarter. Parkland intends
    to purchase this business in the future.

    12.  Comparative Figures

    Certain comparative figures have been reclassified to comply with the
    presentation adopted in the current period.

    Supplementary Information

                                                        For the three months
                                                          ended September 30
    (Unaudited)                                 2007        2006        2005
    -------------------------------------------------------------------------

    Fuel volume (millions of litres)
      Retail gas and diesel                      143         142         134
      Wholesale gas and diesel                   416         270         188
      Propane                                     19           -           -
    -------------------------------------------------------------------------
    Total fuel volume                            578         412         322
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net sales and operating revenue
     ($000's)
      Retail gas and diesel               $  135,060  $  128,022  $  112,716
      Wholesale gas and diesel               297,953     214,762     133,729
      Propane                                 13,545           -           -
      Convenience store merchandise sales     18,307      16,488      12,456
      Commercial sales                        18,030           -           -
    -------------------------------------------------------------------------
    Total net sales and operating revenue    482,895  $  359,272  $  258,901
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Gross profit ($000's)                 $   55,083  $   46,350  $   27,716

    Less: Convenience store
           merchandise gross profit       $    4,698  $    4,386  $    3,168
            Gross profit on
             commercial sales                  9,826           -           -
            Other revenue included
             in gross profit                   2,991       2,069       1,945
    -------------------------------------------------------------------------
    Fuel gross profit                     $   37,568  $   39,895  $   22,603
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cents per litre                       $   0.0650  $   0.0968  $   0.0702
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                         For the nine months
                                                          ended September 30
    (Unaudited)                                 2007        2006        2005
    -------------------------------------------------------------------------

    Fuel volume (millions of litres)
      Retail gas and diesel                      411         390         373
      Wholesale gas and diesel                 1,008         725         507
      Propane                                     70           -           -
    -------------------------------------------------------------------------
    Total fuel volume                          1,489       1,115         880
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net sales and operating revenue
     ($000's)
      Retail gas and diesel               $  350,735  $  331,184  $  286,012
      Wholesale gas and diesel               758,741     545,361     324,717
      Propane                                 34,576           -           -
      Convenience store merchandise sales     48,921      44,445      33,430
      Commercial sales                        48,556           -           -
    -------------------------------------------------------------------------
    Total net sales and operating revenue  1,241,529  $  920,990  $  644,159
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Gross profit ($000's)                 $  166,793  $  109,048  $   65,112

    Less: Convenience store
           merchandise gross profit       $   12,582  $   11,674  $    8,833
            Gross profit on
             commercial sales                 19,763           -           -
            Other revenue included
             in gross profit                   7,132       5,706       5,276
    -------------------------------------------------------------------------
    Fuel gross profit                     $  127,316  $   91,668  $   51,003
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cents per litre                       $   0.0855  $   0.0822  $   0.0580
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Station counts:

    Retail (Parkland and
     commission operated)
      Fas Gas                                     87          99         116
      Fas Gas Plus                                91          91          89
      Esso                                         6           6           -
    -------------------------------------------------------------------------
                                                 184         196         205
    -------------------------------------------------------------------------

    Wholesale (Independent dealer)
      Race Trac Fuels                            177         202         218
      Fas Gas Plus                                23          11           -
      Esso                                       174         152           -
    -------------------------------------------------------------------------
                                                 374         365         218
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Total stations                               558         561         423
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Red Deer: Mike W. Chorlton, President and CEO,
(403) 357-6400; John G. Schroeder, Vice President and CFO, (403) 357-6400; If
you prefer to receive Company news releases via e-mail, please request at
corpinfo@parkland.ca.

Organization Profile

Parkland Fuel Corporation

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