Pembina Pipeline Income Fund reports strong 2009 financial results

The following information is supplementary to and should be read in conjunction with Pembina's audited consolidated financial statements for the years ended December 31, 2009 and 2008, and the accompanying management's discussion and analysis (MD&A). These documents are available at www.sedar.com and at www.pembina.com. Certain financial measures referred to in this document are not prescribed by Canadian generally accepted accounting principles (GAAP). For a description of these measures, see "Non-GAAP Measures" below. All amounts are stated in Canadian dollars unless otherwise specified.

CALGARY, March 4 /CNW/ - Pembina Pipeline Income Fund ("Pembina" or the "Fund") released its 2009 financial results today reporting year-over-year increases in revenue, net operating income, net earnings and cash flow from operating activities. Also during 2009, Pembina established the highest level of cash distributions to Unitholders in the Fund's 12-year history - $1.56 per Trust Unit. Distributed cash was $232.3 million ($1.56 per Trust Unit) in 2009, a 17 percent increase over 2008 when distributed cash was $198.8 million ($1.49 per Trust Unit).

"Pembina achieved these accomplishments by focusing on operational excellence in our existing businesses and responsibly pursuing and implementing new opportunities for growth," said Bob Michaleski, President and Chief Executive Officer. "This enabled us to mitigate the challenges created by the economic downturn and positioned us well for success in 2010 and beyond. It is a testament to the high quality of our people and assets."

Revenue, net of product purchases, for 2009 was $497.4 million, compared to $453.9 million in 2008 while net operating income for 2009 was $338.2 million, as compared to $303 million in 2008.

Net earnings were $162.1 million in 2009 ($1.09 per Trust Unit), compared to $161.8 million ($1.21 per Trust Unit) in 2008 when Pembina realized a $29.9 million one-time after-tax gain on the sale of linefill. Excluding that after-tax gain, net earnings increased 23 percent in 2009 over 2008.

Cash flow from operating activities was $224.6 million in 2009, compared to $219.9 million 2008.

Operational accomplishments in 2009 that contributed to Pembina's strong financial performance included the commencement of full service of the Horizon Pipeline (Pembina completed construction of this oil sands pipeline, which transports synthetic crude oil for Canadian Natural Resources Ltd., in July 2008); the June acquisition of the Cutbank Complex natural gas gathering and processing facilities; and expansion of the company's Alberta-based midstream services.

In Pembina's Conventional Pipelines business, toll increases and reduced operating expenses helped offset declines in throughputs that occurred as a result of a year-over-year reduction in crude oil and natural gas liquids (NGL) production, which in turn was the result of lower drilling and production shut-ins resulting from a decrease in commodity prices in 2009 as compared to 2008. Conventional throughput averaged 393,300 barrels per day (bbls/d) in 2009, compared to 439,200 bbls/d in 2008.

Company-wide, operating expenses in 2009 were $159.2 million, compared to $150.9 million in 2008. Increased operating expenses primarily reflected costs associated with operating the Horizon Pipeline and the Cutbank Complex, offset by reduced spending in the Conventional Pipelines business.

In 2009, Pembina invested nearly $424 million in new capital, primarily to support its growth plan. This investment included spending to acquire the Cutbank Complex in June and work to progress the Nipisi and Mitsue Pipeline projects. In the seven months of 2009 in which Pembina owned the Cutbank Complex, this asset generated $23 million in net operating income. The Nipisi and Mitsue Pipelines, which are expected to be placed into service in mid-2011, should generate, according to internal management estimates, approximately $45 million of net operating income per year. (See "Forward-looking Statements and Information" and "Risk Factors" in Pembina's 2009 Annual Report for more information on the Nipisi and Mitsue Pipeline projects).

"Our growth plan is on track and the investments we made during the year are aimed at generating long-term value for our investors without compromising our near-term financial position," said Michaleski. Pembina's plans include maintaining its annual cash distribution at $1.56 per Trust Unit through 2013 in the form of a dividend following the planned conversion of the income trust to a corporation in the latter half of 2010. (For more information about this planned corporate conversion, see separate news release issued today).

During 2009, Pembina raised approximately $800 million in debt and equity capital to support growth projects. Pembina maintains a strong balance sheet with a total aggregate debt to enterprise value of 30.1 percent at the end of 2009.

Fourth Quarter Results

Revenue, net of product purchases, was $129.2 million in the fourth quarter of 2009 compared to $125.4 million in the fourth quarter of 2008. The increase was primarily the result of revenues generated by the Horizon Pipeline and the Cutbank Complex. This increase was offset by reduced revenues in Pembina's Conventional Pipelines business, a reflection of decreased throughput.

Throughput during the fourth quarter of 2009 was 379,384 bbls/d compared to 434,156 bbls/d during the same period in 2008. During the quarter, Conventional Pipelines instituted select toll increases and deferred discretionary maintenance costs to offset the impact of throughput declines. The throughput decline was mainly due to a quarter-over-quarter reduction in crude oil and NGL production in the upstream energy industry, a reflection of softer commodity prices, changes in the Alberta royalty regime and limited access to credit and equity markets for some producers.

Operating expenses were $39.7 million in the fourth quarter of 2009, compared to $42.4 million in the fourth quarter of 2008.

Net operating income was $89.5 million in the fourth quarter of 2009, compared to $82.9 million during the same period in 2008. This increase is a result of the revenue increases previously indicated, offset by the earnings effect of the excess line fill sales in 2008. In December 2009, Pembina sold its Cremona pipeline system allowing for capital resources to be re-focused to core growth areas. The disposition of this non-core asset did not have a material impact on net operating income.

Net earnings for the fourth quarter of 2009 were $52.9 million ($0.34 per Trust Unit) compared with $39 million in 2008 ($0.29 per Trust Unit). The increase reflects: higher revenues; a depreciation decline of $6.3 million; expense related to the internalization of the management contract in 2008 of $5 million which did not reoccur; and the future income tax reduction increase of $4.8 million. This was offset by an increase in general and administrative expense of $7 million and an increase in interest expense of $2.6 million.

Cash flow from operating activities for the fourth quarter of 2009 was $72 million, compared to $63.5 million during the fourth quarter of 2008.

    
    2009 Consolidated Financial Overview & Comparison to 2008
    (years ended Dec. 31)

    Fourth Quarter 2009 & Comparison to Fourth Quarter 2008
    (three months ended Dec. 31)
    -------------------------------------------------------------------------
    ($ millions, except where noted)   Q4 2009     Q4 2008     2009     2008
    -------------------------------------------------------------------------
    Revenue                              256.4       149.4    811.8    674.8
      Less: product purchases            127.2        24.0    314.4    220.9
    -------------------------------------------------------------------------
    Net revenue(1)                       129.2       125.4    497.4    453.9
    Operating expenses                    39.7        42.4    159.2    150.9
    -------------------------------------------------------------------------
    Net operating income(1)               89.5        82.9    338.2    303.0
    EBITDA(1)                             72.2        66.8    279.9  287.9(2)
    Net earnings                          52.9        39.0    162.1  161.8(2)
    Net earnings per Trust Unit -
     basic (dollars)                      0.34        0.29     1.09   1.21(2)
    Cash flow from operating activities   72.0        63.5    224.6    219.9
    Cash flow from operating activities
     per Trust Unit (dollars)             0.46        0.47     1.51     1.65
    Distributed cash(1)                   61.4        52.3    232.3    198.8
    Distributed cash per Trust Unit(1)
     (dollars)                            0.39        0.39     1.56     1.49
    Capital expenditures                  59.5        25.2    423.7    223.0
    -------------------------------------------------------------------------
    (1) Refer to "Non-GAAP Measures" below.
    (2) Including a one-time gain on sale of linefill of $42.9 million
        ($29.9 million after-tax).


    Results from Operations

    -------------------------------------------------------------------------
                                  2009                      2008
    ($ millions)           Revenues  Net Operating   Revenues  Net Operating
                                          Income(1)                Income(1)
    -------------------------------------------------------------------------
    Conventional Pipelines    255.0          150.4      263.4          150.2
    Oil Sands & Heavy Oil     115.6           81.6       85.4           56.7
    Midstream & Marketing(2)  126.8          106.2      105.1           96.1
    -------------------------------------------------------------------------
    Total                     497.4          338.2      453.9          303.0
    -------------------------------------------------------------------------
    (1) Refer to "Non-GAAP Measures" below.
    (2) Midstream & Marketing revenue is net of $314.4 million in product
        purchase expense for 2009 (2008: $220.9 million). Results for
        Midstream & Marketing in 2009 includes contribution from the Cutbank
        Complex from June 1, 2009 to December 31, 2009.
    

For more information, please see Pembina's 2009 annual report which is available at www.sedar.com and www.pembina.com. The report includes audited consolidated financial statements and the MD&A, which provide a detailed explanation of Pembina's results for the year ended December 31, 2009.

Pembina Pipeline Corporation, a wholly-owned subsidiary of Pembina Pipeline Income Fund, transports crude oil and natural gas liquids produced in Western Canada, owns and operates oil sands pipelines and has a growing presence in the midstream and gas services sectors. Pembina's trust units (PIF.UN) and convertible debentures (PIF.DB.B) are traded on the TSX.

Non-GAAP Measures

Throughout this document the Fund and Pembina use the term "distributed cash" to refer to the amount of cash that has been or is to be distributed to the Fund's Unitholders. Distributed cash is a measure the Fund uses to manage its business, to assess future cash requirements that impact the determination of future distributions to Unitholders, and, along with other measures, to determine payout ratio. "Distributed cash" is not a measure recognized by Canadian generally accepted accounting principles ("GAAP"). Therefore, distributed cash of the Fund may not be comparable to similar measures presented by other issuers, and investors are cautioned that distributed cash should not be construed as an alternative to net earnings, cash from operating activities or other measures of financial performance calculated in accordance with GAAP as an indicator of the Fund's performance. Further, the use of terms "EBITDA" (earnings before interest, taxes, depreciation and amortization), "net operating income" (revenues less operating expenses), and "net revenue" (revenue net of product purchases) are not recognized under Canadian GAAP. Management believes that in addition to earnings, EBITDA, net operating income and net revenue are useful measures. They provide an indication of the results generated by the Fund's business activities prior to consideration of how activities were financed and how the results are taxed and measured. Investors should be cautioned, however, that EBITDA, net operating income and net revenue should not be construed as an alternative to net earnings, cash flows from operating activities or other measures of financial performance determined in accordance with GAAP as an indicator of the Fund's performance. Furthermore, these measures may not be comparable to similar measures presented by other issuers. For more information in respect to non-GAAP measures, see the section entitled "Non-GAAP Measures" in Pembina's management's discussion and analysis for the year ending December 31, 2009, which has been filed on Pembina's SEDAR profile at www.sedar.com and posted on Pembina's website at www.pembina.com.

Forward-Looking Statements and Information

The information contained in this document contains certain forward-looking statements and information ("forward-looking statements") that are based on the Fund's current expectations, estimates, projections and assumptions in light of its experience and its perception of historical trends.

In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expects", "projects", "plans", "believes", "aims", "estimates", "maintain", and similar expressions.

In particular, this document contains forward-looking statements, including certain financial outlooks, regarding (i) the proposed conversion of Pembina to a corporate form in 2010 and the ability of Pembina to maintain its current level of cash distributions to its equity holders both prior to and for the foreseeable future after conversion (in the form of dividends after conversion); (ii) the future net operating income of Pembina in relation to the Nipisi and Mitsue Pipelines; and (iii) the proposed construction of the Nipisi and Mitsue Pipelines.

With respect to forward-looking statements and information contained in this document, Pembina has made assumptions regarding, among other things: ongoing utilization and future expansion, development, growth and performance of the Fund's business and asset base; future demand for oil sands transportation services; future levels of oil and natural gas development in proximity to Pembina's pipelines and other assets (which could be affected by, among other things, possible changes to applicable royalty and tax regimes); the amount of future liabilities related to environmental incidents; the availability of coverage under Pembina's insurance policies (including in respect of Pembina's business interruption insurance policy); future acquisitions, growth and growth potential in Pembina's Conventional Pipelines, Oil Sands & Heavy Oil and Midstream & Marketing operations; potential revenue and cash flow enhancement; future cash flows; maintenance of operating margins; additional throughput potential on additional connections and other initiatives on the Conventional Pipelines systems; expected project start-up and construction dates; future distributions, payout ratios and taxation of distributions; future financing capability and sources; and negative credit rating adjustments.

Although the Fund believes the expectations and material factors and assumptions reflected in these forward-looking statements and information are reasonable as of the date hereof, there can be no assurance that these expectations, factors and assumptions will prove to be correct. Readers are cautioned that events or circumstances could cause results to differ materially from those predicted, forecasted or projected. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause 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 and information.

None of the forward-looking statements described above are guarantees of future performance and are subject to a number of known and unknown risks and uncertainties, including, but not limited to: the impact of competitive entities and pricing; reliance on key industry partners, alliances and agreements; the strength and operations of the oil and natural gas production industry and related commodity prices; the continuation or completion of third-party projects; regulatory environment and inability to obtain required regulatory approvals (including in respect to the Nipisi and Mitsue Pipeline projects and related facilities); tax laws and treatment; fluctuations in operating results; lower than anticipated results of operations and accretion from the Fund's business initiatives; reduced amounts of cash available for distributions to Unitholders; the ability of Pembina to raise sufficient capital (or to raise capital on favourable terms) to complete future projects and satisfy future commitments, including the construction of the Nipisi and Mitsue Pipeline projects and related facilities; construction costs of the Nipisi and Mitsue Pipeline projects and related facilities, construction delays; labour and material shortages; and certain other risks detailed from time to time in the Fund's public disclosure documents available at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

The forward-looking statements and information contained in this document speak only as of the date of this document. The Fund does not undertake any obligation to publicly update or revise any forward-looking statements or information contained herein, except as required by applicable laws. The forward-looking statements and information contained in this document are expressly qualified by this cautionary statement.

Management of the Fund approved the financial outlook contained herein as of the date of this document. The purpose of the financial outlook contained herein is to give the reader an indication of the value to Pembina of its future business opportunities, growth projects as well as the potential effects to Unitholders of a possible conversion of Pembina to a corporate form. Readers should be aware that the information contained in the financial outlook contained herein may not be appropriate for other purposes.

    
    Conference Call and Webcast
    ---------------------------
    

There will be a live internet broadcast of the conference call discussing Pembina's 2009 results, which is scheduled for March 5, 2010 at 9 a.m. Calgary (11 a.m. Eastern, 8 a.m. Pacific). Those wishing to access the webcast are invited to visit www.pembina.com or www.newswire.ca/webcast. An archive of the call will be available on-line for 90 days following the broadcast date.

SOURCE Pembina Pipeline Corporation

For further information: For further information: Glenys Hermanutz, Vice President, Corporate Affairs, (403) 231-7500, 1-888-428-3222, e-mail: investor-relations@pembina.com


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