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Inter Pipeline reports strong first quarter, record throughput volumes

Inter Pipeline reports strong first quarter, record throughput volumes

Inter Pipeline Ltd. has announced strong financial and operating results for the three month period ended March 31, 2018. Funds from operations (FFO) totalled $254 million, a three percent increase over first quarter 2017, while net income for the quarter was a record $143 million. The company's NGL processing business segment generated record quarterly FFO of $99 million, up 20 percent from first quarter 2017, and record total pipeline throughput volumes averaged 1,488,400 barrels per day (b/d). In addition, the company continued to advance construction activities at the Heartland Petrochemical Complex site in Strathcona County, Alberta.

Oil Sands Transportation 

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

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

NGL Processing

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

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

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

Heartland Petrochemical Complex 

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

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

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

Conventional Oil Pipelines 

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

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

Bulk Liquid Storage 

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

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

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Suite 3200, 215 – 2nd Street S.W.
Calgary, AB
CA, T2P 1M4


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