CALGARY, AB, Aug. 6, 2020 /CNW/ – Inter Pipeline Ltd. (“Inter Pipeline”) (TSX: IPL) today announced financial and operating results for the three and six month periods ended June 30, 2020.
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* Please refer to the “Non-GAAP Financial Measures” section of the MD&A. |
In the second quarter of 2020, Inter Pipeline continued implementing measures to ensure the ongoing health and safety of its workforce, which align with the recommendations of governments and public health authorities. Personnel continue to work safely at its pipeline facilities, NGL extraction and offgas plants, European storage terminals and major project sites, such as HPC without material disruption to activities or service. Planning is now underway to begin transitioning personnel currently working from home back to Inter Pipeline offices in a phased, methodical fashion as conditions allow.
Christian Bayle, President and Chief Executive Officer of Inter Pipeline. “Most importantly, Inter Pipeline’s commitment to the wellbeing of its workforce has ensured our essential services personnel remain safe while they continue to operate our diverse asset base safely and reliably.”
$184.4 million in the second quarter of 2020, compared to $240.2 million in the second quarter of 2019.
“Our oil sands transportation business generated strong, consistent financial results and European bulk liquid storage capacity utilization rates climbed to near record levels during the quarter,” added Bayle. “However, as expected, throughput was down on our conventional pipeline systems as producers shut-in volume in response to the collapse in global oil pricing. Our NGL processing results were also significantly affected by the lower commodity price environment.”
For the second quarter of 2020, Inter Pipeline’s four business segments generated funds from operations as follows:
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Funds from operations |
Three Months Ended |
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(millions) |
June 30, 2020 |
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Oil sands transportation |
$151.8 |
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NGL processing |
$37.1 |
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Bulk liquid storage |
$34.2 |
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Conventional oil pipelines |
$26.3 |
$65 million compared to $58 million in the same period of 2019, primarily as a result of higher employee costs.
$51.5 million, or $0.12 per share in the second quarter of 2020. Inter Pipeline’s current monthly dividend rate is $0.04 per share, or $0.48 per share on an annualized basis.
Inter Pipeline’s payout ratio* for the quarter was 27.9 percent.
$151.8 million compared to $149.7 million for the same period in 2019. Inter Pipeline generates cash flow from this business from a variety of high-quality, long-term cost of service contracts that are not generally impacted by throughout volume or commodity price fluctuations.
1,158,100 b/d to 1,232,900 b/d in the second quarter compared to the same period in 2019.
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Volume |
Three Months Ended |
|
(000 b/d) |
June 30, 2020 |
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Cold Lake |
583.9 |
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Corridor |
433.0 |
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Polaris |
216.0 |
$37.1 million for the second quarter of 2020, compared to $72.1 million for the second quarter of 2019. Results continued to be unfavourably impacted by lower frac spread pricing on Cochrane propane-plus and Offgas olefinic NGL production, which was partially offset by higher sales volume and higher Offgas paraffinic frac-spread pricing. In the near term, FFO from this business would remain under pressure should lower commodity prices persist.
Cochrane and Empress straddle plants processed 3.1 billion cubic feet of natural gas per day during the second quarter of 2020, consistent with volumes processed during the same period a year ago. Approximately 120,200 b/d of ethane and propane-plus was extracted during the quarter, an increase of 18,900 b/d compared to the second quarter of 2019. Average sales volume from the Redwater Olefinic Fractionator (ROF) increased by six percent, from 32,600 b/d in the second quarter of 2019, to 34,700 b/d during the second quarter of 2020.
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Frac-spread |
Three Months Ended |
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(USD/USG) |
June 30, 2020 |
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Cochrane propane-plus |
$0.29 |
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Offgas Olefinic* |
$0.32 |
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Offgas Paraffinic* |
$0.21 |
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*Price after applicable benchmark adjustment |
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$4 billion Heartland Petrochemical Complex. Construction at HPC remains very active with approximately 2,600 workers currently on site each day, protected by rigorous sanitation and social distancing controls. Second quarter 2020 investment into the project was $238 million, bringing the total project spend since inception to approximately $2.7 billion.
Several construction milestones were met at the propane dehydrogenation facility over this period including the installation of the electrical systems, the interior components of the splitter tower and the condensers. Activities at the polypropylene plant include the completion of the reactor structure and the installation of the cycle gas compressor and the flare stack. Significant progress was also made on advancing the rail loading yard, a critical supply chain component for the transportation of polypropylene to market.
The process to secure a partner to purchase a material interest in the Heartland Petrochemical Complex remains active. While there can be no certainty that a definitive agreement will be reached, a partner would benefit from joining a well-developed, world-scale petrochemical project that has substantial commercial advantages.
$26.3 million as throughput volume and marketing activities on this system declined in response to the collapse in global energy prices.
140,000 b/d, down approximately 45,000 b/d from the second quarter of 2019, due to producer production curtailments. At this time, early results for the third quarter of 2020 indicate that volume is beginning to recover. July’s average volume was approximately 157,000 b/d.
Edmonton market hub and additional flexibility for producers, was placed into service on time and on budget. In addition, the construction of two,130,000-barrel storage tanks at the Stettler Terminal, was completed at the end of June. These activities conclude the first two-phases of Inter Pipeline’s planned multi-phased expansion of the Central Alberta pipeline system. Additional phases are expected to be developed when market conditions improve.
$34.2 million in the second quarter of 2020, from $26.9 million a year ago, with the Danish terminals continuing to experience strong refined petroleum storage demand.
Europe throughout 2020.
$1.0 billion unsecured revolving credit facility with a syndicate of key lenders and extended the maturity date of our drawn $500 million term loan facility by two years to August 2022. In June of 2020, Inter Pipeline successfully issued $700 million of 7-year senior unsecured medium-term notes to reduce indebtedness under its $1.5 billion revolving credit facility and to repay $500 million of medium-term notes that matured in July 2020.
June 30, 2020, Inter Pipeline had $2.5 billion of available committed capacity on its existing revolving credit facilities and is positioned to fund any near-term planned capital expenditures, including remaining costs for the Heartland Petrochemical Complex. At quarter end, Inter Pipeline had a consolidated net debt to total capitalization ratio* of 42.5 percent, significantly below the maximum covenant level of 65 percent.
Inter Pipeline maintains investment grade credit ratings. Standard & Poor’s and DBRS Limited have assigned Inter Pipeline a credit rating of BBB- (negative) and BBB (stable), respectively.
Richard Shaw and Mr. Brant Sangster will be retiring from Inter Pipeline’s Board of Directors effective at the May 2021 annual general meeting. Mr. Shaw has served on the board since 2009 and in the role of Chair since 2014. Mr. Sangster also joined the board in 2009 and served on the EH&S Committee and chaired the Major Projects Review Committee.
Margaret McKenzie, a member of Inter Pipeline’s Board of Directors since 2015, as Chair of the board following the next annual meeting of shareholders. Ms. McKenzie has more than 30 years experience in the energy sector notably in the areas of finance, strategy development and corporate governance.
Richard Shaw, Chair of the Board. “She has the breadth of industry experience and understanding of this organization to be highly successful in leading Inter Pipeline’s Board of Directors.”
August 7, 2020 at 9:00 a.m. MT (11:00 a.m. ET) for interested shareholders, analysts and media representatives.
August 14, 2020 by calling 1 (855) 859-2056. The code for the replay is 7889542. A link to the webcast is accessible on Inter Pipeline’s website.
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Select Financial and Operating Highlights |
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(millions, except volume, per share and percent amounts) |
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Three Months Ended June 30 |
Six Months Ended June 30 |
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Operating Results |
2020 |
2019 |
2020 |
2019 |
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Pipeline volume (000s b/d) |
||||
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Oil sands transportation |
1,232.9 |
1,158.1 |
1,289.4 |
1,178.7 |
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Conventional oil pipelines |
139.7 |
184.9 |
160.8 |
186.0 |
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Total pipeline volume |
1,372.6 |
1,343.0 |
1,450.2 |
1,364.7 |
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NGL processing volume (000s b/d)(1) |
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Natural gas processing – Ethane |
71.6 |
59.5 |
71.0 |
65.8 |
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Natural gas processing – Propane-plus |
48.6 |
41.8 |
47.4 |
45.6 |
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Redwater Olefinic Fractionator sales volume |
34.7 |
32.6 |
35.7 |
34.1 |
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Total NGL processing volume |
154.9 |
133.9 |
154.1 |
145.5 |
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Bulk liquid storage capacity utilization |
98% |
83% |
97% |
80% |
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Financial Results |
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Revenue |
$539.5 |
$641.6 |
$1,143.3 |
$1,300.5 |
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Funds from operations |
||||
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Oil sands transportation |
$151.8 |
$149.7 |
$306.3 |
$297.3 |
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NGL processing |
$37.1 |
$72.1 |
$80.3 |
$140.1 |
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Conventional oil pipelines |
$26.3 |
$49.6 |
$62.9 |
$83.7 |
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Bulk liquid storage |
$34.2 |
$26.9 |
$69.0 |
$53.7 |
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Corporate costs |
$(65.0) |
$(58.1) |
$(126.6) |
$(123.1) |
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Total funds from operations |
$184.4 |
$240.2 |
$391.9 |
$451.7 |
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Per share(2) |
$0.43 |
$0.59 |
$0.92 |
$1.11 |
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Net income |
$62.5 |
$260.3 |
$151.6 |
$358.6 |
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Per share – basic and diluted |
$0.15 |
$0.63 |
$0.36 |
$0.88 |
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Adjusted EBITDA(2) |
$232.5 |
$285.1 |
$487.7 |
$538.2 |
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Supplemental Financial Information |
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Cash dividends declared |
$51.5 |
$175.7 |
$232.6 |
$349.6 |
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Per share(3) |
$0.120 |
$0.428 |
$0.548 |
$0.855 |
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Payout ratio(2) |
27.9% |
73.1% |
59.4% |
77.4% |
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Capital expenditures |
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Growth(2) |
$275.7 |
$363.7 |
$587.3 |
$680.4 |
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Sustaining(2) |
$7.6 |
$18.8 |
$12.5 |
$30.7 |
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Total capital expenditures |
$283.3 |
$382.5 |
$599.8 |
$711.1 |
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(1) |
Empress V NGL production reported on a 100% basis. |
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(2) |
Please refer to the NON-GAAP FINANCIAL MEASURES section. |
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(3) |
Dividends to shareholders per share are calculated based on the number of common shares outstanding at each record date. |
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www.interpipeline.com” data-reactid=”111″>Inter Pipeline is a major petroleum transportation, natural gas liquids processing, and bulk liquid storage business based in Calgary, Alberta, Canada. Inter Pipeline owns and operates energy infrastructure assets in western Canada and Europe. Inter Pipeline is a member of the S&P/TSX 60 Index and its common shares trade on the Toronto Stock Exchange under the symbol IPL. www.interpipeline.com
[email protected]
Tel: 403-290-6015 or 1-866-716-7473″ data-reactid=”113″>Investor Relations:
Jeremy Roberge
Vice President, Finance and Investor Relations
Email:[email protected]
Tel: 403-290-6015 or 1-866-716-7473
[email protected]
Tel: 587-475-1118 or 1-866-716-7473″ data-reactid=”114″>Media Relations:
Breanne Oliver
Director, Corporate Communications
Email: [email protected]
Tel: 587-475-1118 or 1-866-716-7473
Central Alberta pipeline system will be developed when market conditions improve; the expectation that the demand for storage infrastructure will remain strong in Europe throughout 2020; our commitment to maintaining financial flexibility and increased liquidity during the current challenging market environment; the future impact on our business due to COVID-19; being positioned to fund any near-term planned capital expenditures, including remaining costs for the Heartland Petrochemical Complex; the timing for changes to Inter Pipeline’s board of directors and the appointment of a new Chair and the nature of the transition process in this regard; and the timing for holding our quarterly conference call. Such statements reflect the current views of Inter Pipeline with respect to future events and are subject to certain risks, uncertainties and assumptions that could cause Inter Pipeline’s results to differ materially from those expressed in the forward-looking statements. Factors that could cause actual results to vary from forward-looking statements or may affect the operations, performance, development and results of Inter Pipeline’s businesses include, among other things, risks and assumptions associated with operations, such as Inter Pipeline’s ability to successfully implement its strategic initiatives and achieve the expected benefits therefrom, including the further development of its projects and facilities; assumptions concerning operational reliability; the potential delays of and costs of overruns on construction projects and future expansions of Inter Pipeline’s assets; the realization of the anticipated benefits of acquisitions and other projects Inter Pipeline is developing; the timing, financing and completion of acquisitions and other projects Inter Pipeline is developing; risks inherent in Inter Pipeline’s Canadian and foreign operations; risks associated with the failure to finalize formal agreements with counterparties in circumstances where letters of intent or similar agreements have been executed and announced by Inter Pipeline; Inter Pipeline’s ability to generate sufficient cash flow from operations to meet its current and future obligations; Inter Pipeline’s ability to maintain its current level of cash dividends to its shareholders; Inter Pipeline’s ability to access sources of debt and equity capital; Inter Pipeline’s ability to make capital investments and the amounts of capital investments; Inter Pipeline’s ability to maintain its credit ratings; the availability and price of labour, equipment and construction materials; the status, credit risk and continued existence of counterparties having contracts with Inter Pipeline and its affiliates and their performance of such contracts; competitive factors, pricing pressures and supply and demand in the oil and gas transportation, natural gas liquids processing and storage industries; increases in maintenance, operating or financing costs; availability of adequate levels of insurance; difficulty in obtaining necessary regulatory approvals or land access rights and maintenance of support of such approvals and rights; risks of war, hostilities, civil insurrection, instability and political and economic conditions in or affecting countries in which Inter Pipeline and its affiliates operate; severe weather conditions and risks related to climate change; terrorist threats; risks associated with technology; availability of energy commodities; volatility of and assumptions regarding prices of energy commodities; fluctuations in currency and interest rates; changes in laws and regulations, including environmental, regulatory and taxation laws, and the interpretation of such changes to Inter Pipeline’s business; the risks associated with existing and potential or threatened future lawsuits and regulatory actions against Inter Pipeline and its affiliates; general economic and business conditions; the effects and impacts of the COVID-19 pandemic as further described below, the extent and duration of which are uncertain at this time, on Inter Pipeline’s business and general economic and business conditions and markets, and such other risks and uncertainties described from time to time in Inter Pipeline’s reports and filings with the Canadian securities authorities.
www.sedar.com). As actual results could vary significantly from the forward-looking information, you should not put undue reliance on forward-looking information. Such information, although considered reasonable by Inter Pipeline at the time of preparation, may later prove to be incorrect and actual results may differ materially from those anticipated in the statements made. For this purpose, any statements that are not statements of historical fact are deemed to be forward-looking statements. The forward-looking statements contained in this news release are made as of the date of this document, and, except to the extent required by applicable law, Inter Pipeline assumes no obligation to update or revise forward-looking statements made herein or otherwise, whether as a result of new information, future events, or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary note.” data-reactid=”119″>Many of the risk factors and other assumptions related to the forward-looking information are discussed further in Inter Pipeline’s most recent MD&A and Annual Information Form, and other documents it files from time to time. You can find these documents by referring to Inter Pipeline’s profile on SEDAR (www.sedar.com). As actual results could vary significantly from the forward-looking information, you should not put undue reliance on forward-looking information. Such information, although considered reasonable by Inter Pipeline at the time of preparation, may later prove to be incorrect and actual results may differ materially from those anticipated in the statements made. For this purpose, any statements that are not statements of historical fact are deemed to be forward-looking statements. The forward-looking statements contained in this news release are made as of the date of this document, and, except to the extent required by applicable law, Inter Pipeline assumes no obligation to update or revise forward-looking statements made herein or otherwise, whether as a result of new information, future events, or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary note.
SOURCE Inter Pipeline Ltd.
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