Inter Pipeline generated record financial results in the second quarter of 2015. Funds from operations totalled US$181 million or US$0.54 per share, a gain of US$49.4 million compared to the second quarter of 2014.
This increase is primarily due to record financial results from the oil sands transportation business segment. Additional cash flow resulted from major components of the Cold Lake and Polaris pipeline system expansions entering commercial service in January 2015.
In the second quarter 2015, Inter Pipeline’s four business segments generated funds from operations as follows:
- Oil sands transportation, US$135.0 million.
- Conventional oil pipelines, US$46.5 million.
- NGL extraction, US$23.3 million.
- Bulk liquid storage, US$20.6 million.
Corporate costs for the quarter, including interest, income tax and general and administrative charges, totalled US$44.4 million.
Inter Pipeline’s current monthly dividend rate is US$0.1225 per share or US$1.47 per share on an annualised basis. Payout ratio for the quarter remained attractive at 71.9% compared to 81.5% in the second quarter of 2014.
The oil sands transportation segment generated record financial results in the second quarter of 2015. Funds from operations increased 114% to a record US$135 million, representing a gain of US$72 million over second quarter 2014 levels. The marked increase in funds from operations was a result of major expansions on the Cold Lake and Polaris pipeline systems, which entered commercial service earlier in the year.
Conventional oil pipelines
Funds from operations in the quarter totalled US$46.5 million within the conventional oil pipelines segment, as compared to US$49.6 million in the same quarter last year. Slightly lower results were primarily due to lower contributions from midstream marketing activities, offset partially by higher crude oil volumes transported.
Horizontal drilling and multi-stage fracturing activity, predominantly in the Viking formation in Saskatchewan, continues to underpin higher conventional throughput volumes. Aggregate throughput on Inter Pipeline’s three conventional gathering systems totalled 208 500 bpd, a quarter-over-quarter increase of approximately 4%. Volume growth continues to be strongest on the Mid-Saskatchewan pipeline system where throughput levels have risen to 76 000 bpd, representing a 21% increase over second quarter 2014 volumes.
In July, Inter Pipeline completed a US$112 million expansion of its Mid-Saskatchewan pipeline system. Total capacity for light crude oil increased 95 000 bpd through the construction of 50 km of new mainline pipe segments and 40 km of new pipeline laterals to connect five new oil batteries. The expanded system also provides significant transportation capacity for third party connections. The expansion, now fully in service, is supported by a number of contracts that are expected to generate approximately US$25 million to US$30 million in incremental annual EBITDA.
NGL extraction financial results had a continued impact by lower frac-spread pricing on propane-plus sales at the Cochrane NGL extraction facility, partially offset by higher production volumes. Funds from operations totalled US$23.3 million in the second quarter of 2015, compared to US$34.7 million in the second quarter of 2014. In the quarter, realised frac-spread prices averaged US$0.35 per US gallon, down approximately 55% over the same period last year.
Natural gas flows to Inter Pipeline’s extraction facilities at Cochrane and Empress were strong in the quarter. In total, 2.4 billion ft3/d of natural gas was processed, extracting 90 400 bpd of natural gas liquids.
Bulk liquid storage
Inter Pipeline’s bulk liquid storage segment generated funds from operations of US$20.6 million in the second quarter of 2015, compared to US$18.2 million in the second quarter of 2014. The increase is largely due to higher utilisation rates in Denmark and the inclusion of Inter Terminals Sweden in this quarter’s results.
Overall utilisation rates in the second quarter of 2015 were substantially higher, averaging 93% compared to 75% in the second quarter of 2014. European storage operations benefited from stronger contango pricing relationships in the futures markets for several petroleum products. This was particularly evident at Inter Terminals Denmark where utilisation averaged 95%, up 30% from the same period in 2014.
Inter Pipeline continues to maintain a strong balance sheet with significant liquidity available on its committed revolving credit facility. As at 30 June 2015, Inter Pipeline had over US$570 million of credit capacity on its US$1,250 million credit facility. At quarter end, Inter Pipeline’s recourse debt to capitalisation ratio was 54.7%, compared to 54.2% as at 31 December 2014.
Conference call and webcast
Inter Pipeline will hold a conference call and webcast on 6 August at 2:30 p.m. Mountain Time – 4:30 p.m. Eastern Time – to discuss its second quarter 2015 financial and operating results.
Edited from press release by Stephanie Roker