PIPELINES / Pembina Pipeline Income Fund 3rd Interim Report for the
Nine Months Ended September 30, 1998
CALGARY, Oct. 27 /CNW/ -
- Pembina remains on track to achieve the 1998 forecast distributable
cash of $59.3 million or $0.95 per Unit.
- The Fund made Unitholder distributions of $15.0 million ($0.24 per
Unit) during the quarter, bringing total cash distributions for the
first three quarters of 1998 to $45.0 million or $0.72 per Unit, in
line with expectations.
- Third quarter revenue of $27.8 million was up $1.4 million from the
second quarter as throughput levels began to normalize after temporary
second quarter disruptions. Earnings of $6.9 million were a $1.2
million improvement over those reported for the second quarter, and
were in line with expectations and the forecast full year earnings
target.
- System throughput averaged 346,200 barrels per day through the first
three quarters of 1998. Third quarter average volume levels of
341,200 barrels per day were up two percent over the second quarter.
Third quarter volumes reflect full Novagas contract volumes noted
below, including the startup shortfall between contracted levels and
actual deliveries.
- A ten year transportation agreement between Novagas Canada Ltd. and
Pembina went into effect August 1, 1998. Novagas has contracted for
firm capacity of an initial 19,000 barrels per day of natural gas
liquids on Pembina's Peace System. NGLs from Novagas' newly
constructed pipeline gathering system connecting production facilities
in Northwestern Alberta and Northeastern B.C. are delivered to Peace
at LaGlace, Alberta for transportation to Novagas fractionation
facilities in the Edmonton area. As Novagas becomes fully operational
during the fourth quarter, delivery volumes are expected to increase
to at least minimum contracted levels by year-end, with a provision to
contract for two higher volume commitment levels.
Results From Operations
Revenue through the first three quarters 1998 totalled $81.7 million,
consistent with expectations. The Peace System contributed close to 70% of
Pembina's operating income over the first three quarters, with throughput
levels rising during the third quarter as producers completed annual
maintenance and plant turnaround projects and Novagas deliveries came on line.
Third quarter activity on the Peace System centered on the completion of new
battery connections and facilities expansions started earlier in the year, and
on upgrading and development projects.
Revenue generated by the Pembina System fell within expectations, despite
lower throughput due to a reduction in transfer volumes. These volumes,
injected at a point very close to Edmonton, pay a relatively low tariff
consequently the impact on operating results is not significant. Crude oil
and condensate deliveries were as anticipated.
Throughput on the non-operated Bonnie Glen System was in line with
expectations and system revenue was greater than anticipated due to higher
contracted condensate tariffs. Pembina's ten percent share of Wabasca System
operations exceeded expectations due to higher throughputs.
In August Pembina announced that it had entered into an Operating
Agreement for an initial one year term to contract operate the recently
constructed Pelican Lake pipeline system and related facilities. This
positions Pembina to develop expertise in the maintenance and operation of a
blended system, and provides another opportunity to leverage Pembina's
existing infrastructure.
Expenses
Third quarter operating expense was $10.3 million, comparable to first
and second quarter levels. Pembina expended $1.2 million in capital during
the third quarter, comprised of $1.1 million in facility upgrades and $0.1
million in maintenance capital. Pembina continues to finance capital
expenditures primarily from cash on hand.
Distributable Cash
Distributable cash of the Fund is determined by deducting maintenance
capital expenditures and any required debt repayments and working capital
reserve adjustments from the cash flow generated by Pembina's pipeline
operations. Third quarter cash distributions of the Fund totalled $15.0
million or $0.24 per Trust Unit. Distributions were made in three equal
monthly payments of $0.08 per Unit. The Fund makes cash distributions to
Unitholders of record the last calendar day of each month, payable on or
before the 15th day of the month following. Pembina's full year forecast cash
distribution for 1998 is $0.95 per Unit, unchanged from prior periods.
It is
estimated that roughly 65% of the total 1998 distributions will be considered
taxable income from a Trust for income taxation purposes and that 35% will be
considered a tax deferred Capital Distribution from a Trust. For most
Unitholders, the return of capital amount will reduce the cost base of each
Unit for purposes of calculating the capital gains amount upon ultimate
disposition.
New Developments and Outlook
On October 23, 1998 Pembina successfully completed its first full year of
operation as a public entity with the conclusion of the final instalment and
conversion of Pembina's Trust Units to fully paid status. Pembina's operations
have generated the cash distributions indicated in the Initial Offering
Prospectus, and have provided our Unitholders with a regular income stream.
Pembina provides pipeline transportation service to a wide range of
producers and shippers, shipping products ranging from light crude oil and
condensate to natural gas liquids and ethane. Pembina does not own any of the
product shipped and transportation tolls are based on contract and market
rates not linked to commodity price levels. As such, Pembina is not directly
exposed to commodity prices. While prevailing crude oil prices will likely
have a negative impact on oil exploration programs in the upcoming drilling
season, industry sources expect buoyant natural gas prices will spur
exploration and development activities targeting natural gas and natural gas
liquids in the regions served by Pembina's pipeline systems. This augurs well
for Pembina as natural gas liquids and condensate produced in association with
natural gas comprise almost 40 percent of the Fund's throughput volumes.
Pembina continues to explore ways to realize efficiencies by adopting
best practices in its operations and periodically reviewing tolls and tariffs
to ensure proper alignment with Pembina's cost structure and market
expectations. Through this ongoing process of review and improvement, Pembina
maintains its position as the low cost service provider in the areas it
serves. This, along with Pembina's unregulated tariff structure, base of
contracts, operating expertise and focus on customer service, places Pembina
in a good position to meet its competitive challenges.
The instalment receipts due on October 23, 1998 were fully paid in the
amount of $249,700,000 and Pembina now trades as a fully paid trust unit as
PIF.UN. We are gratified current trading values in the Fund have recovered
from the lows experienced during the past year while we traded as an
instalment receipt. We believe that by continuing to deliver the operating and
financial results our Unitholders expect, we will in time improve market
recognition of both the underlying and long-term value of the Fund.
On behalf of the Board of Trustees of the Pembina Pipeline Income Fund,
William R. Stedman
President and Chief Executive Officer
Pembina Pipeline Corporation
October 27, 1998
consolidated balance sheet
September 30, 1998
(In thousands of dollars)
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September 30 December 31
1998 1997
(Unaudited) (Audited)
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Assets
Current assets:
Cash and term deposits $ 4,202 $ 14,034
Final instalment receivable 248,815 238,761
Accounts receivable 14,423 15,996
Income taxes receivable 5,840
Inventories 2,925 2,718
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270,365 277,349
Property, plant and equipment 532,045 546,836
Other assets 6,866 8,144
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$ 809,276 $ 832,329
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Liabilities and Unitholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 6,267 $ 10,539
Distributions payable to Unitholders 4,994 8,740
Final instalment bank loan 248,815 238,761
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260,076 258,040
Unitholders' equity:
Trust Units 578,473 578,473
Earnings to date 24,413 4,556
Distributions to date (53,686) (8,740)
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549,200 574,289
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$ 809,276 $ 832,329
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consolidated statement of earnings and distributable cash
September 30, 1998 - Unaudited
(In thousands of dollars, except per Trust Unit amount)
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3 Months 9 Months
Ended Ended
September 30, September 30,
1998 1998
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Operating revenue $ 27,762 $ 81,735
Expenses:
Operations 10,292 29,379
General and administrative 2,017 6,058
Management fee 225 675
Depreciation and amortization 8,303 25,519
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20,837 61,631
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Operating earnings 6,925 20,104
Interest and other income (expense) 38 128
Capital and other taxes (124) (375)
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Net earnings 6,839 19,857
Items not involving cash:
Depreciation and amortization 8,303 25,519
Non-cash tax 124 375
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Cash flow from operations 15,266 45,751
Deduct:
Maintenance capital expenditures (92) (850)
Change in working capital reserve (192) 45
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Distributable cash $ 14,982 $ 44,946
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Distributable cash per Trust Unit $ 0.24 $ 0.72
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consolidated statement of cash flows
September 30, 1998 - Unaudited
(In thousands of dollars)
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3 Months 9 Months
Ended Ended
September 30, September 30,
1998 1998
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Cash provided by (used in):
Operations:
Net earnings $ 6,839 $ 19,857
Item not involving cash:
Depreciation and amortization 8,303 25,519
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Cash flow from operations 15,142 45,376
Change in non-cash working capital (2,198) 2,934
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12,944 48,310
Financing:
Final instalment receivable (2,592) (10,054)
Final instalment bank loan 2,592 10,054
Distributions to Unitholders (14,982) (48,692)
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(14,982) (48,692)
Investments:
Development capital expenditures (1,120) (8,600)
Maintenance capital expenditures (92) (850)
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(1,212) (9,450)
Change in cash (3,250) (9,832)
Cash and term deposits, beginning of period 7,452 14,034
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Cash and term deposits, end of period $ 4,202 $ 4,202
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Pembina pipeline income fund - information
Registrar and Stock Exchange Listing:
Transfer Agent:
Montreal Trust The Toronto Stock Exchange
Company of Canada Stock symbol: PIF.UN
600, 530 - 8th Avenue S.W.
Calgary, Alberta T2P 3S8 |
