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Inter Pipeline Reiterates Confidence in Underlying Business
CNW Group - Thu Mar 19, 8:00AM CDT
In response to the unprecedented decline in global energy prices and the COVID-19 pandemic, Inter Pipeline Ltd. ("Inter Pipeline") (TSX:IPL.TO), is providing the following update to our stakeholders.
"Inter Pipeline's top priorities remain the health and safety of our workforce, while ensuring the safe and reliable operations of our facilities and pipeline infrastructure", commented Christian Bayle, Inter Pipeline's President and Chief Executive Officer. "Despite a very challenging environment, I am confident in our underlying businesses and high-quality customer base."
"The financial bedrocks of our company are our assets which produce substantial cost-of-service and fee-based cash flow. These assets remain fully operational and continue to generate stable and predictable returns."
Financial Resilience
Inter Pipeline's financial resilience is underpinned by the long-term, stable cash flow that is generated by our oil sands transportation business. This segment is supported by 20+ year cost-of-service contracts that are not materially impacted by throughput volume or commodity price fluctuations. Furthermore, the majority of cash flow from our conventional oil pipeline business is supported by fee-based contracts with more than 100 producers and shippers within our broad service capture areas. Our well contracted bulk liquid storage business is currently exceeding expectations as demand for storage infrastructure continues to improve in Europe.
In 2019, these three business segments generated cost-of-service and fee-based EBITDA of over $800 million, or approximately 80 percent of Inter Pipeline's total EBITDA of $1,050 million. For 2020, Inter Pipeline expects these segments to contribute contracted EBITDA between $780 and $810 million, assuming normal operations.
Results from Inter Pipeline's NGL processing business remain under pressure in this lower commodity price environment. However, operationally, our Cochrane extraction facility continues to operate at near full capacity with approximately 2.5 bcf/d flowing through the plant. Sales volumes at the Redwater Olefinic Fractionator also remain strong averaging about 35,000 barrels per day year to date in 2020.
High-Quality Counterparties
Inter Pipeline's customer base is diverse and supported by creditworthy counterparties. Approximately 80 percent of our revenue is underpinned by investment grade counterparties and we maintain the ability to call for letters of credit, parental guarantees, prepayments or other types of security. Inter Pipeline has a robust credit review process and has successfully prevented any material credit losses during all previous market cycles.
Heartland Petrochemical Complex
Construction at the Heartland Petrochemical Complex remains active with a full contingent of trades continuing to execute planned construction work packages. Inter Pipeline is committed to making the site as safe as possible for its workforce. Additional safety measures to address potential COVID-19 transmission concerns at the site have been implemented and Inter Pipeline remains in close contact with the Government of Alberta on these efforts.
At this time, we continue to operate without impact at the Heartland Complex and across the rest of the organization. In addition, robust continuity plans have been implemented in alignment with recommendations from government agencies and public health authorities.
Bulk Liquid Storage Sale Process
Inter Pipeline's process to explore the sale of the bulk liquid storage business remains active and we expect to provide a more detailed market update on the status of the sales process within the next few weeks.
Should a definitive transaction be concluded, the process is expected to be completed by mid 2020 with proceeds from the full or partial sale used to reduce debt and finance our capital expenditure program.
2020 Capital Expenditure Program
Inter Pipeline's 2020 capital program will continue to focus primarily on the construction of the Heartland Petrochemical Complex. However, in these volatile conditions, it is prudent to scale back certain discretionary expenditures to further protect the balance sheet. As a result, Inter Pipeline expects to reduce its previously announced 2020 capital program by between $60 million and $120 million.
The multi-phase expansion of Inter Pipeline's Central Alberta pipeline system will continue to advance on time and budget. The construction of a new 75-kilometer Viking Connector pipeline is expected to be completed in April 2020 and two 130,000-barrel storage tanks at Stettler Terminal are planned to enter service mid 2020.
Financial Measures
Inter Pipeline continues to maintain a strong balance sheet with significant liquidity available on its committed revolving credit facility. Over $1.2 billion of available capacity remains on Inter Pipeline's 5-year, $1.5 billion revolving credit facility. Subject to lender approval, Inter Pipeline also has access to $500 million of additional capacity through an accordion feature within the credit agreement.
As at December 31, 2019, Inter Pipeline's consolidated net debt to total capitalization ratio was 41.3 percent, significantly below the maximum level of 65 percent. Inter Pipeline also has a $3 billion base shelf prospectus that provides quick and efficient access to capital markets that could be utilized to term out additional debt.
About Inter Pipeline Ltd.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
Contact Information
Investor Relations:Jeremy RobergeVice President, Finance and Investor RelationsEmail: investorrelations@interpipeline.comTel: 403-290-6015 or 1-866-716-7473
Media Relations:Breanne OliverDirector, Corporate CommunicationsEmail: mediarelations@i