CALGARY, ALBERTA, Nov. 5, 2009 (Marketwire) -- Inter Pipeline Fund ("Inter Pipeline") (TSX:IPL.UN) announced today its financial and operating results for the three and nine month periods ended September 30, 2009.

Highlights

- Funds from operations(i) totalled $81.3 million in the third quarter

- Strong payout ratio before sustaining capital(i) of 64.4% for the third quarter

- Cash distributions to unitholders totalled $52.4 million, or $0.21 per unit during the quarter

- Throughput volumes on Inter Pipeline's oil sands transportation and conventional oil pipeline systems averaged 734,700 barrels per day (b/d)

- Construction of the Corridor expansion project mechanically completed on schedule and under budget; firm revenue commencement date of no later than January 1, 2011

- Nexen storage and marketing agreement extended for 3 years

- DBRS upgraded the trend outlook on Inter Pipeline and Corridor debt from stable to positive, and Standard & Poor's increased the outlook on Corridor debt from stable to positive

- Subsequent to quarter end, announced a 7.1% increase to monthly cash distributions to unitholders commencing December 2009 for distributions payable in January 2010

(i) Please refer to the "Non-GAAP Financial Measures" section of the MD&A.

Funds From Operations

Funds from operations during the quarter were very strong, totalling $81.3 million, a decrease of only $4.4 million from record results realized in the same period of 2008. The small decline is primarily due to exceptional pricing on propane-plus sales at Cochrane in the third quarter of 2008 and lower funds from operations in the conventional business segment in the third quarter of 2009 as compared to 2008. Decreases in these segments were partially offset by a positive variance in the oil sands transportation segment.

In the third quarter of 2009, Inter Pipeline's oil sands transportation, NGL extraction, conventional oil pipelines and bulk liquid storage businesses contributed $18.6 million, $40.9 million, $27.3 million and $10.6 million, respectively, to funds from operations. Corporate charges, including interest and general & administrative expenses totalled $16.1 million, a decrease of $2.1 million from the third quarter of 2008.

Cash Distributions

Inter Pipeline distributed $52.4 million, or $0.21 per unit, to unitholders in the third quarter of 2009 resulting in a strong payout ratio before sustaining capital of 64.4%. After including $4.0 million of sustaining capital costs incurred during the quarter, the payout ratio was 67.7%.

Current cash distributions are $0.07 per unit monthly or $0.84 per unit on an annualized basis. In October 2009, Inter Pipeline announced an increase to monthly distributions effective for payment in January 2010. Monthly cash distributions will increase from $0.07 per unit to $0.075 per unit, or $0.90 per unit annualized, representing an increase of 7.1%.

Inter Pipeline believes that it is well positioned to maintain its increased level of cash distributions to unitholders through 2011 and beyond, despite becoming a taxable entity in 2011. Attractive fundamentals within each of Inter Pipeline's four business segments combined with successful advancement of organic development opportunities support this positive outlook. Current projects underway including the Corridor expansion, Kearl diluent transportation and Bow River segregation projects are together expected to contribute approximately $200 million in incremental EBITDA per year once in service.

Oil Sands Transportation

Inter Pipeline's oil sands transportation business segment consists of the Cold Lake and Corridor pipeline systems. Together they comprise the largest oil sands gathering business in Canada. In the third quarter, volumes transported on the two systems averaged 572,900 b/d, an increase of 21,600 b/d or 4% over third quarter 2008 volumes.

Cold Lake pipeline volumes averaged 356,900 b/d in the quarter, an increase of 28,500 b/d over the same period of 2008. While volumes on the Cold Lake system fluctuate with the timing of steam injection cycles, overall production from major producers in the Cold Lake area continues to grow.

Volumes on the Corridor pipeline system averaged 216,000 b/d in the third quarter, down 3% from third quarter 2008 levels. Lower shipments on the Corridor system in the third quarter of 2009 were the result of maintenance activity at Shell's Scotford upgrader, which processes Corridor volumes. Cash flow on the Corridor system is underpinned by a 25-year cost of service contract with Shell, Chevron and Marathon, providing highly stable cash flow which is not dependent on throughput volumes or commodity prices.

In the third quarter, preliminary engineering work began on the $135 million Kearl diluent transportation project, which was announced in the second quarter of 2009. This project will transport diluent to Imperial Oil and ExxonMobil Canada's Kearl oil sands project under a 25-year ship-or-pay contract. The initial volume commitment is 60,000 b/d, which is expected to generate approximately $40 million annually in EBITDA once diluent deliveries begin late in 2012.

Corridor Expansion Project

The $1.8 billion Corridor capacity expansion project achieved a major milestone in the third quarter, with the project achieving mechanical completion. Inter Pipeline completed construction of the project on schedule and approximately $100 million under budget. Bitumen blend capacity on Corridor is expected to initially increase from 300,000 b/d to 465,000 b/d once the expansion goes into service.

In the third quarter of 2009, capital expenditures on the Corridor expansion project were $376 million. As of September 30, 2009, approximately $1.6 billion has been spent on the project. With pipeline installation and facility construction now complete, Inter Pipeline's exposure to major cost overruns has been eliminated. Inter Pipeline has no capital risk on certain remaining cost components, including line fill, remaining tank costs and interest during construction. These cost items will be added to Corridor's rate base at their actual cost.

The expansion is expected to be in service in late 2010.