News Release

Increased revenue boosts Pembina Pipeline's quarterly results

All financial figures are in Canadian dollars unless noted otherwise.

CALGARY, Aug. 5 /CNW/ - Pembina Pipeline Income Fund ("Pembina" or the "Fund") announced today that it generated increased revenue, net operating income, net earnings and cash flow from operating activities during the second quarter of 2010 compared to the second quarter of 2009. While Pembina's Gas Services business, which was acquired in 2009, was the primary driver of the improved financial results, diligent cost control in Conventional Pipelines also contributed to increased net earnings and cash flow from operations.

"Our focus on operational excellence is paying off," said Bob Michaleski, President and Chief Executive Officer. "We're boosting revenue through expansion and providing customers with reliable and highly competitive services. Safe work practices and a comprehensive integrity management system enable us to operate responsibly."

Revenue, net of product purchases, during the second quarter of 2010 was $129.9 million, compared to $121.1 million during the same period in 2009. During the first six months of 2010, Pembina generated revenue, net of product purchases, of $261.4 million, compared to $237.2 million in the first six months of 2009.

Operating expenses were $39.1 million during the second quarter of 2010, compared to $35.8 million during the same period in 2009. The increase reflects Pembina's expanded operations - the addition of Gas Services - as well as higher power costs in the Oil Sands & Heavy Oil business. Reduced maintenance and labour costs in the Conventional Pipelines business offset this increase. During the first six months of 2010, operating expenses were $77.4 million, compared to $79.9 million during the first half of 2009.

Net operating income was $90.8 million during the second quarter of 2010, compared to $85.3 million during the same time period in 2009. Year-to-date net operating income totaled $184.0 million, up from $157.3 million generated during the six months ended June 30, 2009.

Net earnings were $41.2 million ($0.25 per Trust Unit) in the second quarter of 2010, compared to $36.2 million ($0.25 per Trust Unit) during the second quarter of 2009. The increase in net earnings reflects higher revenues and decreased depreciation and amortization offset by higher operating expenses. For the six months ended June 30, 2010, net earnings totaled $92.2 million, compared to $64.5 million during the same period in 2009.

Cash flow from operating activities during the second quarter of 2010 was $68.1 million, compared to $49.2 million the year before. Year-to-date cash flow from operating activities was $135.4 million, compared to $90.4 million during the same six months in 2009.

Distributable cash per Trust Unit during the second quarter of 2010 was $0.39 compared to $0.41 during the second quarter of 2009. On a year-to-date basis for 2010, distributable cash per Trust Unit was $0.81, an increase over the $0.78 generated during the first six months of 2009.

Distributed cash was $63.7 million during the second quarter of 2010, representing a quarterly payment of $0.39 per Trust Unit ($0.13 per Trust Unit monthly), compared to $57.5 million in the second quarter of 2009 (no change in per Trust Unit payments). Distributed cash year-to-date totaled $126.6 million compared to $110.7 million during the first six months of 2009. At its annual general and special meeting held May 7, 2010, unitholders voted in favour of the recommendation to convert Pembina from an income trust to a corporation. Following corporate conversion, Pembina expects to maintain its current cash distributions in the form of a dividend of $1.56 per share per year ($0.13 per share monthly) through 2013 (see "Forward-Looking Statements and Information" on page 4).

Growth Update

Strong operational performance during the first half of the year is expected to provide a firm financial foundation to support Pembina's growth strategy. "We're on track to expand our service offering to customers and invest in new assets which support and enhance long-term value for our investors," said Michaleski.

Nipisi and Mitsue Pipeline Projects

On July 13, 2010, Pembina announced it had received approval from the Energy Resources Conservation Board ("ERCB") to construct and operate the Nipisi and Mitsue Pipelines. Approval to proceed with construction of the pipeline projects was granted by the ERCB without a public hearing, as all stakeholder objections were resolved through the consultation process.

The Nipisi Pipeline, designed to initially transport 100,000 barrels per day ("bbls/d") of diluted heavy oil, will originate north of the Town of Slave Lake, Alberta and run south to Judy Creek, Alberta. From there it will connect to Pembina's existing pipeline system that delivers products to the Edmonton area. The Nipisi Pipeline is designed such that it can be expanded to a capacity of approximately 200,000 bbls/d. The Mitsue Pipeline is designed to transport approximately 20,000 bbls/d of condensate (a light hydrocarbon used to dilute heavy oil) from Whitecourt, Alberta to producers operating north of the Town of Slave Lake, Alberta. The Mitsue Pipeline is designed such that it can be expanded to a capacity of approximately 45,000 bbls/d.

Piping fabrication for the pump stations will commence in August and pump station construction is expected to begin in September. Right-of-way clearing is also anticipated to start in September in preparation for pipeline construction, which is planned to begin in early December. Approximately 800 to 1,000 temporary positions are expected to be created during construction. All engineering, construction and procurement contracts have been awarded.

Both projects, which Pembina estimates to cost a combined total of $440 million, are scheduled to be completed in mid-2011. Based on certain assumptions, Pembina's internal projections estimate the two projects combined will generate approximately $45 million per annum in net operating income (see "Forward-Looking Statements and Information" on page 4).

Enhanced NGL Extraction at Cutbank Complex

Pembina is negotiating long-term fee-for-service agreements to provide producers with enhanced natural gas liquids ("NGLs") processing at its Cutbank natural gas gathering and processing facility. Assuming such long-term commitments are obtained, Pembina plans to expand the Cutbank Complex to extract up to 15,000 bbls/d of incremental NGLs (primarily ethane).

Regulatory approval for the project, which includes constructing an ethane extraction facility as well as a 10-kilometre pipeline that will deliver the product to Pembina's Peace Pipeline system, has been granted. Project engineering is approximately 35 percent complete and pending the completion of customer agreements, construction is scheduled to begin in the fall of 2010. Commissioning is expected to begin in mid-2011.

Located about 100 kilometres southwest of Grande Prairie, the Cutbank Complex is a fully interconnected sweet gas gathering and processing complex consisting of three gas plants and 300 kilometres of gathering systems. Total gross processing capacity at the Cutbank Complex is 360 million cubic feet per day ("mmcf/d") (of which 305 mmcf/d is net to Pembina).

"Pembina's priority is to pursue investments that are located near long-life economic hydrocarbon reserves that can generate strong returns in both the near-term and the long-term," said Michaleski. "This region has significant supply potential and new technologies are driving production costs down and recovery rates up, while multi-year, fee-for service contracts increase cash flow certainty for Pembina and further reduces our exposure to commodity price risk."

"This is a good project on a standalone basis but there is additional integration value as well. Our Conventional Pipelines business will transport the NGLs, while there may be future opportunity for our Midstream & Marketing operations to provide terminal, storage and hub services," added Michaleski.

Corporate Conversion

Pembina's Board of Directors plans to complete the conversion of the Fund into a dividend-paying corporate entity on October 1, 2010 and the Toronto Stock Exchange ("TSX") has conditionally approved the listing of the common shares and convertible debentures of Pembina Pipeline Corporation ("PPC") following conversion. As a result, Pembina expects the common shares and convertible debentures of PPC will commence trading on the TSX on or about Tuesday, October 5, 2010 under the symbols "PPL" and "PPL.DB.B", respectively. The Fund's trust units and convertible debentures are expected to be de-listed by the TSX that same day.

The decision to convert to a corporate entity results from a Government of Canada decision in 2006 that introduced legislation designed to change the taxation of income trusts. By converting to a corporation, Pembina can avoid the imposition of specified-investment flow through ("SIFT") tax applicable beginning in 2011. Pembina expects conversion to provide greater access to capital markets, improved liquidity and greater flexibility to pursue growth and expansion.

Conference Call & Webcast

Pembina will host a conference call and webcast on Thursday, August 5, at 2 p.m. MT (4 p.m. ET) for interested investors, analysts, brokers and media representatives to discuss the second quarter financial and operating results.

The conference call dial-in numbers for Canada and the U.S. are 647-427-7450 or 888-231-8191. A recording of the conference call will be available for replay until August 11, 2010 at 11:59 p.m. ET. To access the replay, please dial either 416-849-0833 or 800-642-1687 and enter the password 89676088.

A live webcast of the conference call can be accessed on Pembina's website at under Investor Information, Calendar of Events, or by entering in your web browser. Shortly after the call, an audio archive will be posted on the website for 90 days.

MD&A, Financial Statements & Notes

The Fund's management's discussion and analysis ("MD&A"), consolidated financial statements and notes for the period ended June 30, 2010 provide a detailed explanation of Pembina's operating results for the three and six month period ended June 30, 2010 as compared to the three and six month period ended June 30, 2009. These documents are available at and at

Non-GAAP Financial Measures

Throughout this news release the Fund and Pembina use the terms "net operating income" (revenue less operating expenses and product purchases), "distributed cash" (the amount of cash that has been or is to be distributed to unitholders) and "distributable cash per trust unit" (cash flow from operating activities less pension and post retirement benefit expense net of contributions, net changes in non-cash working capital, trust unit based compensation expense and amortization of financing fees on a per trust unit level), which are not recognized under Canadian generally accepted accounting principles ("GAAP"). Management believes that, in addition to earnings, net operating income is a useful measure as it is used to assess the performance of specific business units before general and administrative expenses and other non-operating expenses. Distributed cash is a measure the Fund uses to manage its business and is commonly used by management, along with other measures, to determine payout ratio. Distributable cash is a non-GAAP measure the Fund uses to manage its business and to assess future cash requirements that impact the determination of future distributions to unitholders. These measures, together with other measures, are also used by management and the investment community to assess the source and sustainability of cash distributions. Investors should be cautioned, however, that net operating income, distributed cash, and distributable cash per trust unit should not be construed as an alternative to net earnings, cash flow from operating activities or other measures of financial performance determined in accordance with GAAP as an indicator of the Fund's performance. Furthermore, these measures may not be comparable to similar measures presented by other issuers. For further information about Pembina's use of non-GAAP measures, see the second quarter report to unitholders available on and

Forward-Looking Statements and Information

Certain statements contained in this news release constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation (collectively, "forward-looking statements").

All forward-looking statements are based on Pembina's current expectations, estimates, projections, beliefs and assumptions based on information available at the time the statement was made and in light of its experience and its perception of historical trends. The use of any of the words "estimate", "expect", "may", "will", "believe", "plan", "anticipate", "design", "maintain", "schedule", "potential" and similar expressions are intended to identify forward-looking statements.

By their nature, such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Fund believes the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of the news release.

In particular, this news release contains forward-looking statements, including certain financial outlook, pertaining to the following:

    -   the completion and timing of the conversion of the Fund's structure
        to a corporate structure and the ability of the Fund to maintain its
        current level of cash distributions to equity holders both prior to
        and after completion of the proposed corporate conversion through
        2013 (in the form of dividends after the corporate conversion);
    -   capital expenditure estimates, plans, schedules, rights and
        activities and the planning, development, construction, operations
        and costs of pipelines, including in relation to the Nipisi and
        Mitsue Pipeline projects, facilities and other energy infrastructure;
    -   the Fund's strategy and the development of new business initiatives;
    -   expectations regarding the Fund's ability to raise capital and to
        carry out acquisition, expansion and growth plans;
    -   cash distributions and dividends and the tax treatment thereof; and
    -   changes in legislation relating to the Fund and its structure,
        including income tax considerations and the treatment of income and
        mutual fund trusts.

These forward-looking statements are being made by Pembina based on certain assumptions that Pembina has made in respect thereof as at the date of this document including those discussed under the section entitled "Forward-Looking Statements and Information" in the Q2 2010 MD&A.

None of the forward-looking statements described above are guarantees of future performance and they are all subject to a number of known and unknown risks and uncertainties, including but not limited to:

    -   the inability of the Fund to complete the corporate conversion as
        planned or at all;
    -   the regulatory environment and decisions;
    -   the impact of competitive entities and pricing;
    -   labour and material shortages;
    -   reliance on key alliances and agreements;
    -   the strength and operations of the oil and natural gas production
        industry and related commodity prices;
    -   non-performance or default by counterparties to agreements which the
        Fund or one or more of its affiliates has entered into in respect of
        its business;
    -   actions by governmental or regulatory authorities including changes
        in tax laws and treatment, changes in royalty rates or increased
        environmental regulation;
    -   fluctuations in operating results;
    -   continued adverse general economic and market conditions and further
        changes thereto in Canada, North America and elsewhere, including
        changes in interest rates, foreign currency exchange rates and
        commodity prices; and
    -   other factors discussed under "Risk Factors" in the Fund's MD&A for
        the year ended December 31, 2009 and in the Fund's current Annual
        Information Form available under the Fund's profile at

Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted, forecasted or projected. Such forward-looking statements are expressly qualified by the above statement. Unless required by law, the Fund does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

For additional detail and information, please see the Fund's public disclosure documents, including the Fund's annual information form for the year ended December 31, 2009 and the Fund's MD&A for the year ended December 31, 2009, each of which can be found under the Fund's SEDAR profile at

For further information: Glenys Hermanutz, Vice President, Corporate Affairs, Pembina Pipeline Corporation, (403) 231-7500, 1-888-428-3222, e-mail: [email protected]