News Release

Pembina Pipeline first quarter boosts earnings and cash flow

All financial figures are in Canadian dollars unless noted otherwise.

CALGARY, May 6 /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 first quarter of 2010 compared to the first quarter of 2009, primarily the result of expanding operations to include natural gas gathering and processing and reduced operating expenses.

Revenue, net of product purchases, during the first quarter of 2010 was $131.5 million, compared to $116.1 million during the same period in 2009. The increase primarily reflects the contribution of Pembina's Gas Services business, which was acquired in June 2009, as well as increased revenue generated by the Midstream & Marketing business. This was offset by decreased revenue in the Conventional Pipelines business, a result of reduced throughput. During the first quarter of 2010, throughput averaged 389,300 barrels per day (bbls/d), compared to 412,500 bbls/d during the same period in 2009. The decline is attributable to reduced crude oil and natural gas liquids ("NGLs") production in the upstream energy sector and the December 2009 sale of Pembina's Cremona Pipeline system.

Operating expenses during the first quarter of 2010 were $38.3 million, compared to $44.1 million during the first quarter of 2009, largely because of cost reductions in the Conventional Pipelines business. This decrease in expenses had a positive impact on net operating income, which totaled $93.2 million during the first quarter of 2010 compared to $72 million generated during the same time period in 2009.

Net earnings were $51.1 million ($0.32 per Trust Unit) in the first quarter of 2010, compared to $28.3 million ($0.21 per Trust Unit) in 2009. The increase reflects higher revenues, decreased operating expenses as well as lower depreciation costs, general and administrative expenses and a future income tax reduction, offset by higher interest on long-term debt. Cash flow from operating activities during the first quarter of 2010 was $67.3 million, compared to $41.2 million in the first quarter of the year before.

"We had a strong start to 2010 and we have every intention of building on this success through the remainder of the year," said Bob Michaleski, President and Chief Executive Officer. "We expect to generate additional value by continuing to deliver on our growth projects while also operating our businesses in a cost-effective, reliable and safe manner."

Cash distributions were $62.8 million during the quarter, compared to $53.2 million in the first three months of 2009, representing a quarterly payment of $0.39 per Trust Unit ($0.13 per Trust Unit monthly). Pembina intends to maintain this level of cash distribution through 2013. At its annual general and special meeting on May 7, 2010, unitholders will vote on a Board of Director recommendation to convert Pembina from an income trust to a corporation (for more information, see page 2). Following conversion, Pembina expects to maintain cash distributions to investors as a dividend (see "Forward Looking Statements and Information" below).

Effective April 25, 2010, Pembina suspended its Premium Distribution, Distribution Reinvestment and Optional Unit Purchase Plan ("DRIP"). The decision to suspend the DRIP was based on the strength of Pembina's balance sheet and the Fund's view that it does not require further equity investment at this time. Pembina believes it has the ability to fund currently planned capital expenditures with existing credit facilities and may resume the DRIP in the future should it be required to fund new investing or financing activities. Accordingly, cash distributions on the April 25, 2010 record date will not be reinvested through the DRIP.

Nipisi and Mitsue Pipeline Projects

The ERCB has issued notice that a public hearing on the Nipisi and Mitsue Pipeline projects will commence July 6, 2010 in Slave Lake, Alberta. Two stakeholders have filed interventions concerned with the potential impacts the projects may have on Aboriginal rights and the environment. Pembina believes its project plans, which include incorporating avoidance techniques to its routing strategy to protect environmental and Aboriginal cultural interests and identifying local employment and business opportunities, reflect the input received from stakeholders over a two-year consultation process.

The ERCB is expected to issue a hearing panel decision report within 90 days of the close of the hearing.

The Nipisi Pipeline, designed to initially transport 100,000 bbls/d of diluted heavy oil, is proposed to originate north of Slave Lake and run south to Swan Hills. From there, it would connect to an existing pipeline system that delivers products to the Edmonton area. The Mitsue Pipeline is being designed to transport approximately 20,000 bbls/d of condensate from Whitecourt, Alberta to producers operating north of Slave Lake. Both projects, which Pembina estimates to cost a combined total of $440 million, are scheduled to be completed in mid 2011.

Corporate Conversion

On March 4, 2010, Pembina's Board of Directors announced it had determined that the conversion of the Fund into a dividend paying corporate structure is in the best interests of unitholders and unanimously recommended that unitholders approve the corporate conversion at the annual general and special meeting on May 7, 2010. As part of the conversion process, unitholders will also vote on the adoption of a post-conversion shareholder rights plan and amended corporate by-laws. Pending a positive vote by unitholders and outstanding regulatory approvals, Pembina's conversion could become effective as early as July 1, 2010. Pembina's Board of Directors has the discretion to delay implementation of the corporate conversion to not later than December 31, 2010 if it believes such delay is in the best interests of unitholders.

Examining Opportunities for Enhanced NGL Extraction at Cutbank Complex

Stakeholder consultation has begun on a potential project to extract approximately 10,000 bbls/d of NGLs (primarily ethane) from the natural gas currently processed at Pembina's Cutbank Complex. The project includes constructing an ethane extraction facility as well as 10-kilometres of pipeline that will deliver the product to Pembina's Peace Pipeline system. Pembina is currently in discussion with various customers in the area to utilize the facility's capacity on a fee for service basis.

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 (of which 305 mmcf/d is net to Pembina).

Conference Call & Webcast

Pembina will host a conference call and webcast on Thursday, May 6, at 2 p.m. MT (4 p.m. ET) for interested investors, analysts, brokers and media representatives to discuss the first 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 May 12, 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 70808285.

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

Annual General and Special Meeting

The Fund's annual general and special meeting is being held May 7, 2010 at 2 p.m. at the Grand Lecture Theatre, The Metropolitan Centre, 333 - 4th Avenue S.W., Calgary, Alberta.

MD&A, Financial Statements & Notes

The Fund's management's discussion and analysis, consolidated financial statements and notes for the period ended March 31, 2010 provide a detailed explanation of Pembina's operating results for the three month period ended March 31, 2010 as compared to the three month period ended March 31, 2009. These documents are available at and at

Non-GAAP Financial Measures

Throughout this news release the Fund and Pembina use the term "net operating income" (revenue less operating expenses and product purchases) which is 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. This measure, together with other measures, is 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 should not be construed as an alternative to net earnings, cash flows 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 first 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", "should", "believe", "plan", "intend", "design", "view", "maintain", "schedule", "potential", "propose" 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 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 ability of the Fund to obtain the necessary unitholder, Court,
        regulatory and other third-party approvals in respect of the
        corporate conversion, in a timely fashion, or at all;
    -   the completion of the corporate conversion when planned or at all;
    -   the regulatory environment and decisions and the ability to obtain
        required regulatory and other stakeholder approvals (including in
        respect of the Nipisi and Mitsue Pipeline projects);
    -   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
    -   the other factors discussed under "Risk Factors" in the Fund's
        Management's Discussion and Analysis 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]