Kinder Morgan Canada (KML) has reported an income of $21.6 million in the second quarter, a decrease of $1.9 million from the same period last year, a result of a non-recurring gain on an asset sale during the second quarter of 2018.
Distributable cash flow (DCF) from continuing operations was $28.3 million, down 22 percent compared to the comparable prior year period. DCF from continuing operations was negatively impacted by a $9 million increase in cash tax payments due to the change from a net operating loss to a taxable position as a result of the Trans Mountain sale.
Income from continuing operations and DCF both benefited from greater contributions from ongoing operations in the Pipelines and Terminals segments versus the same period in 2018.
For the first half of 2019, KML generated net income of $42.9 million, Adjusted EBITDA of $104.8 million, and DCF of $50.7 million.
“Due to the recognition of the gain on the sale of an Edmonton area pipeline lateral in the second quarter of 2018, earnings in our Terminals segment were down 5 percent in the second quarter of 2019, compared to that prior period. Excluding that gain recognition, contributions from the segment were actually up 15 percent compared to the second quarter of 2018,” noted John Schlosser, KML President.
“Earnings contributions from the Edmonton-area terminals were up nearly 17 percent compared to the second quarter of 2018 driven primarily by storage capacity additions at our new Base Line Terminal joint venture. Volume at our Edmonton-area terminals was down 1.8 million barrels, or 8 percent, year-over-year, as mandated production curtailments continue to compress pricing differentials and pressure crude-by-rail economics. The take-or-pay nature of our contracts largely insulates segment earnings from short-term volume fluctuations.
“Contributions from our Vancouver Wharves facility were flat compared to the second quarter of 2018,” continued John. “Also this quarter, with all material permits secured, we began construction activities on the distillate storage expansion project at the Wharves facility. During this $43 million capital project, we will construct two new distillate tanks with combined storage capacity of 200,000 barrels and enhance railcar-unloading capabilities. The project is supported by a 20-year initial term, take-or-pay contract with an affiliate of a large, international integrated energy company, and we expect to place it in service late second quarter of 2021.”
Pipeline segment earnings were up $1.1 million, or 11 percent, compared to the second quarter of 2018, primarily due to increased volumes on Cochin.
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