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News Releases

Pembina Reports Solid First Quarter 2008 Results

    CALGARY, April 30 /CNW/ -

    -   The Fund distributed $0.36 per Trust Unit during the first quarter of
        2008 for total cash distributions of $47.8 million, a 14 percent
        increase over the same period of 2007.

    -   Pembina generated distributable cash of $50.8 million, an increase of
        7 percent over the same period of 2007.

    -   Pembina generated net earnings of $32.6 million during the quarter,
        representing a 4 percent decrease over the same period of 2007, due
        to a decline in the future income tax reduction of $2.8 million.

    -   The conventional pipelines contributed $67.1 million in revenue and
        $39.8 million in net operating income during the first quarter of
        2008, an 8 percent and 5 percent increase, respectively, from the
        same quarter of the previous year. March exit throughputs were at the
        highest level in 12 months due to better than expected results from
        recent connections and the implementation of new services.

    -   Pembina's Oil Sands & Heavy Oil Infrastructure business segment
        contributed $15.6 million in revenue and $9.6 million in net
        operating income during the first quarter, an 8 percent and 1 percent
        increase, respectively, from the same quarter of 2007. Construction
        and commissioning of the $400 million Horizon Pipeline is on schedule
        and is expected to be available for service on July 1, 2008. Pembina
        expects the operating income contribution of the Oil Sands & Heavy
        Oil Infrastructure unit to more than double once Horizon comes on
        stream which, commencing at start up, will generate incremental
        annual net operating income of approximately $45 million.

    -   Midstream & Marketing contributed $23.6 million in revenue and
        $21.8 million in net operating income during the first quarter of
        2008, a 19 and 23 percent increase, respectively, from the same
        quarter of 2007. The ongoing expansion of the asset base and range of
        services offered by this business unit has generated a material
        increase in cash flow contribution, which Pembina expects to continue
        with the addition of new terminalling services on the Peace system
        commencing July 1, 2008.

    Management's Discussion and Analysis

    This Management's Discussion and Analysis ("MD&A") is dated April 30,
2008 and is supplementary to, and should be read in conjunction with, the
unaudited comparative interim financial statements and notes of Pembina
Pipeline Income Fund as at and for the three months ended March 31, 2008,
along with the Fund's Management's Discussion and Analysis and audited
financial statements and notes for the year ended December 31, 2007. This MD&A
has been reviewed and approved by both the Audit Committee of the Board of
Directors and by the Board of Directors. All amounts are listed in Canadian
dollars unless otherwise specified. References to "mbbls/d", "bbls/d" and
"$/bbl" mean thousands of barrels per day, barrels per day and dollars per
barrel, respectively. See "Non-GAAP Measures" relating to footnoted non-GAAP
measures reflected in this document. This MD&A contains certain
forward-looking statements and information: see "Forward-Looking Information
and Statements".

    Fund Description

    Pembina Pipeline Income Fund is among the predominant issuers in the
Canadian energy infrastructure trust sector. Pembina's network of conventional
liquids feeder pipelines, and growing presence in the oil sands and midstream
sectors, provide an integral service to the western Canadian energy industry.
This balanced portfolio of long-life energy infrastructure assets supports the
stability and sustainability of the Fund.
    Pembina Pipeline Income Fund, an unincorporated open-ended trust, pays
monthly cash distributions to Unitholders, if, as and when determined by the
Board of Directors of Pembina Pipeline Corporation. Pembina's publicly traded
securities trade on the Toronto Stock Exchange under the symbols: PIF.UN -
Trust Units and PIF.DB.B - 7.35% convertible debentures. Pembina's corporate
head office is located in Calgary, Alberta.

    Fund Strategy

    Pembina's principal objective is to provide a stable stream of
distributions to Unitholders while pursuing opportunities for enhancement
through accretive growth. Pembina believes the most prudent manner to achieve
this objective is to maintain and develop assets around its
hydrocarbon-liquids services business in western Canada. Pembina plans to
further develop this business through the continuous improvement and ongoing
expansion of its asset base and the acquisition of quality energy
infrastructure assets. To Pembina, "quality" means assets that are imbued with
inherent competitive advantages, which are under long-term contract with
credit-worthy customers, and either service or are in close proximity to
long-life and economic hydrocarbon reserves. This strategy is intended to
generate stable or increasing per-unit cash distributions to Pembina's
Unitholders over the long-term.
    Pembina's business is structured in three key segments: Conventional
Pipelines, Oil Sands & Heavy Oil Infrastructure and Midstream & Marketing.
    The primary objective for Pembina's conventional pipeline assets is safe,
reliable operations and the maintenance of operating margin contribution while
pursuing opportunities for throughput and revenue enhancement. Margins are
maintained through the use of toll management, strict adherence to operating
cost controls and asset rationalization. Pembina strives to attract new
business to its conventional pipeline systems by offering cost-effective,
competitively-positioned and reliable transportation services.
    Pembina has successfully leveraged its uniquely positioned infrastructure
and operating knowledge in the oil sands and intends to continue to pursue
future opportunities in this key sector. Pembina's existing oil sands assets,
and those currently under development, offer fully contracted and long-term
returns which are designed to provide a secure stream of stable cash flow. The
further expansion of Pembina's business interests in this area is a priority.
    The Midstream & Marketing business consists of Pembina's 50 percent
non-operated interest in the Fort Saskatchewan Ethylene Storage Facility and
the wholly-owned terminalling, storage and hub services currently operated, or
under development, on several of Pembina's conventional pipeline systems.
Pembina anticipates that the further expansion of midstream services over
segments of its conventional assets will produce significant benefits to both
pipeline customers and to Unitholders of the Fund. This strategy serves to
both expand the range of services offered to customers and to extend the
economic life of Pembina's conventional asset base, with substantial revenue
enhancement potential.

    Results from Operations

    -------------------------------------------------------------------------
    HIGHLIGHTS(1)                         3 Months     3 Months
    (in millions of dollars,                 Ended        Ended
     except where noted)                  March 31,    March 31,
                                              2008         2007     % Change
    -------------------------------------------------------------------------
    Average throughput - conventional
     (mbbls/d)                               459.0        459.4         (0.1)
    Contracted capacity - oil sands
     (mbbls/d)                               525.0        525.0            -
    Total throughput and contracted
     volumes (mbbls/d)                       984.0        984.4            -
    Capital expenditures                      95.2         88.7          7.3
    Revenue(2)                               106.3         96.4         10.3
    Operating expenses                        35.1         31.2         12.5
    Net operating income(3)                   71.2         65.2          9.2
    General & administrative expense           9.4          6.7         40.3
    Interest expense on long-term debt         8.2          7.2         13.9
    Net earnings                              32.6         33.9         (3.8)
    Cash flow from operations                 59.0         46.9         25.8
    Cash distributions to Unitholders         47.8         42.1         13.5
      $ Per Trust Unit                     $0.3600      $0.3300          9.1
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    (1) This first quarter 2008 Interim Report to Unitholders reports
        unaudited results of the Fund for the three months ended March 31,
        2008 and comparative unaudited results for the three months ended
        March 31, 2007.
    (2) Net of product purchases of $36.5 million in the first quarter of
        2008 and $16.6 million in the first quarter of 2007.
    (3) Refer to "Non-GAAP Measures" below.


    Conventional Pipelines

    -------------------------------------------------------------------------
                                          3 Months     3 Months
    (in millions of dollars,                 Ended        Ended
     except where noted)                  March 31,    March 31,
                                              2008         2007     % Change
    -------------------------------------------------------------------------
    Average throughput (mbbls/d)             459.0        459.4         (0.1)
    Revenue                             $     67.1   $     62.0          8.2
    Operating expenses                        27.3         24.1         13.3
    Net operating income(1)                   39.8         37.9          5.0
    Capital expenditures                      16.0         23.0        (30.4)
    Operating expenses ($/bbl)                0.62         0.55         12.7
    Average revenue ($/bbl)                   1.53         1.40          9.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refer to "Non-GAAP Measures" below.

    Pembina's conventional pipelines transported an average of 459,000 bbls/d
during the first quarter of 2008, consistent with the first quarter of 2007.
    Of the total throughput for the quarter, 435,300 bbls/d were transported
on the Alberta systems. March volumes on these systems of approximately
445,000 bbls/d were the highest they have been in the previous 12-month
period. Receipts from recent connections on both the Peace and Drayton Valley
pipeline systems continue to ramp up. The Nisku connections to the Drayton
Valley system performed well late in the first quarter and exited March with
throughput of approximately 20,000 bbls/d. The $22 million product segregation
facilities on the Peace pipeline system came on-stream at the end of the first
quarter. Similar facilities on the Drayton Valley system came on-stream in the
third quarter of 2007. Pembina anticipates that these product segregation
facilities will contribute to the maintenance of the stream quality and
optimization of product pricing for customers.
    The British Columbia (BC) gathering pipelines transported 28,600 bbls/d
during the first three months of 2008, down 8 percent from the same period of
2007. Pembina's Western system transported 23,700 bbls/d during the quarter,
down 10 percent from the same period of 2007, due in part to restrictions at a
third party delivery point. Pembina entered into a four year toll agreement
with one of two primary shippers on the Western system during the first
quarter of 2008 and is awaiting approval of this negotiated settlement from
the British Columbia Utilities Commission (BCUC). For further discussion, see
"New Developments and Outlook".
    During the first quarter of 2008, Pembina's conventional systems
generated revenue of $67.1 million, up from $62.0 million from a year earlier.
The Alberta systems generated revenue of $57.2 million during the quarter
which was 6 percent higher than the first quarter of 2007. Average revenue per
barrel on the Alberta systems was $1.44 during the first quarter and was up
6 cents per barrel from the average for the same period of 2007. This increase
was the result of toll adjustments that were implemented on certain systems in
January and February of this year.

    Oil Sands & Heavy Oil Infrastructure

    -------------------------------------------------------------------------
                                          3 Months     3 Months
    (in millions of dollars,                 Ended        Ended
     except where noted)                  March 31,    March 31,
                                              2008         2007     % Change
    -------------------------------------------------------------------------
    Average throughput (mbbls/d)(1)          525.0        525.0            -
    Revenue                             $     15.6   $     14.5          7.6
    Operating expenses                         6.0          5.0         20.0
    Net operating income(2)                    9.6          9.5          1.1
    Capital expenditures                      76.4         65.4         16.8
    Operating expenses ($/bbl)(3)             0.24         0.18         33.3
    Average revenue ($/bbl)(3)                0.63         0.53         18.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Contracted capacity. Actual average throughput was 272,332 bbls/d in
        the first quarter of 2008.
    (2) Refer to "Non-GAAP Measures" below.
    (3) Calculation uses actual average throughput.

    Pembina's oil sands infrastructure consists of: the Syncrude Pipeline
(formerly AOSPL) which provides dedicated service to Syncrude, the world's
largest crude oil producer from oil sands; the Cheecham Lateral pipeline which
delivers synthetic crude oil to a facility near Cheecham Alberta; and, the
Horizon Pipeline, which will provide dedicated service from Canadian Natural
Resource Limited's (CNRL) Horizon Project, located 70 kilometres north of
Fort McMurray, to Edmonton, Alberta, which is expected to come into service in
mid-2008.
    The fully contracted Syncrude Pipeline transported an average of
272,332 bbls/d during the quarter, 10 percent lower than the first quarter of
2007. This pipeline has a transportation capacity of 389,000 bbls/d and is
fully contracted to the Syncrude owners. The Syncrude Pipeline generated
revenue of $14.4 million during the quarter.
    The Cheecham Lateral has a capacity of 136,000 bbls/d and is fully
contracted to shippers. This pipeline generated $1.2 million of revenue during
the first quarter of 2008.
    Revenue on both of these pipelines is contracted to recover operating
costs and earn a return on invested capital, therefore is not impacted by
actual pipeline throughput.
    Pembina is nearing completion of the final construction phase of the
Horizon Pipeline and has commenced facilities commissioning. Pembina is firmly
on track to have the Horizon Pipeline available for service July 1, 2008. The
Horizon Pipeline will have an ultimate capacity of 250,000 bbls/d and will
provide fully-contracted, exclusive transportation service to CNRL's Horizon
oil sands project.

    Midstream & Marketing Business

    -------------------------------------------------------------------------
                                          3 Months     3 Months
    (in millions of dollars,                 Ended        Ended
     except where noted)                  March 31,    March 31,
                                              2008         2007     % Change
    -------------------------------------------------------------------------
    Revenue(1)                          $     23.6   $     19.9         18.6
    Operating expenses                         1.8          2.1        (14.3)
    Net operating income(2)                   21.8         17.8         22.5
    Capital expenditures                       2.8          0.3        833.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Net of $36.5 million in product purchase expense for the first
        quarter 2008 and $16.6 million in the first quarter of 2007.
    (2) Refer to "Non-GAAP Measures" below.

    Pembina's Midstream & Marketing business consists of its 50 percent
non-operated interest in the Fort Saskatchewan Ethylene Storage Facility and
its wholly-owned terminalling, storage and hub services currently operated on
several of its conventional pipeline systems.
    Since the start up of this business, Pembina has experienced substantial
growth resulting in another material increase in cash flow contribution during
the quarter. Pembina's midstream business continues to exhibit strong
aggregate performance with revenue and net operating income generated of
$23.6 million and $21.8 million, respectively, during the first quarter of
2008, representing a 19 percent and 23 percent increase over the same quarter
of 2007.
    Pembina's 50 percent interest in the fully contracted Fort Saskatchewan
Ethylene Storage Facility generates stable, long-term returns that are
independent of capacity utilization and operating expenses. Variables that
have the potential to impact certain elements of this business include, but
are not limited to, pipeline volume and relative and absolute product pricing.
Pembina does not assume any material commodity price or speculative risk in
conducting this business and Pembina endeavors to diversify its revenue
sources in this unit to enhance stability in results.

    Expenses

    During the first quarter of 2008, operating expenses totaled
$35.1 million, up from operating expenses incurred during the same period of
2007 of $31.2 million. Pembina's conventional pipelines incurred operating
costs of $27.3 million during the first three months of 2008, up from
$24.1 million incurred during the comparable period in 2007. On a per barrel
of throughput basis, operating expenses on the conventional systems averaged
0.62 cents for the quarter compared to 0.55 cents during the same quarter of
2007. Approximately 50 percent of this increase is related to one time
maintenance work completed in the quarter, with the remainder being associated
with various increases in property taxes, power and field costs.
    General and administrative expenses (G&A) of $9.4 million were recorded
during the first three months of 2008, $2.7 million higher than the previous
year. G&A expenses have risen in response to a substantial increase in
construction activities, competitive employment pressures which has led to the
introduction of additional short-term and long-term incentive programs in
recent years, and an overall increase in staffing levels to support ongoing
business along with the pursuit of growth opportunities. Pembina expects G&A
expenditures to approximate 11.8 percent of net operating income in 2008,
consistent with 2007.

    Cash Distributions

    It is the Fund's principal objective to provide Unitholders with stable
cash distributions over time. As a result, not all cash available for
distribution is distributed to Unitholders. The Fund pays cash distributions
on a monthly basis to Unitholders of record on the last calendar day of each
month. Distributions are payable on the 15th day of the month following the
record date.
    Distributable cash is a non-GAAP measure that the Fund uses to manage its
business and to assess future cash requirements that impact the determination
of future distributions to Unitholders. The Fund defines distributable cash as
cash flow from operations less pension and post retirement benefits net of
pension contributions, net changes in non-cash working capital, trust unit
based compensation expense and amortization of financing fees. The impact of
these items is excluded in the calculation of distributable cash as it adjusts
for timing differences throughout the year.
    The following table sets forth the recalculation of cash flow from
operations to certain distributable cash and distributed cash measures.

    -------------------------------------------------------------------------
                                                       3 Months     3 Months
    (in thousands of dollars,                             Ended        Ended
     except where noted)                               March 31,    March 31,
                                                           2008         2007
    -------------------------------------------------------------------------
    Cash flow from operations                        $   59,034   $   46,907
    Add/(deduct):
      Employee future benefits expense                     (945)      (1,348)
      Employee future benefits
       contributions                                      1,000
      Changes in non-cash working capital                (8,043)       2,583
      Other                                                (268)        (477)
    -------------------------------------------------------------------------
    Distributable cash(1)                                50,778       47,665
    Increase in distribution reserve                     (2,985)      (5,567)
    -------------------------------------------------------------------------
    Distributed cash(1)                              $   47,793   $   42,098
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributable cash(1) per Trust Unit
     (before reserve)                                $   0.3823   $   0.3717
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributed cash per Trust Unit(1)               $   0.3600   $   0.3300
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted distributed cash to Unitholders
     per Trust Unit(1)                               $   0.3530   $   0.3219
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refer to "Non-GAAP Measures" below.

    During the first quarter of 2008, the Fund declared distributions of
$0.36 per Trust Unit, or $47.8 million in aggregate, compared to $0.33 per
Trust Unit, or $42.1 million in aggregate, paid in the first quarter of 2007.
Under Canadian tax laws, a component of the Fund's cash distributions are
taxable in the hands of the Unitholder, with the remaining portion a return of
capital, unless held in a tax-deferred account. Pembina estimates that
85 percent of the distributions declared in 2008 will be taxable and
15 percent will be a return of capital for Canadian tax purposes. For purposes
of calculating the capital gains upon disposition of the Trust Units, the
amount considered a return of capital will reduce the Unitholders' adjusted
cost base of each Trust Unit for Canadian tax purposes. Pembina's
distributions are subject to current domestic tax laws which require a
withholding tax from distribution income to non-residents of Canada.
    The table below shows the Fund's cash distributions paid relative to cash
flow from operations and net earnings for the periods indicated. See also "New
Developments and Outlook" and "Risk Factors" below for further information
regarding the sustainability of cash distributions.

    -------------------------------------------------------------------------
                                   3 Months
                                      Ended
    (in thousands of dollars,      March 31,
     except where noted)               2008       2007       2006       2005
    -------------------------------------------------------------------------
    Cash flow from operations      $ 59,034  $ 189,540  $ 143,860  $ 112,360
    Net earnings                     32,572    142,305     88,885     70,409
    Distributed cash                 47,793    178,870    142,285    113,482
    -------------------------------------------------------------------------
    Excess (shortfall) of cash
     flow from operations over
     distributed cash                11,241     10,670      1,575     (1,122)
    Excess (shortfall) of net
     earnings over distributed
     cash                           (15,221)   (36,565)   (53,400)   (43,073)
    -------------------------------------------------------------------------
    Cumulative notional
     reserve(1)                   $  34,036  $  31,052  $  21,022  $  15,128
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refer to "Non-GAAP Measures" below.

    Pembina maintains a notional reserve in order to ensure stability over
economic and industry cycles and to absorb the impact of material one-time
events. Therefore, not all available cash is distributed to Unitholders but
instead a portion of the Fund's distributable cash is used to reduce bank
indebtedness. Historical cash distributions compared to cash flow from
operations shows excess cash flow in every period except 2005. The shortfall
in 2005 was due to a prepaid pension contribution made by the Fund in the
amount of $13.3 million and due to changes in non-cash working capital. As at
December 31, 2005, a cumulative notional reserve of $15.1 million remained
after funding the shortfall. Cash distributions to Unitholders are greater
than net earnings as the Fund does not consider it necessary to retain
non-cash depreciation that has been deducted in the determination of net
earnings. Pembina generally does not expect the earning capacity of the Fund's
existing assets to erode or to be replaced provided they are properly
maintained, such maintenance costs are deducted in determining net earnings.
Asset additions increase the earning capacity of the Fund and have
historically been financed in either the debt or equity markets and are not
dependent on cash flow from existing assets.
    The Fund's payout ratio for the three months ended March 31, 2008 was
94 percent, 6 percent higher than the same period in the prior year. Pembina
estimates that the full year payout ratio in 2008 will approximate 86 percent,
lower than the full year payout ratio of 95 percent in 2007. Pembina
calculates the payout ratio as the percentage of distributable cash, prior to
distribution reserve adjustments, that is distributed to Unitholders. See
"Non-GAAP Measures" below.

    Liquidity and Capital Resources

    At March 31, 2008, Pembina's bank facilities consisted of an unsecured
$500 million revolving credit facility and a $30 million operating line of
credit. On July 24, 2007, the revolving credit facilities were increased from
$230 million to $500 million for a period of five years to July 24, 2012. In
addition, the $30 million operating facility was extended to July 24, 2008.
There are no repayments due over the term. At March 31, 2008, Pembina had
$311.3 million drawn leaving $218.7 million of undrawn capacity on the
$530 million of established bank facilities. Borrowings bear interest at
either prime lending rates or are based on bankers acceptances plus applicable
margins. The margins are based on the credit rating of the senior unsecured
debt of Pembina Pipeline Corporation and range from 0.50 percent to
1.50 percent. Other debt includes $85.1 million in fixed rate Senior Secured
Notes due 2017, $175 million in fixed rate Senior Unsecured Notes due 2014,
$75 million of Floating Rate Senior Unsecured Notes due 2009 and $200 million
in fixed rate Senior Unsecured Notes due 2021. At March 31, 2008, Pembina had
long-term debt (excluding deferred financing fees) of $846.5 million. This
long-term debt, together with $46.2 million of outstanding convertible
debentures, resulted in a ratio of total debt to total enterprise value of
28.4 percent compared to a ratio of 26.2 percent as at December 31, 2007.
    During the first quarter, $7.6 million in net debt financing costs were
recorded compared with $7.2 million during the same period of 2007. Interest
rate exposure on Pembina's floating rate debt is managed utilizing interest
rate swap instruments. At March 31, 2008, Pembina had an interest rate swap in
place on a principal amount of $60 million at an average rate of 4.75 percent
and an average term to maturity of 0.2 years, maturing in June 2008. The
mark-to-market value of the swap represented an unrealized loss of $0.1
million at March 31, 2008.
    Pembina considers the maintenance of investment grade credit agency
ratings as critical to its ongoing ability to access capital markets on
attractive terms. The rating systems employed by the agencies referenced below
recognize the stable profile of Pembina's assets and financial results and the
sustainability of the per Trust Unit distributions of the Fund. The Dominion
Bond Rating Service Ltd. (DBRS) stability rating system measures the
volatility and sustainability of distributions per Trust Unit. DBRS has
assigned Pembina Pipeline Income Fund a STA-2 (low) stability rating. DBRS's
stability rating scale is from STA-1 to STA-7, with STA-1 representing the
highest rating possible, and STA-7 the lowest. Pembina Pipeline Corporation,
the Fund's primary operating subsidiary, is also rated by DBRS, which has
assigned a senior secured debt rating of 'BBB High' and a 'BBB' senior
unsecured debt rating. Standard & Poor's (S&P) rates Pembina Pipeline
Corporation as follows: 'BBB' long-term corporate credit with a stable
outlook, 'BBB plus' senior secured debt and 'BBB' senior unsecured debt. S&P
also rates the Fund and has a current rating of SR-2. According to S&P's
rating system, which rates distributable cash on a scale of SR-1 to SR-7, SR-2
rated funds are considered to have very high stability and debt instruments
rated BBB have adequate protection parameters.

    Contractual Obligations

    The Fund is committed to annual payments as follows:

    -------------------------------------------------------------------------
    ($ millions)                          Payments Due By Period
    -------------------------------------------------------------------------
                                      Less than    1-3       4-5      After
    Contractual Obligations   Total    1 year     years     years    5 years
    -------------------------------------------------------------------------
    Office and vehicle
     leases                  $  13.4   $   3.3   $   5.1   $   3.9   $   1.1
    Long-term debt             846.5       6.5      97.7     329.5     412.8
    Convertible debentures      46.2                46.2
    Construction
     commitments                70.5      37.5      16.5      16.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total contractual
     obligations             $ 976.6   $  47.3   $ 165.5   $ 349.9   $ 413.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Pembina is contractually committed to the construction and the operation
of the Horizon Pipeline. Construction of the Horizon Pipeline is underway and
Pembina anticipates the pipeline to be available for service on July 1, 2008.
Pembina currently projects the cost to be $400 million, with $329.5 million of
that amount expended to March 31, 2008, $37.5 million expected to be spent in
the last nine months of 2008 and $33 million expected to be spent in later
years. Pembina expects to utilize its undrawn bank facilities to finance the
remaining costs of the Horizon Pipeline.

    -------------------------------------------------------------------------
                                                       3 Months     3 Months
                                                          Ended        Ended
                                                       March 31,    March 31,
    Capital Expenditures ($ millions)                      2008         2007
    -------------------------------------------------------------------------
    Development capital
      Conventional pipelines                         $     16.0   $     23.0
      Oil Sands & Heavy Oil infrastructure                 76.4         65.4
      Midstream & Marketing business                        2.8          0.3
    -------------------------------------------------------------------------
    Total development capital                        $     95.2   $     88.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Pembina expended $95.2 million on capital projects during the first
quarter of 2008, up from $88.7 million expended during the first quarter of
2007. Capital expenditures for the conventional systems of $16.0 million
during the quarter related to $6.6 million for new connections and upgrades,
$5.6 million for the Peace system product segregation facilities, $3.2 million
for the Western system corrosion and pipeline inspection programs and
$0.6 million for Drayton Valley system product segregation facilities. Oil
sands infrastructure spending totaled $76.4 million in the first quarter, up
from the $65.4 million expended during the same period of 2007. Of the oil
sands related capital expenditures during the first quarter of 2008,
$75.1 million was related to Horizon Pipeline construction and $1.3 million
was invested in upgrades on the Syncrude Pipeline. Spending in the midstream
business segment of $2.8 million year-to-date related mainly to operations
equipment. Capital expenditures are financed utilizing Pembina's existing
credit facilities.

    Trust Unit and Convertible Debenture Information

    Since June 30, 2007, Pembina has prorated its DRIP to zero as its bank
facilities offer a lower cost of financing for the Fund as compared to equity
issuances. Pembina expects that it has sufficient bank facilities to fund
current projects but it may resume the DRIP in the future should it desire to
raise new equity.
    The Fund's Trust Units, together with the one remaining series of
convertible debentures, are traded on the Toronto Stock Exchange.

    -------------------------------------------------------------------------
                                          April 28,    March 31,    March 31,
                                              2008         2008         2007
    -------------------------------------------------------------------------

    Trust Units Outstanding            132,864,561  132,815,734  128,246,780
    Average Daily Volume (Units
     per day)(1)                           196,440      208,300      242,000
    Unit Trading Price ($/Unit)         $    17.24   $    16.30   $    15.86

    Principal Amount of Debentures
     Outstanding ($millions)            $     48.0   $     48.3   $     75.8

    7.35% Convertible Debentures
     Trading Price(2)                   $   137.50   $   133.00   $   127.00
    Total Market Value of Securities
     Outstanding ($millions)            $  2,357.0   $  2,229.0   $  2,133.0
    -------------------------------------------------------------------------
    Pembina's convertible debentures
     are convertible to Trust Units
     at conversion prices of ($/Unit):
      7.35% Convertible Debentures
       maturing December 31, 2010                    $    12.50
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Based on the 20 trading days from April 1 to April 28, 2008,
        inclusive.
    (2) Full conversion to Trust Units of the remaining principal amount of
        the debenture issue as at April 28, 2008 would result in the issuance
        of 3.8 million Trust Units.

    As at March 31, 2008, non-resident holdings in the Fund totaled
approximately 19 percent. This level is within the 49 percent restriction on
non-resident ownership in the Fund imposed by Pembina's Declaration of Trust
and is consistent with the requirements of the Income Tax Act (Canada).

    Critical Accounting Estimates and Changes in Accounting Principles and
    Practices

    The Canadian Institute of Chartered Accountants issued three new
accounting standards: Handbook Section 1535 "Capital Disclosures", Handbook
Section 3862 "Financial Instruments - Disclosure" and Handbook Section 3863
"Financial Instruments - Presentation" effective January 1, 2008. The Fund
adopted these standards effective January 1, 2008 and as a result has included
additional disclosures, both qualitative and quantitative, on financial
instruments and on the management of capital in the financial statements and
notes in this 2008 interim report.
    There were no changes in Pembina's other critical accounting estimates
and practices that affected the disclosure of or the accounting for its
operations for the quarter ended March 31, 2008. Such critical accounting
estimates are presented in Management's Discussion and Analysis for the year
ended December 31, 2007.

    New Developments and Outlook

    Pembina continues to work with its customers on new connections and
upgrades on a number of its conventional systems. The development of a
proposed pipeline project targeting Nipisi and Peace River heavy oil producers
progressed during the quarter. Pembina currently estimates that this project
will cost approximately $360 million, which includes a 22,000 bbls/d diluent
pipeline and a 100,000 bbls/d heavy oil pipeline. Pembina expects to use a
combination of new and existing infrastructure to provide competitive
transportation services to and from these areas. Pembina is continuing to work
with various shippers towards obtaining firm commitments, and targets a
potential start-up date in 2010. However, at this time, no definitive
agreements or commitments relating to this project are in place and there is
no assurance the project will proceed.
    During the first quarter of 2008, Pembina reached a four year agreement
with Husky Energy Inc. for volumes transported on the Western System to
Prince George, BC and is awaiting a decision from the British Columbia
Utilities Commission regarding tolls applicable to volumes transported on the
Western system to Kamloops, BC.
    In its midstream business, Pembina expects future growth resulting from
the addition of truck terminalling services and enhanced throughput on the
Peace system effective July 1, 2008.
    Pembina's reputation for consistent results and growing distributions is
supported by its continued success in developing new services and executing on
opportunities. Pembina's established record of accomplishment reflects the
quality of its strategically located assets, prudent expansions and additions
to its asset portfolio, the introduction of new and innovative services and
strong stakeholder relationships. Ongoing anticipated future growth in all
three of Pembina's business segments lends confidence in Pembina's continuing
ability to meet its distribution objective going forward.

    Risk Factors

    Management has identified the primary risk factors that could potentially
have a material impact on the financial results and operations of the Fund.
Such risk factors are presented in Management's Discussion and Analysis for
the year ended December 31, 2007, and in the Fund's Annual Information Form
for the year ended December 31, 2007. See "Additional Information" below.

    Additional Information

    Additional information relating to Pembina Pipeline Income Fund,
including the Fund's Annual Information Form and financial statements, can be
found on the Fund's profile on the SEDAR website at www.sedar.com.

    Selected Quarterly Information

    -------------------------------------------------------------------------
                               2008                     2007
    -------------------------------------------------------------------------
    (in thousands of dollars,
     except where noted)        Q1        Q4        Q3        Q2        Q1
    -------------------------------------------------------------------------

    Revenue(1)               106,284   101,234    98,716    93,426    96,359
    Operating expenses        35,095    35,885    31,833    30,718    31,192
    EBITDA(2)                 59,916    54,518    58,660    53,676    56,271
    Cash flow from
     operations               59,034    48,788    51,666    42,180    46,907
    Net earnings              32,572    34,981    37,903    35,492    33,929

    Net earnings per Trust
     Unit ($/Unit):
      Basic                     0.25      0.26      0.29      0.27      0.27
      Diluted                   0.24      0.26      0.28      0.27      0.26

    Distributed cash(2)       47,793    47,684    46,198    42,890    42,098

    Distributed cash per
     Trust Unit(2)
      Basic                   0.3600    0.3600    0.3500    0.3300    0.3300
      Diluted                 0.3530    0.3521    0.3393    0.3211    0.3219

    Trust Units outstanding
     (thousands):
      Weighted average
       (basic)               132,758   132,454   131,994   129,966   127,568
      Weighted average
       (diluted)             137,196   137,243   136,850   135,274   135,206
      End of period          132,816   132,542   132,065   131,388   128,247
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    ---------------------------------------------------------------
                                              2006
    ---------------------------------------------------------------
    (in thousands of dollars,
     except where noted)        Q4        Q3        Q2        Q1
    ---------------------------------------------------------------

    Revenue(1)                88,062    85,326    80,924    81,506
    Operating expenses        32,933    29,570    28,132    29,970
    EBITDA(2)                 49,626    50,261    39,554    44,732
    Cash flow from
     operations               41,111    32,430    26,055    44,264
    Net earnings              27,231    24,563    16,940    20,150

    Net earnings per Trust
     Unit ($/Unit):
      Basic                     0.22      0.20      0.14      0.17
      Diluted                   0.22      0.20      0.14      0.17

    Distributed cash(2)       37,687    36,461    34,567    33,570

    Distributed cash per
     Trust Unit(2)
      Basic                   0.3000    0.2950    0.2850    0.2850
      Diluted                 0.2956    0.2902    0.2803    0.2786

    Trust Units outstanding
     (thousands):
      Weighted average
       (basic)               125,625   123,576   121,289   117,784
      Weighted average
       (diluted)             132,789   131,502   130,036   129,692
      End of period          126,218   124,262   122,030   119,816
    ---------------------------------------------------------------
    ---------------------------------------------------------------
    (1) Net of product purchases.
    (2) Refer to "Non-GAAP Measures" below.

    Net earnings of $32.6 million were recorded during the first quarter of
2008, compared to $33.9 million and $20.2 million over the same periods in
2007 and 2006. The 4% decline in net earnings over the same period in 2007
relates to a decline in the future income tax reduction of $2.8 million. Net
operating income continues to grow at $71.2 million in the first quarter of
2008, compared to $65.2 million and $51.5 million over the same periods in
2007 and 2006 representing a substantial increase of 9 percent and 38 percent,
respectively, due to the addition of midstream operations as well as toll
increases on conventional pipeline systems.
    Pembina's stable operations typically produce limited variability in
quarterly results. However, continued growth in Pembina's underlying asset
base and business operations has generally resulted in increased revenues,
expenses and cash flows over the last nine quarters. Variations in this trend
result from one-time events and expected seasonal factors which impact
pipeline receipts and operating expenses, occurring most frequently during the
second quarter of each year. Such events and factors include, but are not
limited to, regularly scheduled facilities maintenance, road bans and
weather-related impact on receipts and spending patterns.

    Non-GAAP Measures

    Throughout this MD&A the Fund and Pembina use the term "distributable
cash" to refer to the amount of cash that is to be available for distribution
to the Fund's Unitholders. Distributable cash is used as a financial measure
as it adjusts cash flow from operations for timing differences in non-cash
working capital and for non-cash items charged to earnings that the Fund
considers to be unavailable for distribution. "Distributable cash" is not a
measure recognized by Canadian generally accepted accounting principles
(GAAP). Therefore, distributable cash of the Fund may not be comparable to
similar measures presented by other issuers, and investors are cautioned that
distributable cash should not be construed as an alternative to net earnings,
cash flow from operations or other measures of financial performance
calculated in accordance with GAAP as an indicator of the Fund's performance.
    Further, the use of terms "EBITDA" (earnings before interest, taxes,
depreciation and amortization), "net operating income" (revenues less
operating expenses), "payout ratio" (the Fund's cash distributions to
Unitholders divided by its distributable cash), "notional reserve" (the
difference between the Fund's distributable cash and the cash distributions to
Unitholders in a given period) and "enterprise value" (the Fund's market
capitalization plus long-term debt) are not recognized under Canadian GAAP.
Management believes that, in addition to earnings, EBITDA, net operating
income, payout ratio and enterprise value are useful measures. They provide an
indication of the results generated by the Fund's business activities prior to
consideration of how activities were financed, how the results are taxed and
measured and, in the case of enterprise value, the aggregate value of the
Fund. Notional reserve indicates investors should be cautioned, however, that
EBITDA, net operating income, payout ratio, notional reserve and enterprise
value 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.

    Forward-Looking Information and Statements

    The information contained in this press release contains certain
forward-looking statements and information that are based on the Fund's
current expectations, estimates, projections and assumptions in light of its
experience and its perception of historical trends. In some cases,
forward-looking statements and information can be identified by terminology
such as "may", "will", "should", "expects", "projects", "plans",
"anticipates", "targets", "believes", "strives", "estimates", "continue",
"designed", "objective", "maintain", "schedule", "endeavor" and similar
expressions. In particular, this MD&A contains forward-looking statements and
information with respect to: future stability and sustainability of cash
distributions to Unitholders; ongoing utilization and expansions of and
additions to Pembina's asset base; future acquisitions and growth and growth
potential in Pembina's conventional pipelines, oil sands & heavy oil
infrastructure and midstream operations; potential revenue and cash flow
enhancement; maintenance of operating margins; continued high levels of oil
and gas activity and increased oil and gas production in proximity to our
pipelines and other assets (which could be affected by, among other things,
possible changes to applicable royalty and tax regimes); additional throughput
potential on additional connections and other initiatives on our conventional
system; expected project start-up and construction dates; future
distributions, payout ratios and taxation of distributions; future financing
capability and sources; negative credit rating adjustments; the expansion of
midstream services; and the future tax treatment of the Fund and income
trusts. These statements are not guarantees of future performance and are
subject to a number of known and unknown risks and uncertainties, including
but not limited to, the impact of competitive entities and pricing, approvals
by industry partners, reliance on key alliances and agreements, the strength
and operations of the oil and natural gas production industry and related
commodity prices, the regulatory environment and decisions, tax laws and
treatment, fluctuations in operating results, the ability of Pembina to raise
sufficient capital (or to raise capital on favourable terms) to complete
future projects and satisfy future commitments, construction delays and labour
and material shortages, and certain other risks detailed from time to time in
the Fund's public disclosure documents. The Fund believes the expectations
reflected in these forward-looking statements and information are reasonable
as of the date hereof but no assurance can be given that these expectations
will prove to be correct. Undue reliance should not be placed on these
forward-looking statements and information as both known and unknown risks and
uncertainties, including those business risks stated above, may cause actual
performance and financial results in future periods to differ materially from
any projections of future performance or results expressed or implied by such
forward-looking statements and information. Accordingly, readers are cautioned
that events or circumstances could cause results to differ materially from
those predicted. Such forward-looking statements and information are expressly
qualified by the above statements. The Fund does not undertake any obligation
to publicly update or revise any forward-looking statements or information
contained herein, except as required by applicable laws.

    consolidated balance sheets
    (unaudited)

    (In thousands of dollars)
    -------------------------------------------------------------------------
                                                       March 31      Dec. 31
                                                           2008         2007
    -------------------------------------------------------------------------

    Assets
    Current assets:
      Cash                                          $            $    16,736
      Accounts receivable and other                      54,121       56,177
    -------------------------------------------------------------------------
                                                         54,121       72,913
    Property, plant and equipment                     1,603,842    1,524,887
    Goodwill and other                                  357,354      358,212
    Derivative financial instruments                     12,284       10,796
    -------------------------------------------------------------------------
                                                    $ 2,027,601  $ 1,966,808
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Unitholders' Equity
    Current liabilities:
      Bank indebtedness                             $       379  $
      Accounts payable and accrued liabilities           70,069       59,485
      Distributions payable to Unitholders               15,938       15,905
      Current portion of long-term debt                   6,539        6,422
    -------------------------------------------------------------------------
                                                         92,925       81,812
    Long-term debt                                      832,300      772,364
    Convertible debentures                               46,190       47,702
    Asset retirement obligations                         63,180       62,236
    Future income taxes                                  94,485       93,957
    -------------------------------------------------------------------------
                                                      1,129,080    1,058,071
    -------------------------------------------------------------------------
    Unitholders' equity:
      Trust Units (note 6)                            1,324,601    1,320,692
      Deficit                                          (435,111)    (419,890)
      Accumulated other comprehensive income              9,031        7,935
    -------------------------------------------------------------------------
                                                        898,521      908,737
    -------------------------------------------------------------------------
                                                    $ 2,027,601  $ 1,966,808
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

       See accompanying notes to the consolidated financial statements



    consolidated statements of earnings and deficit
    (Unaudited)

    (In thousands of dollars, except per Trust Unit amounts)
    -------------------------------------------------------------------------
                                                       3 Months     3 Months
                                                          Ended        Ended
                                                       March 31,    March 31,
                                                           2008         2007
    -------------------------------------------------------------------------

    Revenues:
      Conventional pipelines                         $   67,097   $   61,985
      Oil Sands & Heavy Oil infrastructure               15,598       14,478
      Midstream & Marketing business                     60,040       36,485
    -------------------------------------------------------------------------
                                                        142,735      112,948
    -------------------------------------------------------------------------

    Expenses:
      Operations                                         35,095       31,192
      Product purchases                                  36,451       16,589
      General and administrative                          9,372        6,721
      Depreciation and amortization                      17,126       16,006
      Accretion on asset retirement obligations             944          408
      Internalization of management contract              1,859          558
      Other                                                  42        1,617
    -------------------------------------------------------------------------
                                                        100,889       73,091
    -------------------------------------------------------------------------
    Earnings before interest and taxes                   41,846       39,857
    Interest on long-term debt                           (8,240)      (7,181)
    Interest on convertible debentures                     (898)      (1,425)
    -------------------------------------------------------------------------
    Earnings before taxes                                32,708       31,251
    Income tax expense (reduction)                          136       (2,678)
    -------------------------------------------------------------------------
    Net earnings                                         32,572       33,929
    Deficit, beginning of period                       (419,890)    (383,325)
    Distributed cash                                    (47,793)     (42,098)
    -------------------------------------------------------------------------
    Deficit, end of period                           $ (435,111)  $ (391,494)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per Trust Unit
      Basic                                          $     0.25   $     0.27
      Diluted                                        $     0.24   $     0.26
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

       See accompanying notes to the consolidated financial statements



    consolidated statement of comprehensive income
    (Unaudited)

    (In thousands of dollars)
    -------------------------------------------------------------------------
                                                       3 Months     3 Months
                                                          Ended        Ended
                                                       March 31,    March 31,
                                                           2008         2007
    -------------------------------------------------------------------------

    Net earnings for the period                      $   32,572   $   33,929
    Other comprehensive income:
      Unrealized gain on derivative instruments
       designated as cash flow hedges, net of
       tax of $0.4 million                                1,096        7,782
    -------------------------------------------------------------------------
      Total comprehensive income                     $   33,668   $   41,711
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated other comprehensive income:
      Opening balance, net of tax of $2.9 million    $    7,935   $    5,048
      Unrealized gain on derivative instruments
       designated as cash flow hedges, net of
       tax of $0.4 million                                1,096        7,782
    -------------------------------------------------------------------------
      Balance, end of period, net of tax of
       $3.3 million                                  $    9,031   $   12,830
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

       See accompanying notes to the consolidated financial statements



    consolidated statements of cash flows
    (Unaudited)

    (In thousands of dollars)
    -------------------------------------------------------------------------
                                                       3 Months     3 Months
                                                          Ended        Ended
                                                       March 31,    March 31,
                                                           2008         2007
    -------------------------------------------------------------------------

    Cash provided by (used in):
    Operating activities:
    Net earnings                                     $   32,572   $   33,929
    Items not involving cash:
      Depreciation and amortization                      17,126       16,006
      Accretion on asset retirement obligations             944          408
      Future income tax expense (reduction)                 136       (2,678)
      Employee future benefits expense                      945        1,348
      Trust Unit based compensation expense                 268          277
      Other                                                              200
    Employee future benefits contributions               (1,000)
    Changes in non-cash working capital                   8,043       (2,583)
    -------------------------------------------------------------------------
    Cash flow from operations                            59,034       46,907

    Financing activities:
      Bank borrowings                                    61,615       47,006
      Repayment of senior secured notes                  (1,562)      (1,453)
      Issue of Trust Units on exercise of options         2,129        1,561
      Issue of Trust Units under Distribution
       Reinvestment Plan                                              23,177
      Distributions to Unitholders - current year       (31,855)     (27,990)
      Distributions to Unitholders - prior year         (15,905)     (12,622)
    -------------------------------------------------------------------------
                                                         14,422       29,619
    Investing activities:
      Capital expenditures                              (95,168)     (81,452)
      Changes in non-cash working capital                 4,597        1,043
    -------------------------------------------------------------------------
                                                        (90,571)     (80,409)
    Change in cash                                      (17,115)      (3,883)
    Cash, beginning of period                            16,736        1,861
    -------------------------------------------------------------------------
    Bank indebtedness, end of period                 $     (379)  $   (2,022)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Other cash disclosures:
      Interest on long-term debt paid                $  (10,636)  $   (9,951)
      Interest capitalized                           $   (3,522)  $   (1,178)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

       See accompanying notes to the consolidated financial statements



    Notes to the consolidated financial statements:
    (Tabular amounts in thousands of dollars, except per Trust Unit amounts)

    1.  Significant accounting policies:

        The interim consolidated financial statements of Pembina Pipeline
        Income Fund ("the Fund") have been prepared by management in
        accordance with Canadian generally accepted accounting principles for
        non rate-regulated entities. The interim consolidated financial
        statements have been prepared following the same accounting policies
        and methods of computation as the consolidated financial statements
        for the fiscal year ended December 31, 2007 with the exception of
        accounting policies relating to newly issued accounting standards by
        the Canadian Institute of Chartered Accountants. The disclosure
        provided below is incremental to that included with the annual
        consolidated financial statements. The interim consolidated financial
        statements should be read in conjunction with the Fund's consolidated
        financial statements and the notes thereto for the year ended
        December 31, 2007. Certain of the prior period's comparative figures
        have been reclassified to conform with the current period's
        presentation.

        Effective January 1, 2008, the Fund adopted the new recommendations
        of the Canadian Institute of Chartered Accountants ("CICA") Handbook
        Section 3862, Financial Instruments - Disclosures ("Section 3862")
        and Handbook Section 3863, Financial Instruments - Presentation
        ("Section 3863"). Section 3862 requires entities to provide
        disclosures in their financial statements that enable users to
        evaluate the significance of financial instruments on the entity's
        financial position and its performance and the nature and extent of
        risks arising from financial instruments to which the entity is
        exposed during the period and at the balance sheet date, and how the
        entity manages those risks. Section 3863 established standards for
        presentation of financial instruments and nonfinancial derivatives.
        It deals with the classification of financial instruments, from the
        perspective of the issuer, between liabilities and equities, the
        classification of related interest, dividends, losses and gains, and
        circumstances in which financial assets and financial liabilities are
        offset. The adoption of these standards did not have any impact on
        the classification and valuation of the Fund's financial instruments.
        The Fund has included disclosures recommended by these new standards
        in Note 4 of the financial statements.

        Effective January 1, 2008, the Fund adopted the new recommendation of
        CICA Handbook Section 1535, Capital Disclosures ("Section 1535").
        Section 1535 establishes standards for disclosing information about
        an entity's capital and how it is managed. It requires the disclosure
        of information about: the entity's objectives, policies and processes
        for managing capital, qualitative information about what the entity
        regards as capital, whether the entity has complied with any capital
        requirements, and if it has not complied, the consequences of such
        non-compliance. The Fund has included disclosures recommended by
        Section 1535 in Note 5 of the financial statements.

        International Financial Reporting Standards

        The Canadian Institute of Chartered Accountants ("CICA") Accounting
        Standards Board (AcSB) announced that Canadian publicly accountable
        enterprises will adopt International Financial Reporting Standards
        (IFRS) as issued by the International Accounting Standards Board
        (IASB), effective January 1, 2011. IFRS will require increased
        financial statement disclosures. Although IFRS uses a conceptual
        framework similar to Canadian GAAP, differences in accounting
        policies will need to be addressed to assess the impact on the Fund's
        existing accounting policies, the impact on business processes and
        the impact on information systems requirements and internal controls.
        The Fund is currently beginning to assess the impact of this AcSB
        announcement on its financial statements and business processes.

    2.  Internalization of management contract:

        Effective June 30, 2006, the Fund acquired all of the outstanding
        common shares of Pembina Management Inc. (Manager), the manager of
        the Fund. Total consideration for the transaction consisted of an
        initial cash payment of $6 million and a contingent deferred payment
        payable in 2009 that is linked to future growth in distributable cash
        per Trust Unit of the Fund. If the future cumulative distributable
        cash in the period from January 1, 2006, to December 31, 2008 does
        not exceed $3.42 per Trust Unit ($1.14 per Trust Unit per year), the
        deferred amount is zero. Every approximate 10 cent per Trust Unit
        increase in cumulative distributable cash over $3.42 per Trust Unit
        results in a $1 million increase in purchase price to a maximum of
        $15 million, which is converted into notional Trust Units based on
        the weighted-average trading price of the Trust Units for the
        20 trading days prior to June 30, 2006 of $15.87 (the "closing
        price"). The purchase price will also be adjusted by the
        distributions payable on the notional Trust Units for the period from
        January 1, 2006 to December 31, 2008, and the change in the value of
        the Fund's Trust Units from the closing price. No further payments
        under the share purchase agreement are payable until 2009, however
        assuming the total 2008 distributable cash is similar to that for the
        three months ended March 31, 2008, and using the March 31, 2008
        closing price of $16.30 per Trust Unit on the TSX as the "closing
        price" and assuming monthly distributions for the remainder of 2008
        remain at the level of distribution for the month of March 2008, the
        potential deferred payment would be $12.1 million of which,
        $4.7 million has been expensed in 2007 and $1.9 million has been
        expensed at March 31, 2008.

    3.  Business segments:

        The Fund conducts its operations through three operating segments:
        conventional pipelines, oil sands & heavy oil infrastructure and
        midstream & marketing business.

        Conventional pipelines consists of the tariff based operations of
        pipelines and related facilities to deliver crude oil, condensate and
        natural gas liquids in Alberta and British Columbia.

        Oil sands & Heavy Oil Infrastructure consists of the Syncrude
        Pipeline, the Cheecham Lateral and the Horizon Pipeline, which is
        currently under construction. As at March 31, 2008, the Syncrude
        Pipeline and the Cheecham Lateral were operational. This operating
        segment consists of pipelines and related facilities to deliver
        synthetic crude oil produced from oil sands under long-term cost of
        service arrangements.

        Midstream & Marketing business consists of the Fund's direct and
        indirect interest in a storage operation and direct interests in
        terminalling, storage and hub services under a mixture of short,
        medium and long-term contractual arrangements.

        The financial results of the business segments are as follows:

        ---------------------------------------------------------------------
                                         Oil Sands &
                                           Heavy Oil  Midstream &
        (in thousands       Conventional      Infra-   Marketing
         of dollars)           Pipelines   structure    Business       Total
        ---------------------------------------------------------------------
        Three months ended
         March 31, 2008

        Revenues:
          Pipeline
           transportation     $   67,097  $   15,598  $           $   82,695
          Terminalling, storage
           and hub services                               60,040      60,040
        ---------------------------------------------------------------------
          Revenue before
           expenses               67,097      15,598      60,040     142,735
        ---------------------------------------------------------------------

        Expenses:
          Operations              27,266       5,988       1,841      35,095
          Product purchases                               36,451      36,451
          General and
           administrative          9,035         337                   9,372
          Depreciation and
           amortization           11,701       3,028       2,397      17,126
          Accretion on asset
           retirement
           obligations               892          52                     944
          Internalization of
           management contract     1,859                               1,859
          Other                       42                                  42
        ---------------------------------------------------------------------
                                  50,795       9,405      40,689     100,889
        ---------------------------------------------------------------------
        Earnings before
         interest and taxes   $   16,302  $    6,193  $   19,351  $   41,846
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Property, plant and
         equipment(1)         $  797,021  $  665,833  $  140,988  $1,603,842
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Goodwill and other    $  206,628  $   28,300  $  122,426  $  357,354
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        (1) Included in property, plant and equipment are assets under
            construction for the Horizon Pipeline of $329.5 million.



        ---------------------------------------------------------------------
                                         Oil Sands &
                                           Heavy Oil  Midstream &
        (in thousands       Conventional      Infra-   Marketing
         of dollars)           Pipelines   structure    Business       Total
        ---------------------------------------------------------------------
        Three months ended
         March 31, 2007

        Revenues:
          Pipeline
           transportation     $   61,985  $   14,478  $           $   76,463
          Terminalling, storage
           and hub services                               36,485      36,485
        ---------------------------------------------------------------------
          Revenue before
           expenses               61,985      14,478      36,485     112,948
        ---------------------------------------------------------------------

        Expenses:
          Operations              24,116       4,997       2,079      31,192
          Product purchases                               16,589      16,589
          General and
           administrative          6,394         327                   6,721
          Depreciation and
           amortization           10,783       2,984       2,239      16,006
          Accretion on asset
           retirement
           obligations               382          26                     408
          Internalization of
           management contract       558                                 558
          Other                    1,617                               1,617
        ---------------------------------------------------------------------
                                  43,850       8,334      20,907      73,091
        ---------------------------------------------------------------------
        Earnings before
         interest and taxes   $   18,135  $    6,144  $   15,578  $   39,857
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Property, plant and
         equipment(1)         $  764,587  $  437,960  $  121,606  $1,324,153
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Goodwill and other    $  206,320  $   28,300  $  126,073  $  360,693
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        (1) Included in property, plant and equipment are assets under
            construction for the Horizon Pipeline of $108.7 million.


    4.  Financial Risk Management and Financial Instruments:

        Financial risk

        The Fund has exposure to credit risk, liquidity risk and market risk.
        The Fund's Board of Directors has the overall responsibility for the
        oversight of these risks and reviews the Fund's policies on an
        ongoing basis to ensure that these risks are appropriately managed.
        The Fund's Audit Committee oversees how management monitors
        compliance with the Fund's risk management policies and procedures
        and reviews the adequacy of this risk framework in relation to the
        risks faced by the Fund. The Fund's Risk Management Function assists
        in managing these risks. The Fund's primary risk management objective
        is to protect earnings and cash flow and ultimately Unitholder
        distributions.

        Credit risk

        Credit risk is the risk of financial loss to the Fund if a customer,
        partner or counterparty to a financial instrument fails to meet its
        contractual obligations and arises primarily from the Fund's cash and
        cash equivalents and receivables and from counterparties on its
        interest rate and power cost swaps. The carrying amount of the
        financial assets and liabilities and the fair value of the long-term
        debt, convertible debentures and swaps represents the maximum credit
        exposure to the Fund.

        The Fund manages credit risk for its cash and cash equivalents by
        maintaining bank accounts with Schedule 1 banks. The Fund has minimal
        credit risk related to its receivables as a majority of these amounts
        are with large customers in the oil and gas industry and are subject
        to the terms of the Fund's shipping rules and regulations or pursuant
        to contracts. Balances are payable on the 25th day of the following
        month. This date coincides with the date on which oil and gas
        companies receive payment from industry partners and customers.
        Historically, Pembina has collected its receivables in full with an
        excess of 90% collected on the due date. Pembina also maintains lien
        rights on the oil and NGL's that are in the Fund's custody during the
        transportation of such products on the pipeline as well as the right
        to offset for single shipper operations. Therefore, the risk of
        non-collection is considered to be extremely low and no allowance for
        doubtful accounts has been made.

        Additionally, credit risk is mitigated through established credit
        management techniques, including conducting financial and other
        assessments for all new shippers on its systems and regular reviews
        of the credit status of current shippers to establish and monitor the
        counterparty's creditworthiness, to set exposure limits and to obtain
        financial assurances such as letters of credit and guarantees when
        warranted. The Fund's review includes external ratings for customers,
        where available, and in other cases, detailed financial assessments
        and reviews which generates a credit rating based on financial
        ratios. Purchase limits are established for each customer
        representing the maximum open amount without requiring approval from
        the Risk Management Committee. These limits are reviewed on an
        ongoing basis as deemed required.

        The Fund minimizes credit risk on its derivative financial
        instruments (interest rate and power swap) by entering into risk
        management transactions only with entities that have investment grade
        credit ratings.

        Liquidity risk

        Liquidity risk is the risk that the Fund will not be able to meet its
        financial obligations as they come due. The Fund's approach to
        managing liquidity risk is to ensure that it always has sufficient
        cash and credit facilities to meet its obligations when due.
        Management monitors daily cash positions and performs cash forecasts
        weekly to determine cash requirements. On a monthly basis, Management
        typically forecasts cash flows for a period of 12 months to identify
        financing requirements. These financing requirements are then
        addressed through a combination of credit facilities and through
        access to capital markets if required.

    -------------------------------------------------------------------------
    (in thousands of dollars)           Payment Due By Period
    -------------------------------------------------------------------------
                                                                    (greater
                  Carrying  6 months    6 - 12     1 - 2     2 - 5   than) 5
                    Amount   or less    months     years     years     years
    -------------------------------------------------------------------------
    Accounts
     payable and
     accrued
     liabilities  $ 69,330  $ 55,278  $  3,430  $ 10,622  $         $
    Distributions
     payable to
     Unitholders    15,938    15,938
    Long-term debt
     (excluding
     financing
     fees)         846,478     3,210     3,329    89,590   337,592   412,757
    Convertible
     debentures     46,190                                  46,190
    -------------------------------------------------------------------------
                  $977,936  $ 74,426  $  6,759  $100,212  $383,782  $412,757
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        Market risk

        Market risk is the risk that the changes in market prices, such as
        interest rates, foreign exchange rates, and commodity prices affect
        the Fund's earnings and the value of financial instruments it holds.

        The Fund uses derivative financial instruments to manage exposure to
        interest rates, power costs and crude oil and natural gas liquids.
        The Fund does not use financial instruments for trading or
        speculative purposes.

        Contracts used to manage market risk generally consist of swap
        contracts. These contracts consist of an interest rate swap and power
        swap hedges designated as cash flow hedges (see Note 16 in the
        December 31, 2007 Annual Report). These cash flow hedges are used to
        manage the potential increase or decrease in the price of non-
        transmission power charges and interest expense on floating rate debt
        instruments.

        The Fund's credit facilities as at March 31, 2008 consisted of an
        unsecured $500 million revolving credit facility and a $30 million
        operating line of credit. Pembina had $311.3 million drawn leaving
        $218.7 of undrawn capacity. At March 31, 2008, the Fund was exposed
        to changes in interest rates on $326.3 million of bank borrowings.

        ---------------------------------------------------------------------
        Liquidity and Capital Resources                March 31      Dec. 31
        (in thousands of dollars)                          2008         2007
        ---------------------------------------------------------------------
        Variable rate debt
          Bank debt                                  $  311,332   $  250,000
          Senior unsecured notes                         75,000       75,000
          Variable rate debt swapped to fixed           (60,000)     (60,000)
        ---------------------------------------------------------------------
        Total variable rate debt outstanding
         (average rate of 4.30%)                        326,332      265,000
        ---------------------------------------------------------------------
        Fixed rate debt
          Senior unsecured notes                        375,000      375,000
          Senior secured notes                           85,146       86,708
          Variable rate debt swapped to fixed            60,000       60,000
        ---------------------------------------------------------------------
        Total fixed rate debt outstanding
         (average rate of 5.89%)                        520,146      521,708
        ---------------------------------------------------------------------
        Convertible debentures                           46,190       47,702
        Total debt and debentures outstanding           892,668      834,410
        Unutilized debt capacity                        218,668      280,000
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The Fund has fixed the interest rate on $60 million of variable rate
        bank borrowings through an interest rate swap. The interest rate swap
        had a fair value of a $0.1 million unrealized loss as at March 31,
        2008. Including the interest swap, interest rates on $520.1 million
        in senior secured and unsecured notes have been fixed, leaving
        roughly 38% of Pembina's outstanding debt exposed to interest rate
        fluctuations. A 0.25 percent change in short-term interest rates
        would have an annualized impact of $0.8 million on net cash flows.

        The Fund is also exposed to changes in the cost of power. At
        March 31, 2008, the Fund has fixed the price of non-transmission
        power charges by way of price swap contracts which expire in 2010.
        The fair value of these contracts at March 31, 2008, was an
        unrealized gain of $12.4 million. The power swap hedges the first 16
        MW of power consumption each day on the conventional pipeline
        systems. Pembina's current consumption is not greater than 16 MW a
        day and hence considers its power costs fully hedged. Power costs on
        our oil sands systems are not hedged and as revenue on these
        pipelines is contracted to recover operating costs, Pembina's net
        operating income from oil sands is not impacted by fluctuations in
        power costs. Assuming a portion of the power was not hedged, every $5
        change in the Alberta pool price will increase operating expenses by
        approximately $0.7 million.

        Terminalling, storage and hub services are dependent upon the ability
        of Pembina to take advantage of pricing differentials for various
        qualitative factors in the crude oil and NGL streams. These
        differentials are based primarily on product density and sulphur
        content and are subject to normal market forces. Pembina actively
        monitors the market conditions and the stream content and quality to
        ensure that it is not subject to undue risk or exposure should there
        be significant change in either price or quality factors. The Fund
        does have some commodity swap hedges in place but the swaps have an
        insignificant value and are recorded in current period earnings. The
        Fund documents all relationships between hedging instruments and
        hedged items, as well as its risk management objective and strategy
        for undertaking various hedge transactions for all financial
        instruments designated as cash flow hedges. The Fund also assesses,
        both at inception and on an ongoing basis, whether the derivatives
        that are used in hedging transactions are highly effective in
        offsetting changes in fair values or cash flows of hedged items.
        Pembina does not have any currency risk as all transactions are done
        in Canadian dollars.

        Fair values

        The Fund classifies its financial instruments as follows: cash is
        designated as "held for trading" and is measured at carrying value
        which approximates fair value due to the short term nature of these
        instruments. Accounts receivable and other are designated as "loans
        and receivables" and are measured at amortized cost. The derivative
        financial instruments are designated as cash flow hedges and are
        measured at fair value using market rates (values disclosed above).
        Accounts payable and accrued liabilities, distributions payable,
        long-term debt and convertible debentures are designated as "other
        liabilities" and recorded at amortized cost. The fair values for the
        long-term debt are determined by discounting the future contractual
        cash flows under the note agreements at discount rates which
        represent borrowing rates available for loans with similar terms and
        conditions. The fair value of debentures are determined based on
        available market information. Disclosure of the fair value of
        financial instruments was presented in Note 16 in the December 31,
        2007 Annual Report.

    5.  Capital Risk Management:

        The Fund's objective when managing capital is to safeguard the Fund's
        ability to continue as a going concern so that it can continue to
        provide a stable stream of distributions to Unitholders that is
        sustainable over the long-term. The Fund distributes all of its net
        cash flow, subject to retaining an appropriate distribution reserve,
        financing, making repayments on debt and, if applicable, funding
        future removal and site restoration reserves.

        The Fund manages its capital structure and makes adjustments to it in
        light of changes in economic conditions and risk characteristics of
        its underlying asset base and based on requirements arising from
        significant capital development activities. The Fund, upon approval
        from its Board of Directors, will balance its overall capital
        structure through new Trust Unit or debt issuances as required.
        Additionally, the Fund can resume its Premium Distribution Plan,
        Distribution Reinvestment and Optional Unit Purchase Plan ("DRIP")
        should it desire to raise new equity.

        The Fund maintains a conservative capital structure that allows it to
        finance its day-to-day cash requirements through its operations,
        without requiring external sources of capital. The Fund funds its
        operating commitments, short-term capital spending as well as its
        distributions to Unitholders through this cash flow, while new
        borrowing and equity issuances are reserved for the support of
        specific significant development activities. The capital structure of
        the Fund consists of Trust Units, deficit and accumulated other
        comprehensive income. Long-term debt is comprised of bank credit
        facilities, senior secured and unsecured notes and convertible
        debentures. The Fund monitors its ratio of total debt (as shown on
        the balance sheet) to total enterprise value (market value of trust
        units and debentures) quarterly and remains satisfied that the
        leverage currently employed in the Fund's capital structure is
        sufficient and appropriate given the characteristics and operations
        of the underlying asset base.

        The Fund is not subject to externally imposed capital requirements
        and the Fund's overall strategy with respect to capital risk
        management remains unchanged from the year ended December 31, 2007.

        Note 6 of these interim financial statements demonstrates the change
        in Trust Units for the first quarter of 2008 and Note 12 in the
        December 31, 2007 Annual Report provides further information
        regarding the characteristics of the Trust Units outstanding.


    6.  Trust Units:

        The Fund is authorized to create and issue an unlimited number of
        Trust Units.

        ---------------------------------------------------------------------
                                                    Trust Units       Amount
        ---------------------------------------------------------------------
        Balance, January 1, 2008                    132,541,536    1,320,692
        Exercise of Trust Unit options                  147,798        2,129
        Debenture conversions                           126,400        1,512
        Contributed surplus                                              268
        ---------------------------------------------------------------------
        Balance, March 31, 2008                     132,815,734   $1,324,601
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The net earnings per Trust Unit are based on earnings available to
        Unitholders and the weighted average Trust Units outstanding for the
        period. The earnings available to Unitholders for the first quarter
        of 2008 was $32.6 million (2007 - $33.9 million). The weighted
        average Trust Units outstanding for the first quarter of 2008 were
        132,758,000 Units (2007 - 127,568,000).

        The diluted earnings per Trust Unit are based on net earnings and the
        weighted average Trust Units outstanding adjusted for the dilutive
        effect of convertible debentures and employee Trust Unit options. The
        diluted net earnings for the first quarter of 2008 were $33.2 million
        (2007 - $35.4 million). In computing diluted earnings per Trust Unit,
        4,438,000 Trust Units (2007 - 7,639,000) were added to the weighted
        average Trust Units outstanding for the first quarter of 2008 for the
        dilutive effect of both convertible debentures and employee Trust
        Unit options. Basic and diluted earnings per Trust Unit for the first
        quarter of 2008 are $0.25 and $0.24, respectively, compared to $0.27
        and $0.26, respectively, in the first quarter of 2007. At March 31,
        2008, 3,855,850 options were outstanding, of which 2,447,550 were
        exercisable (March 31, 2007 - 1,934,608) at a weighted average price
        of $14.14 (March 31, 2007 - $13.57).

    -------------------------------------------------------------------------
    Pembina Pipeline Income Fund                  Investor Information
    -------------------------------------------------------------------------
    Exchange Listing and                    Premium Distribution,
    Trading Symbols:                        Distribution Reinvestment and
                                            Optional Unit Purchase Plan(1):
    The Toronto Stock Exchange
    Trust Units Symbol: PIF.UN              Pembina offers a Premium
    7.35% Convertible Debentures            Distribution, Distribution
    Symbol: PIF.DB.B                        Reinvestment and Optional Unit
                                            Purchase Plan to eligible
    Trustee, Registrar and Transfer         Unitholders of Pembina Pipeline
     Agent:                                 Income Fund.

    Computershare Trust Company             The Plan allows participants an
     of Canada                              opportunity to:
    Shareholder Communications:
    1-800-564-6253                          -  reinvest distributions into
                                               Trust Units at a 5 percent
    Corporate Office:                          discount to a weighted average
                                               market price, under the
    700 - 9th Avenue S.W.                      distribution reinvestment
    P.O. Box 1948                              component of the Plan; or,
    Calgary, Alberta T2P 2M7
    Telephone: (403) 231-7500               -  realize 2 percent more cash on
    Fax: (403) 237-0254                        their distributions, under the
                                               premium distribution component
    Investor Information:                      of the Plan;

    e-mail:                                 -  eligible Unitholders may also
    investor-relations@pembina.com          make optional Trust Unit
                                               purchases at the weighted
    Telephone: (403) 231-7500                  average market price.
               1-888-428-3222
    Fax:       (403) 691-7356               A brochure, detailing
                                            administration of the Plan and
    Website: www.pembina.com                eligibility and enrolment
                                            information, is available on-line
    Quarterly Results Webcast:              on Pembina's web site located at
                                            www.pembina.com, or call
    A live internet broadcast of            1-888-428-3222 to receive a copy
    Pembina's First Quarter 2008            by mail. Unitholders wishing to
    Results conference call is              enroll in the Plan are asked to
    scheduled for April 30, 2008            contact their broker, investment
    at 2:00 p.m. Calgary (4:00 p.m.         dealer, financial institution or
    Eastern, 1:00 p.m. Pacific).            other nominee through which the
    Those wishing to access the             Trust Units are held.
    webcast are invited to visit
    Pembina's website located at            (1)  As of June 30, 2007,
    www.pembina.com, or the host                 Pembina has prorated its
    site at www.newswire.ca/webcast.             DRIP to zero as it prefers
    An archive of the call will be               not to raise further equity
    available on-line for 90 days                under this plan at this
    following the broadcast date.                time.

    -------------------------------------------------------------------------

    This document contains forward-looking information and statements that
involve risks and uncertainties. Such information, although considered
reasonable by Pembina at the time of preparation, may prove to be incorrect
and actual results may differ materially from those anticipated in the
statements made. For this purpose, any statements that are contained herein
that are not statements of historical fact may be deemed to be forward-looking
statements. Such risks and uncertainties include, but are not limited to risks
associated with operations, such as loss of market, regulatory matters,
environmental risks, industry competition, and ability to access sufficient
capital from internal and external sources. See "Forward-Looking Information
and Statements" presented in the Management's Discussion and Analysis
contained in this document for additional information, which applies to all
forward-looking information and statements contained in this document.

    %SEDAR: 00008906E

For further information: Ms. Glenys Hermanutz, Vice President, Corporate
Affairs, Pembina Pipeline Corporation, (403) 231-7500, 1-888-428-3222, email:
investor-relations@pembina.com