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News Releases

Pembina first interim report for the three months ended March 31, 2007

PEMBINA DELIVERS RECORD FIRST QUARTER RESULTS

    
    CALGARY, April 26 /CNW/ -

    -   The Fund distributed $0.33 per Trust Unit during the first quarter of
        2007 for total cash distributions of $42.1 million. Per Trust Unit
        distributions were 16 percent higher than for the same quarter of
        2006, reflecting the distribution rate increases implemented in
        August 2006 and in January of this year.

    -   Net earnings for the first quarter of 2007 were $29.4 million
        compared to $20.2 million and $14.6 million over the same periods in
        2006 and 2005, respectively. This is a substantial increase of
        46 percent and 102 percent over those periods, respectively.

    -   Total actual throughput, including both the conventional pipelines
        and the Syncrude Pipeline, averaged 761,200 barrels per day
        ("bbls/d") during the first quarter of 2007. The conventional
        pipelines transported an average of 459,400 bbls/d during the
        quarter, a slight increase over the first three months of 2006.
        Pembina is currently developing several new initiatives on the
        conventional pipeline systems that Pembina expects to result in
        higher average throughput volumes during the second half of 2007. For
        the first quarter of 2007, the conventional pipelines contributed
        $62.0 million in revenue and $37.9 million in operating income, up
        10 percent and 13 percent, respectively, over the same period last
        year.

    -   Pembina's oil sands business segment contributed $14.5 million in
        revenue during the quarter, down 2 percent compared to the first
        quarter in 2006, and $9.5 million in operating income during the
        quarter, up 4 percent from the $9.1 million recorded in the first
        quarter of 2006. Increased operating income is largely attributable
        to the commencement of revenue contribution of the Cheecham Lateral
        pipeline in February 2007.

    -   Pembina's midstream business segment generated $19.9 million in
        revenue and $17.8 million in net operating income during the first
        quarter of 2007. This is a 93 percent increase for both revenue and
        net operating income over the same period last year. Pembina expects
        further increases in cash flow contribution from this business
        segment as new services are developed and implemented.

    -   The first phase of construction of the Horizon Pipeline is nearing
        completion. Almost 100 kilometres of pipeline has been installed and
        preparation for the remaining two phases of construction is currently
        underway. Pembina expects to meet the July 1, 2008 target date for
        completion of this new service.

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                                          3 Months     3 Months
    HIGHLIGHTS(1)                            Ended        Ended
    (in millions of dollars,              March 31,    March 31,
     except where noted)                      2007         2006     % Change
    -------------------------------------------------------------------------
    Average throughput - conventional
     (mbbls/d)                               459.4        454.3          1.1
    Contracted capacity - oil sands
     (mbbls/d)                               525.0        389.0         35.0
    Total throughput and contracted
     volumes                                 984.4        843.3         16.7
    Capital expenditures                      88.7         38.9        128.0
    Revenue(2)                                96.4         81.5         18.3
    Operating expenses                        31.2         29.6          5.4
    Net operating income(3)                   65.2         51.9         25.6
    General & administrative expense           6.7          6.7            -
    Interest expense on long-term debt         7.2          5.8         24.1
    Net earnings                              29.4         20.2         45.5
    Cash flow from operations                 46.9         44.3          5.9
    Cash distributions to Unitholders         42.1         33.6         25.3
      $ Per Trust Unit                     $0.3300      $0.2850         15.8
    -------------------------------------------------------------------------
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    (1) This first quarter 2007 Interim Report to Unitholders reports
        unaudited results of the Fund for the three months ended March 31,
        2007.
    (2) Net of product purchases of $16.6 million in the first quarter of
        2007 and $2.5 million in the first quarter of 2006.
    (3) Refer to "Non-GAAP Measures" below.

    Management's Discussion and Analysis

    This Management's Discussion and Analysis ("MD&A") is dated April 26,
2007 and is supplementary to, and should be read in conjunction with, the
unaudited comparative interim financial statements and notes of Pembina
Pipeline Income Fund ("Pembina" or the "Fund") as at and for the three months
ended March 31, 2007, along with the Fund's Management's Discussion and
Analysis and audited financial statements and notes for the year ended
December 31, 2006.
    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 high quality, 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, 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; PIF.DB.A - 7.50% convertible debentures, 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 that are sustainable over the long-term while
pursuing opportunities for enhancement through accretive growth. Pembina
believes the most prudent manner to achieve this objective is to maintain and
to develop assets around our hydrocarbon-liquids services business within
western Canada. Pembina plans to 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 Infrastructure and Midstream.
    The primary objective for Pembina's conventional pipeline assets is 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 control and by asset
rationalization. By offering cost-effective, competitively positioned and
reliable transportation services to our customers, Pembina strives to attract
new business to its conventional pipeline systems.
    Pembina intends to leverage its uniquely positioned infrastructure and
operating knowledge in the oil sands sector to pursue future opportunities in
this key development area. Pembina's existing oil sands assets, and those
currently under development, offer fully contracted and long-term returns
which provide a secure stream of stable cash flow to the Fund. Further
expansion of Pembina's business interests in this area is a priority.
    The ongoing expansion of Pembina's midstream business is a strategic
imperative. Pembina continues to initiate new terminalling, storage and hub
services over segments of its conventional pipeline systems. Pembina
anticipates that this integration strategy will produce significant benefits
to both pipeline customers and Unitholders of the Fund, by expanding the range
of services offered, extending the economic life of Pembina's conventional
asset base and by providing substantial revenue enhancement potential.

    Results from Operations

    Conventional Pipelines

    -------------------------------------------------------------------------
                                          3 Months     3 Months
                                             Ended        Ended
    (in millions of dollars,              March 31,    March 31,
     except where noted)                      2007         2006     % Change
    -------------------------------------------------------------------------
    Average throughput (mbbls/d)             459.4        454.3          1.1
    Revenue                                 $ 62.0       $ 56.4          9.9
    Operating expenses                        24.1         22.8          5.7
    Net operating income(1)                   37.9         33.6         12.8
    Capital expenditures(2)                   23.0         11.9         93.3
    Operating expenses ($/bbl)                0.55         0.52          5.8
    Average revenue ($/bbl)                   1.40         1.28          9.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Refer to "Non-GAAP Measures" below.
    (2) Maintenance capital in 2006 has been reclassified to development
        capital for comparative purposes.

    Pembina's conventional systems transported an average of 459,400 bbls/d
for the first quarter of 2007, a slight increase over the 454,300 bbls/d
transported during the same period of 2006. The Alberta pipeline systems
transported an average of 433,300 bbls/d during the quarter, up from
427,600 bbls/d recorded during the first three months of 2006. The
provincially regulated British Columbia (BC) gathering pipelines transported
volumes of 31,000 bbls/d during the first quarter of 2007, lower than the
first quarter of 2006 due to operational issues at a number of pipeline
connections. Western system volumes averaged 26,200 bbls/d during the first
three months of 2007 which is consistent with the same period in the prior
year.
    Pembina's conventional system receipts were slightly lower than Pembina
expected, due to the delayed start-up and lower production from new
connections. Calven pipeline volumes were also less than Pembina expected.
Volumes on the Western system were essentially unchanged year-over-year as
some shippers elected to transport product west instead of east. Increased
volumes were received from the Nisku connections on Pembina's Drayton system
early in 2007, but were not sustained as shippers struggled with production
reliability toward the end of the quarter.
    The conventional systems generated $62.0 million in revenues during the
first quarter of 2007, 10 percent higher than the same quarter of 2006.
Revenue generated by the Alberta systems during the quarter was 12 percent
higher than the first quarter of 2006, at $53.9 million. Average revenue per
barrel on the Alberta systems of $1.38 during the first three months of 2007
was up 12 cents per barrel compared to the average for the same period of
2006. The increase was partially attributable to toll adjustments implemented
on certain systems at the beginning of the first quarter of 2007, primarily in
response to higher actual and anticipated operating and maintenance costs.

    Oil Sands Infrastructure

    -------------------------------------------------------------------------
                                          3 Months     3 Months
                                             Ended        Ended
    (in millions of dollars,              March 31,    March 31,
     except where noted)                      2007         2006     % Change
    -------------------------------------------------------------------------
    Average throughput (mbbls/d)(1)          525.0        389.0         35.0
    Revenue                                 $ 14.5       $ 14.8         (2.0)
    Operating expenses                         5.0          5.7        (12.3)
    Net operating income(2)                    9.5          9.1          4.4
    Capital expenditures                      65.4         26.5        146.8
    Operating expenses ($/bbl)                0.18         0.30        (40.0)
    Average revenue ($/bbl)                   0.53         0.78        (32.1)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Contracted capacity. Actual average throughput was 301,770 bbls/d in
        the first quarter of 2007.
    (2) Refer to "Non-GAAP Measures" below.

    Record throughputs were received on Pembina's Syncrude Pipeline (formerly
referred to as the Alberta Oil Sands Pipeline or AOSPL) this quarter. Average
throughput on this fully contracted system increased to 301,800 bbls/d during
the first quarter of 2007, an increase of 44 percent year-over-year. The
Syncrude Pipeline generated revenue of $13.6 million during the first quarter
of 2007, an 8 percent decrease over the same period in 2006 where flow through
of higher operating costs caused revenue to be greater in the first quarter of
2006. Revenue for the Syncrude Pipeline is contracted to recover operating
costs and earn a return on invested capital, therefore it is not impacted by
actual pipeline receipts.
    The Cheecham Lateral pipeline began generating revenue February 1, 2007
and at the close of the quarter had contributed $0.8 million. The pipeline was
filled with product during the quarter and shippers have nominated volumes for
the month of April. The full capacity of the Cheecham Lateral (136,000 bbls/d
of synthetic crude oil) is contracted to shippers.
    Pembina recorded another active quarter in its oil sands business
segment, with the completion of the Cheecham Lateral and construction of
almost 100 kilometres of pipeline of the Horizon Pipeline. All construction
and planning activities for the Horizon Pipeline are on schedule for the
targeted July 1, 2008 completion date. The Horizon Pipeline, with carrying
capacity of 250,000 bbls/d, will provide fully-contracted, exclusive
transportation from Canadian Natural Resources Limited's Horizon Oil Sands
project, located 70 kilometres north of Fort McMurray to Edmonton, Alberta.
See "New Developments and Outlook".

    Midstream Business

    -------------------------------------------------------------------------
                                          3 Months     3 Months
                                             Ended        Ended
    (in millions of dollars,              March 31,    March 31,
     except where noted)                      2007         2006     % Change
    -------------------------------------------------------------------------
    Revenue(1)                              $ 19.9       $ 10.3         93.2
    Operating expenses                         2.1          1.1         90.9
    Net operating income(2)                   17.8          9.2         93.5
    Capital expenditures(3)                    0.3          0.5        (40.0)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Net of $16.6 million in product purchase expense for the first
        quarter 2007 and $2.5 million in the first quarter of 2006.
    (2) Refer to "Non-GAAP Measures" below.
    (3) Maintenance capital in 2006 has been reclassified to development
        capital for comparative purposes.

    Pembina's midstream business segment consists of its 50 percent
non-operated interest in the Fort Saskatchewan Ethylene Storage Facility
together with its wholly-owned terminalling, storage and hub services.
    Pembina's 50 percent interest in the Fort Saskatchewan Ethylene Storage
Facility generates fixed contracted returns over the term of the agreement
that extends through June 2023. Along with stable, long-term cash flow, this
asset provides diversification of Pembina's business into the petrochemical
sector without corresponding commodity price exposure.
    Pembina continued to develop the terminalling, storage and hub services
component of the midstream business during the first quarter of 2007,
resulting in yet another quarter-over-quarter increase in revenue and net
operating income contribution. Aggregate net operating income generated by the
midstream business for the first quarter rose 94 percent from $9.2 million in
2006 to $17.8 million in 2007. Pembina anticipates returns on the Drayton
system midstream operations to continue to escalate to full potential over the
next few months. Several other projects are currently in various stages of
development and, Pembina expects these undertakings to further boost the
operating income contribution of the midstream business segment in future
quarters.

    Expenses

    Total operating expenses of $31.2 million during the first quarter of
2007 were up from operating expenses incurred during the same period of last
year of $29.6 million. Operating costs on the conventional pipeline systems
totaled $24.1 million during the first three months of 2007, up from
$22.8 million during the prior year. On a per barrel of throughput basis,
operating expenses on the conventional systems averaged 55 cents for the
quarter compared to 52 cents during the same quarter of 2006.
    General and administrative expenses of $6.7 million during the first
quarter of 2007 was unchanged year-over-year. Pembina intends to increase its
staff complement during the year, to facilitate growth initiatives currently
underway in all areas of its business. Market-based salary increases together
with higher short-term incentives and the introduction of a company-wide
long-term incentive program in 2006 reflect Pembina's response to competitive
employment pressures.

    Cash Distributions

    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. In 2006, Pembina
announced two increases to the distribution rate: a 5.3 percent increase in
July 2006 and in November 2006 a further 10 percent increase to 11 cents per
Trust Unit per month, or $1.32 per Trust Unit on an annualized basis,
effective for the January 2007 distribution.
    The Fund declared distributions of $0.33 per Trust Unit, or $42.1 million
in aggregate during the first quarter of 2007, compared to $0.2850 per Trust
Unit, or $33.6 million in aggregate, paid in the first quarter of 2006. 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 90 percent of
the distributions declared in 2007 will be taxable and 10 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.

    Cash Distributions to Unitholders

    -------------------------------------------------------------------------
                                                       3 Months     3 Months
                                                          Ended        Ended
                                                       March 31,    March 31,
    (in thousands of dollars, except where noted)          2007         2006
    -------------------------------------------------------------------------
    Cash flow from operations                          $ 46,907     $ 44,264
    Add/(deduct):
      Maintenance capital expenditures                                  (422)
      Employee future benefits expense                   (1,348)        (342)
      Employee future benefits contributions                           1,675
      Changes in non-cash working capital                 2,583       (9,442)
      Other                                                (477)         (90)
    -------------------------------------------------------------------------
    Distributable cash(1)                                47,665       35,643
    Increase in distribution reserve                     (5,567)      (2,073)
    -------------------------------------------------------------------------
    Cash distributions to Unitholders                  $ 42,098     $ 33,570
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash distributions to Unitholders per Trust Unit   $ 0.3300     $ 0.2850
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted cash distributions to Unitholders
     per Trust Unit                                    $ 0.3219     $ 0.2786
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Refer to "Non-GAAP Measures" below.

    Pembina maintains a notional distribution 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 is used to reduce bank indebtedness. During the first
quarter of 2007, Pembina's business operations and interests generated a
$5.6 million increase in the notional distribution reserve, resulting in a
notional balance of $26.6 million at March 31, 2007. The payout ratio during
the first quarter of 2007 was 88 percent. This compares to a payout ratio of
94 percent for the same quarter of the prior year. Pembina estimates that the
full year payout ratio will approximate 94 percent, as compared to 96 percent
in 2006. 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".

    Liquidity and Capital Resources

    Pembina's bank facilities include an unsecured $230 million revolving
credit facility and a $30 million operating line of credit. At March 31, 2007,
Pembina had $57.7 million drawn, leaving $202.3 million of undrawn capacity on
the $260 million of established facilities. On July 24, 2006, the revolving
credit facility and operating line of credit were renewed for a period of five
years to July 24, 2011. There are no repayments due over the term. Borrowings
bear interest at either prime lending rates or 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 $91 million in Senior
Secured Notes due 2017, $175 million in Senior Unsecured Notes due 2014,
$75 million of Floating Rate Senior Unsecured Notes due 2009 and $200 million
in Senior Unsecured Notes due 2021. At March 31, 2007, Pembina had long-term
debt of $599 million (excluding transaction costs), compared to $553 million
(excluding transaction costs) at December 31, 2006. This long-term debt,
together with $72.7 million of outstanding convertible debentures, resulted in
a ratio of debt to total enterprise value of 25 percent. This compares to a
ratio of 24 percent at the end of 2006.
    Net debt financing costs of $7.2 million were recorded during the first
quarter of 2007 compared with $5.8 million during the first quarter of 2006.
Interest rate exposure on Pembina's floating rate debt is managed utilizing
interest rate swap instruments. At March 31, 2007, Pembina had an interest
rate swap in place on a principal amount of $60 million at an average rate of
5.2 percent and an average term to maturity of 1.2 years, maturing in
June 2008. The mark-to-market value of the swap represented an unrealized loss
of $0.03 million at March 31, 2007. As at the end of the first quarter of
2007, Pembina has fixed interest on approximately 88 percent of its long-term
debt in order to minimize exposure to rising interest rates.
    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:

    -------------------------------------------------------------------------
    ($ thousands)                          Payments Due By Period
    -------------------------------------------------------------------------
    Contractual                   Less than      1 - 3      4 - 5      After
    Obligations            Total     1 year      years      years    5 years
    -------------------------------------------------------------------------
    Office and vehicle
     leases            $  13,838  $   3,166  $   4,887  $   3,454  $   2,331
    Long-term debt       598,922      6,082     96,129     74,559    422,152
    Convertible
     debentures           72,669     13,315     59,354
    Construction
     commitments         241,300    130,700    110,600
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total contractual
     obligations       $ 926,729  $ 153,263  $ 270,970  $  78,013  $ 424,483
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Pembina is contractually committed to the construction and the operation
of the Horizon Pipeline. Construction on the Horizon Pipeline is underway in
the first quarter of 2007 and is currently projected to cost $350 million with
$108.7 million incurred to date as of March 31, 2007.
    Pembina's revolving bank facilities have a five year-term maturing
July 24, 2011. These facilities were previously renewed annually, therefore
drawn amounts under the facilities previously payable in 1 to 3 years are now
repayable in 4 to 5 years, should the credit facilities not be renewed.

    -------------------------------------------------------------------------
                                                       3 Months     3 Months
                                                          Ended        Ended
                                                       March 31,    March 31,
    Capital Expenditures ($ millions)                      2007         2006
    -------------------------------------------------------------------------
    Development capital(1)
      Conventional pipelines                             $ 23.0       $ 11.9
      Oil Sands infrastructure                             65.4         26.5
      Midstream business                                    0.3          0.5
    -------------------------------------------------------------------------
    Total development capital(1)                         $ 88.7       $ 38.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Maintenance capital in 2006 has been reclassified to development
        capital for comparative purposes.

    During the first quarter of 2007, Pembina expended $88.7 million on
capital projects, up significantly from the prior year when $38.9 million was
spent during the same quarter. Capital expenditures on the conventional
systems during the quarter related to new connections and system and
instrumentation upgrades. Oil sands spending totaled $65.4 million in the
first quarter, up significantly from the $26.5 million expended last year. Of
the oil sands related capital expended during the first three months of 2007,
$59.3 million related to Horizon Pipeline construction, $2.9 million was spent
on the Cheecham Lateral and $3.2 million was invested in upgrades on the
Syncrude Pipeline. Spending in the midstream business segment of $0.3 million
during the quarter related mainly to operations equipment.
    Development capital is financed utilizing existing credit facilities and
Pembina's distribution reinvestment plan.

    Trust Unit and Convertible Debenture Information

    The Fund's Premium Distribution, Distribution Reinvestment and Optional
Cash Purchase Plan (DRIP) raised $23.1 million during the first quarter of
2007 through the issuance of 1,524,653 Trust Units, compared with
$13.3 million in the first quarter of 2006 through the issuance of 830,302
Trust Units. The DRIP plan continues to attract significant Unitholder
interest, and Pembina's targeted plan proceeds for 2007 have been increased to
$100 million, which is consistent with Pembina's expanded capital program.
DRIP plan proceeds are directed towards debt repayment and funding development
capital expenditures.
    The Fund's Trust Units, together with both of the two remaining series of
convertible debentures, are traded on the Toronto Stock Exchange. Pembina's
7.50 percent convertible debentures mature on June 30, 2007.

    -------------------------------------------------------------------------
                                          April 23,    March 31,    March 31,
                                              2007         2007         2006
    -------------------------------------------------------------------------
    Trust Units Outstanding            128,819,114  128,246,780  119,816,422
    Average Daily Volume
     (Units per day)                       124,218      242,000      253,800
    Unit Trading Price ($/Unit)(1)       $   16.18    $   15.86    $   18.05

    Principal Amount of Debentures
     Outstanding ($millions)             $    75.5    $    75.8    $   106.9

    7.50% Convertible Debentures
     Trading Price(2)                    $  154.21    $  150.67    $  171.30
    7.35% Convertible Debentures
     Trading Price(3)                    $  129.68    $  127.00    $  144.00

    Total Market Value of Securities
     Outstanding ($millions)(4)          $ 2,789.2    $ 2,133.0    $ 2,322.0
    -------------------------------------------------------------------------
    Pembina's convertible debentures are
     convertible to Trust Units at
     conversion prices of ($/Unit):
      7.50% Convertible Debentures
       maturing June 30, 2007                         $   10.50
      7.35% Convertible Debentures
       maturing December 31, 2010                     $   12.50
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Based on the 23 trading days from April 1 to April 23, 2007,
        inclusive.
    (2) $13.8 million principal amount of 7.50% convertible debentures
        outstanding at March 31, 2007.
    (3) $62.0 million principal amount of 7.35% convertible debentures
        outstanding at March 31, 2007.
    (4) Full conversion to Trust Units of the remaining principal amount of
        the two remaining debenture issues as at April 23, 2007 would result
        in the issuance of 6.2 million Trust Units.

    As at January 31, 2007, non-resident holdings in the Fund totaled
16.5 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

    Newly issued accounting standards by the Canadian Institute of Chartered
Accountants relating to financial instruments, hedges and comprehensive income
were adopted by the Fund effective January 1, 2007. As a result of these new
standards, a new category, accumulated other comprehensive income, forms part
of Unitholders' Equity and certain unrealized gains or losses on derivatives
designated as cash flow hedges are reported in accumulated other comprehensive
income until realization.
    At March 31, 2007, accumulated other comprehensive income totaled
$12.8 million and consisted of an unrealized gain of $12.7 million, net of
future income taxes, related to a 16 MW per hour power swap with an expiry
date of December 31, 2010. The Fund also has an interest rate swap of
$60 million and commodity hedges as at March 31, 2007 with a fair value of
$0.1 million, net of future income taxes. The new accounting standard related
to hedges requires the Fund to fair value the hedging item, with the changes
recorded through comprehensive income for any hedges designated as cash flow
hedges. Hence, there is no impact on net earnings. All of the Fund's swaps
have been designated as cash flow hedges as at March 31, 2007.
    There were no changes in Pembina's critical accounting estimates and
practices that affected the disclosure of or the accounting for its operations
for the quarter ended March 31, 2007. Such critical accounting estimates are
presented in Management's Discussion and Analysis for the year ended
December 31, 2006.

    New Developments and Outlook

    Geopolitical concerns caused crude oil prices to surge late in the first
quarter of 2007 and natural gas prices rose on improving fundamentals.
Industry development in many of Pembina's traditional service areas remains
robust and Pembina projects that the upward trend in throughputs on its
conventional pipeline systems will continue through the year, as new
initiatives on these systems build toward potential.
    Pembina's conventional pipeline service regions continue to benefit from
strong oil and gas industry activity over past years with a number of new
facilities and projects in various stages of development. Construction of the
$32 million product segregation facilities on Pembina's Drayton Valley
pipeline is nearing completion and Pembina expects the facilities to be fully
operational in mid-2007. These facilities will allow Pembina to preserve a
high quality crude oil stream while providing additional services to its
customers. Similar facilities, at an estimated cost of $25 million, have been
approved for Pembina's Peace system.
    Pembina continues to actively develop its oil sands infrastructure. The
first phase of construction on the Horizon Pipeline progressed significantly
during the quarter with a majority of the pipeline loops constructed during
this first phase of construction. Pembina is working collaboratively with its
customer in the development of this project and has secured contracts for all
of the major elements required to complete the three phases of construction.
The second and final phases of construction are expected to occur over the
summer of 2007 and winters of 2007 and 2008 with completion on schedule for
July 1, 2008. The Cheecham Lateral, which became available for service at the
beginning of the year, began earning revenue on February 1, 2007. Pembina is
also actively pursuing other opportunities to provide pipeline transportation
service to several other proposed oil sands developments and is engaged in
preliminary discussions with a number of parties for projects that Pembina
expects to come on-stream between 2010 and 2015.
    Pembina continues to expand its midstream business with the
implementation of new services across segments of its conventional pipeline
systems. Several additional projects are currently being explored, including
the potential development of full service terminals on the Peace system.
Pembina anticipates that its midstream business, which is enabled by Pembina's
ability to utilize its existing infrastructure and market position to create
new revenue streams with minimal capital outlay, will provide significant
operating income contribution in the coming quarters. The layering of
midstream services over traditional pipeline operations enhances the returns
on, and extend the economic life of, Pembina's conventional asset base.
    Progress slowed on the development of the condensate project this quarter
at the request of prospective customers. While both Pembina and its shippers
believe that the proposed project has merit and is viable, various
uncertainties relating to the demand and timing for diluent have delayed the
potential condensate pipeline customers from entering into firm agreements. In
the meantime, Pembina continues to advance the consultation process for this
project.
    The income trust tax issue remained at the forefront during the quarter
as the Department of Finance held hearings and consulted with various lobby
groups in mid-February, including the Canadian Energy Infrastructure Group of
which Pembina plays a leading role. Assuming the trust tax is enacted as
proposed in 2011, certain distributions from the Fund which would have
otherwise been taxed as ordinary income generally would be characterized as
dividends. In addition, a 31.5 percent tax would be assessed on the Fund's
cash distributions to Unitholders. Pembina continues to examine how the tax
measures, if enacted in their present form, will impact the financial results
and business opportunities of the Fund, and remains confident in its
continuing ability to deliver maximum value to Unitholders.
    In its tenth year as a publicly traded income fund, Pembina has
established a reputation for stable operations and a record of consistent and
growing distributions to Unitholders. Since our initial public offering in
October 1997, Pembina has distributed a total of $872 million, or $9.75 per
Trust Unit, on a $10 per unit original issue price. We have met our
distribution objective in each year of our public history. Growth in all three
of our business segments enabled a 10 percent increase in our distribution
rate effective January 2007, and the breadth of tangible and prospective
growth opportunities currently under development across all of our business
segments lend confidence in our continuing ability to meet our objectives.

    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, 2006, and in the Fund's Annual Information Form
for the year ended December 31, 2006. See "Additional Information" below.

    Selected Quarterly Information

    -------------------------------------------------------------------------
                                   2007                  2006
    -------------------------------------------------------------------------
    (in thousands of dollars,
     except where noted)            Q1       Q4       Q3       Q2       Q1
    -------------------------------------------------------------------------

    Revenue(1)                    96,359   88,062   85,326   80,924   81,506
    Operating expenses            31,192   32,534   29,171   27,733   29,572
    EBITDA(2)                     56,271   49,626   50,261   39,554   44,732
    Cash flow from operations     46,907   41,111   32,430   26,055   44,264
    Net earnings                  29,388   27,231   24,563   16,940   20,150

    Net earnings per Trust Unit
     ($/Unit):
      Basic and diluted             0.23     0.22     0.20     0.14     0.17

    Cash distributions to
     Unitholders                  42,098   37,687   36,461   34,567   33,570

    Cash distributions to
     Unitholders per Trust Unit
      Basic                       0.3300   0.3000   0.2950   0.2850   0.2850
      Diluted                     0.3219   0.2954   0.2902   0.2803   0.2786

    Trust Units outstanding
     (thousands):
      Weighted average (basic)   127,568  125,625  123,576  121,289  117,784
      Weighted average (diluted) 135,206  132,842  131,501  130,033  129,664
      End of period              128,247  126,218  124,262  122,030  119,816
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    ----------------------------------------------------------------
                                                2005
    ----------------------------------------------------------------
    (in thousands of dollars,
     except where noted)            Q4       Q3       Q2       Q1
    ----------------------------------------------------------------

    Revenue(1)                    77,644   73,100   70,120   69,658
    Operating expenses            28,520   24,480   24,763   24,973
    EBITDA(2)                     45,027   44,558   40,207   39,738
    Cash flow from operations     17,517   34,259   23,984   36,600
    Net earnings                  21,705   19,778   14,373   14,553

    Net earnings per Trust Unit
     ($/Unit):
      Basic and diluted             0.19     0.18     0.14     0.14

    Cash distributions to
     Unitholders                  29,667   29,099   27,474   27,242

    Cash distributions to
     Unitholders per Trust Unit
      Basic                       0.2625   0.2625   0.2625   0.2625
      Diluted                     0.2527   0.2599   0.2556   0.2548

    Trust Units outstanding
     (thousands):
      Weighted average (basic)   113,019  110,845  104,660  103,776
      Weighted average (diluted) 128,226  128,621  126,104  125,679
      End of period              113,897  111,938  104,949  104,127
    ----------------------------------------------------------------
    ----------------------------------------------------------------

    (1) Net of product purchases.
    (2) Refer to "Non-GAAP Measures" below.

    Net earnings of $29.4 million were recorded during the first quarter of
2007, compared to $20.2 million and $14.6 million over the same periods in
2006 and 2005 representing a substantial increase of 46 percent and
102 percent, respectively.
    Pembina's stable operations typically produce limited variability in
quarterly results. However, continued growth in Pembina's underlying asset
base has generally resulted in increased revenues, expenses and cash flows
over the last eight 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.

    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.

    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 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 from
operating activities 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) 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. Investors should be cautioned, however, that
EBITDA, net operating income, payout ratio 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", "estimates", "continue", "designed",
"objective", "maintain", "schedule" and similar expressions. In particular,
this press release contains forward-looking statements with respect to: future
stability and sustainability of cash distributions to Unitholders; ongoing
expansions of and additions to our asset base; future growth and growth
potential in Pembina's conventional pipelines, oil sands infrastructure and
midstream operations; potential revenue 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; 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; the future
development of the condensate projects; 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, reliance on key alliances and agreements,
the strength and operations of the oil and natural gas production industry and
related commodity prices, regulatory environment, tax laws and treatment,
fluctuations in operating results, the ability of Pembina to raise sufficient
capital 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

    (In thousands of dollars)
    -------------------------------------------------------------------------
                                                       March 31      Dec. 31
                                                           2007         2006
                                                     (Unaudited)
    -------------------------------------------------------------------------

    Assets
    Current assets:
      Cash                                          $            $     1,861
      Accounts receivable                                59,142       44,947
    -------------------------------------------------------------------------
                                                         59,142       46,808
    Property, plant and equipment                     1,319,612    1,257,729
    Goodwill and other                                  360,693      371,667
    Derivative financial instruments (note 1)            18,075
    -------------------------------------------------------------------------
                                                    $ 1,757,522  $ 1,676,204
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Unitholders' Equity
    Current liabilities:
      Bank indebtedness                             $     2,022  $
      Accounts payable and accrued liabilities           50,142       37,411
      Distributions payable to Unitholders               14,107       12,622
      Current portion of long-term debt                   6,082        5,973
      Current portion of convertible debentures          13,315       15,133
    -------------------------------------------------------------------------
                                                         85,668       71,139
    Long-term debt                                      584,318      547,396
    Convertible debentures                               59,354       61,679
    Asset retirement obligations                         30,297       29,889
    Future income taxes                                 116,183      113,617
    -------------------------------------------------------------------------
                                                        875,820      823,720
    -------------------------------------------------------------------------
    Unitholders' equity:
      Trust Units (note 3)                            1,264,907    1,235,809
      Deficit                                          (396,035)    (383,325)
      Accumulated other comprehensive income (note 1)    12,830
    -------------------------------------------------------------------------
                                                        881,702      852,484
    -------------------------------------------------------------------------
                                                    $ 1,757,522  $ 1,676,204
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

       See accompanying notes to the consolidated financial statements


    consolidated statements of earnings
    (Unaudited)

    (In thousands of dollars, except per Trust Unit amounts)
    -------------------------------------------------------------------------
                                                       3 Months     3 Months
                                                          Ended        Ended
                                                       March 31,    March 31,
                                                           2007         2006
    -------------------------------------------------------------------------

    Revenues:
      Conventional pipelines                        $    61,985  $    56,409
      Oil sands infrastructure                           14,478       14,751
      Midstream business                                 36,485       12,864
    -------------------------------------------------------------------------
                                                        112,948       84,024
    -------------------------------------------------------------------------
    Expenses:
      Operations                                         31,192       29,572
      Product purchases                                  16,589        2,518
      General and administrative                          6,721        6,721
      Management fee                                                     508
      Depreciation and amortization                      20,547       21,567
      Accretion on asset retirement obligations             408          351
      Internalization of management contract                558
      Other                                               1,617          (27)
    -------------------------------------------------------------------------
                                                         77,632       61,210
    -------------------------------------------------------------------------
    Earnings before interest and taxes                   35,316       22,814
    Interest on long-term debt                           (7,181)      (5,802)
    Interest on convertible debentures                   (1,425)      (2,560)
    -------------------------------------------------------------------------
    Earnings before taxes                                26,710       14,452
    Income and capital taxes reduction                   (2,678)      (5,698)
    -------------------------------------------------------------------------
    Net earnings                                         29,388       20,150
    Deficit, beginning of period                       (383,325)    (329,925)
    Distributed cash                                    (42,098)     (33,570)
    -------------------------------------------------------------------------
    Deficit, end of period                          $  (396,035) $  (343,345)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per Trust Unit
      Basic and diluted                             $      0.23  $      0.17
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

       See accompanying notes to the consolidated financial statements


    consolidated statement of comprehensive income
    (Unaudited)

    (In thousands of dollars)
    -------------------------------------------------------------------------
                                                                    3 Months
                                                                       Ended
                                                              March 31, 2007
    -------------------------------------------------------------------------
    Net earnings for the period                                  $    29,388
    Other comprehensive income:
      Unrealized gain on derivative instruments designated
       as cash flow hedges, net of tax of $2.8 million                 7,782
    -------------------------------------------------------------------------
    Total comprehensive income                                   $    37,170
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Accumulated other comprehensive income (note 1):
      Transitional adjustment, net of tax of $2.4 million        $     5,048
      Unrealized gain on derivative instruments designated
       as cash flow hedges, net of tax of $2.8 million                 7,782
    -------------------------------------------------------------------------
      Balance, end of period, net of tax of $5.2 million         $    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,
                                                           2007         2006
    -------------------------------------------------------------------------

    Cash provided by (used in):
    Operating activities:
    Net earnings                                    $    29,388  $    20,150
    Items not involving cash:
      Depreciation and amortization                      20,547       21,567
      Accretion on asset retirement obligations             408          351
      Future income and capital taxes reduction          (2,678)      (5,698)
      Employee future benefits expense                    1,348          342
      Trust Unit based compensation expense                 277
      Other                                                 200         (215)
    Employee future benefits contributions                            (1,675)
    Changes in non-cash working capital                  (2,583)       9,442
    -------------------------------------------------------------------------
    Cash flow from operations                            46,907       44,264

    Financing activities:
      Bank borrowings                                    47,006       26,385
      Issue cost of senior unsecured notes                            (3,705)
      Repayment of senior secured notes                  (1,453)      (1,351)
      Issue of Trust Units on exercise of options         1,561        2,175
      Issue of Trust Units under Distribution
       Reinvestment Plan                                 23,117       13,306
      Distributions to Unitholders - current year       (27,990)     (22,188)
      Distributions to Unitholders - prior year         (12,622)      (9,966)
    -------------------------------------------------------------------------
                                                         29,619        4,656

    Investing activities:
      Capital expenditures                              (81,452)     (38,907)
      Changes in non-cash working capital                 1,043       (2,283)
    -------------------------------------------------------------------------
                                                        (80,409)     (41,190)
    Change in cash                                       (3,883)       7,730
    Cash (bank indebtedness), beginning of period         1,861       (7,311)
    -------------------------------------------------------------------------
    Cash (bank indebtedness), end of period         $    (2,022) $       419
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Other cash disclosures:
      Interest on long-term debt paid               $    (9,951) $    (4,602)
      Interest on convertible debentures paid       $            $      (240)
      Interest capitalized                          $    (1,178) $    (1,224)
      Taxes paid                                    $            $      (215)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

       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, 2006 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, 2006. Certain of the prior period's comparative figures
        have been reclassified to conform with the current period's
        presentation.

        Effective January 1, 2007, the Fund adopted the new accounting
        policies relating to financial instruments, hedges and comprehensive
        income. At January 1, 2007, all of the derivative financial
        instruments in the Fund were designated as cash flow hedges.
        Unrealized gains and losses in the fair value of cash flow hedging
        instruments are recorded in other comprehensive income, net of tax,
        until recognized in earnings. The fair value of these cash flow
        hedges are recorded on the Balance Sheet as assets with changes in
        the fair value of cash flow hedges reflected in accumulated
        comprehensive income in Unitholders' equity with no impact on net
        earnings for the period. The Fund has interest rate swaps, power
        swaps and commodity hedges that are all designated as cash flow
        hedges.

        The new rules require the recording of hedging derivatives at fair
        value. Prior to January 1, 2007, derivatives that qualified as
        accounting hedges were accounted for on an accrual basis.

        The types of hedging relationships that qualify for hedge accounting
        have not changed under the new rules. The Fund will continue to
        designate hedges as either cash flow hedges or fair value hedges and
        record the receivable or payable on the derivative as an adjustment
        to power costs, interest and fee income in the Consolidated
        Statements of Earnings over the life of the hedge.

        Cash flow hedges are used to manage the potential increase or
        decrease in the price of non-transmission power charges, interest
        expense on floating debt instruments and commodity price changes.

        On January 1, 2007, cash flow hedge derivatives were measured at fair
        value. The portion of the fair value that offset the fair value of
        the hedged item totaled $7.4 million ($5.0 million after tax) and was
        recorded in opening accumulated other comprehensive income.

        At March 31, 2007, accumulated other comprehensive income totaled
        $12.8 million and consisted of an unrealized gain of $12.7 million,
        net of future income taxes, related to a 16 MW per hour power swap
        with an expiry date of December 31, 2010. The Fund also has an
        interest rate swap of $60 million and commodity hedges as at
        March 31, 2007 totaling an unrealized gain of $0.1 million.

        Effective January 1, 2007, the Fund reclassified transaction costs
        (deferred financing fees) related to long-term debt previously
        disclosed in "goodwill and other" to "long-term debt" of
        $8.8 million.

    2.  Business segments:

        The Fund conducts its operations through three operating segments:
        conventional pipelines, oil sands infrastructure and midstream
        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 infrastructure consists of the Syncrude Pipeline (formerly
        referred to as the Alberta Oil Sands Pipeline or "AOSPL"), the
        completed Cheecham Lateral and the Horizon Pipeline. As at March 31,
        2007, 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 business consists of the Fund's direct and indirect
        interest in a storage operation and direct and contractual interests
        in terminalling, storage and hub services under a mixture of short,
        medium and long-term contractual agreements.

        The financial results of the business segments are as follows:

        ---------------------------------------------------------------------
                                         Oil Sands
                         Conventional       Infra-    Midstream
                            Pipelines  structure(1)    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        15,324        2,984        2,239       20,547
          Accretion on asset
           retirement
           obligations            382           26                       408
          Internalization of
           management
           contract               558                                    558
          Other                 1,617                                  1,617
        ---------------------------------------------------------------------
                               48,391        8,334       20,907       77,632
        ---------------------------------------------------------------------
        Earnings before
         interest and
         taxes            $    13,594  $     6,144  $    15,578  $    35,316
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Property, plant
         and equipment    $   760,046  $   437,960  $   121,606  $ 1,319,612
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        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.


        ---------------------------------------------------------------------
                                         Oil Sands
                         Conventional       Infra-    Midstream
                            Pipelines    structure     Business        Total
        ---------------------------------------------------------------------
        Three months ended
         March 31, 2006
        Revenues:
          Pipeline
           transportation $    56,409  $    14,751  $            $    71,160
          Terminalling,
           storage and hub
           services                                      12,864       12,864
        ---------------------------------------------------------------------
          Revenue before
           expenses            56,409       14,751       12,864       84,024
        ---------------------------------------------------------------------

        Expenses:
          Operations           22,810        5,685        1,077       29,572
          Product purchases                               2,518        2,518
          General and
           administrative       6,022          314          385        6,721
          Management fee          508                                    508
          Depreciation and
           amortization        16,797        2,476        2,294       21,567
          Accretion on asset
           retirement
           obligations            334           17                       351
          Other                   (27)                                   (27)
        ---------------------------------------------------------------------
                               46,444        8,492        6,274       61,210
        ---------------------------------------------------------------------
        Earnings before
         interest and
         taxes            $     9,965  $     6,259  $     6,590  $    22,814
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Property, plant
         and equipment    $   746,152  $   322,620  $   120,073  $ 1,188,845
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Goodwill and
         other            $   212,310  $    28,300  $   129,719  $   370,329
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    3.  Trust Units:

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

        ---------------------------------------------------------------------
                                                    Trust Units       Amount
        ---------------------------------------------------------------------
        Balance, January 1, 2006                    113,897,002  $ 1,073,537
        Exercise of Trust Unit options                  276,317        3,271
        Debenture conversions                         7,131,696       81,227
        Distribution Reinvestment Plan                4,912,873       76,639
        Contributed surplus                                            1,135
        ---------------------------------------------------------------------
        Balance, December 31, 2006                  126,217,888    1,235,809
        Exercise of Trust Unit options                  131,073        1,561
        Debenture conversions                           373,166        4,143
        Distribution Reinvestment Plan                1,524,653       23,117
        Contributed surplus                                              277
        ---------------------------------------------------------------------
        Balance, March 31, 2007                     128,246,780  $ 1,264,907
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        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
        was $29.4 million (2006 - $20.2 million). The weighted average Trust
        Units outstanding for the first quarter were 127,568,000 Units (2006
        - 117,784,000).

        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 were $30.8 million (2006 -
        $20.2 million). In computing diluted earnings per Trust Unit,
        7,639,000 Trust Units were added to the weighted average Trust Units
        outstanding for the first quarter of 2007 for the dilutive effect of
        convertible debentures and employee Trust Unit options. For the first
        quarter of 2006, 339,000 Trust Units were added to the weighted
        average Trust Units outstanding for the dilutive effect of the
        options since the effect of convertible debentures was anti-dilutive.
        Both basic and diluted earnings per Trust Unit are $0.23 for the
        first quarter of 2007 and $0.17 in 2006. At March 31, 2007, 4,208,541
        options were outstanding, of which 1,934,608 were exercisable
        (March 31, 2006 - 1,016,059) at a weighted average price of
        $13.57 (March 31, 2006 - $12.07).

    4.  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 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 2007
        and 2008 distributable cash is similar to the period January 1, 2006
        to March 31, 2007 levels, the potential deferred payment would be
        $4.5 million of which $0.6 million has been expensed at March 31,
        2007.


    -------------------------------------------------------------------------
    Pembina Pipeline Income Fund                  INVESTOR INFORMATION
    -------------------------------------------------------------------------
    Exchange Listing and                      Premium Distribution,
     Trading Symbols:                         Distribution Reinvestment and
                                              Optional Unit Purchase Plan:
    The Toronto Stock Exchange
    Trust Units Symbol: PIF.UN                Pembina offers a Premium
    7.50% Convertible Debentures              Distribution, Distribution
     Symbol: PIF.DB.A                         Reinvestment and Optional Unit
    7.35% Convertible Debentures              Purchase Plan to eligible
     Symbol: PIF.DB.B                         Unitholders of Pembina Pipeline
                                              Income Fund.
    Trustee, Registrar and
     Transfer Agent:                          The Plan allows participants an
                                              opportunity to:
    Computershare Trust Company
     of Canada                                -   reinvest distributions into
    Shareholder Communications:                   Trust Units at a 5 percent
    1-800-564-6253                                discount to a weighted
                                                  average market price, under
    Corporate Office:                             the distribution
                                                  reinvestment component of
    700 - 9th Avenue S.W.                         the Plan; or,
    P.O. Box 1948
    Calgary, Alberta T2P 2M7                  -   realize 2 percent more cash
    Telephone: (403) 231-7500                     on their distributions,
    Fax: (403) 237-0254                           under the premium
                                                  distribution component of
    Investor Information:                         the Plan;

    e-mail:                                   -   eligible Unitholders may
    investor-relations@pembina.com             also make optional Trust
                                                  Unit purchases at the
    Telephone: (403) 231-7500                     weighted average market
               1-888-428-3222                     price.
    Fax:       (403) 691-7356
                                              A brochure, detailing
    Website: www.pembina.com                  administration of the Plan and
                                              eligibility and enrolment
    Quarterly Results Webcast:                information, is available
                                              on-line on Pembina's web site
    A live internet broadcast of              located at www.pembina.com, or
    Pembina's First Quarter 2007              call 1-888-428-3222 to receive
    Results conference call is                a copy by mail. Unitholders
    scheduled for April 26, 2007 at           wishing to enroll in the Plan
    2:00 p.m. Calgary (4:00 p.m.              are asked to contact their
    Eastern, 1:00 p.m. Pacific).              broker, investment dealer,
    Those wishing to access the               financial institution or other
    webcast are invited to visit              nominee through which the Trust
    Pembina's website located at              Units are held.
    www.pembina.com, or the host site
    at www.newswire.ca/webcast. An
    archive of the call will be
    available on-line for 90 days
    following the broadcast date.
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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) 231-7600, 1-888-428-3222, email:
investor-relations@pembina.com