HispanicBusiness

Divisional Outlook

Management expects the 2013 retail fuel market to be comparable to 2012, subject to unforeseen movements in retail margins and will continue to focus on managing prudently to maintain operating efficiencies, growing same store sales, site acquisitions and signing additional dealer business.

Refiners' Margins and Elbow River Marketing Drive Strong First Quarter

Parkland Wholesale, Supply and Distribution is responsible for managing Parkland's fuel supply contracts, purchasing fuel from refiners, distribution through third party long-haul carriers, and serving wholesale and reseller customers.

Q1 2013 vs. Q1 2012

For the three months ended March 31, 2013 Parkland Wholesale, Supply and Distribution fuel volumes (factoring out intersegment sales) increased 173% to 567 million litres compared with 208 million litres for the same period in 2012 primarily due to 327 million litres added from the acquisition of Elbow River Marketing and strong sales in both Western and Eastern Canada.

Fuel adjusted gross profits for the three months ended March 31, 2013 increased 81% to $37.8 million compared with $20.9 million for the same period in 2012 primarily due to $10.0 million in adjusted gross profits from the acquisition of Elbow River Marketing and increased refiners' margins.

Parkland recorded a $0.5 million expense related to put option contracts in place to hedge and secure a portion of the future economic benefit that Parkland receives on its refiners' margins based contract.

Divisional Outlook

Planned shut downs are coming this year to a number of refinery operators in Canada. While it is expected that these refiners have the ability to cover product demand during their shut down, Parkland has contingencies in place to provide supply options during these periods. In addition, Parkland is working closely with refinery operators to ensure that they have access to additional terminal and distribution options such as the Bowden terminal. Fuel supplies are therefore expected to be sufficient in all Canadian markets for 2013.

Weak Canadian crude prices relative to Brent crude prices drove record high refiners' margins in 2012. Refiners' margins for gasoline contracted significantly in January and remained at the low end of the five year range until March, when they returned to the high end of the five year range. In the first quarter of 2013, refiners' margins for gasoline were consistently lower than the levels seen during the same period in 2012. Diesel margins remained at the high end of the five year range during the first quarter of 2013 and exceeded diesel margins compared to January and February of 2012 before decreasing year over year in the month of March.

As at April 16, 2013, Refiners' margins for gasoline and diesel were above the median of the five year range for the month of April, but trending below 2012 levels.

Simplification and Standardization Continues to Drive Down Costs

Q1 2013 vs. Q1 2012

Operating and direct costs decreased by 5% to $42.2 million (3.0 cpl) for the three months ended March 31, 2013, compared with $44.4 million (4.1 cpl) in the three months ended March 31, 2012, primarily due to business simplification and standardization in Parkland's Retail Fuels Division, reduced volumes and cost initiatives within the Commercial Fuels Division, partially offset by the acquisition of Elbow River Marketing.

Marketing, General and Administrative Costs Higher on Elbow River Marketing and Ongoing Mergers and Acquisition Activities