Gibson Energy Annual Report 2014

FY2014 Annual Report · Gibson Energy

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MOVINGAHEAD

CONTENTS

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2
5
38
39

2014 Results and Highlights
President & CEO’s Message
Management’s Discussion and Analysis
Independent Auditor’s Report
Consolidated Financial Statements for the
Year Ended December 31, 2014

44 Notes to the Consolidated Financial Statements
IBC Corporate Information

Annual General Meeting Information

Wednesday, May 6, 2015 at 10:00 a.m.
(Mountain Standard Time)

The Metropolitan Conference Centre
333 - 4 Ave SW, Calgary, Alberta

Gibson Energy is a large midstream energy company in North America with opera-
tions in some of the most hydrocarbon-rich basins in the world.

For over 60 years, Gibsons has provided market access to the leading oil and gas companies in Western Canada. By
diversifying our service offerings and expanding geographically, we continue to meet our customers’ needs in key hy-
drocarbon producing regions throughout North America. Our unparalleled service level is what sets us apart from our
competitors and we strive to provide hands-on service between the producer and end-user.

Our integrated operations allow us to participate in the full midstream energy value chain. We transport millions of bar-
rels of energy products each year by pipeline, trucks and rail through our strategically located terminals in Hardisty and
Edmonton, Alberta, Canada, and through our injection stations and small terminals in the United States.

Gibsons’ diversified service offering includes terminals, storage, blending, processing, marketing and distribution of
crude oil, condensate, natural gas liquids, and refined products. We also provide emulsion treating, water disposal and
oilfield waste management services in Canada and the U.S.

2014 RESULTS AND HIGHLIGHTS

Gibsons has a strong corporate culture that sees value in strategic planning and prides itself on the effective delivery
of its goals and objectives over time. In 2014, we continued to execute on our plans.

 Demonstrated strong safety and operational performance;

 Achieved record annual adjusted EBITDA of $453 million, a 6% increase over 2013;

 Expended $352 million of growth capital in 2014, a 99% increase over the prior year;

 Successfully commissioned our pipeline connection from Gibsons’ Hardisty Terminal to the USD Group’s crude oil

unit train rail loading facility at Hardisty, Alberta;

 Completed two new tanks on the east side of the Hardisty Terminal resulting in an 800,000 barrel increase in capacity;

 Constructed and commissioned a processing, recovery and disposal (PRD) facility in North Dakota, along with

a co-located licensed landfill. Both of these facilities are expected to provide stable production-related revenue
sources for the Environmental Services segment;

 Completed the acquisition of Cal-Gas Inc. for $96 million and Stittco Energy Limited for $32 million. Combined,
these transactions contributed to making Gibsons the largest industrial propane company in western Canada;

 Completed an offering of Senior Unsecured Notes totaling $300 million aggregate principal amount of 5.375%
Senior Unsecured Notes, due July 15, 2022 issued at par, and U.S.$50 million aggregate principal amount of
6.75% Senior Unsecured Notes, due July 15, 2021 at an issue price of 108% of par;

 Amended the terms of our $500 million secured revolving credit facility to, among other things, release all security

required by the lenders, and to extend the maturity date from June 2018 to August 2019;

 Declared total dividends of $149 million ($1.20/share) in 2014 compared to $134 million ($1.10/share), in 2013;



500

400

300

200

100

0.35

0.30

0.25

0.20

Increased distributable cash flow to $265 million resulting in a gross dividend payout ratio of 56% and a net divi-
dend payout ratio of 42%, after considering our DRIP participation level; and

Increased our quarterly dividend by 7% to $0.32 cents per common share in conjunction with the release of our
year-end 2014 results, the fifth increase since our public offering in June 2011.

Trailing Twelve Month Adjusted EBITDA ($ Millions)

Enterprise Value ($ Billions)

5.0

4.0

3.0

2.0

1.0

0.0

2011

2012

2013

2014

Quarterly Dividend ($/share)

Growth Capital ($ Millions)

400

300

200

100

Q4
2011

2012

2013

2014

Q1
2015

$453MM

Record Adjusted
EBITDA in 2014

$352MM

Spent on Growth
Capital in 2014

5.9MMbbls

Storage Capacity
at Year End 2014

Gibson Energy  Annual Report 2014  1

PRESIDENT & CEO’S MESSAGE

“May you live in interesting times…”

It’s a phrase I’ve used often when speaking about the economic, geo-
political and social challenges that affected our industry in 2014. It’s
also a phrase that describes the kind of year that Gibson Energy had
- a year of record performance and growth, contrasted with a year

marked by significant volatility in oil prices.

During the year we welcomed two new companies to
the Gibsons family, both of which I would characterize
as “bucket list” acquisitions, as we have followed their
successes over the last
twenty plus years.

“ Our successes in 2014
did not materialize over-
night. They were made
possible because of the
focused execution of our
strategic plan.”

 Cal-Gas Inc. has
been in business
for over 40 years,
providing propane
equipment, service
and delivery to
the oil and gas,
commercial, min-
ing and residential sectors. This acquisition dovetails
nicely with our existing Canwest Propane operations
and extends our geographic footprint into Manitoba
and Northwest Ontario.



Further expanding the Manitoba footprint and
adding Northwest Territories as well, Stittco Energy
Limited provides propane equipment, service and
delivery to the same business sectors as Cal-Gas.

We expect the turmoil created by lower commodity
prices in 2015 to provide some compelling opportunities
to continue our tradition of making strategic acquisitions
as a means of growing our core businesses.

Delivering Results

In 2014, we delivered
record annual results with
Segment Profit of $487
million and Pro Forma
Adjusted EBITDA of $458
million. We also success-
fully executed the most
ambitious capital spend-
ing plan in the company’s
history, spending $352
million on growth capital

projects, many of which
will contribute meaningfully
to our profitability in 2015
and beyond.

But our successes in 2014 did
not materialize overnight. They
were made possible because
of the focused execution of our
strategic plan: to provide mid-
stream solutions that capitalize
on growth trends in North Ameri-
can oil and liquids production.

Stewart Hanlon
President & CEO

2  Gibson Energy  Annual Report 2014

In 2014, we also acted on numerous opportunities to
improve and grow our operations.

 The multi-year expansion of our eastern lands at

Hardisty continued throughout the year, culminating
in the commissioning of the first two new tanks
that added 800,000 barrels of incremental capacity
in the fourth quarter. An additional 400,000 barrel
tank came into service in February of 2015. This
brought our total capacity at the Hardisty terminal
to 5.5 million barrels, with 1.6 million barrels cur-
rently under construction.

 We added two new pipeline connections to our
Hardisty terminal, which advanced the ever-in-
creasing flexibility of the terminal. We completed
our pipeline receipt connection from the recently
twinned Cold Lake pipeline. We also commissioned
the exclusive, delivery pipeline to USD Group’s Hard-
isty unit train loading facility. Both of these projects
are underpinned by long-term contracts with key
credit-worthy customers.

 We constructed and commissioned a full-service,

processing, recovery and disposal facility and landfill
in the North Dakota Bakken – Gibsons’ first in the U.S.
It will recover and recycle oilfield waste streams, effi-
ciently meeting waste treatment and disposal require-
ments, while minimizing the industry’s environmental
footprint in the region.

The safety of our workforce, contractors and nearby
communities remains top-of-mind. In 2014, we intro-
duced several programs to continue on our journey of
continuous improvement. I’m pleased to say we saw real
and significant improvements in key safety metrics. While
we continue to see improvements in our performance, we
can never become complacent. In 2015, we will continue
to strengthen our programs, improve our processes and
support our workforce.

Underlying all of our activities is our operating and finan-
cial discipline that helps us pursue the activities, projects
and ventures that create shareholder value and make us a
stronger company. Gibsons’ balance sheet remains solid.

At year end:

 We had $132 million of cash and $442 million avail-
able under our $500 million revolving credit facility,
which carries an August 2019 renewal date;

 Our debt to debt plus capital ratio was 41%;

 Our leverage ratio was 2.2 times; and our interest

coverage ratio was 6.7 times.

Our debt levels are low and we are in great financial
health to succeed through another industry cycle. And it
is a cycle. That’s the nature of our business. Our exec-
utive team and Board have been through commodity
price cycles like this before and we will persevere through
this one. In 2015,
we will continue
to work hard to
meet our targets,
realize our cost
management
goals, capitalize
on opportunities
and advance our
growth strategy.

“ Our debt levels are low
and we are in great fi-
nancial health to succeed
through another industry
cycle. And it is a cycle.”

Recognizing our Strengths

We know successful companies thrive over time, largely
because they have attracted, retained and motivated the
best talent in their industry. For over 60 years, Gibsons
has been defined by people who seized opportunities
and made exceptional customer service a part of every-
thing they do. I want to thank our employees for their
hard work and dedication. I would also like to thank our
Board of Directors. Their guidance and governance have
been invaluable over the past year.

At Gibsons, we recognize that good corporate citizen-
ship is good business. In fact, it is essential to achieve
long-term business sustainability. In 2014, we continued
to invest both time and money into the communities
where we live and work.

Gibson Energy  Annual Report 2014  3

At Gibsons, we are committed to being a company that
people want to do business with, want to work for, and
want to invest in. We do, indeed, live in interesting times
and I look forward to sharing them with you as we
strengthen and grow our company, seize opportunities
and move ahead.

Stewart Hanlon,
President & CEO

During our annual United Way campaign, Gibsons and
its employees pledged more than $350,000 to support
various United Way agencies and organizations across
North America. During the Calgary campaign kick-off,
employees participated in our first-ever truck pull. The
public event, which saw teams of employees pull a 1953
refurbished Gibsons truck, drew valuable attention to
the United Way cause while at the same time, building
team spirit among employees.

During 2014, Gibsons also contributed to programs
across North America through its community investment
program. The program, founded on the four pillars of
Health, Safety and Wellness; Education and the Arts;
Community Enhancement; and the Environment, allows
Gibsons to support many organizations across North
America, including multi-year partnerships with Ducks
Unlimited and the Calgary Police Foundation.

Moving Ahead

The challenges going forward are numerous and com-
plex, but the opportunities are also many.

Oil and liquids production in North America is still pro-
jected to increase. Crude oil and liquids still need to be
hauled from the wellhead to injection stations and ter-
minals. Pipelines and tank infrastructure still need to be
built to support production growth. Production waste
and water will still need to be treated, managed safely
and disposed of. To be direct, we are well-positioned for
the future. While the current challenges of the market
may continue for longer than we would like, we are
committed to focusing on the things we believe we can
influence and control:

 Providing our customers with exceptional

customer-service;



Investing in our people and strengthening our culture;

 Delivering long-term value to our shareholders; and

 Making valuable contributions to the communities

where we live and work

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

Management’s Discussion and Analysis

The following Management’s Discussion and Analysis (“MD&A”) was prepared and approved by the Company’s Board of

Directors as of March 3, 2015 and should be read in conjunction with the audited consolidated financial statements and related

notes of Gibson Energy Inc. (“Gibson” or the “Company”) for the years ended December 31, 2014 and 2013, which were

prepared under International Financial Reporting Standards (“IFRS”) as set out in the Handbook of the Canadian Institute of

Chartered Accountants and as issued by the International Accounting Standards Board (IASB). Amounts are stated in Canadian

dollars unless otherwise noted.

This MD&A contains forward-looking statements and non-GAAP measures and readers are cautioned that this MD&A should be

read in conjunction with the Company’s disclosure under “Forward-Looking Statements” and “Non-GAAP Financial Measures”

included at the end of this MD&A. Non-GAAP measures contained in this MD&A include EBITDA, Adjusted EBITDA, Pro-forma

Adjusted EBITDA, and Distributable Cash flow.

EXECUTIVE OVERVIEW

Gibson is a large independent integrated service provider to the oil and gas industry with operations across major producing

regions throughout North America. Gibson is engaged in the movement, storage, blending, processing, marketing and

distribution of crude oil, condensate, natural gas liquids (“NGLs”), water, oilfield waste, and refined products. The Company

transports energy products by utilizing its integrated network of terminals, pipelines, storage tanks, and trucks located throughout

western Canada and through its significant truck transportation and injection station network in the United States. The Company

also provides emulsion treating, water disposal and oilfield waste management services in Canada and the United States and is the

second largest industrial propane distribution company in Canada. The Company’s integrated operations allow it to participate

across the full midstream energy value chain, from the hydrocarbon producing regions in Canada and the United States, through

the Company’s strategically located terminals in Hardisty and Edmonton, Alberta and injection stations and small terminals in the

United States, to the refineries of North America via major pipelines.

Gibson has provided market access to leading oil and gas industry participants in western Canada for over 60 years. The

Company has grown by diversifying its service offerings to meet customers’ needs and by expanding geographically to provide

its service offerings to key hydrocarbon producing regions throughout the United States.

The Company’s integrated segments can be broken down as follows: (1) Terminals and Pipelines, (2) Environmental Services, (3)

Truck Transportation, (4) Propane and NGL Marketing and Distribution, (5) Processing and Wellsite Fluids and (6) Marketing.

The Company believes its competitive advantage is driven by its geographic presence in the majority of hydrocarbon-rich basins

in North America, its footholds in strategic market hubs, its ability to capture value throughout the midstream energy value chain,

its diversified, integrated, synergistic service offerings, its ability to source and successfully execute internal growth projects, its

proven track record of sourcing, executing and successfully integrating business acquisitions, its leading health, safety, security

and environment record, its experienced management team with a proven history of successful operations and strong industry

reputation and its conservative risk management policies. The Company is continuously focused on improving its operations

across all segments by utilizing the Company’s integrated asset base to capture inter segment synergies and to expand the

Company’s network of assets, and to increase the Company’s margins by providing additional value added services along the

midstream energy value chain.

4  Gibson Energy  Annual Report 2014

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

Management’s Discussion and Analysis

The following Management’s Discussion and Analysis (“MD&A”) was prepared and approved by the Company’s Board of
Directors as of March 3, 2015 and should be read in conjunction with the audited consolidated financial statements and related
notes of Gibson Energy Inc. (“Gibson” or the “Company”) for the years ended December 31, 2014 and 2013, which were
prepared under International Financial Reporting Standards (“IFRS”) as set out in the Handbook of the Canadian Institute of
Chartered Accountants and as issued by the International Accounting Standards Board (IASB). Amounts are stated in Canadian
dollars unless otherwise noted.

This MD&A contains forward-looking statements and non-GAAP measures and readers are cautioned that this MD&A should be
read in conjunction with the Company’s disclosure under “Forward-Looking Statements” and “Non-GAAP Financial Measures”
included at the end of this MD&A. Non-GAAP measures contained in this MD&A include EBITDA, Adjusted EBITDA, Pro-forma
Adjusted EBITDA, and Distributable Cash flow.

EXECUTIVE OVERVIEW

Gibson is a large independent integrated service provider to the oil and gas industry with operations across major producing
regions throughout North America. Gibson is engaged in the movement, storage, blending, processing, marketing and
distribution of crude oil, condensate, natural gas liquids (“NGLs”), water, oilfield waste, and refined products. The Company
transports energy products by utilizing its integrated network of terminals, pipelines, storage tanks, and trucks located throughout
western Canada and through its significant truck transportation and injection station network in the United States. The Company
also provides emulsion treating, water disposal and oilfield waste management services in Canada and the United States and is the
second largest industrial propane distribution company in Canada. The Company’s integrated operations allow it to participate
across the full midstream energy value chain, from the hydrocarbon producing regions in Canada and the United States, through
the Company’s strategically located terminals in Hardisty and Edmonton, Alberta and injection stations and small terminals in the
United States, to the refineries of North America via major pipelines.

Gibson has provided market access to leading oil and gas industry participants in western Canada for over 60 years. The
Company has grown by diversifying its service offerings to meet customers’ needs and by expanding geographically to provide
its service offerings to key hydrocarbon producing regions throughout the United States.

The Company’s integrated segments can be broken down as follows: (1) Terminals and Pipelines, (2) Environmental Services, (3)
Truck Transportation, (4) Propane and NGL Marketing and Distribution, (5) Processing and Wellsite Fluids and (6) Marketing.
The Company believes its competitive advantage is driven by its geographic presence in the majority of hydrocarbon-rich basins
in North America, its footholds in strategic market hubs, its ability to capture value throughout the midstream energy value chain,
its diversified, integrated, synergistic service offerings, its ability to source and successfully execute internal growth projects, its
proven track record of sourcing, executing and successfully integrating business acquisitions, its leading health, safety, security
and environment record, its experienced management team with a proven history of successful operations and strong industry
reputation and its conservative risk management policies. The Company is continuously focused on improving its operations
across all segments by utilizing the Company’s integrated asset base to capture inter segment synergies and to expand the
Company’s network of assets, and to increase the Company’s margins by providing additional value added services along the
midstream energy value chain.

1
5

Gibson Energy Inc.
TSX: GEI

Highlights

2014 Year End Report

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

The key highlights for the year ended December 31, 2014 were as follows:

•
Revenue increased by 24% in the year ended December 31, 2014 compared to the year ended December 31, 2013. The

increase was primarily due to increased overall activity in the Company’s segments;

•
Overall segment profit increased by 7% to $487.1 million in the year ended December 31, 2014 compared to $456.4 million
in the year ended December 31, 2013. The increase in segment profit was primarily driven by increases in the Terminals and
Pipelines, Environmental Services, Processing and Wellsite Fluids, and Propane and NGL Marketing and Distribution
segments;

•
Adjusted EBITDA in the year ended December 31, 2014 increased by 6% to $453.1 million compared to $427.0 million in
the year ended December 31, 2013. The increase in adjusted EBITDA was primarily due to the increase in segment profits.
Pro Forma Adjusted EBITDA for the year ended December 31, 2014 was $458.2 million;

•
Net income was $91.9 million in the year ended December 31, 2014 compared to $103.8 million in the year ended December
31, 2013. The decrease was largely due to an increase in the non-cash foreign exchange loss incurred on translating the
Company’s U.S. dollar denominated long-term debt, higher depreciation and amortization and interest charges, partially
offset by an increase in overall segment profitability and decreased debt extinguishment charges;

• The Company declared a dividend of $0.30 per common share in each of the four quarters of 2014 for total dividends of
$148.6 million for the year ended December 31, 2014. For the year ended December 31, 2014, distributable cash flow was
$265.2 million resulting in a dividend payout ratio of 56%;

• Capital expenditures were $411.5 million for the year ended December 31, 2014, of which $352.5 million related to growth
capital. Growth capital expenditures are primarily related to the construction of tankage and pipeline connections at the
Company’s facilities, in particular at the Hardisty Terminal, and the expansion of the Environmental Services business. At
December 31, 2014, the Company had capital expenditures totaling $200.4 million included in work in progress;

•

In June 2014, the crude oil unit train rail loading facility at Hardisty, Alberta, was successfully commissioned. The facility,
which the Company jointly developed with US Development Group LLC, is underpinned by long-term customer
commitments. With pipeline connectivity from the Company’s Hardisty Terminal, the facility provides customers with
increased optionality to facilitate crude oil movements across North America;

In October 2014, Gibson revised the design configuration of its storage tank construction project currently underway at the
Hardisty Terminal resulting in a 200,000 barrel increase in the original planned capacity and the construction of an
incremental 300,000 barrel tank to accommodate current and forecasted operational requirements at the terminal;

In October 2014, the Company successfully commissioned two new tanks at the east side of the Hardisty Terminal resulting
in a 800,000 barrel increase in capacity;

In December 2014, the Company successfully commissioned a processing, recovery, and disposal (PRD) facility in North
Dakota. The facility is well located, offers modern processing technologies and establishes Gibson as a full-service waste
provider in the US Bakken tight oil play. This facility is co-located with the licensed landfill which was commissioned earlier
in 2014, both of which will contribute to our efforts to shift the profile of our environmental services business toward more
stable production-related revenue sources;

•
On August 1, 2014, the Company completed the acquisition of Cal-Gas Inc. (“Cal-Gas”) for cash consideration of $96.4
million subject to final purchase price adjustments. Cal-Gas is one of the largest propane distribution companies in western
Canada, with operations in British Columbia, Alberta, Saskatchewan, Manitoba and Northwest Ontario. Cal-Gas has been in
business for over 40 years, providing propane equipment, service and delivery to the oil and gas, commercial, mining and
residential sectors;

•
On April 1, 2014, the Company completed the acquisition of all of the issued and outstanding common shares of Stittco
Energy Limited (“Stittco”) for cash consideration of $32.1 million. Stittco is a private company which provides propane
equipment, service and delivery to residential and commercial and mining customers in Northern Manitoba and the
Northwest Territories;

•
On June 12, 2014, the Company completed an offering of Senior Unsecured Notes totaling $300.0 million aggregate
principal amount of 5.375% Senior Unsecured Notes due July 15, 2022 issued at par and U.S.$50.0 million aggregate

2
6

principal amount of 6.75% Senior Unsecured Notes due July 15, 2021 at an issue price of 108% of par. The net proceeds

were used to repay all outstanding indebtedness under the existing revolving credit facility (excluding letters of credit), with

the remaining net proceeds used to fund capital expenditures and general corporate purposes; and

•

On August 20, 2014, the Company amended the terms of its $500.0 million secured revolving credit facility to, among other

things, release all security required by the lenders, and to extend the maturity date from June 2018 to August 2019 (the

“Revolving Credit Facility”).

On January 31, 2015, the Company acquired all of the issued and outstanding shares of Littlehawk Enterprises Ltd.

(“Littlehawk”) for approximately $8.2 million, subject to the final purchase price adjustments. Littlehawk is a private Canadian

company which operates hydrovac units that specialize in hydro excavation, pressure testing and water hauling for the

construction and energy industries.

In February 2015, the Company successfully commissioned a new tank on the east side of the Hardisty Terminal resulting in a

400,000 barrel increase in capacity. In addition, the Company successfully commissioned its connectivity enhancement project

related to the twining of the Cold Lake pipeline connection to the Hardisty Terminal.

On March 3, 2015, the Board declared a quarterly dividend on its outstanding common shares of $0.32 cents per common share

for the quarter ended March 31, 2015. The dividend is payable on April 17, 2015 to shareholders of record at the close of business

on March 31, 2015.

Trends affecting the Company’s business

In accordance with the Company’s long-range strategic plan, the Company continuously evaluates organic growth opportunities

and potential acquisitions of transportation, industrial propane distribution, gathering, terminalling or storage and other

complementary midstream businesses, such as emulsion treating, water disposal and oilfield waste management services. Some of

the key industry trends that currently affect Gibson’s business and prospects over the short-term (2 years or less) and the medium

to long-term (in two to five years) are:

Increased oil production in North America has increased demand for many facets of the midstream energy value chain

including storage, transportation, distribution, processing, refining and environmental and production services, all of which

are activities the Company participates in. However, the recent decline in crude oil prices has caused many North American

oil producers, who form a significant part of Gibsons customer base, to lower their near term capital spending plans. This is

expected to impact the overall rate of North American production growth over the short-term. Over the medium to long-term,

as crude oil supply and demand rebalances and crude oil prices realign with global cost structures the Company anticipates a

return to increased activity and production levels and a continued demand for midstream value chain assets;

• The growing supply of Canadian heavy crude oil from the oilsands will result in an increasing demand for diluent in the

Western Canada Sedimentary Basin (the “WCSB”). This should result in increased movements of diluent through the

Edmonton area pipeline and terminal infrastructure and may generate increased opportunities for Gibson’s services;

• Crude oil pricing, location and quality disconnects combined with a shortage of pipeline takeaway capacity from the WCSB

has created demand for crude by rail as a solution for export market access. While the recent decline in crude oil prices has

negatively impacted the economics of this export alternative, the Company expects that a return to higher oil prices should

create opportunities for the Company to increase its service offering to include more crude rail movements;

The Keystone XL and Energy East pipeline projects, if approved, would help provide the growing supply of Canadian crude

oil access to the large refining markets in the United States, Eastern Canada and other foreign markets. If approved, the

starting point for both pipelines would be adjacent to the Company’s Hardisty Terminal which could provide increased

opportunities for the Company’s terminalling services;

Enbridge’s expansion of its Line 67 and replacement of its Line 3 will also help provide the growing supply of Canadian

crude oil access to the largest refining markets in the United States and Eastern Canada. The additional capacity from Line

67 expansion is expected to be available in Q3 2015. The replacement of Line 3, if approved, could provide incremental

capacity by 2018. Gibson’s Hardisty Terminal is connected to deliver to both of these pipelines and these expansions should

provide increased opportunities for the Company’s terminalling services at Hardisty;

Enbridge’s twinning of the southern section of its Athabasca pipeline as well as Inter Pipeline Ltd.’s twinning of its Cold

Lake pipeline should provide for additional volumes into the Hardisty area and increased opportunities for the Company’s

terminalling services at Hardisty;

•

Gibson Energy Inc.

TSX: GEI

Highlights

The key highlights for the year ended December 31, 2014 were as follows:

Revenue increased by 24% in the year ended December 31, 2014 compared to the year ended December 31, 2013. The

increase was primarily due to increased overall activity in the Company’s segments;

Overall segment profit increased by 7% to $487.1 million in the year ended December 31, 2014 compared to $456.4 million

in the year ended December 31, 2013. The increase in segment profit was primarily driven by increases in the Terminals and

Pipelines, Environmental Services, Processing and Wellsite Fluids, and Propane and NGL Marketing and Distribution

segments;

Adjusted EBITDA in the year ended December 31, 2014 increased by 6% to $453.1 million compared to $427.0 million in

the year ended December 31, 2013. The increase in adjusted EBITDA was primarily due to the increase in segment profits.

Pro Forma Adjusted EBITDA for the year ended December 31, 2014 was $458.2 million;

Net income was $91.9 million in the year ended December 31, 2014 compared to $103.8 million in the year ended December

31, 2013. The decrease was largely due to an increase in the non-cash foreign exchange loss incurred on translating the

Company’s U.S. dollar denominated long-term debt, higher depreciation and amortization and interest charges, partially

offset by an increase in overall segment profitability and decreased debt extinguishment charges;

• The Company declared a dividend of $0.30 per common share in each of the four quarters of 2014 for total dividends of

$148.6 million for the year ended December 31, 2014. For the year ended December 31, 2014, distributable cash flow was

$265.2 million resulting in a dividend payout ratio of 56%;

• Capital expenditures were $411.5 million for the year ended December 31, 2014, of which $352.5 million related to growth

capital. Growth capital expenditures are primarily related to the construction of tankage and pipeline connections at the

Company’s facilities, in particular at the Hardisty Terminal, and the expansion of the Environmental Services business. At

December 31, 2014, the Company had capital expenditures totaling $200.4 million included in work in progress;

In June 2014, the crude oil unit train rail loading facility at Hardisty, Alberta, was successfully commissioned. The facility,

which the Company jointly developed with US Development Group LLC, is underpinned by long-term customer

commitments. With pipeline connectivity from the Company’s Hardisty Terminal, the facility provides customers with

increased optionality to facilitate crude oil movements across North America;

In October 2014, Gibson revised the design configuration of its storage tank construction project currently underway at the

Hardisty Terminal resulting in a 200,000 barrel increase in the original planned capacity and the construction of an

incremental 300,000 barrel tank to accommodate current and forecasted operational requirements at the terminal;

In October 2014, the Company successfully commissioned two new tanks at the east side of the Hardisty Terminal resulting

in a 800,000 barrel increase in capacity;

In December 2014, the Company successfully commissioned a processing, recovery, and disposal (PRD) facility in North

Dakota. The facility is well located, offers modern processing technologies and establishes Gibson as a full-service waste

provider in the US Bakken tight oil play. This facility is co-located with the licensed landfill which was commissioned earlier

in 2014, both of which will contribute to our efforts to shift the profile of our environmental services business toward more

stable production-related revenue sources;

On August 1, 2014, the Company completed the acquisition of Cal-Gas Inc. (“Cal-Gas”) for cash consideration of $96.4

million subject to final purchase price adjustments. Cal-Gas is one of the largest propane distribution companies in western

Canada, with operations in British Columbia, Alberta, Saskatchewan, Manitoba and Northwest Ontario. Cal-Gas has been in

business for over 40 years, providing propane equipment, service and delivery to the oil and gas, commercial, mining and

residential sectors;

Northwest Territories;

On April 1, 2014, the Company completed the acquisition of all of the issued and outstanding common shares of Stittco

Energy Limited (“Stittco”) for cash consideration of $32.1 million. Stittco is a private company which provides propane

equipment, service and delivery to residential and commercial and mining customers in Northern Manitoba and the

•

On June 12, 2014, the Company completed an offering of Senior Unsecured Notes totaling $300.0 million aggregate

principal amount of 5.375% Senior Unsecured Notes due July 15, 2022 issued at par and U.S.$50.0 million aggregate

2014 Year End Report

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

principal amount of 6.75% Senior Unsecured Notes due July 15, 2021 at an issue price of 108% of par. The net proceeds
were used to repay all outstanding indebtedness under the existing revolving credit facility (excluding letters of credit), with
the remaining net proceeds used to fund capital expenditures and general corporate purposes; and

•

On August 20, 2014, the Company amended the terms of its $500.0 million secured revolving credit facility to, among other
things, release all security required by the lenders, and to extend the maturity date from June 2018 to August 2019 (the
“Revolving Credit Facility”).

In February 2015, the Company successfully commissioned a new tank on the east side of the Hardisty Terminal resulting in a
400,000 barrel increase in capacity. In addition, the Company successfully commissioned its connectivity enhancement project
related to the twining of the Cold Lake pipeline connection to the Hardisty Terminal.

On March 3, 2015, the Board declared a quarterly dividend on its outstanding common shares of $0.32 cents per common share
for the quarter ended March 31, 2015. The dividend is payable on April 17, 2015 to shareholders of record at the close of business
on March 31, 2015.
Trends affecting the Company’s business
In accordance with the Company’s long-range strategic plan, the Company continuously evaluates organic growth opportunities
and potential acquisitions of transportation, industrial propane distribution, gathering, terminalling or storage and other
complementary midstream businesses, such as emulsion treating, water disposal and oilfield waste management services. Some of
the key industry trends that currently affect Gibson’s business and prospects over the short-term (2 years or less) and the medium
to long-term (in two to five years) are:
•

Increased oil production in North America has increased demand for many facets of the midstream energy value chain
including storage, transportation, distribution, processing, refining and environmental and production services, all of which
are activities the Company participates in. However, the recent decline in crude oil prices has caused many North American
oil producers, who form a significant part of Gibsons customer base, to lower their near term capital spending plans. This is
expected to impact the overall rate of North American production growth over the short-term. Over the medium to long-term,
as crude oil supply and demand rebalances and crude oil prices realign with global cost structures the Company anticipates a
return to increased activity and production levels and a continued demand for midstream value chain assets;

• The growing supply of Canadian heavy crude oil from the oilsands will result in an increasing demand for diluent in the
Western Canada Sedimentary Basin (the “WCSB”). This should result in increased movements of diluent through the
Edmonton area pipeline and terminal infrastructure and may generate increased opportunities for Gibson’s services;

• Crude oil pricing, location and quality disconnects combined with a shortage of pipeline takeaway capacity from the WCSB
has created demand for crude by rail as a solution for export market access. While the recent decline in crude oil prices has
negatively impacted the economics of this export alternative, the Company expects that a return to higher oil prices should
create opportunities for the Company to increase its service offering to include more crude rail movements;

•
The Keystone XL and Energy East pipeline projects, if approved, would help provide the growing supply of Canadian crude
oil access to the large refining markets in the United States, Eastern Canada and other foreign markets. If approved, the
starting point for both pipelines would be adjacent to the Company’s Hardisty Terminal which could provide increased
opportunities for the Company’s terminalling services;

•
Enbridge’s expansion of its Line 67 and replacement of its Line 3 will also help provide the growing supply of Canadian
crude oil access to the largest refining markets in the United States and Eastern Canada. The additional capacity from Line
67 expansion is expected to be available in Q3 2015. The replacement of Line 3, if approved, could provide incremental
capacity by 2018. Gibson’s Hardisty Terminal is connected to deliver to both of these pipelines and these expansions should
provide increased opportunities for the Company’s terminalling services at Hardisty;

•
Enbridge’s twinning of the southern section of its Athabasca pipeline as well as Inter Pipeline Ltd.’s twinning of its Cold
Lake pipeline should provide for additional volumes into the Hardisty area and increased opportunities for the Company’s
terminalling services at Hardisty;

3
7

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

•
Price fluctuations between crude oil types can create incremental margin opportunities in multiple areas of the Company’s
operations. While current price differentials have compressed in response to the recent decline in benchmark crude oil prices,
the Company remains attentive to opportunities as this trend continues to evolve;

•
The growing supply of propane related to higher liquids rich natural gas development has resulted in declining propane prices
in Western Canada. This may result in increased volumes and potential margin improvement related to our Propane and NGL
Marketing and Distribution segment;

•
The recent reduction in the value of the Canadian dollar relative to the U.S. dollar highlights added foreign currency volatility
which could result in both positive and negative impacts for the Company. A weakening Canadian dollar should result in
increased profit contributions from the Company’s U.S. business. In addition, it would result in increased revenues and cost
of sales for the Company’s Canadian operations that transact in U.S. dollars. Furthermore, a weakening Canadian dollar will
result in an increase in foreign exchange losses with respect to the Company’s U.S. dollar denominated debt, which are
partially offset by gains on foreign currency forward contracts and options;

•
Over the medium to long-term the Company expects new technology for drilling and well completion methodology to be

deployed towards conventional and unconventional production within the Company’s operating areas; and

•
Over the medium to long-term the Company expects increased oil and natural gas production in North America should also
mean a significant increase in produced water and other oilfield waste. This increase in oilfield waste, together with increased
regulatory scrutiny, should increase demand for the Company’s Environmental Services solutions.

The Company believes the collective impact of these trends and developments, many of which are beyond the Company’s
control, will result in an increasingly volatile crude oil market that is subject to more frequent short-term swings in market prices
and grade differentials and shifts in market structure. Over the short-term, the Company anticipates that lower crude oil prices
may create a challenging environment for some of the Company’s services however over the medium to long-term the Company
feels demand for its services should remain strong.

Capital expenditures

The following table summarizes growth capital and upgrade and replacement capital (in thousands):

Year ended December 31,

software related to information and operational systems.

(6) Mainly includes the purchase of land in Strathcona County in Alberta’s Industrial Heartland as well as equipment and

2014
Growth capital.............................................................................................................................. $ 352,487
Upgrade and replacement capital .................................................................................................
59,035
$ 411,522

2013
$ 177,443
69,513
$ 246,956

Total expenditures for growth capital and upgrade and replacement capital were $411.5 million and $247.0 million in the year
ended December 31, 2014 and 2013, respectively. In the year ended December 31, 2014 and 2013, $391.2 million and
$238.5 million, respectively, were included as additions to property, plant and equipment and $20.3 million and $8.5 million,
respectively, were included as additions to intangible assets.

Growth capital

The following table summarizes the Company’s growth capital by segment (in thousands):

Terminals and Pipelines(1) ..........................................................................................................

Environmental Services (2) .........................................................................................................

Truck Transportation(3) ..............................................................................................................

Propane and NGL Marketing and Distribution (4) ......................................................................

Processing and Wellsite Fluids(5) ...............................................................................................

Other(6) .......................................................................................................................................

Total...........................................................................................................................................

Year ended December 31,

2014

2013

$ 220,916 $ 101,300

68,430

22,164

12,131

13,979

14,867

46,649

19,156

6,807

2,528

1,003

$ 352,487 $ 177,443

(1) Expenditures in the year ended December 31, 2014 relate to a number of construction and expansion projects including the

construction of additional tanks and related infrastructure at the Hardisty and Edmonton Terminals and the related

infrastructure to connect the unit rail facility to the Hardisty Terminal.

(2) Expenditures in the year ended December 31, 2014 relate to the expansion of existing and construction of new emulsion and

waste treatment and salt water disposal facilities in both Canada and the United States and also the addition of equipment

and rolling stock.

maintenance facility.

(3) Largely represents the purchase of land in the Edmonton area and the initial costs for constructing a new office and

(4) Mainly represents the addition of trucks, tanks and generators to meet growing demand in key market areas and the

expansion of rail infrastructure at a Company facility.

(5) Expenditures in the year ended December 31, 2014 largely relates to increasing throughput capacity and rail capabilities at

the facility in Moose Jaw.

Upgrade and replacement capital

Upgrade and replacement capital includes improvement projects that extend the physical life of an asset, while replacement

capital includes purchases that replace existing assets as necessary to maintain current service levels or replace assets that no

longer have a useful economic life. Upgrade and replacement capital decreased by 15% to $59.0 million in the year ended

December 31, 2014 from $69.5 million in the year ended December 31, 2013. The decrease was mainly due to a reduction in the

replacement of rolling stock within the Truck Transportation segment.

Acquisitions

On August 1, 2014, the Company acquired all of the issued and outstanding common shares of Cal-Gas for cash consideration of

$96.4 million. Cal-Gas is one of the largest propane distributors in Western Canada with operations in British Columbia, Alberta,

Saskatchewan, Manitoba and Northwest Ontario. Cal-Gas has been in business for over 40 years, providing propane equipment,

service and delivery to the oil and gas, commercial, mining and residential sectors.

On April 1, 2014, the Company acquired all of the issued and outstanding common shares of Stittco for cash consideration of

$32.1 million. Stittco provides propane equipment, service and delivery to residential and commercial and mining customers in

Northern Manitoba and Northwest Territories.

4
8

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

•

Price fluctuations between crude oil types can create incremental margin opportunities in multiple areas of the Company’s

operations. While current price differentials have compressed in response to the recent decline in benchmark crude oil prices,

the Company remains attentive to opportunities as this trend continues to evolve;

The growing supply of propane related to higher liquids rich natural gas development has resulted in declining propane prices

in Western Canada. This may result in increased volumes and potential margin improvement related to our Propane and NGL

Marketing and Distribution segment;

The recent reduction in the value of the Canadian dollar relative to the U.S. dollar highlights added foreign currency volatility

which could result in both positive and negative impacts for the Company. A weakening Canadian dollar should result in

increased profit contributions from the Company’s U.S. business. In addition, it would result in increased revenues and cost

of sales for the Company’s Canadian operations that transact in U.S. dollars. Furthermore, a weakening Canadian dollar will

result in an increase in foreign exchange losses with respect to the Company’s U.S. dollar denominated debt, which are

partially offset by gains on foreign currency forward contracts and options;

Over the medium to long-term the Company expects new technology for drilling and well completion methodology to be

deployed towards conventional and unconventional production within the Company’s operating areas; and

Over the medium to long-term the Company expects increased oil and natural gas production in North America should also

mean a significant increase in produced water and other oilfield waste. This increase in oilfield waste, together with increased

regulatory scrutiny, should increase demand for the Company’s Environmental Services solutions.

The Company believes the collective impact of these trends and developments, many of which are beyond the Company’s

control, will result in an increasingly volatile crude oil market that is subject to more frequent short-term swings in market prices

and grade differentials and shifts in market structure. Over the short-term, the Company anticipates that lower crude oil prices

may create a challenging environment for some of the Company’s services however over the medium to long-term the Company

feels demand for its services should remain strong.

Capital expenditures

The following table summarizes growth capital and upgrade and replacement capital (in thousands):

Growth capital.............................................................................................................................. $ 352,487

$ 177,443

Upgrade and replacement capital .................................................................................................

59,035

69,513

Year ended December 31,

2014

2013

$ 411,522

$ 246,956

Total expenditures for growth capital and upgrade and replacement capital were $411.5 million and $247.0 million in the year

ended December 31, 2014 and 2013, respectively. In the year ended December 31, 2014 and 2013, $391.2 million and

$238.5 million, respectively, were included as additions to property, plant and equipment and $20.3 million and $8.5 million,

respectively, were included as additions to intangible assets.

Growth capital

The following table summarizes the Company’s growth capital by segment (in thousands):

Terminals and Pipelines(1) ..........................................................................................................
Environmental Services (2) .........................................................................................................
Truck Transportation(3) ..............................................................................................................
Propane and NGL Marketing and Distribution (4) ......................................................................
Processing and Wellsite Fluids(5) ...............................................................................................
Other(6) .......................................................................................................................................
Total...........................................................................................................................................

Year ended December 31,

2014

2013
$ 220,916 $ 101,300
46,649
19,156
6,807
2,528
1,003
$ 352,487 $ 177,443

68,430
22,164
12,131
13,979
14,867

(1) Expenditures in the year ended December 31, 2014 relate to a number of construction and expansion projects including the
construction of additional tanks and related infrastructure at the Hardisty and Edmonton Terminals and the related
infrastructure to connect the unit rail facility to the Hardisty Terminal.

(2) Expenditures in the year ended December 31, 2014 relate to the expansion of existing and construction of new emulsion and
waste treatment and salt water disposal facilities in both Canada and the United States and also the addition of equipment
and rolling stock.

(3) Largely represents the purchase of land in the Edmonton area and the initial costs for constructing a new office and

maintenance facility.

(4) Mainly represents the addition of trucks, tanks and generators to meet growing demand in key market areas and the

expansion of rail infrastructure at a Company facility.

(5) Expenditures in the year ended December 31, 2014 largely relates to increasing throughput capacity and rail capabilities at

the facility in Moose Jaw.

(6) Mainly includes the purchase of land in Strathcona County in Alberta’s Industrial Heartland as well as equipment and

software related to information and operational systems.

Upgrade and replacement capital

Upgrade and replacement capital includes improvement projects that extend the physical life of an asset, while replacement
capital includes purchases that replace existing assets as necessary to maintain current service levels or replace assets that no
longer have a useful economic life. Upgrade and replacement capital decreased by 15% to $59.0 million in the year ended
December 31, 2014 from $69.5 million in the year ended December 31, 2013. The decrease was mainly due to a reduction in the
replacement of rolling stock within the Truck Transportation segment.

Acquisitions

On August 1, 2014, the Company acquired all of the issued and outstanding common shares of Cal-Gas for cash consideration of
$96.4 million. Cal-Gas is one of the largest propane distributors in Western Canada with operations in British Columbia, Alberta,
Saskatchewan, Manitoba and Northwest Ontario. Cal-Gas has been in business for over 40 years, providing propane equipment,
service and delivery to the oil and gas, commercial, mining and residential sectors.

On April 1, 2014, the Company acquired all of the issued and outstanding common shares of Stittco for cash consideration of
$32.1 million. Stittco provides propane equipment, service and delivery to residential and commercial and mining customers in
Northern Manitoba and Northwest Territories.

5
9

Gibson Energy Inc.
TSX: GEI

Seasonality

2014 Year End Report

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

The Company believes that seasonality does not have a material impact on its combined operations and segments. However,
certain of the Company’s individual segments are impacted by seasonality. Generally, the Company’s second quarter results are
impacted by road bans and other restrictions which impact overall activity levels in the WCSB and the northern United States, and
therefore negatively impact the Company’s trucking, propane and wellsite fluids businesses in Canada and certain operations
within Environmental Services in Canada and the United States.

Within the Company’s Processing and Wellsite Fluids segment, certain products are impacted by seasonality. Canadian road
asphalt activity is affected by the impact of weather conditions on road construction. Refineries produce liquid asphalt year round,
but road asphalt demand peaks during the summer months when most of the road construction activity in Canada takes place. In
the off peak demand months for road asphalt, the demand for roofing flux continues. Demand for wellsite fluids is dependent on
overall well drilling activity, with drilling activity normally the busiest in the winter months. As a result, the Company’s
Processing and Wellsite Fluids segment’s sales of road asphalt peak in the summer and sales of wellsite fluids peak in the winter.

The Company’s Propane and NGL Marketing and Distribution segment is characterized by a high degree of seasonality driven by
the impact of weather on the need for heating and the amount of propane required to produce power for oil and gas related
applications. Therefore, volumes are low during the summer months relative to the winter months. Operating profits are also
considerably lower during the summer months. Most of the annual segment profit is earned from October to March each year.

Within the Company’s Environmental Services segment, certain services and geographical regions are impacted by seasonality
including the impact of weather and daylight hours. Due to exposure to weather, activity is generally the lowest in the winter
months and shorter daylight hours during the winter months also result in lower overall service activity.

SELECTED ANNUAL FINANCIAL MEASURES

Year ended December 31,

2014

2013

2012

Revenue .......................................................................................................
Net income .................................................................................................

$ 8,573,529
91,941

(in thousands except per share amounts)
$ 6,940,669
103,816

$ 4,913,029
116,186

Earnings per share
Basic ..........................................................................................................
Diluted .......................................................................................................

0.74
0.73

0.86
0.84

1.13
1.10

Dividends declared per common share ........................................................

1.20

1.10

1.01

Total assets ..................................................................................................
Total non-current liabilities .........................................................................

2014
$ 3,573,029
1,507,876

As at December 31,
2013
$ 3,049,382
1,058,582

2012
$ 2,796,525
947,374

6
10

SEGMENTED RESULTS OF OPERATIONS

The Company’s senior management evaluates segment performance based on a variety of measures depending on the particular

segment being evaluated, including profit, volumes, operating expenses, profit per barrel and upgrade and replacement capital

requirements. The Company defines segment profit as revenues less cost of sales (excluding depreciation and amortization

expense) and operating expenses. Revenues presented by segment in the table below include inter-segment revenue, as this is

considered more indicative of the level of each segment’s activity. Profit by segments excludes depreciation, amortization,

accretion, impairment charges, stock based compensation and corporate expenses, as senior management looks at each period’s

earnings before corporate expenses and non-cash items such as depreciation, amortization and stock based compensation, as one

of the Company’s important measures of segment performance.

The following is a discussion of the Company’s segmented results of operations for the year ended December 31, 2014 and 2013

and the following table sets forth revenue and profit by segment for those periods:

Year ended December 31,

2014

(in thousands)

2013

Segment revenue

Terminals and Pipelines ...............................................................................................................

$ 157,969

$ 132,144

Environmental Services .................................................................................................................

Truck Transportation .....................................................................................................................

Propane and NGL Marketing and Distribution .............................................................................

Processing and Wellsite Fluids ......................................................................................................

Marketing ......................................................................................................................................

431,153

557,735

1,352,741

667,793

7,005,045

Total segment revenue...................................................................................................................

10,172,436

325,059

532,490

1,151,206

611,097

5,580,040

8,332,036

Revenue—inter-segmental ............................................................................................................

Total revenue—external ................................................................................................................

(1,598,907)

(1,391,367)

8,573,529

6,940,669

Segment profit

Terminals and Pipelines ................................................................................................................

Environmental Services .................................................................................................................

Truck Transportation .....................................................................................................................

Propane and NGL Marketing and Distribution .............................................................................

Processing and Wellsite Fluids ......................................................................................................

Marketing ......................................................................................................................................

Total segment profit ......................................................................................................................

General and administrative ............................................................................................................

Depreciation and amortization ......................................................................................................

Stock based compensation .............................................................................................................

Debt extinguishment costs .............................................................................................................

Foreign exchange loss ...................................................................................................................

Net interest expense ......................................................................................................................

Gain on financial instruments relating to interest expense ............................................................

Income before income tax .............................................................................................................

Income tax provision .....................................................................................................................

Net income ....................................................................................................................................

116,524

100,273

83,178

70,271

51,675

65,180

487,101

37,385

209,925

13,977

31,519

66,766

127,529

35,588

95,613

83,094

83,674

62,277

48,720

83,004

456,382

34,664

184,057

8,271

38,209

15,725

52,987

(18,252)

140,721

36,905

91,941

$ 103,816

The exclusion of depreciation and amortization expense could be viewed as limiting the usefulness of segment profit as a

performance measure because it does not take into account in current periods the implied reduction in value of the Company’s

capital assets (such as rolling stock, tanks, pipelines, plant and equipment and disposal wells) caused by use, aging and wear and

tear. Repair and maintenance expenditures that do not extend the useful life, improve the efficiency or expand the operating

capacity of the asset are charged to operating expense as incurred.

The Company’s segment analysis involves an element of judgment relating to the allocations between segments. Inter-segment

sales, cost of sales and operating expenses are eliminated on consolidation. Transactions between segments and within segments

are valued at prevailing market rates. The Company believes that the estimates with respect to these allocations and rates are

reasonable.

Gibson Energy Inc.

TSX: GEI

Seasonality

The Company believes that seasonality does not have a material impact on its combined operations and segments. However,

certain of the Company’s individual segments are impacted by seasonality. Generally, the Company’s second quarter results are

impacted by road bans and other restrictions which impact overall activity levels in the WCSB and the northern United States, and

therefore negatively impact the Company’s trucking, propane and wellsite fluids businesses in Canada and certain operations

within Environmental Services in Canada and the United States.

Within the Company’s Processing and Wellsite Fluids segment, certain products are impacted by seasonality. Canadian road

asphalt activity is affected by the impact of weather conditions on road construction. Refineries produce liquid asphalt year round,

but road asphalt demand peaks during the summer months when most of the road construction activity in Canada takes place. In

the off peak demand months for road asphalt, the demand for roofing flux continues. Demand for wellsite fluids is dependent on

overall well drilling activity, with drilling activity normally the busiest in the winter months. As a result, the Company’s

Processing and Wellsite Fluids segment’s sales of road asphalt peak in the summer and sales of wellsite fluids peak in the winter.

The Company’s Propane and NGL Marketing and Distribution segment is characterized by a high degree of seasonality driven by

the impact of weather on the need for heating and the amount of propane required to produce power for oil and gas related

applications. Therefore, volumes are low during the summer months relative to the winter months. Operating profits are also

considerably lower during the summer months. Most of the annual segment profit is earned from October to March each year.

Within the Company’s Environmental Services segment, certain services and geographical regions are impacted by seasonality

including the impact of weather and daylight hours. Due to exposure to weather, activity is generally the lowest in the winter

months and shorter daylight hours during the winter months also result in lower overall service activity.

SELECTED ANNUAL FINANCIAL MEASURES

Year ended December 31,

2014

2013

2012

(in thousands except per share amounts)

Revenue .......................................................................................................

$ 8,573,529

$ 6,940,669

$ 4,913,029

Net income .................................................................................................

91,941

103,816

116,186

Earnings per share

Basic ..........................................................................................................

Diluted .......................................................................................................

0.74

0.73

0.86

0.84

1.13

1.10

Dividends declared per common share ........................................................

1.20

1.10

1.01

Total assets ..................................................................................................

$ 3,573,029

$ 3,049,382

$ 2,796,525

Total non-current liabilities .........................................................................

1,507,876

1,058,582

947,374

As at December 31,

2014

2013

2012

2014 Year End Report

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

SEGMENTED RESULTS OF OPERATIONS

The Company’s senior management evaluates segment performance based on a variety of measures depending on the particular
segment being evaluated, including profit, volumes, operating expenses, profit per barrel and upgrade and replacement capital
requirements. The Company defines segment profit as revenues less cost of sales (excluding depreciation and amortization
expense) and operating expenses. Revenues presented by segment in the table below include inter-segment revenue, as this is
considered more indicative of the level of each segment’s activity. Profit by segments excludes depreciation, amortization,
accretion, impairment charges, stock based compensation and corporate expenses, as senior management looks at each period’s
earnings before corporate expenses and non-cash items such as depreciation, amortization and stock based compensation, as one
of the Company’s important measures of segment performance.

The following is a discussion of the Company’s segmented results of operations for the year ended December 31, 2014 and 2013
and the following table sets forth revenue and profit by segment for those periods:

Segment revenue
Terminals and Pipelines ...............................................................................................................
Environmental Services .................................................................................................................
Truck Transportation .....................................................................................................................
Propane and NGL Marketing and Distribution .............................................................................
Processing and Wellsite Fluids ......................................................................................................
Marketing ......................................................................................................................................
Total segment revenue...................................................................................................................
Revenue—inter-segmental ............................................................................................................
Total revenue—external ................................................................................................................
Segment profit
Terminals and Pipelines ................................................................................................................
Environmental Services .................................................................................................................
Truck Transportation .....................................................................................................................
Propane and NGL Marketing and Distribution .............................................................................
Processing and Wellsite Fluids ......................................................................................................
Marketing ......................................................................................................................................
Total segment profit ......................................................................................................................
General and administrative ............................................................................................................
Depreciation and amortization ......................................................................................................
Stock based compensation .............................................................................................................
Debt extinguishment costs .............................................................................................................
Foreign exchange loss ...................................................................................................................
Net interest expense ......................................................................................................................
Gain on financial instruments relating to interest expense ............................................................
Income before income tax .............................................................................................................
Income tax provision .....................................................................................................................
Net income ....................................................................................................................................

Year ended December 31,

2014
(in thousands)

2013

$ 157,969
431,153
557,735
1,352,741
667,793
7,005,045
10,172,436
(1,598,907)
8,573,529

$ 132,144
325,059
532,490
1,151,206
611,097
5,580,040
8,332,036
(1,391,367)
6,940,669

116,524
100,273
83,178
70,271
51,675
65,180
487,101
37,385
209,925
13,977
-
31,519
66,766
-
127,529
35,588
91,941

95,613
83,094
83,674
62,277
48,720
83,004
456,382
34,664
184,057
8,271
38,209
15,725
52,987
(18,252)
140,721
36,905
$ 103,816

The exclusion of depreciation and amortization expense could be viewed as limiting the usefulness of segment profit as a
performance measure because it does not take into account in current periods the implied reduction in value of the Company’s
capital assets (such as rolling stock, tanks, pipelines, plant and equipment and disposal wells) caused by use, aging and wear and
tear. Repair and maintenance expenditures that do not extend the useful life, improve the efficiency or expand the operating
capacity of the asset are charged to operating expense as incurred.

The Company’s segment analysis involves an element of judgment relating to the allocations between segments. Inter-segment
sales, cost of sales and operating expenses are eliminated on consolidation. Transactions between segments and within segments
are valued at prevailing market rates. The Company believes that the estimates with respect to these allocations and rates are
reasonable.

7
11

Gibson Energy Inc.
TSX: GEI

Terminals and Pipelines

2014 Year End Report

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

The following tables set forth the operating results from the Company’s Terminals and Pipelines segment:

The following tables set forth operating results from the Company’s Environmental Services segment:

Volumes (barrels in thousands)
Terminals

Year ended December 31,

2014

2013

Hardisty Terminal ......................................................................................................................
Edmonton Terminal ...................................................................................................................
Injection stations ........................................................................................................................
Total terminals...............................................................................................................................

184,519
16,822
47,154
248,495

144,940
17,161
46,582
208,683

Year ended December 31,

2014
(in thousands)

2013

Revenues .......................................................................................................................................
Operating expenses and other ........................................................................................................
Segment profit ...............................................................................................................................

$ 157,969
41,445
$ 116,524

$ 132,144
36,531
95,613

Volumes, revenues and cost of sales. Hardisty Terminal volumes increased by 27% in the year ended December 31, 2014
compared to the year ended December 31, 2013, as a result of increased throughput volumes from customers with dedicated tank
usage and increased volumes from the Company’s crude oil train rail loading facility which commenced operations in June 2014.
Revenue at the Hardisty Terminal increased by $23.3 million in the year ended December 31, 2014 compared to the year ended
December 31, 2013. The increase in revenue was mainly due to the increase in volume and the additional revenue from customers
with dedicated tank usage that are subject to minimum volume charges, and in particular, due to the impact of two new tanks at
the east side of the Hardisty Terminal that were commissioned in October 2014. Revenue also increased due to the
commencement of operations at the crude oil train rail loading facility in June 2014.

Edmonton Terminal volumes decreased by 2% in the year ended December 31, 2014 compared to the year ended December 31,
2013 mainly due to various tanks being taken out of service to facilitate the expansion of the facility, offset in part by the increase
in diesel receipt volumes from a major customer. Although volumes at the Edmonton Terminal decreased, revenues increased by
$1.9 million in the year ended December 31, 2014 compared to the year ended December 31, 2013 as a result of the impact of
minimum volume charges and an increase in fixed fee arrangements.

Injection station volumes increased by 1% in the year ended December 31, 2014 compared to the year ended December 31, 2013
due to an increase in activity with a major customer in the fourth quarter of 2014. As a result of increased volumes and the impact
of foreign exchange rates on translating revenue denominated in U.S dollars, revenue increased by $0.1 million in the year ended
December 31, 2014 compared to the year ended December 31, 2013.

Operating expenses and other. Overall operating expenses increased by $4.9 million, or 13%, in the year ended December 31,
2014 compared to the year ended December 31, 2013. The increase was largely related to the increase in operating costs due to
the expansion of the Hardisty Terminal and costs incurred related to the crude oil train rail loading facility that was commissioned
in June 2014.

Segment profit. Overall, segment profit in the year ended December 31, 2014 increased by $20.9 million, or 22%, compared to the
year ended December 31, 2013. The increase was primarily due to an overall increase in volumes, the impact of additional
customers with dedicated tank usage that are subject to minimum volume charges, and the commencement of operations for the
crude oil train rail loading facility, offset in part by an increase in operating costs.

8
12

Environmental Services

Year ended December 31,

2014

(in thousands)

2013

Revenues

Environmental services and fluid handling ...............................................................................

$ 312,806

$ 214,595

Production services....................................................................................................................

Other services ............................................................................................................................

Total revenues ...............................................................................................................................

Cost of sales ..................................................................................................................................

Operating expenses and other ........................................................................................................

66,344

52,003

431,153

256,990

73,890

68,713

41,751

325,059

183,133

58,832

Segment profit ...............................................................................................................................

$ 100,273

83,094

Revenues and cost of sales. Environmental services and fluid handling revenues increased by 46% in the year ended December

31, 2014 compared to the year ended December 31, 2013. The increase was primarily driven by an increase in the fluid disposal

business in the United States and the impact of an increase in volumes processed at the Canadian envir onmental processing

facilities. Further, the increase was also due to the favorable impact of the change in foreign exchange rates on translating revenue

denominated in U.S. dollars from the Company’s United States operations.

Production services revenue decreased by 3% in the year ended December 31, 2014 as compared to the year ended December 31,

2013. The decrease was primarily due to the impact of lower overall activity, pricing pressure related to additional competition

and weather conditions which negatively impacted the first and third quarters of 2014 in the United States. The decrease was

offset by the favorable impact of the change in foreign exchange rates on translating revenue denominated in U.S. dollars from

the Company’s United States operations.

Other services revenue increased by 25% in the year ended December 31, 2014 as compared to the year ended December 31,

2013 primarily due to an increase in exploration support services revenue resulting from increased seismic activity in the United

States, partially offset by lower accommodations revenue due to the impact of additional competition in the Bakken region.

Further, the increase was also due to the favorable impact of the change in foreign exchange rates on translating revenue

denominated in U.S. dollars from the segment’s U.S. operations.

Cost of sales increased by 40% in the year ended December 31, 2014 as compared to the year ended December 31, 2013, as a

result of increased activity and also due to the unfavorable impact of translating costs of sales denominated in U.S. dollars.

Operating expenses and other. Operating costs increased by $15.1 million in the year ended December 31, 2014 as compared to

the year ended December 31, 2013, mainly due to increased payroll related costs and also due to the unfavorable impact of

translating operating costs denominated in U.S. dollars.

Segment profit. Segment profit increased by $17.2 million in the year ended December 31, 2014 as compared to the year ended

December 31, 2013, largely as a result of the impact of improved margins in the environmental services and fluid handling

operations.

The following tables set forth the operating results from the Company’s Terminals and Pipelines segment:

The following tables set forth operating results from the Company’s Environmental Services segment:

Environmental Services

2014 Year End Report

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

Year ended December 31,

2014
(in thousands)

2013

Revenues

Environmental services and fluid handling ...............................................................................
Production services....................................................................................................................
Other services ............................................................................................................................
Total revenues ...............................................................................................................................
Cost of sales ..................................................................................................................................
Operating expenses and other ........................................................................................................
Segment profit ...............................................................................................................................

$ 312,806
66,344
52,003
431,153
256,990
73,890
$ 100,273

$ 214,595
68,713
41,751
325,059
183,133
58,832
83,094

Revenues and cost of sales. Environmental services and fluid handling revenues increased by 46% in the year ended December
31, 2014 compared to the year ended December 31, 2013. The increase was primarily driven by an increase in the fluid disposal
business in the United States and the impact of an increase in volumes processed at the Canadian envir onmental processing
facilities. Further, the increase was also due to the favorable impact of the change in foreign exchange rates on translating revenue
denominated in U.S. dollars from the Company’s United States operations.

Production services revenue decreased by 3% in the year ended December 31, 2014 as compared to the year ended December 31,
2013. The decrease was primarily due to the impact of lower overall activity, pricing pressure related to additional competition
and weather conditions which negatively impacted the first and third quarters of 2014 in the United States. The decrease was
offset by the favorable impact of the change in foreign exchange rates on translating revenue denominated in U.S. dollars from
the Company’s United States operations.

Other services revenue increased by 25% in the year ended December 31, 2014 as compared to the year ended December 31,
2013 primarily due to an increase in exploration support services revenue resulting from increased seismic activity in the United
States, partially offset by lower accommodations revenue due to the impact of additional competition in the Bakken region.
Further, the increase was also due to the favorable impact of the change in foreign exchange rates on translating revenue
denominated in U.S. dollars from the segment’s U.S. operations.

Cost of sales increased by 40% in the year ended December 31, 2014 as compared to the year ended December 31, 2013, as a
result of increased activity and also due to the unfavorable impact of translating costs of sales denominated in U.S. dollars.

Operating expenses and other. Operating costs increased by $15.1 million in the year ended December 31, 2014 as compared to
the year ended December 31, 2013, mainly due to increased payroll related costs and also due to the unfavorable impact of
translating operating costs denominated in U.S. dollars.

Segment profit. Segment profit increased by $17.2 million in the year ended December 31, 2014 as compared to the year ended
December 31, 2013, largely as a result of the impact of improved margins in the environmental services and fluid handling
operations.

Gibson Energy Inc.

TSX: GEI

Terminals and Pipelines

Volumes (barrels in thousands)

Terminals

Hardisty Terminal ......................................................................................................................

Edmonton Terminal ...................................................................................................................

Injection stations ........................................................................................................................

Total terminals...............................................................................................................................

184,519

16,822

47,154

248,495

144,940

17,161

46,582

208,683

Year ended December 31,

2014

2013

Year ended December 31,

2014

(in thousands)

2013

Revenues .......................................................................................................................................

$ 157,969

$ 132,144

Operating expenses and other ........................................................................................................

Segment profit ...............................................................................................................................

41,445

36,531

$ 116,524

95,613

Volumes, revenues and cost of sales. Hardisty Terminal volumes increased by 27% in the year ended December 31, 2014

compared to the year ended December 31, 2013, as a result of increased throughput volumes from customers with dedicated tank

usage and increased volumes from the Company’s crude oil train rail loading facility which commenced operations in June 2014.

Revenue at the Hardisty Terminal increased by $23.3 million in the year ended December 31, 2014 compared to the year ended

December 31, 2013. The increase in revenue was mainly due to the increase in volume and the additional revenue from customers

with dedicated tank usage that are subject to minimum volume charges, and in particular, due to the impact of two new tanks at

the east side of the Hardisty Terminal that were commissioned in October 2014. Revenue also increased due to the

commencement of operations at the crude oil train rail loading facility in June 2014.

Edmonton Terminal volumes decreased by 2% in the year ended December 31, 2014 compared to the year ended December 31,

2013 mainly due to various tanks being taken out of service to facilitate the expansion of the facility, offset in part by the increase

in diesel receipt volumes from a major customer. Although volumes at the Edmonton Terminal decreased, revenues increased by

$1.9 million in the year ended December 31, 2014 compared to the year ended December 31, 2013 as a result of the impact of

minimum volume charges and an increase in fixed fee arrangements.

Injection station volumes increased by 1% in the year ended December 31, 2014 compared to the year ended December 31, 2013

due to an increase in activity with a major customer in the fourth quarter of 2014. As a result of increased volumes and the impact

of foreign exchange rates on translating revenue denominated in U.S dollars, revenue increased by $0.1 million in the year ended

December 31, 2014 compared to the year ended December 31, 2013.

Operating expenses and other. Overall operating expenses increased by $4.9 million, or 13%, in the year ended December 31,

2014 compared to the year ended December 31, 2013. The increase was largely related to the increase in operating costs due to

the expansion of the Hardisty Terminal and costs incurred related to the crude oil train rail loading facility that was commissioned

in June 2014.

Segment profit. Overall, segment profit in the year ended December 31, 2014 increased by $20.9 million, or 22%, compared to the

year ended December 31, 2013. The increase was primarily due to an overall increase in volumes, the impact of additional

customers with dedicated tank usage that are subject to minimum volume charges, and the commencement of operations for the

crude oil train rail loading facility, offset in part by an increase in operating costs.

9
13

Gibson Energy Inc.
TSX: GEI

Truck Transportation

2014 Year End Report

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

The following tables set forth the operating results from the Company’s Truck Transportation segment:

The following tables set forth operating results from the Company’s Propane and NGL Marketing and Distribution segment:

Volumes (barrels in thousands)

Year ended December 31,

2014

2013

Volumes

Barrels hauled ..................................................................................................................................

131,998

144,340

Sales volumes—Industrial (litres in thousands)

Revenues .........................................................................................................................................
Cost of sales ....................................................................................................................................

Operating expenses and other ..........................................................................................................
Segment profit .................................................................................................................................

Year ended December 31,

2014
(in thousands)

2013

$ 557,735
376,685
181,050
97,872
83,178

$ 532,490
352,728
179,762
96,088
83,674

Volumes, revenues and cost of sales. For the year ended December 31, 2014, barrels hauled decreased by 9% compared to the
year ended December 31, 2013. The decrease was mainly due to the impact of adverse weather conditions in both Canada and the
United States that limited the Company’s ability to haul in certain regions on a short-term basis and also a decline in overall
volumes hauled of sulphur and petroleum coke particularly in the first quarter of 2014.

Despite the decrease in volumes, revenues increased 5% in the year ended December 31, 2014 as compared to the year ended
December 31, 2013. The impact of decreased volumes was offset by increased rates for spot hauling activities due to more long
haul opportunities, increased service related charges, and also the favorable foreign exchange impact of translating revenue
denominated in U.S. dollars from the Company’s United States operations.

Cost of sales is primarily comprised of payments to owner-operators and lease operators. Cost of sales increased by 7% in the
year ended December 31, 2014 compared to the year ended December 31, 2013 due to the overall increase in revenues and an
increase in service related activities from Canadian operations.

Operating expenses and other. Overall operating expenses increased by $1.8 million, or 2%, in the year ended December 31,
2014 compared to the year ended December 31, 2013, mainly due to the unfavorable impact of translating operating costs
denominated in U.S. dollars partially offset by the impact of a gain of $1.5 million on sale of certain property, plant and
equipment.

Segment profit. Segment profit decreased by $0.5 million, or 1%, in the year ended December 31, 2014 compared to the year
ended December 31, 2013, primarily due to the impact of lower margins, offset in part by lower operating costs.

Propane and NGL Marketing and Distribution

Year ended December 31,

2014

2013

250,173

126,448

20,786

39,292

34,899

471,598

207,449

89,960

21,108

22,824

21,627

362,968

2,986

3,864

3,220

10,070

2,046

1,980

4,332

8,358

Year ended December 31,

2014

(in thousands)

2013

29,721

278,497

228,771

845,473

1,074,244

1,352,741

1,206,361

76,109

23,855

193,999

235,828

721,379

957,207

1,151,206

1,028,479

60,450

Oil and gas .................................................................................................................................

Commercial ...............................................................................................................................

Automotive ................................................................................................................................

Residential .................................................................................................................................

Other ..........................................................................................................................................

Sales volumes—wholesale (barrels in thousands)

Propane ......................................................................................................................................

3,129

4,656

Other NGLs

Butane .....................................................................................................................................

Condensate .............................................................................................................................

U.S. division ...........................................................................................................................

Revenues

Industrial

Wholesale

Propane...................................................................................................................................

$ 248,776

$ 170,144

Other ......................................................................................................................................

Total industrial ...........................................................................................................................

Propane...................................................................................................................................

Other NGLs ............................................................................................................................

Total wholesale ..........................................................................................................................

Total revenues ...............................................................................................................................

Cost of sales ..................................................................................................................................

Operating expenses and other ........................................................................................................

Segment profit ...............................................................................................................................

70,271

62,277

Volumes, revenues and cost of sales. Industrial volumes increased by 30% in the year ended December 31, 2014 compared to the

year ended December 31, 2013, largely due to the increased volumes in the oil and gas, commercial, and residential markets as a

result of the Cal-Gas and Stittco acquisitions completed during 2014.

Industrial propane revenues increased 46% in the year ended December 31, 2014 as compared to the year ended December 31,

2013, as a result of higher sales volumes and overall rack prices. Other industrial revenue relates to equipment sales, service

labour and rental and delivery charges. Other industrial revenue increased by 25% in the year ended December 31, 2014

compared to the year ended December 31, 2013, largely due to the Company’s investment in related equipment and the impact of

the Cal-Gas and Stittco acquisitions.

Wholesale propane volumes decreased by 33% in the year ended December 31, 2014 compared to the year ended December 31,

2013. The decrease in volumes was largely driven by the impact of lower propane demand by certain customers. Wholesale

propane revenues decreased by 3% in the year ended December 31, 2014 compared to the year ended December 31, 2013 due to

lower propane volumes, offset in part by higher overall propane wholesale prices.

Other NGLs volumes increased by 20% in the year ended December 31, 2014 as compared to the year ended December 31, 2013,

primarily as a result of higher demand from internal and external customers. As a result of the increase in volumes, other NGLs

revenues increased by 17% in the year ended December 31, 2014 as compared to the year ended December 31, 2013.

10
14

Gibson Energy Inc.

TSX: GEI

Truck Transportation

Volumes (barrels in thousands)

Barrels hauled ..................................................................................................................................

131,998

144,340

Revenues .........................................................................................................................................

$ 557,735

$ 532,490

Cost of sales ....................................................................................................................................

Operating expenses and other ..........................................................................................................

Segment profit .................................................................................................................................

83,178

83,674

Volumes, revenues and cost of sales. For the year ended December 31, 2014, barrels hauled decreased by 9% compared to the

year ended December 31, 2013. The decrease was mainly due to the impact of adverse weather conditions in both Canada and the

United States that limited the Company’s ability to haul in certain regions on a short-term basis and also a decline in overall

volumes hauled of sulphur and petroleum coke particularly in the first quarter of 2014.

Despite the decrease in volumes, revenues increased 5% in the year ended December 31, 2014 as compared to the year ended

December 31, 2013. The impact of decreased volumes was offset by increased rates for spot hauling activities due to more long

haul opportunities, increased service related charges, and also the favorable foreign exchange impact of translating revenue

denominated in U.S. dollars from the Company’s United States operations.

Cost of sales is primarily comprised of payments to owner-operators and lease operators. Cost of sales increased by 7% in the

year ended December 31, 2014 compared to the year ended December 31, 2013 due to the overall increase in revenues and an

increase in service related activities from Canadian operations.

Operating expenses and other. Overall operating expenses increased by $1.8 million, or 2%, in the year ended December 31,

2014 compared to the year ended December 31, 2013, mainly due to the unfavorable impact of translating operating costs

denominated in U.S. dollars partially offset by the impact of a gain of $1.5 million on sale of certain property, plant and

equipment.

Segment profit. Segment profit decreased by $0.5 million, or 1%, in the year ended December 31, 2014 compared to the year

ended December 31, 2013, primarily due to the impact of lower margins, offset in part by lower operating costs.

The following tables set forth the operating results from the Company’s Truck Transportation segment:

The following tables set forth operating results from the Company’s Propane and NGL Marketing and Distribution segment:

Propane and NGL Marketing and Distribution

2014 Year End Report

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

Year ended December 31,

2014

2013

Year ended December 31,

2014

(in thousands)

2013

376,685

181,050

97,872

352,728

179,762

96,088

Volumes
Sales volumes—Industrial (litres in thousands)

Oil and gas .................................................................................................................................
Commercial ...............................................................................................................................
Automotive ................................................................................................................................
Residential .................................................................................................................................
Other ..........................................................................................................................................

Year ended December 31,

2014

2013

250,173
126,448
20,786
39,292
34,899
471,598

207,449
89,960
21,108
22,824
21,627
362,968

Sales volumes—wholesale (barrels in thousands)

Propane ......................................................................................................................................

3,129

4,656

Other NGLs

Butane .....................................................................................................................................
Condensate .............................................................................................................................
U.S. division ...........................................................................................................................

Revenues

Industrial

2,986
3,864
3,220
10,070

2,046
1,980
4,332
8,358

Year ended December 31,

2014
(in thousands)

2013

Propane...................................................................................................................................
Other ......................................................................................................................................
Total industrial ...........................................................................................................................
Wholesale

Propane...................................................................................................................................
Other NGLs ............................................................................................................................
Total wholesale ..........................................................................................................................
Total revenues ...............................................................................................................................
Cost of sales ..................................................................................................................................
Operating expenses and other ........................................................................................................
Segment profit ...............................................................................................................................

$ 248,776
29,721
278,497

$ 170,144
23,855
193,999

228,771
845,473
1,074,244
1,352,741
1,206,361
76,109
70,271

235,828
721,379
957,207
1,151,206
1,028,479
60,450
62,277

Volumes, revenues and cost of sales. Industrial volumes increased by 30% in the year ended December 31, 2014 compared to the
year ended December 31, 2013, largely due to the increased volumes in the oil and gas, commercial, and residential markets as a
result of the Cal-Gas and Stittco acquisitions completed during 2014.

Industrial propane revenues increased 46% in the year ended December 31, 2014 as compared to the year ended December 31,
2013, as a result of higher sales volumes and overall rack prices. Other industrial revenue relates to equipment sales, service
labour and rental and delivery charges. Other industrial revenue increased by 25% in the year ended December 31, 2014
compared to the year ended December 31, 2013, largely due to the Company’s investment in related equipment and the impact of
the Cal-Gas and Stittco acquisitions.

Wholesale propane volumes decreased by 33% in the year ended December 31, 2014 compared to the year ended December 31,
2013. The decrease in volumes was largely driven by the impact of lower propane demand by certain customers. Wholesale
propane revenues decreased by 3% in the year ended December 31, 2014 compared to the year ended December 31, 2013 due to
lower propane volumes, offset in part by higher overall propane wholesale prices.

Other NGLs volumes increased by 20% in the year ended December 31, 2014 as compared to the year ended December 31, 2013,
primarily as a result of higher demand from internal and external customers. As a result of the increase in volumes, other NGLs
revenues increased by 17% in the year ended December 31, 2014 as compared to the year ended December 31, 2013.

11
15

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

Cost of sales increased 17% in the year ended December 31, 2014 compared to the year ended December 31, 2013 primarily due
to the increases in both industrial and wholesale business. The increase in industrial cost of sales was due to the impact of the
acquisitions of Cal-Gas and Stittco completed during 2014. The increase in wholesale cost of sales was largely in line with
increased revenue.

Operating expenses and other. Overall operating expenses increased by $15.7 million, or 26%, in the year ended December 31,
2014 compared to the year ended December 31, 2013, primarily due to the impact of the Cal-Gas and Stittco acquisitions.

Segment profit. The Propane and NGL Marketing and Distribution segment profit increased in the year ended December 31, 2014
by $8.0 million, or 13%, compared to the year ended December 31, 2013 as a result of the increase in industrial and wholesale
propane segment profit partially offset by lower wholesale other NGLs segment profit. Increased industrial segment profit was
mainly due to the higher volumes as a result of the acquisitions of Cal-gas and Stittco acquisitions completed during 2014. Higher
wholesale propane segment profit was positively impacted by the increase in overall higher wholesale propane prices. Lower
other NGLs segment profit was primarily due to the impact of unfavorable pricing conditions.

Processing and Wellsite Fluids

The following tables set forth operating results from the Company’s Processing and Wellsite Fluids segment:

Volumes (barrels in thousands)
Roofing flux ..................................................................................................................................
Road asphalt ..................................................................................................................................
Frac oils (Gibson Clear and light straight run distillate) ...............................................................
Distillate (D822) ............................................................................................................................
Tops ...............................................................................................................................................
Other ..............................................................................................................................................
Total sales volumes .......................................................................................................................

2014
1,830
470
539
754
2,117
222
5,932

2013
2,076
186
466
835
1,909
152
5,624

Year ended December 31,

2014
(in thousands)

2013

Revenues

Road asphalt and roofing flux ...................................................................................................
Frac oils (Gibson Clear and light straight run distillate) ...........................................................
Distillate (D822) ........................................................................................................................
Tops ...........................................................................................................................................
Other ..........................................................................................................................................
Total revenues ...............................................................................................................................
Cost of sales ..................................................................................................................................
Operating expenses and other ........................................................................................................
Segment profit ...............................................................................................................................

247,423
77,897
110,914
192,512
39,047
667,793
594,331
21,787
51,675

234,887
59,353
118,632
174,071
24,154
611,097
540,182
22,195
48,720

Volumes, revenues and cost of sales. Sales volumes for road asphalt increased by 153% in the year ended December 31, 2014
compared to the year ended December 31, 2013 mainly due to an increase in demand from customers as a result of increased
paving activities. Sales volumes for roofing flux decreased by 12% in the year ended December 31, 2014 compared to the year
ended December 31, 2013 due to an increase in the amount of asphalt being sold as road asphalt. Road asphalt and roofing flux
revenue increased by 5% in the year ended December 31, 2014 compared to year ended December 31, 2013 mainly due to the
impact of higher road asphalt volumes.

Frac oils volumes increased 16% in the year ended December 31, 2014 compared to the year ended December 31, 2013 largely
due to an overall increase in customer demand. Frac oils revenues increased by 31% in the year ended December 31, 2014
compared to the year ended December 31, 2013 primarily due to higher overall selling prices and higher sales volumes.

Sales volumes for distillate decreased 10% in the year ended December 31, 2014 compared to the year ended December 31, 2013
due to more volumes being sold as frac oils and due to lower customer demand in the United States, particularly in the fourth
quarter of 2014. As a result of lower volumes, distillate revenues decreased by 7% in the year ended December 31, 2014,
compared to the year ended December 31, 2013.

Tops volumes increased 11% in the year ended December 31, 2014 as compared to the year ended December 31, 2013 due to an

increase in customer demand. As a result, tops revenues increased by 11% in the year ended December 31, 2014 compared to the

year ended December 31, 2013.

Other volumes include the sale of the Company’s oil based mud product (“OBM”) and solvents. Other volumes increased by 46%

in the year ended December 31, 2014 as compared to the year ended December 31, 2013, largely driven by increased demand for

the Company’s OBM product. Other revenue increased by 62% in the year ended December 31, 2014 as compared to the year

ended December 31, 2013 largely due to the increase in volumes.

The overall cost per barrel for the suite of products sold by the Processing and Wellsite Fluids segment increased by 4% due to

the increase in crude oil costs driven by tighter differentials and a negative foreign exchange impact on crude oil purchases

denominated in U.S. dollars, particularly in the fourth quarter of 2014.

Overall margins increased by $2.5 million, or 4%, in the year ended December 31, 2014 as compared to the year ended

December 31, 2013. The increase was largely due to increased margins for frac oils, distillate and other products, offset in part by

lower overall margins for roofing flux, road asphalt and tops.

Operating expenses and other. Operating expenses decreased by $0.4 million, or 2%, in the year ended December 31, 2014 as

compared to the year ended December 31, 2013. Operating expenses decreased mainly due to an increase in foreign exchange

gains on realizing U.S. dollar denominated and other revenue.

Segment profit. The Processing and Wellsite Fluids segment profit increased in the year ended December 31, 2014 by

$2.9 million, or 6%, as compared to the year ended December 31, 2013, primarily due to higher margins for frac oils, distillate

and other products and lower operating costs, partially offset by lower overall margins for roofing flux, asphalt, and tops.

The following tables set forth the operating results from the Company’s Marketing segment:

Marketing

Volumes (barrels in thousands)

Sales Volumes

Crude and diluent ......................................................................................................................

120,676

103,549

Year ended December 31,

2014

2013

Year ended December 31,

2014

(in thousands)

2013

Revenues ....................................................................................................................................... $ 7,005,045

$ 5,580,040

Cost of sales ..................................................................................................................................

6,931,758

Operating expenses and other ........................................................................................................

8,107

5,487,361

9,675

Segment profit ..............................................................................................................................

65,180

83,004

The following tables set forth the monthly average NYMEX benchmark price of West Texas Intermediate crude oil (U.S.$):

Calendar Period

January ..........................................................................................................................................

February ........................................................................................................................................

March ............................................................................................................................................

April ..............................................................................................................................................

May ...............................................................................................................................................

June ...............................................................................................................................................

July ................................................................................................................................................

August ...........................................................................................................................................

September .....................................................................................................................................

October .........................................................................................................................................

November .....................................................................................................................................

December .....................................................................................................................................

Average for the year ended December 31 .....................................................................................

2014

$ 94.86

100.68

100.51

102.03

101.79

105.15

102.39

96.08

93.03

84.34

75.81

59.29

92.99

2013

$ 94.83

95.32

92.96

92.07

94.80

93.80

104.67

106.57

106.24

100.55

93.93

97.89

97.80

12
16

Gibson Energy Inc.

TSX: GEI

increased revenue.

Operating expenses and other. Overall operating expenses increased by $15.7 million, or 26%, in the year ended December 31,

2014 compared to the year ended December 31, 2013, primarily due to the impact of the Cal-Gas and Stittco acquisitions.

Segment profit. The Propane and NGL Marketing and Distribution segment profit increased in the year ended December 31, 2014

by $8.0 million, or 13%, compared to the year ended December 31, 2013 as a result of the increase in industrial and wholesale

propane segment profit partially offset by lower wholesale other NGLs segment profit. Increased industrial segment profit was

mainly due to the higher volumes as a result of the acquisitions of Cal-gas and Stittco acquisitions completed during 2014. Higher

wholesale propane segment profit was positively impacted by the increase in overall higher wholesale propane prices. Lower

other NGLs segment profit was primarily due to the impact of unfavorable pricing conditions.

Processing and Wellsite Fluids

The following tables set forth operating results from the Company’s Processing and Wellsite Fluids segment:

Volumes (barrels in thousands)

Roofing flux ..................................................................................................................................

Road asphalt ..................................................................................................................................

Frac oils (Gibson Clear and light straight run distillate) ...............................................................

Distillate (D822) ............................................................................................................................

Tops ...............................................................................................................................................

Other ..............................................................................................................................................

Total sales volumes .......................................................................................................................

2014

1,830

470

539

754

2,117

222

5,932

2013

2,076

186

466

835

1,909

152

5,624

Year ended December 31,

2014

(in thousands)

2013

Revenues

Road asphalt and roofing flux ...................................................................................................

247,423

234,887

Frac oils (Gibson Clear and light straight run distillate) ...........................................................

Distillate (D822) ........................................................................................................................

Tops ...........................................................................................................................................

Other ..........................................................................................................................................

Total revenues ...............................................................................................................................

Cost of sales ..................................................................................................................................

Operating expenses and other ........................................................................................................

77,897

110,914

192,512

39,047

667,793

594,331

21,787

Segment profit ...............................................................................................................................

51,675

59,353

118,632

174,071

24,154

611,097

540,182

22,195

48,720

Volumes, revenues and cost of sales. Sales volumes for road asphalt increased by 153% in the year ended December 31, 2014

compared to the year ended December 31, 2013 mainly due to an increase in demand from customers as a result of increased

paving activities. Sales volumes for roofing flux decreased by 12% in the year ended December 31, 2014 compared to the year

ended December 31, 2013 due to an increase in the amount of asphalt being sold as road asphalt. Road asphalt and roofing flux

revenue increased by 5% in the year ended December 31, 2014 compared to year ended December 31, 2013 mainly due to the

impact of higher road asphalt volumes.

Frac oils volumes increased 16% in the year ended December 31, 2014 compared to the year ended December 31, 2013 largely

due to an overall increase in customer demand. Frac oils revenues increased by 31% in the year ended December 31, 2014

compared to the year ended December 31, 2013 primarily due to higher overall selling prices and higher sales volumes.

Sales volumes for distillate decreased 10% in the year ended December 31, 2014 compared to the year ended December 31, 2013

due to more volumes being sold as frac oils and due to lower customer demand in the United States, particularly in the fourth

quarter of 2014. As a result of lower volumes, distillate revenues decreased by 7% in the year ended December 31, 2014,

compared to the year ended December 31, 2013.

Cost of sales increased 17% in the year ended December 31, 2014 compared to the year ended December 31, 2013 primarily due

to the increases in both industrial and wholesale business. The increase in industrial cost of sales was due to the impact of the

acquisitions of Cal-Gas and Stittco completed during 2014. The increase in wholesale cost of sales was largely in line with

Tops volumes increased 11% in the year ended December 31, 2014 as compared to the year ended December 31, 2013 due to an
increase in customer demand. As a result, tops revenues increased by 11% in the year ended December 31, 2014 compared to the
year ended December 31, 2013.

2014 Year End Report

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

Other volumes include the sale of the Company’s oil based mud product (“OBM”) and solvents. Other volumes increased by 46%
in the year ended December 31, 2014 as compared to the year ended December 31, 2013, largely driven by increased demand for
the Company’s OBM product. Other revenue increased by 62% in the year ended December 31, 2014 as compared to the year
ended December 31, 2013 largely due to the increase in volumes.

The overall cost per barrel for the suite of products sold by the Processing and Wellsite Fluids segment increased by 4% due to
the increase in crude oil costs driven by tighter differentials and a negative foreign exchange impact on crude oil purchases
denominated in U.S. dollars, particularly in the fourth quarter of 2014.

Overall margins increased by $2.5 million, or 4%, in the year ended December 31, 2014 as compared to the year ended
December 31, 2013. The increase was largely due to increased margins for frac oils, distillate and other products, offset in part by
lower overall margins for roofing flux, road asphalt and tops.

Operating expenses and other. Operating expenses decreased by $0.4 million, or 2%, in the year ended December 31, 2014 as
compared to the year ended December 31, 2013. Operating expenses decreased mainly due to an increase in foreign exchange
gains on realizing U.S. dollar denominated and other revenue.

Segment profit. The Processing and Wellsite Fluids segment profit increased in the year ended December 31, 2014 by
$2.9 million, or 6%, as compared to the year ended December 31, 2013, primarily due to higher margins for frac oils, distillate
and other products and lower operating costs, partially offset by lower overall margins for roofing flux, asphalt, and tops.

Marketing

The following tables set forth the operating results from the Company’s Marketing segment:

Volumes (barrels in thousands)
Sales Volumes

Year ended December 31,

2014

2013

Crude and diluent ......................................................................................................................

120,676

103,549

Year ended December 31,

2014
(in thousands)

2013

Revenues ....................................................................................................................................... $ 7,005,045
6,931,758
Cost of sales ..................................................................................................................................
Operating expenses and other ........................................................................................................
8,107
Segment profit ..............................................................................................................................
65,180

$ 5,580,040
5,487,361
9,675
83,004

The following tables set forth the monthly average NYMEX benchmark price of West Texas Intermediate crude oil (U.S.$):

Calendar Period
January ..........................................................................................................................................
February ........................................................................................................................................
March ............................................................................................................................................
April ..............................................................................................................................................
May ...............................................................................................................................................
June ...............................................................................................................................................
July ................................................................................................................................................
August ...........................................................................................................................................
September .....................................................................................................................................
October .........................................................................................................................................
November .....................................................................................................................................
December .....................................................................................................................................
Average for the year ended December 31 .....................................................................................

2014
$ 94.86
100.68
100.51
102.03
101.79
105.15
102.39
96.08
93.03
84.34
75.81
59.29
92.99

2013
$ 94.83
95.32
92.96
92.07
94.80
93.80
104.67
106.57
106.24
100.55
93.93
97.89
97.80

13
17

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

Volumes, revenues and cost of sales. Sales volumes for crude and diluent increased by 17% in the year ended December 31, 2014,
due to a continued focus on bringing volumes to the Company’s integrated assets. Revenue increased by 26% in the year ended
December 31, 2014 compared to the year ended December 31, 2013, primarily due to higher volumes, higher crude oil prices in
the first half of the year and the impact of a tightening in crude oil differentials during the year.

Cost of sales increased by 26% in the year ended December 31, 2014 compared to the year ended December 31, 2013 mainly due
to the increase in revenue.

Operating expenses and other. Operating expenses decreased by $1.6 million, or 16%, in the year ended December 31, 2014
compared to the year ended December 31, 2013 primarily due to lower payroll related costs.

Segment profit. The Marketing segment profit decreased by $17.8 million, or 21%, in the year ended December 31, 2014 as
compared to the year ended December 31, 2013. In the year ended December 31, 2014, overall margins were positively impacted
by the increase in volumes, especially deliveries to the Company’s terminals, including crude oil shipped via rail at the
Company’s various rail loading facilities. However, lower margins were earned in the year ended December 31, 2014 compared
to the year ended December 31, 2013 which led to the overall decrease in segment profitability.

General and administrative, excluding depreciation and amortization

General and administrative expense (“G&A”) is comprised of costs incurred for executive services, accounting, finance, treasury,
legal, human resources, investor relations and communications that are incurred at a corporate level and are not related to a
specific segment. G&A expense was $37.4 million in the year ended December 31, 2014 compared to $34.7 million in the year
ended December 31, 2013. The increase was largely driven by the continued growth of the Company resulting in an increase in
payroll related costs.

Depreciation and amortization

Depreciation and amortization expense was $209.9 million in the year ended December 31, 2014 compared to $184.1 million in
the year ended December 31, 2013. The increase was largely due to the additional depreciation and amortization related to the
increase in the Company’s tangible assets resulting from the completion of capital projects and the completion of the Cal-Gas and
Stittco acquisitions during 2014.

Stock based compensation

Stock based compensation expense was $14.0 million in the year ended December 31, 2014 compared to $8.3 million in the year
ended December 31, 2013. The increase was primarily due to granting of additional annual stock awards in 2014 as a result of the
expansion of the equity incentive plan to include more employees.

Debt extinguishment costs

On June 28, 2013, upon the issuance of senior unsecured notes and the revolving credit facility, the Company repaid and
terminated its previous senior secured credit facility which was comprised of a Tranche B Term Loan facility of U.S.$650.0
million and a revolving credit facility of U.S.$375.0 million. Accordingly, the Company recorded debt extinguishment costs of
$38.2 million in the year ended December 31, 2013. No similar debt extinguishment costs were incurred in the year ended
December 31, 2014.

Foreign exchange loss (gain) not affecting segment profit

In the year ended December 31, 2014, the Company recorded a foreign exchange loss of $31.5 million compared to $15.7 million
in the year ended December 31, 2013.

The gains and losses recorded are primarily as a result of the impact of the movement in exchange rates on the Company’s U.S.
dollar denominated long-term debt and related financial instruments. In the year ended December 31, 2014, a loss of $52.0
million was recorded due to the unfavorable movement in exchange rates on the Company’s U.S. dollar denominated long-term
debt. This was partially offset by a gain of $16.6 million, related to the change in mark-to-market value of U.S. dollar forward
contracts and options used to mitigate the currency risk associated with the Company’s U.S. dollar denominated long-term debt.
In the year ended December 31, 2013, a loss of $42.5 million was recorded due to the unfavorable movement in exchange rates on
the Company’s U.S. dollar denominated long-term debt. This was partially offset by a gain of $22.5 million, related to the change
in mark-to-market value of U.S. dollar denominated forward contracts and options used to mitigate the currency risk associated
with the Company’s U.S. dollar denominated long-term debt.

Net interest expense

Net interest expense, excluding the non-cash movement in financial instruments relating to interest expense, was $66.8 million in

the year ended December 31, 2014 compared to $52.9 million in the year ended December 31, 2013. The increase was primarily

due to an increase in interest charges as a result of the increase in outstanding debt balance.

Financial instruments relating to interest expense

In the year ended December 31, 2013, the Company recorded a gain of $18.3 million relating to an embedded derivative on an

interest rate floor within the Company’s Tranche B Term Loan that was required to be separated from the carrying value of long-

term debt and was accounted for as a separate financial instrument that was measured at fair value at each balance sheet date.

Following the repayment of the Tranche B Term Loan on June 28, 2013, the Company no longer has an embedded derivative

relating to the interest rate floor.

Income tax expense

Income tax expense was $35.6 million in the year ended December 31, 2014 compared to $36.9 million in the year ended

December 31, 2013 with the decrease due to lower income before taxes in the current year. The effective tax rate was 27.9%

during the year ended December 31, 2014, compared to 26.2% in the year ended December 31, 2013, respectively. The main

reason for the increase in the effective rate was the increase in non-deductible net capital losses related to foreign exchange losses

on the Company’s long-term debt. The non-deductible net capital losses for the year ended December 31, 2014 were $9.4 million.

Fourth Quarter Results

Segment revenue

Three months ended December 31,

2014

(in thousands)

2013

Terminals and Pipelines ..............................................................................................................

44,087

Environmental Services ...............................................................................................................

Truck Transportation ...................................................................................................................

Propane and NGL Marketing and Distribution ...........................................................................

Processing and Wellsite Fluids ....................................................................................................

Marketing ....................................................................................................................................

Total segment revenue.................................................................................................................

Revenue – inter-segmental ..........................................................................................................

Total revenue – external .............................................................................................................

115,185

144,097

383,265

162,253

1,502,860

2,351,747

(375,282)

1,976,465

35,208

81,386

134,102

369,418

156,930

1,424,424

2,201,468

(285,430)

1,916,038

Total segment profit ....................................................................................................................

129,523

123,343

Segment profit

Terminals and Pipelines ..............................................................................................................

Environmental Services ...............................................................................................................

Truck Transportation ...................................................................................................................

Propane and NGL Marketing and Distribution ...........................................................................

Processing and Wellsite Fluids ....................................................................................................

Marketing ....................................................................................................................................

General and administrative ..........................................................................................................

Depreciation and amortization ....................................................................................................

Stock based compensation ...........................................................................................................

Foreign exchange loss .................................................................................................................

Net interest expense ....................................................................................................................

Income before income tax ...........................................................................................................

Income tax provision ...................................................................................................................

34,020

28,097

22,743

15,524

14,807

14,332

10,984

58,338

3,827

15,269

19,273

21,832

8,426

Net income .................................................................................................................................

13,406

25,065

22,564

22,165

23,204

13,612

16,733

9,310

52,002

2,258

15,056

14,662

30,055

9,331

20,724

14
18

Volumes, revenues and cost of sales. Sales volumes for crude and diluent increased by 17% in the year ended December 31, 2014,

due to a continued focus on bringing volumes to the Company’s integrated assets. Revenue increased by 26% in the year ended

December 31, 2014 compared to the year ended December 31, 2013, primarily due to higher volumes, higher crude oil prices in

the first half of the year and the impact of a tightening in crude oil differentials during the year.

Cost of sales increased by 26% in the year ended December 31, 2014 compared to the year ended December 31, 2013 mainly due

to the increase in revenue.

Operating expenses and other. Operating expenses decreased by $1.6 million, or 16%, in the year ended December 31, 2014

compared to the year ended December 31, 2013 primarily due to lower payroll related costs.

Segment profit. The Marketing segment profit decreased by $17.8 million, or 21%, in the year ended December 31, 2014 as

compared to the year ended December 31, 2013. In the year ended December 31, 2014, overall margins were positively impacted

by the increase in volumes, especially deliveries to the Company’s terminals, including crude oil shipped via rail at the

Company’s various rail loading facilities. However, lower margins were earned in the year ended December 31, 2014 compared

to the year ended December 31, 2013 which led to the overall decrease in segment profitability.

General and administrative, excluding depreciation and amortization

General and administrative expense (“G&A”) is comprised of costs incurred for executive services, accounting, finance, treasury,

legal, human resources, investor relations and communications that are incurred at a corporate level and are not related to a

specific segment. G&A expense was $37.4 million in the year ended December 31, 2014 compared to $34.7 million in the year

ended December 31, 2013. The increase was largely driven by the continued growth of the Company resulting in an increase in

Depreciation and amortization expense was $209.9 million in the year ended December 31, 2014 compared to $184.1 million in

the year ended December 31, 2013. The increase was largely due to the additional depreciation and amortization related to the

increase in the Company’s tangible assets resulting from the completion of capital projects and the completion of the Cal-Gas and

Stock based compensation expense was $14.0 million in the year ended December 31, 2014 compared to $8.3 million in the year

ended December 31, 2013. The increase was primarily due to granting of additional annual stock awards in 2014 as a result of the

expansion of the equity incentive plan to include more employees.

On June 28, 2013, upon the issuance of senior unsecured notes and the revolving credit facility, the Company repaid and

terminated its previous senior secured credit facility which was comprised of a Tranche B Term Loan facility of U.S.$650.0

million and a revolving credit facility of U.S.$375.0 million. Accordingly, the Company recorded debt extinguishment costs of

$38.2 million in the year ended December 31, 2013. No similar debt extinguishment costs were incurred in the year ended

December 31, 2014.

Foreign exchange loss (gain) not affecting segment profit

In the year ended December 31, 2014, the Company recorded a foreign exchange loss of $31.5 million compared to $15.7 million

in the year ended December 31, 2013.

The gains and losses recorded are primarily as a result of the impact of the movement in exchange rates on the Company’s U.S.

dollar denominated long-term debt and related financial instruments. In the year ended December 31, 2014, a loss of $52.0

million was recorded due to the unfavorable movement in exchange rates on the Company’s U.S. dollar denominated long-term

debt. This was partially offset by a gain of $16.6 million, related to the change in mark-to-market value of U.S. dollar forward

contracts and options used to mitigate the currency risk associated with the Company’s U.S. dollar denominated long-term debt.

In the year ended December 31, 2013, a loss of $42.5 million was recorded due to the unfavorable movement in exchange rates on

the Company’s U.S. dollar denominated long-term debt. This was partially offset by a gain of $22.5 million, related to the change

in mark-to-market value of U.S. dollar denominated forward contracts and options used to mitigate the currency risk associated

with the Company’s U.S. dollar denominated long-term debt.

payroll related costs.

Depreciation and amortization

Stittco acquisitions during 2014.

Stock based compensation

Debt extinguishment costs

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

Net interest expense

Net interest expense, excluding the non-cash movement in financial instruments relating to interest expense, was $66.8 million in
the year ended December 31, 2014 compared to $52.9 million in the year ended December 31, 2013. The increase was primarily
due to an increase in interest charges as a result of the increase in outstanding debt balance.

Financial instruments relating to interest expense

In the year ended December 31, 2013, the Company recorded a gain of $18.3 million relating to an embedded derivative on an
interest rate floor within the Company’s Tranche B Term Loan that was required to be separated from the carrying value of long-
term debt and was accounted for as a separate financial instrument that was measured at fair value at each balance sheet date.
Following the repayment of the Tranche B Term Loan on June 28, 2013, the Company no longer has an embedded derivative
relating to the interest rate floor.

Income tax expense

Income tax expense was $35.6 million in the year ended December 31, 2014 compared to $36.9 million in the year ended
December 31, 2013 with the decrease due to lower income before taxes in the current year. The effective tax rate was 27.9%
during the year ended December 31, 2014, compared to 26.2% in the year ended December 31, 2013, respectively. The main
reason for the increase in the effective rate was the increase in non-deductible net capital losses related to foreign exchange losses
on the Company’s long-term debt. The non-deductible net capital losses for the year ended December 31, 2014 were $9.4 million.

Fourth Quarter Results

Three months ended December 31,

2014
(in thousands)

2013

Segment revenue
Terminals and Pipelines ..............................................................................................................
Environmental Services ...............................................................................................................
Truck Transportation ...................................................................................................................
Propane and NGL Marketing and Distribution ...........................................................................
Processing and Wellsite Fluids ....................................................................................................
Marketing ....................................................................................................................................
Total segment revenue.................................................................................................................
Revenue – inter-segmental ..........................................................................................................
Total revenue – external .............................................................................................................
Segment profit
Terminals and Pipelines ..............................................................................................................
Environmental Services ...............................................................................................................
Truck Transportation ...................................................................................................................
Propane and NGL Marketing and Distribution ...........................................................................
Processing and Wellsite Fluids ....................................................................................................
Marketing ....................................................................................................................................
Total segment profit ....................................................................................................................
General and administrative ..........................................................................................................
Depreciation and amortization ....................................................................................................
Stock based compensation ...........................................................................................................
Foreign exchange loss .................................................................................................................
Net interest expense ....................................................................................................................
Income before income tax ...........................................................................................................
Income tax provision ...................................................................................................................
Net income .................................................................................................................................

15
19

44,087
115,185
144,097
383,265
162,253
1,502,860
2,351,747
(375,282)
1,976,465

35,208
81,386
134,102
369,418
156,930
1,424,424
2,201,468
(285,430)
1,916,038

34,020
28,097
22,743
15,524
14,807
14,332
129,523
10,984
58,338
3,827
15,269
19,273
21,832
8,426
13,406

25,065
22,564
22,165
23,204
13,612
16,733
123,343
9,310
52,002
2,258
15,056
14,662
30,055
9,331
20,724

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

Segment revenue increased by $60.4 million in the three months ended December 31, 2014 compared to the three months ended
December 31, 2013. Changes in segment revenue were as follows:

•
Terminals and Pipelines segment revenue for the three months ended December 31, 2014 increased by $8.9 million compared
to the three months ended December 31, 2013. The increase was largely due to an increase in revenue at the Hardisty
Terminal resulting from an increase in revenue from customers with dedicated tank usage that are subject to minimum
volumes and fixed fee arrangements, two additional large tanks coming into service and revenue from the commencement of
operations at the crude oil train rail loading facility;

•
Environmental Services segment revenue increased by $33.8 million in the three months ended December 31, 2014 as
compared to the year ended December 31, 2013 mainly due to increased volumes at the Company’s Canadian environmental
services facilities and an increase in the U.S. fluid disposal business;

•
Truck Transportation segment revenue increased by $9.9 million mainly as a result of increased rates for spot hauling
activities due to more long haul opportunities, increased service related charges, and also the favorable foreign exchange
impact of translating revenue denominated in U.S. dollars from the Company’s United States operations;

•
Propane and NGL Marketing and Distribution segment revenue increased by $13.8 million due to higher industrial sales

volumes realized from the Cal-gas and Stittco acquisitions, offset in part by lower wholesale revenue;

•
Processing and Wellsite Fluids segment revenue increased by $5.3 million due to an increase in demand for road asphalt, frac

oils and tops and OBM products, partially offset by lower roofing flux and distillate revenues; and
• Marketing segment revenue increased by $78.4 million which was driven by the impact of higher volumes.
Segment profit increased by $6.2 million or 5% in the three months ended December 31, 2014 compared to the three months
ended December 31, 2013. The increase in segment profit was due to:
• Terminals and Pipelines segment profit increased by $8.9 million, largely due to increased volumes through the Company’s
terminals and the additional profit from customers with dedicated tank usage and the impact of the commencement or start-up
of operations at the crude oil train rail loading facility;

• Environmental Services segment profit increased $5.5 million largely as a result of an increase in volumes from the Canadian

environmental services facilities and an increase in the U.S. fluid disposal business;

• Truck Transportation segment profit increased by $0.6 million with the increase in revenues largely offset by higher

operating costs;

• Propane and NGL Marketing and Distribution segment profit decreased by $7.7 million due to reduced margins from the

wholesale business, largely as a result of lower volumes and unfavorable pricing conditions;

• Processing and Wellsite Fluids segment profit increased by $1.2 million, primarily as a result of higher margins on asphalt,

frac oils and OBM products, partially offset by lower tops and distillate revenues; and

• Marketing segment profit decreased by $2.4 million mainly due to lower margins partially offset by the impact of higher

volumes.

Net income was $13.4 million in the three months ended December 31, 2014 compared to $20.7 million in the three months
ended December 31, 2013. Net income decreased due to higher interest, depreciation and amortization, general and administrative
and stock based compensation expenses.

SUMMARY OF QUARTERLY RESULTS

The following table sets forth a summary of the Company’s quarterly results for each of the last eight quarters.

Three months ended

(in thousands)

December 31 September 30

June 30 March 31

December 31 September 30

June 30 March 31

2014

2013

Revenues ..........................

$1,976,465

$2,360,007 $2,126,365 $2,110,692

$1,916,038

$1,841,894 $1,619,726 $1,563,011

Net income (loss) .............

EBITDA(1) ........................

Adjusted EBITDA(2) ........

Earnings (loss) per share

Basic ............................

Diluted .........................

13,406

100,001

119,302

8,542

89,272

114,134

0.10

0.07

23,838

89,798

82,684

0.19

46,155

125,981

136,945

20,724

96,806

115,284

42,599

115,385

103,533

(5,235)

33,060

87,176

45,728

114,733

121,044

0.38

0.37

0.17

0.16

0.35

(0.04)

0.38

0.37

(1) EBITDA is not a measure recognized under IFRS and does not have standardized meanings prescribed by IFRS. EBITDA

consists of net income (loss) before interest expense, income taxes, depreciation, and amortization.

(2) Adjusted EBITDA is defined as net income (loss) before interest expense, income taxes, depreciation, amortization, other

non-cash expenses and charges deducted in determining consolidated net income (loss), including movement in the

unrealized gains and losses on the Company’s financial instruments, stock based compensation expense, impairment of

goodwill and intangible assets, and asset writedowns. It also removes the impact of foreign exchange movements in the

Company’s U.S. dollar denominated long-term debt, debt extinguishment expenses and adjustments that are considered non-

recurring in nature.

The Company presents EBITDA because it considers it to be an important supplemental measure of the Company’s performance

and believes this measure is frequently used by securities analysts, investors and other interested parties in the evaluation of

companies in industries with similar capital structures. EBITDA has limitations as an analytical tool, and readers should not

consider this item in isolation, or as a substitute for an analysis of the Company’s results as reported under IFRS. Some of these

limitations are:

- EBITDA:

commitments;

excludes certain income tax payments that may represent a reduction in cash available to the Company;

does not reflect the Company’s cash expenditures, or future requirements, for capital expenditures or contractual

does not reflect changes in, or cash requirements for, the Company’s working capital needs; and

does not reflect the significant interest expense, or the cash requirements necessary to service interest payments on the

Company’s debt, including the Senior Unsecured Notes and the Revolving Credit Facility;

- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to

be replaced in the future and EBITDA does not reflect any cash requirements for such replacements; and

- Other companies in the industry may calculate EBITDA differently than the Company does, limiting its usefulness as a

comparative measure.

16
20

December 31, 2013. Changes in segment revenue were as follows:

•

Terminals and Pipelines segment revenue for the three months ended December 31, 2014 increased by $8.9 million compared

to the three months ended December 31, 2013. The increase was largely due to an increase in revenue at the Hardisty

Terminal resulting from an increase in revenue from customers with dedicated tank usage that are subject to minimum

volumes and fixed fee arrangements, two additional large tanks coming into service and revenue from the commencement of

operations at the crude oil train rail loading facility;

Environmental Services segment revenue increased by $33.8 million in the three months ended December 31, 2014 as

compared to the year ended December 31, 2013 mainly due to increased volumes at the Company’s Canadian environmental

services facilities and an increase in the U.S. fluid disposal business;

Truck Transportation segment revenue increased by $9.9 million mainly as a result of increased rates for spot hauling

activities due to more long haul opportunities, increased service related charges, and also the favorable foreign exchange

impact of translating revenue denominated in U.S. dollars from the Company’s United States operations;

Propane and NGL Marketing and Distribution segment revenue increased by $13.8 million due to higher industrial sales

volumes realized from the Cal-gas and Stittco acquisitions, offset in part by lower wholesale revenue;

Processing and Wellsite Fluids segment revenue increased by $5.3 million due to an increase in demand for road asphalt, frac

oils and tops and OBM products, partially offset by lower roofing flux and distillate revenues; and

• Marketing segment revenue increased by $78.4 million which was driven by the impact of higher volumes.

Segment profit increased by $6.2 million or 5% in the three months ended December 31, 2014 compared to the three months

ended December 31, 2013. The increase in segment profit was due to:

• Terminals and Pipelines segment profit increased by $8.9 million, largely due to increased volumes through the Company’s

terminals and the additional profit from customers with dedicated tank usage and the impact of the commencement or start-up

of operations at the crude oil train rail loading facility;

• Environmental Services segment profit increased $5.5 million largely as a result of an increase in volumes from the Canadian

environmental services facilities and an increase in the U.S. fluid disposal business;

• Truck Transportation segment profit increased by $0.6 million with the increase in revenues largely offset by higher

operating costs;

• Propane and NGL Marketing and Distribution segment profit decreased by $7.7 million due to reduced margins from the

wholesale business, largely as a result of lower volumes and unfavorable pricing conditions;

• Processing and Wellsite Fluids segment profit increased by $1.2 million, primarily as a result of higher margins on asphalt,

frac oils and OBM products, partially offset by lower tops and distillate revenues; and

• Marketing segment profit decreased by $2.4 million mainly due to lower margins partially offset by the impact of higher

volumes.

Net income was $13.4 million in the three months ended December 31, 2014 compared to $20.7 million in the three months

ended December 31, 2013. Net income decreased due to higher interest, depreciation and amortization, general and administrative

and stock based compensation expenses.

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

Segment revenue increased by $60.4 million in the three months ended December 31, 2014 compared to the three months ended

SUMMARY OF QUARTERLY RESULTS

The following table sets forth a summary of the Company’s quarterly results for each of the last eight quarters.

Three months ended
(in thousands)
Revenues ..........................
Net income (loss) .............
EBITDA(1) ........................
Adjusted EBITDA(2) ........
Earnings (loss) per share

Basic ............................
Diluted .........................

December 31 September 30

June 30 March 31

December 31 September 30

June 30 March 31

2014

2013

$1,976,465
13,406
100,001
119,302

$2,360,007 $2,126,365 $2,110,692
46,155
125,981
136,945

8,542
89,272
114,134

23,838
89,798
82,684

$1,916,038
20,724
96,806
115,284

$1,841,894 $1,619,726 $1,563,011
45,728
114,733
121,044

42,599
115,385
103,533

(5,235)
33,060
87,176

0.10
0.10

0.07
0.07

0.19
0.19

0.38
0.37

0.17
0.16

0.35
0.35

(0.04)
(0.04)

0.38
0.37

(1) EBITDA is not a measure recognized under IFRS and does not have standardized meanings prescribed by IFRS. EBITDA

consists of net income (loss) before interest expense, income taxes, depreciation, and amortization.

(2) Adjusted EBITDA is defined as net income (loss) before interest expense, income taxes, depreciation, amortization, other
non-cash expenses and charges deducted in determining consolidated net income (loss), including movement in the
unrealized gains and losses on the Company’s financial instruments, stock based compensation expense, impairment of
goodwill and intangible assets, and asset writedowns. It also removes the impact of foreign exchange movements in the
Company’s U.S. dollar denominated long-term debt, debt extinguishment expenses and adjustments that are considered non-
recurring in nature.

The Company presents EBITDA because it considers it to be an important supplemental measure of the Company’s performance
and believes this measure is frequently used by securities analysts, investors and other interested parties in the evaluation of
companies in industries with similar capital structures. EBITDA has limitations as an analytical tool, and readers should not
consider this item in isolation, or as a substitute for an analysis of the Company’s results as reported under IFRS. Some of these
limitations are:

- EBITDA:

-
-

excludes certain income tax payments that may represent a reduction in cash available to the Company;
does not reflect the Company’s cash expenditures, or future requirements, for capital expenditures or contractual
commitments;
does not reflect changes in, or cash requirements for, the Company’s working capital needs; and
does not reflect the significant interest expense, or the cash requirements necessary to service interest payments on the
Company’s debt, including the Senior Unsecured Notes and the Revolving Credit Facility;

- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to

be replaced in the future and EBITDA does not reflect any cash requirements for such replacements; and

- Other companies in the industry may calculate EBITDA differently than the Company does, limiting its usefulness as a

comparative measure.

17
21

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to the Company to
invest in the growth of the Company’s business. The Company compensates for these limitations by relying primarily on the
Company’s IFRS results and using EBITDA only supplementally. The following table reconciles consolidated net income (loss)
to EBITDA:

Three months ended
(in thousands)
Net income (loss) ...............

Depreciation and
amortization ...................
Interest expense(1) ............
Income tax expense
(recovery) ......................
EBITDA ............................

December 31 September 30

June 30 March 31

December 31 September 30

June 30 March 31

2014

2013

$ 13,406 $

8,542

$ 23,838

$ 46,155

$ 20,724

$ 42,599

(5,235) $ 45,728

58,338
19,831

53,510
18,774

49,264
15,331

48,813
13,662

52,002
14,749

44,460
14,901

44,942
(5,286)

42,653
10,842

8,426
$ 100,001

8,446
$ 89,272

1,365
$ 89,798

17,351
$ 125,981

9,331
$ 96,806

13,425
$ 115,385

(1,361)
$ 33,060

15,510
$ 114,733

Pro forma impact of acquisitions (6) ............................................

Pro Forma Adjusted EBITDA ....................................................

5,129

458,194

(1) Interest expense includes the impact of the change in net unrealized gains or losses attributable to movement in the mark to

market valuation of financial instruments relating to interest expense.

Adjusted EBITDA and Pro Forma Adjusted EBITDA are presented in the table below because the Company believes it facilitates
investors’ use of operating performance comparisons from period to period and company to company by backing out potential
differences caused by variations in capital structures (affecting relative interest expense and foreign exchange differences on the
Company’s long-term debt), the book amortization of intangibles (affecting relative amortization expense) and the age and book
value of property, plant and equipment (affecting relative depreciation expense). The Company also presents Adjusted EBITDA
and Pro Forma Adjusted EBITDA because it believes it is frequently used by securities analysts, investors and other interested
parties as a measure of financial performance. Adjusted EBITDA and Pro Forma Adjusted EBITDA as presented herein are not
recognized measures under IFRS and should not be considered as an alternative to operating income or net income as measures of
operating results or an alternative to cash flows as measures of liquidity. Adjusted EBITDA differs from the term EBITDA as it is
commonly used. Adjusted EBITDA is defined as consolidated net income (loss) before interest expense, income taxes,
depreciation, amortization, other non-cash expenses and charges deducted in determining consolidated net income (loss),
including movement in the unrealized gains and losses on the Company’s financial instruments, stock based compensation
expense, impairment of goodwill and intangible assets and asset writedowns. It also removes the impact of foreign exchange
movements in the Company’s U.S. dollar denominated long-term debt, debt extinguishment expenses and other adjustments that
are considered non-recurring in nature. Pro Forma Adjusted EBITDA differs from the term Adjusted EBITDA in that it also
includes the pro forma effect of acquisitions that took place in each fiscal year as if the acquisitions took place at the beginning of
the fiscal year in which such acquisition occurred. Pro Forma Adjusted EBITDA is also used in calculating the Company’s
covenant compliance under the Company’s debt agreements.

The Company’s calculation of Adjusted EBITDA and Pro Forma Adjusted EBITDA may not be comparable to such calculations
used by other companies. In calculating Pro Forma Adjusted EBITDA, the Company makes certain adjustments that are based on
assumptions and estimates that may prove to have been inaccurate. In addition, in evaluating Adjusted EBITDA and Pro Forma
Adjusted EBITDA, readers should be aware that in the future the Company may incur expenses similar to those eliminated in the
presentation herein.

The following tables reconcile EBITDA to Adjusted EBITDA for each of the last eight quarters and Pro Forma Adjusted

EBITDA for the year ended December 31, 2014 and 2013:

Three months ended

Year ended

December 31,

September 30,

June 30,

March 31,

December 31,

2014

(in thousands)

EBITDA .....................................................................................

$ 100,001

89,272 $ 89,798 $ 125,981

405,052

Unrealized foreign exchange loss (gain) on long-term debt (1) ...

Net unrealized loss (gain) from financial instruments (2) ............

Share based compensation (3) ......................................................

Acquisition related costs (5) .........................................................

21,615

(6,141)

3,827

29,260

(8,361)

3,642

321

(19,725)

9,064

3,380

167

20,850

(13,014)

3,128

52,000

(18,452)

13,977

488

Adjusted EBITDA ......................................................................

$ 119,302

$ 114,134 $ 82,684 $ 136,945

453,065

Three months ended

Year ended

December 31,

September 30,

June 30,

March 31,

December 31,

2013

(in thousands)

EBITDA .....................................................................................

$ 96,806

$ 115,385 $ 33,060 $ 114,733

359,984

Unrealized foreign exchange loss (gain) on long-term debt (1) ...

Net unrealized (gain) from financial instruments (2) ...................

Share based compensation (3) ......................................................

Debt extinguishment costs (4) ......................................................

17,549

(1,329)

2,258

(11,350)

(2,867)

2,365

22,898

(9,014)

2,023

38,209

13,354

(8,668)

1,625

42,451

(21,878)

8,271

38,209

Adjusted EBITDA ......................................................................

$ 115,284

$ 103,533 $ 87,176 $ 121,044

427,037

Pro forma impact of acquisitions (6) ............................................

Pro Forma Adjusted EBITDA ....................................................

427,037

(1) Non-cash adjustment representing the unrealized foreign exchange loss (gain) on long-term debt, as a result of the movement

in exchange rates in the periods.

(2) Reflects the exclusion of the movement in the mark-to-market valuation of financial instruments used in risk management

activities. The Company uses crude oil and NGL priced futures, options and swaps to manage the exposure to commodities

price movements and foreign currency forward contracts and options to manage foreign exchange risks, although the

Company does not formally designate these financial instruments as hedges for accounting purposes. Accordingly, the

unrealized gains or losses on these financial instruments are recorded directly to the income statement. Management believes

that this adjustment better correlates the effect of risk management activities to the underlying operating activities to which

they relate.

(3) Represents the non-cash stock based compensation relating to the Company’s equity incentive plan.

(4) In connection with the repayment of the Company’s long-term debt and termination of the previous revolving credit facility,

the Company recorded $38.2 million of non-cash debt extinguishment expenses in the three months ended June 30, 2013.

(5) Represents transaction fees that were expensed in connection with acquisitions made by the Company.

(6) Reflects the pro forma impact of acquisitions on the Company’s Pro Forma Adjusted EBITDA as if the acquisitions that took

place in the twelve months occurred on January 1 of each twelve month period.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s primary liquidity and capital resource needs are to fund ongoing capital expenditures, growth opportunities and

acquisitions and to fund its targeted dividend level. In addition, the Company must service its debt, including interest payments

and finance working capital needs. The Company relies on its cash flow from operations, debt and equity financings and

borrowings under the Company’s Revolving Credit Facility for liquidity.

The Company’s operating cash flow has historically been affected by the overall profitability of sales within the Company’s

segments, the Company’s ability to invoice and collect from customers in a timely manner and the Company’s ability to

efficiently implement the Company’s acquisition strategy and manage costs. The Company’s cash, cash equivalents and cash flow

18
22

Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to the Company to

invest in the growth of the Company’s business. The Company compensates for these limitations by relying primarily on the

Company’s IFRS results and using EBITDA only supplementally. The following table reconciles consolidated net income (loss)

to EBITDA:

Three months ended

(in thousands)

Depreciation and

amortization ...................

Interest expense(1) ............

Income tax expense

December 31 September 30

June 30 March 31

December 31 September 30

June 30 March 31

2014

2013

Net income (loss) ...............

$ 13,406 $

8,542

$ 23,838

$ 46,155

$ 20,724

$ 42,599

(5,235) $ 45,728

58,338

19,831

53,510

18,774

49,264

15,331

48,813

13,662

52,002

14,749

44,460

14,901

44,942

(5,286)

42,653

10,842

(recovery) ......................

8,426

8,446

1,365

17,351

9,331

13,425

(1,361)

15,510

EBITDA ............................

$ 100,001

$ 89,272

$ 89,798

$ 125,981

$ 96,806

$ 115,385

$ 33,060

$ 114,733

(1) Interest expense includes the impact of the change in net unrealized gains or losses attributable to movement in the mark to

market valuation of financial instruments relating to interest expense.

Adjusted EBITDA and Pro Forma Adjusted EBITDA are presented in the table below because the Company believes it facilitates

investors’ use of operating performance comparisons from period to period and company to company by backing out potential

differences caused by variations in capital structures (affecting relative interest expense and foreign exchange differences on the

Company’s long-term debt), the book amortization of intangibles (affecting relative amortization expense) and the age and book

value of property, plant and equipment (affecting relative depreciation expense). The Company also presents Adjusted EBITDA

and Pro Forma Adjusted EBITDA because it believes it is frequently used by securities analysts, investors and other interested

parties as a measure of financial performance. Adjusted EBITDA and Pro Forma Adjusted EBITDA as presented herein are not

recognized measures under IFRS and should not be considered as an alternative to operating income or net income as measures of

operating results or an alternative to cash flows as measures of liquidity. Adjusted EBITDA differs from the term EBITDA as it is

commonly used. Adjusted EBITDA is defined as consolidated net income (loss) before interest expense, income taxes,

depreciation, amortization, other non-cash expenses and charges deducted in determining consolidated net income (loss),

including movement in the unrealized gains and losses on the Company’s financial instruments, stock based compensation

expense, impairment of goodwill and intangible assets and asset writedowns. It also removes the impact of foreign exchange

movements in the Company’s U.S. dollar denominated long-term debt, debt extinguishment expenses and other adjustments that

are considered non-recurring in nature. Pro Forma Adjusted EBITDA differs from the term Adjusted EBITDA in that it also

includes the pro forma effect of acquisitions that took place in each fiscal year as if the acquisitions took place at the beginning of

the fiscal year in which such acquisition occurred. Pro Forma Adjusted EBITDA is also used in calculating the Company’s

covenant compliance under the Company’s debt agreements.

The Company’s calculation of Adjusted EBITDA and Pro Forma Adjusted EBITDA may not be comparable to such calculations

used by other companies. In calculating Pro Forma Adjusted EBITDA, the Company makes certain adjustments that are based on

assumptions and estimates that may prove to have been inaccurate. In addition, in evaluating Adjusted EBITDA and Pro Forma

Adjusted EBITDA, readers should be aware that in the future the Company may incur expenses similar to those eliminated in the

presentation herein.

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

The following tables reconcile EBITDA to Adjusted EBITDA for each of the last eight quarters and Pro Forma Adjusted
EBITDA for the year ended December 31, 2014 and 2013:

EBITDA .....................................................................................
Unrealized foreign exchange loss (gain) on long-term debt (1) ...
Net unrealized loss (gain) from financial instruments (2) ............
Share based compensation (3) ......................................................
Acquisition related costs (5) .........................................................
Adjusted EBITDA ......................................................................
Pro forma impact of acquisitions (6) ............................................
Pro Forma Adjusted EBITDA ....................................................

Three months ended

December 31,
2014

September 30,
2014

June 30,
2014

March 31,
2014

$ 100,001

21,615
(6,141)
3,827
-

$ 119,302

(in thousands)
89,272 $ 89,798 $ 125,981
20,850
(19,725)
29,260
(13,014)
9,064
(8,361)
3,128
3,380
3,642
-
167
321
$ 114,134 $ 82,684 $ 136,945

Three months ended

December 31,
2013

September 30,
2013

June 30,
2013

March 31,
2013

(in thousands)

EBITDA .....................................................................................
Unrealized foreign exchange loss (gain) on long-term debt (1) ...
Net unrealized (gain) from financial instruments (2) ...................
Share based compensation (3) ......................................................
Debt extinguishment costs (4) ......................................................
Adjusted EBITDA ......................................................................
Pro forma impact of acquisitions (6) ............................................
Pro Forma Adjusted EBITDA ....................................................

$ 96,806

17,549
(1,329)
2,258
-

$ 115,284

$ 115,385 $ 33,060 $ 114,733
13,354
(8,668)
1,625
-
$ 103,533 $ 87,176 $ 121,044

(11,350)
(2,867)
2,365
-

22,898
(9,014)
2,023
38,209

Year ended
December 31,
2014

405,052
52,000
(18,452)
13,977
488
453,065
5,129
458,194

Year ended
December 31,
2013

359,984
42,451
(21,878)
8,271
38,209
427,037
-
427,037

(1) Non-cash adjustment representing the unrealized foreign exchange loss (gain) on long-term debt, as a result of the movement

in exchange rates in the periods.

(2) Reflects the exclusion of the movement in the mark-to-market valuation of financial instruments used in risk management
activities. The Company uses crude oil and NGL priced futures, options and swaps to manage the exposure to commodities
price movements and foreign currency forward contracts and options to manage foreign exchange risks, although the
Company does not formally designate these financial instruments as hedges for accounting purposes. Accordingly, the
unrealized gains or losses on these financial instruments are recorded directly to the income statement. Management believes
that this adjustment better correlates the effect of risk management activities to the underlying operating activities to which
they relate.

(3) Represents the non-cash stock based compensation relating to the Company’s equity incentive plan.
(4) In connection with the repayment of the Company’s long-term debt and termination of the previous revolving credit facility,
the Company recorded $38.2 million of non-cash debt extinguishment expenses in the three months ended June 30, 2013.

(5) Represents transaction fees that were expensed in connection with acquisitions made by the Company.
(6) Reflects the pro forma impact of acquisitions on the Company’s Pro Forma Adjusted EBITDA as if the acquisitions that took

place in the twelve months occurred on January 1 of each twelve month period.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s primary liquidity and capital resource needs are to fund ongoing capital expenditures, growth opportunities and
acquisitions and to fund its targeted dividend level. In addition, the Company must service its debt, including interest payments
and finance working capital needs. The Company relies on its cash flow from operations, debt and equity financings and
borrowings under the Company’s Revolving Credit Facility for liquidity.

The Company’s operating cash flow has historically been affected by the overall profitability of sales within the Company’s
segments, the Company’s ability to invoice and collect from customers in a timely manner and the Company’s ability to
efficiently implement the Company’s acquisition strategy and manage costs. The Company’s cash, cash equivalents and cash flow

19
23

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

from operations have historically been sufficient to meet the Company’s working capital, capital expenditure and debt servicing
requirements.

The following table summarizes the Company’s sources and uses of funds for the year ended December 31, 2014 and 2013:

Year ended December 31,

2014
(in thousands)

2013

Statement of Cash Flows
Cash flows provided by (used in):
Operating activities ....................................................................................................................
Investing activities ......................................................................................................................
Financing activities ....................................................................................................................

$ 336,228

(495,015)
188,199

$ 331,631
(232,250)
(66,672)

Cash provided by operating activities

The primary drivers of cash flow from operating activities are the collection of amounts related to sales of products such as crude
oil, propane, NGLs, asphalt and other products and fees for services provided associated with the Company’s Truck
Transportation, Terminals and Pipelines and Environmental Services segments. Offsetting these collections are payments for
purchases of crude oil and other products and other expenses. Other expenses primarily consist of owner-operator and lease
operator payments for the provision of contract trucking services, field operating expenses and G&A expenses. Historically, the
Marketing and the Processing and Wellsite Fluids segments have been the most variable with respect to generating cash flows due
to the impact of crude oil price levels and the volatility that price changes and crude oil grade basis changes have on the cash
flows and working capital requirements of these segments.

Cash provided by operations in the year ended December 31, 2014 was $336.2 million compared to $331.6 million in the year
ended December 31, 2013. The increase was primarily attributable to increases in overall segment profitability, partially offset by
an increase in net accounts receivable and accounts payable and income tax paid.

Cash used in investing activities

Cash used in investing activities consists primarily of expenditures for growth capital, upgrade and replacement capital and
business acquisitions.

Cash used in investing activities was $495.0 million in the year ended December 31, 2014 compared to $232.3 million in the year
ended December 31, 2013. The increase in cash used in investing activities was due largely to the Cal-Gas and Stittco acquisitions
and capital expenditures in 2014. For a summary of capital expenditures, see “Capital expenditures” included in this MD&A.

Cash provided by (used in) financing activities

Cash provided by financing activities was $188.2 million compared to cash used in financing activities of $66.7 million in the
year ended December 31, 2013.

The main reason for the change in the year ended December 31, 2014 compared to December 31, 2013 was primarily the
completion of the debt offering and amendment for net proceeds of $352.0 million offset in part by the payment of net cash
dividends of $108.2 million and interest of $62.1 million.

In addition, in the year ended December 31, 2013, the Company completed the notes offering on June 28, 2013 for proceeds, net
of issue discount of, $764.2 million, which was offset in part by the repayment of the Tranche B Term Loan of $678.1 million.
During the year ended December 31, 2013, the Company also paid debt issue and financing costs of $16.2 million, paid net cash
dividends of $93.9 million, paid interest of $19.8 million, received net proceeds of $8.7 million on settlement of certain derivative
financial instruments relating to interest expense and foreign exchange and received proceeds of $1.2 million on the exercise of
stock options.

Liquidity sources, requirements and contractual cash requirements and commitments

The Company believes that cash on hand, together with cash from operations and borrowings under the Revolving Credit Facility,
will be adequate to meet its working capital needs, upgrade and replacement capital expenditures, currently sanctioned growth
capital projects, debt service, targeted dividend level and other cash requirements for at least the next twelve months. The
Company had unrestricted cash of $131.9 million and $442.5 million available under the Revolving Credit Facility as at
December 31, 2014.

The Company’s ability to make interest payments on the Company’s indebtedness, to pay targeted dividends and to fund the

Company’s other liquidity requirements will depend on the Company’s ability to generate cash in the future. In the three months

ended December 31, 2014, the Company declared a dividend of $0.30 per share for a total dividend of $37.3 million, of which

$29.1 million was paid in cash on January 16, 2015 with the remainder of the dividend being settled with the issuance of common

shares to shareholders participating in the Company’s dividend reinvestment plan (“DRIP”) and stock dividend program (“SDP”).

The declaration of dividends is considered on a quarterly basis and is at the sole discretion of the Board and will be determined on

the basis of earnings, financial requirements for operations and a solvency calculation.

Capital expenditures amounted to $411.5 million in the year ended December 31, 2014. As previously announced, the Company’s

planned capital expenditures for 2015 are expected to be approximately $510.0 million. While the Company anticipates that these

planned capital expenditures will occur, they are subject to general economic, financial, competitive, legislative, regulatory and

other factors, some of which are beyond the Company’s control.

In addition to anticipated capital expenditures, the Company may engage in additional strategic acquisitions and capital

expenditures as opportunities arise that benefit the Company’s existing operations by expanding the Company’s reach in existing

markets or by providing platforms by which to enter new markets. Any such acquisition or capital expenditure could be material

and could have a material effect on the Company’s liquidity, cash flows and capital commitments and resources. Any future

acquisitions, capital expenditures or other similar transactions may require additional capital and there can be no assurance that

such capital will be available to the Company on acceptable terms, or at all.

On June 12, 2014, the Company closed a Senior Unsecured Notes offering consisting of $300.0 million aggregate principal

amount of 5.375% Senior Unsecured Notes due July 15, 2022 and U.S.$50.0 million aggregate principal amount of 6.75% Senior

Unsecured Notes due July 15, 2021. The net proceeds from this offering were used to repay all outstanding indebtedness under its

existing Revolving Credit Facility (excluding letters of credit), with the remaining net proceeds used to fund capital expenditures

and general corporate purposes.

As of December 31, 2014, the Company had total outstanding Senior Unsecured Notes, excluding debt discount and the issuance

costs, of U.S.$550.0 million bearing fixed interest of 6.75% per annum due July 15, 2021, $250.0 million bearing fixed interest of

7.00% per annum due July 15, 2020 and $300.0 million bearing fixed interest of 5.375% per annum due July 15, 2022

(collectively the “Notes”). Interest is payable semi-annually on January 15 and July 15 of each year the Notes are outstanding.

The Notes agreements contain certain redemption options whereby the Company can redeem all or part of the Notes subject to

certain premiums if such prepayment occurs prior to the dates specified in the agreements. In addition, the Note holders have the

right to require the Company to redeem the Notes or a portion thereof, at the redemption prices set forth in the agreements in the

event of change in control or in the event certain asset sale proceeds are not re-invested in the time and manner specified in the

agreements.

On August 20, 2014, the Company amended the terms of its $500.0 million secured revolving credit facility to, among other

things, release all security held by its lenders, to extend the maturity date from June 2018 to August 2019 and to revise the

definition of senior debt leverage ratio to consist of total debt excluding subordinated debt.

The Revolving Credit Facility of $500.0 million, the proceeds of which are available to provide financing for working capital and

other general corporate purposes, has an accordion feature whereby the Company can increase the Revolving Credit Facility to

$750.0 million subject to obtaining incremental lender commitments. The Revolving Credit Facility has an extendible term of five

years, expiring on August 15, 2019. The Revolving Credit Facility provides sub-facilities for letters of credit, swingline loans and

borrowings in Canadian dollars and U.S. dollars. Borrowings under the Revolving Credit Facility bear interest at a rate equal to

Canadian Prime Rate or U.S. Base Rate or U.S. LIBOR or Canadian Bankers Acceptance Rate as the case may be plus an

applicable margin. The applicable margin for borrowings under the Revolving Credit Facility is subject to step up and step down

based on the Company’s total debt leverage ratio. In addition, the Company must pay a standby fee on the unused portion of the

Revolving Credit Facility and customary letter of credit fees equal to the applicable margins determined in a manner similar to the

interest.

At December 31, 2014, the Company had no amounts drawn under the Revolving Credit Facility, had no restricted cash, and had

issued letters of credit totaling $57.5 million.

The terms of the Company’s Revolving Credit Facility require the Company to maintain certain covenants defined in the

agreement including a consolidated senior debt leverage ratio of no greater than 3.5 to 1.0, a consolidated total debt leverage ratio

of no greater than 4.0 to 1.0 and an interest coverage ratio of no less than 2.5 to 1.0. As at December 31, 2014, the Company was

in compliance with the financial ratios with the senior debt leverage ratio at 2.2 to 1.0, total debt leverage ratio at 2.2 to 1.0, and

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Gibson Energy Inc.

TSX: GEI

requirements.

from operations have historically been sufficient to meet the Company’s working capital, capital expenditure and debt servicing

The following table summarizes the Company’s sources and uses of funds for the year ended December 31, 2014 and 2013:

Year ended December 31,

2014

(in thousands)

2013

Statement of Cash Flows

Cash flows provided by (used in):

Operating activities ....................................................................................................................

$ 336,228

$ 331,631

Investing activities ......................................................................................................................

Financing activities ....................................................................................................................

(495,015)

188,199

(232,250)

(66,672)

Cash provided by operating activities

The primary drivers of cash flow from operating activities are the collection of amounts related to sales of products such as crude

oil, propane, NGLs, asphalt and other products and fees for services provided associated with the Company’s Truck

Transportation, Terminals and Pipelines and Environmental Services segments. Offsetting these collections are payments for

purchases of crude oil and other products and other expenses. Other expenses primarily consist of owner-operator and lease

operator payments for the provision of contract trucking services, field operating expenses and G&A expenses. Historically, the

Marketing and the Processing and Wellsite Fluids segments have been the most variable with respect to generating cash flows due

to the impact of crude oil price levels and the volatility that price changes and crude oil grade basis changes have on the cash

flows and working capital requirements of these segments.

Cash provided by operations in the year ended December 31, 2014 was $336.2 million compared to $331.6 million in the year

ended December 31, 2013. The increase was primarily attributable to increases in overall segment profitability, partially offset by

an increase in net accounts receivable and accounts payable and income tax paid.

Cash used in investing activities

business acquisitions.

Cash used in investing activities consists primarily of expenditures for growth capital, upgrade and replacement capital and

Cash used in investing activities was $495.0 million in the year ended December 31, 2014 compared to $232.3 million in the year

ended December 31, 2013. The increase in cash used in investing activities was due largely to the Cal-Gas and Stittco acquisitions

and capital expenditures in 2014. For a summary of capital expenditures, see “Capital expenditures” included in this MD&A.

Cash provided by (used in) financing activities

year ended December 31, 2013.

Cash provided by financing activities was $188.2 million compared to cash used in financing activities of $66.7 million in the

The main reason for the change in the year ended December 31, 2014 compared to December 31, 2013 was primarily the

completion of the debt offering and amendment for net proceeds of $352.0 million offset in part by the payment of net cash

dividends of $108.2 million and interest of $62.1 million.

In addition, in the year ended December 31, 2013, the Company completed the notes offering on June 28, 2013 for proceeds, net

of issue discount of, $764.2 million, which was offset in part by the repayment of the Tranche B Term Loan of $678.1 million.

During the year ended December 31, 2013, the Company also paid debt issue and financing costs of $16.2 million, paid net cash

dividends of $93.9 million, paid interest of $19.8 million, received net proceeds of $8.7 million on settlement of certain derivative

financial instruments relating to interest expense and foreign exchange and received proceeds of $1.2 million on the exercise of

stock options.

Liquidity sources, requirements and contractual cash requirements and commitments

The Company believes that cash on hand, together with cash from operations and borrowings under the Revolving Credit Facility,

will be adequate to meet its working capital needs, upgrade and replacement capital expenditures, currently sanctioned growth

capital projects, debt service, targeted dividend level and other cash requirements for at least the next twelve months. The

Company had unrestricted cash of $131.9 million and $442.5 million available under the Revolving Credit Facility as at

December 31, 2014.

2014 Year End Report

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

The Company’s ability to make interest payments on the Company’s indebtedness, to pay targeted dividends and to fund the
Company’s other liquidity requirements will depend on the Company’s ability to generate cash in the future. In the three months
ended December 31, 2014, the Company declared a dividend of $0.30 per share for a total dividend of $37.3 million, of which
$29.1 million was paid in cash on January 16, 2015 with the remainder of the dividend being settled with the issuance of common
shares to shareholders participating in the Company’s dividend reinvestment plan (“DRIP”) and stock dividend program (“SDP”).
The declaration of dividends is considered on a quarterly basis and is at the sole discretion of the Board and will be determined on
the basis of earnings, financial requirements for operations and a solvency calculation.

Capital expenditures amounted to $411.5 million in the year ended December 31, 2014. As previously announced, the Company’s
planned capital expenditures for 2015 are expected to be approximately $510.0 million. While the Company anticipates that these
planned capital expenditures will occur, they are subject to general economic, financial, competitive, legislative, regulatory and
other factors, some of which are beyond the Company’s control.

In addition to anticipated capital expenditures, the Company may engage in additional strategic acquisitions and capital
expenditures as opportunities arise that benefit the Company’s existing operations by expanding the Company’s reach in existing
markets or by providing platforms by which to enter new markets. Any such acquisition or capital expenditure could be material
and could have a material effect on the Company’s liquidity, cash flows and capital commitments and resources. Any future
acquisitions, capital expenditures or other similar transactions may require additional capital and there can be no assurance that
such capital will be available to the Company on acceptable terms, or at all.

On June 12, 2014, the Company closed a Senior Unsecured Notes offering consisting of $300.0 million aggregate principal
amount of 5.375% Senior Unsecured Notes due July 15, 2022 and U.S.$50.0 million aggregate principal amount of 6.75% Senior
Unsecured Notes due July 15, 2021. The net proceeds from this offering were used to repay all outstanding indebtedness under its
existing Revolving Credit Facility (excluding letters of credit), with the remaining net proceeds used to fund capital expenditures
and general corporate purposes.

As of December 31, 2014, the Company had total outstanding Senior Unsecured Notes, excluding debt discount and the issuance
costs, of U.S.$550.0 million bearing fixed interest of 6.75% per annum due July 15, 2021, $250.0 million bearing fixed interest of
7.00% per annum due July 15, 2020 and $300.0 million bearing fixed interest of 5.375% per annum due July 15, 2022
(collectively the “Notes”). Interest is payable semi-annually on January 15 and July 15 of each year the Notes are outstanding.

The Notes agreements contain certain redemption options whereby the Company can redeem all or part of the Notes subject to
certain premiums if such prepayment occurs prior to the dates specified in the agreements. In addition, the Note holders have the
right to require the Company to redeem the Notes or a portion thereof, at the redemption prices set forth in the agreements in the
event of change in control or in the event certain asset sale proceeds are not re-invested in the time and manner specified in the
agreements.

On August 20, 2014, the Company amended the terms of its $500.0 million secured revolving credit facility to, among other
things, release all security held by its lenders, to extend the maturity date from June 2018 to August 2019 and to revise the
definition of senior debt leverage ratio to consist of total debt excluding subordinated debt.

The Revolving Credit Facility of $500.0 million, the proceeds of which are available to provide financing for working capital and
other general corporate purposes, has an accordion feature whereby the Company can increase the Revolving Credit Facility to
$750.0 million subject to obtaining incremental lender commitments. The Revolving Credit Facility has an extendible term of five
years, expiring on August 15, 2019. The Revolving Credit Facility provides sub-facilities for letters of credit, swingline loans and
borrowings in Canadian dollars and U.S. dollars. Borrowings under the Revolving Credit Facility bear interest at a rate equal to
Canadian Prime Rate or U.S. Base Rate or U.S. LIBOR or Canadian Bankers Acceptance Rate as the case may be plus an
applicable margin. The applicable margin for borrowings under the Revolving Credit Facility is subject to step up and step down
based on the Company’s total debt leverage ratio. In addition, the Company must pay a standby fee on the unused portion of the
Revolving Credit Facility and customary letter of credit fees equal to the applicable margins determined in a manner similar to the
interest.

At December 31, 2014, the Company had no amounts drawn under the Revolving Credit Facility, had no restricted cash, and had
issued letters of credit totaling $57.5 million.

The terms of the Company’s Revolving Credit Facility require the Company to maintain certain covenants defined in the
agreement including a consolidated senior debt leverage ratio of no greater than 3.5 to 1.0, a consolidated total debt leverage ratio
of no greater than 4.0 to 1.0 and an interest coverage ratio of no less than 2.5 to 1.0. As at December 31, 2014, the Company was
in compliance with the financial ratios with the senior debt leverage ratio at 2.2 to 1.0, total debt leverage ratio at 2.2 to 1.0, and

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Gibson Energy Inc.
TSX: GEI

2014 Year End Report

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

the interest coverage ratio at 6.7 to 1.0. If the Company fails to comply with the financial covenants, the lenders may declare an
event of default. An event of default resulting from a breach of a financial covenant may result, at the option of lenders holding a
majority of the loans, in an acceleration of repayment of the principal and interest outstanding and a termination of the Revolving
Credit Facility.

The Notes and the Revolving Credit Facility contain non-financial covenants that restrict, subject to certain thresholds, some of
the Company’s activities, including the Company’s ability to dispose of assets, incur additional debt, pay dividends, create liens,
make investments and engage in specified transactions with affiliates. The Notes and the Revolving Credit Facility also contain
customary events of default, including defaults based on events of bankruptcy and insolvency, non-payment of principal, interest
or fees when due, breach of covenants, change in control and material inaccuracy of representations and warranties, subject to
specified grace periods. As of December 31, 2014, the Company was in compliance with all of its covenants under the Notes and
the Revolving Credit Facility.

Contingencies

The Company is currently undergoing various income tax related and excise tax audits. While the final outcome of such audits
cannot be predicted with certainty, the Company believes that the resolution of these audits will not have a material impact on the
Company’s consolidated financial position or results of operations. As a part of the acquisition of the Company by the wholly-
owned subsidiary of R/C Guitar Cooperatief U.A., a Dutch Co-operative owned by investment funds affiliated with Riverstone
Holdings LLC, from Hunting PLC (“Hunting”) on December 12, 2008, Hunting has indemnified the Company for the pre-closing
period impact of these audits.

The Company is subject to various regulatory and statutory requirements relating to the protection of the environment. These
requirements, in addition to the contractual agreements and management decisions, result in the recognition of estimated
decommissioning obligations and environmental remediation. Estimates of decommissioning obligations and environmental
remediation costs can change significantly based on such factors as operating experience and changes in legislation and
regulations.

The Company is involved in various legal actions which have occurred in the ordinary course of business. The Company is of the
opinion that losses, if any, arising from such legal actions would not have a material impact on the Company’s consolidated
financial position or results of operations.

Contractual obligations

The following table presents, at December 31, 2014, the Company’s obligations and commitments to make future payments under
contracts and contingent commitments:

(in thousands)
Long-term debt(1) ................................................................ $1,188,055
Interest payments on long-term debt(1) ...............................
596,647
Operating lease and other commitments(2) .........................
301,274
Total contractual obligations .............................................. $2,085,976

Total

Payments due by period

Less than
1 year
-
76,694
70,097
$ 146,791

1-3 years

3-5 years

-
153,388
119,333
$ 272,721

-
153,388
87,523
$ 240,911

More than
5 years
$1,188,055
213,177
24,321
$1,425,553

(1) The exchange rate used to translate the U.S. dollar obligations on the Company’s long-term debt and interest payments is the

rate as of December 31, 2014 of U.S.$0.8620 to $1.00.

(2) Operating lease and other commitments relate to an office lease for the Company’s Calgary head office, rail tank cars,

vehicles, field buildings, various equipment leases and terminal services arrangements.

As at December 31, 2014, the Company has identified and approved a capital expenditure budget, excluding acquisitions, of
$409.1 million that the Company expects to undertake over the next 12 to 24 months. In addition, the Company had accrued
liabilities for obligations with respect to the Company’s defined benefit plans of $5.7 million and provisions associated with site
restoration on the retirement of assets and environmental costs of $136.3 million but the timing of such payments is uncertain due
to the estimates used to calculate these amounts and the long-term nature of these balances. The Company also has commitments
relating to its risk management contracts which are discussed further in “Quantitative and Qualitative Disclosures about Market
Risks”.

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or

future effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditure or

OFF-BALANCE SHEET ARRANGEMENTS

capital expenses that are material to investors.

RELATED PARTY TRANSACTIONS

On August 11, 2011, the Company formed a partnership (the “Plato Partnership”) to jointly construct and own a pipeline and

emulsion treating, water disposal and oilfield waste management facilities in the Plato area of Saskatchewan. The Plato

Partnership commenced operations in 2012. The Company’s interest in the Plato Partnership is 50%. A member of the

Company’s Board is also a director of the other party with the 50% interest in the Plato Partnership. At December 31, 2014 and

2013, the Company’s proportionate share of property, plant and equipment was $10.2 million and $10.5 million, respectively. The

impact of the Company’s share of the other financial position and results of the Plato Partnership is not material to the Company’s

The related party transactions noted above have been measured at agreed upon market based terms.

consolidated financial statements.

OUTSTANDING SHARE DATA

The Company is authorized to issue an unlimited number of common shares and an unlimited number of preferred shares. As at

December 31, 2014, there were 124.5 million common shares outstanding and no preferred shares outstanding. In addition, under

the Company’s equity incentive award plan, there were an aggregate of 1.3 million restricted share units, performance share units

and deferred share units outstanding and 2.5 million stock options outstanding as at December 31, 2014.

At December 31, 2014, awards available to grant under the Company’s amended equity incentive plan were approximately 8.6

As at February 27, 2015, 124.9 million common shares, 1.3 million restricted share units, performance share units and deferred

share units and 2.5 million stock options were outstanding.

million.

DIVIDENDS

The Company is currently paying quarterly dividends to holders of common shares. The payment of dividends is not guaranteed,

and the amount and timing of any dividends payable by Gibson will be at the discretion of the Board and will be established on

the basis of Gibson's earnings, financial requirements for operations, the satisfaction of a solvency calculation and the terms of the

Company’s debt agreements. In addition, in connection with Company’s dividend policy, after each fiscal year end the Board will

formally review the annual dividend amount.

The Board has approved a DRIP and a SDP that provide eligible holders of common shares with the opportunity to reinvest their

cash dividends, on each dividend payment date, in additional common shares to be issued from treasury of Gibson. For the

dividend paid on January 16, 2015, holders of approximately 22.0% of the common shares participated in the DRIP and SDP.

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Gibson Energy Inc.

TSX: GEI

2014 Year End Report

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

the interest coverage ratio at 6.7 to 1.0. If the Company fails to comply with the financial covenants, the lenders may declare an

event of default. An event of default resulting from a breach of a financial covenant may result, at the option of lenders holding a

majority of the loans, in an acceleration of repayment of the principal and interest outstanding and a termination of the Revolving

Credit Facility.

The Notes and the Revolving Credit Facility contain non-financial covenants that restrict, subject to certain thresholds, some of

the Company’s activities, including the Company’s ability to dispose of assets, incur additional debt, pay dividends, create liens,

make investments and engage in specified transactions with affiliates. The Notes and the Revolving Credit Facility also contain

customary events of default, including defaults based on events of bankruptcy and insolvency, non-payment of principal, interest

or fees when due, breach of covenants, change in control and material inaccuracy of representations and warranties, subject to

specified grace periods. As of December 31, 2014, the Company was in compliance with all of its covenants under the Notes and

the Revolving Credit Facility.

Contingencies

The Company is currently undergoing various income tax related and excise tax audits. While the final outcome of such audits

cannot be predicted with certainty, the Company believes that the resolution of these audits will not have a material impact on the

Company’s consolidated financial position or results of operations. As a part of the acquisition of the Company by the wholly-

owned subsidiary of R/C Guitar Cooperatief U.A., a Dutch Co-operative owned by investment funds affiliated with Riverstone

Holdings LLC, from Hunting PLC (“Hunting”) on December 12, 2008, Hunting has indemnified the Company for the pre-closing

period impact of these audits.

The Company is subject to various regulatory and statutory requirements relating to the protection of the environment. These

requirements, in addition to the contractual agreements and management decisions, result in the recognition of estimated

decommissioning obligations and environmental remediation. Estimates of decommissioning obligations and environmental

remediation costs can change significantly based on such factors as operating experience and changes in legislation and

regulations.

The Company is involved in various legal actions which have occurred in the ordinary course of business. The Company is of the

opinion that losses, if any, arising from such legal actions would not have a material impact on the Company’s consolidated

financial position or results of operations.

Contractual obligations

contracts and contingent commitments:

The following table presents, at December 31, 2014, the Company’s obligations and commitments to make future payments under

(in thousands)

Long-term debt(1) ................................................................ $1,188,055

$1,188,055

Interest payments on long-term debt(1) ...............................

Operating lease and other commitments(2) .........................

596,647

301,274

76,694

70,097

153,388

119,333

153,388

87,523

213,177

24,321

Total contractual obligations .............................................. $2,085,976

$ 146,791

$ 272,721

$ 240,911

$1,425,553

Payments due by period

Total

Less than

1 year

1-3 years

3-5 years

More than

5 years

(1) The exchange rate used to translate the U.S. dollar obligations on the Company’s long-term debt and interest payments is the

rate as of December 31, 2014 of U.S.$0.8620 to $1.00.

(2) Operating lease and other commitments relate to an office lease for the Company’s Calgary head office, rail tank cars,

vehicles, field buildings, various equipment leases and terminal services arrangements.

As at December 31, 2014, the Company has identified and approved a capital expenditure budget, excluding acquisitions, of

$409.1 million that the Company expects to undertake over the next 12 to 24 months. In addition, the Company had accrued

liabilities for obligations with respect to the Company’s defined benefit plans of $5.7 million and provisions associated with site

restoration on the retirement of assets and environmental costs of $136.3 million but the timing of such payments is uncertain due

to the estimates used to calculate these amounts and the long-term nature of these balances. The Company also has commitments

relating to its risk management contracts which are discussed further in “Quantitative and Qualitative Disclosures about Market

Risks”.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or
future effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditure or
capital expenses that are material to investors.

RELATED PARTY TRANSACTIONS

On August 11, 2011, the Company formed a partnership (the “Plato Partnership”) to jointly construct and own a pipeline and
emulsion treating, water disposal and oilfield waste management facilities in the Plato area of Saskatchewan. The Plato
Partnership commenced operations in 2012. The Company’s interest in the Plato Partnership is 50%. A member of the
Company’s Board is also a director of the other party with the 50% interest in the Plato Partnership. At December 31, 2014 and
2013, the Company’s proportionate share of property, plant and equipment was $10.2 million and $10.5 million, respectively. The
impact of the Company’s share of the other financial position and results of the Plato Partnership is not material to the Company’s
consolidated financial statements.

The related party transactions noted above have been measured at agreed upon market based terms.

OUTSTANDING SHARE DATA

The Company is authorized to issue an unlimited number of common shares and an unlimited number of preferred shares. As at
December 31, 2014, there were 124.5 million common shares outstanding and no preferred shares outstanding. In addition, under
the Company’s equity incentive award plan, there were an aggregate of 1.3 million restricted share units, performance share units
and deferred share units outstanding and 2.5 million stock options outstanding as at December 31, 2014.

At December 31, 2014, awards available to grant under the Company’s amended equity incentive plan were approximately 8.6
million.

As at February 27, 2015, 124.9 million common shares, 1.3 million restricted share units, performance share units and deferred
share units and 2.5 million stock options were outstanding.

DIVIDENDS

The Company is currently paying quarterly dividends to holders of common shares. The payment of dividends is not guaranteed,
and the amount and timing of any dividends payable by Gibson will be at the discretion of the Board and will be established on
the basis of Gibson's earnings, financial requirements for operations, the satisfaction of a solvency calculation and the terms of the
Company’s debt agreements. In addition, in connection with Company’s dividend policy, after each fiscal year end the Board will
formally review the annual dividend amount.

The Board has approved a DRIP and a SDP that provide eligible holders of common shares with the opportunity to reinvest their
cash dividends, on each dividend payment date, in additional common shares to be issued from treasury of Gibson. For the
dividend paid on January 16, 2015, holders of approximately 22.0% of the common shares participated in the DRIP and SDP.

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Gibson Energy Inc.
TSX: GEI

DISTRIBUTABLE CASH FLOW

2014 Year End Report

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

Distributable cash flow is not a standard measure under IFRS and, therefore, may not be comparable to similar measures reported
by other entities. Distributable cash flow is used to assess the level of cash flow generated from ongoing operations and to
evaluate the adequacy of internally generated cash flow to fund dividends. Changes in non-cash working capital are excluded
from the determination of distributable cash flow because they are primarily the result of fluctuations in product inventories or
other temporary changes. Upgrade and replacement capital expenditures are deducted from distributable cash flow as they are
ongoing recurring expenditures.

The following is a reconciliation of distributable cash flow to its most closely related IFRS measure, cash flow from operating
activities.

Year ended
December 31
2014
(in thousands)

2013

Cash flow from operating activities ................................................................................................
Adjustments:

$ 336,228

$ 331,631

Changes in non-cash working capital ................................................................................................ 105,291
(59,035)
Upgrade and replacement capital ................................................................................................
(68,708)
Cash interest expense, including capitalized interest ................................................................
Current income tax ................................................................................................................................(48,549)
$ 265,227

Distributable cash flow ................................................................................................................................

90,043
(69,513)
(46,909)
(52,074)
$ 253,178

Dividends declared to shareholders ................................................................................................

$ 148,573

$ 133,682

Dividends declared in the twelve months ended December 31, 2014 were $148.6 million, of which $112.5 million was paid in
cash and the balance was settled with the issuance of common shares under the Company’s DRIP and SDP. In the twelve months
ended December 31, 2014, dividends declared represented 56% of the distributable cash flow generated, or distributable cash
flow was 1.8 times dividends declared.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is involved in various commodity related marketing activities that are intended to enhance the Company’s
operations and increase profitability. These activities often create exposure to price risk between the time contracted volumes are
purchased and sold and to foreign exchange risk when contracts are in different currencies (Canadian dollar versus U.S. dollar).
The Company is also exposed to various market risks, including volatility in (i) crude oil, refined products, natural gas and NGL
prices, (ii) interest rates and (iii) currency exchange rates. The Company utilizes various derivative instruments from time to time
to manage commodity price, interest rate and currency exchange rate exposure and, in certain circumstances, to realize
incremental margin during volatile market conditions. The Company’s commodity trading and risk management policies and
procedures are designed to establish and manage to an approved level of Value at Risk. The Company has a Risk Management
Committee that has direct responsibility and authority for the Company’s risk policies and the Company’s trading controls and
procedures and certain aspects of corporate risk management. The Company’s approved strategies are intended to mitigate risks
that are inherent in the Company’s core businesses of aggregating and marketing and distribution. To hedge the risks discussed
above the Company engages in risk management activities that the Company categorizes by the risks the Company is hedging and
by the physical product that is creating the risk. The following discussion addresses each category of risk.

Commodity Price Risk. The Company hedges its exposure to price fluctuations with respect to crude oil, refined products, natural
gas and NGLs, and expected purchases and sales of these commodities (relating primarily to crude oil, roofing flux, propane sales
and purchases of natural gasoline). The derivative instruments utilized consist primarily of futures and option contracts traded on
the NYMEX, ICE and over-the-counter transactions, including swap and option contracts entered into with financial institutions
and other energy companies. The Company’s policy is to transact only in commodity derivative products for which the Company
physically transacts, and to structure the Company’s hedging activities so that price fluctuations for those products do not
materially affect the net cash the Company ultimately receives from its commodity related marketing activities.

Although the Company seeks to maintain a position that is substantially balanced within the Company’s various commodity
purchase and sales activities, the Company may experience net unbalanced positions as a result of production, transportation and
delivery variances as well as logistical issues associated with inclement weather conditions.

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28

Although the intent of the Company’s risk management strategy is to hedge the Company’s margin, the Company has not

designated nor attempted to qualify for hedge accounting. Thus, changes in the fair values of all of the Company’s derivatives are

recognized in earnings, and result in greater potential for earnings volatility.

The fair value of futures contracts is based on quoted market prices obtained from the CME. The fair value of swaps and option

contracts is estimated based on quoted prices from various sources such as independent reporting services, industry publications

and brokers. These quotes are compared to the contract price of the swap, which approximates the gain or loss that would have

been realized if the contracts had been closed out at the period end. For positions where independent quotations are not available,

an estimate is provided, or the prevailing market price at which the positions could be liquidated is used. No such positions

existed as at December 31, 2014 and 2013. All derivative positions offset existing or anticipated physical exposures. Price-risk

sensitivities were calculated by assuming 15% volatility in crude oil and NGL related prices, regardless of term or historical

relationships between the contractual price of the instruments and the underlying commodity price. In the event of an increase or

decrease in prices, the fair value of the Company’s derivative portfolio would typically increase or decrease, offsetting changes in

the Company’s physical positions. A 15% favorable change would increase the Company’s net income by $5.6 million and

$3.1 million as of December 31, 2014 and 2013, respectively. A 15% unfavorable change would decrease the Company’s net

income by $5.6 million and $3.0 million as of December 31, 2014 and 2013, respectively. However, these changes may be offset

by the use of one or more risk management strategies.

Interest rate risks. Following the Notes offering, the Company’s long-term debt accrues interest at fixed interest rates and

accordingly, changes in market interest rates do not expose the Company to future interest cash outflow variability.

Under the Revolving Credit Facility, the Company is subject to interest rate risk, as borrowings bear interest at a rate equal to, at

the Company’s option, either U.S. LIBOR, U.S. Base Rate, Canadian Prime Rate or Canadian Bankers’ Acceptance rate, plus an

applicable margin based on the Company’s total leverage ratio. As at December 31, 2014, the Company had no amounts drawn

under the Revolving Credit Facility and accordingly, was not exposed to the interest rate cash flow risk.

Currency exchange risks. The Company’s monetary assets and liabilities in foreign currencies are translated at the period-end

rate. Exchange differences arising from this translation are recorded in the Company’s statement of operations. In addition,

currency exposures can arise from revenues and purchase transactions denominated in foreign currencies. Generally, transactional

currency exposures are naturally hedged (i.e., revenues and expenses are approximately matched), but where appropriate, are

covered using forward exchange contracts. All of the foreign currency forward exchange contracts entered into by the Company,

although effective hedges from an economic perspective, have not been designated as hedges for accounting purposes, and

therefore any gains and losses on such forward exchange contracts impact the Company’s earnings. A 5% unfavorable change in

the value of the Canadian dollar relative to the U.S. dollar would affect the fair value of the Company’s outstanding forward

currency contracts and options and would decrease the Company’s net income by $3.2 million and $5.3 million as at December

31, 2014 and 2013, respectively. A 5% favorable change would increase the Company’s net income by $3.2 million and

$5.1 million as at December 31, 2014 and 2013, respectively. The Company expects to continue to enter into financial

derivatives, primarily forward contracts, to reduce foreign exchange volatility.

Additionally, currency exposure occurs on a portion of the principal of the Company’s long-term debt and the related interest

payments, as they are denominated in U.S. dollars. As at December 31, 2014, the Company had outstanding U.S. dollar

denominated debt of U.S.$550.0 million.

As at December 31, 2014, the Company had U.S. dollar forward contracts to buy U.S. dollars at a weighted average rate of

$1.0242 for U.S.$1.00 for a notional amount of U.S.$250.0 million expiring on September 15, 2017 and the Company also sold

U.S. dollar call options at a strike price of $1.295 for U.S.$1.00 on a notional amount of U.S.$250.0 million expiring on

September 15, 2017. A 5% unfavorable change in the value of the Canadian dollar relative to the U.S. dollar would impact both

the carrying value of the Company’s long-term debt and the related foreign currency contracts and would decrease the Company’s

net income by $10.7 million and $11.6 million as at December 31, 2014 and 2013, respectively. A corresponding favorable

change would increase the Company’s net income by $10.7 million and $11.6 million as at December 31, 2014 and 2013,

respectively.

With respect to the related interest payments on the U.S. dollar denominated long-term debt, to date the Company has not entered

into any foreign currency hedges as the Company believes that it will generate enough U.S. dollar cash inflows to pay these

interest payments when due. Based on the interest rate in effect at December 31, 2014, a 5% unfavorable change in the value of

the Canadian dollar relative to the U.S. dollar as of December 31, 2014 would increase the Company’s annual interest expense by

$2.2 million. A 5% favorable change in the value of the Canadian dollar relative to the U.S. dollar as of December 31, 2014

would decrease the Company’s annual interest expense by $2.2 million.

Gibson Energy Inc.

TSX: GEI

DISTRIBUTABLE CASH FLOW

Distributable cash flow is not a standard measure under IFRS and, therefore, may not be comparable to similar measures reported

by other entities. Distributable cash flow is used to assess the level of cash flow generated from ongoing operations and to

evaluate the adequacy of internally generated cash flow to fund dividends. Changes in non-cash working capital are excluded

from the determination of distributable cash flow because they are primarily the result of fluctuations in product inventories or

other temporary changes. Upgrade and replacement capital expenditures are deducted from distributable cash flow as they are

ongoing recurring expenditures.

The following is a reconciliation of distributable cash flow to its most closely related IFRS measure, cash flow from operating

activities.

Adjustments:

Cash flow from operating activities ................................................................................................

$ 336,228

$ 331,631

Changes in non-cash working capital ................................................................................................ 105,291

Upgrade and replacement capital ................................................................................................

Cash interest expense, including capitalized interest ................................................................

(59,035)

(68,708)

Current income tax ................................................................................................................................(48,549)

Distributable cash flow ................................................................................................................................

$ 265,227

$ 253,178

Dividends declared to shareholders ................................................................................................

$ 148,573

$ 133,682

Year ended

December 31

2014

(in thousands)

2013

90,043

(69,513)

(46,909)

(52,074)

Dividends declared in the twelve months ended December 31, 2014 were $148.6 million, of which $112.5 million was paid in

cash and the balance was settled with the issuance of common shares under the Company’s DRIP and SDP. In the twelve months

ended December 31, 2014, dividends declared represented 56% of the distributable cash flow generated, or distributable cash

flow was 1.8 times dividends declared.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is involved in various commodity related marketing activities that are intended to enhance the Company’s

operations and increase profitability. These activities often create exposure to price risk between the time contracted volumes are

purchased and sold and to foreign exchange risk when contracts are in different currencies (Canadian dollar versus U.S. dollar).

The Company is also exposed to various market risks, including volatility in (i) crude oil, refined products, natural gas and NGL

prices, (ii) interest rates and (iii) currency exchange rates. The Company utilizes various derivative instruments from time to time

to manage commodity price, interest rate and currency exchange rate exposure and, in certain circumstances, to realize

incremental margin during volatile market conditions. The Company’s commodity trading and risk management policies and

procedures are designed to establish and manage to an approved level of Value at Risk. The Company has a Risk Management

Committee that has direct responsibility and authority for the Company’s risk policies and the Company’s trading controls and

procedures and certain aspects of corporate risk management. The Company’s approved strategies are intended to mitigate risks

that are inherent in the Company’s core businesses of aggregating and marketing and distribution. To hedge the risks discussed

above the Company engages in risk management activities that the Company categorizes by the risks the Company is hedging and

by the physical product that is creating the risk. The following discussion addresses each category of risk.

Commodity Price Risk. The Company hedges its exposure to price fluctuations with respect to crude oil, refined products, natural

gas and NGLs, and expected purchases and sales of these commodities (relating primarily to crude oil, roofing flux, propane sales

and purchases of natural gasoline). The derivative instruments utilized consist primarily of futures and option contracts traded on

the NYMEX, ICE and over-the-counter transactions, including swap and option contracts entered into with financial institutions

and other energy companies. The Company’s policy is to transact only in commodity derivative products for which the Company

physically transacts, and to structure the Company’s hedging activities so that price fluctuations for those products do not

materially affect the net cash the Company ultimately receives from its commodity related marketing activities.

Although the Company seeks to maintain a position that is substantially balanced within the Company’s various commodity

purchase and sales activities, the Company may experience net unbalanced positions as a result of production, transportation and

delivery variances as well as logistical issues associated with inclement weather conditions.

2014 Year End Report

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

Although the intent of the Company’s risk management strategy is to hedge the Company’s margin, the Company has not
designated nor attempted to qualify for hedge accounting. Thus, changes in the fair values of all of the Company’s derivatives are
recognized in earnings, and result in greater potential for earnings volatility.

The fair value of futures contracts is based on quoted market prices obtained from the CME. The fair value of swaps and option
contracts is estimated based on quoted prices from various sources such as independent reporting services, industry publications
and brokers. These quotes are compared to the contract price of the swap, which approximates the gain or loss that would have
been realized if the contracts had been closed out at the period end. For positions where independent quotations are not available,
an estimate is provided, or the prevailing market price at which the positions could be liquidated is used. No such positions
existed as at December 31, 2014 and 2013. All derivative positions offset existing or anticipated physical exposures. Price-risk
sensitivities were calculated by assuming 15% volatility in crude oil and NGL related prices, regardless of term or historical
relationships between the contractual price of the instruments and the underlying commodity price. In the event of an increase or
decrease in prices, the fair value of the Company’s derivative portfolio would typically increase or decrease, offsetting changes in
the Company’s physical positions. A 15% favorable change would increase the Company’s net income by $5.6 million and
$3.1 million as of December 31, 2014 and 2013, respectively. A 15% unfavorable change would decrease the Company’s net
income by $5.6 million and $3.0 million as of December 31, 2014 and 2013, respectively. However, these changes may be offset
by the use of one or more risk management strategies.

Interest rate risks. Following the Notes offering, the Company’s long-term debt accrues interest at fixed interest rates and
accordingly, changes in market interest rates do not expose the Company to future interest cash outflow variability.

Under the Revolving Credit Facility, the Company is subject to interest rate risk, as borrowings bear interest at a rate equal to, at
the Company’s option, either U.S. LIBOR, U.S. Base Rate, Canadian Prime Rate or Canadian Bankers’ Acceptance rate, plus an
applicable margin based on the Company’s total leverage ratio. As at December 31, 2014, the Company had no amounts drawn
under the Revolving Credit Facility and accordingly, was not exposed to the interest rate cash flow risk.

Currency exchange risks. The Company’s monetary assets and liabilities in foreign currencies are translated at the period-end
rate. Exchange differences arising from this translation are recorded in the Company’s statement of operations. In addition,
currency exposures can arise from revenues and purchase transactions denominated in foreign currencies. Generally, transactional
currency exposures are naturally hedged (i.e., revenues and expenses are approximately matched), but where appropriate, are
covered using forward exchange contracts. All of the foreign currency forward exchange contracts entered into by the Company,
although effective hedges from an economic perspective, have not been designated as hedges for accounting purposes, and
therefore any gains and losses on such forward exchange contracts impact the Company’s earnings. A 5% unfavorable change in
the value of the Canadian dollar relative to the U.S. dollar would affect the fair value of the Company’s outstanding forward
currency contracts and options and would decrease the Company’s net income by $3.2 million and $5.3 million as at December
31, 2014 and 2013, respectively. A 5% favorable change would increase the Company’s net income by $3.2 million and
$5.1 million as at December 31, 2014 and 2013, respectively. The Company expects to continue to enter into financial
derivatives, primarily forward contracts, to reduce foreign exchange volatility.

Additionally, currency exposure occurs on a portion of the principal of the Company’s long-term debt and the related interest
payments, as they are denominated in U.S. dollars. As at December 31, 2014, the Company had outstanding U.S. dollar
denominated debt of U.S.$550.0 million.

As at December 31, 2014, the Company had U.S. dollar forward contracts to buy U.S. dollars at a weighted average rate of
$1.0242 for U.S.$1.00 for a notional amount of U.S.$250.0 million expiring on September 15, 2017 and the Company also sold
U.S. dollar call options at a strike price of $1.295 for U.S.$1.00 on a notional amount of U.S.$250.0 million expiring on
September 15, 2017. A 5% unfavorable change in the value of the Canadian dollar relative to the U.S. dollar would impact both
the carrying value of the Company’s long-term debt and the related foreign currency contracts and would decrease the Company’s
net income by $10.7 million and $11.6 million as at December 31, 2014 and 2013, respectively. A corresponding favorable
change would increase the Company’s net income by $10.7 million and $11.6 million as at December 31, 2014 and 2013,
respectively.

With respect to the related interest payments on the U.S. dollar denominated long-term debt, to date the Company has not entered
into any foreign currency hedges as the Company believes that it will generate enough U.S. dollar cash inflows to pay these
interest payments when due. Based on the interest rate in effect at December 31, 2014, a 5% unfavorable change in the value of
the Canadian dollar relative to the U.S. dollar as of December 31, 2014 would increase the Company’s annual interest expense by
$2.2 million. A 5% favorable change in the value of the Canadian dollar relative to the U.S. dollar as of December 31, 2014
would decrease the Company’s annual interest expense by $2.2 million.

25
29

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

ACCOUNTING POLICIES

Critical accounting policies and estimates

The preparation of consolidated financial statements in conformity with IFRS requires management to make estimates and
assumptions. Predicting future events is inherently an imprecise activity and, as such, requires the use of judgment. Actual results
may vary from estimates in amounts that may be material to the financial statements. An accounting policy is deemed to be
critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time
the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that
are reasonably likely to occur periodically, could materially impact the Company’s consolidated financial statements. The
Company’s critical accounting policies and estimates are as follows:

Fair value of assets and liabilities acquired in a business combination. In conjunction with each business combination, the
Company must allocate the cost of the acquired entity to the assets and liabilities assumed based on their estimated fair values at
the date of acquisition. Determining the fair value of assets and liabilities acquired, as well as intangible assets that relate to such
items as customer relationships, brands, contracts, and industry expertise involves professional judgment and is ultimately based
on acquisition models and management’s assessment of the value of the assets acquired and, to the extent available, third party
assessments. Uncertainties associated with these estimates include changes in production volumes, changes in commodity prices,
fluctuations in capacity or product slates, economic obsolescence factors in the area and potential future sources of cash flow.
During the measurement period, the allocation of purchase price of the acquired entity may be adjusted when the initial
accounting for business combination is recorded based on provisional amounts. Although the resolution of these uncertainties has
not historically had a material impact on the Company’s results of operations or financial condition, the actual amounts may vary
significantly from estimated amounts. Any excess of the cost of acquisition over the net fair value of the identifiable assets
acquired is recognized as goodwill.

Recoverability of asset carrying values. The Company carries out impairment reviews in respect of goodwill at least annually or if
indicators of impairment exist. The Company also assesses during each reporting period whether there have been any events or
changes in circumstances that indicate that property, plant and equipment, inventories and other intangible assets may be impaired
and an impairment review is carried out whenever such an assessment indicates that the carrying amount may not be recoverable.
Such indicators include changes in the Company’s business plans, changes in activity levels, and an increase in the discount rate,
the intention of “holding” versus “selling” and evidence of physical damage. For the purposes of impairment testing, assets are
grouped at the lowest levels for which there are separately identifiable cash flows. Where impairment exists, the asset is written
down to its recoverable amount, which is the higher of the fair value less costs to sell and value in use. Impairments are
recognized immediately in the consolidated statement of operations.

The assessment for impairment entails comparing the carrying value of the asset or cash-generating unit with its recoverable
amount, that is, the higher of fair value less costs to sell and value in use. Value in use is usually determined on the basis of
discounted estimated future net cash flows. However, the determination as to whether and how much an asset is impaired involves
management estimates on highly uncertain matters such as the outlook for global or regional market supply-and-demand
conditions, future commodity prices, the effects of inflation on operating expenses and discount rates.

In the year ended December 31, 2014 and 2013, the Company did not have any impairment charge with respect to property, plant
and equipment, goodwill or intangible assets.

Income tax. Income tax expense represents the sum of the income tax currently payable and deferred income tax. Interest and
penalties relating to income tax are also included in income tax expense. Deferred income tax is provided for using the liability
method of accounting. Deferred income tax assets and liabilities are determined based on differences between the financial
reporting and income tax basis of assets and liabilities. These differences are then measured using enacted or substantially enacted
income tax rates and laws that will be in effect when these differences are expected to reverse. The effect of a change in income
tax rates on deferred tax assets and liabilities is recognized in income in the period that the change occurs.

Financial instruments. In situations where the Company is required to mark financial instruments to market, the estimates of

gains or losses at a particular period-end do not reflect the end results of particular transactions, and will most likely not reflect

the actual gain or loss at the conclusion of the underlying transactions. The Company reflects the fair value estimates for financial

instruments based on valuation information from third parties. The calculation of the fair value of certain of these financial

instruments is based on proprietary models and assumptions of third parties because such instruments are not quoted on an active

market. Additionally, estimates of fair value for such financial instruments may vary among different models due to a difference

in assumptions applied, such as the estimate of prevailing market prices, volatility, correlations and other factors, and may not be

reflective of the price at which they can be settled due to the lack of a liquid market. Although the resolution of these uncertainties

has not historically had a material impact on the Company’s results of operations or financial condition, the actual amounts may

vary significantly from estimated amounts.

Provisions and accrued liabilities. The Company uses estimates to record liabilities for obligations associated with site restoration

on the retirement of assets and environmental costs, taxes, potential legal claims, and other accruals and liabilities.

Liabilities for site restoration on the retirement of assets are recognized when the Company has an obligation to restore the site,

and when a reliable estimate of that liability can be made. An obligation may also crystallize during the period of operation of a

facility through a change in legislation or through a decision to terminate operations. The amount recognized is the present value

of the estimated future expenditure determined in accordance with local conditions and requirements. The present value is

determined by discounting the expenditures expected to be required to settle the obligation using a risk-free discount rate.

Estimated future expenditure is based on all known facts at the time and current expected plans for decommissioning. Among the

many uncertainties that may impact the estimates are changes in laws and regulations, public expectations, prices and changes in

technology. A corresponding item of property, plant and equipment of an amount equivalent to the provision is also recorded.

This is subsequently depreciated as part of the asset. Other than the unwinding discount on the provision, any change in the

present value of the estimated expenditure is reflected as an adjustment to the provision and the corresponding item of property,

plant and equipment. As a result of a change in the risk-free rate and upward revision to the initial costs estimates, the Company

recorded an increase to the provision of $40.5 million during the year ended December 31, 2014, with a corresponding increase to

property, plant and equipment.

Liabilities for environmental costs are recognized when a clean-up is probable and the associated costs can be reliably estimated.

Generally, the timing of recognition of these provisions coincides with the completion of a feasibility study or a commitment to a

formal plan of action. The amount recognized is the best estimate of the expenditure required. Where the liability will not be

settled for a number of years, the amount recognized is the present value of the estimated future expenditure. Estimated future

expenditure is based on all known facts at the time and an assessment of the ultimate outcome. A number of factors affect the cost

of environmental remediation, including the determination of the extent of contamination, the length of time remediation may

require, the complexity of environmental regulations and the advancement of remediation technology.

Other provisions and accrued liabilities are recognized in the period when it becomes probable that there will be a future outflow

of funds resulting from past operations or events and the amount of cash outflow can be reliably estimated. The timing of

recognition and quantification of the liability require the application of judgment to existing facts and circumstances, which can

be subject to change. Since the actual cash outflows can take place many years in the future, the carrying amounts of provisions

and liabilities are reviewed regularly and adjusted to take account of changing facts and circumstances. A change in estimate of a

recognized provision or accrued liability would result in a charge or credit to net income in the period in which the change occurs.

Amended standards adopted by the Company

or after January 1, 2014.

The Company adopted the following amendments to IFRS that were effective for the ﬁrst time for the ﬁnancial year beginning on

•

IAS 32, Financial Instruments, Presentation (‘‘IAS 32’’) has been amended to clarify the requirements for offsetting financial

assets and liabilities. The amendment clarifies that the right to offset must be available on the current date and cannot be

contingent on a future event. The Company adopted these amendments on January 1, 2014 which did not result in any

material impact on the consolidated financial statements.

IFRIC 21, Accounting for Levies imposed by governments (‘‘IFRIC 21’’) was issued which clarifies that the obligating event

giving rise to a liability to pay a levy is the activity described in the relevant legislation that triggers payment of the levy. The

Company adopted IFRIC 21 on January 1, 2014 which did not result in any material impact on the consolidated financial

statements.

26
30

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

ACCOUNTING POLICIES

Critical accounting policies and estimates

The preparation of consolidated financial statements in conformity with IFRS requires management to make estimates and

assumptions. Predicting future events is inherently an imprecise activity and, as such, requires the use of judgment. Actual results

may vary from estimates in amounts that may be material to the financial statements. An accounting policy is deemed to be

critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time

the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that

are reasonably likely to occur periodically, could materially impact the Company’s consolidated financial statements. The

Company’s critical accounting policies and estimates are as follows:

Fair value of assets and liabilities acquired in a business combination. In conjunction with each business combination, the

Company must allocate the cost of the acquired entity to the assets and liabilities assumed based on their estimated fair values at

the date of acquisition. Determining the fair value of assets and liabilities acquired, as well as intangible assets that relate to such

items as customer relationships, brands, contracts, and industry expertise involves professional judgment and is ultimately based

on acquisition models and management’s assessment of the value of the assets acquired and, to the extent available, third party

assessments. Uncertainties associated with these estimates include changes in production volumes, changes in commodity prices,

fluctuations in capacity or product slates, economic obsolescence factors in the area and potential future sources of cash flow.

During the measurement period, the allocation of purchase price of the acquired entity may be adjusted when the initial

accounting for business combination is recorded based on provisional amounts. Although the resolution of these uncertainties has

not historically had a material impact on the Company’s results of operations or financial condition, the actual amounts may vary

significantly from estimated amounts. Any excess of the cost of acquisition over the net fair value of the identifiable assets

acquired is recognized as goodwill.

Recoverability of asset carrying values. The Company carries out impairment reviews in respect of goodwill at least annually or if

indicators of impairment exist. The Company also assesses during each reporting period whether there have been any events or

changes in circumstances that indicate that property, plant and equipment, inventories and other intangible assets may be impaired

and an impairment review is carried out whenever such an assessment indicates that the carrying amount may not be recoverable.

Such indicators include changes in the Company’s business plans, changes in activity levels, and an increase in the discount rate,

the intention of “holding” versus “selling” and evidence of physical damage. For the purposes of impairment testing, assets are

grouped at the lowest levels for which there are separately identifiable cash flows. Where impairment exists, the asset is written

down to its recoverable amount, which is the higher of the fair value less costs to sell and value in use. Impairments are

recognized immediately in the consolidated statement of operations.

The assessment for impairment entails comparing the carrying value of the asset or cash-generating unit with its recoverable

amount, that is, the higher of fair value less costs to sell and value in use. Value in use is usually determined on the basis of

discounted estimated future net cash flows. However, the determination as to whether and how much an asset is impaired involves

management estimates on highly uncertain matters such as the outlook for global or regional market supply-and-demand

conditions, future commodity prices, the effects of inflation on operating expenses and discount rates.

In the year ended December 31, 2014 and 2013, the Company did not have any impairment charge with respect to property, plant

and equipment, goodwill or intangible assets.

Income tax. Income tax expense represents the sum of the income tax currently payable and deferred income tax. Interest and

penalties relating to income tax are also included in income tax expense. Deferred income tax is provided for using the liability

method of accounting. Deferred income tax assets and liabilities are determined based on differences between the financial

reporting and income tax basis of assets and liabilities. These differences are then measured using enacted or substantially enacted

income tax rates and laws that will be in effect when these differences are expected to reverse. The effect of a change in income

tax rates on deferred tax assets and liabilities is recognized in income in the period that the change occurs.

The computation of the Company’s income tax expense involves the interpretation of applicable tax laws and regulations in many

jurisdictions. The resolution of tax positions taken by the Company can take significant time to complete and in some cases it is

difficult to predict the ultimate outcome. In addition, the Company has carry-forward tax losses in certain taxing jurisdictions that

are available to offset against future taxable profit. However, deferred income tax assets are recognized only to the extent that it is

probable that taxable profit will be available against which the unused tax losses can be utilized. Management judgement is

exercised in assessing whether this is the case. To the extent that actual outcomes differ from management’s estimates, income tax

charges or credits may arise in future periods.

Financial instruments. In situations where the Company is required to mark financial instruments to market, the estimates of
gains or losses at a particular period-end do not reflect the end results of particular transactions, and will most likely not reflect
the actual gain or loss at the conclusion of the underlying transactions. The Company reflects the fair value estimates for financial
instruments based on valuation information from third parties. The calculation of the fair value of certain of these financial
instruments is based on proprietary models and assumptions of third parties because such instruments are not quoted on an active
market. Additionally, estimates of fair value for such financial instruments may vary among different models due to a difference
in assumptions applied, such as the estimate of prevailing market prices, volatility, correlations and other factors, and may not be
reflective of the price at which they can be settled due to the lack of a liquid market. Although the resolution of these uncertainties
has not historically had a material impact on the Company’s results of operations or financial condition, the actual amounts may
vary significantly from estimated amounts.

Provisions and accrued liabilities. The Company uses estimates to record liabilities for obligations associated with site restoration
on the retirement of assets and environmental costs, taxes, potential legal claims, and other accruals and liabilities.

Liabilities for site restoration on the retirement of assets are recognized when the Company has an obligation to restore the site,
and when a reliable estimate of that liability can be made. An obligation may also crystallize during the period of operation of a
facility through a change in legislation or through a decision to terminate operations. The amount recognized is the present value
of the estimated future expenditure determined in accordance with local conditions and requirements. The present value is
determined by discounting the expenditures expected to be required to settle the obligation using a risk-free discount rate.
Estimated future expenditure is based on all known facts at the time and current expected plans for decommissioning. Among the
many uncertainties that may impact the estimates are changes in laws and regulations, public expectations, prices and changes in
technology. A corresponding item of property, plant and equipment of an amount equivalent to the provision is also recorded.
This is subsequently depreciated as part of the asset. Other than the unwinding discount on the provision, any change in the
present value of the estimated expenditure is reflected as an adjustment to the provision and the corresponding item of property,
plant and equipment. As a result of a change in the risk-free rate and upward revision to the initial costs estimates, the Company
recorded an increase to the provision of $40.5 million during the year ended December 31, 2014, with a corresponding increase to
property, plant and equipment.

Liabilities for environmental costs are recognized when a clean-up is probable and the associated costs can be reliably estimated.
Generally, the timing of recognition of these provisions coincides with the completion of a feasibility study or a commitment to a
formal plan of action. The amount recognized is the best estimate of the expenditure required. Where the liability will not be
settled for a number of years, the amount recognized is the present value of the estimated future expenditure. Estimated future
expenditure is based on all known facts at the time and an assessment of the ultimate outcome. A number of factors affect the cost
of environmental remediation, including the determination of the extent of contamination, the length of time remediation may
require, the complexity of environmental regulations and the advancement of remediation technology.

Other provisions and accrued liabilities are recognized in the period when it becomes probable that there will be a future outflow
of funds resulting from past operations or events and the amount of cash outflow can be reliably estimated. The timing of
recognition and quantification of the liability require the application of judgment to existing facts and circumstances, which can
be subject to change. Since the actual cash outflows can take place many years in the future, the carrying amounts of provisions
and liabilities are reviewed regularly and adjusted to take account of changing facts and circumstances. A change in estimate of a
recognized provision or accrued liability would result in a charge or credit to net income in the period in which the change occurs.

Amended standards adopted by the Company

The Company adopted the following amendments to IFRS that were effective for the ﬁrst time for the ﬁnancial year beginning on
or after January 1, 2014.

•

IAS 32, Financial Instruments, Presentation (‘‘IAS 32’’) has been amended to clarify the requirements for offsetting financial
assets and liabilities. The amendment clarifies that the right to offset must be available on the current date and cannot be
contingent on a future event. The Company adopted these amendments on January 1, 2014 which did not result in any
material impact on the consolidated financial statements.

IFRIC 21, Accounting for Levies imposed by governments (‘‘IFRIC 21’’) was issued which clarifies that the obligating event
giving rise to a liability to pay a levy is the activity described in the relevant legislation that triggers payment of the levy. The
Company adopted IFRIC 21 on January 1, 2014 which did not result in any material impact on the consolidated financial
statements.

27
31

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

•

IFRS 2, Share based payments (‘‘IFRS 2’’) has been amended to clarify the definition of vesting conditions. The amendment
clarifies that the vesting condition is either a service or performance condition and separately defines these two conditions.
The Company adopted these amendments on July 1, 2014 which did not result in any impact on the consolidated financial
statements.

IFRS 3, Business combinations (‘‘IFRS 3’’) has been amended to clarify that an obligation to pay contingent consideration
which meets the definition of a financial instrument is classified as a financial liability or as equity, on the basis of the
definitions in IAS 32. The standard is further amended to clarify that all non-equity contingent consideration, both financial
and non-financial, is measured at fair value at each reporting date, with changes in fair value recognized in profit and loss.
The Company adopted these amendments on July 1, 2014 which did not result in any impact on the consolidated financial
statements.

New standards and interpretations issued but not yet adopted

•
The annual improvements process addresses issues in the 2012-2014 reporting cycles including changes to IFRS 5, Non-
current assets held for sale and discontinued operations, IFRS 7, Financial instruments: Disclosures, IAS 19, Employee
benefits, and IAS 34, Interim financial reporting. These improvements are effective for periods beginning on or after January
1, 2016. The Company is currently evaluating the impact of adopting these improvements on its consolidated financial
statements.

• The annual improvements process addresses issues in the 2010-2012 and 2011-2013 reporting cycles including changes to
IFRS 13, Fair value measurements, IFRS 8, Operating segments and IAS 24, Related party transactions. These improvements
are effective for annual periods beginning on or after July 1, 2014. The Company is currently evaluating the impact of
adopting these improvements on its consolidated financial statements.

•

IAS 19, Employee benefits, has been amended to clarify the application of requirements to plans that require employees or
third parties to contribute toward the cost of the benefits. The amendment to IAS 19 is effective for annual periods beginning
on or after July 1, 2014. The Company is currently evaluating the impact of adopting these improvements on its consolidated
financial statements.

IAS 16, Property Plant and Equipment (“IAS 16”), and IAS 38, Intangible Assets (“IAS 38”), has been amended to (i) clarify
that the use of a revenue-based depreciation and amortization method is not appropriate, and (ii) provide a rebuttable
presumption that amortization of an intangible asset based on revenue generated by using the asset is inappropriate. The
amendments to IAS 16 and IAS 38 are effective for annual periods beginning on or after January 1, 2016. The Company is
currently evaluating the impact of adopting these amendments on its consolidated financial statements.

IFRS 10, Consolidated financial statements (“IFRS 10”), and IAS 28, Investments in associates and joint ventures (“IAS
28”), has been amended to address an inconsistency between IFRS 10 and IAS 28 in regards to a sale or contribution of
assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or
loss is recognized when the transaction involves a business combination, and whereas a partial gain is recognized when the
transaction involves the assets that do not constitute a business. Additionally, the amendments clarify the exception from
preparing consolidated financial statements, the consolidation requirements for subsidiaries which act as an extension of an
investment entity, and the requirements for equity accounting for investments in associates and joint ventures. The
amendments to IFRS 10 and IAS 28 are effective for annual periods beginning on or after January 1, 2016. The Company is
currently evaluating the impact of adopting these amendments on its consolidated financial statements.

IFRS 11, Accounting for acquisitions of interests in joint operations (“IFRS 11”), has been amended to provide specific
guidance on accounting for the acquisition of an interest in a joint operation that is a business. The amendment to IFRS 11 is
effective for annual periods beginning on or after January 1, 2016. The Company is currently evaluating the impact of
adopting these amendments on its consolidated financial statements.

IFRS 15, Revenue from contracts with customers (“IFRS 15”), has been issued as a new standard on revenue recognition and
will supersede IAS 18, Revenue, IAS 11, Construction Contracts and related interpretations. IFRS 15 is effective for annual
periods beginning on or after January 1, 2017. The Company is currently evaluating the impact of adopting this standard on
its consolidated financial statements.

•
The International Accounting Standards Board (“IASB”) completed the final element of its comprehensive publication of
IFRS 9 Financial Instruments in July 2014. The package of improvements introduced by IFRS 9 includes a logical model for

classification and measurement, a single, forward-looking ‘expected loss’ impairment model and a substantially-reformed

approach to hedge accounting. The IASB has previously published versions of IFRS 9 that introduced new classification and

measurement requirements (in 2009 and 2010) and a new hedge accounting model (in 2013). The July 2014 publication

represents the final version of the Standard, replaces earlier versions of IFRS 9 and completes the IASB’s project to replace

IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 is effective for annual periods beginning on or after 1

January 2018. The Company is currently evaluating the impact of adopting this standard on its consolidated financial

statements.

•

IAS 1, Presentation of financial statements (“IAS 1”), has been amended to clarify the guidance on materiality and

aggregation, the presentation of subtotals, the structure of financial statements and the disclosure of accounting policies. The

amendment to IAS 1 is effective for annual periods beginning on or after January 1, 2016. The Company is currently

evaluating the impact of adopting these amendments on its consolidated financial statements.

DISCLOSURE CONTROLS & PROCEDURES

As part of the requirements mandated by the Canadian securities regulatory authorities under National Instrument 52-109-

Certification of Disclosure in Issuers' Annual and Interim Filings ("NI 52-109"), the Company’s Chief Executive Officer ("CEO")

and the Chief Financial Officer ("CFO") have evaluated the design and operation of the Company's disclosure controls and

procedures ("DC&P"), as such term is defined in NI 52-109, as at December 31, 2014. The CEO and CFO are also responsible for

establishing and maintaining internal controls over financial reporting, ("ICFR"), as such term is defined in NI 52-109. In making

its assessment, management used the Committee of Sponsoring Organizations of the Treadway Commission framework in

Internal Control – Integrated Framework (2013) to evaluate the design and effectiveness of internal control over financial

reporting. These controls are designed to provide reasonable assurance regarding the reliability of the Company’s financial

reporting and compliance with IFRS. The Company’s CEO and CFO have evaluated, or caused to be evaluated under their

supervision, the design and operational effectiveness of such controls as at December 31, 2014.

In accordance with the provisions of NI 52-109, management, including the CEO and CFO, have limited the scope of their design

of the Company's DC&P and ICFR to exclude controls, policies and procedures of Cal-Gas and Stittco. Gibson acquired Cal-Gas

and Stittco on August 1, 2014, and April 1, 2014, respectively. Cal-Gas and Stittco’s contribution to the Company's audited

consolidated financial statements for the year ended December 31, 2014 was approximately $61.8 million of consolidated net

revenues and approximately $3.1 million of consolidated income before tax. Additionally, as at December 31, 2014, Cal-Gas and

Stittco’s current assets and current liabilities were approximately $43.8 million and $13.3 million, respectively, and its non-

current assets and non-current liabilities were approximately $112.6 million and $13.6 million, respectively The scope limitation

is primarily due to the time required for the Company’s management to assess Cal-Gas and Stittco’s DC&P and ICFR in a manner

consistent with the Company's other operations.

Based on the evaluation of the design and operating effectiveness of the Company’s DC&P and ICFR, the CEO and the CFO

concluded that Gibson's DC&P and ICFR were effective as at December 31, 2014. There have been no changes in ICFR that

occurred during the period beginning January 1, 2014 and ended on December 31, 2014 that has materially affected or is

reasonably likely to materially affect Gibson’s ICFR.

28
32

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

•

statements.

IFRS 2, Share based payments (‘‘IFRS 2’’) has been amended to clarify the definition of vesting conditions. The amendment

clarifies that the vesting condition is either a service or performance condition and separately defines these two conditions.

The Company adopted these amendments on July 1, 2014 which did not result in any impact on the consolidated financial

IFRS 3, Business combinations (‘‘IFRS 3’’) has been amended to clarify that an obligation to pay contingent consideration

which meets the definition of a financial instrument is classified as a financial liability or as equity, on the basis of the

definitions in IAS 32. The standard is further amended to clarify that all non-equity contingent consideration, both financial

and non-financial, is measured at fair value at each reporting date, with changes in fair value recognized in profit and loss.

The Company adopted these amendments on July 1, 2014 which did not result in any impact on the consolidated financial

New standards and interpretations issued but not yet adopted

The annual improvements process addresses issues in the 2012-2014 reporting cycles including changes to IFRS 5, Non-

current assets held for sale and discontinued operations, IFRS 7, Financial instruments: Disclosures, IAS 19, Employee

benefits, and IAS 34, Interim financial reporting. These improvements are effective for periods beginning on or after January

1, 2016. The Company is currently evaluating the impact of adopting these improvements on its consolidated financial

• The annual improvements process addresses issues in the 2010-2012 and 2011-2013 reporting cycles including changes to

IFRS 13, Fair value measurements, IFRS 8, Operating segments and IAS 24, Related party transactions. These improvements

are effective for annual periods beginning on or after July 1, 2014. The Company is currently evaluating the impact of

adopting these improvements on its consolidated financial statements.

IAS 19, Employee benefits, has been amended to clarify the application of requirements to plans that require employees or

third parties to contribute toward the cost of the benefits. The amendment to IAS 19 is effective for annual periods beginning

on or after July 1, 2014. The Company is currently evaluating the impact of adopting these improvements on its consolidated

financial statements.

IAS 16, Property Plant and Equipment (“IAS 16”), and IAS 38, Intangible Assets (“IAS 38”), has been amended to (i) clarify

that the use of a revenue-based depreciation and amortization method is not appropriate, and (ii) provide a rebuttable

presumption that amortization of an intangible asset based on revenue generated by using the asset is inappropriate. The

amendments to IAS 16 and IAS 38 are effective for annual periods beginning on or after January 1, 2016. The Company is

currently evaluating the impact of adopting these amendments on its consolidated financial statements.

IFRS 10, Consolidated financial statements (“IFRS 10”), and IAS 28, Investments in associates and joint ventures (“IAS

28”), has been amended to address an inconsistency between IFRS 10 and IAS 28 in regards to a sale or contribution of

assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or

loss is recognized when the transaction involves a business combination, and whereas a partial gain is recognized when the

transaction involves the assets that do not constitute a business. Additionally, the amendments clarify the exception from

preparing consolidated financial statements, the consolidation requirements for subsidiaries which act as an extension of an

investment entity, and the requirements for equity accounting for investments in associates and joint ventures. The

amendments to IFRS 10 and IAS 28 are effective for annual periods beginning on or after January 1, 2016. The Company is

currently evaluating the impact of adopting these amendments on its consolidated financial statements.

IFRS 11, Accounting for acquisitions of interests in joint operations (“IFRS 11”), has been amended to provide specific

guidance on accounting for the acquisition of an interest in a joint operation that is a business. The amendment to IFRS 11 is

effective for annual periods beginning on or after January 1, 2016. The Company is currently evaluating the impact of

adopting these amendments on its consolidated financial statements.

IFRS 15, Revenue from contracts with customers (“IFRS 15”), has been issued as a new standard on revenue recognition and

will supersede IAS 18, Revenue, IAS 11, Construction Contracts and related interpretations. IFRS 15 is effective for annual

periods beginning on or after January 1, 2017. The Company is currently evaluating the impact of adopting this standard on

its consolidated financial statements.

The International Accounting Standards Board (“IASB”) completed the final element of its comprehensive publication of

IFRS 9 Financial Instruments in July 2014. The package of improvements introduced by IFRS 9 includes a logical model for

classification and measurement, a single, forward-looking ‘expected loss’ impairment model and a substantially-reformed
approach to hedge accounting. The IASB has previously published versions of IFRS 9 that introduced new classification and
measurement requirements (in 2009 and 2010) and a new hedge accounting model (in 2013). The July 2014 publication
represents the final version of the Standard, replaces earlier versions of IFRS 9 and completes the IASB’s project to replace
IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 is effective for annual periods beginning on or after 1
January 2018. The Company is currently evaluating the impact of adopting this standard on its consolidated financial
statements.

•

IAS 1, Presentation of financial statements (“IAS 1”), has been amended to clarify the guidance on materiality and
aggregation, the presentation of subtotals, the structure of financial statements and the disclosure of accounting policies. The
amendment to IAS 1 is effective for annual periods beginning on or after January 1, 2016. The Company is currently
evaluating the impact of adopting these amendments on its consolidated financial statements.

DISCLOSURE CONTROLS & PROCEDURES

As part of the requirements mandated by the Canadian securities regulatory authorities under National Instrument 52-109-
Certification of Disclosure in Issuers' Annual and Interim Filings ("NI 52-109"), the Company’s Chief Executive Officer ("CEO")
and the Chief Financial Officer ("CFO") have evaluated the design and operation of the Company's disclosure controls and
procedures ("DC&P"), as such term is defined in NI 52-109, as at December 31, 2014. The CEO and CFO are also responsible for
establishing and maintaining internal controls over financial reporting, ("ICFR"), as such term is defined in NI 52-109. In making
its assessment, management used the Committee of Sponsoring Organizations of the Treadway Commission framework in
Internal Control – Integrated Framework (2013) to evaluate the design and effectiveness of internal control over financial
reporting. These controls are designed to provide reasonable assurance regarding the reliability of the Company’s financial
reporting and compliance with IFRS. The Company’s CEO and CFO have evaluated, or caused to be evaluated under their
supervision, the design and operational effectiveness of such controls as at December 31, 2014.

In accordance with the provisions of NI 52-109, management, including the CEO and CFO, have limited the scope of their design
of the Company's DC&P and ICFR to exclude controls, policies and procedures of Cal-Gas and Stittco. Gibson acquired Cal-Gas
and Stittco on August 1, 2014, and April 1, 2014, respectively. Cal-Gas and Stittco’s contribution to the Company's audited
consolidated financial statements for the year ended December 31, 2014 was approximately $61.8 million of consolidated net
revenues and approximately $3.1 million of consolidated income before tax. Additionally, as at December 31, 2014, Cal-Gas and
Stittco’s current assets and current liabilities were approximately $43.8 million and $13.3 million, respectively, and its non-
current assets and non-current liabilities were approximately $112.6 million and $13.6 million, respectively The scope limitation
is primarily due to the time required for the Company’s management to assess Cal-Gas and Stittco’s DC&P and ICFR in a manner
consistent with the Company's other operations.

Based on the evaluation of the design and operating effectiveness of the Company’s DC&P and ICFR, the CEO and the CFO
concluded that Gibson's DC&P and ICFR were effective as at December 31, 2014. There have been no changes in ICFR that
occurred during the period beginning January 1, 2014 and ended on December 31, 2014 that has materially affected or is
reasonably likely to materially affect Gibson’s ICFR.

29
33

This MD&A refers to certain financial measures that are not determined in accordance with IFRS. EBITDA, Adjusted EBITDA,

Pro Forma Adjusted EBITDA and distributable cash flow are not measures recognized under IFRS and do not have standardized

meanings prescribed by IFRS. Management considers these to be important supplemental measures of the Company’s

performance and believes these measures are frequently used by securities analysts, investors and other interested parties in the

evaluation of companies in industries with similar capital structures. See ‘‘Summary of Quarterly Results” for a reconciliation of

EBITDA to net income (loss), the IFRS measure most directly comparable to EBITDA, and for a reconciliation of Adjusted

EBITDA and Pro Forma Adjusted EBITDA to EBITDA. Distributable cash flow is used to assess the level of cash flow generated

from ongoing operations and to evaluate the adequacy of internally generated cash flow to fund dividends. See ‘‘Distributable

Cash Flow” for a reconciliation of distributable cash flow to cash flow from operations, the IFRS measure most directly

comparable to distributable cash flow.

Readers are encouraged to evaluate each adjustment and the reasons the Company considers it appropriate for supplemental

analysis. Readers are cautioned, however, that these measures should not be construed as an alternative to net income (loss)

determined in accordance with IFRS as an indication of the Company’s performance.

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

FORWARD-LOOKING STATEMENTS

NON-GAAP FINANCIAL MEASURES

Certain statements contained in this MD&A constitute forward-looking statements. These statements relate to future events or the
Company’s future performance. All statements other than statements of historical fact are forward-looking statements. The use of
any of the words ‘‘anticipate’’, ‘‘plan’’, ‘‘contemplate’’, ‘‘continue’’, ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘propose’’, ‘‘might’’,
‘‘may’’, ‘‘will’’, ‘‘shall’’, ‘‘project’’, ‘‘should’’, ‘‘could’’, ‘‘would’’, ‘‘believe’’, ‘‘predict’’, ‘‘forecast’’, ‘‘pursue’’, ‘‘potential’’
and ‘‘capable’’ and similar expressions are intended to identify forward-looking statements. These statements involve known and
unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated
in such forward-looking statements. No assurance can be given that these expectations will prove to be correct and such forward-
looking statements included in this MD&A should not be unduly relied upon. These statements speak only as of the date of this
MD&A. In particular, this MD&A contains forward-looking statements pertaining to the following:

•
•
•
•
•

•
•
•

•

•
•
•

the addition of assets to the business and the increase in the number of services to be offered by the Company;
the Company's investment in new equipment, technology, facilities and personnel;
the Company's growth strategy to expand in existing and new markets;
the availability of sufficient liquidity for planned growth;
new technology and drilling methodology being deployed towards conventional and unconventional production within the
Company's operating areas;
uncertainty and volatility relating to crude prices and price differentials between crude oil streams and blending agents;
increased crude oil production and exploration activity on shore in North America, including from the Canadian oil sands;
the expansion of midstream infrastructure in North America to handle increased production and expansion of capacity in the
U.S. refining complex to handle heavier crude oil from the WCSB;
the effect of competition in regions of North America and its impact on downward pricing pressure and regional crude oil
price differentials among crude oil grades and locations;
the effect of market volatility on the Company's marketing revenues and activities;
the Company's ability to pay down and retire indebtedness;
the Company's plans for additional strategic acquisitions, capital expenditures or other similar transaction, including the
costs thereof;
the Company's planned hedging activities;
the Company's projections of commodity purchase and sales activities;
the Company's projections of currency and interest rate fluctuations;
the Company’s projections of a growing dividend; and
the Company's dividend policy and continuing availability of the Company’s DRIP and SDP.

•
•
•
•
•
With respect to forward-looking statements contained in this MD&A, assumptions have been made regarding, among other
things:

•
•
•
•

•

•
•
•
•
•
•

future growth in world-wide demand for crude oil and petroleum products;
crude oil prices supporting increased production and services in North America, including the Canadian oil sands;
no material defaults by the counterparties to agreements with the Company;
the Company's ability to obtain qualified personnel, owner-operators, lease operators and equipment in a timely and cost-
efficient manner;
the regulatory framework governing taxes and environmental matters in the jurisdictions in which the Company conducts
and will conduct its business;
operating costs;
future capital expenditures to be made by the Company;
the Company's ability to obtain financing for its capital programs on acceptable terms;
the Company's future debt levels;
the impact of increasing competition on the Company; and
the impact of future changes in accounting policies on the Company’s consolidated financial statements.

In addition, this MD&A may contain forward-looking statements and forward-looking information attributed to third party
industry sources. The Company does not undertake any obligations to publicly update or revise any forward-looking statements
except as required by securities law. Actual results could differ materially from those anticipated in these forward-looking
statements as a result of numerous risks and uncertainties including, but not limited to, the risks and uncertainties described in
“Forward-Looking Statements” and “Risk Factors” included in the Company’s Annual Information Form dated March 3, 2015
as filed on SEDAR at www.sedar.com and available on the Gibson website at www.gibsons.com.

30
34

Gibson Energy Inc.

TSX: GEI

2014 Year End Report

Gibson Energy Inc.
TSX: GEI

2014 Year End Report

NON-GAAP FINANCIAL MEASURES
This MD&A refers to certain financial measures that are not determined in accordance with IFRS. EBITDA, Adjusted EBITDA,
Pro Forma Adjusted EBITDA and distributable cash flow are not measures recognized under IFRS and do not have standardized
meanings prescribed by IFRS. Management considers these to be important supplemental measures of the Company’s
performance and believes these measures are frequently used by securities analysts, investors and other interested parties in the
evaluation of companies in industries with similar capital structures. See ‘‘Summary of Quarterly Results” for a reconciliation of
EBITDA to net income (loss), the IFRS measure most directly comparable to EBITDA, and for a reconciliation of Adjusted
EBITDA and Pro Forma Adjusted EBITDA to EBITDA. Distributable cash flow is used to assess the level of cash flow generated
from ongoing operations and to evaluate the adequacy of internally generated cash flow to fund dividends. See ‘‘Distributable
Cash Flow” for a reconciliation of distributable cash flow to cash flow from operations, the IFRS measure most directly
comparable to distributable cash flow.

Readers are encouraged to evaluate each adjustment and the reasons the Company considers it appropriate for supplemental
analysis. Readers are cautioned, however, that these measures should not be construed as an alternative to net income (loss)
determined in accordance with IFRS as an indication of the Company’s performance.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this MD&A constitute forward-looking statements. These statements relate to future events or the

Company’s future performance. All statements other than statements of historical fact are forward-looking statements. The use of

any of the words ‘‘anticipate’’, ‘‘plan’’, ‘‘contemplate’’, ‘‘continue’’, ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘propose’’, ‘‘might’’,

‘‘may’’, ‘‘will’’, ‘‘shall’’, ‘‘project’’, ‘‘should’’, ‘‘could’’, ‘‘would’’, ‘‘believe’’, ‘‘predict’’, ‘‘forecast’’, ‘‘pursue’’, ‘‘potential’’

and ‘‘capable’’ and similar expressions are intended to identify forward-looking statements. These statements involve known and

unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated

in such forward-looking statements. No assurance can be given that these expectations will prove to be correct and such forward-

looking statements included in this MD&A should not be unduly relied upon. These statements speak only as of the date of this

MD&A. In particular, this MD&A contains forward-looking statements pertaining to the following:

the addition of assets to the business and the increase in the number of services to be offered by the Company;

the Company's investment in new equipment, technology, facilities and personnel;

the Company's growth strategy to expand in existing and new markets;

the availability of sufficient liquidity for planned growth;

new technology and drilling methodology being deployed towards conventional and unconventional production within the

Company's operating areas;

uncertainty and volatility relating to crude prices and price differentials between crude oil streams and blending agents;

increased crude oil production and exploration activity on shore in North America, including from the Canadian oil sands;

the expansion of midstream infrastructure in North America to handle increased production and expansion of capacity in the

U.S. refining complex to handle heavier crude oil from the WCSB;

the effect of competition in regions of North America and its impact on downward pricing pressure and regional crude oil

price differentials among crude oil grades and locations;

the effect of market volatility on the Company's marketing revenues and activities;

the Company's ability to pay down and retire indebtedness;

the Company's plans for additional strategic acquisitions, capital expenditures or other similar transaction, including the

costs thereof;

the Company's planned hedging activities;

the Company's projections of commodity purchase and sales activities;

the Company's projections of currency and interest rate fluctuations;

the Company’s projections of a growing dividend; and

the Company's dividend policy and continuing availability of the Company’s DRIP and SDP.

With respect to forward-looking statements contained in this MD&A, assumptions have been made regarding, among other

things:

future growth in world-wide demand for crude oil and petroleum products;

crude oil prices supporting increased production and services in North America, including the Canadian oil sands;

no material defaults by the counterparties to agreements with the Company;

the Company's ability to obtain qualified personnel, owner-operators, lease operators and equipment in a timely and cost-

the regulatory framework governing taxes and environmental matters in the jurisdictions in which the Company conducts

efficient manner;

and will conduct its business;

operating costs;

future capital expenditures to be made by the Company;

the Company's ability to obtain financing for its capital programs on acceptable terms;

the Company's future debt levels;

the impact of increasing competition on the Company; and

the impact of future changes in accounting policies on the Company’s consolidated financial statements.

In addition, this MD&A may contain forward-looking statements and forward-looking information attributed to third party

industry sources. The Company does not undertake any obligations to publicly update or revise any forward-looking statements

except as required by securities law. Actual results could differ materially from those anticipated in these forward-looking

statements as a result of numerous risks and uncertainties including, but not limited to, the risks and uncertainties described in

“Forward-Looking Statements” and “Risk Factors” included in the Company’s Annual Information Form dated March 3, 2015

as filed on SEDAR at www.sedar.com and available on the Gibson website at www.gibsons.com.

•

31
35

Gibson Energy Inc.

Consolidated Financial Statements

For the year ended December 31, 2014

(in thousands of Canadian dollars)

Gibson Energy Inc.

Consolidated Financial Statements
For the year ended December 31, 2014
(in thousands of Canadian dollars)

March 3, 2015

Independent Auditor’s Report

To the Shareholders of Gibson Energy Inc.

We have audited the accompanying consolidated financial statements of Gibson Energy Inc., which comprise
the consolidated balance sheets as at December 31, 2014 and December 31, 2013 and the consolidated
statements of operations, comprehensive income, changes in equity and cash flows for the years then ended,
and the related notes, which comprise a summary of significant accounting policies and other explanatory
information.

Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements
in accordance with International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.

Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis
for our audit opinion.

Equity

Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of Gibson Energy Inc. as at December 31, 2014 and December 31, 2013 and its financial performance and its cash
flows for the years then ended in accordance with International Financial Reporting Standards.

Chartered Accountants

PricewaterhouseCoopers LLP
111 5th Avenue SW, Suite 3100, Calgary, Alberta, Canada T2P 5L3
T: 403 509 7500, F: 403 781 1825, www.pwc.com/ca

“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

Gibson Energy Inc.

Consolidated Balance Sheet

(tabular amounts in thousands of Canadian dollars)

Assets

Current assets

December 31,

2014

2013

Cash and cash equivalents ................................................................................................

$ 131,911

Trade and other receivables (note 6) .................................................................................

Inventories (note 7) ...........................................................................................................

Income taxes receivable ....................................................................................................

Prepaid expenses and other assets .....................................................................................

Net investment in finance leases (note 8) ..........................................................................

Total current assets ............................................................................................................

641,283

154,937

12,100

24,366

908

965,505

Non-current assets

Property, plant and equipment (note 9) .............................................................................

1,494,569

1,119,856

Long-term prepaid expenses and other assets (note 10) ....................................................

Net investment in finance leases (note 8) ..........................................................................

Deferred income tax assets (note 11) ................................................................................

Intangible assets (note 12) .................................................................................................

Goodwill (note 13) ............................................................................................................

Total non-current assets ....................................................................................................

39,778

94,387

3,532

191,537

783,721

2,607,524

Total assets ..............................................................................................................................

$ 3,573,029

$ 3,049,382

Liabilities

Current liabilities

Trade payables and accrued charges (note 15) ..................................................................

Dividends payable (note 18) .............................................................................................

Deferred revenue ...............................................................................................................

Income taxes payable ........................................................................................................

Total current liabilities ......................................................................................................

581,463

37,346

19,042

122

637,973

Non-current liabilities

Long-term debt (note 14) ..................................................................................................

1,165,368

Provisions (note 16) ..........................................................................................................

Other long-term liabilities (note 17) ..................................................................................

Deferred income tax liabilities (note 11) ...........................................................................

Total non-current liabilities ...............................................................................................

Total liabilities ..................................................................................................................

136,347

14,810

191,351

1,507,876

2,145,849

97,182

592,850

156,419

7,534

25,170

765

879,920

19,640

93,236

8,187

202,395

726,148

2,169,462

565,179

33,605

2,847

20,535

622,166

757,566

91,424

15,487

194,105

1,058,582

1,680,748

Share capital (note 18) ......................................................................................................

1,634,001

1,585,145

Contributed surplus ...........................................................................................................

Accumulated other comprehensive income.......................................................................

Deficit................................................................................................................................

Total equity .......................................................................................................................

23,841

93,011

(323,673)

1,427,180

16,130

33,879

(266,520)

1,368,634

Total liabilities and equity .....................................................................................................

$ 3,573,029

$ 3,049,382

Commitments and contingencies (note 19)

See accompanying notes to the consolidated financial statements

Approved by the Board of Directors:

(signed) “James M. Estey”

James M. Estey

Director

(signed) “

Marshall L. McRae”

Marshall L. McRae

Director

March 3, 2015

Independent Auditor’s Report

To the Shareholders of Gibson Energy Inc.

We have audited the accompanying consolidated financial statements of Gibson Energy Inc., which comprise

the consolidated balance sheets as at December 31, 2014 and December 31, 2013 and the consolidated

statements of operations, comprehensive income, changes in equity and cash flows for the years then ended,

and the related notes, which comprise a summary of significant accounting policies and other explanatory

information.

Management’s responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements

in accordance with International Financial Reporting Standards, and for such internal control as management

determines is necessary to enable the preparation of consolidated financial statements that are free from material

misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We

conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards

require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance

about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the

consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the

assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud

or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s

preparation and fair presentation of the consolidated financial statements in order to design audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of

the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used

and the reasonableness of accounting estimates made by management, as well as evaluating the overall

presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position

of Gibson Energy Inc. as at December 31, 2014 and December 31, 2013 and its financial performance and its cash

flows for the years then ended in accordance with International Financial Reporting Standards.

for our audit opinion.

Opinion

Chartered Accountants

PricewaterhouseCoopers LLP

111 5th Avenue SW, Suite 3100, Calgary, Alberta, Canada T2P 5L3

T: 403 509 7500, F: 403 781 1825, www.pwc.com/ca

“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

Gibson Energy Inc.
Consolidated Balance Sheet

(tabular amounts in thousands of Canadian dollars)

Assets
Current assets

December 31,
2014

2013

Cash and cash equivalents ................................................................................................
Trade and other receivables (note 6) .................................................................................
Inventories (note 7) ...........................................................................................................
Income taxes receivable ....................................................................................................
Prepaid expenses and other assets .....................................................................................
Net investment in finance leases (note 8) ..........................................................................
Total current assets ............................................................................................................

$ 131,911

641,283
154,937
12,100
24,366
908
965,505

97,182
592,850
156,419
7,534
25,170
765
879,920

Non-current assets

Property, plant and equipment (note 9) .............................................................................
Long-term prepaid expenses and other assets (note 10) ....................................................
Net investment in finance leases (note 8) ..........................................................................
Deferred income tax assets (note 11) ................................................................................
Intangible assets (note 12) .................................................................................................
Goodwill (note 13) ............................................................................................................
Total non-current assets ....................................................................................................
Total assets ..............................................................................................................................
Liabilities
Current liabilities

Trade payables and accrued charges (note 15) ..................................................................
Dividends payable (note 18) .............................................................................................
Deferred revenue ...............................................................................................................
Income taxes payable ........................................................................................................
Total current liabilities ......................................................................................................

Non-current liabilities

Long-term debt (note 14) ..................................................................................................
Provisions (note 16) ..........................................................................................................
Other long-term liabilities (note 17) ..................................................................................
Deferred income tax liabilities (note 11) ...........................................................................
Total non-current liabilities ...............................................................................................
Total liabilities ..................................................................................................................

Equity

Share capital (note 18) ......................................................................................................
Contributed surplus ...........................................................................................................
Accumulated other comprehensive income.......................................................................
Deficit................................................................................................................................
Total equity .......................................................................................................................
Total liabilities and equity .....................................................................................................
Commitments and contingencies (note 19)
See accompanying notes to the consolidated financial statements

1,494,569
39,778
94,387
3,532
191,537
783,721
2,607,524
$ 3,573,029

1,119,856
19,640
93,236
8,187
202,395
726,148
2,169,462
$ 3,049,382

581,463
37,346
19,042
122
637,973

1,165,368
136,347
14,810
191,351
1,507,876
2,145,849

565,179
33,605
2,847
20,535
622,166

757,566
91,424
15,487
194,105
1,058,582
1,680,748

1,634,001
23,841
93,011
(323,673)
1,427,180
$ 3,573,029

1,585,145
16,130
33,879
(266,520)
1,368,634
$ 3,049,382

Approved by the Board of Directors:

(signed) “James M. Estey”
James M. Estey
Director

(signed) “

Marshall L. McRae”

Marshall L. McRae
Director

39
1

Gibson Energy Inc.
Consolidated Statement of Operations

Gibson Energy Inc.

Consolidated Statement of Comprehensive Income

(tabular amounts in thousands of Canadian dollars, except per share amounts)

(tabular amounts in thousands of Canadian dollars)

Year ended
December 31,
2014

2013

Year ended

December 31,

2014

2013

Revenue (note 20) ......................................................................................................................
Cost of sales (notes 7, 21, 22 and 28) .........................................................................................
Gross profit ................................................................................................................................

$ 8,573,529
8,299,403
274,126

$ 6,940,669
6,666,257
274,412

General and administrative expenses (notes 21 and 22) .............................................................
Other operating income (note 23) ..............................................................................................
Income from operating activities ............................................................................................

Interest expense .........................................................................................................................
Gain on financial instruments relating to interest expense (note 28) .........................................
Interest income ...........................................................................................................................
Foreign exchange loss on long-term debt (note 14) ...................................................................
Debt extinguishment costs (note 14) ..........................................................................................
Income before income taxes ....................................................................................................
Income tax provision (note 11) ..................................................................................................
Net income ................................................................................................................................

Earnings per share (note 24)

Basic ....................................................................................................................................
Diluted .................................................................................................................................

See accompanying notes to the consolidated financial statements

56,245
(11,845)
229,726

67,598
-
(832)
35,431
-
127,529
35,588
91,941

47,372
(6,576)
233,616

53,458
(18,252)
(471)
19,951
38,209
140,721
36,905
$ 103,816

0.74
0.73

$
$

0.86
0.84

$
$

Net income ................................................................................................................................

91,941

$ 103,816

Other comprehensive income (loss) ........................................................................................

Items that may be reclassified subsequently to statement of operations

Exchange differences on translating foreign operations ......................................................

59,132

Items that will not be reclassified to statement of operations

Remeasurements of post-employment benefit obligation, net of tax ..................................

Other comprehensive income, net of tax ................................................................................

(521)

58,611

43,045

1,144

44,189

Comprehensive income ............................................................................................................

$ 150,552

$ 148,005

See accompanying notes to the consolidated financial statements

2
40

Gibson Energy Inc.

Consolidated Statement of Operations

Gibson Energy Inc.
Consolidated Statement of Comprehensive Income

(tabular amounts in thousands of Canadian dollars, except per share amounts)

(tabular amounts in thousands of Canadian dollars)

Year ended

December 31,

2014

2013

Year ended
December 31,
2014

2013

Net income ................................................................................................................................

91,941

$ 103,816

Other comprehensive income (loss) ........................................................................................
Items that may be reclassified subsequently to statement of operations

Exchange differences on translating foreign operations ......................................................

59,132

43,045

Items that will not be reclassified to statement of operations

Remeasurements of post-employment benefit obligation, net of tax ..................................
Other comprehensive income, net of tax ................................................................................
Comprehensive income ............................................................................................................

(521)

58,611
$ 150,552

1,144
44,189
$ 148,005

See accompanying notes to the consolidated financial statements

Revenue (note 20) ......................................................................................................................

$ 8,573,529

$ 6,940,669

Cost of sales (notes 7, 21, 22 and 28) .........................................................................................

Gross profit ................................................................................................................................

8,299,403

274,126

6,666,257

274,412

General and administrative expenses (notes 21 and 22) .............................................................

Other operating income (note 23) ..............................................................................................

Income from operating activities ............................................................................................

Interest expense .........................................................................................................................

Gain on financial instruments relating to interest expense (note 28) .........................................

Interest income ...........................................................................................................................

Foreign exchange loss on long-term debt (note 14) ...................................................................

Debt extinguishment costs (note 14) ..........................................................................................

Income before income taxes ....................................................................................................

Income tax provision (note 11) ..................................................................................................

56,245

(11,845)

229,726

67,598

(832)

35,431

127,529

35,588

47,372

(6,576)

233,616

53,458

(18,252)

(471)

19,951

38,209

140,721

36,905

Net income ................................................................................................................................

91,941

$ 103,816

Earnings per share (note 24)

Basic ....................................................................................................................................

Diluted .................................................................................................................................

0.74

0.73

0.86

0.84

See accompanying notes to the consolidated financial statements

3
41

Gibson Energy Inc.
Consolidated Statement of Changes in Equity

(tabular amounts in thousands of Canadian dollars)

Gibson Energy Inc.

Consolidated Statement of Cash Flows

(tabular amounts in thousands of Canadian dollars)

Share
capital
(note 18)
Balance – January 1, 2013 ............................... $ 1,543,149

Contributed
surplus
$ 11,297

Accumulated
other
comprehensive
income
(9,166)

Total
Equity
$ (237,798) $ 1,307,482

Deficit

Net income .........................................................
Other comprehensive income, net of tax ............
Comprehensive income ......................................
Employee share options:

Stock based compensation .........................
Proceeds from exercise of stock options ...
Reclassification of contributed surplus on
exercise of stock option and other stock
awards ....................................................

Issuance of common shares in connection with
the dividend reinvestment and stock dividend
programs .........................................................

Dividends on common shares ($1.10 per

-
-
-

-
43,045
43,045

103,816
1,144
104,960

-
1,169

8,271
-

3,438

(3,438)

37,389

-
-

103,816
44,189
148,005

8,271
1,169

37,389

common share)................................................

-
Balance – December 31, 2013 .......................... $ 1,585,145

-
$ 16,130

-
$ 33,879

(133,682)

(133,682)
$ (266,520) $ 1,368,634

Net income ........................................................
Other comprehensive income, net of tax ............
Comprehensive income ......................................
Employee share options:

Stock based compensation ..........................
Proceeds from exercise of stock options .....
Reclassification of contributed surplus on
exercise of stock option and other stock
awards ......................................................

Issuance of common shares in connection with
the dividend reinvestment and stock dividend
programs...........................................................

-
-
-

-
59,132
59,132

91,941

(521)

91,420

-
5,942

13,977
-

6,266

(6,266)

36,648

-
-

91,941
58,611
150,552

13,977
5,942

36,648

-
-

Dividends on common shares ($1.20 per
-
common share) ...................................................
Balance – December 31, 2014 .......................... $ 1,634,001

$ 23,841

$ 93,011

$ (323,673) $ 1,427,180

(148,573)

See accompanying notes to the consolidated financial statements

4
42

Cash provided by (used in)

Operating activities

Items not affecting cash

Income from operating activities ...........................................................................................

$ 229,726 $ 233,616

Depreciation of property, plant and equipment (note 21) ...................................................

154,934

133,854

Amortization of intangible assets (note 21) ........................................................................

Stock based compensation (note 22) ..................................................................................

Gain on sale of property, plant and equipment (note 23) ...................................................

Other ...................................................................................................................................

Net (gain) loss on fair value movement of financial instruments (note 28).......................

Changes in items of working capital

Trade and other receivables ................................................................................................

Inventories ..........................................................................................................................

Other current assets ............................................................................................................

Trade payables and accrued charges ..................................................................................

Deferred revenue ................................................................................................................

Income taxes..........................................................................................................................

Net cash provided by operating activities ...................................................................................

Investing activities

Purchase of property, plant and equipment ............................................................................

Purchase of intangible assets ..................................................................................................

Acquisitions, net of cash acquired (note 5) ............................................................................

Proceeds on sale of assets ......................................................................................................

Net cash used in investing activities............................................................................................

Financing activities

Payment of shareholder dividends .........................................................................................

Proceeds from dividend reinvestment plans (note 18) ...........................................................

Interest paid ............................................................................................................................

Interest received .....................................................................................................................

Proceeds from exercise of stock options ................................................................................

Proceeds from long-term debt, net of debt discount and premium (note 14) .........................

Payment of debt issue and financing costs .............................................................................

Repayment of long-term debt (note 14) .................................................................................

Repayment of credit facilities ................................................................................................

Proceeds from credit facilities ................................................................................................

Repayment of finance lease liabilities ...................................................................................

Net proceeds on settlement of derivative financial instruments

not affecting operating activities (note 28) .........................................................................

Net cash provided by (used in) financing activities ....................................................................

Year ended

December 31,

2014

2013

54,991

13,977

(2,717)

(7,509)

(1,883)

4,819

10,252

3,127

(63,264)

15,764

(75,989)

336,228

(354,682)

(19,123)

(128,440)

7,230

(495,015)

(144,832)

36,648

(62,058)

850

5,942

358,595

(7,072)

(463,494)

463,601

(563)

582

188,199

50,203

8,271

(1,029)

(3,863)

622

(108,618)

(3,700)

(11,705)

68,481

1,330

(35,831)

331,631

(227,019)

(8,495)

3,264

(232,250)

(131,309)

37,389

(19,803)

466

1,169

764,173

(16,189)

(678,098)

(156,385)

124,000

(808)

8,723

(66,672)

Effect of exchange rate on cash and cash equivalents ............................................................

5,317

3,447

Net increase in cash and cash equivalents ..............................................................................

34,729

36,156

Cash and cash equivalents – beginning of year ......................................................................

97,182

Cash and cash equivalents – end of year .................................................................................

$ 131,911 $

61,026

97,182

See accompanying notes to the consolidated financial statements

Gibson Energy Inc.

Consolidated Statement of Changes in Equity

(tabular amounts in thousands of Canadian dollars)

Balance – January 1, 2013 ............................... $ 1,543,149

$ 11,297

$ (237,798) $ 1,307,482

capital

(note 18)

Contributed

comprehensive

surplus

Deficit

Total

Equity

Accumulated

other

income

(9,166)

43,045

103,816

1,144

104,960

Net income .........................................................

Other comprehensive income, net of tax ............

Comprehensive income ......................................

Employee share options:

Stock based compensation .........................

Proceeds from exercise of stock options ...

Reclassification of contributed surplus on

exercise of stock option and other stock

awards ....................................................

Issuance of common shares in connection with

the dividend reinvestment and stock dividend

8,271

1,169

3,438

(3,438)

programs .........................................................

37,389

Dividends on common shares ($1.10 per

common share)................................................

Balance – December 31, 2013 .......................... $ 1,585,145

$ 16,130

$ 33,879

$ (266,520) $ 1,368,634

(133,682)

Net income ........................................................

Other comprehensive income, net of tax ............

Comprehensive income ......................................

Employee share options:

Stock based compensation ..........................

Proceeds from exercise of stock options .....

Reclassification of contributed surplus on

exercise of stock option and other stock

13,977

5,942

59,132

91,941

(521)

91,420

awards ......................................................

6,266

(6,266)

Issuance of common shares in connection with

the dividend reinvestment and stock dividend

programs...........................................................

36,648

Dividends on common shares ($1.20 per

common share) ...................................................

Balance – December 31, 2014 .......................... $ 1,634,001

$ 23,841

$ 93,011

$ (323,673) $ 1,427,180

(148,573)

See accompanying notes to the consolidated financial statements

103,816

44,189

148,005

8,271

1,169

37,389

91,941

58,611

150,552

13,977

5,942

36,648

Gibson Energy Inc.
Consolidated Statement of Cash Flows

(tabular amounts in thousands of Canadian dollars)

Cash provided by (used in)
Operating activities

Income from operating activities ...........................................................................................
Items not affecting cash

Depreciation of property, plant and equipment (note 21) ...................................................
Amortization of intangible assets (note 21) ........................................................................
Stock based compensation (note 22) ..................................................................................
Gain on sale of property, plant and equipment (note 23) ...................................................
Other ...................................................................................................................................
Net (gain) loss on fair value movement of financial instruments (note 28).......................

Changes in items of working capital

Trade and other receivables ................................................................................................
Inventories ..........................................................................................................................
Other current assets ............................................................................................................
Trade payables and accrued charges ..................................................................................
Deferred revenue ................................................................................................................
Income taxes..........................................................................................................................
Net cash provided by operating activities ...................................................................................
Investing activities

Purchase of property, plant and equipment ............................................................................
Purchase of intangible assets ..................................................................................................
Acquisitions, net of cash acquired (note 5) ............................................................................
Proceeds on sale of assets ......................................................................................................
Net cash used in investing activities............................................................................................

Financing activities

Payment of shareholder dividends .........................................................................................
Proceeds from dividend reinvestment plans (note 18) ...........................................................
Interest paid ............................................................................................................................
Interest received .....................................................................................................................
Proceeds from exercise of stock options ................................................................................
Proceeds from long-term debt, net of debt discount and premium (note 14) .........................
Payment of debt issue and financing costs .............................................................................
Repayment of long-term debt (note 14) .................................................................................
Repayment of credit facilities ................................................................................................
Proceeds from credit facilities ................................................................................................
Repayment of finance lease liabilities ...................................................................................
Net proceeds on settlement of derivative financial instruments

not affecting operating activities (note 28) .........................................................................
Net cash provided by (used in) financing activities ....................................................................

Year ended
December 31,
2014

2013

$ 229,726 $ 233,616

154,934
54,991
13,977
(2,717)
(7,509)
(1,883)

4,819
10,252
3,127
(63,264)
15,764
(75,989)
336,228

(354,682)
(19,123)
(128,440)
7,230
(495,015)

(144,832)
36,648
(62,058)
850
5,942
358,595
(7,072)
-
(463,494)
463,601
(563)

582
188,199

133,854
50,203
8,271
(1,029)
(3,863)
622

(108,618)
(3,700)
(11,705)
68,481
1,330
(35,831)
331,631

(227,019)
(8,495)
-
3,264
(232,250)

(131,309)
37,389
(19,803)
466
1,169
764,173
(16,189)
(678,098)
(156,385)
124,000
(808)

8,723
(66,672)

Effect of exchange rate on cash and cash equivalents ............................................................

5,317

3,447

Net increase in cash and cash equivalents ..............................................................................

34,729

36,156

Cash and cash equivalents – beginning of year ......................................................................
Cash and cash equivalents – end of year .................................................................................

97,182
$ 131,911 $

61,026
97,182

See accompanying notes to the consolidated financial statements

5
43

Gibson Energy Inc.
Notes to Consolidated Financial Statements

Gibson Energy Inc.

Notes to Consolidated Financial Statements

(tabular amounts in thousands of Canadian dollars, except where noted)

1 General Information

Foreign currency translation

Gibson Energy Inc. (“Gibson” or the “Company”) was incorporated pursuant to the Business Corporations Act (Alberta). The
Company’s common shares are traded on the Toronto Stock Exchange under the symbol “GEI”.

Gibson is engaged in the movement, storage, blending, processing and marketing and distribution of crude oil, condensate,
natural gas liquids, water, oilfield waste and refined products. The Company also provides emulsion treating, water disposal,
oil-field waste management services and propane distribution. The Company is incorporated and domiciled in Canada. The
address of the Company’s principal place of business is 1700, 440 Second Avenue S.W., Calgary, Alberta, Canada.

2 Basis of preparation

These consolidated financial statements have been prepared in compliance with International Financial Reporting Standards
(“IFRS”) as set out in the Handbook of the Canadian Institute of Chartered Accountants and as issued by the International
Accounting Standards Board (“IASB”).

These consolidated financial statements were approved for issuance by the Company’s board of directors (“Board”) on
March 3, 2015.

These consolidated financial statements are presented in Canadian dollars, the Company’s functional currency, and all values
are rounded to the nearest thousands of dollars, except where indicated otherwise. All references to $ are to Canadian dollars
and references to U.S.$ are to United States dollars.

3 Summary of significant accounting policies

The significant accounting policies applied in the preparation of these consolidated ﬁnancial statements are set out below.
These policies have been consistently applied to all the years presented.

Basis of measurement

These consolidated financial statements have been prepared under the historical cost convention except for certain items that
are recorded at fair value as required by the respective accounting standards.

Basis of consolidation

These consolidated financial statements include the results of the Company and its subsidiaries together with its interest in
joint operations.

Subsidiaries are all entities over which the Company has control. The Company controls an entity when the Company is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the
Company and continue to be consolidated until the date control ceases. All intercompany transactions, balances, income and
expenses are eliminated on consolidation.

Joint arrangements are classiﬁed as either joint operations or joint ventures depending on the contractual rights and
obligations of each investor. The Company has assessed the nature of its joint arrangements and determined them to be joint
operations and accordingly, the Company has recognized its proportionate share of revenues, expenses, assets and liabilities
relating to these joint operations.

The financial statements for each of the Company’s subsidiaries and joint operations are prepared using their functional

currency. The functional currency is the currency of the primary economic environment in which an entity operates. The

presentation and functional currency of the parent company is Canadian dollars. Assets and liabilities of foreign operations

are translated into Canadian dollars at the market rates prevailing at the balance sheet date. Operating results are translated at

the average rates for the period. Exchange differences arising on the consolidation of the net assets of foreign operations are

recorded in other comprehensive income (loss).

Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the transaction

date. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the

translation at period end exchange rates of monetary assets and liabilities denominated in currencies other than an entity’s

functional currency are recognized in the statement of operations.

Business combinations and goodwill

Business combinations are accounted for using the acquisition method of accounting. The cost of an acquisition is measured

as the cash paid and the fair value of other assets given, equity instruments issued and liabilities incurred or assumed at the

date of exchange. For acquisitions achieved in stages, previously held equity interests in the acquired company are

remeasured at the acquisition date fair value and the resulting gain or loss is recognized in the statement of operations. Direct

costs incurred by the Company in connection with an acquisition, such as finder’s fees, advisors, legal, accounting, valuation

and other professional or consulting fees, are expensed as general and administrative expenses when incurred. The acquired

identifiable assets, liabilities and contingent liabilities are measured at their fair values at the date of acquisition. Any excess

of the cost of acquisition plus the amount of any non-controlling interest in the acquiree, and the acquisition date fair value of

the acquirer’s previously held equity interest, if any, over the net fair value of the identifiable assets, liabilities and contingent

liabilities acquired is recognized as goodwill. Any deficiency of the cost of acquisition below the fair values of the

identifiable net assets acquired is credited to the statement of operations in the period of acquisition.

Any contingent consideration to be transferred by the Company is recognised at fair value at the acquisition date. Subsequent

changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised either in profit

or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-

measured, and its subsequent settlement is accounted for within equity.

At the acquisition date, any goodwill acquired is allocated to each of the operating segments expected to benefit from the

combination’s synergies. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

Intangible assets

An intangible asset acquired as part of a business combination is measured at fair value at the date of acquisition and is

recognized separately from goodwill if the asset is separable or arises from contractual or other legal rights and its fair value

can be measured reliably. Intangible assets acquired separately from a business are carried initially at cost. The initial cost is

the aggregate amount paid and the fair value of any other consideration given to acquire the asset.

Intangible assets with a finite life are amortized on a straight-line basis over their expected useful lives as follows:

Brands ........................................................................................................................................................................ 2 – 10 years

Customer relationships ............................................................................................................................................... 1 – 12 years

Long-term customer contracts .................................................................................................................................... 6 – 10 years

Non-compete agreements ........................................................................................................................................... 2 – 10 years

Technology .................................................................................................................................................................. 3 – 5 years

Software ....................................................................................................................................................................... 3 – 7 years

License and permits ........................................................................................................................................................... 3 years

The expected useful lives and method of amortization of intangible assets are reviewed on an annual basis and, if necessary,

changes in expected useful life are accounted for prospectively.

6
44

Gibson Energy Inc.

Notes to Consolidated Financial Statements

Gibson Energy Inc.
Notes to Consolidated Financial Statements

(tabular amounts in thousands of Canadian dollars, except where noted)

1 General Information

Foreign currency translation

Gibson Energy Inc. (“Gibson” or the “Company”) was incorporated pursuant to the Business Corporations Act (Alberta). The

Company’s common shares are traded on the Toronto Stock Exchange under the symbol “GEI”.

Gibson is engaged in the movement, storage, blending, processing and marketing and distribution of crude oil, condensate,

natural gas liquids, water, oilfield waste and refined products. The Company also provides emulsion treating, water disposal,

oil-field waste management services and propane distribution. The Company is incorporated and domiciled in Canada. The

address of the Company’s principal place of business is 1700, 440 Second Avenue S.W., Calgary, Alberta, Canada.

2 Basis of preparation

These consolidated financial statements have been prepared in compliance with International Financial Reporting Standards

(“IFRS”) as set out in the Handbook of the Canadian Institute of Chartered Accountants and as issued by the International

Accounting Standards Board (“IASB”).

These consolidated financial statements were approved for issuance by the Company’s board of directors (“Board”) on

March 3, 2015.

These consolidated financial statements are presented in Canadian dollars, the Company’s functional currency, and all values

are rounded to the nearest thousands of dollars, except where indicated otherwise. All references to $ are to Canadian dollars

and references to U.S.$ are to United States dollars.

3 Summary of significant accounting policies

The significant accounting policies applied in the preparation of these consolidated ﬁnancial statements are set out below.

These policies have been consistently applied to all the years presented.

Basis of measurement

Basis of consolidation

joint operations.

These consolidated financial statements have been prepared under the historical cost convention except for certain items that

are recorded at fair value as required by the respective accounting standards.

These consolidated financial statements include the results of the Company and its subsidiaries together with its interest in

Subsidiaries are all entities over which the Company has control. The Company controls an entity when the Company is

exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns

through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the

Company and continue to be consolidated until the date control ceases. All intercompany transactions, balances, income and

expenses are eliminated on consolidation.

Joint arrangements are classiﬁed as either joint operations or joint ventures depending on the contractual rights and

obligations of each investor. The Company has assessed the nature of its joint arrangements and determined them to be joint

operations and accordingly, the Company has recognized its proportionate share of revenues, expenses, assets and liabilities

relating to these joint operations.

The financial statements for each of the Company’s subsidiaries and joint operations are prepared using their functional
currency. The functional currency is the currency of the primary economic environment in which an entity operates. The
presentation and functional currency of the parent company is Canadian dollars. Assets and liabilities of foreign operations
are translated into Canadian dollars at the market rates prevailing at the balance sheet date. Operating results are translated at
the average rates for the period. Exchange differences arising on the consolidation of the net assets of foreign operations are
recorded in other comprehensive income (loss).

Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the transaction
date. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the
translation at period end exchange rates of monetary assets and liabilities denominated in currencies other than an entity’s
functional currency are recognized in the statement of operations.

Business combinations and goodwill

Business combinations are accounted for using the acquisition method of accounting. The cost of an acquisition is measured
as the cash paid and the fair value of other assets given, equity instruments issued and liabilities incurred or assumed at the
date of exchange. For acquisitions achieved in stages, previously held equity interests in the acquired company are
remeasured at the acquisition date fair value and the resulting gain or loss is recognized in the statement of operations. Direct
costs incurred by the Company in connection with an acquisition, such as finder’s fees, advisors, legal, accounting, valuation
and other professional or consulting fees, are expensed as general and administrative expenses when incurred. The acquired
identifiable assets, liabilities and contingent liabilities are measured at their fair values at the date of acquisition. Any excess
of the cost of acquisition plus the amount of any non-controlling interest in the acquiree, and the acquisition date fair value of
the acquirer’s previously held equity interest, if any, over the net fair value of the identifiable assets, liabilities and contingent
liabilities acquired is recognized as goodwill. Any deficiency of the cost of acquisition below the fair values of the
identifiable net assets acquired is credited to the statement of operations in the period of acquisition.

Any contingent consideration to be transferred by the Company is recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised either in profit
or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-
measured, and its subsequent settlement is accounted for within equity.

At the acquisition date, any goodwill acquired is allocated to each of the operating segments expected to benefit from the
combination’s synergies. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

Intangible assets

An intangible asset acquired as part of a business combination is measured at fair value at the date of acquisition and is
recognized separately from goodwill if the asset is separable or arises from contractual or other legal rights and its fair value
can be measured reliably. Intangible assets acquired separately from a business are carried initially at cost. The initial cost is
the aggregate amount paid and the fair value of any other consideration given to acquire the asset.

Intangible assets with a finite life are amortized on a straight-line basis over their expected useful lives as follows:

Brands ........................................................................................................................................................................ 2 – 10 years
Customer relationships ............................................................................................................................................... 1 – 12 years
Long-term customer contracts .................................................................................................................................... 6 – 10 years
Non-compete agreements ........................................................................................................................................... 2 – 10 years
Technology .................................................................................................................................................................. 3 – 5 years
Software ....................................................................................................................................................................... 3 – 7 years
License and permits ........................................................................................................................................................... 3 years

The expected useful lives and method of amortization of intangible assets are reviewed on an annual basis and, if necessary,
changes in expected useful life are accounted for prospectively.

7
45

Gibson Energy Inc.
Notes to Consolidated Financial Statements

Gibson Energy Inc.

Notes to Consolidated Financial Statements

(tabular amounts in thousands of Canadian dollars, except where noted)

The carrying value of intangible assets is reviewed for impairment whenever events or changes in circumstances indicate
carrying value may not be recoverable.

of discounted estimated future net cash flows. In determining fair value less costs of disposal, recent market transactions are

taken into account, if available. In the absence of such transactions, an appropriate valuation model is used.

Property, plant and equipment

Property, plant and equipment is stated at cost, less accumulated depreciation and accumulated impairment losses.

The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the
asset into operation, the initial estimate of any decommissioning obligation, if any, and, for qualifying assets, borrowing
costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration
given to acquire the asset.

Expenditure on major maintenance refits or repairs comprises the cost of replacement assets or parts of assets, inspection
costs and overhaul costs. Where an asset or part of an asset that was separately depreciated is replaced and it is probable that
future economic benefits associated with the item will flow to the Company, the expenditure is capitalized and the carrying
amount of the replaced asset is derecognized. Inspection costs associated with major maintenance programs are capitalized
and amortized over the period to the next inspection. All other maintenance costs are expensed as incurred.

Depreciation is charged so as to write off the cost of assets, other than assets that are work in progress, using the straight-line
method over their expected useful lives.

The useful lives of the Company’s property, plant and equipment are as follows:

Buildings .................................................................................................................................................................. 10 – 20 years
Equipment .................................................................................................................................................................. 3 – 20 years
Rolling stock .............................................................................................................................................................. 5 – 23 years
Pipelines ..................................................................................................................................................................... 8 – 20 years
Tanks ........................................................................................................................................................................ 20 – 33 years
Plant ........................................................................................................................................................................... 7 – 25 years
Disposal wells .......................................................................................................................................................... 15 – 25 years

The expected useful lives, method of depreciation and residual values of property, plant and equipment are reviewed on an
annual basis and, if necessary, changes are accounted for prospectively.

Cash and cash equivalents comprise cash on hand and short-term deposit, highly liquid investments that are readily

convertible to known amounts of cash which are subject to insignificant risk of changes in value and maturity of three

The carrying value of property, plant and equipment is reviewed for impairment whenever events or changes in
circumstances indicate the carrying value may not be recoverable.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to
arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the item) is included in the statement of operations in the
period the item is derecognized.

Impairments

The Company carries out impairment reviews in respect of goodwill at least annually or if indicators of possible impairment
exist. The Company also assesses during each reporting period whether there have been any events or changes in
circumstances that indicate that property, plant and equipment and intangible assets may be impaired and an impairment
review is carried out whenever such an assessment indicates that the carrying amount may not be recoverable. Such
indicators include, but are not limited to changes in the Company’s business plans, changes in commodity prices leading to
lower activity levels, an increase in the discount rate and evidence of physical damage. For the purposes of impairment
testing, assets are grouped at the lowest levels for which there are separately identifiable cash inflows. Where impairment
exists, the asset is written down to its recoverable amount, which is the higher of the fair value less costs of disposal and its
value in use. Impairments are recognized immediately in the statement of operations.

8
46

An impairment loss in respect of goodwill is not reversible in the future. In respect of other assets, an impairment loss is

reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is

reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been

determined, net of depreciation or amortization, if no impairment loss had been previously recognized.

Non-derivative financial instruments – recognition and measurement

Financial assets

Financial assets include cash and cash equivalents and trade and other receivables. The Company determines the

classification of its financial assets at initial recognition. Financial assets are recognized initially at fair value, normally being

the transaction price plus directly attributable transaction costs.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active

market. Such assets are carried at amortized cost using the effective interest method if the time value of money is significant.

Gains and losses are recognized in the statement of operations when the loans and receivables are derecognized or impaired,

as well as through the use of the effective interest method. This category of financial assets includes cash and cash

equivalents and trade and other receivables.

A provision for impairment of trade receivables is established when there is objective evidence that the Company may not be

able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the

debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments

(more than 30 days past the due date) are considered indicators that the trade receivable may be impaired. The amount of the

provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows,

discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance

account, and the amount of the loss is recognized in the statement of operations. When a trade receivable is uncollectible, it is

written off against the allowance account for trade receivables.

months or less from the date of acquisition.

Financial liabilities

Financial liabilities classified as other liabilities include amounts borrowed under credit facilities, trade payables and accrued

charges, dividends payable and long-term debt. The Company determines the classification of its financial liabilities at initial

recognition. All financial liabilities are initially recognized at fair value. For interest-bearing loans and borrowings this is the

fair value of the proceeds received net of issue costs associated with the borrowing. After initial recognition, financial

liabilities are subsequently measured at amortized cost using the effective interest method. Amortized cost is calculated by

taking into account any issue costs, and any discount or premium on settlement. Gains and losses arising on the repurchase,

settlement or cancellation of liabilities are recognized in statement of operations.

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable

right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the

liability simultaneously.

Derivative financial instruments

Derivative financial instruments, used periodically by the Company to manage exposure to market risks relating to

commodity prices, interest rates and foreign currency exchange rates, are not designated as hedges. They are recorded at fair

value and recorded on the Company’s balance sheet as either an asset, when the fair value is positive, or a liability, when the

fair value is negative. Changes in fair value are recorded immediately in the statement of operations.

Gibson Energy Inc.

Notes to Consolidated Financial Statements

Gibson Energy Inc.
Notes to Consolidated Financial Statements

(tabular amounts in thousands of Canadian dollars, except where noted)

The carrying value of intangible assets is reviewed for impairment whenever events or changes in circumstances indicate

carrying value may not be recoverable.

Property, plant and equipment

Property, plant and equipment is stated at cost, less accumulated depreciation and accumulated impairment losses.

The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the

asset into operation, the initial estimate of any decommissioning obligation, if any, and, for qualifying assets, borrowing

costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration

given to acquire the asset.

Expenditure on major maintenance refits or repairs comprises the cost of replacement assets or parts of assets, inspection

costs and overhaul costs. Where an asset or part of an asset that was separately depreciated is replaced and it is probable that

future economic benefits associated with the item will flow to the Company, the expenditure is capitalized and the carrying

amount of the replaced asset is derecognized. Inspection costs associated with major maintenance programs are capitalized

and amortized over the period to the next inspection. All other maintenance costs are expensed as incurred.

Depreciation is charged so as to write off the cost of assets, other than assets that are work in progress, using the straight-line

method over their expected useful lives.

The useful lives of the Company’s property, plant and equipment are as follows:

Buildings .................................................................................................................................................................. 10 – 20 years

Equipment .................................................................................................................................................................. 3 – 20 years

Rolling stock .............................................................................................................................................................. 5 – 23 years

Pipelines ..................................................................................................................................................................... 8 – 20 years

Tanks ........................................................................................................................................................................ 20 – 33 years

Plant ........................................................................................................................................................................... 7 – 25 years

Disposal wells .......................................................................................................................................................... 15 – 25 years

The expected useful lives, method of depreciation and residual values of property, plant and equipment are reviewed on an

annual basis and, if necessary, changes are accounted for prospectively.

The carrying value of property, plant and equipment is reviewed for impairment whenever events or changes in

circumstances indicate the carrying value may not be recoverable.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to

arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference

between the net disposal proceeds and the carrying amount of the item) is included in the statement of operations in the

period the item is derecognized.

Impairments

The Company carries out impairment reviews in respect of goodwill at least annually or if indicators of possible impairment

exist. The Company also assesses during each reporting period whether there have been any events or changes in

circumstances that indicate that property, plant and equipment and intangible assets may be impaired and an impairment

review is carried out whenever such an assessment indicates that the carrying amount may not be recoverable. Such

indicators include, but are not limited to changes in the Company’s business plans, changes in commodity prices leading to

lower activity levels, an increase in the discount rate and evidence of physical damage. For the purposes of impairment

testing, assets are grouped at the lowest levels for which there are separately identifiable cash inflows. Where impairment

exists, the asset is written down to its recoverable amount, which is the higher of the fair value less costs of disposal and its

value in use. Impairments are recognized immediately in the statement of operations.

The assessment for impairment entails comparing the carrying value of the asset or cash-generating unit with its recoverable

amount, that is, the higher of fair value less costs of disposal and value in use. Value in use is usually determined on the basis

of discounted estimated future net cash flows. In determining fair value less costs of disposal, recent market transactions are
taken into account, if available. In the absence of such transactions, an appropriate valuation model is used.

An impairment loss in respect of goodwill is not reversible in the future. In respect of other assets, an impairment loss is
reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortization, if no impairment loss had been previously recognized.

Non-derivative financial instruments – recognition and measurement

Financial assets

Financial assets include cash and cash equivalents and trade and other receivables. The Company determines the
classification of its financial assets at initial recognition. Financial assets are recognized initially at fair value, normally being
the transaction price plus directly attributable transaction costs.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. Such assets are carried at amortized cost using the effective interest method if the time value of money is significant.
Gains and losses are recognized in the statement of operations when the loans and receivables are derecognized or impaired,
as well as through the use of the effective interest method. This category of financial assets includes cash and cash
equivalents and trade and other receivables.

A provision for impairment of trade receivables is established when there is objective evidence that the Company may not be
able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the
debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments
(more than 30 days past the due date) are considered indicators that the trade receivable may be impaired. The amount of the
provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows,
discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance
account, and the amount of the loss is recognized in the statement of operations. When a trade receivable is uncollectible, it is
written off against the allowance account for trade receivables.

Cash and cash equivalents comprise cash on hand and short-term deposit, highly liquid investments that are readily
convertible to known amounts of cash which are subject to insignificant risk of changes in value and maturity of three
months or less from the date of acquisition.

Financial liabilities

Financial liabilities classified as other liabilities include amounts borrowed under credit facilities, trade payables and accrued
charges, dividends payable and long-term debt. The Company determines the classification of its financial liabilities at initial
recognition. All financial liabilities are initially recognized at fair value. For interest-bearing loans and borrowings this is the
fair value of the proceeds received net of issue costs associated with the borrowing. After initial recognition, financial
liabilities are subsequently measured at amortized cost using the effective interest method. Amortized cost is calculated by
taking into account any issue costs, and any discount or premium on settlement. Gains and losses arising on the repurchase,
settlement or cancellation of liabilities are recognized in statement of operations.

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable
right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the
liability simultaneously.

Derivative financial instruments

Derivative financial instruments, used periodically by the Company to manage exposure to market risks relating to
commodity prices, interest rates and foreign currency exchange rates, are not designated as hedges. They are recorded at fair
value and recorded on the Company’s balance sheet as either an asset, when the fair value is positive, or a liability, when the
fair value is negative. Changes in fair value are recorded immediately in the statement of operations.

9
47

Environmental liabilities

risk-free discount rate.

Employee benefits

plan (“OPRB”).

Gibson Energy Inc.
Notes to Consolidated Financial Statements

Gibson Energy Inc.

Notes to Consolidated Financial Statements

(tabular amounts in thousands of Canadian dollars, except where noted)

Inventories

Inventories are carried at the lower of cost and net realizable value, with cost determined using a weighted average cost
method. Net realizable value is the estimated selling price less applicable selling expenses. If carrying value exceeds net
realizable amount, a write down is recognized. The write down may be reversed in a subsequent period if the circumstances
which caused it no longer exist.

Environmental liabilities are recognized when a remediation is probable and the associated costs can be reliably estimated.

Generally, the timing of recognition of these provisions coincides with the completion of a feasibility study or a commitment

to a formal plan of action. The amount recognized is the best estimate of the expenditure required. Where the liability will

not be settled for a number of years, the amount recognized is the present value of the estimated future expenditure using a

Leases - lessee

A finance lease is a lease that transfers substantially all the risks and rewards of ownership of an asset to the lessee. Assets
acquired under finance leases are recorded in the balance sheet as property, plant and equipment at the lower of their fair
value and the present value of the minimum lease payments and depreciated over the shorter of their estimated useful life or
their lease terms. The corresponding rental obligations are included in other long-term liabilities as finance lease liabilities.
Interest incurred on finance leases is charged to the statement of operations on an accrual basis.

All other leases are operating leases, and the rental of these is charged to the statement of operations as incurred over the
lease term.

Leases - lessor

Contractual arrangements that transfer substantially all the risks and benefits of ownership of property to the lessee are
recorded as a net investment in a finance lease. The present value of minimum lease receivable under such arrangements are
recorded as an investment in finance lease and the finance income is recognized in a manner that produces a consistent rate
of return on the investment in the finance lease and is included in revenue.

Defined benefit pension plan and other post retirement benefits plan

The company maintains a funded defined benefit pension plan and an unfunded defined benefit other post-retirement benefits

The liability recognised in the balance sheet in respect of deﬁned beneﬁt plans is the present value of the deﬁned beneﬁt

obligation at the end of the reporting period less the fair value of plan assets. The deﬁned beneﬁt obligation is calculated

annually by independent actuaries using the projected unit credit method. The present value of the deﬁned beneﬁt obligation

is determined by discounting the estimated future cash outﬂows using interest rates of high-quality corporate bonds that are

denominated in the currency in which the beneﬁts will be paid, and that have terms to maturity approximating to the terms of

the related pension obligation.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited

to equity in other comprehensive income in the period in which they arise.

Operating lease income is recognized in the statement of operations as it is earned over the lease term.

Past-service costs or credits are recognised immediately in statement of operations.

Provisions and contingencies

Defined contribution pension plans

Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of a past event, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. Where appropriate, the future cash flow estimates are adjusted to
reflect risks specific to the liability.

Share-based payments

The Company’s defined contribution plans are funded as specified in the plans and the pension expense is recorded as the

benefits are earned by employees and funded by the Company.

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows
at a pre-tax rate that reflects current market assessments of the time value of money. Where discounting is used, the increase
in the provision due to the passage of time is recognized within finance costs.

The Company’s equity incentive plan allows for the granting of stock options, restricted share units with time (RSUs) and

performance share units (PSUs) with performance based vesting conditions and deferred share units (DSUs) that vest on the

date such employee redeems the DSUs after their cessation of employment with the Company.

A contingent liability is disclosed where the existence of an obligation will only be confirmed by future events or where the
amount of the obligation cannot be measured reliably and outflow of cash is less than remote. Contingent assets are not
recognized, but are disclosed when an inflow of economic benefits is probable.

awards vest.

The fair value of grants made under the employee share award plan is measured at the date of grant of the award. The

resulting cost, as adjusted for the expected and actual level of vesting of the awards, is expensed over the period in which the

Decommissioning

A corresponding item of property, plant and equipment of an amount equivalent to the provision is also created. The amount
capitalized in property, plant and equipment is depreciated over the useful life of the related asset. Increases in the
decommissioning liabilities resulting from the passage of time are recognized as a finance cost in the consolidated statement
of operations. Other than the unwinding of the discount on the provision, any change in the present value of the estimated
expenditure is reflected as an adjustment to the provision and the corresponding item of property, plant and equipment.

10
48

At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting

period has expired and management’s best estimate of the number of equity instruments that will ultimately vest.

The movement in the cumulative expense since the previous balance sheet date is recognized in the statement of operations

with a corresponding impact to contributed surplus.

The fair value of RSUs, PSUs and DSUs are equal to the Company five days weighted average share price at the date of

grant.

The fair value of options is measured by using the Black-Scholes model. The Black-Scholes option valuation model was

developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable and

it requires the input of highly subjective assumptions. Expected volatility of the stock is based on a combination of the

historical stock price of the Company and also of comparable companies in the industry. The expected term of options

represents the period of time that options granted are expected to be outstanding. The risk-free rate is based on the

Government of Canada’s Canadian Bond Yields with a remaining term equal to the expected life of the options used in the

Black-Scholes valuation model.

Gibson Energy Inc.

Notes to Consolidated Financial Statements

Gibson Energy Inc.
Notes to Consolidated Financial Statements

(tabular amounts in thousands of Canadian dollars, except where noted)

Inventories are carried at the lower of cost and net realizable value, with cost determined using a weighted average cost

method. Net realizable value is the estimated selling price less applicable selling expenses. If carrying value exceeds net

realizable amount, a write down is recognized. The write down may be reversed in a subsequent period if the circumstances

A finance lease is a lease that transfers substantially all the risks and rewards of ownership of an asset to the lessee. Assets

acquired under finance leases are recorded in the balance sheet as property, plant and equipment at the lower of their fair

value and the present value of the minimum lease payments and depreciated over the shorter of their estimated useful life or

their lease terms. The corresponding rental obligations are included in other long-term liabilities as finance lease liabilities.

Interest incurred on finance leases is charged to the statement of operations on an accrual basis.

All other leases are operating leases, and the rental of these is charged to the statement of operations as incurred over the

Inventories

which caused it no longer exist.

Leases - lessee

lease term.

Leases - lessor

Contractual arrangements that transfer substantially all the risks and benefits of ownership of property to the lessee are

recorded as a net investment in a finance lease. The present value of minimum lease receivable under such arrangements are

recorded as an investment in finance lease and the finance income is recognized in a manner that produces a consistent rate

of return on the investment in the finance lease and is included in revenue.

Environmental liabilities

Environmental liabilities are recognized when a remediation is probable and the associated costs can be reliably estimated.
Generally, the timing of recognition of these provisions coincides with the completion of a feasibility study or a commitment
to a formal plan of action. The amount recognized is the best estimate of the expenditure required. Where the liability will
not be settled for a number of years, the amount recognized is the present value of the estimated future expenditure using a
risk-free discount rate.

Employee benefits

Defined benefit pension plan and other post retirement benefits plan

The company maintains a funded defined benefit pension plan and an unfunded defined benefit other post-retirement benefits
plan (“OPRB”).

The liability recognised in the balance sheet in respect of deﬁned beneﬁt plans is the present value of the deﬁned beneﬁt
obligation at the end of the reporting period less the fair value of plan assets. The deﬁned beneﬁt obligation is calculated
annually by independent actuaries using the projected unit credit method. The present value of the deﬁned beneﬁt obligation
is determined by discounting the estimated future cash outﬂows using interest rates of high-quality corporate bonds that are
denominated in the currency in which the beneﬁts will be paid, and that have terms to maturity approximating to the terms of
the related pension obligation.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited
to equity in other comprehensive income in the period in which they arise.

Operating lease income is recognized in the statement of operations as it is earned over the lease term.

Past-service costs or credits are recognised immediately in statement of operations.

Provisions and contingencies

Defined contribution pension plans

Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of a past event, it is

probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable

estimate can be made of the amount of the obligation. Where appropriate, the future cash flow estimates are adjusted to

reflect risks specific to the liability.

The Company’s defined contribution plans are funded as specified in the plans and the pension expense is recorded as the
benefits are earned by employees and funded by the Company.

Share-based payments

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows

at a pre-tax rate that reflects current market assessments of the time value of money. Where discounting is used, the increase

in the provision due to the passage of time is recognized within finance costs.

The Company’s equity incentive plan allows for the granting of stock options, restricted share units with time (RSUs) and
performance share units (PSUs) with performance based vesting conditions and deferred share units (DSUs) that vest on the
date such employee redeems the DSUs after their cessation of employment with the Company.

A contingent liability is disclosed where the existence of an obligation will only be confirmed by future events or where the

amount of the obligation cannot be measured reliably and outflow of cash is less than remote. Contingent assets are not

recognized, but are disclosed when an inflow of economic benefits is probable.

The fair value of grants made under the employee share award plan is measured at the date of grant of the award. The
resulting cost, as adjusted for the expected and actual level of vesting of the awards, is expensed over the period in which the
awards vest.

Decommissioning

Liabilities for site restoration on the retirement of assets are recognized when the Company has an obligation to restore the

site, and when a reliable estimate of that liability can be made. An obligation may also crystallize during the period of

operation of a facility through a change in legislation or through a decision to terminate operations. The amount recognized is

the present value of the estimated future expenditure determined in accordance with local conditions and requirements. The

present value is determined by discounting the expenditures expected to be required to settle the obligation using a risk-free

discount rate. Actual expenditures incurred are charged against the accumulated liability.

A corresponding item of property, plant and equipment of an amount equivalent to the provision is also created. The amount

capitalized in property, plant and equipment is depreciated over the useful life of the related asset. Increases in the

decommissioning liabilities resulting from the passage of time are recognized as a finance cost in the consolidated statement

of operations. Other than the unwinding of the discount on the provision, any change in the present value of the estimated

expenditure is reflected as an adjustment to the provision and the corresponding item of property, plant and equipment.

At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting
period has expired and management’s best estimate of the number of equity instruments that will ultimately vest.

The movement in the cumulative expense since the previous balance sheet date is recognized in the statement of operations
with a corresponding impact to contributed surplus.

The fair value of RSUs, PSUs and DSUs are equal to the Company five days weighted average share price at the date of
grant.

The fair value of options is measured by using the Black-Scholes model. The Black-Scholes option valuation model was
developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable and
it requires the input of highly subjective assumptions. Expected volatility of the stock is based on a combination of the
historical stock price of the Company and also of comparable companies in the industry. The expected term of options
represents the period of time that options granted are expected to be outstanding. The risk-free rate is based on the
Government of Canada’s Canadian Bond Yields with a remaining term equal to the expected life of the options used in the
Black-Scholes valuation model.

11
49

Gibson Energy Inc.
Notes to Consolidated Financial Statements

Gibson Energy Inc.

Notes to Consolidated Financial Statements

(tabular amounts in thousands of Canadian dollars, except where noted)

Termination benefit

Borrowing costs

The Company recognizes termination benefits as an expense when it is demonstrably committed to either terminating the
employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing
benefits as a result of an offer made to encourage voluntary termination.

Income taxes

Income tax expense represents the sum of the income tax currently payable and deferred income tax. Interest and penalties
relating to income tax are also included in income tax expense.

The income tax currently payable is based on the taxable income for the period. Taxable income differs from net income as
reported in the statement of operations because it excludes items of income or expense that are taxable or deductible in other
periods and it further excludes items that are never taxable or deductible. The Company’s liability for current income tax is
calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided for using the liability method of accounting. Deferred income tax assets and liabilities are
determined based on differences between the financial reporting and income tax basis of assets and liabilities. These
differences are then measured using enacted or substantially enacted income tax rates and laws that will be in effect when
these differences are expected to reverse. The effect of a change in income tax rates on deferred tax assets and liabilities is
recognized in income in the period that the change occurs. Deferred income tax assets are recognized for tax loss carry-
forwards to the extent that the realization of the related tax benefit through future taxable profits is probable.

Revenue recognition

Product revenues associated with the sales of crude oil, diluent, natural gas liquids, asphalt, natural gas, wellsite fluids and
distillate owned by the Company are recognized when the risk of ownership passes to the customer and physical delivery
occurs, the price is fixed and collection is reasonably assured. Sales terms are generally FOB shipping point, in which case
the sales are recorded at the time of shipment, because this is when title and risk of loss are transferred. All payments
received before delivery are recorded as deferred revenue and are recognized as revenue when delivery occurs, assuming all
other criteria are met. Freight costs billed to customers are recorded as a component of revenue. Revenues from buy/sell
transactions whereby the Company acts as an agent are recorded on a net basis.

Revenue associated with the provision of services such as transportation, terminalling and environmental services are
recognized when the services are provided, the price is fixed and collection is reasonably assured. Revenue from pipeline
tariffs and fees are based on volumes and rates as the pipeline is being used. Long-term take-or-pay contracts, under which
shippers are obligated to pay fixed amounts ratably over the contract period regardless of volumes shipped, may contain
make-up rights. Make-up rights are earned by shippers when minimum volume commitments are not utilized during the
period but under certain circumstances can be used to offset overages in future periods, subject to expiry periods. The
Company recognizes revenues associated with make-up rights at the earlier of when the make-up volume is shipped, the
make-up right expires or when it is determined that the likelihood that the shipper will utilize the make-up right is remote.
Revenue from pipeline tariffs and fees are based on volumes and rates as the pipeline is being used. Revenue from equipment
rentals and non-refundable propane tank fees are recorded in deferred revenue and are recognized in revenue on a straight
line basis over the rental period, typically one year.

Excise taxes are reported gross within sales and other operating revenues and taxes other than income taxes, while other sales
and value-added taxes are recorded net in operating expenses.

Cost of sales

Cost of sales includes the cost of finished goods inventory (including depreciation, amortization and impairment charges),
processing costs, costs related to transportation, inventory write downs and reversals, and gains and losses on derivative
financial instruments relating to commodities.

Interest

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets,

which are assets that take a substantial period of time to get ready for their intended use or sale, are added to the cost of those

assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are

recognized in the statement of operations in the period in which they are incurred.

Common and preferred shares are classified as equity. Incremental costs directly attributable to the issuance of shares are

Share capital

recognized as a deduction from equity.

Per share amounts

Dividends

Segmental reporting

Basic per share amounts are calculated using the weighted average number of shares outstanding during the year. Diluted per

share amounts are calculated giving effect to the potential dilution that would occur if stock options and other equity awards

were exercised or converted into common shares.

Dividends on common shares are recognized in the period in which the dividends are approved by the Board.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision

maker. The chief operating decision maker, who is responsible for resource allocation and assessing performance of the

operating segments, has been identified as the President and Chief Executive Officer.

Critical accounting estimates and judgements

The preparation of ﬁnancial statements in conformity with IFRS requires the use of certain critical accounting estimates. It

also requires management to exercise its judgement in the process of applying the Company’s accounting policies. Estimates

and judgements are continually evaluated and are based on historical experience and other factors, including expectations of

future events that are believed to be reasonable under the circumstances.

Critical accounting estimates and assumptions

The preparation of financial statements requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the balance sheet date and the

reported amounts of revenues and expenses during the reporting period. Actual outcomes could differ from those estimates.

The estimates and assumptions that have a signiﬁcant risk of causing a material adjustment to the carrying amounts of assets

and liabilities within the next ﬁnancial year are addressed below.

Fair value of assets and liabilities acquired in a business combination

In conjunction with each business combination, the Company must allocate the cost of the acquired entity to the assets and

liabilities assumed based on their estimated fair values at the date of acquisition. Determining the fair value of assets and

liabilities acquired, as well as intangible assets that relate to such items as customer relationships, brands and contracts

involves professional judgment and is ultimately based on acquisition models and management’s assessment of the value of

the assets and liabilities acquired and, to the extent available, third party assessments. Uncertainties associated with these

estimates include changes in production volumes, changes in commodity prices, fluctuations in capacity or product slates,

economic obsolescence factors in the area and potential future sources of cash flow. During the measurement period, the fair

value of assets acquired and liabilities assumed may be adjusted when the initial accounting for business combination is

recorded based on provisional amounts. Although the resolution of these uncertainties has not historically had a material

impact on the Company’s results of operations or financial condition, the actual amounts may vary significantly from

estimated amounts. Any excess of the cost of acquisition over the net fair value of the identifiable assets acquired is

Interest income and expense is recognized in the statement of operations using the effective interest method.

recognized as goodwill.

12
50

Gibson Energy Inc.

Notes to Consolidated Financial Statements

Gibson Energy Inc.
Notes to Consolidated Financial Statements

(tabular amounts in thousands of Canadian dollars, except where noted)

The Company recognizes termination benefits as an expense when it is demonstrably committed to either terminating the

employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing

benefits as a result of an offer made to encourage voluntary termination.

Termination benefit

Income taxes

Income tax expense represents the sum of the income tax currently payable and deferred income tax. Interest and penalties

relating to income tax are also included in income tax expense.

The income tax currently payable is based on the taxable income for the period. Taxable income differs from net income as

reported in the statement of operations because it excludes items of income or expense that are taxable or deductible in other

periods and it further excludes items that are never taxable or deductible. The Company’s liability for current income tax is

calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided for using the liability method of accounting. Deferred income tax assets and liabilities are

determined based on differences between the financial reporting and income tax basis of assets and liabilities. These

differences are then measured using enacted or substantially enacted income tax rates and laws that will be in effect when

these differences are expected to reverse. The effect of a change in income tax rates on deferred tax assets and liabilities is

recognized in income in the period that the change occurs. Deferred income tax assets are recognized for tax loss carry-

forwards to the extent that the realization of the related tax benefit through future taxable profits is probable.

Revenue recognition

Product revenues associated with the sales of crude oil, diluent, natural gas liquids, asphalt, natural gas, wellsite fluids and

distillate owned by the Company are recognized when the risk of ownership passes to the customer and physical delivery

occurs, the price is fixed and collection is reasonably assured. Sales terms are generally FOB shipping point, in which case

the sales are recorded at the time of shipment, because this is when title and risk of loss are transferred. All payments

received before delivery are recorded as deferred revenue and are recognized as revenue when delivery occurs, assuming all

other criteria are met. Freight costs billed to customers are recorded as a component of revenue. Revenues from buy/sell

transactions whereby the Company acts as an agent are recorded on a net basis.

Revenue associated with the provision of services such as transportation, terminalling and environmental services are

recognized when the services are provided, the price is fixed and collection is reasonably assured. Revenue from pipeline

tariffs and fees are based on volumes and rates as the pipeline is being used. Long-term take-or-pay contracts, under which

shippers are obligated to pay fixed amounts ratably over the contract period regardless of volumes shipped, may contain

make-up rights. Make-up rights are earned by shippers when minimum volume commitments are not utilized during the

period but under certain circumstances can be used to offset overages in future periods, subject to expiry periods. The

Company recognizes revenues associated with make-up rights at the earlier of when the make-up volume is shipped, the

make-up right expires or when it is determined that the likelihood that the shipper will utilize the make-up right is remote.

Revenue from pipeline tariffs and fees are based on volumes and rates as the pipeline is being used. Revenue from equipment

rentals and non-refundable propane tank fees are recorded in deferred revenue and are recognized in revenue on a straight

line basis over the rental period, typically one year.

Excise taxes are reported gross within sales and other operating revenues and taxes other than income taxes, while other sales

and value-added taxes are recorded net in operating expenses.

Cost of sales includes the cost of finished goods inventory (including depreciation, amortization and impairment charges),

processing costs, costs related to transportation, inventory write downs and reversals, and gains and losses on derivative

financial instruments relating to commodities.

Cost of sales

Interest

Interest income and expense is recognized in the statement of operations using the effective interest method.

Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets,
which are assets that take a substantial period of time to get ready for their intended use or sale, are added to the cost of those
assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are
recognized in the statement of operations in the period in which they are incurred.

Share capital

Common and preferred shares are classified as equity. Incremental costs directly attributable to the issuance of shares are
recognized as a deduction from equity.

Per share amounts

Basic per share amounts are calculated using the weighted average number of shares outstanding during the year. Diluted per
share amounts are calculated giving effect to the potential dilution that would occur if stock options and other equity awards
were exercised or converted into common shares.

Dividends

Dividends on common shares are recognized in the period in which the dividends are approved by the Board.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, who is responsible for resource allocation and assessing performance of the
operating segments, has been identified as the President and Chief Executive Officer.

Critical accounting estimates and judgements

The preparation of ﬁnancial statements in conformity with IFRS requires the use of certain critical accounting estimates. It
also requires management to exercise its judgement in the process of applying the Company’s accounting policies. Estimates
and judgements are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.

Critical accounting estimates and assumptions

The preparation of financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the balance sheet date and the
reported amounts of revenues and expenses during the reporting period. Actual outcomes could differ from those estimates.
The estimates and assumptions that have a signiﬁcant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next ﬁnancial year are addressed below.

Fair value of assets and liabilities acquired in a business combination

In conjunction with each business combination, the Company must allocate the cost of the acquired entity to the assets and
liabilities assumed based on their estimated fair values at the date of acquisition. Determining the fair value of assets and
liabilities acquired, as well as intangible assets that relate to such items as customer relationships, brands and contracts
involves professional judgment and is ultimately based on acquisition models and management’s assessment of the value of
the assets and liabilities acquired and, to the extent available, third party assessments. Uncertainties associated with these
estimates include changes in production volumes, changes in commodity prices, fluctuations in capacity or product slates,
economic obsolescence factors in the area and potential future sources of cash flow. During the measurement period, the fair
value of assets acquired and liabilities assumed may be adjusted when the initial accounting for business combination is
recorded based on provisional amounts. Although the resolution of these uncertainties has not historically had a material
impact on the Company’s results of operations or financial condition, the actual amounts may vary significantly from
estimated amounts. Any excess of the cost of acquisition over the net fair value of the identifiable assets acquired is
recognized as goodwill.

13
51

Gibson Energy Inc.
Notes to Consolidated Financial Statements

Gibson Energy Inc.

Notes to Consolidated Financial Statements

(tabular amounts in thousands of Canadian dollars, except where noted)

Impairment assessment of non-financial assets

Investment in finance leases

The Company tests annually whether goodwill of an operating segment has suffered any impairment, in accordance with the
Company’s accounting policy. The recoverable amounts of the operating segments are determined based on fair value less
costs of disposal calculations which requires the use of estimates. The Company also assesses at least annually whether there
have been any events or changes in circumstances that indicate that property, plant and equipment and other intangible assets
may be impaired and an impairment review is carried out whenever such an assessment indicates that the carrying amount
may not be recoverable.

In the impairment analysis of the Company’s assets, some of the key assumptions used in estimating future cash flows
include revenue growth, future commodity prices, expected margin, expected sales volumes, cost structures and the outlook
of market supply and demand conditions appropriate to the local circumstances and environment. These assumptions and
estimates are uncertain and are subject to change as new information becomes available. Changes in economic conditions can
also affect the rate used to discount future cash flow estimates.

Income taxes

The Company is subject to income taxes in Canada and the United States of America. Tax provisions are recognized when it
is considered probable that there will be a future outflow of funds to a taxing authority. In such cases, provision is made for
the amount that is expected to be settled, where this can be reasonably estimated. This requires management to make some
assumptions as to the ultimate outcome, which can change over time depending on facts and circumstances. A change in
estimate of the likelihood of a future outflow and/or in the expected amount to be settled would be recognized in statement of
operations in the period in which the change occurs.

Fair value of derivatives ﬁnancial instruments

The Company reflects the fair value of derivative financial instruments based on valuation information from third parties.
The calculation of the fair value of certain of these instruments is based on proprietary models and assumptions of third
parties because such instruments are not quoted on an active market. Additionally, estimates of fair value may vary among
different models due to a difference in assumptions applied, such as the estimate of prevailing market prices, volatility,
correlations and other factors, and may not be reflective of the price at which they can be settled due to the lack of a liquid
market. As a result of changes in key assumptions, the actual amounts may vary significantly from estimated amounts.

Provisions

Accruals for decommissioning and environmental remediation are recorded when it is considered probable and the costs can
be reasonably estimated. A number of factors affect the cost of environmental remediation, including the determination of the
extent of contamination, the length of time remediation may require, the complexity of environmental regulations and the
advancement of technology. Considering these factors, the Company has estimated the costs of remediation, which will be
incurred in future years. The Company believes the provisions made for environmental matters are adequate, however it is
reasonably possible that actual costs may differ from the estimated accrual, if the selected methods of remediation do not
adequately reduce the contaminates and further remedial action is required. The Company uses third-party environmental
evaluators, where possible, to obtain the estimates of decommissioning and environmental provision.

Critical judgements in applying the Company’s accounting policies

Identification of cash-generating unit (“CGU”)

For the purposes of impairment testing, assets are grouped at the lowest levels of integrated assets that generate identifiable
cash inflows that are largely independent of the cash inflows of other assets or groups of assets, termed as a CGU. The
allocation of assets into a CGU requires significant judgment and interpretations with respect to the integration between
assets, the existence of active markets, similar exposure to market risks, shared infrastructures and the way in which
management monitors the operations.

In determining whether certain of the Company’s long-term tank storage arrangements are, or contain, a lease, the Company

must use judgement in assessing whether the fulfilment of the arrangement is dependent on the use of a specific asset and the

arrangement conveys the right to use the assets. For those arrangements considered to be a lease, further judgement is

required to determine whether substantially all of the significant risks and rewards of ownership are transferred to the

customer or remain with the Company, to appropriately account for the arrangement as a finance or operating lease. These

judgements can be significant as to how the Company classifies amounts related to the arrangements as property, plant and

equipment or net investment in finance lease on the balance sheet. The Company has determined, based on the terms and

conditions of these arrangements, that the substantial risks and rewards to the ownership of certain storage tanks have been

transferred to the customer, and accordingly, these storage tanks have been recognized as an investment in finance lease.

Current and deferred taxation

The computation of the Company’s income tax expense involves the interpretation of applicable tax laws and regulations in

many jurisdictions. The resolution of tax positions taken by the Company can take significant time to complete and in some

cases it is difficult to predict the ultimate outcome. In addition, the Company has carry-forward tax losses in certain taxing

jurisdictions that are available to offset against future taxable profit. This involves an assessment of when those deferred tax

assets are likely to be realized, and a judgment as to whether or not there will be sufficient taxable profits available to offset

the tax assets when they do reverse. This requires assumptions regarding future profitability and is therefore inherently

uncertain. To the extent assumptions regarding future profitability change, there can be an increase or decrease in the

amounts recognized in respect of deferred tax assets as well as in the amounts recognized in statement of operations in the

period in which the change occurs. However, deferred income tax assets are recognized only to the extent that it is probable

that taxable profit will be available against which the unused tax losses can be utilized. To the extent that actual outcomes

differ from management’s estimates, income tax charges or credits may arise in future periods.

Change in the terms of the credit agreement

The Company incurs costs on the refinancing, replacement and re-pricing of its long-term debt and credit facilities. The

treatment of such costs is dependent on the assessment of whether the refinancing, replacement or re-pricing was an

extinguishment or a modification of the original loan. In the case of an extinguishment, the costs incurred are charged to

statements of operations whereas in the case of a modification, the costs are capitalized as a part of the existing carrying

amount of the loan and amortized to statement of operations over the term of the loan using effective interest method. When

the terms and conditions of a refinancing, replacement and re-pricing are substantially different, it is generally considered an

extinguishment. The assessment requires the exercise of significant judgement involving comparing qualitative and

quantitative factors of the credit agreement before and after the refinancing, replacement or re-pricing.

4 Changes in accounting policies and disclosures

New and amended standards adopted by the Company

The Company adopted the following new and revised standards, along with any consequential amendments. These changes

were made in accordance with applicable transitional provisions.

•

IAS 32, Financial Instruments, Presentation (‘‘IAS 32’’) has been amended to clarify the requirements for offsetting

financial assets and liabilities. The amendment clarifies that the right to offset must be available on the current date and

cannot be contingent on a future event. The Company adopted these amendments on January 1, 2014 which did not

result in any material impact on the consolidated financial statements.

IFRIC 21, Accounting for Levies imposed by governments (‘‘IFRIC 21’’) was issued which clarifies that the obligating

event giving rise to a liability to pay a levy is the activity described in the relevant legislation that triggers payment of

the levy. The Company adopted IFRIC 21 on January 1, 2014 which did not result in any material impact on the

consolidated financial statements.

IFRS 2, Share based payments has been amended to clarify the definition of vesting conditions. The amendment

clarifies that the vesting condition is either a service or performance condition and separately defines these two

14
52

Gibson Energy Inc.

Notes to Consolidated Financial Statements

Gibson Energy Inc.
Notes to Consolidated Financial Statements

(tabular amounts in thousands of Canadian dollars, except where noted)

Impairment assessment of non-financial assets

Investment in finance leases

The Company tests annually whether goodwill of an operating segment has suffered any impairment, in accordance with the

Company’s accounting policy. The recoverable amounts of the operating segments are determined based on fair value less

costs of disposal calculations which requires the use of estimates. The Company also assesses at least annually whether there

have been any events or changes in circumstances that indicate that property, plant and equipment and other intangible assets

may be impaired and an impairment review is carried out whenever such an assessment indicates that the carrying amount

may not be recoverable.

In the impairment analysis of the Company’s assets, some of the key assumptions used in estimating future cash flows

include revenue growth, future commodity prices, expected margin, expected sales volumes, cost structures and the outlook

of market supply and demand conditions appropriate to the local circumstances and environment. These assumptions and

estimates are uncertain and are subject to change as new information becomes available. Changes in economic conditions can

also affect the rate used to discount future cash flow estimates.

Income taxes

The Company is subject to income taxes in Canada and the United States of America. Tax provisions are recognized when it

is considered probable that there will be a future outflow of funds to a taxing authority. In such cases, provision is made for

the amount that is expected to be settled, where this can be reasonably estimated. This requires management to make some

assumptions as to the ultimate outcome, which can change over time depending on facts and circumstances. A change in

estimate of the likelihood of a future outflow and/or in the expected amount to be settled would be recognized in statement of

operations in the period in which the change occurs.

Fair value of derivatives ﬁnancial instruments

The Company reflects the fair value of derivative financial instruments based on valuation information from third parties.

The calculation of the fair value of certain of these instruments is based on proprietary models and assumptions of third

parties because such instruments are not quoted on an active market. Additionally, estimates of fair value may vary among

different models due to a difference in assumptions applied, such as the estimate of prevailing market prices, volatility,

correlations and other factors, and may not be reflective of the price at which they can be settled due to the lack of a liquid

market. As a result of changes in key assumptions, the actual amounts may vary significantly from estimated amounts.

Provisions

Accruals for decommissioning and environmental remediation are recorded when it is considered probable and the costs can

be reasonably estimated. A number of factors affect the cost of environmental remediation, including the determination of the

extent of contamination, the length of time remediation may require, the complexity of environmental regulations and the

advancement of technology. Considering these factors, the Company has estimated the costs of remediation, which will be

incurred in future years. The Company believes the provisions made for environmental matters are adequate, however it is

reasonably possible that actual costs may differ from the estimated accrual, if the selected methods of remediation do not

adequately reduce the contaminates and further remedial action is required. The Company uses third-party environmental

evaluators, where possible, to obtain the estimates of decommissioning and environmental provision.

Critical judgements in applying the Company’s accounting policies

Identification of cash-generating unit (“CGU”)

For the purposes of impairment testing, assets are grouped at the lowest levels of integrated assets that generate identifiable

cash inflows that are largely independent of the cash inflows of other assets or groups of assets, termed as a CGU. The

allocation of assets into a CGU requires significant judgment and interpretations with respect to the integration between

assets, the existence of active markets, similar exposure to market risks, shared infrastructures and the way in which

management monitors the operations.

In determining whether certain of the Company’s long-term tank storage arrangements are, or contain, a lease, the Company
must use judgement in assessing whether the fulfilment of the arrangement is dependent on the use of a specific asset and the
arrangement conveys the right to use the assets. For those arrangements considered to be a lease, further judgement is
required to determine whether substantially all of the significant risks and rewards of ownership are transferred to the
customer or remain with the Company, to appropriately account for the arrangement as a finance or operating lease. These
judgements can be significant as to how the Company classifies amounts related to the arrangements as property, plant and
equipment or net investment in finance lease on the balance sheet. The Company has determined, based on the terms and
conditions of these arrangements, that the substantial risks and rewards to the ownership of certain storage tanks have been
transferred to the customer, and accordingly, these storage tanks have been recognized as an investment in finance lease.

Current and deferred taxation

The computation of the Company’s income tax expense involves the interpretation of applicable tax laws and regulations in
many jurisdictions. The resolution of tax positions taken by the Company can take significant time to complete and in some
cases it is difficult to predict the ultimate outcome. In addition, the Company has carry-forward tax losses in certain taxing
jurisdictions that are available to offset against future taxable profit. This involves an assessment of when those deferred tax
assets are likely to be realized, and a judgment as to whether or not there will be sufficient taxable profits available to offset
the tax assets when they do reverse. This requires assumptions regarding future profitability and is therefore inherently
uncertain. To the extent assumptions regarding future profitability change, there can be an increase or decrease in the
amounts recognized in respect of deferred tax assets as well as in the amounts recognized in statement of operations in the
period in which the change occurs. However, deferred income tax assets are recognized only to the extent that it is probable
that taxable profit will be available against which the unused tax losses can be utilized. To the extent that actual outcomes
differ from management’s estimates, income tax charges or credits may arise in future periods.

Change in the terms of the credit agreement

The Company incurs costs on the refinancing, replacement and re-pricing of its long-term debt and credit facilities. The
treatment of such costs is dependent on the assessment of whether the refinancing, replacement or re-pricing was an
extinguishment or a modification of the original loan. In the case of an extinguishment, the costs incurred are charged to
statements of operations whereas in the case of a modification, the costs are capitalized as a part of the existing carrying
amount of the loan and amortized to statement of operations over the term of the loan using effective interest method. When
the terms and conditions of a refinancing, replacement and re-pricing are substantially different, it is generally considered an
extinguishment. The assessment requires the exercise of significant judgement involving comparing qualitative and
quantitative factors of the credit agreement before and after the refinancing, replacement or re-pricing.

4 Changes in accounting policies and disclosures

New and amended standards adopted by the Company

The Company adopted the following new and revised standards, along with any consequential amendments. These changes
were made in accordance with applicable transitional provisions.

•

IAS 32, Financial Instruments, Presentation (‘‘IAS 32’’) has been amended to clarify the requirements for offsetting
financial assets and liabilities. The amendment clarifies that the right to offset must be available on the current date and
cannot be contingent on a future event. The Company adopted these amendments on January 1, 2014 which did not
result in any material impact on the consolidated financial statements.

IFRIC 21, Accounting for Levies imposed by governments (‘‘IFRIC 21’’) was issued which clarifies that the obligating
event giving rise to a liability to pay a levy is the activity described in the relevant legislation that triggers payment of
the levy. The Company adopted IFRIC 21 on January 1, 2014 which did not result in any material impact on the
consolidated financial statements.

IFRS 2, Share based payments has been amended to clarify the definition of vesting conditions. The amendment
clarifies that the vesting condition is either a service or performance condition and separately defines these two

15
53

Gibson Energy Inc.
Notes to Consolidated Financial Statements

Gibson Energy Inc.

Notes to Consolidated Financial Statements

(tabular amounts in thousands of Canadian dollars, except where noted)

conditions. The Company adopted these amendments on July 1, 2014 which did not result in any material impact on the
consolidated financial statements.

•

IFRS 3, Business combinations has been amended to clarify that an obligation to pay contingent consideration which
meets the definition of a financial instrument is classified as a financial liability or as equity, on the basis of the
definitions in IAS 32. The standard is further amended to clarify that all non-equity contingent consideration, both
financial and non-financial, is measured at fair value at each reporting date, with changes in fair value recognized in
profit and loss. The Company adopted these amendments on July 1, 2014 which did not result in any impact on the
consolidated financial statements.

New standards and interpretations issued but not yet adopted

The following provides information requiring new standards and interpretations that have been issued but not yet adopted by
the Company:

•
The annual improvements process addresses issues in the 2012-2014 reporting cycles including changes to IFRS 5,
Non-current assets held for sale and discontinued operations, IFRS 7, Financial instruments: Disclosures, IAS 19,
Employee benefits, and IAS 34, Interim financial reporting. These improvements are effective for periods beginning on
or after January 1, 2016. The Company is currently evaluating the impact of adopting these improvements on its
consolidated financial statements.

• The annual improvements process addresses issues in the 2010-2012 and 2011-2013 reporting cycles including changes
to IFRS 13, Fair value measurements, IFRS 8, Operating segments and IAS 24, Related party transactions. These
improvements are effective for annual periods beginning on or after July 1, 2014. The impact of adopting these
improvements will not have a material impact on the consolidated financial statements.

•

IAS 1, Presentation of financial statements (“IAS 1”), has been amended to clarify the guidance on materiality and
aggregation, the presentation of subtotals, the structure of financial statements and the disclosure of accounting policies.
The amendment to IAS 1 is effective for annual periods beginning on or after January 1, 2016. The Company is
currently evaluating the impact of adopting these improvements on its consolidated financial statements.

IAS 16, Property Plant and Equipment (“IAS 16”), and IAS 38, Intangible Assets (“IAS 38”), has been amended to (i)
clarify that the use of a revenue-based depreciation and amortization method is not appropriate, and (ii) provide a
rebuttable presumption that amortisation of an intangible asset based on revenue generated by using the asset is
inappropriate. The amendments to IAS 16 and IAS 38 are effective for annual periods beginning on or after January 1,
2016. The Company is currently evaluating the impact of adopting these amendments on its consolidated financial
statements.

IAS 19, Employee benefits (“IAS 19”), has been amended to clarify the application of requirements to plans that require
employees or third parties to contribute toward the cost of the benefits. The amendment to IAS 19 is effective for
annual periods beginning on or after July 1, 2014. The impact of adopting this amendment will not have a material
impact on the consolidated financial statements.

•
The IASB completed the final element of its comprehensive publication of IFRS 9 Financial Instruments in July 2014.
The package of improvements introduced by IFRS 9 includes a logical model for classification and measurement, a
single, forward-looking ‘expected loss’ impairment model and a substantially-reformed approach to hedge accounting.
The IASB has previously published versions of IFRS 9 that introduced new classification and measurement
requirements (in 2009 and 2010) and a new hedge accounting model (in 2013). The July 2014 publication represents the
final version of the Standard, replaces earlier versions of IFRS 9 and completes the IASB’s project to replace IAS 39
Financial Instruments: Recognition and Measurement. IFRS 9 is effective for annual periods beginning on or after 1
January 2018. The Company is currently evaluating the impact of adopting this standard on its consolidated financial
statements.

•

is recognized when the transaction involves the assets that do not constitute a business. Additionally, the amendments

clarify the exception from preparing consolidated financial statements, the consolidation requirements for subsidiaries

which act as an extension of an investment entity, and the requirements for equity accounting for investments in

associates and joint ventures. The amendments to IFRS 10 and IAS 28 are effective for annual periods beginning on or

after January 1, 2016. The Company is currently evaluating the impact of adopting these amendments on its

consolidated financial statements.

•

IFRS 11, Accounting for acquisitions of interests in joint operations (“IFRS 11”), has been amended to provide specific

guidance on accounting for the acquisition of an interest in a joint operation that is a business. The amendment to IFRS

11 is effective for annual periods beginning on or after January 1, 2016. The Company is currently evaluating the

impact of adopting these amendments on its consolidated financial statements.

IFRS 15, Revenue from contracts with customers (“IFRS 15”), has been issued as a new standard on revenue

recognition and will supersede IAS 18, Revenue, IAS 11, Construction Contracts and related interpretations. IFRS 15 is

effective for annual periods beginning on or after January 1, 2017. The Company is currently evaluating the impact of

adopting this standard on its consolidated financial statements.

5 Business combinations

Cal-Gas Inc. (“Cal-Gas”)

On August 1, 2014, the Company acquired all of the issued and outstanding common shares of Cal-Gas for total cash

consideration of $96.4 million, including final closing adjustments. Cal-Gas is a provider of propane and related equipment,

service and delivery to commercial, industrial and residential customers in Western Canada and Northwestern Ontario.

The following table summarizes the fair value of assets acquired and liabilities assumed at the acquisition date:

Trade and other receivables ..............................................................................................................................

Inventories.........................................................................................................................................................

Prepaid and other assets ....................................................................................................................................

Property, plant and equipment ..........................................................................................................................

Goodwill(1) .......................................................................................................................................................

Intangible assets (2) ............................................................................................................................................

Other long-term assets ......................................................................................................................................

Trade payables and accrued charges .................................................................................................................

Deferred revenue ...............................................................................................................................................

Provisions ..........................................................................................................................................................

Deferred income tax liabilities ..........................................................................................................................

Net assets acquired ............................................................................................................................................

96,385

Fair Value

11,314

1,457

331

64,401

29,152

7,534

105

(10,957)

(442)

(90)

(6,420)

(1) The goodwill arising on the acquisition is not deductible for tax purposes.

(2) Consists of customer relationships of $5.1 million and non-compete agreements of $2.4 million.

Acquisition-related costs of $0.3 million have been charged to general and administrative expenses in the consolidated

statement of operations for the year ended December 31, 2014.

The goodwill arising from the acquisition is attributable to the expected synergies with the Company’s existing propane

operations within the Propane and NGL Marketing and Distribution segment. The goodwill for this acquisition is allocated to

the Propane and NGL Marketing and Distribution segment.

The fair value of trade receivables is $11.3 million, which approximates its gross contractual amount.

16
54

Gibson Energy Inc.

Notes to Consolidated Financial Statements

Gibson Energy Inc.
Notes to Consolidated Financial Statements

(tabular amounts in thousands of Canadian dollars, except where noted)

•

conditions. The Company adopted these amendments on July 1, 2014 which did not result in any material impact on the

consolidated financial statements.

IFRS 3, Business combinations has been amended to clarify that an obligation to pay contingent consideration which

meets the definition of a financial instrument is classified as a financial liability or as equity, on the basis of the

definitions in IAS 32. The standard is further amended to clarify that all non-equity contingent consideration, both

financial and non-financial, is measured at fair value at each reporting date, with changes in fair value recognized in

profit and loss. The Company adopted these amendments on July 1, 2014 which did not result in any impact on the

consolidated financial statements.

New standards and interpretations issued but not yet adopted

The following provides information requiring new standards and interpretations that have been issued but not yet adopted by

the Company:

The annual improvements process addresses issues in the 2012-2014 reporting cycles including changes to IFRS 5,

Non-current assets held for sale and discontinued operations, IFRS 7, Financial instruments: Disclosures, IAS 19,

Employee benefits, and IAS 34, Interim financial reporting. These improvements are effective for periods beginning on

or after January 1, 2016. The Company is currently evaluating the impact of adopting these improvements on its

consolidated financial statements.

• The annual improvements process addresses issues in the 2010-2012 and 2011-2013 reporting cycles including changes

to IFRS 13, Fair value measurements, IFRS 8, Operating segments and IAS 24, Related party transactions. These

improvements are effective for annual periods beginning on or after July 1, 2014. The impact of adopting these

improvements will not have a material impact on the consolidated financial statements.

IAS 1, Presentation of financial statements (“IAS 1”), has been amended to clarify the guidance on materiality and

aggregation, the presentation of subtotals, the structure of financial statements and the disclosure of accounting policies.

The amendment to IAS 1 is effective for annual periods beginning on or after January 1, 2016. The Company is

currently evaluating the impact of adopting these improvements on its consolidated financial statements.

IAS 16, Property Plant and Equipment (“IAS 16”), and IAS 38, Intangible Assets (“IAS 38”), has been amended to (i)

clarify that the use of a revenue-based depreciation and amortization method is not appropriate, and (ii) provide a

rebuttable presumption that amortisation of an intangible asset based on revenue generated by using the asset is

inappropriate. The amendments to IAS 16 and IAS 38 are effective for annual periods beginning on or after January 1,

2016. The Company is currently evaluating the impact of adopting these amendments on its consolidated financial

statements.

IAS 19, Employee benefits (“IAS 19”), has been amended to clarify the application of requirements to plans that require

employees or third parties to contribute toward the cost of the benefits. The amendment to IAS 19 is effective for

annual periods beginning on or after July 1, 2014. The impact of adopting this amendment will not have a material

impact on the consolidated financial statements.

The IASB completed the final element of its comprehensive publication of IFRS 9 Financial Instruments in July 2014.

The package of improvements introduced by IFRS 9 includes a logical model for classification and measurement, a

single, forward-looking ‘expected loss’ impairment model and a substantially-reformed approach to hedge accounting.

The IASB has previously published versions of IFRS 9 that introduced new classification and measurement

requirements (in 2009 and 2010) and a new hedge accounting model (in 2013). The July 2014 publication represents the

final version of the Standard, replaces earlier versions of IFRS 9 and completes the IASB’s project to replace IAS 39

Financial Instruments: Recognition and Measurement. IFRS 9 is effective for annual periods beginning on or after 1

January 2018. The Company is currently evaluating the impact of adopting this standard on its consolidated financial

statements.

IFRS 10, Consolidated financial statements (“IFRS 10”), and IAS 28, Investments in associates and joint ventures

(“IAS 28”), has been amended to address an inconsistency between IFRS 10 and IAS 28 in regards to a sale or

contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments

is that a full gain or loss is recognized when the transaction involves a business combination, and whereas a partial gain

is recognized when the transaction involves the assets that do not constitute a business. Additionally, the amendments
clarify the exception from preparing consolidated financial statements, the consolidation requirements for subsidiaries
which act as an extension of an investment entity, and the requirements for equity accounting for investments in
associates and joint ventures. The amendments to IFRS 10 and IAS 28 are effective for annual periods beginning on or
after January 1, 2016. The Company is currently evaluating the impact of adopting these amendments on its
consolidated financial statements.

IFRS 11, Accounting for acquisitions of interests in joint operations (“IFRS 11”), has been amended to provide specific
guidance on accounting for the acquisition of an interest in a joint operation that is a business. The amendment to IFRS
11 is effective for annual periods beginning on or after January 1, 2016. The Company is currently evaluating the
impact of adopting these amendments on its consolidated financial statements.

IFRS 15, Revenue from contracts with customers (“IFRS 15”), has been issued as a new standard on revenue
recognition and will supersede IAS 18, Revenue, IAS 11, Construction Contracts and related interpretations. IFRS 15 is
effective for annual periods beginning on or after January 1, 2017. The Company is currently evaluating the impact of
adopting this standard on its consolidated financial statements.

•

5 Business combinations

Cal-Gas Inc. (“Cal-Gas”)
On August 1, 2014, the Company acquired all of the issued and outstanding common shares of Cal-Gas for total cash
consideration of $96.4 million, including final closing adjustments. Cal-Gas is a provider of propane and related equipment,
service and delivery to commercial, industrial and residential customers in Western Canada and Northwestern Ontario.

The following table summarizes the fair value of assets acquired and liabilities assumed at the acquisition date:

Trade and other receivables ..............................................................................................................................
Inventories.........................................................................................................................................................
Prepaid and other assets ....................................................................................................................................
Property, plant and equipment ..........................................................................................................................
Goodwill(1) .......................................................................................................................................................
Intangible assets (2) ............................................................................................................................................
Other long-term assets ......................................................................................................................................
Trade payables and accrued charges .................................................................................................................
Deferred revenue ...............................................................................................................................................
Provisions ..........................................................................................................................................................
Deferred income tax liabilities ..........................................................................................................................
Net assets acquired ............................................................................................................................................

Fair Value

11,314
1,457
331
64,401
29,152
7,534
105
(10,957)
(442)
(90)
(6,420)
96,385

(1) The goodwill arising on the acquisition is not deductible for tax purposes.
(2) Consists of customer relationships of $5.1 million and non-compete agreements of $2.4 million.
Acquisition-related costs of $0.3 million have been charged to general and administrative expenses in the consolidated
statement of operations for the year ended December 31, 2014.

The goodwill arising from the acquisition is attributable to the expected synergies with the Company’s existing propane
operations within the Propane and NGL Marketing and Distribution segment. The goodwill for this acquisition is allocated to
the Propane and NGL Marketing and Distribution segment.

The fair value of trade receivables is $11.3 million, which approximates its gross contractual amount.

17
55

Gibson Energy Inc.
Notes to Consolidated Financial Statements

(tabular amounts in thousands of Canadian dollars, except where noted)

Stittco Energy Limited (“Stittco”)
On April 1, 2014, the Company acquired all of the issued and outstanding common shares of Stittco for total cash
consideration of $32.1 million including final closing adjustments. Stittco is a provider of propane and related equipment,
service and delivery to commercial, industrial and residential customers in northern Manitoba and the Northwest Territories.

The following table summarizes the fair value of assets acquired and liabilities assumed at the acquisition date:

Trade and other receivables ..............................................................................................................................
Inventories.........................................................................................................................................................
Prepaid and other assets ....................................................................................................................................
Property, plant and equipment ..........................................................................................................................
Goodwill(1) .......................................................................................................................................................
Intangible assets (2) ............................................................................................................................................
Trade payables and accrued charges .................................................................................................................
Income taxes payable ........................................................................................................................................
Other liabilities ..................................................................................................................................................
Provisions ..........................................................................................................................................................
Deferred income tax liabilities ..........................................................................................................................
Net assets acquired ............................................................................................................................................

Fair Value

12,818
4,922
253
15,653
4,837
5,660
(4,068)
(1,270)
(2,007)
(734)
(4,009)
32,055

(1) The goodwill arising on the acquisition is not deductible for tax purposes.
(2) Consists of customer relationships of $5.4 million, and non-compete agreements of $0.3 million.
Acquisition-related costs of $0.2 million have been charged to general and administrative expenses in the consolidated
statement of operations for the year ended December 31, 2014.

The fair value of trade receivables is $12.8 million, which approximates its gross contractual amount.

Additional Information
If the Cal-Gas and Stittco acquisitions had occurred on January 1, 2014, the Company estimates that it would have reported
combined revenue of $8,671.7 million and net income before income taxes of $129.2 million for the year ended December
31, 2014. From the date of the acquisitions to December 31, 2014, the acquisitions contributed revenue of $61.8 million and
income before tax of $3.1 million.

6 Trade and other receivables

Trade receivables ............................................................................................................
Allowance for doubtful accounts ....................................................................................
Trade receivables - net ....................................................................................................
Risk management assets (note 28) ..................................................................................
Deposits held as collateral ...............................................................................................
Broker accounts receivable .............................................................................................
Indirect taxes receivable ..................................................................................................
Other ...............................................................................................................................

December 31,

2014

599,546
(4,678)
594,868
18,702
898
4,554
15,377
6,884
641,283

2013

583,068
(4,092)
578,976
1,120
1,145
1,326
5,967
4,316
592,850

Gibson Energy Inc.

Notes to Consolidated Financial Statements

Allowance for doubtful accounts

Year ended

December 31,

2014

2013

4,092

1,708

(1,191)

(73)

142

December 31,

2014

4,603

1,291

(1,866)

(28)

2013

77,610

3,561

14,638

34,749

13,003

12,858

Opening balance ..............................................................................................................

Additional allowances .....................................................................................................

Receivables written off as uncollectible ..........................................................................

Recoveries .......................................................................................................................

Effect of changes in foreign exchange rates ....................................................................

Closing balance ...............................................................................................................

4,678

4,092

Inventories

Crude oil..........................................................................................................................

68,883

Diluent ............................................................................................................................

Asphalt ............................................................................................................................

Natural gas liquids ..........................................................................................................

Wellsite fluids and distillate ............................................................................................

Spare parts and other .......................................................................................................

2,889

15,922

41,230

11,727

14,286

$ 154,937

$ 156,419

The cost of the inventory sold included in cost of sales was $7,149.1 million and $5,631.0 million for the year ended

December 31, 2014 and 2013, respectively.

8 Net investment in finance leases

The following summarizes the Company’s net investment in arrangements whereby the Company has entered into fixed term

contractual arrangements to allow customers to have dedicated use of certain tanks owned by the Company. These

arrangements are accounted for as finance leases:

Total minimum lease payments receivable .......................................................................

$ 353,392

Residual value ...................................................................................................................

Unearned income ..............................................................................................................

Less: current portion .........................................................................................................

Net investment in finance lease : non-current portion.......................................................

94,387

93,236

December 31,

2014

2013

35,858

(293,955)

95,295

908

$ 363,742

35,182

(304,923)

94,001

765

The minimum lease receivables are expected to be as follows:

2015 ....................................................................................................................................................................

2016 ....................................................................................................................................................................

2017 ....................................................................................................................................................................

2018 ....................................................................................................................................................................

2019 ....................................................................................................................................................................

23,548

2020 and later ......................................................................................................................................................

235,652

18
56

Gibson Energy Inc.

Notes to Consolidated Financial Statements

Gibson Energy Inc.
Notes to Consolidated Financial Statements

(tabular amounts in thousands of Canadian dollars, except where noted)

Stittco Energy Limited (“Stittco”)

Allowance for doubtful accounts

On April 1, 2014, the Company acquired all of the issued and outstanding common shares of Stittco for total cash

consideration of $32.1 million including final closing adjustments. Stittco is a provider of propane and related equipment,

service and delivery to commercial, industrial and residential customers in northern Manitoba and the Northwest Territories.