CALGARY,
AB, May 9, 2023 /CNW/ - Keyera Corp. (TSX:
KEY) ("Keyera") announced its 2023 first quarter financial results
today, the highlights of which are included in this news release.
To view the Management's Discussion and Analysis (the "MD&A")
and financial statements, visit either Keyera's website or Keyera's
filings on SEDAR at www.sedar.com.
"Keyera had a very strong start to the year, delivering record
results in our fee-for-service business segments and reaching a
major milestone with the first barrels shipped on our KAPS pipeline
system," said Dean Setoguchi,
President and CEO. "Our proven business model has delivered
reliable returns through all commodity cycles. With KAPS in
service, we are a stronger and more competitive company, focused on
leveraging the strength of our integrated value chain to maximize
value for all stakeholders."
First Quarter Highlights
- Strong Quarterly Results – Net earnings were
$138 million (Q1 2022 – $114 million), adjusted earnings before interest,
taxes, depreciation, and amortization1 ("adjusted
EBITDA") were $292 million for the
quarter (Q1 2022 – $257 million), and
distributable cash flow1 ("DCF") was $227 million (Q1 2022 – $178 million). The year-over-year increases were
driven by record quarterly contributions from the Gathering and
Processing ("G&P") and Liquids Infrastructure segments.
- KAPS In Service and Within Latest Cost Estimate – KAPS
construction is complete, and costs are within the latest cost
estimate of $1.0 billion net to
Keyera. The condensate line is now in service with the first
volumes shipped in April. Linefill activities are underway on the
natural gas liquids line which is expected to be in service in
June.
- Record Fee-For-Service Contributions – The Gathering and
Processing segment delivered record quarterly realized
margin1,3 of $100 million
(Q1 2022 – $77 million), driven by
record volumes. This includes approximately $3 million related to the recovery of maintenance
turnaround costs. The Liquids Infrastructure segment delivered
record quarterly realized margin1,3 of $119 million (Q1 2022 – $105 million) driven by contributions from newly
acquired incremental capacity at the Keyera Fort Saskatchewan
complex ("KFS") combined with strong asset utilization.
- Marketing Guidance Increased – 2023 realized
margin1,3 for the Marketing segment is now expected to
range between $330 million and
$370 million4 (previously
$250 million to $280 million). The increase is due to lower
butane feedstock costs and the continued strength of iso-octane
premiums, which benefit the company's iso-octane business.
- Strong Financial Position – The company continues to
maintain its strong financial position with net debt to adjusted
EBITDA2 at 2.6 times, well within the target range of
2.5 to 3.0 times.
- Capital Allocation Priorities – The company's capital
allocation priorities remain unchanged. They are, to first ensure
the financial strength of the business, and then to balance
increasing returns to shareholders with disciplined capital
investment.
- New KAPS Partner – Keyera is pleased to welcome
Stonepeak as its new 50 percent partner in KAPS following the
closing of their acquisition in April. Keyera and Stonepeak look
forward to working closely together to deliver a much-needed
competitive liquids transportation alternative for Montney and Duvernay producers.
Reaffirming 2023 Capital and Cash Tax Guidance
- Growth capital expenditures to range between $200 million and $240
million.
- Maintenance capital expenditures to range between $75 million and $85
million.
- Cash tax expense is expected to be $nil.
Keyera Responds to Alberta Wildfires
Keyera has been responding to wildfires across Central and
Northern Alberta. The company's
first priority is the safety of its people, the surrounding
communities and emergency responders.
As a precaution, the company proceeded with the safe and orderly
shut-in of six gas plants between Thursday,
May 4 and Friday, May 5. These are the Brazeau River,
Pembina North, Zeta Creek, Cynthia, Nordegg and Wapiti gas plants. All Keyera
employees and their families in the affected areas are safe and
accounted for.
At this time, the company does not believe the outages will have
a material financial impact. Keyera is prepared to restart
operations as soon as conditions allow. At the Wapiti plant,
regulatory approval has been received to restart.
Keyera continues to support the efforts of emergency responders
and thanks them for their efforts as they manage these events.
Summary of Key Measures
|
|
Three months ended
March 31,
|
(Thousands of
Canadian dollars, except where noted)
|
|
|
2023
|
2022
|
Net earnings
|
|
|
137,789
|
113,794
|
Per share
($/share) – basic
|
|
|
0.60
|
0.51
|
Cash flow from
operating activities
|
|
|
311,489
|
457,052
|
Funds from
operations1
|
|
|
247,306
|
197,573
|
Distributable cash
flow1
|
|
|
227,367
|
178,458
|
Per share
($/share)1
|
|
|
0.99
|
0.81
|
Dividends
declared
|
|
|
109,994
|
106,091
|
Per share
($/share)
|
|
|
0.48
|
0.48
|
Payout
ratio %1
|
|
|
48 %
|
59 %
|
Adjusted
EBITDA1
|
|
|
292,158
|
257,203
|
Operating
margin
|
|
|
332,436
|
272,926
|
Realized
margin1,3
|
|
|
335,454
|
283,868
|
Gathering and Processing
|
|
|
|
|
Operating
margin
|
|
|
99,422
|
76,569
|
Realized
margin1,3
|
|
|
100,306
|
76,687
|
Gross processing
throughput5 (MMcf/d)
|
|
|
1,692
|
1,513
|
Net processing
throughput5 (MMcf/d)
|
|
|
1,447
|
1,311
|
Liquids Infrastructure
|
|
|
|
|
Operating
margin
|
|
|
117,406
|
104,872
|
Realized
margin1,3
|
|
|
118,665
|
104,920
|
Gross processing
throughput6 (Mbbl/d)
|
|
|
194
|
186
|
Net processing
throughput6 (Mbbl/d)
|
|
|
98
|
91
|
AEF iso-octane
production volumes (Mbbl/d)
|
|
|
14
|
14
|
Marketing
|
|
|
|
|
Operating
margin
|
|
|
115,642
|
92,249
|
Realized
margin1,3
|
|
|
116,517
|
103,025
|
Inventory
value
|
|
|
210,127
|
209,629
|
Sales volumes
(Bbl/d)
|
|
|
206,100
|
194,900
|
Acquisitions
|
|
|
366,537
|
—
|
Growth capital
expenditures
|
|
|
80,732
|
243,569
|
Maintenance capital
expenditures
|
|
|
8,252
|
7,236
|
Total capital
expenditures
|
|
|
455,521
|
250,805
|
Weighted average number
of shares outstanding – basic and diluted
|
|
|
229,153
|
221,023
|
As at March 31,
|
|
|
2023
|
2022
|
Long-term
debt7
|
|
|
3,623,062
|
3,617,508
|
Credit
facility
|
|
|
400,000
|
—
|
Working capital surplus
(current assets less current liabilities)
|
(149,535)
|
(219,076)
|
Net debt
|
|
|
3,873,527
|
3,398,432
|
Common shares
outstanding – end of period
|
|
|
229,153
|
221,023
|
CEO's Message to Shareholders
Strategy continues to deliver with strong first quarter.
Keyera had an excellent start to the year. Our Gathering and
Processing segment delivered record results driven by record
volumes. Our G&P customers continue to be in a very strong
financial position, allowing for continued volume growth while
improving cash flow stability for the segment. Our Liquids
Infrastructure segment delivered record results, benefiting from
strong asset utilization and margin contribution from the newly
acquired additional interest in KFS. The Marketing segment had
another strong quarter, contributing to Keyera ending the quarter
in a strong financial position with net debt to adjusted EBITDA at
2.6 times, well within our target range of 2.5 to 3.0 times.
KAPS is onstream, making us more competitive. We are
pleased to announce that KAPS construction is complete, the
condensate line is in service, and costs are within our latest
estimate of $1.0 billion, net to
Keyera. In April, we successfully shipped our first volumes of
condensate on KAPS, and we expect the natural gas liquids line to
be in service and flowing in June. This highly strategic project
offers a much-needed competitive alternative for liquids
transportation for Montney and
Duvernay producers, on a new
pipeline. KAPS is the link that completes our value chain, fully
integrating our business from wellhead to end market.
High fractionation demand and available capacity provides
advantage. Our acquisition of additional fractionation capacity
at our core KFS complex positions us to benefit from high demand
for fractionation services. With available fractionation capacity
and KAPS in service we can attract volumes by offering customers a
complete suite of services including gas processing, liquids
transportation, fractionation, storage, and product marketing, to
ensure their products reach the highest value markets. By providing
an alternate end-to-end solution for customers, we ensure our
services remain in high demand for the long-term. As a result, we
are better equipped to maximize value from new and existing assets,
driving higher overall returns for our shareholders.
Reaching a cash flow inflection
point. In the last five years we
have invested significantly to strengthen our integrated value
chain and establish a competitive footprint in the Montney. This strategic spend is now behind
us. Projects like Wapiti, Pipestone, KAPS and our recent KFS acquisition
support our annual adjusted EBITDA growth rate of 6% to 7% from our
fee-for-service business⁸ from 2022 to 2025, and support
growth beyond this timeframe. Our capital allocation
priorities remain unchanged. They are, to first ensure the
financial strength of the business, and then to balance
increasing returns to shareholders with disciplined capital
investment.
Marketing strength provides optionality with $330 million to $370
million expected in 2023. Over the past five years, the
Marketing segment has delivered, on average, more than $340 million per year, totaling $1.7 billion. This physical business generates
margins by leveraging our integrated assets to purchase, upgrade,
transport, and sell natural gas liquids products throughout
North America. The cash flow
generated from this segment is reinvested in our fee-for-service
infrastructure businesses, supporting further growth in stable and
reliable cash flows.
Proven track record and strategy for long-term value
creation. Our basin continues to grow and set new records
for both natural gas and crude oil production. LNG Canada and the
Trans Mountain Expansion pipeline, will unlock further growth. With
KAPS in service, we enter our next chapter as an essential
infrastructure service provider with an integral role in enabling
basin growth.
On behalf of Keyera's board of directors and management team I
want to thank our employees, customers, shareholders, Indigenous
peoples, and other stakeholders for their continued support.
Dean Setoguchi
President and CEO
Keyera Corp
Notes:
1
|
Keyera uses certain
non-Generally Accepted Accounting Principles ("GAAP") and other
financial measures such as EBITDA, adjusted EBITDA, funds from
operations, distributable cash flow, distributable cash flow per
share, payout ratio, realized margin and return on invested
capital. Since these measures are not a standard measure under
GAAP, they may not be comparable to similar measures reported by
other entities. For a reconciliation of the historical non-GAAP
financial measures to the most directly comparable GAAP measure,
refer to the section of this news release titled "Non-GAAP and
Other Financial Measures".
|
2
|
Ratio is calculated in
accordance with the covenant test calculations related to the
company's credit facility and senior note agreements and excludes
hybrid notes.
|
3
|
Realized margin is not
a standard measure under GAAP and excludes the effect of $3 million
in non-cash losses from commodity-related risk management contracts
($1 million loss for each of the Marketing, Liquids Infrastructure
and Gathering and Processing segments). See the section of this
news release titled "Non-GAAP and Other Financial
Measures".
|
4
|
For the assumptions
associated with the realized margin guidance for the Marketing
segment, refer to the section titled "Segmented Results of
Operations: Marketing" of Management's Discussion and
Analysis.
|
5
|
Includes gas volumes
and the conversion of liquids volumes handled through the
processing facilities to a gas volume equivalent. Net processing
throughput refers to Keyera's share of raw gas processed at its
processing facilities.
|
6
|
Fractionation
throughput in the Liquids Infrastructure segment is the aggregation
of volumes processed through the fractionators and the
de-ethanizers at the Keyera and Dow Fort Saskatchewan
facilities.
|
7
|
Long-term debt includes
the total value of Keyera's hybrid notes which receive 50% equity
treatment by Keyera's rating agencies. The hybrid notes are also
excluded from Keyera's covenant test calculations related to the
company's credit facility and senior note agreements.
|
8
|
Compound annual growth
rate ("CAGR") for adjusted EBITDA from the fee-for-service business
is a non-GAAP and other financial measure and therefore, may not be
comparable to similar measures reported by other entities. For
additional information, refer to the section titled "Non-GAAP and
Other Financial Measures" of Management's Discussion and
Analysis.
|
First Quarter 2023 Results Conference Call and Webcast
Keyera will be conducting a conference call and webcast for
investors, analysts, brokers and media representatives to discuss
the financial results for the first quarter of 2023 at 8:00 a.m. Mountain Time (10:00 a.m. Eastern Time) on Tuesday, May 9, 2023. Callers may participate by
dialing 888-664-6392 or 416-764-8659. A recording of the
conference call will be available for replay until 10:00 PM
Mountain Time on May 23, 2023 (12:00 AM Eastern
Time on May 24, 2023), by
dialing 888-390-0541 or 416-764-8677 and
entering passcode 677308.
Internet users can listen to the call live on Keyera's website
at www.keyera.com/news/events. Shortly after the call, an audio
archive will be posted on the website for 90 days.
Additional Information
For more information about Keyera Corp., please visit our
website at www.keyera.com or contact:
Dan Cuthbertson, Director,
Investor Relations
Calvin Locke, Manager, Investor
Relations
Rahul Pandey, Senior Advisor,
Investor Relations
Email: ir@keyera.com Telephone: 403.205.7670
Toll free: 888.699.4853
For media inquiries, please contact:
Kirsten Bell, Director,
Stakeholder Communications
Email: media@keyera.com
Telephone: 587.496.8092
About Keyera Corp.
Keyera Corp. (TSX:KEY) operates an integrated Canadian-based
energy infrastructure business with extensive interconnected assets
and depth of expertise in delivering energy solutions. Its
predominantly fee-for-service based business consists of natural
gas gathering and processing; natural gas liquids processing,
transportation, storage and marketing; iso-octane production and
sales; and an industry-leading condensate system in the
Edmonton/Fort Saskatchewan area of Alberta. Keyera strives to provide high
quality, value-added services to its customers across North America and is committed to conducting
its business ethically, safely and in an environmentally and
financially responsible manner.
Non-GAAP and Other Financial
Measures
This news release refers to certain financial and other measures
that are not determined in accordance with Generally Accepted
Accounting Principles ("GAAP") and as a result, may not be
comparable to similar measures reported by other entities.
Management believes that these supplemental measures facilitate the
understanding of Keyera's results of operations, leverage,
liquidity and financial position. These measures do not have any
standardized meaning under GAAP and therefore, should not be
considered in isolation, or used in substitution for measures of
performance prepared in accordance with GAAP. For additional
information on these non-GAAP and other financial measures,
including reconciliations to the most directly comparable GAAP
measures for Keyera's historical non-GAAP financial measures, refer
below and to Management's Discussion and Analysis available on
SEDAR at www.sedar.com and Keyera's website at www.keyera.com.
Funds from Operations and Distributable Cash Flow
("DCF")
Funds from operations is defined as cash flow from operating
activities adjusted for changes in non-cash working capital. This
measure is used to assess the level of cash flow generated from
operating activities excluding the effect of changes in non-cash
working capital, as they are primarily the result of seasonal
fluctuations in product inventories or other temporary changes.
Funds from operations is also a valuable measure that allows
investors to compare Keyera with other infrastructure companies
within the oil and gas industry.
Distributable cash flow is defined as cash flow from operating
activities adjusted for changes in non-cash working capital,
inventory write-downs, maintenance capital expenditures and lease
payments, including the periodic costs related to prepaid leases.
Distributable cash flow per share is defined as distributable cash
flow divided by weighted average number of shares – basic.
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.
The following is a reconciliation of funds from operations and
distributable cash flow to the most directly comparable GAAP
measure, cash flow from operating activities:
Funds from Operations and Distributable Cash
Flow
|
For the three
months ended
March 31,
|
(Thousands of
Canadian dollars)
|
|
|
2023
|
2022
|
Cash flow from operating
activities
|
|
|
311,489
|
457,052
|
Add
(deduct):
|
|
|
|
|
Changes in
non-cash working capital
|
|
|
(64,183)
|
(259,479)
|
Funds from operations
|
|
|
247,306
|
197,573
|
Maintenance
capital
|
|
|
(8,252)
|
(7,236)
|
Leases
|
|
|
(11,092)
|
(11,248)
|
Prepaid
lease asset
|
|
|
(595)
|
(631)
|
Distributable cash flow
|
|
|
227,367
|
178,458
|
Payout Ratio
Payout ratio is calculated as dividends declared to shareholders
divided by distributable cash flow. This ratio is used to assess
the sustainability of the company's dividend payment program.
Payout Ratio
|
|
For the three months
ended
March 31,
|
(Thousands of
Canadian dollars, except %)
|
|
|
2023
|
2022
|
Distributable cash
flow1
|
|
|
227,367
|
178,458
|
Dividends declared to
shareholders
|
|
|
109,994
|
106,091
|
Payout ratio
|
|
|
48 %
|
59 %
|
1 Non-GAAP
measure as defined above.
|
EBITDA and Adjusted EBITDA
EBITDA is a measure showing earnings before finance costs,
taxes, depreciation and amortization. Adjusted EBITDA is calculated
as EBITDA before costs associated with non-cash items, including
unrealized gains/losses on commodity-related contracts, net foreign
currency gains/losses on U.S. debt and other, impairment expenses
and any other non-cash items such as gains/losses on the disposal
of property, plant and equipment. Management believes that these
supplemental measures facilitate the understanding of Keyera's
results from operations. In particular, these measures are used as
an indication of earnings generated from operations after
consideration of administrative and overhead costs.
The following is a reconciliation of EBITDA and adjusted EBITDA
to the most directly comparable GAAP measure, net earnings:
EBITDA and Adjusted EBITDA
|
|
For the three months
ended
March 31,
|
(Thousands of
Canadian dollars)
|
|
|
2023
|
2022
|
Net earnings
|
|
|
137,789
|
113,794
|
Add
(deduct):
|
|
|
|
|
Finance
costs
|
|
|
41,721
|
41,367
|
Depreciation,
depletion and amortization expenses
|
|
|
72,186
|
49,648
|
Income tax
expense
|
|
|
40,556
|
35,693
|
EBITDA
|
|
|
292,252
|
240,502
|
Unrealized loss on
commodity contracts
|
|
|
3,018
|
10,942
|
Net foreign currency
(gain) loss on U.S. debt and other
|
|
|
(3,112)
|
5,282
|
Loss on disposal of
property, plant and equipment
|
|
|
—
|
477
|
Adjusted EBITDA
|
|
|
292,158
|
257,203
|
Realized Margin
Realized margin is defined as operating margin excluding
unrealized gains and losses on commodity-related risk management
contracts. Management believes that this supplemental measure
facilitates the understanding of the financial results for the
operating segments in the period without the effect of
mark-to-market changes from risk management contracts related to
future periods.
The following is a reconciliation of realized margin to the most
directly comparable GAAP measure, operating margin:
Operating Margin and Realized
Margin
For the three months
ended March 31, 2023
|
(Thousands of
Canadian dollars)
|
Gathering &
Processing
|
Liquids
Infrastructure
|
Marketing
|
Corporate
and Other
|
Total
|
Operating margin
(loss)
|
99,422
|
117,406
|
115,642
|
(34)
|
332,436
|
Unrealized loss on risk
management contracts
|
884
|
1,259
|
875
|
—
|
3,018
|
Realized margin
(loss)
|
100,306
|
118,665
|
116,517
|
(34)
|
335,454
|
Operating Margin and Realized
Margin
For the three months
ended March 31, 2022
|
(Thousands of
Canadian dollars)
|
Gathering &
Processing
|
Liquids
Infrastructure
|
Marketing
|
Corporate
and Other
|
Total
|
Operating margin
(loss)
|
76,569
|
104,872
|
92,249
|
(764)
|
272,926
|
Unrealized loss on risk
management contracts
|
118
|
48
|
10,776
|
—
|
10,942
|
Realized margin
(loss)
|
76,687
|
104,920
|
103,025
|
(764)
|
283,868
|
Forward-Looking Statements
In order to provide readers with information regarding Keyera,
including its assessment of future plans and operations, its
financial outlook and future prospects overall, this press release
contains certain statements that constitute "forward-looking
information" within the meaning of applicable Canadian securities
legislation (collectively, "forward-looking information").
Forward-looking information is typically identified by words such
as "anticipate", "continue", "estimate", "expect", "may", "will",
"project", "should", "plan", "intend", "believe", "commit",
"maintain", "future", "strategy" and similar words or expressions,
including the negatives or variations thereof. All statements other
than statements of historical fact contained in this document are
forward-looking information, including, without limitation,
statements regarding:
- target payout, targeted annual adjusted EBITDA growth rate and
net debt to adjusted EBITDA ratios;
- future capital expenditures and cash taxes;
- expectations regarding the anticipated benefits from certain
projects, including the KAPS pipeline system, the Wapiti, and
Pipestone gas plants and the KFS
complex, and expected capacity and volumes therefrom;
- Keyera's reliance on key relationships and agreements,
including Keyera's partnership with Stonepeak;
- Keyera's future common share dividend;
- Expectations about future demand for Keyera's infrastructure
and services;
- Anticipated in-service date of KAPS' natural gas liquids
line;
- industry, market and economic conditions, including but not
limited to commodity prices, and any anticipated effects on
Keyera;
- Keyera's future financial position and operational performance
and future financial contributions and margins from its business
segments including, but not limited to, Keyera's expectation that
in 2023, its Marketing business will contribute realized margin of
between $330 million and $370 million and between the years 2024 and 2025,
a "base realized margin" of between $250
million and $280 million
annually, on average;
- estimated maintenance and turnaround costs and estimated
decommissioning expenses;
- Keyera's financial priorities, including its capital allocation
priorities, and ESG initiatives; and
- Potential restrictions or interference with Keyera's
operations, as well as expected costs related thereto, caused by
the wildfires across Alberta,
where certain of Keyera's properties are proximately located, and
governmental or regulatory responses thereof.
All forward-looking information reflects Keyera's
beliefs and assumptions based on information available at the time
the applicable forward-looking information is made and in light of
Keyera's current expectations. Forward-looking information does not
guarantee future performance. Management believes that its
assumptions and expectations reflected in the forward-looking
information contained herein are reasonable based on the
information available on the date such information is provided and
the process used to prepare the information. However, it cannot
assure readers that these expectations will prove to be
correct. All forward-looking information is subject to known
and unknown risks, uncertainties and other factors that may cause
actual results, events, levels of activity and achievements to
differ materially from those anticipated in the forward-looking
information.
Readers are cautioned that they should not unduly
rely on the forward-looking information included in this press
release. Further, readers are cautioned that the forward-looking
information contained herein is made as of the date of this press
release. Unless required by law, Keyera does not intend and does
not assume any obligation to update any forward-looking
information. All forward-looking information contained in this
press release is expressly qualified by this cautionary
statement.
Further information about the assumptions, risks, uncertainties
and other factors affecting the forward-looking information
contained in this press release is available in filings made by
Keyera with Canadian provincial securities commissions, including
under "Forward-Looking Statements" in Keyera's MD&A for
the year ended December 31, 2022 and
for the period ended March 31, 2023
and in Keyera's Annual Information Form for the year ended
December 31, 2022, each of which is
available on the company's SEDAR profile at
www.sedar.com.
SOURCE Keyera Corp.