CALGARY,
AB, Dec. 12, 2023 /CNW/ - Keyera Corp. (TSX:
KEY) ("Keyera") is pleased to provide a general business update and
2024 guidance.
"Keyera continues to leverage the strength of its integrated
value chain, maximizing value for customers and generating strong
returns for shareholders," said Dean
Setoguchi, President and CEO. "The fundamentals for natural
gas liquids volume growth in the Western Canada Sedimentary Basin
remain strong and the recent investments we have made position
Keyera to benefit for many years to come, as an essential enabler
of this growth. As we look to 2024, we will experience continued
growth from investments made in prior years coupled with lower
capital spending. This is anticipated to result in strong free cash
flow generation after funding dividends and growth capital."
HIGHLIGHTS
- Strong execution against Keyera's strategy in 2023, on-track
for a record year.
- Keyera expects to reach the upper end of its compound annual
growth rate (CAGR) target for adjusted EBITDA holding Marketing
constant1 of 6-7% over the 2022 to 2025 timeframe.
- Driving an improvement in the quality of cash flows, realized
margin from the fee-for-service business segments1 has
grown by more than 20% since the beginning of 2022.
- Increasing base Marketing realized margin1 guidance
range to $310 million to $350 million (previously $250 million to $280
million).
- 2024 is expected to generate strong free cash flow after
funding current dividends and growth capital investments of
$80 million to $100 million.
DELIVERING ON THE STRATEGY IN 2023
Keyera continued to deliver against its strategic pillars in
2023 and displayed the strength of its competitive position in the
basin. Select accomplishments include:
Demonstrating Financial Discipline
- Maintained financial strength throughout the year with net debt
to adjusted EBITDA1 at 2.5 times as at the third
quarter, at the bottom of the company's stated target of 2.5-3.0
times.
- Received a corporate credit rating upgrade from S&P Global
to BBB with a Stable outlook.
- Returned to Keyera's long history of sustainable dividend
growth with a 4.2% dividend increase for its common shares. This is
supported by the growth of high-quality cash flow in its
fee-for-service business segments.
- On track to deliver record distributable cash flow (DCF) per
share1 in 2023.
Driving Competitiveness of the Assets
- With KAPS complete, Keyera now has a fully-integrated value
chain from the Montney and
Duvernay plays to its core
infrastructure in Edmonton and
Fort Saskatchewan. This has made
the company more competitive, enhancing its ability to attract
volumes.
- Reached record utilization and volumes at several facilities,
positioning Keyera to be on track to deliver record realized
margins1 from all three business segments in 2023.
Strengthening the Integrated Value Chain
- Executed the accretive acquisition of an additional 21%
interest in the Keyera Fort Saskatchewan (KFS) complex, thereby
increasing the company's stake in a highly strategic core asset at
the heart of Keyera's value chain.
- Successfully completed the KAPS pipeline.
- Completed the 40 MMcf/d Pipestone Gas Plant expansion, ahead of
schedule and slightly below the budgeted range of $60 million to $70
million.
Ensuring Long-Term Business Sustainability
- Significant improvement in Total Recordable Injury Frequency
(TRIF), down to 0.24 at the end of Q3 2023 from 0.62 in 2022.
- 60 indigenous owned or affiliated businesses were contracted
for KAPS.
- A 13.5% decrease in GHG intensity over the 2019 to 2022 period.
The company remains on track to meet its GHG intensity reduction
targets of 25% by 2025 and 50% by 2035.
- Keyera's 2022 ESG Performance Summary is now available at
www.keyera.com.
EXPECT TO REACH UPPER END OF GROWTH TARGET
The company expects to reach the upper end of its CAGR target
for adjusted EBITDA holding Marketing constant1 of 6-7%
over the 2022 to 2025 period. This is calculated leaving the
Marketing realized margin contributions at $310 million (previously $250 million) per year over the same period. This
growth has largely been funded in prior years. The key drivers of
growth are:
- Filling of available capacity at the Wapiti gas plant
- The start-up of the 40 MMcf/d Pipestone Gas Plant expansion in
December of 2023
- The continued ramp-up of KAPS; and
- Re-contracting of available fractionation capacity and other
services at KFS, where the company purchased an additional 21%
interest earlier this year.
Beyond the 2022-2025 timeframe, additional growth could come
from a KAPS Zone 4 expansion and increasing fractionation capacity
at KFS. These projects are subject to appropriate customer
underpinning and Board sanction.
The company continues to evaluate the potential to pursue its
low-carbon hub strategy. This strategy leverages Keyera's existing
land, assets, connectivity, and proximity to large industrial
players to offer value added low-carbon infrastructure
services.
GROWTH IN HIGH QUALITY CASH FLOWS
Realized margin from Keyera's fee-for-service
business1 has grown over 20% since the beginning of
2022, improving the quality of cash flow.
The Gathering & Processing (G&P) business has undergone
a significant transformation. In 2017, over 70% of the realized
margin1 in this segment was from the company's South
region assets. Since then, the company has built a strong G&P
asset footprint in its North region, focused on the Montney and Duvernay plays. It also completed an
optimization program in the Southern region aimed at redirecting
volumes from less efficient plants toward its most efficient
plants, increasing profitability.
Today, over 70% of the realized margin1 in G&P
comes from the North region which has a significantly higher
proportion of cash flow being generated from take-or-pay contracts
for longer durations with strong counterparties. Additionally,
volume growth in the North region is more closely linked to
condensate pricing rather than AECO gas pricing. With the North
region now fully-integrated to KAPS and Keyera's core
infrastructure at Edmonton and
KFS, the company has more opportunity to capture liquids and make
additional margin across the entire value chain.
In the Liquids Infrastructure segment, contributing to higher
quality cash flow is the continued ramp up of KAPS, renewal of
fractionation contracts at the KFS complex and the growth in the
oilsands which is driving higher demand for Keyera's industry
leading condensate system. These growth factors contribute to a
higher proportion of take-or-pay cash flows.
INCREASING BASE MARKETING GUIDANCE
The base realized margin1 guidance for the Marketing
segment has been increased to range between $310 million to $350
million (previously $250
million to $280 million). This
range indicates management's current view of what is achievable
with a high degree of confidence.
There are structural shifts driving the increased estimate,
including higher volumes now flowing through Keyera's integrated
system and the company's ability to unlock more advantaged pricing
markets for iso-octane. The principal assumptions are detailed in
the "2024 Guidance and Business Update" presentation found at
www.keyera.com.
As has been usual practice, the annual Marketing guidance range
will be updated with Keyera's results for the first quarter of 2024
which will be released in May following the conclusion of the next
NGL contracting season.
2024 GUIDANCE
Continued growth in adjusted EBITDA1 has been largely
funded in prior years and the company is focused on optimization
projects to maximize the value of its existing value chain in
Western Canada. As a result,
growth capital spending for this year is lower than in prior years,
leading to strong free cash flow generation after funding dividends
and growth capital in 2024.
2024 Capital Spending
- Growth capital is expected to range between $80 million and $100
million in 2024. This includes about $60 million of sanctioned capital for various
optimization projects at Simonette, Wapiti, KAPS and AEF. The
remaining $20 million to $40 million is contingent on the potential
sanctioning of KAPS Zone 4 and potential fractionation capacity
expansions, for the procurement of long-lead items. Progressing
with these projects will require appropriate customer underpinning
and Board sanction.
- Maintenance capital is expected to range between $90 million and $110
million of which about $20
million is recoverable in 2024 with another $15 million recoverable within the next few
years. Go-forward annual run-rate maintenance capital is expected
to range between $70 million and
$90 million in years without a major
AEF turnaround. AEF turnarounds typically occur every four years
with the next one scheduled in 2026.
2024 Planned
Turnarounds and Outages
|
Keyera Fort
Saskatchewan Fractionation Unit 1 outage
|
5 days
|
Q2 2024
|
Wapiti Gas Plant
turnaround
|
3 weeks
|
Q2 2024
|
Keyera Fort
Saskatchewan Fractionation Unit 2 outage
|
5 days
|
Q2 2024
|
Strachan Gas Plant
turnaround
|
2 weeks
|
Q3 2024
|
Keyera Fort
Saskatchewan Fractionation Unit 1 outage
|
5 days
|
Q3 2024
|
2024 Cash Taxes
- Cash taxes for 2024 are expected to range between $45 million and $55
million. The increase relative to 2023 ($nil) is due to the
accelerated usage of tax pools in 2023 due to strong financial
performance.
CAPITAL ALLOCATION PRIORITIES
2024 is anticipated to be a year of strong free cash flow
generation as the company enters a phase of lower capital spending
relative to the past five years. This leaves more cash available to
build balance sheet optionality and to increase returns to
shareholders.
Financial Framework and Capital Allocation
Context
|
|
Target
|
Near-Term
Context
|
Preserve Financial
Strength and Flexibility
|
Credit
Ratings
|
BBB
|
•
Maintain Credit Rating
•
Remain within targeted leverage
range
•
Deploy some excess cash to pay down
credit facilities
|
Net Debt / Adjusted
EBITDA1
|
2.5x –
3.0x
|
Invest for Margin
Growth and Cash Flow Stability
|
Corporate
ROIC1
|
>12%
|
•
Focus on projects that enhance existing
NGL value chain in Western Canada
|
Increasing Cash
Returns to Shareholders
|
Dividend Payout
Ratio1
|
50% -
70%
|
•
Sustainable dividend growth supported by
fee-for-service cash flow growth and DCF1
growth
|
Share
Buybacks
|
Use
Opportunistically
|
•
Potential for share buybacks, preference
given to capital efficient growth investments
|
Note:
|
|
1
|
Is not a standard
measure under GAAP or is an Other Financial Measure as specified
under National Instrument 52-112. See section titled "Non-GAAP and
Other Financial Measures" and "Forward-Looking Information" of this
news release for additional information.
|
2024 GUIDANCE CONFERENCE CALL AND PRESENTATION
DETAILS
Date:
December 12, 2023
Time:
8:00 a.m. MT (10:00 ET or 15:00
GMT)
A live webcast of the conference call with accompanying
presentation, can be accessed here or through Keyera's website at
https://www.keyera.com/investors/events-and-presentations/. Shortly
after the call, a webcast archive will be posted on Keyera's
website.
The audio-only conference call dial-in number is 888-664-6392 or
416-764-8659. A recording of the conference call will be available
for replay and can be accessed by dialing 888-390-0541 or
416-764-8677 and entering passcode 537947.
To join the conference call without operator assistance, you may
register and enter your phone number here to receive an instant
automated call back. This link will be active on Tuesday, December 12, 2023, at 7:00 AM Mountain Time (9:00 AM Eastern Time).
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.
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
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 to Management's Discussion and Analysis (MD&A)
for the three and nine months ended September 30, 2023 and for the year ended
December 31, 2022 which are available
on SEDAR+ at www.sedarplus.ca and Keyera's website at
www.keyera.com. Specifically, the sections of the MD&A titled
"Non-GAAP and Other Financial Measures", "Segmented Results of
Operations", "EBITDA and Adjusted EBITDA", "Dividends: Funds from
Operations, Distributable Cash Flow and Payout Ratio", and
"Adjusted Cash Flow from Operating Activities and Return on
Invested Capital" include information that has been incorporated by
reference for these non-GAAP and other financial measures.
Realized margin from the Marketing segment, realized margin from
the Gathering and Processing (G&P) segment, realized margin
from the Liquids Infrastructure segment, realized margin from the
fee-for-service business segments, adjusted EBITDA, compound annual
growth rate (CAGR) for adjusted EBITDA holding Marketing constant,
distributable cash flow (DCF), DCF per share, payout ratio, and
return on invested capital (ROIC) are all non-GAAP or other
financial measures referenced in this news release. The most
directly comparable GAAP measure to realized margin from the
Marketing, G&P and Liquids Infrastructure segments is operating
margin from these same segments, respectively. The most directly
comparable GAAP measure to adjusted EBITDA is net earnings. The
most directly comparable GAAP measure to DCF is cash flow from
operating activities. DCF per share and payout ratio are non-GAAP
ratios that use DCF as a component of the ratio. ROIC is only
prepared on an annual basis; therefore, refer to the MD&A for
the year ended December 31, 2022 for
additional details related to this financial measure.
This news release includes certain non-GAAP and other financial
measures that include forward-looking information or cannot be
incorporated by reference to the MD&A. Refer below for
additional information related to these measures.
Realized Margin from the Marketing Segment
The guidance for base realized margin from the Marketing segment
(or Marketing realized margin) has been increased to a range of
$310 million to $350 million (previously was $250 million to $280
million). The following includes the equivalent historical
measures for this financial measure.
Marketing Realized Margin
|
Three months
ended
September
30,
|
Nine months
ended
September
30,
|
Twelve months
ended
December
31,
|
(Thousands of
Canadian dollars)
|
2023
|
2022
|
2023
|
2022
|
2022
|
Operating margin –
Marketing
|
69,387
|
124,235
|
351,400
|
386,680
|
414,973
|
Unrealized loss (gain)
on risk
management
contracts
|
30,327
|
(40,555)
|
(1,030)
|
(37,990)
|
(17,552)
|
Realized margin –
Marketing
|
99,714
|
83,680
|
350,370
|
348,690
|
397,421
|
|
|
|
|
|
|
|
Realized Margin from the Fee-for-Service Business
Segments
Realized margin from the fee-for-service business segments, or
fee-for-service realized margin (defined as realized margin from
the Gathering and Processing and Liquids Infrastructure segments),
is a non-GAAP financial measure that is utilized in this news
release; however, is not included in the MD&A.
Fee-for-service realized margin is used to assess the financial
performance of Keyera's ongoing operations in its G&P and
Liquids Infrastructure segments without the effect of unrealized
gains and losses on commodity-related risk management contracts
related to future periods. The following is a reconciliation of
fee-for-service realized margin to the most directly comparable
GAAP measure, operating margin for the G&P and Liquids
Infrastructure segments.
Fee-for-Service Realized Margin
|
Three months
ended
September
30,
|
Nine months
ended
September
30,
|
Twelve months
ended
December
31,
|
(Thousands of
Canadian dollars)
|
2023
|
2022
|
2023
|
2022
|
2022
|
Operating margin –
Fee-for-service
|
214,573
|
192,621
|
635,913
|
562,220
|
761,779
|
Unrealized loss (gain)
on risk
management
contracts
|
7,289
|
(2,141)
|
8,578
|
(4,126)
|
(9,095)
|
Realized margin –
Fee-for-service
|
221,862
|
190,480
|
644,491
|
558,094
|
752,684
|
|
|
|
|
|
|
|
Compound Annual Growth Rate (CAGR) for Adjusted EBITDA
holding Marketing constant
(previously disclosed as CAGR for Adjusted EBITDA from the
Fee-for-Service Business)
CAGR is calculated as follows:
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Number of
Years
|
|
|
|
|
CAGR
|
=
|
|
|
End of the
period*
|
|
|
|
|
|
|
-1
|
|
|
|
|
|
Beginning of the
period*
|
|
|
|
|
|
|
|
|
CAGR for adjusted EBITDA holding Marketing constant is intended
to provide information on a forward-looking basis. This calculation
utilizes beginning and end of period adjusted EBITDA, which
includes the following components and assumptions: (i) forecasted
realized margin for the G&P and Liquids infrastructure
segments, (ii) realized margin for the Marketing segment, which is
held at a value within the expected base realized margin between
$310 million and $350 million (previously between $250 million and $280
million), and (iii) adjustments for total forecasted general
and administrative, and long-term incentive plan expenses. During
the fourth quarter of 2024, Keyera revised the label of this metric
to "CAGR for Adjusted EBITDA holding Marking constant" (previously
disclosed as CAGR for Adjusted EBITDA from the Fee-for-Service
Business). The reason for this change is to more accurately reflect
the meaning of the metric and the inclusion of Marketing cash flows
which are not fee-for-service cash flows. This revision did not
impact the composition of the metric.
Forward-Looking
Information
To provide readers with information regarding Keyera, including
its assessment of future plans, operations and financial
performance, certain statements contained herein contain
forward-looking information within the meaning of applicable
Canadian securities legislation (collectively, "forward-looking
information"). Forward-looking information relate to future events
and/or Keyera's future performance. Forward-looking information are
predictions only; actual events or results may differ materially.
Use of words such as "anticipate", "continue", "estimate",
"expect", "may", "will", "project", "should", "plan", "intend",
"believe", and similar expressions (including negatives thereof),
is intended to identify forward-looking information. All statements
other than statements of historical fact contained herein are
forward-looking information, including, without limitation,
statements regarding future dividends, future financial position,
operating and financial results and capital and other expenditures
of Keyera (including those forming part of expected 2023 year end
results and the 2024 and future years' guidance), future returns
from capital projects or corporate return on investment, financial
and capital targets and priorities, Keyera's vision, business
strategy and plans of management, anticipated growth and proposed
activities, 2024 planned turnarounds and outages, future
opportunities, expected capacities associated with capital
projects, expected sources of and demand for energy, estimated
utilization rates, attaining emissions reduction targets, and
expected commodity prices and production levels.
Forward-looking information reflect management's current beliefs
and assumptions with respect to such things as outlook for general
economic trends, industry forecasts and/or trends, commodity
prices, capital markets, and government, regulatory and/or legal
environment and potential impacts thereof. In some instances,
forward-looking information may be attributed to third party
sources. Management believes its assumptions and analysis are
reasonable and that expectations reflected in forward-looking
information contained herein are also reasonable. However, Keyera
cannot assure readers these expectations will prove to be correct
and differences could be material.
All forward-looking information involve 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. The
principal risks, uncertainties, and other factors affecting Keyera
and its business are contained in Keyera's 2022 Year-End Report and
in Keyera's Annual Information Form, each dated February 15, 2023, each filed on SEDAR+ at
www.sedarplus.ca and available on the Keyera website at
www.keyera.com.
Proposed construction and completion schedules and budgets for
capital projects are subject to many variables, including the
continued uncertainty of the COVID-19 pandemic; weather;
availability of and/or prices of materials and/or labour; customer
project schedules and expected in-service dates; contractor
productivity; contractor disputes; quality of cost estimating;
decision processes and approvals by joint venture partners; changes
in project scope at the time of project sanctioning; legislation
and regulations and regulatory and other approvals, conditions or
delays (including possible intervention by third parties); Keyera's
ability to secure adequate land rights and water supply; and macro
socio-economic trends. As a result, expected timing, costs and
benefits associated with these projects may differ materially from
descriptions contained herein. Further, some of the projects
discussed herein are subject to securing sufficient
producer/customer interest and may not proceed, or proceed as
expected, if sufficient commitments are not obtained. Typically,
the earlier in the engineering process that projects are
sanctioned, the greater the likelihood that the schedule and budget
may change.
In addition to factors referenced above, Keyera's expectations
with respect to future returns associated with: (i) growth capital
projects sanctioned and in development as of the date hereof, and
(ii) the KAPS project, are based on a number of assumptions,
estimates and projections developed based on past experience and
anticipated trends, including but not limited to: capital cost
estimates assuming no material unforeseen costs; timing for
completion of growth capital projects; customer performance of
contractual obligations; reliability of production profiles;
commodity prices, margins and volumes; tax and interest and
exchange rates; availability of capital at attractive prices; and
no changes in legislative, regulatory or approval requirements,
including no delay in securing any outstanding regulatory
approvals.
All forward-looking information contained herein are expressly
qualified by this cautionary statement. Readers are cautioned they
should not unduly rely on these forward-looking information and
that information contained in such forward-looking information may
not be appropriate for other purposes. Further, readers are
cautioned that the forward-looking information contained herein is
made as of the date hereof. 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 news release is expressly qualified by this
cautionary statement. Further information about the factors
affecting forward-looking statements and management's assumptions
and analysis thereof, is available in filings made by Keyera with
Canadian provincial securities commissions, which can be viewed on
SEDAR+ at www.sedarplus.ca.
SOURCE Keyera Corp.