RBC First CommentsMay 10, 2022
Keyera Corp.
First Glance: Marketing a big story for Q1/22
Sentiment: positive
Our view: Although the overall results were fairly close to our forecast and consensus, we believe that the market will positively view the increased Marketing guidance, particularly given the extra cash flow it would provide to help manage the capex (and the pro forma credit metrics) for the KAPS project.
First impression:
Modestly stronger-than-expected EBITDA was more than offset by higher cash taxes. In Q1/22, Adjusted EBITDA was $257 million versus our estimate $245 million and consensus of $248 million (11 estimates; range of $222-263 million). DCF/share of $0.81 matched our estimate with the modestly better-than-expected EBITDA being offset by higher-than[1]forecast cash taxes booked in Q1/22.
The core infrastructure segments were close to our forecast. Segment realized margin was as follows:
• Gathering and Processing - Realized margin was $77 million compared to our estimate of $79 million and $79 million in Q1/21. Of note, a 22- day outage at the Wapiti plant negatively impacted operating margin by roughly $10 million in Q1/22.
• Liquids Infrastructure - Realized margin was $105 million, which matched our estimate, and was flat to the contribution in Q1/21.
• Marketing - Realized margin was $103 million compared to our estimate of $84 million and $61 million in Q1/21.
Guidance for 2022: Updates include higher Marketing as well as higher cash taxes. Despite only rolling out its 2022 Marketing guidance range at its Investor Day on March 29, Keyera increased its Marketing guidance as part of the Q1/22 results to a new range of $300-340 million (up from its prior range of $250-280 million; we were at $271 million heading into the quarter). Due to its revised Marketing outlook, Keyera now expects higher cash taxes in the range of $30-40 million (previously $15-30 million; we were at $27 million heading into the quarter).
KAPS: No major updates. Keyera noted that the project is nearly 70% complete. Cost-wise, the company's capex estimate for the project of $800-880 million is consistent with its commentary at the March 2022 Investor Day. The company highlighted that its cost estimate includes the purchase and receipt of all the required steel pipe and the "vast majority" of other materials.
Conference call: today at 10:00 AM (ET). The dial-in number is is (888) 664-6392