Keyera Corp.
Quick Take: Strong results coupled with new KAPS and KFS contracts
TSX: KEY | CAD 32.18 | Outperform | Price Target CAD 38.00
Sentiment: Positive
Our take
We expect a positive impact on the shares driven by the stronger-than-forecast results (even accounting for several one-time benefits booked during the quarter) and the new contract disclosures for KAPS and KFS (a portion of which were newly signed in Q4/23).
Details
Q4/23 results were well ahead of our expectations and consensus. In Q4/23, adjusted EBITDA was $339 million compared to our forecast of $281 million and consensus of $291 million (11 estimates; range of $273-303 million). DCF/share was $1.02 compared to our estimate of $0.81 and consensus of $0.92 (seven estimates; $0.81-1.02).
• Gathering and Processing: Q4/23 realized margin was $116 million compared to our estimate of $105 million. • Liquids Infrastructure: Realized margin in Q4/23 was $130 million versus our forecast of $123 million.
• Marketing: Q4/23 realized margin was $129 million compared to our estimate of $88 million.
• G&A and Other: Costs during the quarter were ($35) million versus our forecast of ($36) million.
New contracts for KAPS and KFS. During Q4/23 and throughout 2023, Keyera added: (1) roughly 30,000 b/d of long-term contracts for KAPS with a weighted average contract term of 12 years and with roughly half of the volumes begin contributing midway through 2024 with a ramp up to 2029; and (2) approximately 33,000 b/d of fractionation commitments at KFS with a weighted average contract term of 13 years and with about half of the volumes being new commitments and the other half being renewals of existing contracts.
2024 guidance is unchanged. Specifically, the company reiterated its previously-disclosed guidance, including: (1) growth capex of $80-100 million (we were at $90 million heading into the quarter) with $20-40 million being contingent on the sanctioning of KAPS Zone 4 and fractionation capacity expansions at KFS; (2) maintenance capex of $90-110 million (we were at $100 million heading into the quarter); (3) cash taxes of $45-55 million (we were at $48 million heading into the quarter); and (4) base marketing realized margin of $310-350 million (our 2024 and 2025 forecast is $350 million).
AEF maintenance scheduled for the spring of 2024; no change in Marketing guidance. Keyera disclosed that it will take the plant offline for roughly six weeks to proactively complete maintenance to facilitate AEF's ability to operate at full capacity until its next major scheduled turnaround in 2026. The company expects the outage to negatively impact its 2024 realized Marketing margin by approximately $35-45 million with no impact on maintenance capex. However, Keyera stated that it still expects to be within its "base" Marketing realized margin guidance of $310-350 million for 2024 (we were at $350 million heading into the quarter), and that it expects to update its Marketing guidance in May when it reports Q1/24 results.
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