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November 28, 2024 Flash Research
KEYERA CORPORATION
Begins Inaugural NCIB For Up To 2.5% Of Shares Outstanding
Summary: The company announced that TSX has accepted its intention to
implement a normal course issuer bid (NCIB). It had announced its intention
to file an NCIB with Q3/24 results. Under the NCIB, Keyera can purchase
and cancel up to ~2.5% or 5.7MM common shares between December 3,
2024 and December 2, 2025. During any trading day, the company can
repurchase up to 280,671 shares, which represents 25% of the average daily
trading volume for the six months ended October 31. However, one block
purchase over the daily maximum purchase limit is permitted per calendar
week.
Financial Impact: The NCIB has been widely expected but is for a relatively
modest number of shares outstanding. For example, many NCIBs
contemplate a buyback of up to 10% of shares outstanding. Using the most
recent closing price, the 2.5% buyback would still total $261MM. As of Q3/24, the company’s leverage is 1.9x net-debt-to-EBITDA (excluding hybrid notes), below the low end of the company’s 2.5x-3.0x target range, with a low payout ratio, excellent liquidity and modest near-term maturities. Despite its ability to repurchase more shares, repurchases must compete with other alternatives, notably dividend growth and capital projects.
As we expect the company will have new capital projects in the coming
months, such as Zone 4 on the KAPS system and fractionation capacity
expansions, we are doubtful it will be highly active under the NCIB without a
significant change in market conditions or industry activity. For these
reasons, we anticipate the NCIB will be used on an opportunistic basis rather
than a programmatic basis