Keyera Corp T.KEY

Initial comments from TDWaterhouse

[hawk35]

Keyera Corp.
(KEY-T) C$31.02
 
First Glance: Q4/21 Results
Linda Ezergailis, P.Eng. Alexander Kwong, CPA, (Associate)
 
Event
Keyera Corp. (KEY) reported Q4/21 AFFO/share of $0.93, above our estimate of $0.75, the recent consensus of $0.89, and Q4/20 AFFO/share of $0.60.
 
Impact: SLIGHTLY POSITIVE
 
Q4/21 Results: Q4/21 results were above our estimate, driven by stronger-than[1]expected marketing results as well as operational performance across the board. The Wapiti gas plant benefited from higher processing throughput as well as lower operating costs, and the Pipestone gas plant also contributed to strong Gathering & Processing results. Marketing margins benefited from strong propane and butane markets. This was partly offset by reduced operating margin and lower ethane sales at Rimbey among a few offsets.
 
KAPS: Growth capital spending net of capitalized interest of $438mm was below the previously provided guidance range of $460-$490mm. Guidance for 2022 capital spending on growth projects has increased to $570-$610mm from $520- $560mm. While the change in guidance relates to timing of spending mostly related to KAPS, management noted that the project is 40% complete as of the end of January 2022 and remains on track to commence operations in Q1/23. The current estimate for the project is not expected to materially exceed its sanctioned cost of $800mm despite cost pressures from inflation as the company has locked in a majority of costs for the project.
 
Sale of Hull Terminal: KEY announced that the company has closed the sale of its Hull Terminal subsequent to Q4/21. Proceeds of US$40mm is expected to be used in strengthening the company's balance sheet.
 
  2022 Investor Day: KEY will be hosting an investor day on March 29, 2022 where we expect the company to provide a more comprehensive update of the business.
 
Conference Call Today at 10:00 am ET: Telephone: [phone]. Replay: 1-888-390-0541 or 416-764-8677, Passcode: 523095.

[fauxtomato]

Should be an interesting investor day. The conference call today had a much different tone than recent years: selling assets, investments made outside of core area lowering returns. .... but into a very strong gas market in the WCSB that should increase utilization on the deep basin network and increase frac fees. I added a bit when it was in the 27-28 range because long term I'm trying to

[Antonyius]

Didn't listen to the call today but I pretty much agree with TD's comments. Not super amazing results, particularly regarding KAPS, but overall I thought it was a good quarter at least compared to Q3.

[Puma1back]

RBC had a very slightly negative conclusion - they mention all the good points , like TD does, but they then muse about inflation impacts on KAPS and worry that mgmt were not clearer on that issue. To recap, mgmt said no material impact expected to KAPS from inflation, but rbc wanted more clarity.  

[Antonyius]

Yeah I think I have PTSD from what happened with IPL and Heartland so I'm hoping KAPS doesn't go down the same path but I'm more cautiously optimistic because I think one it's a smaller project and two I think Keyera is in a slightly better position financially than IPL was (who I thought was fine as well).

[SargeX]

I'm not sure why you thought IPL was fine debt wise. As soon as they announced doing Heartland on their own, it was pretty obvious it was biting off more than it could chew. The 72% divy cut might have also been a bit of a hint. KEY is in way better shape and their payout ratio is only 63% (based on DCF). I have total confidence that we won't see a divy cut. In fact, I think the next move

[Antonyius]

Hey Sarge, if IPL had been a private company they would've had zero trouble finishing the Heartland project. Think of it like this, if you wanted to buy an investment property but you don't quite have enough cash, would you not cut your spendings for a bit to save up? IPL did the exact same thing, their cash flow was safe and once heartland started they would've had no issues what so