Post by
hawk35 on Nov 09, 2022 5:47pm
TDW Initial Comments
Event
Keyera Corp. (KEY) reported Q3/22 AFFO/share of $0.73, above our estimate of $0.62 and the Q3/21 AFFO/share of $0.68.
Impact: MIXED
Q3/22 Results: Results from all segments exceeded our expectations, with the biggest outperformance in the G&P business, and lower-than-forecasted maintenance spending also contributed to the beat. Gathering & Processing benefited from higher processing throughput at the Wapiti, Pipestone, and Strachan gas plants, as well as higher sales volumes in the ethane business at the Rimbey gas plant. Liquids Infrastructure results were driven by higher sales at a non-operated fractionation facility as the facility completed a maintenance turnaround during the third quarter in the prior year. The Marketing business continued to benefit from strong iso-octane margins and commodity prices as well as higher liquids blending contribution.
KAPS Cost Increase: At 90% complete and $850mm spent (net to KEY), KAPS remains on track for a Q1/23 in-service date while costs have increased from the previously communicated estimate of $900mm to an estimate of $1.0bn, as a result of inflationary pressures and productivity losses arising from weather trends. Management noted that KAPS provides a platform for future growth opportunities, which includes a potential fractionation expansion in Fort Saskatchewan, as well as KAPS Zone 4, which enables volume flow from NEBC Montney producers. FIDs for future opportunities are required to have strong contractual underpinnings and will be subject to KEY's return criteria.
2022 Guidance Mostly Unchanged: Management reaffirmed the Marketing guidance range for 2022 of $380mm-$410mm. Maintenance capital for 2022 is unchanged at $100mm-120mm while growth capital for 2022 has increased from $680mm-$720mm to $770mm-$800mm, primarily driven by an upward revision to the estimated cost to complete the KAPS project.
2023 Guidance Provided: Along with its earnings release, KEY introduced 2023 guidance, expecting $140mm-$180mm of growth capital, with $50mm allocated to completing the KAPS pipeline system and $45mm-$55mm budgeted for carrying out Pipestone expansion plans. KEY also guided for a cash tax expense of $10mm-$25mm and maintenance capex of $75mm-$85mm
Comment by
Puma1back on Nov 09, 2022 6:21pm
So it's really a $80 million overrun with $20 million contingency. Doesn't strike me as even being material at this point in the overall KAPs project. it is always a stock that easily gets hammered on Q releases. A near $300 million market cap hit - 5% of capitalized value was lubricated by the oil drop & market mid day pullback on US political outcomes.