Between the Q3/24 results (that were slightly ahead of consensus, which was lowered heading into the results) and the reaffirmation of the company's 2024 guidance, we do not expect the announcement to have a material impact on the company's share price. On the conference call, we expect the market to be interested in hearing about management's capital allocation options given its enviable balance sheet position, including potential share buybacks and growth projects (particularly as it advances initiatives that may add fractionation capacity at KFS).
Details
Q3/24 EBITDA was slightly ahead of consensus, and largely in line with our estimate. In Q3/24, adjusted EBITDA was $322 million compared to our forecast of $315 million and consensus of $309 million (12 estimates; range of $293-318 million). DCF/share was $0.85 compared to our estimate of $0.78 and consensus of $0.71 (seven estimates; range of $0.64-0.78), with the variance to our estimate due to lower-than-expected maintenance capital expenditures and the slightly higher EBITDA.
• Gathering and Processing: Q3/24 realized margin was $99 million compared to our estimate of $97 million. Keyera noted that it saw near-record quarterly volumes in the North region, even with a turnaround at the Wapiti gas plant.
• Liquids Infrastructure: Realized margin in Q3/24 was $135 million versus our forecast of $138 million.
• Marketing: Q3/24 realized margin was $135 million compared to our estimate of $120 million and $100 million in Q3/23, with
the year-over-year increase was driven by higher propane, condensate and isooctane sales volumes. • G&A and Other: Costs during the quarter were ($47) million versus our forecast of ($40) million.
Reaffirming its 2024 guidance. These include: (a) Marketing realized margin $450-480 million (RBCe: $463 million), with a base Marketing guidance range of $310-350 million; (b) growth capital expenditures $80-100 million, which Keyera now expects it will be at the "upper end" of the range (RBCe: $90 million); (c) maintenance capital expenditures of $120-140 million (RBCe: $130 million); and (d) cash taxes of $90-100 million (RBCe: $91 million). Separately, the company will be providing its 2025 guidance on December 10, 2024, and we note its past commentary of delivering the "high end" of its 6-7% EBITDA CAGR range for the 2022-2025 period (holding Marketing realized margins constant at $310 million).
Solid balance sheet offers capital allocation flexibility. Keyera exited Q3/24 with an enviable 1.9x net debt/EBITDA (covenant calculation), which compares to its 2.5–3.0x target range. While reiterating its approach to equity self-fund its growth opportunities, Keyera had previously highlighted its willingness to allocate capital to buy back its shares on an opportunistic basis, and announced today that it plans to file a notice of intention to make a normal course issuer bid.
Advancing initiatives that may add fractionation capacity at KFS. The company is ordering long lead items for the KFS Frac II debottleneck project to add 8,000 b/d of capacity, while advancing customer contracting and engineering on a new 47,000 b/d KFS Frac III project.
Conference Call: Today at 10:00 AM (ET)
The dial-in number is (888) 510-2154