Post by
retiredcf on Dec 10, 2024 9:39am
CIBC
EQUITY RESEARCH
December 10, 2024 Flash Research
KEYERA CORPORATION
Guidance First Look: Robust Outlook Indicates Growth Ticking Up
Keyera’s guidance statement should instill some confidence in the medium-
term outlook. Management introduced the new growth metric of 7%-8% fee-
based adjusted EBITDA CAGR from 2024-2027 (excluding the Marketing
segment) to improve comparability. The company continues to expect
reaching the upper end of the 6%-7% EBITDA CAGR from 2022-2025
(holding Marketing constant), as it benefits from continued filling of available
capacity in existing facilities and yet-to-be-sanctioned growth projects of KFS
Frac II debottlenecking and KAPS Zone 4. While the growth outlook is solid,
if there is a disappointment it’s that management is sticking to previous
timelines rather than announcing FIDs today. This should prove temporary as
we expect KFS II and Zone 4 to be announced in 2025. On the capital
allocation front, we expect the company to favour new capital projects,
dividend growth and balance sheet flexibility over its inaugural NCIB.
7%-8% Fee-based EBITDA CAGR Expected: The company expects
another record year for adjusted EBITDA in 2024 and a 7%-8% fee-based
adjusted EBITDA CAGR from 2024-2027, excluding the Marketing segment.
This compares to our estimate of 6.7% and is mostly driven by increasing
utilization of existing assets, as well as future growth projects in KFS Frac II
debottlenecking and KAPS Zone 4. There is additional growth beyond 2027,
through unsanctioned projects such as KFS Frac III, which has advanced to
FEED and is expected to be in-service in 2028, as well as AEF
debottlenecking to increase capacity by 5%-10%, expanding capacity in
North G&P segment and rail and logistics businesses, and opportunities in
NGL extraction and building a low-carbon hub. The company is also on track
to deliver 2025 emissions intensity reduction target of 25% from 2019 levels.
Growth Capex Guidance Updates: The long-term Marketing guidance
remains unchanged at $310MM-$350MM. Growth capital guidance for 2025
is relatively robust, between $300MM-$330MM, compared to our estimate of
$350MM and consensus at $293MM. The budget includes continued
advancements in KFS Frac II debottleneck, KFS Frac III, KAPS Zone 4,
some enhancements at AEF and optimization work across the portfolio. The
company expects to deploy an average growth capital of $350MM-$450MM
in 2026 and 2027, a significant portion of which will contribute to margin
growth beyond 2027. 2025 maintenance capex is expected at $70MM-
$90MM, compared to our estimate of $80MM and consensus at $87MM.
Cash taxes for 2025 are expected to range between $100MM-$110MM
compared to our estimate of $85MM. The 2025 Marketing guidance range
will be updated with Q1 results in May following the conclusion of the next
NGL contracting season, keeping with past practice.
Keyera will be holding a conference call today discussing the 2025 guidance
at 10:00 a.m. ET, dial-in details: 1-888-510-2154 or 437-900-0527, no
passcode required.