CALGARY, May 10, 2016 /CNW/ - Keyera Corp. (TSX:KEY)
announced their 2016 first quarter results today, the highlights of which are included in this news release. The entire press
release can be viewed by visiting Keyera's website at www.keyera.com or, to view the MD&A and financial statements, visit either Keyera's website or the System for
Electronic Document Analysis and Retrieval at www.sedar.com.
HIGHLIGHTS
- Keyera delivered strong financial results in the first quarter of 2016, generating adjusted earnings before interest, taxes,
depreciation and amortization ("Adjusted EBITDA")1,2 of $145 million, as compared to
$185 million in the same quarter last year, when non-recurring cash gains of approximately
$40 million were realized for the settlement of risk management contracts that were put in place to
protect the value of inventory at the end of 2014.
- Net earnings were $70 million ($0.41 per share) for the first
quarter compared to $57 million ($0.33 per share) in the same period
in 2015.
- All three business segments performed well for the three months ended March 31, 2016 with the
Liquids Infrastructure segment setting a new quarterly record for operating margin3.
- The Gathering and Processing Business Unit generated an operating margin3 of $68
million in the first quarter of the year (Q1 2015 - $60 million) as gross average throughput
volumes remained steady at 1,558 million cubic feet per day compared to 1,541 million cubic feet per day in the previous quarter
and 1,528 million cubic feet per day in the first quarter of 2015.
- The Liquids Infrastructure segment's record operating margin3 was $62 million (Q1
2015 - $54 million) for the quarter, as its capital investments in de-ethanization, storage,
transportation and condensate assets generated incremental margin.
- The Marketing segment reported an operating margin3 of $44 million (Q1 2015 -
$36 million) even with lower iso-octane sales volumes due to some unscheduled downtime at Alberta
EnviroFuels ("AEF").
- Distributable cash flow1,2 was $116 million ($0.68 per
share) for the quarter, compared to $140 million ($0.83 per
share3) recorded in the first quarter of 2015, when non-recurring cash gains of approximately $40 million were realized.
- Keyera maintained its strong financial position with a payout ratio1 of 56% for the first quarter and a net debt
to Adjusted EBITDA1,2 ratio of 2.4 times at March 31, 2016.
- During the first quarter of 2016, total growth capital investment4 was $143 million,
including $32 million for a pipeline, further enhancing Keyera's Hull Terminal infrastructure in
the Gulf Coast of the United States.
- Major capital projects under construction are currently on schedule and costs are trending lower than budgeted. The new
fractionator at Keyera's Fort Saskatchewan complex is currently being commissioned and we expect
to begin commercial operations by June.
- In 2016, Keyera expects growth capital investments4, excluding acquisitions, to be approximately $600 million, with the majority of this investment focused on Liquids Infrastructure projects backed by
customer agreements.
1
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See "Non-GAAP Financial Measures" on pages 33-34 of the MD&A.
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2
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See pages 29 and 30 of the MD&A for a reconciliation of distributable
cash flow to cash flow from operating activities and Adjusted EBITDA to net earnings.
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3
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See note 12 to the accompanying financial statements.
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4
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See "Capital Expenditures and Acquisitions" on page 28 of the MD&A for
further discussion of Keyera's capital investment program.
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Three months ended March 31,
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Summary of Key Measures
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(Thousands of Canadian dollars, except where noted)
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2016
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2015
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Net earnings
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70,131
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56,580
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Per share ($/share) –
basic
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0.41
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0.33
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Cash flow from operating activities
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177,691
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277,563
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Distributable cash flow1
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116,449
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139,794
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Per share ($/share)
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0.68
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0.83
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Dividends declared
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64,662
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55,769
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Per share ($/share)
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0.38
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0.33
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Payout ratio %1
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56%
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40%
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Adjusted EBITDA2
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145,062
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184,507
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Gathering and Processing:
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Gross processing throughput (MMcf/d)
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1,558
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1,528
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Net processing throughput (MMcf/d)
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1,193
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1,230
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Liquids Infrastructure4:
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Gross fractionation throughput (Mbbl/d)
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145
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128
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Net fractionation throughput (Mbbl/d)
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52
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36
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AEF iso-octane production volumes (Mbbl/d)
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11
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13
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Marketing:
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Inventory value
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54,340
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81,929
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Sales volumes (bbl/d)
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134,800
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119,300
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Acquisitions
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32,160
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2,815
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Growth capital expenditures
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110,846
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209,929
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Maintenance capital expenditures
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6,147
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4,304
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Total capital expenditures
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149,153
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217,048
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As at March 31,
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2016
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2015
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Long-term debt
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1,118,646
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1,205,274
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Credit facilities
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368,877
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30,000
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Working capital deficit (surplus)3
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117,593
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124,375
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Net debt
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1,605,116
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1,359,649
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Common shares outstanding – end of period
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172,794
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169,152
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Weighted average number of shares outstanding – basic
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172,258
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168,915
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Weighted average number of shares outstanding – diluted
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172,258
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168,915
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Notes:
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1
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Payout ratio is defined as dividends declared to shareholders divided by
distributable cash flow. Payout ratio and distributable cash flow are not standard measures under Generally Accepted
Accounting Principles ("GAAP"). See page 29 for a reconciliation of distributable cash flow to its most closely related
GAAP measure.
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2
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Adjusted EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, accretion, impairment expenses, unrealized gains/losses and any other non-cash items such as gains/losses on
the disposal of property, plant and equipment. EBITDA and Adjusted EBITDA are not standard measures under GAAP. See section
of the MD&A titled "EBITDA" for a reconciliation of Adjusted EBITDA to its most closely related GAAP
measure.
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3
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Working capital is defined as current assets less current
liabilities.
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4
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Fractionation throughput in the Liquids Infrastructure segment is the
aggregation of volumes processed through the fractionators and the de-ethanizers at the Keyera and Dow Fort Saskatchewan
facilities.
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Message to Shareholders
Keyera continued to generate strong financial results in the first quarter of 2016, reflecting the effectiveness of our strategy
and our strategically located network of gas plants, pipelines and facilities. Although oil and natural gas prices reached new lows
in the quarter, our results were predominantly driven by our fee-for-service business model and contributions from our growth
capital program. Keyera reported Adjusted EBITDA of $145 million for the first quarter of 2016 and
Distributable Cash Flow of $116 million. Our financial results for the three months ended
March 31, 2016 were comparable to the same period last year after excluding non-recurring cash gains
of approximately $40 million that were included in the first quarter of 2015.
While we recognize that the persistent low commodity price environment is challenging for our industry, Keyera takes a long-term
view of our business. During the quarter, we continued working with customers to provide efficient and cost-effective services and
progressing our growth capital projects that are expected to generate the next level of incremental cash flow growth. The
combination of our disciplined strategy, integrated asset base and strong balance sheet positions Keyera to weather the downturn,
pursue opportunities, respond quickly to a recovery and create shareholder value.
Gathering and Processing Business Unit
The Gathering and Processing Business Unit reported strong results in the first quarter of 2016 even with producers
significantly reducing drilling activity. Overall, Keyera's average gross throughput volumes have remained steady since the
beginning of this economic downturn. In the first quarter of 2016, gross throughput volumes averaged 1,558 million cubic feet per
day, slightly over the 1,541 million cubic feet per day in the prior quarter, as a significant portion of previously curtailed
volumes on the TCPL system returned to Keyera's gas plants for processing. These throughput volume gains were partially offset by
natural production declines, reduced drilling activity and some producers shutting in gas due to the low commodity price
environment. We estimate that the amount of gas shut-in for the first quarter of 2016 was approximately 2% of our gross throughput
volumes.
With volumes holding relatively steady and incremental cash flow from recently completed expansion projects and new gas plants,
operating margin was $68 million in the first quarter, which represented a 13% increase over the same
period in 2015. This segment's strong results confirm that Keyera's gathering and processing assets are located in the areas of the
Western Canada Sedimentary Basin where producers remain active. We continue to work with our customers to deliver cost-effective
and value-added services to help enhance their economics while at the same time increasing throughputs and efficiencies at our
facilities.
Liquids Business Unit - Liquids Infrastructure Segment
The Liquids Infrastructure segment reported a record quarter, delivering an operating margin of $62
million for the three months ended March 31, 2016 compared to $54
million for the same period last year. The main drivers for the growth include the incremental cash flows generated from
recent capital investments and from increased volumes being handled through our industry-leading condensate system. Demand for our
diluent handling services has remained strong as several large scale oil sands projects became operational in 2015. With multiple
oil sands projects under construction and planned to come on stream over the next two years, we expect continued demand growth for
our diluent transportation, storage and terminalling services in the Edmonton/Fort Saskatchewan area into 2018.
At our Keyera Fort Saskatchewan ("KFS") complex, the 35,000 barrel per day fractionation expansion is on schedule and under
budget, with commissioning currently underway and commercial operations expected by June. We expect our cash flow from
fractionation services to grow as the expansion is supported by several long-term contracts.
Supporting meaningful future cash flow growth, a number of capital projects are proceeding on schedule, including the Norlite
diluent pipeline joint venture with Enbridge, the Base Line Terminal above ground storage joint venture with Kinder Morgan and the South Grand Rapids diluent pipeline joint venture with
TransCanada PipeLines and Brion Energy. These projects are supported by customer demand and continue to expand and enhance our
asset base in the Edmonton/Fort Saskatchewan area. As demand for
NGL storage continues to be strong, we are also progressing with the next phase of our cavern development program and expect to
begin drilling our 16th and 17th caverns in the second half of this year.
During the quarter, we acquired a pipeline in east Texas for approximately US$24 million to further enhance Keyera's Hull Terminal infrastructure in the Gulf Coast of the United States. The pipeline originates at ExxonMobil's petrochemical facility in Beaumont, extends through Keyera's Hull terminal and ends near Mont Belvieu,
North America's largest NGL hub. This pipeline is expected to provide Keyera with proprietary
access to transport NGL mix and specification products in and out of the Mont Belvieu area
starting by 2018, assuming commercial agreements and pipeline connections are in place.
Liquids Business Unit - Marketing Segment
The Marketing segment once again delivered solid results in a challenging price environment by leveraging Keyera's strategically
located storage and transportation assets while managing risk effectively. Operating margin was $44
million in the first quarter of 2016 compared to $36 million in the same period last year. All
products handled by the Marketing group (ethane, propane, butane, condensate and iso-octane) contributed positively, although
iso-octane volumes were lower as AEF operated at approximately 80% of its capacity during the quarter due to unscheduled downtime.
In the fall, iso-octane sales volumes will be lower as we have a six-week maintenance turnaround at AEF scheduled to begin in
September.
Outlook
While the difficult economic environment persists for the energy sector, the recent devastating wildfires in the Fort McMurray area have added even more challenges. The residents of Fort
McMurray are facing daunting hardships, and thousands of workers who rely on the oil and gas industry are struggling. At
Keyera, we will do our part to assist our communities, our industry and our fellow Canadians through this difficult period.
Reflecting on the quarter, I am proud of Keyera's performance as we continue to provide steady results. Our success is a
reflection of our disciplined approach and our high-quality assets, and we are managing the business for the long term, working
with customers to provide efficient and cost-effective midstream solutions. We continue to invest in assets that strengthen our
core infrastructure, provide operational flexibility and are expected to generate a steady stream of cash flows. We also take a
conservative approach to our capital structure, which provides us with a solid foundation, access to capital, and the financial
flexibility to fund our 2016 capital program and take advantage of acquisition opportunities.
On behalf of Keyera's directors and management team, I would like to thank our employees, customers, shareholders and other
stakeholders for their continued support. I am confident that we will weather this low commodity price environment while creating
long-term growth and value for shareholders.
David G. Smith
President & Chief Executive Officer
Keyera Corp.
ABOUT KEYERA
Keyera Corp. (TSX:KEY) operates one of the largest midstream energy companies in Canada,
providing essential services to oil and gas producers in the Western Canada Sedimentary Basin. Its predominantly fee-for-service
based business consists of natural gas gathering and processing, natural gas liquids fractionation, transportation, storage and
marketing, iso-octane production and sales, and an industry-leading condensate system in the Edmonton/Fort Saskatchewan area of Alberta.
Keyera strives to provide high quality, value-added services to its customers across North America
and is committed to conducting its business ethically, safely and in an environmentally and financially responsible manner.
DISCLAIMER
Certain statements contained in this news release and accompanying documents contain forward-looking statements. These
statements relate to future events or Keyera's future performance. Such statements are predictions only and actual events or
results may differ materially. The use of words such as "anticipate", "continue", "estimate", "expect", "may", "will", "project",
"should", "plan", "intend", "believe", and similar expressions, including the negatives thereof, is intended to identify
forward-looking statements. All statements other than statements of historical fact contained in this document are forward-looking
statements.
The forward-looking statements reflect management's current beliefs and assumptions with respect to such things as the outlook
for general economic trends, industry trends, commodity prices, capital markets, and the governmental, regulatory and legal
environment. In some instances, this news release and accompanying documents may also contain forward-looking statements
attributed to third party sources. Management believes that its assumptions and analysis in this news release are reasonable
and that the expectations reflected in the forward-looking statements contained herein are also reasonable. However, Keyera
cannot assure readers that these expectations will prove to be correct.
All forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results,
events, levels of activity and achievements to differ materially from those anticipated in the forward-looking statements.
Such factors include but are not limited to: general economic, market and business conditions; access to capital and debt markets;
operational matters, including potential hazards inherent in our operations; risks arising from co-ownership of facilities;
activities of other facility owners; access to third party facilities, competitive action by other companies; activities of
producers and other customers and overall industry activity levels; changes in gas composition; fluctuations in commodity prices
and supply/demand trends; processing and marketing margins; effects of weather conditions; availability of construction crews and
materials; fluctuations in interest rates and foreign currency exchange rates; changes in operating and capital costs, including
fluctuations in input costs; actions by governmental authorities; compliance with regulatory requirements; decisions or approvals
of administrative tribunals; changes in environmental and other regulations; reliance on key personnel; competition for, among
other things, capital, acquisition opportunities and skilled personnel; changes in tax laws, including the effects that such
changes may have on shareholders, and in particular any differential effects relating to shareholder's country of residence; and
other factors, many of which are beyond the control of Keyera, some of which are discussed in this news release and in Keyera's
Annual Information Form dated February 10, 2016, filed on SEDAR and available on the Keyera website
at www.keyera.com.
Proposed construction and completion schedules and budgets for capital projects are subject to many variables, including
weather; availability and prices of materials; labour; customer project schedules and expected in service dates; contractor
productivity; contractor disputes; quality of cost estimating; decision processes and approvals by joint venture partners; changes
in project scope at the time of project sanctioning; regulatory approvals, conditions or delays (including possible intervention by
third parties); and macro socio-economic trends. Pipeline projects are also subject to Keyera's ability to secure the
necessary rights of way; and underground cavern development is dependent on sufficient water supply. As a result, expected timing,
costs and benefits associated with these projects may differ materially from the descriptions in this news release. Further,
some of the projects discussed in this news release are subject to securing sufficient producer/customer interest and may not
proceed if sufficient commitments are not obtained. Typically, the earlier in the engineering process that projects are
sanctioned, the greater the likelihood that the schedule and budget may change.
Readers are cautioned that they should not unduly rely on the forward-looking statements in this news release and accompanying
documents. Further, readers are cautioned that the forward-looking statements in this document speak only as of the date of
this news release.
Any statements relating to "reserves" are deemed to be forward-looking statements as they involve the implied assessment, based
on certain estimates and assumptions, that the reserves described can be profitably produced in the future.
All forward-looking statements contained in this news release and accompanying documents are expressly qualified by this
cautionary statement. Further information about the factors affecting forward-looking statements and management's assumptions
and analysis thereof, is available in filings made by Keyera with Canadian provincial securities commissions, which can be viewed
on SEDAR at www.sedar.com.
SOURCE Keyera Corp.