CALGARY, Nov. 8, 2016 /CNW/ - Keyera Corp. (TSX:KEY)
("Keyera") announced its 2016 third 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's distributable cash flow1,2 was $101 million ($0.55 per share) for the quarter compared to $127 million ($0.75 per share) in the third quarter of 2015, primarily due to lower contributions from the sale of iso-octane
in the Marketing segment and higher turnaround costs. On a year to date basis, distributable cash flow was $356 million, comparable to the $359 million reported for the first nine months
of 2015.
- Net earnings for the period were $52 million ($0.28 per share)
compared to $110 million ($0.64 per share) in the same quarter of
2015. Year to date, net earnings were $182 million, virtually unchanged from 2015.
- Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA")1,2 was $148 million in the third quarter of 2016 (Q3 2015 - $188 million) and
$452 million year to date (2015 - $529 million).
- Effective with the August dividend, Keyera increased its dividend by 6% to $0.1325 per share
per month or $1.59 per share annually. Keyera's payout ratio1 was 71% for the third
quarter and 57% year to date.
- The Gathering and Processing Business Unit generated an operating margin3 of $72
million in the third quarter of 2016 (Q3 2015 - $69 million) even with lower throughput
volumes due to low drilling activity.
- The Liquids Infrastructure segment reported a record operating margin3 of $63
million for the quarter (Q3 2015 - $56 million) as recent investments are generating
incremental margins.
- The Marketing segment delivered operating margin3 of $24 million, including
$9 million of unrealized losses, in the third quarter (Q3 2015 - $99
million, including $26 million of unrealized gains) due to a lower contribution from
iso-octane sales, as a result of the scheduled turnaround at Alberta EnviroFuels ("AEF") and lower iso-octane margins.
- During the quarter, Keyera closed the acquisition of an additional 35% ownership interest in the Alder Flats gas plant from Bellatrix Exploration Ltd. Bellatrix continues to advance Phase 2 of the gas
plant, which is expected to be on stream in the first half of 2018.
- During the quarter, we advanced front-end engineering and design work on the Wapiti gas plant and associated gathering system
and expect to have a detailed cost estimate by year end.
- Construction progressed on Keyera's three major Liquids Infrastructure joint-venture projects: the Norlite pipeline, the Base
Line Terminal above ground crude oil storage facility and the South Grand Rapids pipeline.
- Growth capital investment4 in the third quarter of 2016 was $130 million and Keyera
remains on track to invest approximately $600 million in 2016. Based on current plans, Keyera
expects growth capital investment in 2017 to range between $500 million and $600 million, with the
majority focused on Liquids Infrastructure projects, including the acquisition of the South Grand
Rapids pipeline.
1
|
See "Non-GAAP Financial Measures" on page 39 of the MD&A.
|
2
|
See pages 34 and 35 of the MD&A for a reconciliation of distributable
cash flow to cash flow from operating activities and Adjusted EBITDA to net earnings.
|
3
|
See Note 14 to the accompanying financial statements.
|
4
|
See "Capital Expenditures and Acquisitions" on page 32 of the MD&A for
further discussion of Keyera's capital investment program.
|
|
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
Summary of Key Measures
(Thousands of Canadian dollars, except where noted)
|
2016
|
2015
|
2016
|
2015
|
Net earnings
|
52,420
|
109,538
|
182,230
|
181,705
|
|
Per share ($/share) – basic
|
0.28
|
0.64
|
1.02
|
1.07
|
Cash flow from operating activities
|
137,145
|
117,714
|
372,703
|
521,711
|
|
|
|
|
|
Distributable cash flow1
|
101,451
|
126,843
|
355,577
|
358,942
|
|
Per share ($/share)
|
0.55
|
0.75
|
2.00
|
2.12
|
Dividends declared
|
71,819
|
62,178
|
203,921
|
176,426
|
|
Per share ($/share)
|
0.390
|
0.37
|
1.14
|
1.04
|
|
Payout ratio %1
|
71%
|
49%
|
57%
|
49%
|
Adjusted EBITDA2
|
148,424
|
187,961
|
451,592
|
529,391
|
Gathering and Processing:
|
|
|
|
|
Gross processing throughput (MMcf/d)
|
1,367
|
1,476
|
1,454
|
1,479
|
Net processing throughput (MMcf/d)
|
1,073
|
1,121
|
1,125
|
1,145
|
Liquids Infrastructure4:
|
|
|
|
|
Gross fractionation throughput (Mbbl/d)
|
150
|
140
|
144
|
130
|
Net fractionation throughput (Mbbl/d)
|
56
|
47
|
53
|
41
|
AEF iso-octane production volumes (Mbbl/d)
|
10
|
13
|
11
|
13
|
Marketing:
|
|
|
|
|
Inventory value
|
120,918
|
93,738
|
120,918
|
93,738
|
Sales volumes (Bbl/d)
|
117,000
|
103,100
|
127,500
|
107,800
|
|
|
|
|
|
Acquisitions
|
130,300
|
1,288
|
182,342
|
17,695
|
Growth capital expenditures
|
130,429
|
133,804
|
382,485
|
512,338
|
Maintenance capital expenditures
|
28,188
|
15,669
|
36,234
|
58,728
|
Total capital expenditures
|
288,917
|
150,761
|
601,061
|
588,761
|
|
|
|
As at September 30,
|
|
|
|
2016
|
2015
|
Long-term debt
|
|
|
1,185,568
|
1,138,602
|
Credit facilities
|
|
|
365,000
|
325,000
|
Working capital (surplus) deficit3
|
|
|
(7,734)
|
75,689
|
Net debt
|
|
|
1,542,834
|
1,539,291
|
|
Three months ended
September 30,
|
|
|
2016
|
2015
|
|
|
|
|
|
|
|
Common shares outstanding – end of period
|
|
|
184,520
|
170,677
|
Weighted average number of shares outstanding – basic
|
183,962
|
170,191
|
177,865
|
169,510
|
Weighted average number of shares outstanding – diluted
|
183,962
|
170,191
|
177,865
|
169,510
|
Notes:
1
|
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 the section titled, "Dividends: Distributable Cash Flow", for a reconciliation of
distributable cash flow to its most closely related GAAP measure.
|
2
|
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.
|
3
|
Working capital is defined as current assets less current
liabilities.
|
4
|
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
As the oil and gas industry continues to manage its way through this economic downturn, Keyera's midstream infrastructure is
demonstrating its strategic significance and operational value. Overall, our Adjusted EBITDA was $148
million, Distributable Cash Flow was $101 million and Net Earnings were $52 million for the three months ended September 30, 2016. Our Gathering and
Processing Business Unit and Liquids Infrastructure segment both generated increased cash flow, quarter over quarter and year over
year, while lower contributions from iso-octane sales affected Marketing's results.
With a long-term view, we have used this industry slowdown to strengthen Keyera's competitive position. We have successfully
reduced our operating costs in a meaningful manner, strengthened our balance sheet and focused on operational excellence. With a
disciplined investment strategy, we continue to look for the right opportunities to increase shareholder value. I am pleased with
Keyera's performance during this challenging time and am confident about our future.
Gathering and Processing Business Unit
In the third quarter of 2016, our Gathering and Processing business delivered a strong operating margin of $72 million, 4% higher than the $69 million reported in the same period in 2015.
More than two years into the economic downturn facing the oil and gas industry, our Gathering and Processing business has
consistently delivered results that demonstrate the benefit of our strategically located and interconnected network of gas plants
and our disciplined capital investment strategy. Although gas processing volumes were lower in the third quarter of 2016 compared
to the same period in 2015, producer commitments, expanded service offerings and operating efficiencies have resulted in stable
operating margins. We have also had considerable success in our ongoing efforts to reduce operating costs for the benefit of our
customers.
Gross processing volumes averaged 1,367 million cubic feet per day in the third quarter of 2016, 4% lower than the 1,425 million
cubic feet per day reported in the second quarter of this year. Reduced drilling activity, natural declines from existing wells and
sales gas pipeline curtailments were the largest contributing factors affecting the decline in throughput volumes. However, with
the recent modest recovery in commodity prices, there are indications that drilling activity may increase in certain areas around
our gas plants.
Keyera currently has 17 gas plants with approximately 2.9 billion cubic feet per day of licensed processing capacity and we
continue to look for the right opportunities to expand our integrated system. In August, we acquired an additional 35% ownership
interest in the Alder Flats gas plant and its associated gathering pipelines. We now have a 70%
ownership interest in this fully utilized facility and are looking forward to expanding the capacity of the plant with our partner,
Bellatrix Exploration Ltd. Phase 2 is currently in the detailed engineering stage and is expected to be on stream in the first half
of 2018, based on the current schedule.
We are also continuing to advance the proposed Wapiti gas plant and associated gathering system. We expect to have a
detailed cost estimate for the complex by year end. This project is an exciting opportunity to expand our presence in the
liquids-rich Montney formation.
Liquids Business Unit − Liquids Infrastructure Segment
Our Liquids Infrastructure segment reported a record quarter with operating margin of $63 million,
compared to $56 million for the same period last year. As capital projects are completed, this
segment continues to perform and demonstrate its importance to the industry. Utilization of our condensate network and storage
caverns has been growing and we continue to expand these assets.
Keyera's three large joint-venture projects continue to progress, with costs trending lower than budget. The Norlite diluent
pipeline joint venture with Enbridge is on schedule for completion in mid-2017 and the South Grand
Rapids diluent pipeline joint venture project with TransCanada PipeLines and Brion Energy is on schedule for completion in
late 2017. The Base Line Tank Terminal crude oil storage joint venture with Kinder Morgan is
progressing well and the first set of tanks are expected to be ready for commercial use in early 2018.
As demand for natural gas liquids storage continues to be strong, we are progressing with our cavern development program.
During the quarter, we continued washing two caverns, which are expected to be ready for use in the first half of 2017 and 2018,
and we completed drilling two other caverns. This next phase of cavern development will expand our 12.5 million barrels of capacity
to meet customer demand.
Keyera continues to look for the right opportunities to expand our Liquids Infrastructure assets. We have been working with
customers to find new opportunities to provide midstream solutions that will add value by expanding capacity and lowering
costs.
Liquids Business Unit − Marketing Segment
The Marketing segment continued to contribute to Keyera's integrated value chain during the quarter, generating an operating
margin of $33 million, excluding unrealized losses from risk management contracts. Results were lower
than in the same period last year due to a lower contribution from iso-octane, as a result of the scheduled turnaround at AEF and
lower iso-octane margins. After a very strong year in 2015, iso-octane margins have returned to levels comparable to the healthy
levels experienced in 2014.
AEF operated at over 100% of its licensed capacity in July and August, prior to its scheduled turnaround that began in early
September. The facility was off-line approximately two weeks longer than planned to complete some additional work identified during
the maintenance shutdown. After two years of careful planning, I am pleased to report that the turnaround was completed safely and
on budget, and AEF has now resumed production.
Outlook
While we are confident in Keyera's strategy, we will continue to face pressures on our throughput volumes, fees and revenues
until industry activity levels recover. We have a strong track record of growing shareholder value and increasing our monthly
dividend and plan to extend this trend. We continue to improve our operational efficiencies, work with customers to develop
solutions for the industry and look for the right acquisitions to enhance our asset portfolio. With our conservative balance sheet
and strong competitive advantages, we are well positioned for continued growth as and when the industry recovers.
On behalf of Keyera's board of directors and management team, I would like to thank our employees, customers, shareholders and
other stakeholders for their ongoing support. I am confident that we will continue to 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. Expected closing of acquisitions and financings are subject to
satisfaction of closing conditions which may vary depending on the nature of the transactions. Acquisitions may be subject to
rights of first refusal and other third party consents.
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. Such statements speak only as of the date hereof. 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.
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