CALGARY, Feb. 14, 2017 /CNW/ - Keyera Corp. (TSX:KEY)
("Keyera") announced its 2016 year end 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 2016 with net earnings of $217 million
($1.21 per share) compared to $202 million ($1.19 per share) reported in 2015.
- Both facility operating segments reported record results for the year as recent capital investments are generating
incremental cash flow. The Gathering and Processing segment recorded an operating margin of $290
million in the year (2015 – $259 million) while the Liquids Infrastructure segment
reported an operating margin of $246 million (2015 – $220
million).
- The Marketing segment's operating margin was $101 million (2015 – $244
million) primarily 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.
- Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA")1 was $605 million compared to $705 million in 2015. Distributable cash
flow1 was $460 million ($2.56 per share) in 2016
compared to $482 million ($2.84 per share) recorded in 2015. The
prior year's financial results included a non-recurring gain of approximately $40 million on risk
management contracts.
- To support future growth, Keyera recently purchased 1,290 acres of undeveloped land in the Industrial Heartland area near
Fort Saskatchewan, providing the company with significant growth optionality.
- Keyera today announced plans to construct a new NGL gathering pipeline system ("Keylink") that will provide producers in
west central Alberta with a pipeline alternative for transporting NGLs from a number of Keyera
gas plants. The estimated $147 million2 Keylink system is targeted to be operational
by mid-2018.
- Keyera also announced a project to expand the liquids handling capacity at the Simonette gas plant to meet customers'
growing needs. The project is estimated to cost $100 million2 and to be operational by
mid-2018, based on the proposed construction schedule.
- Growth capital invested in 2016, excluding acquisitions, was $502 million2 and
included the NGL fractionation expansion at Keyera's Fort Saskatchewan facility that was
completed in the second quarter. During the year, construction also progressed on three major Liquids Infrastructure
joint-venture projects: the Norlite diluent pipeline, the South Grand Rapids diluent pipeline,
and the Base Line Terminal crude oil storage facility. These projects are expected to begin generating cash flow over the next
6 to 12 months.
- Acquisitions in 2016 included an additional 35% ownership interest in the Alder Flats gas
plant and gathering lines, as well as the Wapiti gas plant site, acid gas injection well and associated third-party engineering
work. Keyera completed its detailed cost estimate for the Wapiti project and is in discussions with the primary customer
regarding sanctioning phase one.
- In 2017, Keyera expects to invest growth capital of between $600 million and $700
million2, mainly to complete its three major Liquids Infrastructure projects including acquiring the
South Grand Rapids pipeline, expand the liquids handling capacity at the Simonette gas plant
and advance work on the Keylink pipeline.
1
|
Keyera uses certain "Non-GAAP Measures" such as Adjusted EBITDA,
Distributable Cash Flow, Distributable Cash Flow per Share and Payout Ratio. See sections titled "Non-GAAP
Financial Measures", "Dividends: Distributable Cash Flow" and "EBITDA" of the MD&A for further details.
|
2
|
See section titled "Capital Expenditures and Acquisitions" of the MD&A
for further discussion of Keyera's capital investment program.
|
|
|
Three months ended
December 31,
|
Twelve months ended
December 31,
|
Summary of Key Measures
(Thousands of Canadian dollars, except where noted)
|
|
2016
|
2015
|
2016
|
2015
|
Net earnings
|
|
34,621
|
20,215
|
216,851
|
201,920
|
|
Per share ($/share) –
basic
|
|
0.19
|
0.12
|
1.21
|
1.19
|
Cash flow from operating activities
|
|
40,223
|
126,444
|
412,926
|
648,155
|
|
|
|
|
|
|
Distributable cash flow1
|
|
104,006
|
123,176
|
459,583
|
482,118
|
|
Per share ($/share)1
|
|
0.56
|
0.72
|
2.56
|
2.84
|
Dividends declared
|
|
73,657
|
64,259
|
277,578
|
240,685
|
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Per share
($/share)
|
|
0.40
|
0.38
|
1.54
|
1.42
|
|
Payout ratio %1
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|
71%
|
52%
|
60%
|
50%
|
Adjusted EBITDA2
|
|
153,535
|
175,249
|
605,127
|
704,640
|
Gathering and Processing:
|
|
|
|
|
|
Gross processing throughput (MMcf/d)
|
|
1,362
|
1,541
|
1,431
|
1,498
|
Net processing throughput (MMcf/d)
|
|
1,088
|
1,174
|
1,123
|
1,155
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Liquids Infrastructure3:
|
|
|
|
|
|
Gross processing throughput (Mbbl/d)
|
|
152
|
137
|
147
|
133
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Net processing throughput (Mbbl/d)
|
|
50
|
41
|
53
|
41
|
AEF iso-octane production volumes (Mbbl/d)
|
|
9
|
13
|
11
|
13
|
Marketing:
|
|
|
|
|
|
Inventory value
|
|
107,876
|
76,989
|
107,876
|
76,989
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Sales volumes (Bbl/d)
|
|
134,600
|
118,300
|
129,300
|
110,500
|
|
|
|
|
|
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Acquisitions
|
|
8,033
|
6,949
|
190,375
|
24,644
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Growth capital expenditures
|
|
119,018
|
129,089
|
501,503
|
641,427
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Maintenance capital expenditures
|
|
29,305
|
6,103
|
65,539
|
64,831
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Total capital expenditures
|
|
156,356
|
142,141
|
757,417
|
730,902
|
|
|
|
|
As at December 31,
|
|
|
|
|
2016
|
2015
|
Long-term debt
|
|
|
|
1,437,413
|
1,156,486
|
Credit facilities
|
|
|
|
235,000
|
370,000
|
Working capital (surplus) deficit 4
|
|
|
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(46,322)
|
73,622
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Net debt
|
|
|
|
1,626,091
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1,600,108
|
|
|
Three months ended
December 31,
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|
|
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2016
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2015
|
|
|
|
|
|
|
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Common shares outstanding – end of period
|
|
|
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185,683
|
171,702
|
Weighted average number of shares outstanding – basic
|
|
185,116
|
171,199
|
179,688
|
169,936
|
Weighted average number of shares outstanding – diluted
|
|
185,116
|
171,199
|
179,688
|
169,936
|
|
|
|
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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.
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3
|
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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4
|
Working capital is defined as current assets less current
liabilities.
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Message to Shareholders
More than two years after the energy industry entered the current economic downturn, Keyera's assets continue to generate
strong returns. Our Gathering and Processing and Liquids Infrastructure segments once again delivered record results in 2016 as
our recent capital investments, along with increasing demand for our oil sands services, generated incremental cash flow. The
Marketing segment's results were affected by the scheduled turnaround at our Alberta EnviroFuels facility and iso-octane margins
narrowing during the year after very strong margins in 2015. Adjusted EBITDA was $605 million,
while distributable cash flow was $460 million and net earnings were $217
million.
I am pleased with Keyera's performance during this time. We continue to strengthen our competitive advantages and position the
company for growth. We have successfully reduced our operating costs, strengthened our balance sheet and continued to focus on
operational excellence. During the year, we invested almost $700 million in growth capital projects
and acquisitions. In 2017, we expect to invest another $600 million to $700 million in growth
capital, excluding acquisitions. We are confident in our business and remain committed to growing shareholder returns. In 2016,
we increased our dividend per share by 6%.
Gathering and Processing Business Unit
The Gathering and Processing segment delivered record financial results in 2016, despite the low commodity price environment
and corresponding low producer drilling activity in Alberta. Operating margin of $290 million was 12% higher than in 2015. This increase was primarily the result of a full year of
incremental cash flow associated with capital projects completed in the prior year, as well as the additional 35% ownership
interest in the Alder Flats gas plant and gathering pipelines acquired mid-year.
Gross processing throughput volumes for the year averaged 1,431 million cubic feet per day, down 4% from the 1,498 million
cubic feet per day processed in 2015 due to low drilling activity and curtailments on TransCanada PipeLines' sales gas system. In
the fourth quarter of 2016, gross throughput volumes averaged 1,362 million cubic feet per day, consistent with the 1,367 million
cubic feet per day processed in the third quarter. We are encouraged by the recovery in commodity prices compared to the first
half of 2016. There are indications that drilling activity has increased, particularly in geological zones rich in NGLs, such as
the Spirit River (near the Alder Flats gas plant) and the Montney (near our Simonette gas plant).
To support future growth, in 2016 we entered into agreements with the Canadian subsidiary of a large creditworthy
multi-national producer for the proposed construction of a natural gas gathering and processing complex in the Wapiti area of
Alberta. In the fourth quarter, we received regulatory approvals for the acid gas injection well
and completed front-end engineering and design work. The current cost estimate for the project is approximately $625 million, which includes up to 300 million cubic feet per day of sour gas processing capacity and 25,000
barrels per day of field condensate capacity. We are continuing to work closely with our customer towards sanctioning of phase
one, which would consist of 150 million cubic feet per day of processing capacity, the associated gathering system and an acid
gas injection well, for an estimated cost of $470 million. This investment would be underpinned by
a long-term contract consisting of a combination of an area dedication and minimum volume commitments. We are also negotiating
with other producers with Montney-based development plans in the area.
We continue to focus on delivering cost-effective and value-added services to enhance customer economics, while maximizing
throughput and efficiencies at our facilities. During the year, we reduced our operating costs by 13% compared to 2015. To meet
our customers' growing needs at the Simonette gas plant, we are proceeding with a project to expand the liquids handling
capacity. This project is estimated to cost approximately $100 million and is anticipated to be
operational by mid-2018, assuming construction proceeds as planned. Upon completion of this project, the condensate handling
operational capacity at the Simonette gas plant is expected to be approximately 27,000 barrels per day.
Liquids Business Unit - Liquids Infrastructure Segment
The Liquids Infrastructure segment generated record results in 2016, reporting an operating margin of $246 million, a 12% increase over the $220 million reported in the prior year.
The robust performance was supported by a full year of contributions from projects completed in 2015, along with the completion
of the 35,000 barrel per day fractionation expansion at Keyera Fort Saskatchewan in late May and growing volumes flowing through
Keyera's condensate network.
Significant progress was made on Keyera's three major joint-venture projects in 2016, with their total cost trending lower
than budget. The Norlite diluent pipeline project with Enbridge is on track to be operational this summer, followed by the
South Grand Rapids diluent pipeline project with TransCanada PipeLines and Brion Energy late in
2017. The Base Line Terminal crude oil storage project with Kinder Morgan is expected to have its
first set of tanks ready for commercial use in early 2018. These projects are expected to begin generating cash flow over the
next 6 to 12 months.
In 2016, we continued to focus on developing strategic projects that are expected to provide Keyera with further growth
opportunities and enhance our integrated service offering. To add to this growth profile, we are announcing plans to construct a
new NGL gathering pipeline system, called "Keylink". The Keylink pipeline will connect several Keyera gas plants, including the
Brazeau River, West Pembina, and Minnehik Buck Lake, to the Rimbey gas plant where we can
provide onsite fractionation. The Rimbey gas plant is pipeline connected to our Edmonton rail terminal and Fort Saskatchewan fractionation and storage
complex. We believe Keylink will provide producers with a safe, reliable and economically improved alternative to trucking NGL
volumes in the region. We are pleased with the progress we have made with our engineering work, as well as our regulatory and
construction plans. Assuming progress continues on schedule, our goal is to have the Keylink pipeline system operational in the
second quarter of 2018 at an estimated cost of $147 million.
We recently completed the acquisition of 1,290 acres of undeveloped land adjacent to our Josephburg rail terminal in
Alberta's Industrial Heartland near Fort Saskatchewan.
Strategically located in western Canada's liquids hub, this land is expected to provide Keyera
with a wide range of business opportunities for future growth.
Liquids Business Unit - Marketing Segment
The Marketing segment continued to contribute to Keyera's integrated value chain during the year, generating operating margin
of $101 million compared to $244 million in 2015. Results were lower
than the prior year due to a reduced contribution from iso-octane, as a result of the eight week scheduled turnaround at AEF and
lower iso-octane margins. After a very strong year in 2015, iso-octane margins have returned close to the levels realized in
2014.
Keyera's Marketing group also manages the sale of propane, butane and condensate. All products contributed positively to the
segment's results in 2016, with propane earning strong margins late in the fourth quarter mainly due to colder than expected
winter weather.
Outlook
While it remains a challenging time for the industry, our disciplined approach to executing our strategy has served our
shareholders well. We continue to improve and expand our integrated network of assets and look for opportunities to enhance our
value chain. The proposed Wapiti gas gathering and processing complex, the new Keylink NGL gathering pipeline system, the liquids
handling expansion at the Simonette gas plant and our recent land acquisition in the Industrial Heartland all represent exciting
growth opportunities. Our strong balance sheet, access to capital and conservative payout ratio allow us to pursue these and
other opportunities to enhance shareholder returns. In addition, we will continue to work with the industry to provide midstream
solutions that are efficient and cost-effective to help support the overall competitiveness of the Western Canada Sedimentary
Basin in the global market.
I am confident that Keyera is well positioned for the future and 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 continued support.
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 14, 2017, filed on SEDAR at www.sedar.com 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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