Keyera Corp. Announces First Quarter 2015 Results
CALGARY, May 5, 2015 /CNW/ - Keyera Corp. (TSX:KEY) announced their 2015 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 first quarter financial results with net earnings of $57 million ($0.33 per share1) compared to $55 million ($0.35 per share1) in the first quarter 2014.
- Adjusted earnings before interest, taxes, depreciation and amortization2, 3 ("EBITDA") were $185 million in first quarter 2015, 71% higher than the $108 million posted in first quarter 2014.
- All three business segments performed well and contributed to Keyera's strong financial results. The Gathering and Processing Business Unit generated operating margin4 of $60 million (Q1 2014 - $48 million); the NGL Infrastructure segment's operating margin4 was $54 million (Q1 2014 - $39 million); and operating margin4 in the Marketing segment was $36 million (Q1 2014 - $37 million).
- Distributable cash flow2, 3 was $140 million ($0.83 per share1) in first quarter 2015 compared to $78 million ($0.49 per share1) recorded in first quarter 2014, resulting in a payout ratio of 40%.
- Keyera completed the previously announced two-for-one split of its outstanding common shares effective April 1, 2015. In addition, during the quarter Keyera increased its monthly dividend by 7%, which was Keyera's thirteenth consecutive dividend increase since going public in 2003.
- Several capital projects have been completed and are now operational, including the 100 million cubic feet per day gas plant expansion and the 10,000 barrel per day condensate stabilizer at the Simonette gas plant; the 30,000 barrel per day de-ethanizer project at our Fort Saskatchewan facility; and the Twin Rivers pipeline system, which is now delivering incremental gas to our Brazeau River and West Pembina gas plants.
- Progress was made on a number of other projects that will enhance our natural gas liquids handling capabilities, including the turbo expander and debottlenecking project at the Rimbey gas plant and the new Josephburg rail terminal. All of these projects are expected to be completed in mid-2015.
- Keyera entered into a 50/50 joint venture with Kinder Morgan, Inc. ("Kinder Morgan") to build an above ground crude oil storage terminal near Edmonton with an initial scope of 12 tanks and 4.8 million barrels of capacity. The project is fully underpinned by several take-or-pay agreements ranging up to 10 years in length. Keyera's share of costs to construct the terminal is currently estimated to be $330 million.
- Total growth capital investment was $213 million in the first quarter of 2015, including $3 million of acquisitions. In 2015, growth capital investment, excluding acquisitions, is expected to be between $700 million and $800 million5.
- Today, Keyera declared a May dividend of $0.115 per share, with an ex-dividend date of May 21, 2015 and payable on June 15, 2015 to shareholders of record as of May 25, 2015. The Premium DRIPTM, previously suspended in April 2010, has been amended and will be reinstated effective with the May 2015 dividend.
1 |
Keyera completed a two-for-one split of its outstanding common shares payable to shareholders of record on April 1, 2015. |
2 |
See "Non-GAAP Financial Measures" on page 36 of the MD&A. |
3 |
See pages 31 and 32 of the MD&A for a reconciliation of distributable cash flow to cash flow from operating activities and Adjusted EBITDA to net earnings. |
4 |
See note 13 to the accompanying financial statements. |
5 |
See "Capital Expenditures and Acquisitions" on page 30 of the MD&A for further discussion of Keyera's capital investment program. |
Three months ended March 31, |
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Summary of Key Measures |
2015 |
2014 |
|
Net earnings |
56,580 |
55,233 |
|
Per share ($/share) – basic4 |
0.33 |
0.35 |
|
Cash flow from operating activities |
277,563 |
119,493 |
|
Distributable cash flow2 |
139,794 |
78,220 |
|
Per share ($/share) 4 |
0.83 |
0.49 |
|
Dividends declared |
55,769 |
47,605 |
|
Per share ($/share) 4 |
0.33 |
0.30 |
|
Payout ratio %1 |
40% |
61% |
|
Adjusted EBITDA2 |
184,507 |
107,747 |
|
Gathering and Processing: |
|||
Gross processing throughput (MMcf/d) |
1,528 |
1,356 |
|
Net processing throughput (MMcf/d) |
1,230 |
1,114 |
|
NGL Infrastructure: |
|||
Gross processing throughput (Mbbl/d) |
128 |
122 |
|
Net processing throughput (Mbbl/d) |
36 |
38 |
|
Marketing: |
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Inventory value |
81,929 |
159,493 |
|
Sales volumes (bbl/d) |
119,300 |
99,400 |
|
Acquisitions (including business combination) |
2,815 |
5,783 |
|
Growth capital expenditures |
209,929 |
198,598 |
|
Maintenance capital expenditures |
4,304 |
3,279 |
|
Total capital expenditures |
217,048 |
207,660 |
|
As at March 31, |
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2015 |
2014 |
||
Long-term debt |
1,205,274 |
1,098,347 |
|
Credit facilities |
30,000 |
— |
|
Working capital deficit (surplus)3 |
124,375 |
(158,832) |
|
Net debt |
1,359,649 |
939,515 |
|
Common shares outstanding – end of period4 |
169,152 |
158,834 |
|
Weighted average number of shares outstanding – basic4 |
168,915 |
158,602 |
|
Weighted average number of shares outstanding – diluted4 |
168,915 |
158,602 |
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 page 31 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 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 |
On April 1, 2015, Keyera's outstanding common shares were split on a two-for-one basis. All per share information has been presented on a post-share split basis. |
Message to Shareholders
Keyera had a great start to the year and continued to deliver strong operating results in the first quarter. Operating margins were strong across all business segments and Adjusted EBITDA in the first quarter of 2015 was a record $185 million, 71% higher than the same period last year. Our success is a result of the stability and diversity of our revenue streams, the location of our facilities, the investments we have made in strategic infrastructure over the past several years and our focus on customer service. Our customers continue to see value in our integrated service offering, which provides them with access to the processing, transportation, storage and logistics facilities and expertise necessary to turn their production into cash flow. We take a long-term view of our business and remain committed to executing our business plan.
Gathering and Processing Business Unit
The Gathering and Processing Business Unit reported operating margin of $60 million in the first quarter, 25% higher than the same period in 2014, primarily due to increased plant throughput. As producers develop liquids-rich gas zones such as the Mannville, Glauconite and Montney horizons, the utilization of several of our gas plants continued to increase as compared to the first quarter of 2014. Overall, net throughput in the first quarter averaged 1.2 billion cubic feet per day, compared to 1.1 billion cubic feet per day in the same period last year. Many of our facilities are operating at or near operational capacity due to the drilling that has occurred over the past year. Throughput will be lower in the second quarter of this year due to planned maintenance turnarounds at three of our gas plants and the continuation of TransCanada pipeline curtailments.
During the quarter, we continued to make progress on a number of projects. At the Simonette gas plant, we completed and commissioned the 10,000 barrel per day condensate stabilizer. This facilitated the startup of the Wapiti liquids pipeline which was installed along with the Wapiti gas pipeline in 2014. We also completed the Simonette plant expansion, adding 100 million cubic feet per day of processing capacity, and commissioned that project in early April. With these two units operational, the Simonette gas plant is now processing additional Montney volumes from the Wapiti region. At the Rimbey gas plant, construction continued on the 400 million cubic feet per day turbo expander, which we expect to be operational by mid-2015.
We also continued to expand our gathering system in west central Alberta during the quarter. We completed construction of the north portion of the Twin Rivers pipeline system, which is now delivering incremental gas to our Brazeau River and West Pembina gas plants. In April, the south portion of the Twin Rivers pipeline system was completed, providing additional incremental gas to these gas plants. During the quarter, we also approved a 17-kilometre extension of our Wilson Creek pipeline which connects to our Rimbey gas plant. The project is underpinned by new producer gas in the area and we are targeting to be operational in early 2016.
We continue to work with producers to evaluate construction of a pipeline connecting our Ricinus gas plant, which we acquired in late 2014, to our Strachan gas plant, as well as possible enhancements to the gathering systems. A pipeline connection between these two plants would provide producers with access to incremental processing capacity for sweet gas volumes and would also add operational flexibility. In addition, work is continuing on the two new gas plants being constructed by the producers we partnered with in late 2014. Phase 1 of the Alder Flats gas plant is nearing completion and the Zeta Creek gas plant is expected to be completed later this year, assuming construction schedules are met. We are a 35% non-operating owner in the Alder Flats plant, and a 60% owner in the Zeta Creek plant, which we will operate once construction is complete.
Liquids Business Unit – NGL Infrastructure Segment
Our Liquids Business Unit reported an operating margin of $54 million in the first quarter, an increase of 37% over the same period in 2014. The growth in operating margin was due to an increased level of activity at our facilities and higher fractionation and storage revenues, driven by liquids-rich gas drilling as well as growing oil sands production and related services. In addition, several of the capital investments to enhance our NGL infrastructure are now operational and generating incremental operating margin.
With continued customer demand for fractionation and storage services, we remain committed to enhancing our NGL infrastructure in the Edmonton/Fort Saskatchewan area. During the quarter, we made progress on a number of capital projects. At our Fort Saskatchewan complex, we completed construction and began operating the 30,000 barrel per day de-ethanizer, where our share of the capacity is contracted under a long-term take-or-pay agreement. The de-ethanizer is operating as expected and volumes will continue to ramp up over the remainder of the year and into 2016. In addition, construction of the fractionation expansion, which will more than double our C3+ fractionation capability at Fort Saskatchewan, continues to progress well. During the quarter, we completed the site civil work, advanced the engineering design, and began fabricating modules offsite for the fractionation expansion.
To meet the growing demand for diluent storage and logistics, we continued the expansion of our underground storage cavern capacity at our Fort Saskatchewan complex. We are currently washing the 13th and 14th caverns and in January completed drilling the well bore for our 15th underground storage cavern. By the third quarter of 2015, we expect to have the 13th cavern in service and begin washing the 15th cavern, increasing our gross storage capacity to approximately 12.2 million barrels.
During the quarter, construction continued at our Josephburg rail terminal, located east of the Keyera Fort Saskatchewan facility. The terminal is expected to be completed mid-2015 and will allow for essential rail deliveries of propane from Western Canada. Also, Keyera acquired additional land near the Josephburg rail terminal for future development.
At the end of the quarter, we announced a 50/50 joint venture with Kinder Morgan to build a 12 tank, 4.8 million barrel above ground crude oil storage terminal. This project addresses demand for merchant storage of crude oil in the Edmonton area and is underpinned by several take-or-pay agreements ranging up to 10 years in length. We will contribute undeveloped land at our Alberta EnviroFuels ("AEF") site, while Kinder Morgan will provide connectivity to numerous sources of crude oil at their Edmonton area terminal. Based on current capital estimates, our share of the costs to construct the terminal is estimated to be approximately $330 million and the first tanks are scheduled to be in service in the second half of 2017.
In April, we entered into a long-term lease-to-own arrangement to utilize an 8-inch pipeline that is approximately 49 kilometres in length and will complement Keyera's pipeline system in the Fort Saskatchewan area. This pipeline will provide increased flexibility and capacity to provide NGL transportation services in the region.
Liquids Business Unit – Marketing Segment
Our Marketing segment also reported strong results in the first quarter of 2015, with an operating margin of $36 million compared to $37 million in the same period last year. Our iso-octane business continued to perform well with the plant operating near capacity for the quarter. Demand remains strong for our iso-octane and we continue to develop new markets for this product.
Outlook
The significantly lower commodity price environment has created a challenging time for our industry. Most oil and gas producers have curtailed their 2015 capital budgets, which has slowed the pace of drilling and development activities across western Canada. To date, there has not been a material effect on our operations and we believe that our business model provides insulation from short-term changes in activity levels. Our assets are strategically located in the Western Canada Sedimentary Basin, where prospective geology and proximity to infrastructure could enable liquids-rich gas wells to remain economic in the current environment. Both of our business units are expected to continue to generate additional revenue as we bring new infrastructure projects on line. Demand for our oil sands service offering is also expected to increase as new major bitumen production projects come on stream this year.
As a service provider to the energy sector, we will continue to work with our customers during this challenging time. We will also continue to focus on the next phase of infrastructure investments that the industry will need. In 2015, we continue to expect to invest between $700 million and $800 million, excluding acquisitions. As we look ahead, we remain focused on our strategy of pursuing infrastructure projects and acquisitions that are supported by customer demand and support our goal to deliver long-term value for investors. Our strong balance sheet and access to capital allow us to fund these expenditures prudently, and also provide the flexibility to selectively pursue acquisitions.
On behalf of Keyera's directors and management team, I thank you for your continued support and look forward to continued success in 2015.
David G. Smith
President & Chief Executive Officer
Keyera Corp.
ABOUT KEYERA
Keyera Corp. (TSX:KEY) operates one of the largest natural gas midstream businesses in Canada. Its business consists of natural gas gathering and processing as well as the processing, transportation, storage and marketing of NGLs, the production of iso-octane and crude oil midstream activities.
Keyera's gas processing plants and associated facilities are strategically located in the west central, foothills and deep basin natural gas production areas of the Western Canada Sedimentary Basin. Its NGL and crude oil infrastructure, including pipelines, terminals and processing and storage facilities, as well as its iso-octane facility, are located in Edmonton and Fort Saskatchewan, Alberta, a major North American NGL hub. Keyera markets propane, butane, condensate and iso-octane to customers in Canada and the United States.
DISCLAIMER
Certain statements contained in this document 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 document and accompanying documents may also contain forward-looking statements attributed to third party sources. Management believes that its assumptions and analysis in this document 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; 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 document and in Keyera's Annual Information Form dated February 11, 2015, 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; 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 document. Further, some of the projects discussed in this document 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. Alberta's move toward a single regulator has affected approval processing times for projects that are subject to regulatory approval. The new regulatory requirements implemented with the transition to the AER, and possible future changes as integration of the regulatory bodies continues, create uncertainty for project timing, requirements and compliance. Regulatory applications are also subject to intervention by interested parties which could result in delays.
Readers are cautioned that they should not unduly rely on the forward-looking statements in this document and accompanying documents. Further, readers are cautioned that the forward-looking statements in this document speak only as of the date of this document.
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 document and accompanying documents are expressly qualified by this cautionary statement. For additional information on these and other factors, see Keyera's public filings on www.sedar.com. The information provided in this release is given as of the date hereof. Readers are cautioned that they should not unduly rely on forward-looking information.
SOURCE Keyera Corp.
Please visit our website at www.keyera.com or contact: Keyera Corp., John Cobb, Vice-President, Investor Relations, or Lavonne Zdunich, Director, Investor Relations, or Nick Kuzyk, Manager, Investor Relations, Email: [email protected]; Telephone: 403.205.7670 / Toll Free: 888.699.4853
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