Keyera Corp. Announces First Quarter 2016 Results

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 flow^1,2 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 EBITDA^1,2 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	See "Non-GAAP Financial Measures" on pages 33-34 of the MD&A.
^2	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.
^3	See note 12 to the accompanying financial statements.
^4	See "Capital Expenditures and Acquisitions" on page 28 of the MD&A for further discussion of Keyera's capital investment program.

			Three months ended March 31,
Summary of Key Measures
(Thousands of Canadian dollars, except where noted)				2016	2015
Net earnings				70,131	56,580
	Per share ($/share) – basic			0.41	0.33
Cash flow from operating activities				177,691	277,563
Distributable cash flow^1				116,449	139,794
	Per share ($/share)			0.68	0.83
Dividends declared				64,662	55,769
	Per share ($/share)			0.38	0.33
	Payout ratio %^1			56%	40%
Adjusted EBITDA^2				145,062	184,507
Gathering and Processing:
Gross processing throughput (MMcf/d)				1,558	1,528
Net processing throughput (MMcf/d)				1,193	1,230
Liquids Infrastructure^4:
Gross fractionation throughput (Mbbl/d)				145	128
Net fractionation throughput (Mbbl/d)				52	36
AEF iso-octane production volumes (Mbbl/d)				11	13
Marketing:
Inventory value				54,340	81,929
Sales volumes (bbl/d)				134,800	119,300
Acquisitions				32,160	2,815
Growth capital expenditures				110,846	209,929
Maintenance capital expenditures				6,147	4,304
Total capital expenditures				149,153	217,048
				As at March 31,
				2016	2015
Long-term debt				1,118,646	1,205,274
Credit facilities				368,877	30,000
Working capital deficit (surplus)^3				117,593	124,375
Net debt				1,605,116	1,359,649
Common shares outstanding – end of period				172,794	169,152
Weighted average number of shares outstanding – basic				172,258	168,915
Weighted average number of shares outstanding – diluted				172,258	168,915

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 29 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.

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 16^th and 17^th 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.

For further information about Keyera, please visit our website at www.keyera.com or contact: Lavonne Zdunich, Director, Investor Relations, or Nick Kuzyk, Manager, Investor Relations, Email: [email protected], Telephone: [phone] / Toll Free: 888.699.4853