Keyera Corp. Announces Third Quarter 2015 Results

CALGARY, Nov. 3, 2015 /CNW/ - Keyera Corp. (TSX:KEY) announced its 2015 third quarter results today, the highlights of which are included in this news release. The entire news 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 another strong quarter, generating adjusted earnings before interest, taxes, depreciation and amortization^{1, 2} ("Adjusted EBITDA") of $188 million for the three months ended September 30, 2015, 24% higher than the $151 million reported in the third quarter of 2014. Year to date Adjusted EBITDA was $529 million, 32% higher than the same period in 2014.
• All three business segments performed well. The Gathering and Processing Business Unit delivered operating margin⁴ of $69 million (Q3 2014 - $54 million) due to new and expanded facilities, offset in part by extended third-party sales gas pipeline curtailments and a planned gas plant turnaround. The NGL Infrastructure segment reported operating margin⁴ of $56 million (Q3 2014 - $46 million) as demand for fractionation, storage, transportation, and condensate services remains strong. The Marketing segment's operating margin⁴ was $99 million (Q3 2014 - $80 million) largely due to strong margins from the sale of iso-octane.
• Distributable cash flow^{1, 2} increased to $127 million ($0.75 per share³) for the third quarter and exceeded the $124 million ($0.74 per share³) recorded in the same period in 2014 even after higher cash taxes. Keyera's payout ratio was 49% both for the quarter and year to date.
• Net earnings were $110 million or $0.64 per share³ for the quarter compared to $82 million or $0.49 per share in the same period last year, primarily due to strong financial results from all operating segments.
• Several capital projects were completed in the third quarter and are generating incremental cash flow, including the 400 million cubic feet per day turbo expander at the Rimbey gas plant, the Josephburg Rail Terminal and the 54 million cubic feet per day Zeta Creek gas plant.
• Progress was made on a number of other projects that will support the infrastructure needs of the industry and generate future incremental cash flow, including construction of the 35,000 barrel per day fractionation expansion and development of additional underground storage capacity at Keyera's Fort Saskatchewan ("KFS") complex.
• To further enhance Keyera's industry-leading condensate system, Keyera agreed to acquire a 50% interest in the southern most portion of the proposed Grand Rapids Pipeline. The pipeline will be constructed by Grand Rapids Pipeline Limited Partnership, an affiliate of TransCanada PipeLines Limited ("TransCanada") and Brion Energy Corporation, and provide Keyera with proprietary access to at least 225,000 net barrels per day of additional diluent transportation capacity between Edmonton and Fort Saskatchewan.
• Growth capital investment was $134 million in the third quarter of 2015 and $512 million year to date. In 2015, growth capital investment, excluding acquisitions, is expected to range between $700 million and $800 million⁵.
• In 2016, Keyera expects its growth capital investment, excluding acquisitions, will range between $600 million and $800 million. This planned investment will focus on NGL Infrastructure projects backed by customer demand, such as the fractionation expansion at KFS, the Norlite Pipeline, the Base Line Terminal above ground storage project and continued investment in Keyera's condensate network.

^1	See "Non-GAAP Financial Measures" on page 38 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	On April 1, 2015, Keyera's outstanding common shares were split on a two-for-one basis. All per share information is presented on a post-share split basis.
^4	See note 13 to the accompanying financial statements.
^5	See "Capital Expenditures and Acquisitions" on page 31 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)			2015		2014		2015		2014
Net earnings			109,538		82,439		181,705		200,602
	Per share ($/share) – basic^1		0.64		0.49		1.07		1.23
Cash flow from operating activities			117,714		54,667		521,711		280,835
Distributable cash flow^2			126,843		124,370		358,942		286,605
	Per share ($/share)^1		0.75		0.74		2.12		1.76
Dividends declared			62,178		54,226		176,426		152,875
	Per share ($/share)^1		0.37		0.32		1.04		0.94
	Payout ratio %^2		49%		44%		49%		53%
Adjusted EBITDA^3			187,961		151,382		529,391		402,172
Gathering and Processing:
Gross processing throughput (MMcf/d)			1,476		1,404		1,479		1,368
Net processing throughput (MMcf/d)			1,121		1,189		1,145		1,134
NGL Infrastructure:
Gross processing throughput (Mbbl/d)			123		109		123		116
Net processing throughput (Mbbl/d)			34		27		34		31
Marketing:
Inventory value			93,738		272,414		93,738		272,414
Sales volumes (Bbl/d)			103,100		84,700		107,800		88,900
Acquisitions			1,288		8,596		17,695		128,539
Growth capital expenditures			133,804		166,174		512,338		521,793
Maintenance capital expenditures			15,669		5,584		58,728		48,467
Total capital expenditures			150,761		180,354		588,761		698,799
							As at September 30,
							2015		2014
Long-term debt							1,138,602		1,134,382
Credit facilities							325,000		—
Working capital deficit (surplus)^4							75,689		(191,571)
Net debt							1,539,291		942,811
Common shares outstanding – end of period^1							170,677		168,270
Weighted average number of shares outstanding – basic^1							169,510		162,982
Weighted average number of shares outstanding – diluted^1							169,510		162,982

Notes:
^1	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.
^2	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 GAAP. See page 34 for a reconciliation of distributable cash flow to its most closely related GAAP measure.
^3	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.
^4	Working capital is defined as current assets less current liabilities.

Message to Shareholders

Keyera again had solid results in the third quarter in 2015, reflecting the strength of our strategy and the ongoing contributions from our robust growth capital program. Adjusted EBITDA was $188 million in the third quarter of 2015, 24% higher than the same period last year, and year-to-date Adjusted EBITDA was $529 million, representing a 32% increase over 2014. Our network of interconnected gas plants, pipelines and facilities, as well as our diverse service offering driven by natural gas, NGL and oil sands production, continue to generate impressive results and position us for future success. 

Gathering and Processing Business Unit

The Gathering and Processing Business Unit recorded strong results in the third quarter even with ongoing third-party sales gas pipeline restrictions at certain facilities, a planned gas plant turnaround and continued low commodity prices. Operating margin of $69 million for the business unit was approximately 28% higher than the third quarter of 2014. Our results reflect the incremental cash flow being generated from our growth capital projects, as we continue to work with customers to provide the infrastructure needed to support the development of the Western Canada Sedimentary Basin.

During the quarter, we generated incremental cash flow from the 110 million cubic feet per day Alder Flats gas plant that began operating in May and is processing gas near its licensed capacity, as well as our new 400 million cubic feet per day turbo expander at the Rimbey gas plant. The turbo expander became operational in July and allows us to extract ethane that is being sold to a large consumer in Alberta under a long-term sales agreement. In September, the 54 million cubic feet per day Zeta Creek gas plant was completed by Velvet Energy and is now adding incremental cash flow. Keyera owns 60% of the gas plant and is the operator.

The continued low commodity price environment has resulted in a slower pace of drilling and development in Western Canada compared to last year. However, producers are continuing to develop resource plays around several of Keyera's core facilities such as the Rimbey, Strachan, Brazeau River, Simonette and Minnehik Buck Lake gas plants. During the quarter, gross processing throughput increased approximately 3% from the previous quarter and approximately 5% as compared to the same period last year. These increases occurred even though third quarter volumes were affected by a planned maintenance turnaround at the Minnehik Buck Lake gas plant, an unexpected week-long outage at the Simonette gas plant and ongoing curtailments imposed by TransCanada PipeLines Limited ("TransCanada") on its sales gas pipelines. Due to overall system constraints, TransCanada continues to impose sales gas restrictions at Keyera's Strachan, Brazeau River and Minnehik Buck Lake gas plants. TransCanada has indicated that these restrictions may be reduced in the fourth quarter and Keyera is optimistic that throughput will increase at these facilities.

Liquids Business Unit - NGL Infrastructure Segment

The NGL Infrastructure segment also reported strong third quarter results with an operating margin of $56 million, representing an increase of 21% over the same period in 2014. The segment benefited from increased demand for diluent handling services, high utilization of fractionation facilities and storage assets, increased activity at select rail terminals and the new de-ethanizer facility that became operational in April at the KFS facility.

Growing demand for Keyera's NGL and oil sands services supports the success of this business unit and we continue to enhance and expand our asset base in the Edmonton/Fort Saskatchewan area. At our KFS complex, construction of the fractionation expansion is well underway with all major equipment and modules on site. This expansion will add 35,000 barrels per day of fractionation capacity. To meet growing demand for storage, we continue to expand our underground storage capacity at KFS. In late October we placed the 13^th cavern into service and are currently washing the 14^th and 15^th caverns. In July, the Josephburg Rail Terminal was completed, providing a much needed outlet for Western Canadian propane.

For our oil sands customers, we have an industry-leading condensate system in the Edmonton/Fort Saskatchewan area and we are investing to enhance and expand the system. The South Grand Rapids Diluent Pipeline, a 50/50 joint venture with an affiliate of TransCanada and Brion Energy Corporation, is expected to provide Keyera with proprietary access to at least 225,000 net barrels per day of additional diluent transportation capacity between Edmonton and Fort Saskatchewan. A portion of this capacity will be used to meet Keyera's commitments under existing agreements with customers for diluent transportation with the remaining capacity available for new diluent transportation business.

As previously announced, Keyera has leased an existing pipeline from Praxair. We are advancing work to convert the northern portion of the pipeline, between Redwater and Fort Saskatchewan, to condensate service. Assuming the work is completed and regulatory approvals are received, the pipeline will be used to add incremental diluent supply into our Fort Saskatchewan Condensate System from the North West Sturgeon Refinery under a long-term handling agreement. The southern portion of this pipeline, between Edmonton and Fort Saskatchewan, is expected to be available for future debottlenecking opportunities.

In 2016, we expect to invest a significant portion of our planned $600 million to $800 million growth capital program, excluding acquisitions, in NGL Infrastructure projects that are backed by customer demand, including the fractionation expansion at KFS, the Norlite Pipeline (a 30/70 joint venture with Enbridge Pipelines (Athabasca) Inc.), the Base Line Terminal above ground storage project (a 50/50 joint venture with Kinder Morgan) and ongoing investment in Keyera's condensate network. These projects are expected to add meaningful incremental cash flow in 2018 and beyond.

Liquids Business Unit – Marketing Segment

The Marketing segment posted another outstanding quarter with operating margin of $99 million, 24% higher than the same period in 2014. Iso-octane, manufactured by our Alberta EnviroFuels ("AEF") facility, was the main contributor to these results as its margins were robust in the quarter primarily due to the combination of low North American butane feedstock costs, a strong North American summer driving season and attractive foreign currency exchange rates.

Our Marketing segment continues to manage risk effectively and generate solid results from the services we provide even in this low commodity price environment. We recognize this is a challenging time for producers and our marketing group is working hard to leverage Keyera's integrated system with access to storage, pipelines, and truck and rail terminals in order to obtain the best prices for our customers' NGL products.

Outlook

While the third quarter of 2015 represented record results for Keyera, we recognize that these are challenging times for the oil and gas industry and our customers. To date, there has not been a material effect on our operations, and we believe that our flexible asset portfolio, our diverse service offerings and our financial discipline position Keyera to weather this difficult period. We are confident in the competitiveness of the areas of the Western Canada Sedimentary Basin in which we operate and we are continuing with our growth capital investment program, supported by long-term contracts. As we recognize Keyera's long-term success depends on our customers and their success competing in the global market, we will continue to work with producers to add value by providing essential infrastructure solutions.

On behalf of Keyera's board of directors and management team, thank you for your support.

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 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 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, 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