CALGARY, Feb. 11, 2015 /CNW/ - Keyera Corp. (TSX:KEY) announced their 2014 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
- Net earnings were a record $230 million ($2.80 per share) in 2014, 56% higher than the $147 million ($1.87 per share) reported in 2013. Results were primarily driven by higher plant throughput, higher margins and strong performance from the sale of iso-octane.
- Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") 1, 2 of $530 million in 2014 was also a record, 40% higher than the $379 million posted in 2013.
- Distributable cash flow1, 2 was $389 million ($4.73 per share) in 2014, 35% higher than the $288 million ($3.68 per share) recorded in 2013. Keyera's payout ratio was 53% in 2014 compared to 61% in the prior year.
- All three business segments contributed strongly to the record financial results. The Gathering and Processing Business Unit generated operating margin3 of $218 million in 2014 (2013 - $157 million); the NGL Infrastructure segment's operating margin3 was $189 million (2013 - $123 million); and operating margin3 in the Marketing segment was $237 million (2013 - $133 million).
- Keyera is increasing its dividend by 7%, from $0.215 per share per month to $0.23 per share per month, or $2.76 per share annually, beginning with its March dividend payable on April 15, 2015 to shareholders of record on March 23, 2015. The ex-dividend date is March 19, 2015. This will be Keyera's thirteenth increase since going public in 2003.
- Keyera announced today a two-for-one split of Keyera's outstanding common shares. The record date for the share split will be April 1, 2015.
- Keyera acquired a 71% ownership interest in the Ricinus gas plant and agreed to participate as an owner in two new gas plants, Alder Flats and Zeta Creek, currently being constructed by producers in west central Alberta. These plants will help satisfy customer demand for additional processing capacity in the area.
- Several projects, including the Wapiti pipeline system, the Alberta Crude Terminal and the Hull Rail and Truck Terminal, were completed in the third and fourth quarters and are now operational.
- Subsequent to the quarter, Keyera approved a project for approximately $90 million to construct four 60,000 barrel condensate tanks at its Edmonton Terminal to enhance its diluent logistics business.
- Work continues on a number of projects that began in 2014. Projects expected to be completed in the first quarter include a plant expansion and a condensate stabilizer at the Simonette gas plant as well as the de-ethanizer at Fort Saskatchewan.
- Total growth capital investment in 2014 was $956 million, of which $221 million was acquisitions. In 2015, growth capital investment, excluding acquisitions, is expected to be between $700 million and $800 million.4
- Keyera amended its bank credit facility in the fourth quarter by extending the term to December 2019 and increasing the limit from $750 million to $1 billion, with the potential to increase to $1.35 billion subject to certain conditions.
1 See "Non-GAAP Financial Measures" on page 50 of the MD&A. |
2 See page 41 and 42 of the MD&A for a reconciliation of distributable cash flow to cash flow from operating activities and Adjusted EBITDA to net earnings. |
3 See note 29 to the accompanying financial statements. |
4 See "Capital Expenditures and Acquisitions" on page 38 of the MD&A for further discussion of Keyera's capital investment program. |
Three months ended December 31, |
Twelve months ended December 31, |
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Summary of Key Measures |
2014 |
2013 |
2014 |
2013 |
|||||||||||||
Net earnings |
29,387 |
34,396 |
229,989 |
146,836 |
|||||||||||||
Per share ($/share) – basic |
0.35 |
0.44 |
2.80 |
1.87 |
|||||||||||||
Cash flow from operating activities |
179,759 |
172,597 |
460,594 |
385,094 |
|||||||||||||
Distributable cash flow1 |
102,356 |
74,975 |
388,961 |
288,063 |
|||||||||||||
Per share ($/share) |
1.22 |
0.95 |
4.73 |
3.68 |
|||||||||||||
Dividends declared |
54,353 |
47,297 |
207,228 |
177,132 |
|||||||||||||
Per share ($/share) |
0.65 |
0.60 |
2.52 |
2.26 |
|||||||||||||
Payout ratio %1 |
53% |
63% |
53% |
61% |
|||||||||||||
Adjusted EBITDA2 |
127,879 |
99,474 |
530,051 |
379,324 |
|||||||||||||
Gathering and Processing: |
|||||||||||||||||
Gross processing throughput (MMcf/d) |
1,562 |
1,283 |
1,420 |
1,272 |
|||||||||||||
Net processing throughput (MMcf/d) |
1,292 |
1,051 |
1,177 |
1,030 |
|||||||||||||
NGL Infrastructure: |
|||||||||||||||||
Gross processing throughput (Mbbl/d) |
114 |
112 |
116 |
112 |
|||||||||||||
Net processing throughput (Mbbl/d) |
34 |
34 |
32 |
34 |
|||||||||||||
Marketing: |
|||||||||||||||||
Inventory value |
124,292 |
175,658 |
124,292 |
175,658 |
|||||||||||||
Sales volumes (Bbl/d) |
112,100 |
117,200 |
94,800 |
99,800 |
|||||||||||||
Acquisitions |
92,849 |
4,790 |
221,388 |
31,878 |
|||||||||||||
Growth capital expenditures |
213,019 |
107,687 |
734,812 |
299,849 |
|||||||||||||
Maintenance capital expenditures |
3,516 |
8,587 |
51,983 |
39,663 |
|||||||||||||
Total capital expenditures |
309,384 |
121,064 |
1,008,183 |
371,390 |
|||||||||||||
As at December 31, |
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2014 |
2013 |
||||||||||||||||
Long-term debt |
1,152,133 |
1,077,140 |
|||||||||||||||
Credit facilities |
90,000 |
— |
|||||||||||||||
Working capital surplus3 |
(80,726) |
(306,817) |
|||||||||||||||
Net debt |
1,161,407 |
770,323 |
|||||||||||||||
Common shares outstanding – end of period |
84,339 |
79,187 |
|||||||||||||||
Weighted average number of shares outstanding – basic |
82,183 |
78,316 |
|||||||||||||||
Weighted average number of shares outstanding – diluted |
82,183 |
78,728 |
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 41 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. |
Message to Shareholders
Keyera had a successful year in 2014, delivering record financial results, completing a number of strategic growth initiatives and announcing several acquisitions to complement existing operations. More than ever, our customers benefited from the integrated services of Keyera's three business segments, delivering increasing amounts of natural gas to Keyera's processing plants and securing additional capacity in the facilities in our Liquids Business Unit. Our success in 2014 is a direct result of strategically located facilities, integrated business segments and a focus on customer service.
For the second consecutive year, all three of Keyera's business segments generated record results. Our key financial and operating metrics were impressive, reporting a year-over-year increase of 35% in distributable cash flow and a 40% increase in Adjusted EBITDA.
Gathering and Processing Business Unit
The Gathering and Processing Business Unit reported operating margin of $218 million, 39% higher than 2013, primarily due to increased plant throughput. Net throughput in the fourth quarter was 1.3 billion cubic feet per day, 23% higher than the same period in 2013. Demand for our services continues, as producers remain focused on liquids-rich gas drilling, from zones such as the Mannville, Glauconite, and Montney horizons.
With all the liquids-rich gas drilling that has occurred in west central Alberta, infrastructure in many areas is at or nearing capacity. In response to the resulting demand for additional gathering and processing capacity, Keyera successfully advanced a number of projects in 2014. In the Rimbey area, we completed modifications to the Carlos pipeline system and construction of the Wilson Creek pipeline system. The turbo expander project at the Rimbey gas plant is progressing well and we anticipate the unit will be operational by mid-2015. At Simonette, construction of the Wapiti pipeline system was completed in the third quarter. A plant expansion to add 100 million cubic feet per day of processing capacity and the construction of a 10,000 barrel per day condensate stabilizer are expected to start up in the first quarter of 2015.
In the fourth quarter, we began construction of the Twin Rivers pipeline system that will deliver gas to our Brazeau River and West Pembina gas plants. We also agreed to participate as an owner in two new gas plants currently being constructed by producers (Alder Flats and Zeta Creek). All of these projects are expected to be operational later in 2015, assuming construction schedules are met.
In addition to these plants, Keyera acquired the Cynthia gas plant and associated oil and gas reserves in the second quarter of 2014 and, at the end of the year, we acquired an ownership interest in the Ricinus gas plant. This plant is located about 22 kilometres to the south of our Strachan gas plant and we are currently working with producers to evaluate the construction of a pipeline between these plants which would provide producers with access to incremental processing capacity and add operational flexibility.
Liquids Business Unit - NGL Infrastructure Segment
Our Liquids Business Unit also delivered record operating results in 2014, reporting operating margin of $189 million, a 54% increase over 2013. Liquids-rich gas drilling and oil sands production, continued to be driving forces behind growth in the services our NGL infrastructure network provides.
During the year, Keyera enhanced its NGL infrastructure and improved market access for Western Canadian producers by commissioning two rail and truck terminals. The Alberta Crude Terminal ("ACT"), a joint venture with Kinder Morgan, was completed in late September and is able to load up to 40,000 barrels per day of crude oil, with the capacity committed to Irving Oil under a multi-year agreement. The Hull rail and truck terminal, located near Mont Belvieu, Texas, began operating in October and currently handles the receipt and delivery of NGL mix, butane and iso-butane. To allow for essential rail deliveries of propane from Western Canada, Keyera began construction of the Josephburg rail terminal, located east of the Keyera Fort Saskatchewan facility. Construction is well underway and the terminal is expected to be completed later in 2015.
The 30,000 barrel per day de-ethanizer currently under construction at Fort Saskatchewan is expected to be commissioned by the end of the first quarter. Keyera's share of the capacity is contracted under a long-term take-or-pay agreement. In January we completed the drilling of the well bore for our 15th underground storage cavern, and engineering work continues on the fractionation expansion.
We remain focused on expanding our diluent logistics business in the Edmonton/Fort Saskatchewan area and continue to have customers committing to these services. To further enhance this service offering, we are planning to construct four condensate tanks at our Edmonton Terminal for approximately $90 million. These tanks will ensure our Fort Saskatchewan condensate system operates as a reliable, efficient hub for our customers.
To support the demand for merchant storage for crude oil and other products in the Edmonton area, we are working with a third party to evaluate the feasibility of constructing storage tanks on unused land at our Alberta EnviroFuels site.
Liquids Business Unit - Marketing Segment
Our Marketing segment also reported record results in 2014 with operating margin of $237 million, $104 million, or 78%, higher than the prior year. The higher results were primarily due to growth in our iso-octane business resulting from a combination of improved volumes and sales margins. Volumes increased in 2014 as Keyera utilized its rail infrastructure to enhance delivery options and develop new Gulf Coast markets. Marketing's strong results were achieved despite the inclusion of a $59 million inventory write-down in the fourth quarter caused by the significant decline in NGL commodity prices. With our effective risk management strategy, we anticipate our hedges will offset most of the write-down.
Outlook
With the significant drop in the price of crude oil that began in the second half of 2014, along with the recent decline in the price of natural gas, most oil and gas producers have announced reductions to their 2015 capital expenditure programs. As a service provider to the energy sector, Keyera will continue to work with our customers during this challenging time and adjust our plans as appropriate. The full duration and effect of this slowdown will depend on a variety of factors that are difficult to predict. In the near term, we do not expect Keyera's throughput volumes to be materially affected, and our cash flows are largely driven by fee-for-service arrangements. Keyera's business will continue to benefit from the broad diversification of our facilities, services, customers, revenue streams and growth opportunities.
As we look ahead, we remain focused on our strategy of pursuing infrastructure projects and acquisitions that are backed by customer demand and deliver long-term growth and return for investors. We will continue to approach new business opportunities selectively and cautiously. We currently expect our 2015 growth capital expenditures will be between $700 million and $800 million, excluding acquisitions. Our strong balance sheet and access to capital allow us to fund these expenditures prudently, and also provide the flexibility to selectively pursue acquisitions. Beyond 2015, we are still excited about our infrastructure investment opportunities, but the timing of these future projects may be affected by the current slowdown in industry activity.
Given the strength in our business today and our growth prospects into the future, we are pleased to announce a 7% dividend increase, to $0.23 per share per month, beginning with our dividend payable on April 15, 2015. This latest increase continues Keyera's consistent track record for steady growth in our dividend per share and represents an 8% compound annual growth rate in dividends per share since our initial public offering in 2003. We are also pleased to announce a two-for-one split of our outstanding common shares, with the record date for the share split being April 1, 2015.
I would like to take this opportunity to recognize and express our appreciation to Jim Bertram, who has been our Chief Executive Officer since we started in 1998. Keyera's success today is a reflection of Jim's vision, values, leadership and work ethic over the past 16 years. During that time, it has been my pleasure to work alongside Jim, and I look forward to continuing our relationship as he moves into his new role as Executive Chair of Keyera's Board of Directors.
On behalf of Keyera's directors and management team, thank you for your continued 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 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; 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 MD&A 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 documents 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.
about Keyera, 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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