Keyera Facilities Income Fund Announces 2010 First Quarter Results

CALGARY, May 11 /CNW/ - Keyera Facilities Income Fund announced their 2010 First Quarter results today, the highlights of which are included in this press 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's distributable cash flow(1) was $59.6 million ($0.90 per unit)
       in the first quarter. Distributions to unitholders totalled $30.0
       million ($0.45 per unit), resulting in a payout ratio of 50%.

    -  Net earnings were $36.7 million ($0.55 per unit) in the first quarter
       compared to $54.4 million ($0.86 per unit) in the same period in 2009.
       Cash flow from operating activities was $81.9 million, or $1.23 per
       unit.

    -  All business segments delivered strong first quarter results:

         -  Contribution from Gathering and Processing was $31.4 million,
            7% higher than the same period last year.

         -  In the Liquids Business Unit, contribution from NGL
            Infrastructure was $15.7 million, 15% higher than the first
            quarter of 2009. Marketing contribution was $20.7 million, which
            while strong, was significantly lower than the record first
            quarter of 2009.

    -  Today, Keyera received unitholder approval for its plans to convert to
       a corporation. Keyera expects to implement the conversion effective
       January 1, 2011 which will allow it to maximize the tax benefits of
       its current trust structure through 2010.

    -  Work continued through the quarter on the 40 MMcf/d expansion at
       Keyera's Caribou gas plant in northeast British Columbia. The
       expansion is expected to be ready for commissioning by mid year 2010.

    -  In the first quarter, Keyera entered into an agreement to provide
       Imperial Oil with solvent handling services for their Kearl oil sands
       project. These services will be provided at the Alberta Diluent
       Terminal and are in addition to the previously announced diluent
       handling services that Keyera will be providing.

    -  Keyera is proceeding with plans to strengthen its NGL delivery
       infrastructure in west central Alberta. This initiative will expand
       Keyera's NGL capture area in the region and enhance the NGL supply
       connections into its Fort Saskatchewan fractionation facility.

    -  Capital investment was $12.2 million in the first quarter. Keyera is
       pursuing a number of growth opportunities, and in 2010 continues to
       expect to invest between $80 million and $100 million(2) on growth
       initiatives.

    -  Keyera continued to strengthen its balance sheet in the first quarter
       to enable it to finance incremental capital projects and acquisitions.
       Net Debt to EBITDA(3) was 1.4 times at March 31, 2010.

    (1) See "Non-GAAP Financial Measures" on page 28 and a reconciliation of
        distributable cash flow to cash flow from operating activities is
        included on page 20.
    (2) See "Capital Expenditures and Acquisitions" on page 18 for further
        discussion of Keyera's capital investment program.
    (3) See Note 14 "Capital Management" for a further discussion of Keyera's
        capital structure.


    -------------------------------------------------------------------------
                                                          Three months ended
                                                                March 31,
    Summary of Key Measures
    (Thousands of Canadian dollars, except where noted)       2010      2009
    -------------------------------------------------------------------------
    Net earnings                                            36,741    54,360
      Per unit ($/unit) - basic                               0.55      0.86
    Cash flow from operating activities                     81,876   168,213

    Distributable cash flow(1)                              59,603   117,138
      Per unit ($/unit)                                       0.90      1.86
    Distributions declared                                  30,038    28,330
      Per unit ($/unit)                                       0.45      0.45
      Payout ratio %(1)                                        50%       24%
    Gathering and Processing:
    Gross processing throughput (MMcf/d)                       882       940
    Net processing throughput (MMcf/d)                         755       793
    NGL Infrastructure:
    Gross processing throughput (Mbbl/d)                        93       100
    Net processing throughput (Mbbl/d)                          29        37
    Marketing:
    Inventory value                                         62,741    44,119
    Sales volumes (bbl/d)                                   76,300    70,500

    Capital expenditures                                    12,241    27,610
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Long-term debt                                         256,731   223,650
    Working capital deficit(2)                              69,420   135,972
                                                          -------------------
    Net debt                                               326,151   359,622
    Convertible debentures                                  65,480    78,982
                                                          -------------------
    Net debt (including debentures)                        391,631   438,604

    Trust units outstanding - end of period                 67,121    62,999
    Weighted average number of units outstanding
     - basic                                                66,532    62,934
    Weighted average number of units outstanding
     - diluted                                              70,524    67,514
    -------------------------------------------------------------------------
    Notes:
    (1) Payout ratio is defined as distributions declared to unitholders
        divided by distributable cash flow. Payout ratio and distributable
        cash flow are not standard measures under Canadian Generally Accepted
        Accounting Principles and, therefore, may not be comparable to the
        calculations of similar measures for other companies.
    (2) Working capital is defined as current assets less current
        liabilities.
    

Message to Unitholders

Keyera delivered strong financial results again this quarter, driven by solid performance from all three business lines.

In the first quarter, distributable cash flow was $59.6 million, or $0.90 per unit. Although these were strong results, first quarter 2010 distributable cash flow was lower than the $117.1 million, or $1.86 per unit, posted in the first quarter of 2009, when almost $60 million of proceeds from the settlement of financial contracts were recorded. Distributions to unitholders in the first quarter were $30.0 million, or $0.45 per unit. This resulted in a first quarter payout ratio of 50%. Net earnings in the first quarter were $36.7 million, compared to $54.4 million in the same period of 2009.

First quarter Gathering and Processing contribution was $31.4 million, 7% higher than the first quarter of 2009. Gross throughput at Keyera plants increased from the fourth quarter of 2009, due to higher levels of drilling activity around Keyera's plants.

The Liquids Business Unit also had a strong first quarter. Contribution from our NGL Infrastructure segment was $15.7 million, up 15% from the same period last year. Continued strong demand for storage, terminalling and pipeline services was the contributing factor. The Marketing segment also posted solid results, delivering contribution of $20.7 million in the first quarter. First quarter results were largely driven by strong propane margins early in the quarter, steady butane margins and higher volumes resulting from an increase in condensate demand. Despite these solid results, first quarter Marketing contribution was lower than the record first quarter of 2009.

Natural gas producers continued to employ horizontal wells and multi fracturing technologies to capture higher production levels. In addition, economics favoured drilling liquids-rich gas reserves, as the higher value NGL products, which are priced off of crude oil, increased producer netbacks. Producers also selected drilling locations close to existing gathering and processing infrastructure to ensure quick tie-in of their production. Recent changes to commingling regulations now allow producers to produce from more than one zone into the same well bore, providing increased production without incurring the cost of drilling multiple wells. These changes favoured Keyera facilities in west central Alberta and were among the reasons why throughput increased at several of our facilities compared to the fourth quarter.

In the areas around the Rimbey, Gilby and Strachan gas plants, producer activity continued to be strong and throughput increased slightly compared to the fourth quarter of 2009. In northeast British Columbia, several producers were active over the winter around the Caribou gas plant. Work is proceeding on the 40 million cubic feet per day expansion at Caribou to bring capacity to 105 million cubic feet per day. We plan to tie-in the new units while the plant is off-line for its maintenance turnaround in June and expect to begin commissioning immediately afterwards.

In the Liquids Business Unit, a number of initiatives are underway to strengthen our facilities infrastructure. We are proceeding with the project, announced in February, to enhance our NGL transportation network in west central Alberta. By investing approximately $11 million in new pipeline and storage facilities, we will augment our existing pipelines to provide another long-term, reliable connection to NGL supply for our Fort Saskatchewan facility and expand our NGL capture area in the region.

In the first quarter, we initiated the engineering design work for the pipeline connection between the Enbridge Southern Lights diluent pipeline and our Edmonton terminal. Access to condensate delivered on the Southern Lights system, a long-term diluent supply source, will enhance the diluent receipt options available in the Edmonton area for our customers. Our ability to receive diluent from multiple sources, together with our storage, terminal and delivery options, strengthens our position as the diluent service provider of choice and positions us for continued growth as oil sands activities increase.

In the first quarter, Keyera entered into an agreement with Imperial Oil to provide solvent handling services at our ADT facility in Edmonton. Keyera will invest $9 million to construct additional facilities at ADT, enabling us to provide segregated rail offloading, storage and truck loading services for Imperial's Kearl oil sands project. This initiative is incremental to the Kearl oil sands agreement announced in the fourth quarter, and demonstrates Keyera's ability to provide new, complementary logistics services to oil sands producers.

I am pleased to report that Keyera today received the approval of its unitholders to convert to a corporation. The conversion will be effective January 1, 2011 in order to maximize the tax benefit available to income trusts in 2010. While conversion to a corporation represents a significant change to Keyera's legal structure, we do not intend to change our approach to the business. Our vision of delivering steady value growth built around sustainable, competitive energy facilities will continue to guide our business strategy. To achieve that, we will continue to manage the business with the same focus and discipline that resulted in our success as an income trust. Based on our current assessment of Keyera's business environment and strategy, we expect to maintain our dividend at the same level as our current annual distribution ($1.80 per unit) when we convert to a corporation.

Keyera continues to have the characteristics that have made us a successful high-yield equity investment. We continue to add to our stable, long-life, fee-for-service cash flows and are well positioned to grow our business in the future. We have a low payout ratio and a conservative balance sheet to provide flexibility to grow through capital projects and acquisitions, and tax pools that will mitigate our tax obligation when we become a corporation. I am confident that Keyera has the attributes to continue to deliver long-term steady value growth to investors.

On behalf of the Fund's directors and management team, I thank you for your continued support and look forward to continued success in 2010.

    
    Jim V. Bertram
    President and CEO
    Keyera Facilities Income Fund
    

DISCLAIMER

Certain statements contained in this document contain forward-looking statements. These statements relate to future events or the Fund'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 may also contain forward-looking statements attributed to third party sources. Management believes that its assumptions and analysis 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; 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 unitholders, and in particular any differential effects relating to unitholder's country of residence; and other factors, many of which are beyond the control of Keyera, which are discussed in Keyera's Annual Information Form dated February 18, 2010 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 approvals and expected in service dates; regulatory approvals; and macro socio-economic trends. As a result, expected timing, costs and benefits associated with these projects may differ materially from the descriptions in this document.

Keyera's plans to convert to a corporation effective January 1, 2011 and its anticipated dividend policy, as a corporation, are based on the continuation of favourable growth parameters for current and future projects (including Keyera's ability to finance such projects on favourable terms) and continued sustainable results of all Keyera's business segments. Keyera's disclosure with respect to its conversion plans also assumes there will be no change in the rules governing conversion or any other relevant material changes in the interim. These assumptions may be affected by any or all of the factors listed above, as well as the factors listed under the heading "Corporate Conversion".

Readers are cautioned that they should not unduly rely on the forward looking statements in this document. Further, readers are cautioned that the forward looking statements speak only as of the date of this document and Keyera does not undertake any obligation to publicly update or to revise any of the forward looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable laws.

All forward looking statements contained in this document 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.

%SEDAR: 00019203E

For further information: about Keyera Facilities Income Fund, please visit our website at www.keyera.com or contact: John Cobb, Director, Investor Relations or Bradley White, Investor Relations Advisor, E-mail: [email protected], Telephone: [phone], Toll Free: [phone], Facsimile: [phone]