Keyera Facilities Income Fund Announces 2010 Second Quarter Results
CALGARY, Aug. 4 /CNW/ - Keyera Facilities Income Fund announced their 2010 Second 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
- Strong business conditions continued to support activities in Keyera's
three business segments during the second quarter.
- Net earnings were $29.1 million ($0.43 per unit) in the second quarter
compared to $21.1 million ($0.33 per unit) in the same period in 2009.
Total contribution(1) of $56.0 million was also higher than the second
quarter last year.
- Distributable cash flow(2) was $30.6 million ($0.45 per unit) in the
second quarter compared to $53.0 million ($0.84 per unit) last year.
Approximately $20.0 million ($0.29 per unit) of the reduction in
second quarter distributable cash flow was as a result of three items:
the effect of scheduled plant turnarounds; a one time charge to
interest expense; and a write-down in the value of Keyera's NGL
inventory.
- Distributions to unitholders totalled $30.7 million ($0.45 per unit)
compared to $28.4 million ($0.45 per unit) in the second quarter last
year.
- Contribution from Gathering and Processing was $25.2 million, 21%
lower than the same period last year due to scheduled maintenance
turnarounds at the Strachan, Caribou and West Pembina gas plants.
- In the Liquids Business Unit, contribution from NGL Infrastructure was
$14.7 million, 2% lower than the second quarter of 2009. Marketing
contribution was $16.1 million, significantly higher than the same
period in 2009.
- Keyera recently acquired ownership interests in two additional gas
plants and increased its existing ownership in four facilities. Keyera
now has ownership interests in 17 gas plants and has increased its net
gas processing capacity by 126 million cubic feet per day.
- The 40 million cubic feet per day expansion of Keyera's Caribou gas
plant was completed in June, increasing plant capacity to 105 million
cubic feet per day.
- Keyera is proceeding with the development of a second new storage
cavern at Fort Saskatchewan. Based on initial plans, the cavern is
expected to add approximately 750,000 barrels of storage capacity. The
target for completing the project is 2013.
- Growth capital investment was $43.9 million in the second quarter and
$56.1 million year-to-date. Keyera continues to expect that full year
growth capital, excluding acquisitions, will be between $80 and $100
million.
- Keyera is strengthening its financial position with a $155 million
private placement debt financing scheduled to close on September 8,
2010. Proceeds will be used to repay debt and fund capital
expenditures.
(1) Total contribution refers to total operating revenues less total
operating expenses and general and administrative expenses associated
with the Marketing segment.
(2) See "Non-GAAP Financial Measures" on page 34. A reconciliation of
distributable cash flow to cash flow from operating activities is
included on page 25.
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Three months ended Six months ended
June 30, June 30,
Summary of Key Measures
(Thousands of Canadian dollars,
except where noted) 2010 2009 2010 2009
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Net earnings 29,137 21,057 65,878 75,417
Per unit ($/unit) - basic 0.43 0.33 0.98 1.20
Cash flow from operating activities (6,784) 63,640 75,092 231,853
Distributable cash flow(1) 30,572 53,045 90,175 170,183
Per unit ($/unit) 0.45 0.84 1.34 2.70
Distributions declared 30,650 28,438 60,688 56,768
Per unit ($/unit) 0.45 0.45 0.90 0.90
Payout ratio %(1) 100% 54% 67% 33%
Gathering and Processing:
Gross processing throughput (MMcf/d) 842 915 861 927
Net processing throughput (MMcf/d) 724 766 739 779
NGL Infrastructure:
Gross processing throughput (Mbbl/d) 94 98 93 99
Net processing throughput (Mbbl/d) 26 30 27 34
Marketing:
Inventory value 90,447 51,055 90,447 51,055
Sales volumes (bbl/d) 59,600 66,800 67,900 68,600
Capital expenditures 44,344 23,648 56,585 51,258
Proceeds from dispositions - 2,995 - 2,995
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Long-term debt 259,052 316,342
Working capital deficit(2) 94,343 45,290
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Net debt 353,395 361,632
Convertible debentures 51,419 78,646
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Net debt (including debentures) 404,814 440,278
Trust units outstanding - end of period 68,292 63,390
Weighted average number of units
outstanding - basic 67,217 63,031
Weighted average number of units
outstanding - diluted 70,829 67,579
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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
I am pleased to provide an update on Keyera's achievements in the quarter and the activities in each of our business areas. The second quarter was a very busy time for Keyera. We completed three major plant turnarounds, finalized a plant expansion, closed several plant acquisitions and arranged a private placement financing. These initiatives support our vision of providing steady value growth to unitholders. With strengthening business conditions, we are working on a number of business initiatives to continue to build value for our unitholders.
Net earnings in the second quarter were $29.1 million ($0.43 per unit) compared to $21.1 million ($0.33 per unit) in the same period in 2009. Total contribution of $56.0 million was also higher than the second quarter last year. Distributable cash flow was $30.6 million ($0.45 per unit) in the second quarter compared to $53.0 million ($0.84 per unit) last year. Approximately $20.0 million ($0.29 per unit) of the reduction in second quarter distributable cash flow was the result of three unusual items: scheduled maintenance turnarounds at three facilities; a one-time charge to interest expense; and a write-down in the value of Keyera's NGL inventory. Financial contracts put in place to protect the value of our inventory produced $6.3 million of non-cash unrealized gains in the quarter; however, the proceeds from these contracts will not be included in distributable cash flow until the contracts are settled, beginning in the fourth quarter of the year.
Gathering and Processing contribution in the second quarter was $25.2 million, 21% lower than the second quarter of 2009, due to scheduled maintenance turnarounds at three of our five largest facilities: the Caribou, Strachan and West Pembina gas plants. The turnarounds, conducted every four years, are part of our comprehensive maintenance program designed to minimize unplanned outages and keep our long-life facilities operating reliably. During the turnarounds, we were able to divert some production from Strachan and West Pembina to other Keyera facilities, benefiting our customers and Keyera. At Caribou, we also completed a plant expansion while the plant was offline, increasing licensed capacity by 40 million cubic feet per day to 105 million cubic feet per day.
In the Liquids Business Unit, contribution from our NGL Infrastructure segment was $14.7 million, 2% lower than the second quarter of 2009. Consistently strong demand for storage, terminalling and pipeline services contributed to another strong quarter. The Marketing segment contribution was $16.1 million, significantly higher than the second quarter of 2009. Second quarter Marketing results were driven by strong condensate margins early in the quarter and solid butane margins throughout. The propane business experienced the normal second quarter build in inventories to meet the significantly higher term sales contracted for the winter months.
We are very encouraged by the changes to the royalty regime recently announced by the Government of Alberta. The new regime puts Alberta back on a competitive level with other producing regions in North America, and provides the fiscal stability that will enable producers to make long-term investment decisions with confidence. These factors should encourage investment capital to flow back into the province. Initial indications are that this is occurring, as the July crown land sale was the largest since 2005 and the second largest in Alberta history. Other encouraging signs were increases in rig utilization, the number of meters drilled and the number of horizontal wells drilled around our facilities. These factors are significantly improving the outlook for our Gathering and Processing business.
Natural gas producers continue to increase their use of horizontal drilling and multi fracturing technologies to increase initial production deliverability and ultimate recoverable reserves per well. The success of these techniques and the resulting improvement in economics has prompted a number of companies to pursue new drilling initiatives around our facilities. In addition, many producers are targeting geological zones that have liquids rich natural gas, as the increased netback significantly improves their economics. In certain areas, producers are now allowed to commingle production from more than one geological zone, further enhancing tight gas economics. These technological enhancements and regulatory changes continue to support the economics of natural gas development around Keyera's facilities.
We continue to strengthen our footprint in geologically attractive areas west of the Fifth Meridian. Recently, we acquired ownership interests in two additional gas plants and increased our existing ownership in four facilities. These are strategic investments that complement our existing assets and support our business strategy. The two additional plants, Edson and Minnehik Buck Lake, are located in the heart of Keyera's operations in west central Alberta and are capable of extracting NGLs and handling sour gas. Keyera was also appointed operator of the Minnehik Buck Lake facility.
In the Liquids Business Unit, we continue to move forward with a number of initiatives that strengthen our infrastructure and support our oil sands strategy. An $11 million project to enhance our NGL transportation network in west central Alberta is expected to be operational before the end of the year. The new NGL pipeline and storage facilities will expand our NGL capture area and connect our Strachan gas plant to our Fort Saskatchewan facility.
For our diluent services agreement with Imperial Oil, we are undertaking detailed engineering for the pipeline connection between our Fort Saskatchewan facility and the diluent transportation pipeline inlet approximately 20 km north of Fort Saskatchewan. Subject to regulatory approvals, we anticipate starting pipeline construction in the third quarter of 2011, and are targeting commissioning for the second quarter of 2012.
Washing of the first new storage cavern at our Fort Saskatchewan facility is almost complete and we plan to have the cavern in service by the end of this year. As part of our growth strategy for the business, we have decided to proceed with the development of a second storage cavern this year and have targeted 2013 to have the cavern in operation. Once both caverns are completed, Keyera will have 12 underground caverns at Fort Saskatchewan with approximately 11 million barrels of capacity.
Our $155 million private debt financing of medium and long term senior unsecured notes strengthens our capital structure and enhances our ability to pursue strategic growth initiatives. The transaction is expected to close on September 8, 2010, and the proceeds will be used to repay $52.5 million of long-term debt maturing this month, reduce our short term bank debt and fund growth capital expenditures and acquisitions.
Looking forward, we are committed to pursuing business development opportunities that will complement existing core assets, enhance the services we are able to offer and align with our long-term strategy of adding steady value growth.
On behalf of the Fund's directors and management team, I thank you for your continued support and look forward to reporting on our continuing success in 2010 and beyond.
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: 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: (403) 205-7670, Toll Free: (888) 699-4853, Facsimile: (403) 205-8425
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