CALGARY, Feb. 26, 2020 /CNW/ - Keyera Corp. (TSX:KEY) ("Keyera") announced its year end 2019 financial 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 Keyera's filings on SEDAR at www.sedar.com.
HIGHLIGHTS
- Keyera achieved record results in 2019, delivering net earnings1 of $444 million (2018 – $403 million) and adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA")2 of $944 million (2018 – $807 million). Distributable cash flow2 was $594 million or $2.77 per share (2018 – $638 million or $3.08 per share).
- In 2019, all three business segments achieved record results and finished the year strong. For the fourth quarter, the Gathering and Processing segment generated operating margin of $81 million, the Liquids Infrastructure segment earned $91 million and the Marketing segment reported $120 million in realized margin3,4.
- For the full year, the Gathering and Processing segment recorded operating margin of $294 million (2018 – $272 million) as phase one of the Wapiti gas plant and the North Wapiti Pipeline System became operational.
- The Liquids Infrastructure segment reported record operating margin of $376 million (2018 – $324 million) reflecting a full year contribution from the Base Line Terminal and continued demand for Keyera's fractionation, storage and condensate handling system assets.
- The Marketing segment's operating margin was $325 million (2018 – $366 million). Realized margin3,4 was $373 million (2018 – $296 million), exceeding Keyera's 2019 guidance of between $320 million and $350 million. These record results were largely due to higher contributions from iso-octane sales, liquids blending and an effective risk management strategy.
- In May, Keyera announced the KAPS liquids pipeline system, a project that will provide secure, long-term, take-or-pay revenues, strong project returns and a platform for significant future growth.
- Keyera has a significant capital program underway that remains on schedule and on budget. During the year, Keyera invested $986 million in growth capital and expects to invest between $700 million and $800 million in 2020, excluding acquisitions. The majority of the investment in 2020 relates to the Pipestone gas plant and the KAPS liquids pipeline system.
- With a strong balance sheet and payout ratio2 of 67% for the year, Keyera expects to fund its current growth capital program without issuing common equity, aside from the existing DRIP program.
1
| Net earnings for the year ended December 31, 2018 have been restated. See the section of the MD&A titled "Voluntary Change in Accounting Policy".
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2
| Keyera uses certain "Non-GAAP Measures" such as adjusted EBITDA, funds from operations, distributable cash flow, distributable cash flow per share and payout ratio. See section titled "Non-GAAP Financial Measures", "Dividends: Funds from Operations and Distributable Cash Flow" and "EBITDA" of the MD&A for further details.
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3
| Realized margin is a "Non-GAAP Measure" and excludes the effect of non-cash gains and losses from commodity-related risk management contracts.
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4
| With the adoption of IFRS 16, Leases on January 1, 2019, the Marketing segment financial results are not directly comparable between periods. Refer to the accompanying financial statements for further information on the adoption of IFRS 16, Leases.
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| Three months ended
December 31,
| Twelve months ended
December 31,
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Summary of Key Measures
(Thousands of Canadian dollars, except where noted)
|
2019
|
2018
| 2019
| 2018
|
Net earnings1
| 29,718
| 165,946
| 443,609
| 402,828
|
Per share1 ($/share) – basic
| 0.14
| 0.79
| 2.07
| 1.94
|
Cash flow from operating activities
| 213,676
| 245,632
| 887,935
| 604,329
|
|
|
|
|
|
Funds from operations2
| 200,871
| 219,669
| 754,254
| 696,298
|
Distributable cash flow2
| 158,261
| 200,397
| 593,584
| 638,124
|
Per share ($/share)2
| 0.73
| 0.96
| 2.77
| 3.08
|
Dividends declared
| 104,280
| 94,437
| 396,862
| 359,269
|
Per share ($/share)
| 0.48
| 0.45
| 1.85
| 1.73
|
Payout ratio %2
| 66%
| 47%
| 67%
| 56%
|
Adjusted EBITDA3
| 261,387
| 248,278
| 944,101
| 807,363
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Gathering and Processing:
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|
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Gross processing throughput (MMcf/d)
| 1,483
| 1,551
| 1,496
| 1,537
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Net processing throughput (MMcf/d)
| 1,186
| 1,215
| 1,191
| 1,193
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Liquids Infrastructure:
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|
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|
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Gross processing throughput4 (Mbbl/d)
| 157
| 182
| 170
| 176
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Net processing throughput4 (Mbbl/d)
| 70
| 83
| 79
| 80
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AEF iso-octane production volumes (Mbbl/d)
| 9
| 10
| 12
| 13
|
Marketing:
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|
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|
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Inventory value
| 93,682
| 235,556
| 93,682
| 235,556
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Sales volumes (Bbl/d)
| 177,300
| 165,700
| 150,100
| 152,300
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Acquisitions
| 50
| 5,609
| 599
| 333,204
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Growth capital expenditures
| 253,722
| 228,545
| 986,125
| 935,435
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Maintenance capital expenditures
| 29,732
| 14,419
| 105,077
| 51,882
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Total capital expenditures
| 283,504
| 248,573
| 1,091,801
| 1,320,521
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Weighted average number of shares outstanding –
basic and diluted
| 216,938
| 209,585
| 214,186
| 207,397
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| As at December 31,
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| 2019
| 2018
|
Long-term debt
|
|
| 2,548,468
| 2,117,261
|
Credit facility
|
|
| 90,000
| 80,000
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Working capital deficit (surplus)5
|
|
| 160,684
| (1,247)
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Net debt
|
|
| 2,799,152
| 2,196,014
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|
|
|
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Common shares outstanding – end of period
|
|
| 217,916
| 210,479
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Notes:
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1
| Net earnings for the year ended December 31, 2018 have been restated. See the section of the MD&A titled "Voluntary Change in Accounting Policy".
|
2
| Payout ratio is defined as dividends declared to shareholders divided by distributable cash flow. Payout ratio, funds from operations, and distributable cash flow are not standard measures under Generally Accepted Accounting Principles ("GAAP"). See the section titled, "Dividends: Funds from Operations and Distributable Cash Flow", for a reconciliation of funds from operations and distributable cash flow to the most closely related GAAP measure.
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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.
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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.
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5
| Working capital is defined as current assets less current liabilities.
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Message to Shareholders
Keyera delivered record financial performance in 2019, with Adjusted EBITDA of $944 million and net earnings of $444 million, or $2.07 per share. Distributable cash flow was $594 million, generating $2.77 on a per share basis. Each of our three business segments achieved record financial results on a realized margin basis, highlighting the benefits of our integrated business. With this continued success, we maintained our dividend track record and increased our dividend by 7% in August. Since becoming a corporation in 2011, Keyera has delivered a compound annual growth rate of approximately 9% in distributable cash flow per share, while steadily growing the dividends we return to our shareholders.
Keyera's services remain in high demand and through the year we achieved a number of operational milestones. We handled record volumes through our industry leading Fort Saskatchewan condensate system, which plays an integral role in connecting Alberta condensate to oil sands producers for use as diluent. We also continued executing our current growth capital program, investing approximately $986 million in growth capital during the year.
We remain focused on disciplined capital allocation and will continue to build on our impressive track record of capital investment in infrastructure that aligns with our financial priorities. In 2019, we delivered an impressive return on total in-service capital of approximately 14%.
In 2020, we plan on investing between $700 million and $800 million to advance our capital program currently underway. We expect to complete the second phase of the Wapiti gas plant by mid-2020 and the Wildhorse Terminal in the second half of the year, while continuing to progress the KAPS NGL and condensate pipeline system and the Pipestone gas plant. These projects represent significant steps in further enhancing our integrated network of infrastructure solutions.
Keyera's strong balance sheet and cash flow provide the capacity and flexibility to fund these organic growth opportunities. We are well positioned to fund the remaining portion of our current growth capital program without issuing common equity, apart from the dividend reinvestment program.
At Keyera, we remain committed to achieving the highest standard of operational excellence throughout the organization. During 2019, we continued to reinforce this commitment and achieved important performance milestones in safety and reliability.
Gathering and Processing Operations
The Gathering and Processing segment generated record operating margin of $294 million in 2019, an 8% increase over the prior year. Our natural gas processing volumes remained stable while operating margin increased due to contributions from liquids processing at the Wapiti gas plant and Pipestone liquids hub.
In 2019, we completed the first phase of the Wapiti gas plant, including the North Wapiti Pipeline System, and the expansion of the Simonette gas plant. This doubled our gas processing capacity in the liquids-rich Montney and Duvernay areas of northwestern Alberta to 600 million cubic feet per day and increased our condensate handling capacity to 52,000 barrels per day. Our new infrastructure supports producer activity in the area.
In west central Alberta, where drilling activity has been reduced due to low natural gas prices, we are reviewing various alternatives to optimize Keyera's operations and increase our competitiveness. Our goal is to improve utilization, reduce costs and increase profitability, while also improving customer netbacks.
Liquids Infrastructure Operations
The Liquids Infrastructure segment generated a record operating margin of $376 million in 2019, which represents a 16% increase over the prior year. This was primarily due to a full year contribution from the Base Line Terminal and continued demand for Keyera's fractionation, storage and condensate handling system assets. This demand continued in January 2020 with record volumes moving through our condensate system.
During the year, we continued to expand our underground cavern storage capacity at our Fort Saskatchewan facility and are on track to place a new cavern into service in each of the next three years. We also continued to advance construction of the Wildhorse Terminal, a crude oil storage and blending terminal in Cushing, Oklahoma expected to be operational in the second half of 2020.
Marketing Business
The Marketing segment reported an operating margin of $325 million in 2019 compared to $366 million in the prior year. Excluding the effect of unrealized gains and losses from risk management contracts, we achieved a record realized margin of $373 million compared to $296 million in 2018, exceeding our 2019 guidance of between $320 million and $350 million. Our record financial results were due to strong contributions from our iso-octane business, as our AEF facility operated at 90% of capacity for the year. Our financial results also benefited from contributions from liquids blending, condensate marketing, and an effective risk management strategy.
Business Development
In May 2019, we announced KAPS, an NGL and condensate pipeline system, which will provide a competitive liquids transportation alternative connecting gathering & processing assets in northwestern Alberta to our liquids infrastructure assets in Fort Saskatchewan. With the addition of KAPS, we are enhancing our portfolio of infrastructure assets, further integrating our upstream and downstream operations, and establishing a platform for future growth. The project remains on schedule to begin operating in 2022.
We expect to complete the second phase of the Wapiti gas plant in mid-2020, followed by the Pipestone gas plant in early 2021. When these projects are completed, Keyera will have a strong gathering and processing franchise in northwestern Alberta. These projects are underpinned by long-term agreements with producers, with volume profiles that will ramp up over the next few years and add to our fee-for-service, take-or-pay cash flows.
Outlook
The end of 2019 not only marks another outstanding year for Keyera, but also the end of a memorable decade. Our industry has faced numerous challenges in the last five years but has grown stronger and is now even more financially, operationally and socially responsible. Keyera's foundation is strong and we are well positioned to capitalize on the long-term growth opportunities within the Western Canada Sedimentary Basin as the world transitions to a lower carbon economy. Canada is a leader in responsible energy development and our hydrocarbon fuels are essential to meet increasing global demand for energy while minimizing the impact on the environment. At Keyera, we understand energy as part of a broader social picture and are committed to doing our part to minimize carbon emissions and improve the quality of life for millions of people around the world.
Leadership development and succession planning have always been priorities for Keyera and we are very proud of the depth of our leadership team. We recently announced the promotion of Dean Setoguchi to President and Chief Commercial Officer. I am excited to work closely with Dean and our leadership team to continue delivering steady disciplined growth to create long-term value for shareholders.
On behalf of Keyera's board of directors and management team, I would like to thank our employees, customers, shareholders and other stakeholders for their continued support. Our team is committed to delivering another year of strong financial performance, operational excellence and project execution.
David G. Smith
President & Chief Executive Officer
Keyera Corp.
YEAR END 2019 RESULTS CONFERENCE CALL AND WEBCAST
Keyera will be conducting a conference call and webcast for investors and analysts to discuss the 2019 financial results at 8:00 a.m. Mountain Standard Time (10:00 a.m. Eastern Standard Time) on Thursday, February 27, 2020. Callers may participate by dialing either 888-231-8191 or 647-427-7450. An audio recording of the call will be available for replay until end of day on March 13, 2020 by dialing 855-859-2056 or 416-849-0833 and entering pass code 2089181.
Internet users can listen to the call live on Keyera's website at www.keyera.com/news/events. Shortly after the call, an audio archive will be posted on the website for 90 days.
ABOUT KEYERA
Keyera Corp. (TSX:KEY) operates an integrated Canadian-based energy infrastructure business with extensive interconnected assets and depth of expertise in delivering energy solutions. Its predominantly fee-for-service based business consists of natural gas gathering and processing; natural gas liquids processing, 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.
FORWARD-LOOKING STATEMENTS
In order to provide readers with information regarding Keyera, including its assessment of future plans, and operations, certain statements contained herein (and in the documents incorporated by reference) contain forward-looking statements under applicable securities laws. These statements relate to future events or Keyera's future performance. Such statements are predictions only and actual events or results may differ materially. Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "plan", "intend", "believe", and similar words or expressions, including the negatives or variations thereof. All statements other than statements of historical fact contained in this news release are forward-looking statements, including, without limitation, statements regarding:
- industry, market and economic conditions and any anticipated effects on Keyera;
- Keyera's future financial position and operational performance and future financial contributions and margins from its business segments;
- future dividends and taxes;
- business strategy, anticipated growth and plans of management;
- budgets, including future capital, operating or other expenditures and projected costs;
- expected costs, in-service dates and schedules for capital projects (including projects under construction/development) and sources of funding for such projects;
- anticipated timing for future revenue streams;
- the operation and effectiveness of risk management programs; and
- expectations regarding Keyera's ability to maintain its competitive position, raise capital and add to its assets through acquisitions or internal growth opportunities.
The forward-looking statements reflect Keyera's beliefs and assumptions with respect to such things as the outlook for general economic trends, industry trends, commodity prices, capital markets, the integrity and reliability of Keyera's assets, and the governmental, regulatory and legal environment. Management believes that its assumptions and analysis contained herein (and in the documents incorporated by reference) are reasonable and that the expectations reflected in the forward-looking statements contained herein are also reasonable based on the information available on the date such statements are made and the process used to prepare the information. However, it 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:
- Keyera's ability to implement its strategic priorities and business plan and achieve the expected benefits;
- general industry, market and economic conditions;
- activities of customers, producers and other facility owners;
- operational hazards and performance;
- the effectiveness of Keyera's risk management programs;
- competition;
- changes in commodity composition and prices, inventory levels, supply/demand trends and other market conditions and factors;
- processing and marketing margins;
- climate change risks, including the effects of unusual weather and natural catastrophes;
- climate change effects and regulatory and market compliance and other costs associated with climate change;
- variables associated with capital projects, including costs and timing;
- fluctuations in interest, tax and foreign currency exchange rates;
- counterparty performance and credit risk;
- changes in operating and capital costs;
- cost and availability of financing;
- ability to expand, update and adapt infrastructure on a timely and effective basis;
- decommissioning, abandonment and reclamation costs;
- reliance on key personnel and third parties;
- relationships with external stakeholders, including Indigenous stakeholders;
- technology, security and cybersecurity risks;
- potential litigation and disputes;
- uninsured and underinsured losses;
- ability to service debt and pay dividends;
- changes in credit ratings;
- reputational risks;
- changes in environmental and other laws and regulations;
- actions by governmental authorities;
and other factors, many of which are beyond the control of Keyera. Further, because there is interconnectivity between many of the risks Keyera faces, it is possible that different constellations of risk could materialize which could result in unanticipated outcomes or consequences. For more information on Keyera's risk factors please refer to Keyera's Annual Information Form.
Proposed construction and completion schedules and budgets for capital projects described herein 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; Keyera's ability to secure adequate land rights and water supply; and macro socio-economic trends. As a result, expected timing, costs and benefits associated with these projects may differ materially from the descriptions contained herein. Further, some of the projects described are subject to securing sufficient producer/customer interest and may not proceed if sufficient commitments are not obtained. In addition to the factors referenced above, Keyera's expectations with respect to future returns associated with: (i) the growth capital projects that have been sanctioned and are in development as of the date hereof, and (ii) the KAPS project, are based on a number of assumptions, estimates and projections that have been developed based on past experience and anticipated trends, including but not limited to: capital cost estimates assuming no material unforeseen costs; timing for completion of growth capital projects; customer performance of contractual obligations; reliability of production profiles; commodity prices, margins and volumes; tax and interest rates; availability of capital at attractive prices; and no changes in regulatory or approval requirements, including no delay in securing any outstanding regulatory approvals.
Readers are cautioned that the foregoing list of important factors is not exhaustive and they should not unduly rely on the forward-looking statements included herein (and in the documents incorporated by reference). Further, readers are cautioned that the forward-looking statements contained herein are made as of the date of this news release. Unless required by law, Keyera does not intend and does not assume any obligation to update its forward-looking statements. All forward-looking statements contained in this news release 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 available on SEDAR at www.sedar.com.
ADDITIONAL INFORMATION
For further information about Keyera, please visit our website at www.keyera.com or contact:
Lavonne Zdunich, Director, Investor Relations,
Calvin Locke, Manager, Investor Relations, or
Beata Graham, Senior Analyst, Investor Relations
Email: ir@keyera.com; Telephone: 403.205.7670 / Toll Free: 888.699.4853
SOURCE Keyera Corp.
