CALGARY, Nov. 10 /CNW/ - Keyera Facilities Income Fund announced their
2008 third 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.2008 THIRD QUARTER HIGHLIGHTS
- Keyera delivered strong operational results in the third quarter.
Third quarter net earnings were $36.4 million ($0.58 per unit), more
than double the $15.3 million ($0.25 per unit) reported in the third
quarter of 2007.
- Keyera's risk management program was successful in protecting its NGL
inventory from the impact of falling product prices. A non-cash
unrealized gain of $38.6 million ($0.61 per unit) is included in
earnings but is excluded from the calculation of distributable cash
flow until the gain is realized. As a result, third quarter
distributable cash flow(1) was $2.6 million ($0.04 per unit). Third
quarter distributions to unitholders totaled $26.8 million, or $0.44
per unit. On a year-to-date basis, distributable cash flow of
$99.1 million exceeded distributions to unitholders by $21.8 million.
- All business segments contributed to the strong third quarter
operational results. Contribution from the Gathering and Processing
segment of $30.9 million was a new record, up 36% from the third
quarter of 2007. Third quarter NGL Infrastructure contribution was
$10.9 million, slightly higher than the same period last year.
Contribution from the Marketing business was $13.1 million,
significantly higher than $3.4 million in the third quarter of 2007.
- Keyera announced it is acquiring an additional 40% ownership interest
in the Keyera Brazeau River gas plant, bringing its ownership in the
plant to 91.6%, and 100% of the Nevis gas plant, a 150 million cubic
foot per day sour gas processing plant in central Alberta. The
purchase price is approximately $129 million and, upon closing on
December 1, 2008, the transaction is expected to be immediately
accretive to distributable cash flow per unit.
- Keyera has also agreed to acquire an additional 10.5% ownership
interest in the Keyera Rimbey gas plant for $22 million, bringing its
interest in that facility to 96.9%. The transaction is expected to
close on November 17, 2008.
- Growth capital spending was $41.5 million in the third quarter and
$132.2 million year-to-date. Keyera expects its full year 2008 growth
capital spending, including acquisitions, will be between
$300 million and $320 million. In 2009, growth capital spending is
expected to be between $80 million and $100 million.
(1) See "Non-GAAP Financial Measures" on page 6 and a reconciliation of
distributable cash flow to cash flow from operating activities on
page 23.Message to Unitholders
The current market environment has created a great deal of uncertainty in
global financial markets and is presenting challenges to all publicly traded
entities. Despite this, I am pleased to report that Keyera has continued to
deliver strong quarterly results and is well positioned to take advantage of
market circumstances.
Third quarter net earnings of $36.4 million ($0.58 per unit) were more
than double the $15.3 million ($0.25 per unit) recorded in the same period
last year, as all three business lines delivered solid operational results.
Our risk management program fully offset a write-down in the value of our NGL
inventory at quarter end. Lower commodity prices at September 30 resulted in a
$28.5 million write-down in our NGL inventory, as we record our inventory
value at the lower of cost or net realizable value each quarter. The financial
instruments put in place to hedge these inventories produced $38.6 million of
non-cash unrealized gains. Although these gains are included in earnings, they
are not included in Keyera's distributable cash flow until they are realized,
over the next two quarters. As a result, distributable cash flow in the third
quarter was $2.6 million. On a year-to-date basis, Keyera's distributable cash
flow of $99.1 million was sufficient to pay distributions to unitholders of
$77.4 million and partially fund growth capital projects.
Consistent throughput levels at our gas processing plants resulted in
record contribution from the Gathering and Processing segment of
$30.9 million, up 36% from the third quarter of 2007. Our NGL Infrastructure
segment had another solid quarter, contributing $10.9 million, 2% higher than
the same period last year. Our Marketing business posted solid results in the
third quarter, even with typically weaker seasonal demand and a number of
commodity market challenges experienced this quarter. Marketing contribution
of $13.1 million was significantly higher than the $3.4 million in the third
quarter of 2007.
We invested $41.5 million in growth capital projects in the third
quarter, bringing our year-to-date growth capital investment to
$132.2 million. At the Caribou gas plant, work on the plant expansion is
underway. Mechanical construction and the installation of new process skids
will begin in the first quarter of 2009 and plant commissioning is expected to
begin in the second quarter of 2009. At the Rimbey gas plant, construction of
the foundations for the ethane extraction project is underway. At Fort
Saskatchewan, drilling of the well bore for the new storage cavern was
completed in the third quarter and washing of the cavern has begun. We also
commissioned the fourth pipeline between our Fort Saskatchewan and Edmonton
facilities and are already benefiting from the additional flexibility that the
pipeline provides.
In October, we agreed to acquire an additional 40% interest in our
Brazeau River gas plant, to bring our ownership in the 218 million cubic foot
per day facility to 91.6%, and 100% of the Nevis gas plant, a 150 million
cubic foot per day sour gas plant located in central Alberta, along with over
700 kilometres of gathering pipelines feeding the two plants. The total cost
of this acquisition was approximately $129 million. Keyera has also agreed to
acquire an additional 10.5% ownership interest in our Rimbey gas plant for
$22 million, to bring our ownership in that facility to 96.9%. The Rimbey gas
plant is a 422 million cubic foot per day sour gas plant, with full
fractionation capability and an NGL pipeline connection to the Edmonton/Fort
Saskatchewan area. These transactions, expected to close in the fourth
quarter, will be immediately accretive and fit very well with our strategy in
the Gathering and Processing and NGL Infrastructure segments of our business.
At the Alberta Diluent Terminal, work on pipeline connections and pumping
facilities is underway. Limited product deliveries are expected to begin after
year-end. We expect to have pipelines constructed between ADT and our Fort
Saskatchewan pipeline system by the end of the second quarter 2009, which will
enable ADT's rail facilities to operate at full capacity. We are currently in
discussion with a number of parties who are interested in securing capacity at
the Terminal.
This year, we expect that our capital spending, including acquisitions,
will be between $300 million and $320 million. A significant portion of our
growth projects and acquisitions, representing about $265 million of growth
capital expenditures in 2008 and 2009, are not yet contributing to Keyera's
results. As they become operational over the next several quarters, we
anticipate that they will add approximately $43 million to $48 million to
Keyera's annualized cash flow. We expect to invest between $80 million and
$100 million on our growth capital program in 2009.
Looking to the future, despite the uncertainty in the financial markets,
we believe that we are well positioned to execute our growth strategy in all
three business lines. We base that belief on the location of our assets within
the Western Canada Sedimentary Basin, the strategic nature of the goods and
services we provide to the oil sands sector and our experience gained in
previous business cycles.
We believe that even in times of capital constraint, producers will
continue to drill their best prospects and we are cautiously optimistic that
new technology and the new Alberta deep-gas royalty credit program will
stimulate natural gas drilling adjacent to Keyera's foothills and west central
facilities. In addition, our business model provides some insulation from
short-term changes in activity levels. Revenues from our gathering and
processing and NGL infrastructure businesses are fee-for-service based,
without any link in the fee structure to commodity prices, and we recover the
majority of our gas processing operating expenses.
Assuming that the conversion rules associated with the federal
government's legislation regarding the taxation of income trusts are adopted,
Keyera is likely to consider a conversion to a corporate form in 2011 or 2012.
We believe that we are well positioned to maintain our current level of
distributions to unitholders through that period, given our business outlook
and the expected incremental cash flows from our growth capital and
acquisition program over the next three to five years.
Our targeted strategy has provided a focus to our business decisions that
has resulted in an enviable track record of delivering steady value growth to
unitholders. I believe that we will be able to deliver similar results in the
future.On behalf of Keyera and its employees, I thank you for your continued
support and look forward to continued success in 2009 and beyond.
Jim V. Bertram
President and CEO
Keyera Facilities Income FundContribution From Operating Segments
Keyera operates one of the largest natural gas midstream businesses in
Canada with three major operating segments: Gathering and Processing, NGL
Infrastructure and Marketing. The Gathering and Processing segment includes
natural gas gathering systems and processing plants strategically located in
the natural gas production areas on the western side of the Western Canadian
Sedimentary Basin. The NGL Infrastructure segment includes NGL and crude oil
pipelines, terminals, processing and storage facilities in Edmonton and Fort
Saskatchewan, Alberta, one of North America's major NGL hubs. The Marketing
segment includes activities such as the marketing of propane, butane and
condensate to customers in Canada and the United States, and crude oil
midstream activities.
Keyera's Gathering and Processing and NGL Infrastructure segments provide
a large portion of the total contribution. Keyera benefits from the
geographical diversity of its natural gas processing plants, NGL
infrastructure facilities and associated assets. The revenues generated from
these facilities are fee-for-service based, with minimal direct exposure to
commodity prices. The remainder of Keyera's contribution is derived from its
Marketing segment. Due to Keyera's integrated approach to its business, its
infrastructure provides a significant competitive advantage in NGL marketing.
Keyera also benefits from diversified sources of NGL supply and a diversified
customer base across North America.
The following table shows the contribution from each of Keyera's
operating segments and includes inter-segment transactions that are eliminated
in the Fund's consolidated financial statements. Since contribution is not a
standard measure under Canadian generally accepted accounting principles
("GAAP"), it may not be comparable to similar measures reported by other
entities. Contribution refers to operating revenues less operating expenses
and does not include the elimination of inter-segment transactions as required
by GAAP. Management believes contribution provides an accurate portrayal of
operating profitability by segment. Keyera's Gathering and Processing and NGL
Infrastructure segments charge Keyera's Marketing segment for the use of
facilities at market rates. Those charges are reflected in contribution, but
are eliminated in GAAP segment measures. The most comparable GAAP measures are
reported in note 17, Segmented Information, to the accompanying unaudited
consolidated financial statements.-------------------------------------------------------------------------
Contribution by Three months ended Nine months ended
Operating Segment September 30, September 30,
(in thousands of dollars) 2008 2007 2008 2007
-------------------------------------------------------------------------
Gathering & Processing(1)
Revenue before
inter-segment
eliminations(4) 59,674 51,440 169,492 139,222
Operating
expenses before
inter-segment
eliminations(4) (28,812) (28,771) (80,789) (79,710)
-------------------------------------------------------------------------
Gathering & Processing
contribution 30,862 22,669 88,703 59,512
-------------------------------------------------------------------------
NGL Infrastructure(1)
Revenue before inter-
segment eliminations(4) 19,491 16,495 57,590 51,834
Operating expenses (7,109) (5,453) (21,871) (17,214)
Unrealized gain/(loss) (1,468) (308) (658) (403)
------------------------------------------------
Operating expenses before
inter-segment
eliminations(4) (8,577) (5,761) (22,529) (17,617)
-------------------------------------------------------------------------
NGL Infrastructure
contribution 10,914 10,734 35,061 34,217
-------------------------------------------------------------------------
Marketing(2)
Revenue 456,526 282,683 1,404,442 887,001
Unrealized gain/(loss) 38,565 (5,726) 43,557 (10,376)
------------------------------------------------
Revenue before
inter-segment
eliminations(4) 495,091 276,957 1,447,999 876,625
Operating expenses
before inter-segment
eliminations(4) (481,100) (272,865) (1,386,566) (844,410)
General & administration (924) (674) (2,687) (2,218)
-------------------------------------------------------------------------
Marketing contribution 13,067 3,418 58,746 29,997
-------------------------------------------------------------------------
Total contribution 54,843 36,821 182,510 123,726
-------------------------------------------------------------------------
Other expenses(3) (26,084) (18,243) (73,612) (61,643)
-------------------------------------------------------------------------
Earnings before tax and
non-controlling
interest 28,759 18,578 108,898 62,083
-------------------------------------------------------------------------
Notes:
(1) Gathering and Processing and NGL Infrastructure contribution includes
revenues for processing, transportation and storage services provided
to Keyera's Marketing business.
(2) The Marketing contribution is net of expenses for processing,
transportation and storage services provided by Keyera's facilities
and general and administrative costs directly attributable to the
Marketing segment.
(3) Other expenses include corporate general and administrative,
interest, depreciation and amortization, accretion and impairment
expense. Corporate general and administrative costs exclude the
direct Marketing general and administrative costs.
(4) Revenue and operating expenses before inter-segment eliminations as
shown above are both non-GAAP measures and do not consider the
elimination of inter-segment sales and expenses. Inter-segment
transactions are eliminated upon consolidation of Keyera's financial
results to arrive at external revenue and external operating
expenses, both GAAP measures, as reported in note 17, Segmented
Information.About Keyera Facilities Income Fund
Keyera 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 natural gas
liquids (NGLs) and crude oil midstream activities. Keyera's gas processing
plants and associated facilities are strategically located in the west central
and foothills natural gas production areas of the Western Canadian Sedimentary
Basin. Its NGL and crude oil infrastructure includes pipelines, terminals and
processing and storage facilities in Edmonton and Fort Saskatchewan, Alberta,
a major North American NGL hub. Keyera markets propane, butane and condensate
to customers in Canada and the United States.
Advisory
This document contains forward-looking statements that involve known and
unknown risks and uncertainties, many of which are beyond Keyera's control.
The forward-looking statements are based on management's current expectations
and assumptions relating to Keyera's business and the environment in which it
operates. As the results or events predicted or implied in these
forward-looking statements depend upon future events, actual results or events
may differ materially from those predicted. Some of the factors which could
cause actual results or events to differ materially include Keyera's ability
to successfully implement planned initiatives, whether those initiatives yield
the expected benefits, the impact of government and industry initiatives,
operating and other costs, future operating results, fluctuations in the
demand for natural gas, NGLs and crude oil, the activities of producers,
competitors and others, the weather, overall economic conditions and other
known or unknown factors. There can be no assurance that the results or
developments anticipated by Keyera will be realized or that they will have the
expected consequences for or effects on Keyera. For additional information on
these and other factors, see Keyera's public filings on www.sedar.com. Unless
otherwise required by applicable laws, Keyera does not intend to publicly
update or revise forward-looking statements, whether as a result of new
information, future events or otherwise.
%SEDAR: 00019203E
