CALGARY, May 6, 2014 /CNW/ - Keyera Corp. (TSX:KEY) announced their 2014
first quarter results today, the highlights of which are included in
this press release. The entire earnings 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 $55.2 million ($0.70 per share) in first quarter 2014,
$31.8 million ($0.40 per share) higher than the $23.4 million ($0.30
per share) in first quarter 2013.
-
Earnings before interest, taxes, depreciation and amortization1, 2 ("EBITDA") were $107.7 million in first quarter 2014, 10% higher than
the $97.8 million posted in first quarter 2013.
-
Distributable cash flow1, 2 was $78.2 million ($0.99 per share) in first quarter 2014 compared to
$83.3 million ($1.07 per share) recorded in first quarter 2013.
-
Keyera's Gathering and Processing business delivered record operating
margin3 of $48.3 million in first quarter 2014, compared to $39.9 million in
the same quarter last year. The NGL Infrastructure segment also
delivered record operating margin3 of $39.1 million in first quarter 2014, 35% higher than the $29.0
million recorded in first quarter 2013. Marketing operating margin3 was $36.9 million in first quarter 2014, compared to $23.9 million in
first quarter 2013.
-
Keyera is increasing its dividend by 7.5%, from $0.20 per share per
month to $0.215 per share per month, or $2.58 per share annually,
beginning with its dividend payable on June 16, 2014. This will be
Keyera's twelfth increase since going public in 2003, representing a
7.5% compound annual growth rate in dividends per share.
-
On May 1, Keyera closed its previously announced acquisition of
ownership interests in certain gas processing assets in west central
Alberta and associated oil and gas reserves. The total purchase price
was approximately $113 million. Some of the assets are subject to
third party claims, including certain reserves which closed in escrow
pending the exercise or expiry of rights of first refusal.
-
Keyera's turbo expander project at Rimbey has received all regulatory
approvals and construction is now underway. The turbo expander is
expected to be operational in the first half of 2015.
-
Keyera entered into a long-term, take-or-pay and fee-for-service
agreement to provide Cenovus Energy Inc. with diluent handling
services, including transportation and storage capacity that will
increase to the equivalent of approximately three storage caverns by
2018.
-
Keyera has developed a plan for the next phase of cavern development at
Fort Saskatchewan, which could add approximately four million barrels
of additional storage capacity at the site. As part of this program,
Keyera expects to begin drilling its fifteenth cavern later this year.
-
In April, Keyera closed the final $75 million portion of its private
debt placement announced in the third quarter of 2013.
-
Total growth capital investment was $198.6 million in the first quarter
of 2014, of which $5.8 million was acquisitions. In 2014, growth
capital investment estimates, excluding acquisitions, have been updated
and are now expected to be between $600 million and $700 million.4
|
1
|
See "Non-GAAP Financial Measures" on page 36 of the MD&A.
|
|
2
|
See page 32 and 33 of the MD&A for a reconciliation of distributable
cash flow to cash flow from operating activities and EBITDA to net
earnings.
|
|
3
|
See note 15 to the accompanying financial statements.
|
|
4
|
See "Capital Expenditures and Acquisitions" on page 30 of the MD&A for
further discussion of Keyera's capital investment program.
|
|
|
|
|
|
Three Months Ended March 31,
|
Summary of Key Measures
(Thousands of Canadian dollars, except where noted)
|
2014
|
2013
|
|
Net earnings
|
55,233
|
23,445
|
|
|
Per share ($/share) - basic
|
0.70
|
0.30
|
|
Cash flow from operating activities
|
119,493
|
136,688
|
|
|
|
|
|
Distributable cash flow1
|
78,220
|
83,285
|
|
|
Per share ($/share)
|
0.99
|
1.07
|
|
Dividends declared
|
47,605
|
42,074
|
|
|
Per share ($/share)
|
0.60
|
0.54
|
|
|
Payout ratio %1
|
61%
|
50%
|
|
EBITDA2
|
107,747
|
97,848
|
|
Gathering and Processing:
|
|
|
|
Gross processing throughput (MMcf/d)
|
1,356
|
1,237
|
|
Net processing throughput (MMcf/d)
|
1,114
|
980
|
|
NGL Infrastructure:
|
|
|
|
Gross processing throughput (Mbbl/d)
|
122
|
115
|
|
Net processing throughput (Mbbl/d)
|
38
|
40
|
|
Marketing:
|
|
|
|
Inventory value
|
159,493
|
144,263
|
|
Sales volumes (bbl/d)
|
99,400
|
116,800
|
|
|
|
|
|
Acquisitions (including business combination)
|
5,783
|
3,907
|
|
Growth capital expenditures
|
198,598
|
53,116
|
|
Maintenance capital expenditures
|
3,279
|
2,007
|
|
Total capital expenditures
|
207,660
|
59,030
|
|
|
|
|
|
|
As at March 31,
|
|
|
2014
|
2013
|
|
Long-term debt
|
1,098,347
|
625,966
|
|
Credit facilities
|
—
|
80,000
|
|
Working capital surplus3
|
(158,832)
|
(93,851)
|
|
Net debt
|
939,515
|
612,115
|
|
|
|
|
|
Common shares outstanding - end of period
|
79,417
|
78,013
|
|
Weighted average number of shares outstanding - basic
|
79,301
|
77,862
|
|
Weighted average number of shares outstanding - diluted
|
79,301
|
78,381
|
|
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 GAAP. See page 32 for a reconciliation of
distributable cash flow to its most closely related GAAP measure.
|
|
2
|
EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, unrealized gains / losses, accretion, impairment expenses
and any other non-cash items such as gains/losses on the disposal of
property, plant and equipment. EBITDA is not a standard measure
under GAAP. See section titled "EBITDA" on page 33 of the MD&A for a
reconciliation of EBITDA to its most closely related GAAP measure.
|
|
3
|
Working capital is defined as current assets less current liabilities.
|
Message to Shareholders
Demand for Keyera's services continued to grow in the first quarter of
2014. This demand is being driven by producer activities that are
focused on liquids-rich drilling and oil sands development. Our
customers continue to see value in our integrated service offering,
which provides them with access to the processing, transportation and
logistics facilities necessary to turn their production into cash
flow. This is resulting in increased cash flow from our existing
business and opportunities to acquire and expand facilities to provide
added value for shareholders in the future.
Financially the year had a good start, with EBITDA in the first quarter
of 2014 being 10% higher than the same period last year. Operating
margins were strong across all business segments once again this
quarter, with both of our fee-for-service segments reporting record
results. With growing cash flow from our business and a number of new
projects under development, we are pleased to announce an increase in
our monthly cash dividend. Effective with the May 2014 dividend,
payable to shareholders on June 16, 2014, our dividend will increase by
7.5% to 21.5 cents per share per month, or $2.58 per share annually.
This is Keyera's twelfth dividend increase since going public in 2003.
Since that time, we have provided shareholders with a 7.5% compound
annual growth rate in dividends per share.
Our Gathering and Processing business reported operating margin of $48.3
million, 21% higher than in the first quarter of 2013, primarily due to
increased throughput at most of Keyera's facilities. Drilling activity
around many of our plants continues to be strong and the utilization of
several of our gas plants continues to increase. Net throughput
increased in the first quarter, averaging 1.1 billion cubic feet per
day, 14% higher than the first quarter of last year. This increased
throughput is coming from a number of geological horizons, including
the Mannville, Cardium, Montney, Duvernay and Glauconite zones.
This increased producer activity has led to several gathering pipelines
being built to deliver incremental production to Keyera plants. In
west central Alberta, construction proceeded on two gathering pipelines
to deliver raw gas to the Rimbey gas plant. Modifications made to the
Carlos pipeline system, including construction of a short pipeline
segment to connect to other existing pipeline infrastructure, added an
additional 40 million cubic feet per day of capacity when the pipeline
began operation in April. The Wilson Creek pipeline system was
completed in April, although it will not begin operation until producer
facilities are completed, which is expected in June. In the first
quarter we reached agreement with a producer to construct the Twin
Rivers pipeline, which will deliver production to the Brazeau River gas
plant from the southeast. Construction of that pipeline is expected to
begin later this year.
In the first quarter, we reached agreement with a Deep Basin producer
interested in securing the remaining capacity on the Wapiti pipeline.
Unfortunately, adverse weather conditions and an early spring breakup
hampered construction of the pipeline, requiring us to suspend work
prior to completion. The remaining work is expected to be completed in
the summer and we currently anticipate putting the pipeline into
operation in the third quarter if the remaining construction goes as
planned.
In April, we received all regulatory approvals for our turbo expander
project at the Rimbey gas plant. Construction is now underway and,
assuming there are no further delays, we anticipate the turbo expander
will be operational in the first half of 2015.
On May 1 we closed our previously announced acquisition of ownership
interests in certain gas processing assets in west central Alberta and
associated oil and gas reserves. There are some rights of first
refusal that we are working through as we transition ownership of the
assets. These assets are complementary to our existing gas facilities
in the west central area of Alberta. We were also successful in
increasing our ownership at the Rimbey, Strachan, Brazeau River and
Bigoray gas plants, increasing our net processing capacity by
approximately 13 million cubic feet per day and our ownership in the
Strachan and Bigoray gas plants to 100%.
Our NGL Infrastructure segment results also set a new record in the
first quarter, with operating margin of $39.1 million, a 35% increase
over the first quarter of 2013. The higher operating margin was due to
higher level of activity at our facilities, as well as increased fees
for many of our services. Our Marketing segment contributed
significantly to our results, with operating margin of $36.9 million in
the first quarter of 2014 compared to $23.9 million in the first
quarter of last year.
Significant progress has been made on the agreements associated with the
Norlite pipeline and we anticipate announcing our participation as a
30% non-operating owner shortly. The Norlite pipeline will be a
diluent transportation pipeline delivering condensate from the Fort
Saskatchewan area to the Athabasca oil sands region in northeast
Alberta. Enbridge will construct and operate the pipeline and
anticipates having it in service in the second quarter of 2017. The
scope of the pipeline will be finalized later this year, at which time
we will receive an updated capital cost estimate from Enbridge for the
project. Keyera's diluent transportation system in the Fort
Saskatchewan area will deliver product into the Norlite Pipeline,
providing the Norlite shippers with access to multiple sources of
diluent supply.
In January, we announced that we will be adding 35,000 barrels per day
of C3+ fractionation capacity at our facility in Fort Saskatchewan.
This is in addition to the 30,000 barrels per day de-ethanizer
currently under construction and the existing 30,000 barrels per day
fractionator at that site. The fractionator and de-ethanizer projects
are in response to the growing demand for these types of services and
support our customers' liquids-rich drilling programs. Based on the
current schedule, we estimate that the de-ethanizer facility will be
operational later in 2014, while the fractionation expansion is
expected to be onstream in the first quarter of 2016.
In March we entered into a long-term agreement with Cenovus Energy Inc.
to provide diluent transportation and storage services using our Fort
Saskatchewan Condensate System within the Edmonton/Fort Saskatchewan
area. The services will provide Keyera with long-term take-or-pay and
fee-for-service revenues.
In order to meet the growing demand for diluent storage, Keyera is
continuing to add storage caverns at our facility in Fort
Saskatchewan. Development of the thirteenth cavern on the site is well
underway and drilling of the well bore for the fourteenth cavern was
completed in the first quarter of 2014. We have recently completed a
plan that will allow us to wash both caverns simultaneously and expect
to begin this process once regulatory approval is received. To support
this additional storage capacity, we expect to put our new brine pond
into service this year. We have developed a plan for the next phase of
cavern development at Fort Saskatchewan, which could add approximately
four million barrels of additional storage capacity at the site. As
part of this program, Keyera expects to begin drilling its fifteenth
cavern later this year.
Late in the first quarter, Keyera completed the work necessary to tie
the Cochin pipeline into Keyera's Fort Saskatchewan Condensate System.
In April, the Cochin shippers began injecting linefill into the
pipeline using condensate previously stored within our caverns at Fort
Saskatchewan. Kinder Morgan, owner of the Cochin pipeline, expects to
put the pipeline into service in July of this year delivering
condensate into Alberta. Keyera's Fort Saskatchewan site is currently
the only delivery point for condensate from this pipeline, so all
volumes shipped will pass through Keyera's infrastructure.
Keyera has received all necessary approvals for the Alberta Crude
Terminal in Edmonton which is being advanced as a 50/50 joint venture
with Kinder Morgan. Work on this project is well underway and the
terminal is now expected to be completed and operational in the third
quarter. Once operational, the Alberta Crude Terminal will provide up
to 40,000 barrels per day of crude rail loading services to Irving Oil.
In February, we announced construction of a propane rail loading
terminal at Josephburg, located near our fractionation and storage
facility in Fort Saskatchewan. The facility will provide an additional
propane outlet to meet the growing need for market access for western
Canadian producers.
Alberta EnviroFuels performed well in the first quarter and continues to
be an important piece of Keyera's butane value chain. We continue to
increase our deliveries of iso-octane by rail and are taking advantage
of the storage and transportation services we have secured in the Gulf
Coast region of the U.S. By increasing our rail delivery capabilities,
we have been able to expand our access to new markets since we
originally acquired Alberta EnviroFuels and this is supporting
increased utilization at the plant.
It is an exciting time for our industry and for Keyera. As a service
provider, we continually work with our customers to ensure that we are
meeting their infrastructure needs. With approximately $1.5 billion in
projects currently under development and several other projects under
evaluation, we are well positioned to meet our customers' needs into
the future. As we look to the future, we will remain focused on
maintaining a customer driven mindset and operating our business safely
and reliably.
Jim V. Bertram
Chief Executive Officer
Keyera Corp.
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 13, 2014, 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. Pipeline projects are also subject to Keyera's
ability to secure the necessary rights of way. 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 document are subject to securing
sufficient producer/customer interest and may not proceed if sufficient
commitments are not obtained. The acquisition of the West Pembina
assets, including the Cynthia gas plant, is subject to third party
claims including the resolution of ROFR issues. Depending on the
resolution of these issues, Keyera's ownership and ability to operate
these assets may differ significantly. Alberta's move toward a single
regulator has affected approval processing times for projects that are
subject to regulatory approval and it is unclear whether this will
continue. The new regulatory requirements implemented with the
transition to the AER, and possibly 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 document 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.
