Keyera Corp. (“Keyera”) announced its 2024 third quarter financial results today, the highlights of which are included in this news release. To view Management’s Discussion and Analysis (the “MD&A”) and financial statements, visit either Keyera’s website or its filings on SEDAR+ at www.sedarplus.ca.
“Disciplined execution of our strategy continues to drive strong performance across all three of our business segments,” said Dean Setoguchi, President and CEO. “We are leveraging the full potential of our integrated platform to drive capital-efficient growth, further increasing our competitiveness. At the same time, our financial strength and flexibility continue to position us well to allocate capital to the most value-accretive opportunities for shareholders.”
Third Quarter Highlights
Financial Results – Net earnings were $185 million (Q3 2023 – $78 million), adjusted earnings before interest, taxes, depreciation, and amortization1 (“adjusted EBITDA”) were $322 million (Q3 2023 – $288 million), and distributable cash flow1 (“DCF”) was $195 million (Q3 2023 – $186 million). These increases were mostly driven by higher year-over-year contributions from all three business segments.
Continued Growth of High-Quality Cash Flow – The Gathering & Processing (“G&P”) segment delivered realized margin1 of $99 million (Q3 2023 – $94 million). The year-over-year growth was supported by near-record quarterly volumes in the North region, even with a turnaround at the Wapiti gas plant. The Liquids Infrastructure segment delivered realized margin1 of $135 million (Q3 2023 – $128 million). The year-over-year increase was mostly attributable to higher contributions from KAPS and an increase in contracted volumes at the Keyera Fort Saskatchewan (“KFS”) complex for storage and condensate services.
Marketing Segment Continues to Deliver – The Marketing Segment contributed a realized margin1 of $135 million (Q3 2023 – $100 million). The year-over-year increase was driven by higher propane, condensate and iso-octane sales volumes.
Strong Financial Position – The company ended the quarter with net debt to adjusted EBITDA2 at 1.9 times, below the targeted range of 2.5 to 3.0 times and the company remains well positioned to pursue and equity self-fund opportunities that will enhance shareholder value.
Adding Fractionation Capacity – Demand for fractionation in Western Canada remains strong. At Keyera Fort Saskatchewan Fractionation Unit II (“KFS Frac II”), the company is ordering long lead items for a debottleneck project to add 8,000 barrels per day of capacity. In addition, the company continues to advance customer contracting and engineering on the new 47,000 barrel per day Keyera Fort Saskatchewan Fractionation Unit III (“KFS Frac III”). Together, these projects will increase Keyera’s fractionation capacity by about 60%, from approximately 98,000 barrels per day (net) today, to approximately 155,000 barrels per day (net), further strengthening Keyera’s integrated value chain.
Normal Course Issuer Bid – Keyera plans to file a notice of intention to make a normal course issuer bid (the “NCIB”) with the Toronto Stock Exchange (“TSX”). Keyera remains committed to allocating capital in a manner that will drive the highest value for shareholders. Decisions regarding the amount and timing of future purchases of common shares will be based on market conditions, share price and other factors. The NCIB is subject to the approval of the TSX.
Reaffirming 2024 Guidance
Marketing segment realized margin1 for 2024 is expected to remain between $450 million and $480 million.
Growth capital expenditures are expected to reach the upper end of the previously guided range of $80 million to $100 million. This includes capital for advancing the KFS Frac II debottleneck project and optimization work at the Brazeau River gas plant. It also includes accelerated investments in new tie-in points at Wapiti to support new customer volumes which will also flow onto KAPS and the rest of Keyera’s integrated system.
Maintenance capital expenditures are expected to remain within the range of $120 million and $140 million.
Cash tax expense is expected to remain in the range of $90 million to $100 million.
Upcoming 2025 Guidance Disclosures
Keyera will be providing 2025 guidance on December 10, 2024.
CEO’s Message to Shareholders
Strategically positioned to benefit from basin growth. Over the past several years, we have invested significantly to build a fully integrated natural gas liquids value chain from the Montney and Duvernay to our core liquids infrastructure assets in Edmonton and Fort Saskatchewan. This has enhanced the service offerings and value we can bring to our customers while making Keyera more competitive. Within our G&P segment, we continue to reach new throughput records at our North region gas plants which serve the prolific Montney and Duvernay fairways. Our Liquids Infrastructure segment continues to grow steadily with the ramp up of KAPS and rising demand for fractionation, condensate handling and other ancillary services. With the basin poised to grow, Keyera remains well positioned to keep adding value for customers while increasing its high quality, fee-for-service cash flow.
Financial strength and flexibility. Keyera is in the enviable position of having the strongest balance sheet amongst our peers. This gives us tremendous flexibility to deploy capital in a manner that is the most value accretive for shareholders. We recently raised the dividend, and today, announced that we plan to file a notice of intention to make a normal course issuer bid. We will continue to balance additional cash returns to shareholders with capital efficient growth investments to further strengthen our value chain.
Capital-efficient margin growth. Given the projected volume growth in the basin, we expect to continue to fill available capacity across our integrated system including at our gas plants, KAPS, and our industry leading Fort Saskatchewan Condensate System. This will allow us to continue to grow margins with modest incremental capital. In addition, we continue to advance several capital efficient growth projects including KAPS Zone 4, KFS Frac II debottleneck, and KFS Frac III to name a few. These projects can all be equity self-funded.
Marketing segment is a unique competitive advantage. Our Marketing business enables us to efficiently connect our customers to the highest-value markets, thereby enhancing their netbacks. This segment is a natural extension of our integrated platform, providing us the opportunity to consistently produce higher than average corporate returns on invested capital relative to our peers. The cash flow generated from this segment is reinvested in our fee-for-service business, accelerating growth in high-quality, long-term contracted cash flows.
Basin growth fundamentals remain strong. Western Canada production continues to grow. This trend is supported by the continued filling of the Trans Mountain Pipeline Expansion, the start-up of LNG Canada, a growing Petrochemical industry, and increasing LPG exports off the West Coast of Canada. As an essential infrastructure service provider, Keyera will continue to play an integral role in enabling basin volume growth by leveraging our integrated platform.
On behalf of Keyera, I want to thank our employees, customers, shareholders, Indigenous rights holders, and other stakeholders for their continued support.
Third Quarter 2024 Results Conference Call and Webcast
Keyera will be conducting a conference call and webcast for investors, analysts, brokers and media representatives to discuss the financial results for the third quarter of 2024 at 8:00 a.m. Mountain Time (10:00 a.m. Eastern Time) on Thursday, November 14, 2024. Callers may participate by dialing 1-888-510-2154 or 1-437-900-0527. A recording of the conference call will be available for replay until 10:00 PM Mountain Time on November 27, 2024 (12:00 AM Eastern Time on November 28, 2024), by dialing 1-888-660-6345 or 1-289-819-1450 and entering passcode 98075.
To join the conference call without operator assistance, you may register and enter your phone number here to receive an instant automated call back. This link will be active on Thursday, November 14, 2024, at 7:00 AM Mountain Time (9:00 AM Eastern Time).
A live webcast of the conference call can be accessed here or through Keyera’s website at http://www.keyera.com/news/events. Shortly after the call, an audio archive will be posted on the website for 90 days.
