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Keyera Corp. Announces 2019 First Quarter Results

CALGARYMay 14, 2019 /CNW/ – Keyera Corp. (TSX:KEY) (“Keyera”) announced its 2019 first quarter 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, or, to view the MD&A and financial statements, visit either Keyera’s website or Keyera’s filings on SEDAR at


  • Keyera reported adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”)of $164 million in the first quarter of 2019 (Q1 2018 – $189 million), funds from operations1 of $129 million (Q1 2018 – $161 million), distributable cash flow1 of $108 million or $0.51 per share (Q1 2018 – $155 million or $0.75 per share) and net earnings of $34 million  (Q1 2018 – $88 million).
  • Keyera’s gas plants, fractionators and condensate system operated very well during the quarter. The Gathering and Processing segment delivered stable operating margin of $68 million (Q1 2018 – $71 million) while the Liquids Infrastructure segment reported another record quarter, generating $94 million in operating margin (Q1 2018 – $82 million). These record results were due to increasing demand for our condensate transportation and storage services and the Base Line Terminal that was completed in October 2018.
  • The Marketing segment’s operating margin was a loss of $18 million (Q1 2018 – margin of $66 million) and realized margin2 was $22 million (Q1 2018 – $57 million)3. Results were affected by a 17-day unplanned outage at Alberta EnviroFuels that resulted in a lower contribution from iso-octane. Keyera expects Marketing’s realized margin for 2019 to range between $280 million and $320 million.
  • Phase one of Keyera’s Wapiti gas plant recently became operational, starting the next phase of growth for Keyera, focused on the liquids-rich Montney area in northwestern Alberta. Over the next two years, the North Wapiti Pipeline System, Simonette gas plant expansion, phase two of the Wapiti gas plant, the Pipestone gas plant and Wildhorse terminal will be completed and add to this growth.
  • Keyera is very pleased to be proceeding with the Key Access Pipeline System (“KAPS”) that will transport NGL and condensate from northwest of Grande Prairie into Fort Saskatchewan and Keyera’s fractionation facility and condensate hub. KAPS is expected to provide Keyera with secure, long-term, take-or-pay revenues, strong project returns and a platform for significant future growth. Keyera has partnered with SemGroup Corporation and KKR to develop KAPS. Keyera plans to fund KAPS without issuing common equity, aside from the existing DRIP program.
  • Keyera announced a sulphur handling project at its 50% owned South Cheecham Terminal. A major oil sands producer has contracted the capacity with a long-term, 100% take-or-pay contract starting in 2022.
  • Keyera has approximately $2.9 billion in growth capital projects underway, including KAPS and the sulphur project, and may consider issuing term debt, hybrid notes or preferred shares to fund a portion of this program. For 2019, Keyera still expects to invest between $800 million and $900 million, as the majority of investment for these two new projects occurs in 2020 and 2021.

1 Keyera uses certain “Non-GAAP Measures” such as Adjusted EBITDA, Distributable Cash Flow, Distributable Cash Flow per Share, Payout Ratio and Compound Annual Growth Rate. See section titled “Non-GAAP Financial Measures”, “Dividends: Distributable Cash Flow” and “EBITDA” of the MD&A for further details.

2 Realized margin is a “Non-GAAP Measure” and excludes the effect of non-cash gains and losses from commodity-related risk management contracts.

3 With the adoption of IFRS 16, Leases on January 1, 2019, Marketing’s financial results are not directly comparable between periods. See page 36 of the MD&A  for further details.


Three months ended

March 31,

Summary of Key Measures

(Thousands of Canadian dollars, except where noted)



Net earnings



Per share ($/share) – basic



Cash flow from operating activities



Funds from operations1



Distributable cash flow1



Per share ($/share)1



Dividends declared



Per share ($/share)



Payout ratio %1



Adjusted EBITDA2



Gathering and Processing:

Gross processing throughput (MMcf/d)



Net processing throughput (MMcf/d)



Liquids Infrastructure:

Gross processing throughput3 (Mbbl/d)



Net processing throughput3 (Mbbl/d)



AEF iso-octane production volumes (Mbbl/d)




Inventory value



Sales volumes (Bbl/d)






Growth capital expenditures



Maintenance capital expenditures



Total capital expenditures



Weighted average number of shares outstanding – basic and diluted



As at March 31,



Long-term debt



Credit facility


Working capital deficit (surplus)4



Net debt



Common shares outstanding – end of period





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.


Adjusted EBITDA is defined as earnings before finance costs, taxes, depreciation, amortization, 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.


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.


Working capital is defined as current assets less current liabilities.

Message to Shareholders

After completing a record year in 2018, Keyera continues to achieve new milestones and our midstream services remain in high demand. In the first quarter of 2019, we achieved record gross natural gas processing volumes and our fractionation units operated above nameplate capacity at Keyera Fort Saskatchewan (“KFS”). While our gas plants, fractionators and condensate system operated well during the quarter, we had an unplanned outage at our Alberta EnviroFuels (“AEF”) facility. As a result, our first quarter results were lower than planned and we reported adjusted EBITDA of $164 million, funds from operations of $129 million, distributable cash flow of $108 million and net earnings of $34 million.

Keyera is well positioned to deliver another year of strong financial performance as we are completing a number of new growth capital projects. As well, market fundamentals support higher fractionation fees and iso-octane margins for the remainder of the year. We recently completed the first phase of the Wapiti gas plant, which is an exciting achievement for Keyera as it kicks off the next phase of our cash flow growth.

Gathering and Processing Operations

The Gathering and Processing segment delivered operating margin of $68 million in the first three months of 2019, and gross processing throughput reached a new record, averaging 1,616 million cubic feet per day. Volumes increased as new wells were tied into our Strachan and Brazeau River gas plants, and our Simonette gas plant set a new quarterly record for throughput volumes.

Over the past few years we have been investing in a number of capital projects to build out our footprint in the liquids-rich Montney and Duvernay developments in northwestern Alberta, and we are beginning to see the benefit of these investments. The Wapiti gas plant is now operational. We expect throughput volumes at the plant to continue to grow as the North Wapiti Pipeline System is completed later in the year and as our two anchor tenants increase their production. This growth will be complemented by the completion of the Simonette gas plant expansion in late 2019, the second phase of the Wapiti gas plant in mid-2020 and then the Pipestone gas plant in 2021. In May, we contracted the available capacity at our Pipestone gas plant with a new customer and now have fully contracted phase one of the plant. Once the Pipestone gas plant is completed, Keyera will have 950 million cubic feet of sour gas processing capacity and 90,000 barrels per day of condensate handling capacity in this region, one of the most economic developments in the Western Canada Sedimentary Basin.

Liquids Infrastructure Operations

The Liquids Infrastructure segment continued to generate strong results, reporting a record operating margin of $94 million in the first quarter of 2019, which represents a 15% increase over the same period in the prior year. These results were driven by the Base Line Terminal that was completed in the fall of 2018 and strong demand for our condensate storage and transportation services, including the Norlite pipeline. The Base Line Terminal and our condensate services provide Keyera with long-term take-or-pay cash flows.

With producers continuing to focus on drilling liquids-rich gas formations in Western Canada, fractionation capacity has tightened in Alberta. As a result, Keyera was able to contract higher fractionation fees for the portion of our capacity not underpinned by long-term contracts. These new NGL contract prices were effective April 1, 2019 and will increase our fractionation revenue in 2019 compared to 2018, assuming customers deliver volumes as planned.

Marketing Services

The Marketing business recorded an operating loss of $18 million in the first quarter of 2019, while realized margin was $22 million, excluding the effect of unrealized gains and losses from risk management contracts. Marketing’s results were affected by a 17-day unplanned outage at AEF and the timing of settling risk management contracts.

Although Keyera’s Marketing quarterly results are subject to variability, our processing, storage and transportation assets, as well as our AEF facility provide a strong foundation for Marketing to deliver cash flow year after year. On an annual basis, we expect our Marketing business to contribute, on average, a base realized margin of between $180 million and $220 million. This estimated range is based on a variety of assumptions that are described in our first quarter 2019 MD&A. For 2019, we expect the Marketing segment to outperform this base range and generate realized margin between $280 million and $320 million. This is primarily due to lower butane feedstock prices effective with the new annual term supply contracts that began on April 1, 2019. Marketing adds value to our integrated business by enhancing the returns from our fee-for-service businesses and also provides an additional source of funding for our capital projects.

Business Development

We are very pleased to be proceeding with the KAPS project and have partnered with SemCAMS Midstream, owned jointly by SemGroup Corporation and KKR, to develop this world-class NGL and condensate gathering system. The pipeline system is expected to be in service in the first half of 2022 and will transport NGL and condensate from the liquids-rich Montney and Duvernay developments in northwestern Alberta to Fort Saskatchewan and Keyera’s fractionation assets and condensate system.

This project is highly desired by industry and anchored by multiple long-term agreements, averaging 14 years in length with 75% take-or-pay commitments, as well as specific facility and area dedications. The firm volume commitments over the length of the agreements make up over 60% of the initial aggregate capacity of the pipeline system and includes meaningful commitments from investment grade counterparties. We expect KAPS is to generate an annual return on capital of between 10% and 15% starting in 2024.

KAPS will be an open-access system and initially constructed from northwest of Grande Prairie to KFS. Along this route, KAPS will initially be connected to our Pipestone, Wapiti and Simonette gas plants and several third party gas plants with volume commitments to KAPS. By 2022, Keyera and SemCAMS Midstream will have nine gas plants operating in northwestern Alberta providing KAPS with access to approximately 2.25 billion cubic feet per day of natural gas processing capacity and 130,000 barrels per day of condensate handling facilities. Keyera will construct and operate the pipeline system.

The cost of the pipeline system is currently estimated at $1.3 billion, or $650 million net to Keyera, and we plan to fund this project without issuing common equity, outside of our current DRIP.

KAPS is not only a strategic asset for Keyera, connecting our NGL business to our gathering and processing assets located in a key region of the Western Canada Sedimentary Basin; it also provides numerous future growth opportunities. We thank our customers for their endorsement and commitment to our solution and are committed to developing this pipeline system in a responsible manner for all stakeholders.


This is an exciting time for Keyera as we are completing a number of new growth projects over the next few years and have a number of new opportunities to consider. While we focus on creating value for our shareholders over the long-term, we will maintain our disciplined approach. We will focus our growth on investments that enhance our integrated value chain and we will continue to ensure our capital is deployed efficiently and effectively. We remain committed to our financing plan and may consider issuing term debt, hybrid notes or preferred shares to fund a portion of our current capital program.

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.

David G. Smith
President & Chief Executive Officer
Keyera Corp.


Keyera will hold a conference call and webcast on Wednesday, May 15, 2019 at 8:00 am Mountain Standard Time (10:00 am Eastern Standard Time) to discuss its quarterly financial results.

Members of the investment community and other interested parties are invited to participate by calling  888-231-8191 or 647-427-7450. A recording of the conference call will be available for replay until 11:59 pm Mountain Standard Time on May 22, 2019 by dialing 855-859-2056 or 416-849-0833 and entering passcode 2388456.

A live webcast of the conference call can be accessed on Keyera’s website at Shortly after the call, an audio archive will be posted on the website for 90 days.


Keyera Corp. (TSX:KEY) operates an integrated Canadian-based midstream business with extensive interconnected assets and depth of expertise in delivering midstream 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.

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