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Keyera announces 2020 second quarter results

CALGARY, AB – Keyera Corp. (TSX: KEY) (“Keyera”) announced its 2020 second 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 delivered strong results in the second quarter despite the ongoing COVID-19 pandemic and low commodity prices that continue to affect the global economy and energy industry. To date, Keyera has successfully implemented its pandemic response and business continuity plans resulting in safe and reliable operations.
  • During the second quarter, Keyera made significant progress to enhance its long-term competitive positioning by reducing its overall cost structure. Keyera expects these efforts to contribute a total annual improvement in earnings before tax of between $45 million and $65 million, with the majority to begin in 2021.
  • Keyera’s capital projects are progressing well and the company now expects to invest growth capital in 2020 of between $500 million and $550 million. In addition, Keyera expects to invest approximately $70 million in 2020 related to the butane distribution infrastructure at Kinder Morgan’s Galena Park facility. Keyera plans to fund its 2020 capital program without issuing common equity and expects to adhere to this funding model for growth capital projects in the short to medium term.
  • Keyera maintains its strong financial position, with a net debt to adjusted EBITDA1 ratio of 2.5x as of June 30, 2020, a conservative year to date payout ratio1 of 51%, two investment grade corporate credit ratings, access to a $1.5 billion line of credit, and minimal long-term debt maturities over the next five years.
  • During the second quarter, all three business segments performed well. The Gathering and Processing segment reported operating margin of $69 million, similar to the same period last year (Q2 2019 – $70 million), reflecting Keyera’s strong customer relationships that helped ensure only modest volumes were shut in during the quarter.
  • The Liquids Infrastructure segment generated $100 million in operating margin (Q2 2019 – $93 million) demonstrating the resilience of Keyera’s storage, transportation and fractionation assets.
  • The Marketing segment earned realized margin of $54 million2 (Q2 2019 – $115 million) as Keyera’s effective risk management program protected margins and inventory values from the sharp decline in commodity prices that began in March. Keyera now expects the Marketing segment to generate realized margin between $300 million and $340 million in 2020, exceeding previous guidance of $270 million to $310 million.
  • Keyera’s adjusted EBITDA1 was $182 million (Q2 2019 – $249 million) and distributable cash flow2 increased over the same period last year to $158 million or $0.71 per share (Q2 2019 – $144 million or $0.67 per share), resulting in a year to date payout ratio1 of 51%. Keyera plans on maintaining its current monthly dividend of $0.16 per share or $1.92 per share annually.
  • Net earnings3 for the second quarter were $18 million or $0.08 per share (Q2 2019 – $225 million or $1.05 per share) and included unrealized non-cash losses associated with risk management contracts from the Marketing segment, severance costs, and a lower income tax recovery than in 2019.

1 Keyera uses certain “Non-GAAP Measures” such as EBITDA, 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.

2 Realized margin is a “Non-GAAP Measure” and excludes the effect of $63 million in non-cash losses from commodity-related risk management contracts.

3 Net earnings for 2019 have been restated. Refer to the “Voluntary Change in Accounting Policy” section of the MD&A for further details.

Summary of Key Measures

Three months ended

June 30,

Six months ended

June 30,

(Thousands of Canadian dollars, except where noted)





Net earnings1





   Per share1 ($/share) – basic





Cash flow from operating activities





Funds from operations2





Distributable cash flow2





   Per share ($/share) 2





Dividends declared





   Per share ($/share)





   Payout ratio %2





Adjusted EBITDA3





Gathering and Processing

Gross processing throughput (MMcf/d)





Net processing throughput (MMcf/d)





Liquids Infrastructure

Gross processing throughput4 (Mbbl/d)





Net processing throughput4 (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 June 30,



Long-term debt5



Credit facility

Working capital surplus6



Net debt



Common shares outstanding – end of period




1   Net earnings for 2019 have been restated. Refer to the “Voluntary Change in Accounting Policy” section of the MD&A.

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.

3   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.

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.

5   Long-term debt includes the total value of Keyera’s hybrid notes which receive 50% equity treatment by Keyera’s rating agencies. The hybrid notes are also excluded from Keyera’s covenant test calculations related to the company’s credit facility and senior note agreements.

6   Working capital is defined as current assets less current liabilities.

Message to Shareholders

Our world continues to experience unprecedented challenges due to the ongoing COVID-19 pandemic and its impact on the global economy. The health and safety of our employees, customers and other stakeholders continues to be Keyera’s number one priority and to date we have successfully implemented our pandemic response, resulting in continued safe and reliable operations.

Beginning in March, the energy industry was challenged not only by the pandemic but also by a sharp decrease in global oil prices. However, the global crude oil supply response was greater than initially anticipated and in June supported a recovery in commodity prices from the extreme lows experienced earlier in the year. While the economic and commodity price environment remains uncertain due to the recent surge in COVID-19 cases globally, Keyera continues to focus on what we can control and take prudent steps to address the short-term challenges and enhance the long-term success of the company and our customers. During the quarter we worked with our customers to develop mutually beneficial solutions to ensure they could continue to flow the majority of their volumes to our facilities. We maintained our strong financial position, which includes a healthy balance sheet, two investment grade credit ratings, a $1.5 billion undrawn credit facility, and minimal long-term debt obligations in the next 5 years. We believe our financial strength will allow us to maintain the stability and continuity of the business during this unprecedented economic time, while providing us with flexibility to be opportunistic.

During the quarter, we made significant progress enhancing our competitive positioning by reducing our overall cost structure. We implemented measures to reduce both our operating and general and administrative expenses, while continuing to advance the optimization plan in our Gathering and Processing business. We expect these efforts to have a meaningful impact on our bottom line beginning in 2021 and also reduce our greenhouse gas emissions.

Our second quarter results were impressive given the challenging environment, showing the resilience of our integrated business that provides essential services to producers and is backed by secure long-term contracts. Each of our business segments performed well and we delivered adjusted EBITDA of $182 million, distributable cash flow of $158 million or $0.71 per share, and net income of $18 million or $0.08 per share.

Given the resilience of our integrated business and the proactive steps we have taken to date, I am confident in Keyera’s future. We remain committed to generating value for our shareholders and plan on maintaining our current monthly dividend.

Gathering and Processing Operations 

The Gathering and Processing segment delivered steady results in the second quarter despite the low commodity price environment. We worked with our customers during this time to find short-term solutions that prevented significant volumes from being shut in. As a result, Keyera generated an operating margin of $69 million in the Gathering and Processing segment, similar to the same period last year.

During the quarter, we continued to advance our optimization plan. We suspended operations at our Minnehik Buck Lake gas plant and recently announced plans to suspend gas processing operations at our Bigoray gas plant later this year and at our Brazeau North gas plant in 2021. To date, Keyera’s optimization plan includes suspending operations at six of our gas plants in 2020 and 2021, which is expected to increase utilization in the south region from less than 50% of processing capacity to approximately 70% by the end of 2021. These decisions have been difficult, as many of the facilities have contributed to Keyera’s success for decades; however, the decisions were necessary to increase the competitiveness and profitability of our gathering and processing operations.

Liquids Infrastructure Operations

Keyera’s Liquids Infrastructure segment demonstrated its resilience in the second quarter, generating operating margin of $100 million, which represents an 8% increase over the same period last year. With high take-or-pay contracts in this part of our business, our cash flow stream remained steady even though market conditions resulted in lower volumes through our fractionation capacity and condensate system. Demand for our underground storage increased during the quarter as producers contracted more capacity to improve operational flexibility during these uncertain times. We expect demand for our storage assets to continue.

Marketing Business

The Marketing segment delivered realized margin of $54 million in the second quarter, as Keyera’s effective risk management program protected margins and inventory values from the sharp decline in commodity prices that began in March. With strong contributions through the first half of the year, and an improving commodity price outlook for the remainder of the year, Keyera now expects Marketing to generate realized margin between $300 million and $340 million in 2020 compared to previous guidance of $270 million to $310 million.

Keyera’s marketing services are important to our integrated business model as they allow us to access high value markets for the natural gas liquids we handle and generate free cash flow that we can reinvest into our fee-for-service business.

Business Development

We continue to advance our 2020 capital program according to plan. In September, we expect the Pipestone gas plant to begin processing volumes as our anchor customer, Ovintiv, redirects its production from two other gas plants in the area. In the fourth quarter, we expect to commission phase two of the Wapiti gas plant and also begin operating the Wildhorse crude oil storage and blending terminal in Cushing, Oklahoma. These three projects substantially complete our current capital program, allowing us to focus on the development of the KAPS pipeline, which is expected to transport condensate and natural gas liquids from the Montney to our liquids infrastructure assets in Fort Saskatchewan beginning in 2023.

Keyera has a history of disciplined capital allocation, a track record we plan to continue. With the changing landscape of our industry and higher cost of capital, our goal is to ensure future investments improve the quality of Keyera’s cash flows. We will focus growth in our Liquids Infrastructure segment, which has high barriers to entry and assets that serve the entire Western Canada Sedimentary Basin. We will look for investments that are backed by long-term take-or-pay contracts with credit worthy counterparties and we will adhere to a funding model that does not require the issuance of common equity for growth capital projects in the short to medium term.


While the full extent, effect and duration of the COVID-19 pandemic continues to be unknown, Keyera continues to implement measures to ensure our long-term success. To date, we have reduced our 2020 capital program by deferring the KAPS pipeline project one year; discontinued the dividend reinvestment program; reduced our overall cost structure, including both operating costs and general and administrative expenses; and continued to advance our gathering and processing optimization plan. We have also maintained our strong financial position and demonstrated a resilient business model that delivers results in the most challenging environment.

Looking ahead, it appears that commodity prices have stabilized and are now at levels that are incenting both natural gas and oil sands producers to return their production volumes to pre-COVID levels. As a result, we expect volumes moving through our facilities to continue to recover for the remainder of 2020 and into 2021.

On the world stage, I believe Canadian energy has a long and healthy future and Keyera will be an important part of this success. Keyera’s mission is “Connecting Energy for Life” and we will contribute to helping make Canada’s resource industry the most responsible in the world. We are committed to reducing our environmental footprint and creating environmentally superior energy solutions for the future.

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.

Please continue to stay safe and healthy.
David G. Smith
Chief Executive Officer
Keyera Corp.

Keyera will be conducting a conference call and webcast for investors, analysts, brokers and media representatives to discuss the financial results for the second quarter of 2020 at 8:00 a.m. Mountain Time (10:00 a.m. Eastern Time) on Thursday, August 6, 2020. Callers may participate by dialing 888-231-8191 or 647-427-7450. A recording of the call will be available for replay until 10:00 p.m. Mountain Time (12:00 a.m. Eastern Time) on August 20, 2020 by dialing 855-859-2056 or 416-849-0833 and entering pass code 2672038.

Internet users can listen to the call live 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 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.

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