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US NEWS 
Second Quarter Financial Highlights
- Adjusted earnings before interest, taxes, depreciation, and amortization (“adjusted EBITDA” 1) was $316 million, compared with $224 million for the second quarter of 2021. The year-over-year increase was largely driven by strong Marketing segment performance.
- The company realized cash flow from operating activities (“CFO”) of $199 million, compared with $112 million for the same period in 2021.
- Distributable cash flow1 (“DCF”) was $209 million ($0.94 per share), compared with $148 million ($0.67 per share) for the second quarter of 2021.
- Net earnings were $173 million ($0.78 per share), compared to $79 million ($0.36 per share) for the same period in 2021.
- The company continues to preserve balance sheet strength, ending the quarter with a net debt to adjusted EBITDA ratio2 of 2.3 times, which is below the company’s target range of 2.5 to 3.0 times.
Business Segment Highlights
- The Gathering and Processing (“G&P”) segment delivered a record realized margin1,3 of $88 million, compared to $86 million for the same period last year. Contributing to this performance was record throughput at the Pipestone and Wapiti gas plants and higher volumes across the South region portfolio.
- Keyera’s Liquids Infrastructure segment delivered realized margin1,3 of $98 million, compared to $96 million for the same period last year. The increase was the result of strong demand for fractionation services.
- The Marketing segment contributed a realized margin1,3 of $162 million, compared to $79 million in the second quarter of 2021. These results were driven by robust commodity prices and record iso-octane margins due to strong motor gasoline pricing and octane demand.
KAPS Pipeline Project Update
- KAPS is now over 70% complete and the project is estimated to cost approximately $900 million, net to Keyera (previously $800 million to $880 million). The increase in cost is mainly driven by weather related productivity losses, as well as inflationary pressure for items such as matting required to access excessively wet construction sites.
Increasing Marketing Segment Realized Margin and Cash Tax Guidance
- For 2022, realized margin1 for the Marketing segment is now expected to range between $380 million and $410 million (previously $300 million to $340 million).
- As a result of higher Marketing segment margins, cash tax expense for 2022 is now expected to range between $55 million and $65 million (previously $30 million to $40 million).
Capital Expenditure Guidance Update
- Growth capital for 2022 is now expected to be between $680 million and $720 million (previously $620 million to $660 million), excluding capitalized interest. The increased growth capital guidance range is primarily based on the higher estimated cost to complete the KAPS project. The majority of KAPS related costs are forecasted to be incurred in 2022.
- Maintenance capital guidance remains unchanged with a range between $100 million and $120 million.
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1 Keyera uses certain non-GAAP and other financial measures such as EBITDA, adjusted EBITDA, funds from operations, distributable cash flow, distributable cash flow per share, payout ratio, realized margin and return on invested capital. Since these measures are not standard measures under GAAP, they may not be comparable to similar measures reported by other entities. For a reconciliation of the historical non-GAAP financial measures to the most directly comparable GAAP measure, refer to the section of this news release titled “Non-GAAP and Other Financial Measures”. For the assumptions associated with the realized margin guidance for the Marketing segment, refer to the section titled “Segmented Results of Operations: Marketing” of Management’s Discussion and Analysis. |
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2 Ratio is calculated in accordance with the covenant test calculations related to the company’s credit facility and senior note agreements and excludes hybrid notes. |
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3 Realized margin is not a standard measure under GAAP and excludes the effect of $10 million in non-cash gains from commodity-related risk management contracts. See the section of this news release titled “Non-GAAP and Other Financial Measures”. |
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Summary of Key Measures |
Three months ended June 30, |
Six months ended June 30, |
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(Thousands of Canadian dollars, except where noted) |
2022 |
2021 |
2022 |
2021 |
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Net earnings |
173,006 |
78,595 |
286,800 |
164,420 |
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Per share ($/share) – basic |
0.78 |
0.36 |
1.30 |
0.74 |
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Cash flow from operating activities |
198,763 |
112,071 |
655,815 |
380,500 |
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Funds from operations1 |
246,290 |
181,346 |
443,863 |
362,411 |
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Distributable cash flow1 |
208,553 |
147,940 |
387,011 |
312,691 |
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Per share ($/share)1 |
0.94 |
0.67 |
1.75 |
1.41 |
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Dividends declared |
106,091 |
106,091 |
212,182 |
212,182 |
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Per share ($/share) |
0.48 |
0.48 |
0.96 |
0.96 |
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Payout ratio %1 |
51 % |
72 % |
55 % |
68 % |
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Adjusted EBITDA2 |
315,931 |
223,701 |
573,134 |
448,531 |
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Gathering and Processing |
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Gross processing throughput3 (MMcf/d) |
1,529 |
1,448 |
1,521 |
1,426 |
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Net processing throughput3 (MMcf/d) |
1,300 |
1,218 |
1,305 |
1,206 |
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Liquids Infrastructure |
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Gross processing throughput4 (Mbbl/d) |
180 |
146 |
183 |
150 |
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Net processing throughput4 (Mbbl/d) |
80 |
75 |
85 |
80 |
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AEF iso-octane production volumes (Mbbl/d) |
15 |
15 |
14 |
15 |
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Marketing |
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Inventory value |
330,517 |
207,240 |
330,517 |
207,240 |
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Sales volumes (Bbl/d) |
164,600 |
145,500 |
179,600 |
159,400 |
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Acquisitions |
— |
11,165 |
— |
11,165 |
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Growth capital expenditures |
182,455 |
80,149 |
426,024 |
128,177 |
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Maintenance capital expenditures |
26,906 |
21,917 |
34,142 |
25,822 |
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Total capital expenditures |
209,361 |
113,231 |
460,166 |
165,164 |
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Weighted average number of shares outstanding – basic and diluted |
221,023 |
221,023 |
221,023 |
221,023 |
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As at June 30, |
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2022 |
2021 |
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Long-term debt5 |
3,600,315 |
3,276,826 |
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Credit facility |
— |
— |
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Working capital surplus6 |
(132,054) |
(173,022) |
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Net debt |
3,468,261 |
3,103,804 |
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Common shares outstanding – end of period |
221,023 |
221,023 |
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Notes: |
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1 |
Funds from operations, distributable cash flow, distributable cash flow per share and payout ratio are not standard measures under Generally Accepted Accounting Principles (“GAAP”) and therefore, may not be comparable to similar measures reported by other entities. For additional details regarding the composition of these measures, how management utilizes them, and for a reconciliation of funds from operations and distributable cash flow to the most directly comparable GAAP measure, cash flow from operating activities, refer to the section of this news release titled “Non-GAAP and Other Financial Measures”. |
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2 |
Adjusted EBITDA is not a standard measure under GAAP and therefore, may not be comparable to similar measures reported by other entities. For additional details regarding the composition of this measure, how management utilizes it, and for a reconciliation of adjusted EBITDA to the most directly comparable GAAP measure, net earnings, refer to the section of this news release titled “Non-GAAP and Other Financial Measures”. |
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3 |
Includes gas volumes and the conversion of liquids volumes handled through the processing facilities to a gas volume equivalent. Net processing throughput refers to Keyera’s share of raw gas processed at its processing facilities. |
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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. |
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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. |
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6 |
Working capital is defined as current assets less current liabilities. |
CEO’s Message to Shareholders
Keyera is uniquely positioned to benefit from the global drive toward energy security. We believe commodity prices are poised to remain strong, driven by constrained global supply and continued demand for responsibly produced energy. Our fully integrated assets, combined with our marketing services, allow us to efficiently connect customers’ NGL production from the wellhead to the highest value end-markets. This unique advantage allows us to maximize value for our customers, and deliver strong, stable returns for Keyera’s shareholders.
We aim to grow stable, contracted cash flows from our fee-for-service infrastructure business that provides the foundation for a stable and growing dividend over time. Complementing our fee-for-service business is our Marketing segment that enables us to fund infrastructure projects, like our KAPS pipeline project, and enhances our ability to consistently deliver superior return on invested capital.
Our Marketing segment is poised to generate record cash flows. With robust commodity prices and record iso-octane premiums generated in the second quarter, our Marketing segment is now expected to deliver between $380 million and $410 million in realized margin for the year. For context, the Marketing segment generated record realized margin of $373 million in 2019. With the strong Marketing contribution in 2022, we now anticipate exiting the year with Net Debt to EBITDA within our target range of 2.5 to 3 times.
Our Gathering and Processing (“G&P”) volumes grew by 6% compared to the same period last year due to higher volumes at Pipestone, Wapiti and across our South region assets. At Wapiti, we’ve begun to utilize the second processing train as demand for our services is increasing. We are working with our customers to manage the water disposal associated with the raw gas to ensure we continue to maximize utilization. As we continue to see increased demand from producers in the Northern region, we are evaluating opportunities to expand the capacity of our Pipestone gas plant.
Adding to the favourable outlook for the G&P segment, we are pleased to see continued consolidation amongst upstream producers, with well capitalized companies aiming to grow production. Most recently, a producer near our Simonette gas plant announced plans to double production over the next 3 to 5 years. We have capacity at Simonette to support growth in gas volumes, and our KAPS pipeline to transport associated liquids volumes.
Our Liquids Infrastructure segment delivered another steady quarter backed by continued strong performance from our fractionation, storage, and condensate transportation businesses. We continue to engage with customers to gather support for an expansion to our fractionation business. We are competitively advantaged to efficiently add fractionation capacity given our existing footprint, including extensive storage and connectivity to high value NGL markets.
Our KAPS pipeline project is a game-changer for Keyera as it is the missing link in our value chain, that will connect our Montney G&P business and other third-party facilities to our highly profitable Liquids Infrastructure business in Edmonton and Fort Saskatchewan. It also provides meaningful future growth opportunities, like our Zone 4 expansion which would extend the pipeline to near the British Columbia border. KAPS stands to capture growing volumes from the Western Canada basin. This growth is underpinned by many factors including the increasing importance of energy security and the role Canada plays in delivering responsibly produced energy to the world.
We were very pleased to see the Competition Bureau (“the Bureau”) take decisive action to protect competition in our industry, specifically as it relates to our KAPS pipeline project. Following a thorough review, including extensive engagement with industry producers, the Bureau requires that the other 50% interest in the KAPS project be sold to a third party through an independently supervised disposition process. The Bureau also imposed strict requirements to ensure that commercially sensitive data, including customer information, is protected. The action taken by the Bureau further reinforces both industry’s desire for competition and the importance of KAPS as a critically important alternative to the existing pipeline system. We look forward to the conclusion of the sale process, and to continuing our strong track record of collaborating with our partners.
Grounded in financial discipline, and with several strategic growth opportunities underway, Keyera is well positioned to continue to generate shareholder value for decades to come.
In Q3, we will be releasing our second environmental, social, and governance (ESG) report which will detail our sustainability progress.
On behalf of Keyera’s board of directors and management team, I thank our employees, customers, shareholders, and other stakeholders for their continued support.
Dean Setoguchi
President and Chief Executive Officer
Keyera Corp.
Second Quarter 2022 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 second quarter of 2022 at 8:00 a.m. Mountain Time (10:00 a.m. Eastern Time) on Thursday, August 4, 2022. Callers may participate by dialing 888-664-6392 or 416-764-8659. 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 18, 2022 by dialing 888-390-0541 or 416-764-8677 and entering pass code 439429.
Internet users can listen to the call live on Keyera’s website at www.keyera.com/news/events. Shortly after the call, an audio archive will be posted on the website for 90 days.
Additional Information
For more information about Keyera Corp., please visit our website at www.keyera.com or contact:
Dan Cuthbertson, Director, Corporate Development & Investor Relations
Calvin Locke, Manager, Investor Relations
Rahul Pandey, Senior Advisor, Investor Relations
Email: [email protected] Telephone: 403.205.7670
Toll free: 888.699.4853
For media inquiries, please contact:
Kirsten Bell, Director, Stakeholder Communications
Terry Cunha, Advisor, Media Relations
Email: [email protected]
Telephone: 587.496.8092
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