Keyera Corp. Announces Third Quarter 2012 Results
CALGARY, Nov. 6, 2012 /CNW/ - Keyera Corp. (TSX:KEY)(TSX:KEY.DB.A), announced their 2012 third 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.
- Demand for services from customers continued to support Keyera's business in the third quarter. In addition, Keyera advanced a number of new growth capital projects that will deliver shareholder value in the future.
- Keyera's Gathering and Processing business delivered operating margin1 of $35.6 million in the quarter compared to $37.3 million in the third quarter of 2011. In the NGL Infrastructure segment, operating margin1 of $29.9 million was $13.1 million higher than the same quarter last year, another record quarter. Third quarter Marketing operating margin1 was $16.7 million compared to $31.7 million in the same period last year, largely due to weak propane margins and the timing of hedge contract settlements.
- Earnings before interest, taxes, depreciation and amortization2,3 ("EBITDA") were $72.2 million in the third quarter, slightly lower than the $77.0 million posted in the third quarter of 2011.
- Net earnings for the third quarter were $14.2 million ($0.18 per share), compared to $38.6 million ($0.54 per share) in the same quarter last year, primarily due to higher non-cash expenses.
- Distributable cash flow2,3 for the third quarter was $18.8 million ($0.24 per share) compared to $50.5 million ($0.71 per share) in the third quarter last year, due largely to scheduled maintenance turnarounds at Alberta EnviroFuels and two gas plants.
- Keyera is increasing its dividend by 5.9%, from $0.17 per share per month to $0.18 per share per month, or $2.16 per share annually, beginning with its dividend payable on December 17, 2012. This will be Keyera's tenth increase since going public in 2003, representing a 7.5% compound annual growth rate in dividends per share.
- Keyera announced approximately $330 million of growth capital initiatives in September. At its Fort Saskatchewan fractionation facility, it will construct a 30,000 barrel per day de-ethanizer to enable processing of a C2+ (ethane-rich) mix of NGLs. At the Rimbey gas plant, recoveries of ethane and other NGLs will be enhanced by the addition of a 400 million cubic feet per day turbo expander unit. Both projects are slated to be operational in 2014.
- Keyera entered into an agreement to acquire a rail and truck terminal in Hull, Texas, near Mont Belvieu. Keyera anticipates using the terminal to handle receipt and delivery of propane, butane and NGL mix.
- Total growth capital investment, excluding acquisitions, was $34.1 million during the quarter and $78.6 million year-to-date. Keyera now expects its 2012 growth capital investment, excluding acquisitions, to be $125 million to $140 million. In 2013, growth capital investment, excluding acquisitions, is expected to be between $250 million and $300 million4.
1 See Note 19 of Keyera's Third Quarter 2012 Financial Statements.
2 See "Non-GAAP Financial Measures" on page 40 of Keyera's Third Quarter 2012 MD&A.
3 See page 36 of Keyera's Third Quarter 2012 MD&A for a reconciliation of distributable cash flow to cash flow from operating activities and EBITDA to net earnings.
4 See "Capital Expenditures and Acquisitions" on page 33 of Keyera's Third Quarter 2012 MD&A for further discussion of Keyera's capital investment program.
Three months ended
Nine months ended
Summary of Key Measures
(Thousands of Canadian dollars, except where noted)
|Per share ($/share) - basic||0.18||0.54||0.98||2.21|
|Cash flow from operating activities||92,899||(64,800)||211,926||127,423|
|Distributable cash flow1||18,771||50,460||125,477||150,980|
|Per share ($/share)||0.24||0.71||1.66||2.14|
|Per share ($/share)||0.51||0.48||1.53||1.42|
|Payout ratio %1||210%||68%||92%||67%|
|Gathering and Processing:|
|Gross processing throughput (MMcf/d)||1,154||1,159||1,204||1,149|
|Net processing throughput (MMcf/d)||937||888||955||873|
|Gross processing throughput (Mbbl/d)||89||83||84||84|
|Net processing throughput (Mbbl/d)||32||26||33||26|
|Sales volumes (bbl/d)||82,800||66,300||85,700||72,600|
|Acquisitions (including business combination)||19,281||920||266,382||1,963|
|Growth capital expenditures||34,123||21,657||78,618||75,706|
|Maintenance capital expenditures||29,352||3,590||44,694||22,435|
|Total capital expenditures||82,756||26,167||389,694||100,104|
As at September 30,
|Working capital surplus3||(130,445)||(196,000)|
|Net debt (including debentures)||593,636||478,538|
|Common shares outstanding - end of period||77,324||71,337|
|Weighted average number of shares outstanding - basic||75,746||70,632|
|Weighted average number of shares outstanding - diluted||76,475||71,926|
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 36 of Keyera's Third Quarter 2012 MD&A for a reconciliation of distributable cash flow to its most closely related GAAP measure.
2 EBITDA is defined as earnings (including unrealized gains/losses from financial contracts relating to the Liquids Business unit) before interest, taxes, depreciation, amortization, 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 37 of Keyera's Third Quarter 2012 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
Keyera continued to see strong demand for its services from natural gas and oil sands customers in the third quarter. In addition, we advanced a number of new growth opportunities during the quarter which, when added to the projects currently underway, are anticipated to deliver significant shareholder value in the future.
Tempering these exciting new business opportunities was the passing of Keyera's Chairman, The Honourable E. Peter Lougheed, in September. Peter served as Chairman of Keyera's Board of Directors for nearly a decade. We have benefited from his extraordinary vision, spirit and determination, and he has been instrumental in our success. We all mourn the loss of our esteemed colleague.
In a separate news release today, we announced that Robert B. (Bob) Catell has been appointed Chairman of Keyera's Board of Directors. Bob has over 40 years of experience in the energy sector and has been a member of Keyera's Board since 2003. We wish him well and look forward to continuing to work with him in his new position.
Producer activity continued to support Keyera's business during the quarter, although operational challenges in both the Gathering and Processing and Marketing businesses affected financial results. EBITDA was $72.2 million in the third quarter, $4.8 million lower than the same period in 2011. Third quarter net earnings were $14.2 million ($0.18 per share), compared to $38.6 million ($0.54 per share) in the third quarter last year. Net earnings were negatively affected by a non-cash impairment charge of $29.6 million relating to two gas plants. Distributable cash flow was $18.8 million ($0.24 per share) in the third quarter, compared to $50.5 million ($0.71 per share) in the same period last year. Distributable cash flow in the quarter was also affected by maintenance capital costs of $29.3 million, primarily due to scheduled maintenance turnarounds at Alberta EnviroFuels and the Gilby and Nordegg River gas plants.
With the growth in cash flow from our business and the number of new projects under development, we are pleased to announce an increase in our monthly cash dividend. Effective with the November 2012 dividend, payable to shareholders on December 17, 2012, our dividend will increase by 5.9% to 18 cents per share per month, or $2.16 per share annually. This is Keyera's tenth 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, reflecting Keyera's commitment to providing steady value growth to shareholders.
Third quarter gross throughput at our Gathering and Processing plants of 1.15 billion cubic feet per day was slightly lower than the third quarter of 2011 but year-to-date throughput of 1.2 billion cubic feet per day was tracking above last year. Continued solid performance at the Rimbey and Minnehik Buck Lake gas plants was offset by facility repairs at the Strachan and Edson gas plants, remediation costs on the Cranberry pipeline and scheduled maintenance turnarounds at the Gilby and Nordegg River gas plants. These items reduced operating margin by approximately $6 million to $35.6 million, 5% lower than the same period in 2011.
The NGL Infrastructure business continued to benefit from the acquisition of Alberta EnviroFuels in January, higher NGL production in western Canada, and demand from oil sands producers for additional condensate storage capacity. These factors have resulted in Keyera's NGL fractionators operating at full capacity, increasing diluent deliveries at the Alberta Diluent Terminal and higher storage revenues during the quarter. As a result, operating margin for NGL Infrastructure for the quarter was $29.7 million, 77% higher than the third quarter last year. In anticipation of continued demand for services, we are expanding our facilities in this area.
In our NGL Marketing segment, physical sales of butane and condensate were strong in the quarter and Keyera's crude oil midstream business also delivered good results. Offsetting this were weak propane results, lower iso-octane sales due to the scheduled maintenance turnaround at Alberta EnviroFuels in September and realized losses from the settlement of financial contracts relating to butane and condensate. As a result, Marketing operating margin of $16.7 million in the quarter was $15.1 million lower than the very strong results posted in the third quarter last year.
Producer activity led to a number of new initiatives around Keyera's gas plants in the quarter. As announced in September, we are proceeding with construction of a 400 million cubic feet per day turbo expander at our Rimbey gas plant. This $210 million project will enable us to enhance NGL recoveries, including extracting up to 20,000 barrels per day of ethane as well as incremental propane, butane and condensate. Supporting the project is a long-term sales agreement with a large ethane consumer in Alberta and a long-term fee-for-service processing agreement with a large producer.
Two producers are in the process of constructing gathering pipelines to deliver gas from new areas in west central Alberta to Keyera plants. Keyera has agreed to purchase the pipelines upon their completion over the next eight months, and is in negotiations with another producer to purchase a third pipeline. The two pipelines will deliver raw gas to the Strachan and Minnehik Buck Lake gas plants, while the third will deliver gas to Rimbey.
A number of producers continue to develop the Montney, Duvernay and other zones around the Simonette gas plant. In early October, producers east and south of Simonette began delivering raw gas to the plant through two new gathering pipelines completed in the third quarter. Keyera continues to discuss terms for an expansion of the plant and addition of deep cut facilities with producers in the area.
In the third quarter, we were successful in acquiring additional ownership interests in the Pembina North and Brazeau North gas plants, bringing our ownership in these facilities to 100%. We also acquired an additional 17.4% in the Minnehik Buck Lake gas plant, to bring our ownership in that facility to 80%.
In September, we announced the development of a 30,000 barrel per day de-ethanizer at Keyera's Fort Saskatchewan fractionation and storage facility. Under the terms of a long-term fee-for-service agreement, Keyera will create specification ethane, propane, butane and condensate from a C2+ (ethane-rich) mix of NGLs delivered to the facility by a deep basin producer. The expected total cost of the project is $110 million and the schedule calls for the facility to be operational in the first half of 2014.
We have a number of projects underway to support the demand for terminalling and storage services from oil sands producers. At Fort Saskatchewan, drilling of the well bore for our thirteenth storage cavern was completed in August and washing of the cavern is expected to begin in the fourth quarter. To support the additional storage capacity, construction of a new brine pond is underway and is expected to be complete in the fall of 2013.
With the growth in demand for diluent in Alberta, we are moving to a 24-hour per day operation at the Alberta Diluent Terminal in December. At South Cheecham, work on the rail and truck terminal is progressing and we continue to talk with oil sands producers interested in securing capacity in the new facility for various services
In September we announced an agreement to purchase a rail and truck terminal in Hull, Texas, near Mont Belvieu. When operational, the terminal will enable Keyera to handle the receipt and delivery of propane, butane and NGL mix. Longer term, given the strategic location of the facility, we can evaluate adding to the terminal to handle other products, such as bitumen and dilbit.
Alberta EnviroFuels was off-line for all of September and half of October for its scheduled maintenance turnaround. The turnaround was completed successfully and the plant returned to full operation on October 18th. Cost of the turnaround, which is included in maintenance capital, was $16 million. The replacement of catalyst and other maintenance capital projects were also completed while the facility was off-line bringing the total capital cost of the maintenance work to $23 million.
We are currently modifying our rail loading facility at the Edmonton Terminal to handle iso-octane. Based on the current schedule, we anticipate completing this work early December at which time we will be able to deliver iso-octane by rail. This project is expected to mitigate the effect of apportionment on the Trans Mountain pipeline, currently the primary delivery route for iso-octane produced at Alberta EnviroFuels, and allow us to access additional markets for incremental sales.
At this time, we anticipate that 2012 growth capital investment, excluding acquisitions, will likely be between $125 million and $140 million. In 2013, we anticipate growth capital investment, excluding acquisitions, will be between $250 million and $300 million. Given the level of industry activity, current projects already underway and other opportunities under consideration, we anticipate that Keyera's growth capital investment for the next several years will be significantly higher than recent expenditure levels.
On behalf of Keyera's directors and management team, thank you for your continued support.
Jim V. Bertram
Chief Executive Officer
Certain statements contained in this document 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 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 Keyera's Third Quarter 2012 MD&A and in Keyera's Annual Information Form dated February 16, 2012 filed on SEDAR are 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. 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.
Readers are cautioned that they should not unduly rely on the forward looking statements in this document. 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 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.
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