Keyera Corp. Announces Third Quarter 2013 Results
CALGARY, Nov. 5, 2013 /CNW/ - Keyera Corp. (TSX:KEY)(TSX:KEY.DB.A), announced their 2013 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.
- Net earnings for the third quarter of 2013 were $40.8 million ($0.52 per share), $26.6 million ($0.34 per share) higher than the third quarter of 2012.
- Earnings before interest, taxes, depreciation and amortization1, 2 ("EBITDA") were $82.6 million in the third quarter of 2013, 36% higher than the $60.8 million posted in the same period last year.
- Distributable cash flow1, 2 was $50.5 million ($0.64 per share) in the third quarter of 2013, $31.7 million higher than the $18.8 million ($0.24 per share) recorded in the same quarter of 2012.
- Effective with its August dividend paid in September, Keyera increased its dividend by 11%, from $0.18 per share per month to $0.20 per share per month, or $2.40 per share annually. This was Keyera's eleventh increase since going public in 2003, representing an 8.1% compound annual growth rate in dividends per share.
- Keyera's Gathering and Processing business delivered operating margin3 of $40.7 million in the third quarter of 2013 compared to $35.6 million in the same quarter last year. In the NGL Infrastructure segment, operating margin3 was $31.4 million, the highest in history, compared to $29.9 million in the same quarter of 2012. Marketing operating margin3 was $33.2 million in the third quarter of 2013, $16.5 million higher than the third quarter of last year.
- Keyera is working with producers with respect to the construction of two proposed gathering pipeline systems. The proposed Twin Rivers pipeline is a 12-inch, 38 kilometre gathering pipeline that would deliver raw gas to Keyera's Brazeau River and West Pembina gas plants. The proposed Wilson Creek pipeline system would deliver raw gas and condensate to the Rimbey gas plant through 12-inch raw gas and 6-inch condensate pipelines. Both projects are subject to completing definitive agreements.
- In late September, Keyera completed construction of its South Cheecham Rail and Truck Terminal south of Fort McMurray. The facility is currently receiving bitumen by truck and loading it onto railcars for delivery to end-use markets.
- Keyera's de-ethanizer project at Fort Saskatchewan received regulatory approval in August. Site preparation continued during the third quarter and construction is expected to begin in the fourth quarter of 2013.
- Subsequent to the quarter, Keyera received regulatory approval and is proceeding with the Wapiti gathering pipelines from the Wapiti area of Alberta to the Simonette gas plant, including a dedicated 6-inch condensate pipeline.
- Keyera announced approximately $506 million of additional private placement debt financing in September. Of that amount, $200 million closed in October and the remainder is expected to close in November 2013 and April 2014, subject to normal closing conditions.
- Total growth capital investment, excluding acquisitions, was $93 million during the quarter and $192 million year-to-date. Keyera now expects its 2013 growth capital investment, excluding acquisitions, to be $325 million to $375 million. In 2014, growth capital investment, excluding acquisitions, is expected to be between $500 million and $600 million.4
1 See "Non-GAAP Financial Measures" on page 37 of the MD&A.
2 See page 32 and 33 of the MD&A for a reconciliation of distributable cash flow to cash flow from operating activities and EBITDA to net earnings.
3 See note 18 to the accompanying financial statements.
4 See "Capital Expenditures and Acquisitions" on page 29 of the MD&A for further discussion of Keyera's capital investment program.
Three months ended
Nine months ended
|Summary of Key Measures|
|(Thousands of Canadian dollars, except where noted)||2013||2012||2013||2012|
|Per share ($/share) - basic||0.52||0.18||1.44||0.98|
|Cash flow from operating activities||26,584||92,899||212,497||211,926|
|Distributable cash flow1||50,544||18,771||213,088||125,477|
|Per share ($/share)||0.64||0.24||2.73||1.66|
|Per share ($/share)||0.58||0.51||1.66||1.53|
|Payout ratio %1||90%||210%||61%||92%|
|Gathering and Processing:|
|Gross processing throughput (MMcf/d)||1,274||1,154||1,268||1,204|
|Net processing throughput (MMcf/d)||1,040||937||1,023||955|
|Gross processing throughput (Mbbl/d)||108||89||112||84|
|Net processing throughput (Mbbl/d)||30||32||34||33|
|Sales volumes (Bbl/d)||82,500||82,800||94,000||85,700|
|Acquisitions (including business combination)||80||19,281||27,088||266,382|
|Growth capital expenditures||93,065||34,123||192,162||78,618|
|Maintenance capital expenditures||19,571||29,352||31,076||44,694|
|Total capital expenditures||112,716||82,756||250,326||389,694|
|As at September 30,|
|Long-term debt 4||630,361||617,206|
|Working capital surplus3, 4||(239,350)||(130,445)|
|Convertible debentures 4||—||11,875|
|Net debt (including debentures)||681,011||593,636|
|Common shares outstanding - end of period||78,591||77,324|
|Weighted average number of shares outstanding - basic||78,160||75,746|
|Weighted average number of shares outstanding - diluted||78,611||76,475|
|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 32 of the MD&A for a reconciliation of distributable cash flow to its most closely related GAAP measure.|
|2||Beginning in the first quarter of 2013, Keyera excludes unrealized gains/losses from commodity related risk management contracts in the calculation of EBITDA. These non-cash gains/losses have been excluded because management believes it provides a better reflection of the financial performance of the business in the current period. The comparative amounts have been adjusted to reflect this change. EBITDA is defined as earnings (excluding unrealized gains/losses) 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 33 of the 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.|
|4||Included in the calculation of working capital for Q3 2013 are current liabilities related to the $6,791 of convertible debentures due on December 31, 2013.|
Message to Shareholders
Continuing demand for Keyera's services and products resulted in strong financial results for the third quarter of 2013. In addition, customer demand in both the Gathering and Processing and Liquids Business Units is creating significant new growth opportunities for Keyera. Several of these opportunities are underway, while others continue to be under evaluation. Further work is required to determine whether they will proceed.
EBITDA was $82.6 million in the third quarter of 2013, 36% higher than the $60.8 million posted in the same quarter of 2012. Distributable cash flow was $50.5 million ($0.64 per share) in the third quarter, $31.7 million higher than the $18.8 million ($0.24 per share) recorded in the third quarter last year. Two items affected distributable cash flow in the third quarter of 2013. First, maintenance capital of $19.6 million was higher than expected, largely due to a catalyst replacement at AEF and higher than expected turnaround costs at the Simonette gas plant. Second, realized losses on financial contracts put in place to protect the value of our butane inventory, reduced the Marketing segment's operating margin by approximately $16 million. A portion of these realized losses relate to butane that remained in inventory at the end of the third quarter. Higher operating margins are expected in future periods when the butane is sold or consumed as feedstock for the production of iso-octane.
In the Gathering and Processing Business Unit, several plants, including the Strachan, Minnehik Buck Lake and Caribou gas plants, benefitted from continued liquids-rich gas drilling activity in their regions. This activity has resulted in net throughput increasing 11% compared to the third quarter of 2012.
We have a number of new gathering pipeline initiatives underway to handle anticipated new production from developments in west central Alberta. We are working with producers interested in supporting the construction of the Twin Rivers pipeline, a 38-kilometre, 12-inch pipeline that will deliver gas to our Brazeau River and West Pembina gas plants. Assuming the necessary agreements can be negotiated in a timely manner, the pipeline could be completed as early as second quarter 2014.
At the Rimbey gas plant, three pipeline initiatives are underway. We are proceeding with an expansion of the Carlos pipeline, which is currently operating near capacity, by constructing a short connector pipeline from Carlos to other existing pipeline infrastructure. This will enable us to offload certain volumes from Carlos for delivery to the Rimbey gas plant. We anticipate this project to be complete in the second quarter of next year. At the south end of the Carlos pipeline, a producer is constructing a pipeline to tie into the Carlos system. The producer expects it to be operational by year end 2013, at which time Keyera will purchase the pipeline. We have also signed a letter of intent with a producer in the Rimbey area to build the Wilson Creek pipeline system to deliver raw gas and condensate to Rimbey from west of the plant. The Wilson Creek system would consist of two pipelines: a 12-inch raw gas pipeline and a 6-inch condensate pipeline. This project is subject to the parties signing definitive agreements.
In the Deep Basin area, several project initiatives are underway. We have received regulatory approval for the Wapiti pipeline system, clearing the way to commence construction of a 12-inch raw sour gas gathering pipeline and a 6-inch condensate line from the Wapiti area of Alberta to the Simonette gas plant. Assuming construction proceeds as scheduled, we anticipate completing the pipelines in the second quarter of 2014. In conjunction with the new pipelines, upon receipt of regulatory approvals we intend to begin plant modifications at Simonette that will allow us to process an additional 100 million cubic feet per day of raw natural gas and to handle the expected increase in condensate volumes.
A number of business initiatives are also underway in the Liquids Business Unit. In August, Keyera received regulatory approval for the construction of the de-ethanizer facility in Fort Saskatchewan. Site preparation is well underway and construction at the site is expected to begin shortly. In September, Keyera completed construction of the South Cheecham Rail and Truck Terminal located approximately 80 kilometres south of Fort McMurray. The facility is able to offload diluent delivered by rail for oil sands producers in the area, as well as receive and load undiluted and diluted bitumen onto rail cars for delivery to markets across North America. Deliveries of bitumen for loading onto rail cars began in late September and we look forward to providing additional services to customers in this area.
With North American demand for crude oil delivery by rail increasing, in July we announced plans to build the Alberta Crude Terminal, a crude oil rail loading facility adjacent to Keyera's Alberta Diluent Terminal in Edmonton. The Alberta Crude Terminal is a joint venture with Kinder Morgan, and the terminal will be pipeline connected to the Kinder Morgan crude oil storage terminal in Edmonton. This connection will enable customers to access multiple crude streams and qualities, providing them with substantial flexibility. Work is well underway on the Alberta Crude Terminal site.
We continue to work with producers to develop the proposed Alberta Liquids Pipeline System as a pipeline transportation alternative for NGL mix and condensate from the Deep Basin area of Alberta to Fort Saskatchewan. The Deep Basin is an area where considerable producer activity is expected over the coming years, as producers target the liquids-rich Montney, Duvernay and other liquids-rich geological zones.
We are also working with a number of producers who are interested in securing capacity in an expansion of our fractionator at Fort Saskatchewan. The proposed expansion would have a capacity of approximately 35,000 barrels per day of C3+ NGL mix. We are currently completing the front end engineering and design necessary to firm up the capital cost and project schedule and are also negotiating commercial terms with prospective customers. Depending on the level of commitment we can secure, a decision on whether to proceed with the expansion could be made by year-end.
We are pleased with Enbridge's success securing customer interest in the Norlite pipeline, a condensate transportation pipeline from the Edmonton/Fort Saskatchewan area to the Athabasca oil sands. As part of the service offering, on a limited basis the Norlite system may access certain existing capacity on Keyera's Fort Saskatchewan Condensate System. This would enable shippers to access condensate at numerous locations in the Edmonton/Fort Saskatchewan area, including Keyera's condensate storage facility. Keyera has the right to participate as a 30% non-operating owner in the Norlite pipeline and expects to make a decision in the near term.
We continued to develop new markets for iso-octane and the new demand has allowed us to increase utilization levels at Alberta EnviroFuels in 2013. Much of the incremental production is being delivered by rail using our loading facility at our Edmonton Terminal.
At this time, we anticipate that 2013 growth capital investment, excluding acquisitions, will likely be between $325 million and $375 million, lower than our previous guidance. This is largely due to adjustments in construction schedules, which have resulted in some of the work and capital expenditures originally planned for 2013 shifting to next year. In 2014, we currently anticipate growth capital investment, excluding acquisitions, will be between $500 million and $600 million. With the projects we have currently under evaluation, we anticipate that we will continue to make significant capital investments over the next several years.
This is an exciting period in Keyera's history and one where it is necessary to remain focused on the factors that have made us successful so far: developing a team of highly motivated, capable employees who understand and deliver superior customer service; operating in a manner that provides a healthy, safe and environmentally friendly workplace; and bringing a diligent and focused approach to our business and new business opportunities. It is these factors that will enable us to continue to provide steady and growing value for our shareholders.
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 and accompanying documents 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 and accompanying documents 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 this document and in Keyera's Annual Information Form dated February 14, 2013, filed on SEDAR and 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. Pipeline projects are also subject to Keyera's ability to secure the necessary rights of way. 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. It is unclear whether Alberta's move toward a single regulator will affect processing times for projects that are subject to regulatory approval. Regulatory applications are also subject to intervention by interested parties which could result in delays.
Readers are cautioned that they should not unduly rely on the forward looking statements in this document and accompanying documents. 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 and accompanying documents 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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