Keyera Corp. Announces 2010 Year End Results

CALGARY, Feb. 17 /CNW/ - Keyera Corp. announced their 2010 Year End Results today, the highlights of which are included in this press release. The entire press 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.

HIGHLIGHTS

-   Keyera delivered strong results again in 2010, driven by solid
        performance in its business.
    -   Distributable cash flow(1) totaled $207.9 million ($3.05 per unit).
        Distributions to unitholders were $122.9 million ($1.80 per unit),
        resulting in a payout ratio of 59%.
    -   Net earnings were $125.0 million ($1.84 per unit). Cash flow from
        operating activities was $153.7 million ($2.26 per unit).
    -   Concurrent with the release of its 2010 year end financial results,
        Keyera announced an increase to its dividend from $0.15 per share per
        month to $0.16 per share per month, or $1.92 per share annually. The
        6.7% increase will be effective with its March 2011 dividend, payable
        to shareholders on April 15.
    -   On January 1, 2011, Keyera converted from an income trust to a
        corporation called Keyera Corp. Going forward, Keyera's business
        strategy will not change and dividends will continue to be paid
        monthly to shareholders.
    -   In the fourth quarter, Keyera announced an agreement to provide
        transportation, storage and terminalling services to Husky Oil
        Operations for their Sunrise Oil Sands Project. The agreement will
        provide Keyera with secure, long-term fee-for-service cash flows,
        beginning in late 2014(2).
    -   Keyera also announced the construction of a 45 kilometre, 12 inch
        gathering pipeline to deliver liquids-rich gas from the Glauconite
        formation in the Hoadley area of Alberta to Keyera's Rimbey gas plant
        for processing. Construction is underway and the pipeline is expected
        to be in service in the second quarter of 2011.
    -   In November, Keyera acquired a 62.5% ownership interest in the
        Simonette gas plant, increasing its ownership in the facility to
        100%. In addition, Keyera also acquired the remaining interests in
        two large gathering systems and associated compression facilities.
        Simonette is located in the Deep Basin region of Alberta, where
        producers have recently made significant gas discoveries in the
        Montney and Wilrich zones.
    -   Total capital investment was $244.6 million in 2010, of which
        $184.0 million was acquisitions. Keyera expects its 2011 growth
        capital investment, excluding acquisitions, to be between
        $100 million and $130 million(3).
    -   In January 2011, Keyera closed a $70 million private placement of
        notes. The notes mature in 2019 and have a coupon of 5.005%. Proceeds
        were used to partially fund the acquisition of the Simonette gas
        plant.

    (1) See "Non-GAAP Financial Measures" on page 40 and a reconciliation of
        distributable cash flow to cash flow from operating activities on
        page 27.
    (2) Assumes that construction of the new Keyera operated facilities is
        completed on time and that phase 1 of the Sunrise Oil Sands Project
        is completed and operational as planned.
    (3) See "Capital Expenditures and Acquisitions" on page 26 for further
        discussion of Keyera's capital investment program.



    -------------------------------------------------------------------------
                                     Three months ended   Twelve months ended
    Summary of Key Measures              December 31,          December 31,
    (Thousands of Canadian dollars,
     except where noted)               2010       2009       2010       2009
    -------------------------------------------------------------------------
    Net earnings                     27,083     39,205    125,046    150,324
      Per unit ($/unit) - basic        0.39       0.60       1.84       2.36
    Cash flow from operating
     activities                      78,782     33,430    153,734    313,184

    Distributable cash flow(1)       65,955     43,064    207,889    259,990
      Per unit ($/unit)                0.95       0.66       3.05       4.08
    Distributions declared           31,251     58,477    122,857    144,010
      Per unit ($/unit)                0.45       0.90       1.80       2.25
      - Excluding special
       distribution(2)                 0.45       0.45       1.80       1.80
      Payout ratio%(1)                  47%       136%        59%        55%
      - Excluding special
       distribution(2)                  47%        68%        59%        44%

    Gathering and Processing:
    Gross processing throughput
     (MMcf/d)                         1,071        874        981        907
    Net processing throughput
     (MMcf/d)                           814        752        781        769
    NGL Infrastructure:
      Gross processing throughput
       (Mbbl/d)                          87         94         91         97
    Net processing throughput
     (Mbbl/d)                            30         31         27         31
    Marketing:
      Inventory value               125,404     78,181    125,404     78,181
    Sales volumes (bbl/d)            75,000     70,000     67,900     65,800

    Capital expenditures            158,078     35,305    244,589    100,056
    Proceeds from dispositions            -        (10)         -      3,777
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Long-term debt                                        404,410    258,209
    Working capital (surplus)
     deficit(3)                                            73,914     87,897
                                                        ---------------------
    Net debt                                              478,324    346,106
    Convertible debentures                                 27,903     75,293
                                                        ---------------------
    Net debt (including debentures)                       506,227    421,399

    Trust units outstanding -
     end of period                                         69,891     65,814
    Weighted average number of
     units outstanding - basic                             68,108     63,674
    Weighted average number of
     units outstanding - diluted                           71,139     68,255
    -------------------------------------------------------------------------
    Notes:

    (1) Payout ratio is defined as distributions declared to unitholders
        divided by distributable cash flow. Payout ratio and distributable
        cash flow are not standard measures under Canadian Generally Accepted
        Accounting Principles and, therefore, may not be comparable to the
        calculations of similar measures for other companies.
    (2) A special distribution of $0.45 per unit was paid on
        December 15, 2009.
    (3) Working capital is defined as current assets less current
        liabilities.

Message to Unitholders

Keyera was successful on a number of fronts in 2010. A slowdown in producer activity caused by low natural gas prices resulted in a challenging business environment. Despite this, Keyera continued to deliver strong financial results and implemented a number of strategic initiatives in both business units. Our success in varying business cycles is a testament to our clear vision, focused business strategy and team of talented employees. With our conversion to a corporation in January, we have changed our name to Keyera Corp. Although our name has changed, the attributes which have defined our success have not. Keyera's facilities and infrastructure are located in some of the most attractive areas for natural gas and oil sands development in the WCSB, where we expect significant new developments to occur. Looking ahead at 2011 and beyond, our business strategy positions us to provide value added services to customers, generate new sources of cash flow from internal growth opportunities and selectively pursue acquisitions.

Financial metrics were strong in 2010, despite being somewhat lower than 2009 when the timing of gains from Keyera's risk management program contributed to results significantly higher than usual. Fourth quarter distributable cash flow was $66.0 million ($0.95 per unit) compared to $43.1 million ($0.66 per unit) in the same period last year. Distributions to unitholders in the fourth quarter were $31.3 million ($0.45 per unit), resulting in a payout ratio for the fourth quarter of 47%.

Net earnings in 2010 were $125.0 million, compared to $150.3 million in 2009. Full year distributable cash flow was $207.9 million ($3.05 per unit), and distributions to unitholders were $122.9 million ($1.80 per unit), resulting in a payout ratio for 2010 of 59%. The cash flow available after paying distributions was used to fund the significant growth capital expenditures and acquisitions we completed this year.

As a result of this strong financial performance, low payout ratio and numerous business initiatives, we have announced a 6.7% dividend increase. Effective with the March 2011 dividend payable to shareholders on April 15, our dividend will increase from $0.15 per share per month to $0.16 per share per month, or $1.92 per share annually. The increase is consistent with our philosophy of increasing our dividend when possible, while balancing future capital needs and maintaining a prudent capital structure. Since going public in 2003, we have increased our dividend eight times, representing a 76% increase.

Gathering and Processing contribution in 2010 was $119.1 million, $5.4 million lower than 2009. Significant maintenance turnarounds at three of Keyera's larger facilities in the second quarter, and unexpected maintenance and one-time items in the fourth quarter, offset the increased contribution from new facilities acquired in the second half of 2010. The fee structures at the Strachan and Caribou gas plants, two of the facilities where turnarounds were completed this year, result in a significant reduction in gathering and processing contribution in the year the turnarounds occur.

In the Liquids Business Unit, contribution from our NGL Infrastructure segment was $63.2 million in 2010, $4.3 million higher than last year. Strong demand for storage and fractionation services throughout the year, as well as higher terminal activity during the first half of 2010, contributed to the strong results. The Marketing segment had another solid year with contribution of $79.2 million, compared to $83.5 million in 2009.

Keyera expanded its footprint significantly in 2010, strengthening its network of gathering and processing facilities. Keyera acquired interests in three additional gas plants in 2010: 21.8% of the Edson gas plant, 36.5% of the Minnehik Buck Lake gas plant, and 100% of the Simonette gas plant. Keyera is now the operator of the Minnehik Buck Lake and Simonette gas plants. These three plants have added 625 million cubic feet per day of gross processing capacity, as well as interests in several gathering pipelines and compression facilities. They have extended Keyera's reach into prime natural gas and oil development areas, particularly in the Deep Basin area of Alberta, where significant new liquids-rich gas development activity is occurring.

In addition to acquisitions, we pursued a number of internal growth projects at several facilities. Most significant was at our Caribou gas plant, where we expanded the plant capacity from 65 to 105 million cubic feet per day. We recently completed construction of a NGL delivery pipeline that allows NGLs to flow from the Strachan gas plant to our Fort Saskatchewan fractionation facility. In November, we announced the construction of a 45-kilometre, 12 inch raw gas gathering pipeline from our Rimbey gas plant into the Hoadley region, where a number of companies are actively drilling for liquids-rich gas found in the Glauconite geological formation.

The Liquids Business Unit is working on a number of initiatives. Work is underway on the condensate pipeline expansion project from Keyera's Fort Saskatchewan facility to the inlet of the Polaris diluent pipeline. The 20 inch pipeline will be approximately 21 km in length and has already received approval from regulatory authorities. All of the land required for the pipeline right of way has been acquired and construction is expected to begin in the summer of 2011.

We are also continuing work on the pipeline connection from the Enbridge Southern Lights pipeline to our Edmonton terminal. Assuming construction continues on schedule, we expect the connection to be completed in the second quarter of 2011. When operational, Keyera will be able to receive condensate from the Southern Lights pipeline and deliver it into Keyera storage or, via our pipeline network or rail terminals, to oil sands customers throughout Alberta.

As a result of the services we are able to provide customers in the Edmonton/Fort Saskatchewan area, in October we announced a long-term diluent services agreement with Husky Oil Operations for the Husky-operated Sunrise Oil Sands Project. The agreement includes diluent transportation, storage and terminalling services and is similar in nature to the agreement signed with Imperial Oil in November 2009. The services provided to Husky are expected to begin contributing to Keyera's cash flow in 2014, and because it will utilize the same infrastructure as the agreement with Imperial, will not require incremental capital expenditures. This agreement is further confirmation of the value that Keyera's condensate infrastructure network in the area provides to oil sands producers looking for long-term diluent supply and logistics options.

In Fort Saskatchewan, we have successfully completed all integrity testing on our eleventh storage cavern and are awaiting regulatory approval to begin operations. The cavern increases gross storage capacity by about 800,000 barrels to over 10.5 million barrels at our Fort Saskatchewan facility. In September, we began development of our twelfth cavern at Fort Saskatchewan. The well bore was completed by year-end and washing of the cavern is underway. Based on our previous experience, we expect the cavern to be ready for service in 2013.

In December, we established a private uncommitted debt facility with a limit up to $125 million. In January, we closed a $70 million private placement under this facility to help finance the acquisition of the Simonette gas plant. The notes mature in 2019 and bear interest at a rate of 5.005%.

Looking forward, I am excited about the opportunities I see for Keyera. Despite soft natural gas prices and reduced drilling in 2010, I am encouraged by recent strong land sale activity around many of our plants. Producers' success using horizontal drilling and multi-fracturing completion techniques have significantly strengthened the economics of liquids-rich gas development. Keyera is well-positioned to provide services to producers who are focused on drilling the many new liquids-rich resource plays that are being developed in the deep basin and foothills front regions of western Canada.

Our acquisition of the Simonette gas plant has positioned us to generate new business in the Deep Basin area, where a large number of producers are targeting the Montney, Wilrich and Duvernay zones. Our Carlos pipeline will enable us to gather gas from the Hoadley area, where drilling in the Glauconite zone is poised to deliver favorable economic results for producers. In our Liquids Business Unit, we continue to enhance our infrastructure to capture additional business from the growing oil sands sector. In 2011, we anticipate spending between $100 million and $130 million, excluding acquisitions, on attractive internal growth projects in both business lines.

The stable fee-for-service nature of a large portion of our cash flow, combined with the growth opportunities we see ahead for the business, support our vision of providing our shareholders with stable value growth built around sustainable, competitive energy facilities.

On behalf of Keyera's directors and management team, I thank you for your support and look forward to reporting on our continuing success in 2011 and beyond.

Jim V. Bertram
    President and CEO,
    Keyera Corp. (formerly Keyera Facilities Income Fund)

DISCLAIMER

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 and actions taken by counterparties to agreements; activities of other facility owners; 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 unitholders, and in particular any differential effects relating to unitholder'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 17, 2011, all of which are available on Sedar at www.sedar.com and 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.

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 and Keyera does not undertake any obligation to publicly update or to revise any of the forward looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable laws.

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.

For further information: about Keyera, please visit our website at www.keyera.com or contact: John Cobb, Director, Investor Relations, E-mail: ir@keyera.com, Telephone: (403) 205-7670, Toll Free: (888) 699-4853, Facsimile: (403) 205-8425