Keyera Corp. Announces First Quarter 2011 Results

CALGARY, May 10 /CNW/ - Keyera Corp. (TSX:KEY) (TSX:KEY.DB) (TSX:KEY.DB.A) announced their first quarter 2011 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.

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    HIGHLIGHTS

    -   Keyera delivered strong first quarter results, driven by solid
        performance from the Gathering and Processing and NGL Infrastructure
        groups, and seasonally strong results from the Marketing segment.

    -   Distributable cash flow totaled $65.3 million ($0.93 per share).
        Dividends to shareholders were $32.3 million ($0.46 per share),
        resulting in a payout ratio of 49%. Net earnings were $84.7 million
        ($1.21 per share).

    -   Keyera increased its dividend from $0.15 per share per month, to
        $0.16 per share per month, or $1.92 per share annually beginning with
        its dividend paid on April 15, 2011. This is Keyera's eighth dividend
        increase since going public in 2003, representing a 7.5% compound
        annual growth rate in dividends per share.

    -   On January 1, 2011, Keyera converted from an income trust to a
        corporation called Keyera Corp. Going forward, Keyera does not intend
        to change its business strategy and plans to continue to pay
        dividends monthly to shareholders.

    -   Beginning with the first quarter 2011, Keyera adopted International
        Financial Reporting Standards.

    -   Construction of the Carlos pipeline, a 45-kilometre, 12-inch
        gathering pipeline delivering liquids-rich gas to Keyera's Rimbey gas
        plant, was completed in mid-April and first gas flowed in the
        pipeline on April 21, 2011.

    -   The pipeline connection between the Enbridge Southern Lights diluent
        pipeline and Keyera's Edmonton terminal was completed in April and is
        expected to be in service in May.

    -   The connection allowing Keyera to deliver NGL mix by pipeline from
        the Strachan gas plant to Fort Saskatchewan for fractionation was
        completed in the first quarter of 2011. The pipeline provides another
        important link between Keyera's Gathering and Processing and Liquids
        Business Units.

    -   Total growth capital investment during the first quarter was $28.2
        million. Keyera expects its 2011 growth capital investment, excluding
        acquisitions, to be between $100 million and $130 million(2).

    (1) See "Non-GAAP Financial Measures" on page 30 and page 22 of the MD&A
        for a reconciliation of distributable cash flow to cash flow from
        operating activities.
    (2) See "Capital Expenditures and Acquisitions" on page 20 of the MD&A
        for further discussion of Keyera's capital investment program.

    -------------------------------------------------------------------------
                                                          Three months ended
                                                              March 31,
    Summary of Key Measures
    (Thousands of Canadian dollars,
     except where noted)                                    2011      2010(4)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings                                          84,691      27,650
      Per share(3) ($/share) - basic                        1.21        0.42
    Cash flow from operating activities                  165,496      82,155

    Distributable cash flow(1)                            65,343      59,603
      Per share ($/share)(3)                                0.93        0.90
    Dividends declared                                    32,285      30,038
      Per share ($/share)(3)                                0.46        0.45
      Payout ratio %(1)                                      49%         50%
    Gathering and Processing:
    Gross processing throughput (MMcf/d)                   1,143         882
    Net processing throughput (MMcf/d)                       866         755
    NGL Infrastructure:
    Gross processing throughput (Mbbl/d)                      85          93
    Net processing throughput (Mbbl/d)                        27          29
    Marketing:
    Inventory value                                       43,316      62,741
    Sales volumes (bbl/d)                                 80,800      76,300

    Capital expenditures                                  29,169      12,287
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Long-term debt                                       516,572     346,731
    Working capital deficit (surplus)(2)                 (58,626)    (31,189)
                                                       ----------------------
    Net debt                                             457,946     315,542
    Convertible debentures                                26,107      67,399
                                                       ----------------------
    Net debt (including debentures)                      484,053     382,941

    Common shares outstanding - end of period(3)          70,354      67,121
    Weighted average number of shares
     outstanding - basic(3)                               70,102      66,532
    Weighted average number of shares
     outstanding - diluted(3)                             71,732      70,524
    -------------------------------------------------------------------------

    Notes:

    (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 International Financial Reporting
        Standards and, therefore, may not be comparable to the calculations
        of similar measures for other companies.
    (2) Working capital is defined as current assets less current
        liabilities.
    (3) For the comparative period, shares and dividends were previously
        referred to as "units" and "distributions" reflecting Keyera's income
        trust structure prior to its conversion to a corporation effective
        January 1, 2011.
    (4) Certain comparative amounts have been restated to conform with the
        transition to International Financial Reporting Standards effective
        January 1, 2010. Refer to note 20 of Keyera's first quarter financial
        statements for further information on the transition to International
        Financial Reporting Standards.
    >>

Message to Shareholders

It was a successful start to the year as Keyera continued to benefit from producer activity around our gas plants and the ramp-up of oil sands developments in Alberta. Our conversion from an income trust to a corporation became effective January 1, 2011. While this represents a significant change to Keyera's legal structure, it does not change our approach to the business. Our vision of delivering steady value growth built around sustainable, competitive energy facilities will continue to guide our strategy. To achieve this, we will continue to manage our business with the same focus and discipline that contributed to our success as an income trust.

Operational successes in all of Keyera's business segments resulted in strong first quarter financial performance. Distributable cash flow for the quarter was $65.3 million ($0.93 per share), with distributions to shareholders totaling $32.3 million ($0.46 per share). This equates to a payout ratio of 49%, in line with our commitment to balancing yield with growth opportunities.

Effective with the March 2011 dividend payable to shareholders on April 15, Keyera's dividend increased 7% from $0.15 per share per month to $0.16 per share per month, or $1.92 per share annually. This is Keyera's eighth consecutive dividend increase since going public in 2003, representing a 76% increase. The increase is a result of continued solid financial results, a low payout ratio and numerous growth initiatives.

First quarter Gathering and Processing operating margin was $35.8 million, an increase of 14% over the first quarter in 2010. The gas plants we acquired in 2010, combined with drilling activity in many of our operating areas, resulted in an increase in throughput at Keyera's gas processing plants.

Operating margin from our NGL Infrastructure segment was $16.3 million, an increase of 4% compared to the same period last year. Continued demand for storage, terminalling and pipeline services contributed to the results. The Marketing group also posted very strong results, with an operating margin of $39.4 million in the first quarter. Cold weather in many parts of North America contributed to strong propane margins in the quarter, while butane margins and demand remained steady. Keyera continues to benefit from its integrated assets located in the Edmonton/Fort Saskatchewan energy hub.

In response to sustained low natural gas prices, producers have high-graded their drilling inventories and are focusing on multi-zone, liquids-rich natural gas areas. Keyera is well-positioned to provide producers with enhanced liquids recovery at our plants, along with access to Alberta's NGL markets, helping our producer customers to maximize value from their gas developments.

In addition to favouring liquids-rich gas reserves, producers continue to make use of horizontal drilling and multi-fracturing technologies, leading to higher production levels. An increase in throughput is positive for both the producers, lowering per unit costs and increasing netbacks, and Keyera, optimizing our facilities and generating additional fee-for-service cash flows. This was particularly evident at our Rimbey, Gilby and Strachan gas plants, where throughput increased compared to the fourth quarter of 2010.

The acquisition of the Simonette gas plant late in 2010 made a positive contribution to first quarter results. Simonette serves as a good example of having the right facility, at the right time, in the right location. The plant has a licensed capacity of 150 million cubic feet per day and comes with an extensive gathering system. The areas around the plant are experiencing significant activity, driven by exploration and production of the liquids-rich Montney, Wilrich and Duvernay geological formations. Simonette is versatile, with the ability to gather and process natural gas (both sweet and sour) and extract significant amounts of NGLs from the gas. It is also connected to natural gas export pipelines, along with NGL and condensate pipelines for delivery to Alberta's NGL marketing hub in Edmonton/Fort Saskatchewan. Simonette captures value throughout the entire natural gas and NGL value chain, and fits nicely into Keyera's infrastructure network.

Construction of the Carlos pipeline was completed in late April and first gas flowed in the pipeline on April 21, 2011. The Carlos pipeline is a 45-kilometre, 12-inch gathering pipeline that delivers natural gas produced from the Glauconite formation in the Hoadley area of Alberta to Keyera's Rimbey gas plant for processing. The gas in the Glauconite zone is rich in liquids and the economics of the development have attracted several major producers to the area. In April, Keyera entered into another agreement with a major producer in the Hoadley area for delivery of their Glauconite gas production to the Carlos pipeline. Pipeline volumes are not expected to ramp up until after Rimbey completes its maintenance turnaround in mid May.

At the Strachan gas plant, we completed construction of a pipeline to deliver NGL mix for processing at our Fort Saskatchewan fractionator. This pipeline streamlines our NGL logistics and further integrates our gathering and processing assets and NGL facilities at Fort Saskatchewan.

Longer term, the increasing importance of NGLs provides Keyera with several near, mid and long-term growth opportunities. At our gathering and processing facilities, we are evaluating investments at several of our facilities to remove additional quantities of NGLs by taking a "deeper cut" of liquids from the gas stream. Additional pipeline projects are also under consideration, as drilling activity concentrates in liquids-rich areas within the basin.

In the Gathering and Processing segment, land sales are often a good indication of future activity in the basin, and we are encouraged by producer activity levels we have seen to date. Given these activity levels, we can reasonably expect to see an increasing number of well tie-ins and consequently increasing throughput at a number of our facilities.

In Keyera's Liquids Business Unit, growth projects are a direct result of the growing demand for our services from oil sands producers. Construction of the pipeline connection between the Enbridge Southern Lights pipeline and Keyera's Edmonton terminal was completed in April. The connection will facilitate the movement of condensate from the Southern Lights pipeline, a long-term diluent supply source, to Keyera's storage or to oil sands producers throughout Alberta. Our ability to receive diluent from multiple sources, together with our storage, terminal and delivery options, strengthens our position as the diluent service provider of choice and positions us for continued growth as oil sands development continues.

Construction of the condensate pipeline between Keyera's Fort Saskatchewan facility and the Polaris diluent pipeline also began this quarter. Site preparation was completed during the first quarter and construction of the 20-inch, 21-kilometre pipeline is expected to begin in the summer of 2011.

Also at our Fort Saskatchewan facility, our new 800,000 barrel salt cavern was recently completed and is awaiting regulatory approval before being contracted for next year's storage season. Washing of our twelfth cavern is ongoing with completion scheduled for early 2013.

With the completion of these enhancements to our NGL facilities, we expect to see increasing demand for diluent transportation and storage services.

The first quarter is the first reporting period prepared in accordance with International Financial Reporting Standards ("IFRS"), and further details on the transition from Canadian GAAP to IFRS are included in the MD&A.

I have had the pleasure of working with David Smith for the past 12 years and it gives me great pleasure to announce his appointment as President and Chief Operating Officer. David is a founding member of Keyera and has held a variety of senior positions within the Company. We look forward to David's continued insight and expertise. I personally look forward to focusing my efforts on strategic planning and growing the business alongside our leadership team.

On behalf of Keyera's directors and management team, thank you for your continued support in 2011.

Jim V. Bertram

Chief Executive Officer

Keyera Corp.

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.

SOURCE Keyera Corp.

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


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