Keyera Facilities Income Fund Announces 2009 Year End Results

CALGARY, Feb. 18 /CNW/ - Keyera Facilities Income Fund announced their 2009 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 excellent results in 2009, driven by strong
        performance in both business units.

    -   Distributable cash flow(1) totaled $260.0 million ($4.08 per unit),
        significantly higher than in 2008. Included in this amount was
        $51 million ($0.80 per unit) of proceeds from the settlement of risk
        management financial contracts. Distributions to unitholders were
        $144.0 million ($2.25 per unit) and included a special distribution
        of $0.45 per unit, which was paid on December 15. Keyera's payout
        ratio was 55%.

    -   Net earnings were $150.3 million ($2.36 per unit), 9% lower than in
        2008. Cash flow from operating activities was $313.2 million, or
        $4.92 per unit.

    -   Gathering and Processing posted record contribution of
        $124.4 million, the highest in Keyera's history and 14% higher than
        2008.

    -   The performance of the Liquids Business Unit was also strong, with
        NGL Infrastructure contribution of $58.9 million setting a new
        record, up 18% from 2008, and Marketing posting contribution of
        $83.5 million, very strong results despite being 18% lower than the
        record set in 2008.

    -   In November, Keyera announced an agreement to provide transportation,
        storage and terminalling services to Imperial Oil for their Kearl oil
        sands project. The agreement will provide Keyera with secure, long-
        term fee-for-service cash flows, beginning in late 2012(2), and will
        position Keyera to offer similar services to other oil sands
        producers.

    -   Growth capital investment was $98.8 million in 2009. Keyera expects
        its 2010 growth capital investment to be between $80 million and
        $100 million(3).

    -   In the fourth quarter, Keyera acquired an additional 33% ownership in
        its West Pembina gas plant, bringing its ownership interest to 69%.
        Keyera also made a decision to complete the 40 million cubic foot per
        day expansion at its Caribou gas plant, after receiving additional
        producer commitments to support the project.

    -   Keyera intends to seek unitholder approval to convert to a
        corporation at its Annual and Special Meeting on May 11, 2010.
        Subject to obtaining all necessary consents and approvals, Keyera
        expects to implement its new corporate structure effective January 1,
        2011.

    (1) See "Non-GAAP Financial Measures" on page 37 and a reconciliation of
        distributable cash flow to cash flow from operating activities on
        page 25 of Keyera's 2009 Year End Earnings Release, which can be
        found at www.keyera.com.
    (2) Assumes that construction of the new Keyera operated facilities is
        completed on time and that phase 1 of the Kearl project is completed
        and operational as planned.
    (3) See "Capital Expenditures and Acquisitions" on page 24 of Keyera's
        2009 Year End Earnings Release, which can be found at www.keyera.com,
        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)               2009       2008       2009       2008
    -------------------------------------------------------------------------
    Net earnings                     39,205     50,877    150,324    165,485
      Per unit ($/unit) - basic        0.60       0.81       2.36       2.68
    Cash flow from operating
     activities                      33,430    115,760    313,184     91,302

    Distributable cash flow(1)       43,064     35,763    259,990    135,702
      Per unit ($/unit)                0.66       0.57       4.08       2.20
    Distributions declared           58,477     28,141    144,010    105,501
      Per unit ($/unit)                0.90       0.45       2.25       1.69
      - Excluding special
         distribution                  0.45          -       1.80          -
      Payout ratio %(1)                136%        79%        55%        78%
      - Excluding special
         distribution                   68%          -        44%          -

    Gathering and Processing:
    Gross processing throughput
     (MMcf/d)                           874        867        907        870
    Net processing throughput
     (MMcf/d)                           752        676        769        671
    NGL Infrastructure:
    Gross processing throughput
     (Mbbl/d)                            94         96         97         99
    Net processing throughput
     (Mbbl/d)                            31         35         31         32
    Marketing:
    NGL inventory value              78,181     53,127     78,181     53,127
    Sales volumes (bbl/d)            70,000     75,700     65,800     60,400

    Capital expenditures             35,305    188,555    100,056    321,901
    Proceeds from dispositions          (10)       723      3,777      1,266
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Long-term debt                                        258,209    223,561
    Working capital deficit(2)                             96,966    144,479
                                                         --------------------
    Net debt                                              355,175    368,040
    Convertible debentures                                 75,293     79,034
                                                         --------------------
    Net debt (including debentures)                       430,468    447,074

    Trust units outstanding - end of
     period                                                65,814     62,888
    Weighted average number of units
     outstanding - basic                                   63,674     61,694
    Weighted average number of units
     outstanding - diluted                                 68,255     63,549
    -------------------------------------------------------------------------
    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) Working capital is defined as current assets less current
        liabilities.
    

Message to Unitholders

Keyera posted exceptional results in 2009, supported by continued strong operating performance from all of our business lines in the fourth quarter. We achieved these results in a year when industry and the overall global economy faced a number of challenges. We take great pride in the fact that the business model we developed over the last decade met the tests presented by these events and we were able to continue to deliver stable cash flow to our unitholders. We believe that our success is the result of our focus on a consistent strategy centred around our diversified but integrated business lines, and we intend to continue this approach in the future.

In 2009, distributable cash flow was $260.0 million, or $4.08 per unit, almost double the amount posted in 2008. Included in this amount was $51 million ($0.80 per unit) of proceeds from the settlement of risk management financial contracts. Distributions to unitholders were $144.0 million, or $2.25 per unit, including a special distribution of $0.45 per unit paid to unitholders on December 15. This resulted in a payout ratio of 55%. Net earnings were $150.3 million, compared to $165.5 million in 2008, and cash flow from operations was $313.2 million, about $222 million higher than 2008.

Gathering and Processing contribution was $124.4 million, the highest in Keyera's history and 14% higher than 2008. Although activity levels in western Canada declined significantly compared to 2008, drilling continued in the lands around many of our plants, albeit at a slower pace. Throughput at our facilities increased by over 4% compared to 2008. If we exclude volumes at our Nevis gas plant, which we acquired in late 2008, throughput decreased by less than 4%. Compared to the 7% decline in throughput overall in Alberta, the performance of our Gathering and Processing business this year supports our view that the western side of the basin, where the majority of our plants are located, is a key area for natural gas exploration and production.

Contribution from the two business segments within our Liquids Business Unit was also strong. NGL Infrastructure contribution was $58.9 million, 18% higher than last year, setting a new record. Continued strong demand for storage services, primarily from the oil sands sector, together with solid fractionation and pipeline revenues contributed to these record results. Marketing contribution of $83.5 million, although 18% lower than the record results of 2008, was still very strong. These results were driven by steady butane demand and margins throughout the year, combined with strong first and fourth quarter results in our propane business.

In the fourth quarter, we saw continued drilling activity in the foothills front region of Alberta, particularly around our Strachan, Nordegg River and Brazeau River gas plants. To the east, activity increased in the fourth quarter around the Rimbey gas plant as producers continued their drilling programs. Many of these wells are being drilled horizontally, and are targeting tight gas formations. We also signed a new agreement with a large producer to process gas at our Nevis gas plant. Late in the quarter, we signed an agreement with a producer in northeast British Columbia which will allow us to complete the 40 million cubic foot per day plant expansion at our Caribou gas plant. Several other producers were also drilling around Caribou in the fourth quarter and we are encouraged by the renewed exploration activity we are seeing in the area.

Recently, we have seen a number of positive signs with respect to potential producer activity around our plants. For example, a number of producers have announced increases to drilling budgets in 2010 and we have been approached by several producers seeking gathering and processing services. Some of the factors that may be supporting an increase in drilling include improvements in the credit and capital markets which may enhance producers' access to capital to fund their drilling programs, and strengthening natural gas prices compared to the lows of 2009, which could allow producers to lock in attractive forward prices.

In our Liquids Business Unit, the diluent services agreement that we signed with Imperial Oil in November to support their Kearl oil sands project represented another step in the implementation of our oil sands business strategy. Over the last several years we have strengthened our infrastructure in the Edmonton/Fort Saskatchewan energy hub to enable us to provide the range of services and flexibility needed by oil sands producers to manage their diluent needs. The Kearl agreement solidifies our position as a premier provider of diluent services in the area and, when the Kearl project begins operation in late 2012, will provide us with secure, stable long-term cash flows. Perhaps as importantly, the new infrastructure we will be constructing in connection with this agreement will have excess capacity, which will give us an opportunity to provide similar services to other oil sands producers.

As we look to the future, we continue to believe there are many opportunities available to us in each of our business lines. In our Gathering and Processing business, we are continuing to identify internal opportunities to increase cash flow by leveraging existing facilities and adding to our gathering and compression infrastructure. In the Liquids Business Unit, we are evaluating constructing a second new storage cavern and looking for ways to expand the connectivity and flexibility of our infrastructure in the Edmonton/Fort Saskatchewan area. In both areas, we continue to look for acquisitions that fit our strategy and strengthen our value chain. In 2010, we anticipate investing between $80 and $100 million of growth capital on these types of projects, but we have the financial flexibility to undertake larger transactions should the opportunity arise.

At our Annual and Special Meeting on May 11, 2010, we will be seeking Unitholder approval to convert to a corporation. Subject to receiving all necessary consents and approvals, our plan is to have the new corporate structure take effect on January 1, 2011. We believe this is an appropriate decision, given the change to the taxation of Canadian income trusts at that time. As a corporation, our approach to the business will not change and we will continue to focus on the things that have made us successful thus far. As previously announced, we believe we are positioned to set our corporate dividend at the same level as our current annual distribution of $1.80 per unit. For our taxable Canadian shareholders, the dividend you receive from the new corporation will qualify for a dividend tax credit, resulting in higher after tax proceeds each month compared to the current distribution.

Finally, I am pleased to report that on February 16, 2010, Keyera celebrated a milestone when its cumulative distributions exceeded $10.00 per unit. Those of you who have held Keyera units since inception in 2003 have now had your entire investment returned to you in the form of distributions. In addition, over that period your units have more than doubled in value. We are very proud of this accomplishment and look forward to continuing to deliver value to unitholders for many years to come.

On behalf of the Fund's directors and management team, I thank you for your continued support and look forward to continued success in 2010.

    
    Jim V. Bertram
    President and CEO
    Keyera Facilities Income Fund
    

DISCLAIMER

Certain statements contained in this document contains forward-looking statements. These statements relate to future events or the Fund'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, including, without limitation, statements regarding: the future financial position of Keyera; business strategy and plans of management; anticipated growth and proposed activities; budgets, including future capital, operating or other expenditures and projected costs; estimated utilization rates; objectives of or involving Keyera; impact of commodity prices; treatment of Keyera under governmental regulatory regimes; the impact of the risk management program, including the approximate and maximum amount of forward sales and hedging to be employed; and expectations regarding Keyera's ability to raise capital and to add to its assets through acquisitions or internal growth opportunities.

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 MD&A and accompanying documents may also contain forward-looking statements attributed to third party sources. Management believes that its assumptions and analysis 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; the operation of the Premium DRIP(TM), including participation rates; operational matters, including potential hazards inherent in our operations; risks arising from co-ownership of facilities; 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; 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 18, 2010 filed on SEDAR and available on the Keyera website at www.keyera.com.

Keyera's plans to convert to a corporation effective January 1, 2011 and its anticipated dividend policy, as a corporation, are based on the continuation of favourable growth parameters for current and future projects (including Keyera's ability to finance such projects on favourable terms) and continued sustainable results of all Keyera's business segments. Keyera's disclosure with respect to its conversion plans also assumes there will be no change in the rules governing conversion in the interim. These assumptions may be affected by any or all of the factors listed above, as well as the factors listed under the heading "Corporate Conversion".

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 this date 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.

%SEDAR: 00019203E

SOURCE Keyera Corp.

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


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