Keyera Corp. Announces Year End 2015 Results

CALGARY, Feb. 10, 2016 /CNW/ - Keyera Corp. (TSX:KEY) announced its 2015 year end results today, the highlights of which are included in this news release. The entire news 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 had a record year, generating adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA")^1,2 of $705 million, 33% higher than the $530 million in 2014.
• All three business segments contributed to the record financial results. The Gathering and Processing Business Unit reported operating margin³ of $259 million in 2015 (2014 - $218 million) mainly due to new and expanded facilities; the NGL Infrastructure segment generated operating margin³ of $220 million (2014 - $189 million) as demand for our enhanced services increased; and the Marketing segment's operating margin³ was $244 million (2014 - $237 million) as a result of strong iso-octane margins and an effective risk management strategy.
• Distributable cash flow^1,2 was $482 million ($2.84 per share⁴) for the year, 24% higher than the $389 million ($2.37 per share⁴) recorded in 2014.
• With continued growth in cash flow, Keyera increased its monthly dividend by 16% in 2015 to $0.125 per share per month. Keyera's payout ratio remained conservative at 50% in 2015 compared to 53% in 2014.
• Net earnings were $202 million ($1.19 per share⁴) for the year compared to $230 million ($1.40 per share⁴) in 2014.
• Growth capital investment in 2015, excluding acquisitions, was $641 million⁵, with several capital projects completed during the year and generating incremental cash flow.
• Gathering and processing projects completed during the year included the Simonette gas plant expansion and condensate stabilizer, the Twin Rivers pipeline system, the turbo expander at the Rimbey gas plant and the newly constructed Alder Flats and Zeta Creek gas plants.
• Projects completed in 2015 to enhance the natural gas liquids handling capabilities included the de-ethanizer at Keyera's Fort Saskatchewan ("KFS") facility and the Josephburg Rail Terminal.
• During the fourth quarter, progress was made on a number of other projects that will support the long-term infrastructure needs of the industry and generate future incremental cash flow. These projects include the fractionation expansion and additional underground storage at KFS, the Norlite and South Grand Rapids diluent pipelines, and the Base Line Terminal above ground storage project. 
• In 2016, growth capital investment, excluding acquisitions, is expected to range between $600 million and $700 million⁵ and will focus on NGL Infrastructure projects backed by customer demand.
• Keyera amended its bank credit facility in December 2015 by extending the term to December 2020 and increasing the limit from $1 billion to $1.5 billion, with the potential to increase to $1.85 billion subject to certain conditions. At December 31, 2015, $370 million was drawn under this facility.

^1	See "Non-GAAP Financial Measures" on page 47 of the MD&A.
^2	See pages 39 and 40 of the MD&A for a reconciliation of distributable cash flow to cash flow from operating activities and Adjusted EBITDA to net earnings.
^3	See note 29 to the accompanying financial statements.
^4	On April 1, 2015, Keyera's outstanding common shares were split on a two-for-one basis. All per share information is presented on a post-share split basis.
^5	See "Capital Expenditures and Acquisitions" on page 37 of the MD&A for further discussion of Keyera's capital investment program.

		Three months ended December 31,		Twelve months ended December 31,
Summary of Key Measures (Thousands of Canadian dollars, except where noted)		2015	2014	2015	2014
Net earnings		20,215	29,387	201,920	229,989
	Per share ($/share) – basic^1	0.12	0.17	1.19	1.40
Cash flow from operating activities		126,444	179,759	648,155	460,594
Distributable cash flow^2		123,176	102,356	482,118	388,961
	Per share ($/share)^1	0.72	0.61	2.84	2.37
Dividends declared		64,259	54,353	240,685	207,228
	Per share ($/share)^1	0.38	0.32	1.42	1.26
	Payout ratio %^2	52%	53%	50%	53%
Adjusted EBITDA^3		175,249	127,879	704,640	530,051
Gathering and Processing:
Gross processing throughput (MMcf/d)		1,541	1,562	1,498	1,420
Net processing throughput (MMcf/d)		1,174	1,292	1,155	1,177
NGL Infrastructure^6:
Gross processing throughput (Mbbl/d)		137	114	133	116
Net processing throughput (Mbbl/d)		41	34	41	32
Marketing:
Inventory value		76,989	124,292	76,989	124,292
Sales volumes (Bbl/d)		118,300	112,100	110,500	94,800
Acquisitions		6,949	92,849	24,644	221,388
Growth capital expenditures		129,089	213,019	641,427	734,812
Maintenance capital expenditures		6,103	3,516	64,831	51,983
Total capital expenditures		142,141	309,384	730,902	1,008,183
				As at December 31,
				2015	2014
Long-term debt^5				1,156,486	1,152,133
Credit facilities				370,000	90,000
Working capital deficit (surplus)^4				73,622	(80,726)
Net debt				1,600,108	1,161,407
Common shares outstanding – end of period^1				171,702	168,677
Weighted average number of shares outstanding – basic^1				169,936	164,366
Weighted average number of shares outstanding – diluted^1				169,936	164,366

Notes:
^1	On April 1, 2015, Keyera's outstanding common shares were split on a two-for-one basis.  All per share information has been presented on a post-share split basis.
^2	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 39 for a reconciliation of distributable cash flow to its most closely related GAAP measure.
^3	Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, accretion, impairment expenses, unrealized gains/losses and any other non-cash items such as gains/losses on the disposal of property, plant and equipment. EBITDA and Adjusted EBITDA are not standard measures under GAAP. See section of the MD&A titled "EBITDA" for a reconciliation of Adjusted EBITDA to its most closely related GAAP measure.
^4	Working capital is defined as current assets less current liabilities.
^5	Net of issuance costs.
^6	Throughput from the NGL Infrastructure segment includes only fractionation and de-ethanization volumes at the Keyera and Dow Fort Saskatchewan facilities.

Message to Shareholders

Keyera's network of strategically located and interconnected gas plants, pipelines and facilities, as well as our diverse service offering, continued to generate impressive results in 2015. For the third consecutive year, all three of Keyera's business segments generated record results. Our key financial and operating metrics were impressive, reporting a year-over-year increase of 24% in distributable cash flow and a 33% increase in Adjusted EBITDA. Given the strength in our business, we increased our dividend by 16% during 2015 while still maintaining a conservative balance sheet and payout ratio.

Our results reflect the strength of our strategy and contributions from our growth capital program. To further enhance our integrated infrastructure and service offering, we invested $641 million in growth capital during the year and completed a number of projects that are adding incremental cash flow. Keyera's customers continue to benefit from our integrated services, delivering increasing amounts of natural gas and natural gas liquids to our facilities and moving more condensate barrels through our system in 2015. With a disciplined strategy, strategically located assets and a strong balance sheet, Keyera is well positioned to continue to create shareholder value.

Gathering and Processing Business Unit

The Gathering and Processing Business Unit reported record results in 2015 even as third-party sales gas pipeline restrictions affected certain facilities and planned maintenance turnarounds were completed at four gas plants. Operating margin of $259 million was 19% higher than in 2014, primarily as a result of incremental cash flow from growth capital projects.

During the year, we expanded the Simonette gas plant, adding 100 million cubic feet per day of processing capacity and a 10,000 barrel per day condensate stabilizer. With our recent capital investments, the Simonette gas plant and Wapiti pipeline are well positioned to support future development of the Montney and Duvernay zones in the area. At the Rimbey gas plant, we enhanced our liquids extraction capability by adding a 400 million cubic feet per day turbo expander. The project was completed in July and allows us to extract ethane for sale to a large consumer in Alberta under a long-term sales agreement. During the year, we also completed the Twin Rivers pipeline system that is delivering incremental gas to our Brazeau River and West Pembina gas plants, and we began processing volumes at the newly constructed Alder Flats and Zeta Creek gas plants. 

Overall, gross throughput volumes for the year increased 5% to an average of 1,498 million cubic feet per day as incremental volumes from our capital investments more than offset the effect of curtailments by TransCanada on certain sales gas pipelines and the scheduled turnarounds at four of our facilities. In the fourth quarter, gross throughput volumes averaged 1,541 million cubic feet per day, an increase over the prior quarter as third-party curtailments were lifted on many of our affected facilities in mid-December.

The low commodity price environment has resulted in a slower pace of drilling and development in the Western Canada Sedimentary Basin. While our throughput volumes have decreased at certain gas plants, to date there has not been a material impact on our aggregate volumes or cash flows. Producers continue to develop resource plays around certain core Keyera facilities, including the Rimbey, Strachan, Brazeau River, West Pembina, Simonette and Minnehik Buck Lake gas plants, but continued reduced drilling activity across the entire basin will eventually affect our aggregate throughput volumes. 

Liquids Business Unit – NGL Infrastructure Segment

The NGL Infrastructure segment also delivered record operating results in 2015, reporting operating margin of $220 million, a 16% increase over the prior year. Growing demand for Keyera's NGL and diluent handling services supports the success of this business segment and we continue to enhance and expand our asset base in the Edmonton/Fort Saskatchewan area.

Our KFS complex provides fractionation, storage and transportation services for oil and gas producers. To complement our service offering, during the year we completed the 30,000 barrel per day de-ethanizer that is underpinned by a long-term take-or-pay agreement. The 13^th underground storage cavern and fourth brine pond were brought into service and we are currently washing two additional caverns that will add to our 12.5 million gross barrels of underground storage capacity at KFS. The Josephburg Rail Terminal, located just east of KFS, was also completed in 2015 and provides needed additional capacity for the export of propane from Western Canada. In 2016, we will more than double our propane-plus fractionation capacity at KFS once we complete the 35,000 barrel per day fractionator expansion. Construction is well underway and assuming construction schedules are met, the additional capacity will be available late in the second quarter of 2016.

Keyera's industry-leading condensate system in the Edmonton/Fort Saskatchewan area provides our oil sands customers with the most receipt and delivery connections to meet their growing condensate needs. In 2015, we increased the flexibility and capacity of this system by accessing a pipeline between Redwater and Edmonton. Assuming completion of final due diligence and receipt of regulatory approvals, we will use the northern segment of the pipeline between Redwater and Fort Saskatchewan to receive incremental diluent from the North West Sturgeon Refinery under a long-term handling agreement. During the year, we also agreed to acquire a 50% interest in the southern portion of TransCanada's proposed Grand Rapids Pipeline that is expected to provide Keyera with at least 225,000 net barrels per day of additional diluent transportation capacity between Edmonton and Fort Saskatchewan. In late 2015, all regulatory approvals were received and construction began on the Norlite diluent pipeline, our joint venture with Enbridge.

In 2016, we expect to invest $600 million to $700 million on growth capital projects, excluding acquisitions. A significant portion of the program is focused on our previously announced NGL Infrastructure projects. These projects are backed by customer demand and are expected to add meaningful incremental cash flow in 2018 and beyond.

Liquids Business Unit – Marketing Segment

Our Marketing segment continues to manage risk effectively, generating record results even in the low commodity price environment. Operating margin was $244 million in 2015 compared to $237 million in the prior year. Our iso-octane business was the main contributor to these results primarily due to the combination of low butane feedstock costs, a strong North American summer driving season and attractive foreign currency exchange rates. In addition, our iso-octane production facility, Alberta EnviroFuels (AEF), operated near its capacity of 13,600 barrels per day throughout the year.

In 2016, our iso-octane sales volumes will be lower due to a six week planned maintenance turnaround scheduled to begin in September.  Our marketing services also include the supply and sale of ethane, propane, butane and condensate. All of these products contributed positively to the Marketing segment's operating margin in 2015.

Outlook

It remains a challenging time for the oil and gas industry and for our customers. However, Keyera is well positioned to weather this difficult period as we manage the business for the long term. Our assets are strategically located within the Western Canada Sedimentary Basin above some of the most economic liquids-rich geological zones where producers remain active. For oil sands producers, we've developed the largest and most flexible system to source and trade condensate. With oil sands production expected to continue to increase over the next few years, demand for our condensate services should also increase. Our strong balance sheet, conservative payout ratio and access to capital allow us to manage the downturn while maintaining the flexibility to prudently pursue infrastructure projects and acquisitions and deliver long-term growth and value to investors. We continue to work with our customers to provide midstream solutions that are efficient and cost-effective to help support the overall competitiveness of the Western Canada Sedimentary Basin in the global market.

On behalf of Keyera's directors and management team, I would like to thank our employees, customers, shareholders and other stakeholders for their continued support.

David G. Smith
President & Chief Executive Officer
Keyera Corp.

ABOUT KEYERA

Keyera Corp. (TSX:KEY) operates one of the largest midstream energy companies in Canada, providing essential services to oil and gas producers in the Western Canada Sedimentary Basin. Its predominantly fee-for-service based business consists of natural gas gathering and processing, natural gas liquids fractionation, transportation, storage and marketing, iso-octane production and sales, and an industry-leading condensate system in the Edmonton/Fort Saskatchewan area of Alberta. Keyera strives to provide high quality, value-added services to its customers across North America and is committed to conducting its business ethically, safely and in an environmentally and financially responsible manner.

DISCLAIMER

Certain statements contained in this news release 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 news release and accompanying documents may also contain forward-looking statements attributed to third party sources.  Management believes that its assumptions and analysis in this news release 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; compliance with regulatory requirements; 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 news release and in Keyera's Annual Information Form dated February 10, 2016, 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 schedules and expected in service dates; contractor productivity; contractor disputes; quality of cost estimating; decision processes and approvals by joint venture partners; changes in project scope at the time of project sanctioning; regulatory approvals, conditions or delays (including possible intervention by third parties); and macro socio-economic trends.  Pipeline projects are also subject to Keyera's ability to secure the necessary rights of way; and underground cavern development is dependent on sufficient water supply. As a result, expected timing, costs and benefits associated with these projects may differ materially from the descriptions in this news release.  Further, some of the projects discussed in this news release are subject to securing sufficient producer/customer interest and may not proceed if sufficient commitments are not obtained.  Typically, the earlier in the engineering process that projects are sanctioned, the greater the likelihood that the schedule and budget may change. 

Readers are cautioned that they should not unduly rely on the forward-looking statements in this news release and accompanying documents.  Further, readers are cautioned that the forward-looking statements in this document speak only as of the date of this news release. 

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 news release 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.

SOURCE Keyera Corp.

about Keyera, please visit our website at www.keyera.com or contact: Lavonne Zdunich, Director, Investor Relations, or Nick Kuzyk, Manager, Investor Relations, Email: [email protected]; Telephone: [phone] / Toll Free: 888.699.4853