Keyera Facilities Income Fund Announces 2010 Third Quarter Results
CALGARY, Nov. 2 /CNW/ - Keyera Facilities Income Fund announced their 2010 Third Quarter 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 solid results in the third quarter, while securing
several new long-term growth opportunities.
- Distributable cash flow(1) was $51.8 million ($0.75 per unit) in the
third quarter compared to $46.7 million ($0.73 per unit) last year.
Distributions to unitholders totalled $30.9 million ($0.45 per
unit), resulting in a payout ratio of 60%.
- Net earnings were $32.1 million ($0.47 per unit) in the third
quarter compared to $35.7 million ($0.56 per unit) in the same
period in 2009.
- Subsequent to the quarter, Keyera announced an agreement to provide
diluent 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 2014(2).
- In October, Keyera expanded its gathering and processing network
with the acquisition of a 37.5% ownership interest in the Simonette
gas plant, as well as interests in associated gathering systems. The
$47.5 million acquisition extends Keyera's reach further northwest
into another area in the foothills region of Alberta where the
geology is attractive and significant new drilling activity is
underway.
- At Fort Saskatchewan, the development of a second new storage cavern
is underway.
- At the Rimbey gas plant, Keyera is in discussions with producers
regarding construction of a 45 kilometre gathering pipeline into the
Hoadley region of Alberta in order to deliver liquids rich gas to
Rimbey for processing.
- Keyera closed its $155 million private placement debt financing on
September 8, 2010. Proceeds were used to repay $52.5 million of
maturing notes and reduce bank debt.
- Growth capital investment was $29.4 million in the third quarter and
$85.5 million for the nine months ended September 30, 2010. In 2011,
growth capital investment, excluding acquisitions, is expected to be
between $100 million and $130 million.
- Keyera plans to convert to a corporation effective January 1, 2011.
Dividends of the new Keyera Corp. will be paid monthly and Keyera
anticipates that its dividend level will be $0.15 per share per
month or $1.80 per share annually, unchanged from the current
distribution level.
(1) See "Non-GAAP Financial Measures" on page 34. A reconciliation of
distributable cash flow to cash flow from operating activities is
included on page 25.
(2) Keyera's agreement with Husky Oil Operations is subject to full
sanctioning of the Sunrise Oil Sands Project by Husky and its
partner.
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Three months ended Nine months ended
September 30, September 30,
Summary of Key Measures
(Thousands of Canadian dollars,
except where noted) 2010 2009 2010 2009
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Net earnings 32,085 35,702 97,963 111,119
Per unit ($/unit) - basic 0.47 0.56 1.45 1.76
Cash flow from operating
activities (140) 47,901 74,952 279,754
Distributable cash flow(1) 51,759 46,743 141,934 216,926
Per unit ($/unit) 0.75 0.73 2.10 3.43
Distributions declared 30,918 28,765 91,606 85,533
Per unit ($/unit) 0.45 0.45 1.35 1.35
Payout ratio %(1) 60% 62% 65% 39%
Gathering and Processing:
Gross processing throughput
(MMcf/d) 1,137 898 953 917
Net processing throughput (MMcf/d) 809 765 766 774
NGL Infrastructure:
Gross processing throughput
(Mbbl/d) 89 98 92 99
Net processing throughput (Mbbl/d) 24 27 26 31
Marketing:
Inventory value 138,010 79,075 138,010 79,075
Sales volumes (bbl/d) 60,800 56,100 65,500 64,400
Capital expenditures 29,926 13,493 86,511 64,751
Proceeds from dispositions - 792 - 3,787
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Long-term debt 410,323 259,418
Working capital
(surplus) deficit(2) (41,900) 82,817
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Net debt 368,423 342,235
Convertible debentures 45,573 78,689
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Net debt (including debentures) 413,996 420,924
Trust units outstanding
- end of period 68,814 64,217
Weighted average number of units
outstanding - basic 67,687 63,286
Weighted average number of units
outstanding - diluted 71,004 67,816
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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 continued to deliver value to unitholders in the third quarter, posting strong financial results and pursuing a number of new projects and business initiatives. I am very pleased with the long-term business relationships we have developed with our customers in our Gathering and Processing and Liquids Business Units. These relationships are based upon the value we are able to provide to our customers from the strategic locations and capabilities of our facilities, our integrated business model and our customer service mindset. Together, these characteristics differentiate Keyera and position us well to continue to deliver long-term sustainable performance for our unitholders.
In the third quarter, distributable cash flow was $51.8 million ($0.75 per unit) compared to $46.7 million ($0.73 per unit) in the same period last year. Distributions to unitholders were $30.9 million, or $0.45 per unit, resulting in a third quarter payout ratio of 60%. Net earnings in the third quarter were $32.1 million, compared to $35.7 million in the same period of 2009. Year-to-date, distributable cash flow was $141.9 million, or $2.10 per unit, and distributions to unitholders were $91.6 million, or $1.35 per unit. The cash flow available after the payment of distributions to unitholders has been used to fund growth capital expenditures.
Gathering and Processing contribution in the third quarter was $35.5 million, about 1% higher than the third quarter of 2009. Steady throughput at the Strachan and Rimbey gas plants, combined with the additional ownership interests in the Edson and Minnehik Buck Lake gas plants, contributed to these results.
In the Liquids Business Unit, contribution from our NGL Infrastructure segment was $14.7 million, compared to $14.8 million in the third quarter of 2009. Strong demand for storage and fractionation services continued throughout the quarter. The Marketing segment contribution was $12.7 million, $1.7 million lower than the third quarter of 2009, largely due to differences in unrealized gains and losses relating to hedging contracts put in place to protect the value of our NGL inventory as we head into winter and our high demand season.
Keyera is seeing increasing volumes of liquids rich gas delivered to its plants in the west central and foothills areas of Alberta. To support this activity, we are in discussions with producers regarding the construction of a 45 kilometre 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 combination of gas composition, geology and drilling advances has made this area one of the most economic gas plays in North America. The pipeline will allow producers in the region to deliver gas to the Rimbey plant, which is equipped to remove a high percentage of NGLs from the gas stream, which in turn contributes to higher netbacks for our customers. In addition to gas processing, Rimbey offers full NGL fractionation and delivery of NGL products to markets in the Edmonton/Fort Saskatchewan NGL energy hub and elsewhere in North America.
In October we expanded our gathering and processing infrastructure again with the acquisition of a 37.5% ownership interest in the Simonette gas plant, as well as interests in two major gathering pipelines that deliver gas to the plant for processing. The assets are located in the deep basin region of Alberta northwest of our existing foothills plants. At the conclusion of the transition period, Keyera expects to assume operatorship of the facility. This $47.5 million acquisition is consistent with our strategy of acquiring processing plants in areas where geology is attractive and where we can pursue opportunities to integrate these facilities with our NGL business segments. This 150 million cubic foot per day plant has unutilized capacity, is connected to an extensive network of gathering systems and is able to extract natural gas liquids and process sour gas.
The 40 million cubic foot per day expansion at the Caribou gas plant was completed while the plant was offline for its scheduled maintenance turnaround in June. Commissioning of the expansion occurred in July and in August we started receiving new gas from discoveries north of the plant for processing.
We also acquired interests in the Minnehik Buck Lake and Edson gas plants over the summer, and are integrating these facilities into Keyera's business.
In the Liquids Business Unit, we are very pleased to have recently secured a second long-term diluent services agreement in the Edmonton/Fort Saskatchewan area. This agreement, with Husky Oil Operations, will provide diluent transportation, storage and terminalling services for the Husky-operated Sunrise Oil Sands Project. These services are similar in nature to those we will be providing under our agreement with Imperial Oil for their Kearl oil sands project and supports our view that we are uniquely suited to be the diluent service provider of choice in the Edmonton/Fort Saskatchewan energy hub. The services provided to Husky will use the same facilities and new infrastructure that is currently under construction for the Kearl project and is expected to begin contributing to Keyera's cash flow in 2014. Work is continuing on the new pipeline connection between our Fort Saskatchewan facility and the diluent transportation pipeline inlet approximately 20 km north of Fort Saskatchewan, as well as on the pipeline connection between the Enbridge Southern Lights pipeline terminus and our Edmonton Terminal.
Several other projects are underway to support new business initiatives in the Liquids Business Unit. In west central Alberta, we are constructing our NGL pipeline and storage facilities to deliver NGLs from our Strachan gas plant, where significant new NGL volumes are being processed, to our Fort Saskatchewan facility for fractionation.
In Fort Saskatchewan, we have finished washing the new storage cavern started in 2008. With a capacity of about 800,000 barrels, the cavern increases the gross storage capacity at our Fort Saskatchewan facility to 10.4 million barrels. Integrity testing and regulatory approvals are expected to be completed in the fourth quarter and, assuming these processes go as anticipated, the cavern should be ready for service early in the new year. Work on the second new storage cavern commenced in early October with the spudding of the well bore. The cavern is currently expected to be ready for service sometime in 2013.
In September, we closed our $155 million private debt financing of medium and long term senior unsecured notes that we announced in June. Proceeds were used to repay $52.5 million of maturing long-term debt, reduce our short term bank debt and fund growth capital expenditures and acquisitions.
Looking forward, plans are in place for Keyera's conversion to a corporation effective January 1, 2011. For our unitholders, the conversion will be seamless, with each unitholder receiving one share of the new Keyera Corp. for every unit of Keyera Facilities Income Fund. We will continue to pay dividends monthly, with the first dividend from Keyera Corp. payable on January 17, 2011. As previously announced, we expect to continue to pay dividends at the current distribution level of $0.15 per unit per month or $1.80 per unit annually. Canadian taxable unitholders will notice a significant tax benefit, as the dividends are expected to qualify for the enhanced dividend tax credit.
On behalf of Keyera's directors and management team, I thank you for your continued support and look forward to reporting on our continuing success in 2010 and beyond.
Jim V. Bertram
President and CEO
Keyera Facilities Income Fund
DISCLAIMER
Certain statements contained in this document contain 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. 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 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, in the MD&A for the year ended December 31, 2009 and in Keyera's Annual Information Form dated February 18, 2010, all of which are 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. As a result, expected timing, costs and benefits associated with these projects may differ materially from the descriptions in this document.
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 or any other relevant material changes in the interim. Implementation of the conversion is subject to satisfaction of certain conditions precedent, including final court approval for the Plan of Arrangement. These conditions are further described in the Fund's Information Circular dated March 25, 2010. 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".
The discussion of Keyera's IFRS changeover plan and the potential impacts on its financial reporting are based on management's assumptions and expectations with respect to international standards, accounting policies, regulations and economic conditions. At this time, it is not possible to quantify the impact that the future adoption of IFRS will have on Keyera's financial statements and operating performance measures; however, such impact may be material. In addition, the changeover to IFRS will impact internal controls over financial reporting, disclosure controls and procedures, and IT systems and processes. As international standards and accounting policies are continuing to evolve, the expected impacts and associated accounting policy choices associated with the changeover to IFRS may differ from those described in 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.
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.
%SEDAR: 00019203E
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: [email protected], Telephone: (403) 205-7670, Toll Free: (888) 699-4853, Facsimile: (403) 205-8425
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