Keyera Facilities Income Fund Announces 2009 Third Quarter Results

CALGARY, Nov. 3 /CNW/ - Keyera Facilities Income Fund (TSX:KEY.UN, KEY.DB, KEY.DB.A) ("Keyera") announced their 2009 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 continued to deliver strong financial results in the third
        quarter, despite difficult industry conditions.

    -   Keyera's distributable cash flow(1) was $46.7 million ($0.73 per
        unit) in the third quarter, significantly higher than the same period
        last year. Distributions to unitholders totalled $28.8 million ($0.45
        per unit), resulting in a payout ratio of 62%. Keyera's payout ratio
        for the last twelve months was 59%(2).

    -   Net earnings were $35.7 million ($0.56 per unit) in the third quarter
        compared to $36.4 million ($0.59 per unit) in the same period in
        2008. Cash flow from operating activities was $47.9 million, or $0.75
        per unit.

    -   In a concurrent release, Keyera announced a special distribution of
        $0.45 per unit (as a combination of 50% cash and 50% units of the
        Fund), in addition to the regular distribution of $0.15 per unit,
        payable on December 15, 2009. The special distribution is intended to
        reduce or eliminate any material cash income tax payable by Keyera in
        2009.

    -   All business segments delivered strong third quarter results.

        -   Contribution from Gathering and Processing was $35.3 million, the
            highest in Keyera history and 14% higher than the third quarter
            of 2008.

        -   NGL Infrastructure contribution was $14.8 million, 36% higher
            than the same period last year, driven by continued strong demand
            for storage services.

        -   Marketing contribution of $14.4 million was 10% higher than in
            the same period in 2008.

    -   The ethane extraction project at the Rimbey gas plant began
        operation, delivering ethane to market under a long-term contract in
        August.

    -   Growth capital investment was $13.2 million in the third quarter and
        $63.7 million for the nine months ending September 30, 2009. Keyera
        expects its full year 2009 growth capital will be approximately
        $100 million. In 2010, growth capital investment is expected to be
        between $80 million and $100 million(3).

    (1) See "Non-GAAP Financial Measures" on page 28 and a reconciliation of
        distributable cash flow to cash flow from operating activities on
        page 23 of the Third Quarter Report.
    (2) Payout ratio calculation excludes $59 million of gains from financial
        contracts settled in the first quarter of 2009.
    (3) See "Capital Expenditures and Acquisitions" on page 22 for further
        discussion of Keyera's capital investment program.


    -------------------------------------------------------------------------
                                      Three months ended   Nine months ended
    Summary of Key Measures              September 30,       September 30,
    (Thousands of Canadian dollars,
    except where noted)                   2009      2008      2009      2008
    -------------------------------------------------------------------------
    Net earnings                        35,702    36,377   111,119   114,608
      Per unit ($/unit) - basic           0.56      0.59      1.76      1.87
    Cash flow from operating
     activities                         47,901   (85,261)  279,754   (24,458)

    Distributable cash flow(1)          46,743     3,662   216,926    99,939
      Per unit ($/unit)                   0.73      0.06      3.43      1.63
    Distributions declared              28,765    26,817    85,533    77,360
      Per unit ($/unit)                   0.45      0.44      1.35      1.24

    Payout ratio %(1)                      62%      732%       39%       77%

    Gathering & Processing:
    Gross processing throughput
     (MMcf/d)                              898       876       917       871
    Net processing throughput (MMcf/d)     765       657       774       669
    NGL Infrastructure:
    Gross processing throughput (Mbbl/d)    98       102        99        99
    Net processing throughput (Mbbl/d)      27        36        31        31
    Marketing:
    NGL inventory value                 79,075   191,617    79,075   191,617
    Sales volumes (Bbl/d)               56,100    51,100    64,400    55,300

    Capital expenditures                13,493    41,654    64,751   133,346
    Dispositions                           792       393     3,787       543
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Long-term debt                                         259,418   313,479
    Working capital deficit (surplus)(2)                    82,817   (14,892)
                                                           ------------------
    Net debt                                               342,235   298,587
    Convertible debentures                                  78,689    17,502
                                                           ------------------
    Net debt (including debentures)                        420,924   316,089

    Trust units outstanding - end of
     period                                                 64,217    61,844
    Weighted average number of units
     outstanding - basic                                    63,286    61,438
    Weighted average number of units
     outstanding - diluted                                  67,816    63,169
    -------------------------------------------------------------------------
    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 once again delivered strong financial performance this quarter, driven by solid performance from all three business lines, despite the continued slowdown in activity in the Western Canada Sedimentary Basin. This success is the result of Keyera's stable business model which is anchored by our diversified but integrated business lines, and our application of a consistent strategy. In addition, Keyera has worked hard to assist producers during this difficult period by reducing costs and providing exceptional customer service. This focus on a consistent strategy and customer service has served us well in the past and I believe it will be the foundation for our success in the future.

In the third quarter, distributable cash flow was $46.7 million, or $0.73 per unit, significantly higher than the same period in 2008. Distributions to unitholders were $28.8 million, or $0.45 per unit, resulting in a third quarter payout ratio of 62%. Net earnings in the third quarter were $35.7 million, compared to $36.4 million in the same period of 2008. Year-to-date, distributable cash flow was $216.9 million , or $3.43 per unit, and distributions to unitholders were $85.5 million, or $1.35 per unit. The cash flow available after the payment of distributions to unitholders has allowed Keyera to fund capital expenditures in 2009 and reduce debt, thereby strengthening our balance sheet.

In a concurrent release today, we announced a special distribution of $0.45 per unit, payable to unitholders on December 15, 2009. The special distribution will be payable in a combination of 50% cash ($0.225 per unit) and 50% units of the Fund ($0.225 per unit). In addition to providing a significant benefit to our unitholders, the special distribution will reduce or eliminate cash income tax for 2009. The decision to declare a special distribution results from Keyera's strong financial performance in 2009, which includes $59 million of proceeds in the first quarter from the settlement of financial contracts. Given our low payout ratio and strong balance sheet, we are able to make this payment without jeopardizing Keyera's financial strength or flexibility.

Third quarter Gathering and Processing contribution was $35.3 million, the highest in Keyera's history and 14% higher than the third quarter of 2008. Although drilling activity continues to be slow across the Western Canada Sedimentary Basin, throughput at our facilities declined only modestly and has been more than offset by throughput from new plants and additional ownership interests added in late 2008, along with production from horizontally drilled wells. In addition, we are seeing incremental cash flow from other projects completed in 2008 which has contributed to the solid financial performance this quarter.

In 2009, we invested in a number of small internal projects including plant optimizations and compressor additions. Many of these projects provide flexibility for producers, allowing additional raw gas to be processed while at the same time generating fee-for-service revenues for Keyera. In August, we completed the ethane extraction project at our Rimbey gas plant. We are currently producing over 4,000 barrels of ethane per day under a long-term sales contract. In October, we completed our Nordegg River acid gas project and are now sending acid gas from Nordegg River to the Strachan gas plant for processing. This has allowed us to decommission the sulphur handling facility at the Nordegg River plant and reduce sulphur emissions.

Contribution from our NGL Infrastructure business was $14.8 million, up 36% from the same period last year. Continued strong demand for storage services was one of the main contributing factors in these solid NGL Infrastructure results. During the quarter, we also completed several small NGL midstream projects that we anticipate will contribute to our business going forward.

Marketing contribution of $14.4 million was 10% higher than the third quarter of 2008. These results were largely driven by butane demand in western Canada. In the third quarter, we acquired two additional propane terminals in the northwestern U.S. These terminals complement our existing wholesale propane business and further strengthen our ability to meet our customers' needs in this region.

Recently, there have been indications that factors influencing oil and gas development in North America are improving. Access to the financial markets has improved significantly since the early part of the year and a number of western Canadian producers successfully completed large debt and equity issues. Drilling rig activity has begun to recover in the U.S. and Canada, initially targeting oil plays but more recently directed at natural gas targets in the deeper part of the basin.

In the west central and foothills regions of Alberta, producers are using horizontal drilling to develop natural gas resource plays in the areas surrounding many of Keyera's plants. These techniques allow producers to target multiple geological horizons, many of which were previously uneconomic, and develop repeatable, low risk projects. A producer in the area around our Rimbey gas plant has indicated that it intends to drill as many as 12 horizontal wells by year end. Other producers are indicating that they are positioning themselves to be able to react quickly when gas fundamentals strengthen.

The price of oil has rebounded from the lows experienced earlier this year and prices have recently been in the $70 range or higher. In western Canada, oil sands activity is increasing and several oil sands producers have announced their intention to proceed with new developments. Activity related to conventional oil drilling, as well as oil sands developments, benefits Keyera. Conventional oil often contains solution gas that has to be processed and Keyera's NGL Infrastructure business is very well suited to provide diluent and related services to the oil sands sector.

Despite these positive signs, it is difficult to predict the timing of a recovery in the oil and gas sector and a return to more normal producer activity levels. Until then, we remain focused on working with producers to find solutions that benefit both parties and finding unique and innovative ways to meet customers' needs. When natural gas drilling activity resumes, we are well positioned with existing pipeline infrastructure, compression and processing capacity to efficiently gather and process new gas in our capture areas. As oil sands activity increases, our NGL Infrastructure and Marketing businesses are able to meet producers' needs through the provision of diluent and logistics services.

On behalf of the Fund's directors and management team, I thank you for your continued support and look forward to continued success in 2009.

    
    Jim V. Bertram
    President and CEO
    Keyera Facilities Income Fund
    

ADVISORY

This document contains forward-looking statements that involve known and unknown risks and uncertainties, many of which are beyond Keyera's control. The forward-looking statements are based on management's current expectations and assumptions relating to Keyera's business and the environment in which it operates. As the results or events predicted or implied in these forward-looking statements depend upon future events, actual results or events may differ materially from those predicted. Some of the factors which could cause actual results or events to differ materially include the ability of Keyera to successfully implement strategic initiatives, whether such initiatives yield the expected benefits, operating and other costs, future operating results and the components of those results, fluctuations in the demand for natural gas, NGLs, crude oil and bitumen, changes in commodity prices, the activities of producers, competitors and others, the weather, overall economic conditions, proposed or actual legislative changes, including any further announcements by the federal government with respect to the tax treatment of income trusts and other known or unknown factors. There can be no assurance that the results or developments anticipated by Keyera will be realized or that they will have the expected consequences for or effects on Keyera.

For additional information on these and other factors, see Keyera's public filings on www.sedar.com. Unless otherwise required by applicable laws, Keyera does not intend to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

%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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