CALGARY, Aug. 8, 2012 /CNW/ - Keyera Corp. (TSX:KEY)(TSX:KEY.DB.A), announced their 2012 second quarter results today, the highlights of which are included in this press release. The entire earnings 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.
- Keyera's fee-for-service businesses delivered exceptional results again in the second quarter.
- The Gathering and Processing business contributed record operating margin1 of $41.2 million, 7% higher than the second quarter of 2011.
- NGL Infrastructure exceeded the record set last quarter, delivering $27.8 million of operating margin1, 72% higher than the same period last year.
- Marketing operating margin1 of $11.8 million was 47% lower than in the second quarter of 2011, due to weak propane margins and unrealized losses from financial risk management contracts associated with future NGL supply contracts.
- Earnings before interest, taxes, depreciation and amortization2,3 ("EBITDA") were $70.8 million in the second quarter, slightly lower than the $72.9 million in the same quarter last year.
- Net earnings for the second quarter were $25.8 million ($0.34 per share), compared to $33.1 million ($0.47 per share) in the same quarter last year, primarily due to higher non-cash items.
- Distributable cash flow2,3 for the second quarter was $59.5 million ($0.78 per share) compared to $35.2 million ($0.50 per share) in the second quarter of 2011. Dividends to shareholders were $39.2 million ($0.51 per share), resulting in a payout ratio2 of 65% for the quarter.
- Keyera announced construction of the South Cheecham rail and truck terminal south of Fort McMurray, Alberta, backed by a diluent, dilbit and solvent handling services agreement with Statoil.
- Keyera is continuing with its NGL storage expansion program at its Fort Saskatchewan facility. In July, work began on a thirteenth storage cavern and a new brine pond to support the additional storage capacity.
- Total capital investment was $33.9 million in the second quarter, including $20.2 million related to growth capital projects. Keyera expects its 2012 growth capital investment, excluding acquisitions, to be between $125 and $175 million4.
1 See Note 18 to Keyera's Second Quarter 2012 Financial Statements.
2 See "Non-GAAP Financial Measures" on page 35 of Keyera's Second Quarter 2012 MD&A.
3 See page 31 of Keyera's Second Quarter 2012 MD&A for a reconciliation of distributable cash flow to cash flow from operating activities and EBITDA to net earnings.
4 See "Capital Expenditures and Acquisitions" on page 29 of Keyera's Second Quarter 2012 MD&A for further discussion of Keyera's capital investment program.
| Three months
| Six months
| Summary of Key Measures
(Thousands of Canadian dollars, except where noted)
|Per share ($/share) - basic||0.34||0.47||0.80||1.67|
|Cash flow from operating activities||13,614||26,727||119,027||192,223|
|Distributable cash flow1||59,517||35,177||106,706||100,520|
|Per share ($/share)||0.78||0.50||1.42||1.43|
|Per share ($/share)||0.51||0.48||1.02||0.94|
|Payout ratio %1||65%||96%||72%||66%|
|Gathering and Processing:|
|Gross processing throughput (MMcf/d)||1,230||1,146||1,229||1,144|
|Net processing throughput (MMcf/d)||963||865||965||866|
|Gross processing throughput (Mbbl/d)||55||85||81||85|
|Net processing throughput (Mbbl/d)||28||30||34||29|
|Sales volumes (bbl/d)||75,200||66,300||87,100||74,800|
|Acquisitions (including business combination)||22||—||247,101||1,043|
|Growth capital expenditures||20,843||26,940||44,496||54,049|
|Maintenance capital expenditures||13,671||17,828||15,342||18,845|
|Total capital expenditures||34,536||44,768||306,939||73,937|
|As at June 30,|
|Working capital surplus3||(214,398)||(85,607)|
|Net debt (including debentures)||549,208||479,708|
|Common shares outstanding - end of period||76,958||70,949|
|Weighted average number of shares outstanding - basic||75,036||70,356|
|Weighted average number of shares outstanding - diluted||75,800||71,824|
|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 GAAP. See page 31
of Keyera's Second Quarter 2012 MD&A for a reconciliation of distributable cash flow to its most
closely related GAAP measure.
|2|| EBITDA is defined as earnings (including unrealized gains/losses from financial contracts relating
to the Liquids Business unit) before interest, taxes, depreciation, amortization, accretion, impairment
expenses and any other non-cash items such as gains/losses on the disposal of property, plant and
equipment. EBITDA is not a standard measure under GAAP. See section titled "EBITDA" on page 31
of Keyera's Second Quarter 2012 MD&A for a reconciliation of EBITDA to its most closely related
|3||Working capital is defined as current assets less current liabilities.|
Message to Shareholders
Keyera delivered strong operational results again in the second quarter. Producers remained active around several of our facilities, despite an overall slowdown in drilling activity in western Canada. Keyera's gross throughput remained steady during the quarter and, with producers focusing on liquids-rich gas drilling, NGL production levels have increased this year. This has resulted in very high utilization rates at Keyera's NGL facilities. In light of these trends, we are evaluating a number of projects to enhance our NGL processing capabilities. Demand for diluent logistics services also remains strong and, in addition to several projects underway to enhance our NGL storage and terminalling businesses, we are continuing to pursue other initiatives to grow this business and expand the range of related services we are able to offer.
During the second quarter, net earnings were $25.8 million ($0.34 per share), compared to $33.1 million ($0.47 per share) in the same quarter last year. EBITDA was $70.8 million, 3% lower than the second quarter of 2011. Keyera's fee-for-service businesses delivered record results, offset somewhat by unrealized losses from financial contracts in our marketing business relating to future NGL supply contracts. For the quarter, distributable cash flow was $59.5 million ($0.78 per share), compared to $35.2 million ($0.50 per share) in the same period last year. Dividends to shareholders totaled $39.2 million ($0.51 per share), resulting in a payout ratio of 65%.
Second quarter Gathering and Processing operating margin was $41.2 million, the highest in Keyera's history, and an increase of 7% over the same period in 2011. Higher throughputs at the Rimbey, Edson and Minnehik Buck Lake gas plants offset lower throughput at some of our other facilities.
Operating margin from NGL Infrastructure for the quarter was $27.8 million, another new record for Keyera, and 72% higher than the second quarter last year. This increase was due to the acquisition of Alberta EnviroFuels in January, higher NGL production in western Canada that resulted in increased demand for fractionation, storage and terminalling services and additional demand from oil sands producers for additional condensate storage capacity.
NGL Marketing generated operating margin of $11.8 million in the quarter. These results were $16.5 million lower than the same period last year, largely due to non-cash unrealized losses on financial contracts associated with future NGL supply contracts. Excluding the effect of these financial contracts, margin relating to product sales during the quarter was stronger than the second quarter last year. Margins earned from our butane, condensate, iso-octane and crude oil midstream product lines contributed to our strong results in the second quarter. However, propane fundamentals continued to weaken in the second quarter as increased propane supply across North America put downward pressure on prices, resulting in losses on physical propane sales in the quarter. Risk management contracts put in place to protect the value of propane held in inventory were effective in the quarter and should protect Keyera when inventory is sold in future periods.
Operationally, our Gathering and Processing Business Unit performed well during the quarter. Throughput continued to increase at the Rimbey gas plant, driven by the success of a number of producers who are drilling the liquids-rich Glauconite zone. Brazeau River, Nordegg River, Brazeau North and Pembina North also experienced modest throughput increases this quarter. Maintenance work at the Simonette and Strachan gas plants contributed to lower throughput at those facilities and Simonette was also affected by certain gas being redirected to another facility. Despite this, and scheduled maintenance turnarounds at three other plants in the quarter, gross throughput remained flat.
As a result of the continued weak commodity prices, many producers announced reductions to their drilling programs for 2012. Despite this, many producers are continuing to drill around our plants, albeit at a slower rate. A number of producers in west central Alberta and in the deep basin are testing the Duvernay formation on lands acquired over the last two years, much of it within the capture area of several of our plants, including Rimbey and Simonette.
Discussions are continuing with producers interested in an expansion of the Simonette gas plant to enhance liquids recoveries. Additional engineering work was completed during the quarter to fine tune the design and provide more definition on capital costs for the expansion. We are optimistic that we will be able to secure a sufficient level of interest to proceed with the expansion. Two producer owned gathering pipelines east and south of the Simonette plant are in the final stages of construction and are expected to begin flowing gas to Simonette in the fall.
In west central Alberta, we are continuing to work with producers on the commercial terms necessary to enhance NGL recoveries at the Rimbey gas plant. We are also in discussions with producers to support construction of three separate gathering pipelines to deliver liquids-rich gas to the Strachan, Minnehik Buck Lake and Rimbey gas plants later this year.
In June, we announced we were proceeding with construction of the South Cheecham rail and truck terminal near Fort McMurray, Alberta. The terminal is being designed to provide diluent, dilbit and solvent handling services to oil sands developers in the area. An agreement with Statoil, which we announced in June, provided the contractual underpinning for the $90 million project. Construction began in July and, assuming construction continues on schedule, the terminal is expected to be operational in the first half of 2013. In August, Enbridge notified Keyera of its intention to exercise its option to participate in the project as a 50% joint venture partner.
Increased NGL production in western Canada over the first half of 2012 has resulted in very high utilization rates at Keyera's fractionation and storage facilities in Fort Saskatchewan. In anticipation of a continued increase in demand, we are proceeding with a number of initiatives to expand capacity. In July, we began work on our thirteenth storage cavern and on the construction of a new brine pond to support the additional storage capacity we are adding. Based on the current development schedule, the pond is expected to be completed in late 2013, and the new cavern should be ready to put into service in 2014. Development of the twelfth storage cavern, which we began in 2010, is proceeding according to plan and is expected to be completed in 2013.
On July 1, we began earning revenue from our diluent handling agreement with Imperial Oil for the Kearl project. Under the terms of the agreement, Imperial will use Keyera's diluent logistics services and facilities in the Edmonton/Fort Saskatchewan area to receive, transport, store and deliver diluent for bitumen produced at the Kearl site. In support of this initiative, we recently completed construction of our Fort Saskatchewan Condensate System, an integrated diluent network in the Edmonton/Fort Saskatchewan area, on time and on budget.
The Alberta Diluent Terminal continues to experience growing levels of activity. Demand for diluent in Alberta continues to increase and increased volumes of diluent are being delivered to Alberta from the U.S.
We are very pleased with the performance of Alberta EnviroFuels, which delivered strong results in the second quarter. Iso-octane volumes destined for the west coast continued to be apportioned on the Trans Mountain pipeline system in the quarter, but we were successful in finding new customers for iso-octane within Alberta, thereby mitigating the effect of the apportionment. This increase in volume, combined with strong margins from iso-octane sales, contributed to the strong results. In anticipation of a 40-day maintenance turnaround in the third quarter, we have been running the plant at relatively high levels of utilization in order to build inventory for sale during the plant outage. To enable continued expansion of sales markets, by year end we anticipate completing modifications to our rail loading facility at the Edmonton Terminal to enable us to deliver iso-octane to customers via rail cars.
We have a number of new business opportunities under evaluation, representing substantial potential growth capital investment. Although it is difficult to predict the timing of these projects in the current uncertain environment, we remain optimistic about our long-term outlook for value creation. In 2012, we currently anticipate between $125 and $175 million of growth capital expenditures.
On behalf of Keyera's directors and management team, thank you for your continued support.
Jim V. Bertram
Chief Executive Officer
Certain statements contained in this document 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 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; 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; 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 document, Keyera's Second Quarter 2012 MD&A and in Keyera's Annual Information Form dated February 16, 2012 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. Further, some of the projects discussed in this document are subject to securing sufficient producer/customer interest and may not proceed if sufficient commitments are not obtained.
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.
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 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.
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