Keyera Corp. Announces Year End 2011 Results
Feb 16, 2012, 17:00 ET
CALGARY, Feb. 16, 2012 /CNW/ - Keyera Corp. (TSX:KEY)(TSX:KEY.DB.A), announced their 2011 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.
- Keyera delivered strong results in 2011, led by the performance of its Gathering and Processing and NGL Infrastructure businesses.
- Earnings before interest, taxes, depreciation and amortization1 ("EBITDA") were $255.1 million in 2011, 6% higher than the $241.1 million posted in 2010. EBITDA was negatively affected by weaker than usual Marketing results in the fourth quarter, primarily related to propane.
- Distributable cash flow1 was $202.2 million ($2.85 per share), compared to $207.9 million ($3.05 per share) in 2010. Dividends to shareholders were $136.2 ($1.92 per share), resulting in a payout ratio of 67%.
- Net earnings in 2011 were $135.2 million ($1.91 per share), an increase of 50% on a per share basis compared to last year.
- As a result of the strong business performance, Keyera increased its dividend twice in 2011. Its current dividend is $0.17 per share per month, or $2.04 per share annually.
- In December, Keyera announced the acquisition of Alberta EnviroFuels, an iso-octane manufacturing facility located in Edmonton, Alberta. The transaction closed in January 2012 at a cost of US$194 million plus working capital.
- In the fourth quarter Keyera invested $36.9 million to acquire additional ownership interests in its Strachan, Minnehik Buck Lake, Bigoray and Paddle River gas plants.
- The solvent handling facilities at Keyera's Alberta Diluent Terminal began operation in December, marking the start of the solvent services agreement with Imperial Oil for their Kearl oil sands project.
- In January 2012, Keyera announced it was working with Enbridge on the possible development of a diluent delivery pipeline from Fort Saskatchewan to the Athabasca oil sands region and a rail and truck terminal located south of Fort McMurray.
- Engineering and commercial discussions continued in the fourth quarter on a number of previously announced NGL projects.
- Total growth capital investment was $147.6 million in 2011, of which $36.9 million was acquisitions. Keyera expects its 2012 growth capital investment, excluding acquisitions, to be between $125 and $175 million2.
|1||See pages 31 and 32 of Keyera's 2011 year end MD&A for a reconciliation of distributable cash flow to cash flow from operating activities and EBITDA to net earnings. See also "Non-GAAP Financial Measures" on page 46 of the MD&A.|
|2||See "Capital Expenditures and Acquisitions" on page 29 of Keyera's 2011 year end MD&A for further discussion of Keyera's capital investment program.|
| Three months ended
| Twelve months ended
| Summary of Key Measures
(Thousands of Canadian dollars, except where noted)
|Per share ($/share)3 - basic||(0.30)||0.09||1.91||1.27|
|Cash flow from operating activities||50,792||80,581||178,215||166,908|
|Distributable cash flow1||51,207||65,955||202,187||207,889|
|Per share ($/share) 3||0.72||0.95||2.85||3.05|
|Per share ($/share) 3||0.50||0.45||1.92||1.80|
|Payout ratio %1||70%||47%||67%||59%|
|Gathering and Processing:|
|Gross processing throughput (MMcf/d)||1,189||1,071||1,159||981|
|Net processing throughput (MMcf/d)||911||814||883||781|
|Gross processing throughput (Mbbl/d)||102||87||89||91|
|Net processing throughput (Mbbl/d)||36||30||29||27|
|Sales volumes (bbl/d)||89,400||75,000||76,600||67,900|
|Working capital surplus2||(186,507)||(137,086)|
|Net debt (including debentures)||548,376||506,910|
|Common shares outstanding - end of period 3||71,601||69,891|
|Weighted average number of shares outstanding - basic 3||70,844||68,108|
|Weighted average number of shares outstanding - diluted 3||72,025||71,139|
|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.|
|2||Working capital is defined as current assets less current liabilities.|
|3||For the comparative period, shares and dividends were previously referred to as "units" and "distributions" reflecting Keyera's income trust structure prior to its conversion to a corporation effective January 1, 2011.|
|4||EBITDA is defined as earnings (including unrealized gains/losses from financial contracts) 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 in Keyera's 2011 year end MD&A for a reconciliation of EBITDA to its most closely related GAAP measure.|
|5||Certain comparative amounts in Keyera's financial statements for the year ended December 31, 2011 have been restated to conform with the transition to International Financial Reporting Standards effective January 1, 2010. Refer to note 33 of Keyera's financial statements for the year ended December 31, 2011 for further information on the transition to International Financial Reporting Standards.|
Message to Shareholders
Keyera continued to provide shareholders with exceptional income and growth in 2011. Despite a challenging business environment caused by low natural gas prices and very warm winter weather in the fourth quarter, we have continued to deliver value to shareholders and today find ourselves with more new business opportunities than we have ever seen in our history. In 2011, we successfully implemented a number of projects to serve our customers in the natural gas and oil sands sectors of western Canada and identified a number of other initiatives that we believe have the potential to result in significant future growth. Capturing these opportunities will not be without challenges but we are confident that our capabilities, focused business strategy and attention to customer service will allow us to meet these challenges and continue to deliver value in the future.
Led by strong performance from our Gathering and Processing and NGL Infrastructure facilities, Keyera's EBITDA (earnings before interest, taxes, depreciation and amortization) was $255.1 million, 6% higher than the $241.1 million posted last year. These results were achieved in spite of weak propane markets in the fourth quarter of 2011, which negatively affected Keyera's Marketing results. Net earnings were $135.2 million ($1.91 per share), compared to $86.8 million ($1.27 per share) in 2010.
Distributable cash flow in 2011 was $202.2 million ($2.85 per share) compared to $207.9 million ($3.05 per share) last year, largely the result of higher maintenance turnaround expenses in 2011 and higher long-term incentive plan costs. Dividends were $136.2 million ($1.92 per share), resulting in a payout ratio of 67%. Keyera's strong financial performance allowed us to increase the dividend twice in 2011. Dividends are now $0.17 per share per month, or $2.04 per share annually. Since going public in 2003, we have increased our dividend nine times, representing a 7.6% compound annual growth rate over that period.
Gathering and Processing operating margin in 2011 was $152.7 million, $21.4 million, or 16% higher than last year, a new record for Keyera. High levels of producer activity around some of Keyera's gas plants, as well as the acquisition of additional gas plants in late 2010, contributed to this increase and offset declines in throughput experienced at other Keyera gas plants where activity levels were lower.
In the Liquids Business Unit, operating margin of $68.9 million in 2011 from our NGL Infrastructure segment was also a new record, $5.2 million or 8% higher than last year. Demand for storage services throughout the year, as well as higher terminal activity in 2011, contributed to the strong results. The Marketing segment had another solid year with operating margin of $76.5 million, compared to $79.2 million in 2010. Marketing results were very strong through the first three quarters of the year, but unusually warm weather reduced demand for propane and put downward pressure on prices during the fourth quarter. As a result, margins from the sale of propane were negatively affected. Further reducing these margins were non-cash unrealized losses relating to financial contracts associated with Keyera's risk management program.
Demand for propane continues to be weak due to continued warm winter weather across North America, and prices remain low. Keyera's financial contracts are settling as inventory is sold, and this has resulted in realized losses on these contracts. As a result, Keyera expects that its Marketing business will be adversely affected by weak propane results in the first quarter of 2012.
During the past year, oil and gas land sales in Alberta exceeded $3.5 billion, much of it on lands adjacent to a number of Keyera's facilities. Record amounts were paid for lands in the areas where Keyera operates, as producers target a number of liquids-rich gas resource plays. The liquids content of these resource plays significantly improves producer economics, and is a critical element for producers drilling in this low gas price environment.
Significant drilling activity occurred throughout the year in the areas around the Strachan, Rimbey, Simonette and Edson gas plants. In these areas, producers are targeting the Montney, Duvernay, Glauconite and other liquids-rich zones. As a result of this activity, throughput increased significantly at all these gas plants during the year, and Keyera is evaluating several expansion projects to accommodate anticipated growth in producer volumes.
Activity in the areas west and southwest of the Rimbey gas plant continues to be very strong. A number of producers continue to target liquids-rich gas from the Glauconite zone. In addition, many of the high-value land parcels purchased in 2011 targeting the liquids-rich Duvernay shale are also in this area. As a result of producer success in 2011 and their prospective future production, we are considering an expansion of the Carlos pipeline, and the possible construction of a new pipeline to deliver gas to Rimbey from lands west of the plant. If there is sufficient producer support for these projects, Keyera may also consider an expansion of the Rimbey gas plant to recover additional quantities of ethane-rich NGLs.
In the Simonette region, a producer-owned 12-inch gathering pipeline began delivering gas to the plant in the fourth quarter. Another producer is currently constructing a 65-kilometre, 12-inch gathering pipeline to our Simonette gas plant from lands east of the plant. Other producers are actively drilling wells and targeting multiple geological zones around the plant. Producers in the area have provided sufficient expressions of interest to allow detailed engineering estimates to be prepared for a plant expansion and addition of deep-cut facilities. Should commitments be secured and terms and conditions met in a timely manner, our goal would be to complete the project by late 2013.
Refurbishment of the turbo-expander at the Minnehik Buck Lake gas plant is complete and it is currently undergoing commissioning. At the Strachan gas plant, the upgrade of the turbo expander is expected to be completed in the second half of 2012. Projects to enhance propane recoveries at the Brazeau River and Nordegg River gas plants were also completed in the fourth quarter and will allow our producer customers to extract significantly more propane from their gas streams.
In the fourth quarter, Keyera invested $36.9 million to acquire additional ownership interests in several gas plants in the west central and foothills areas of Alberta, including the Strachan, Minnehik Buck Lake, Bigoray and Paddle River gas plants.
In the Edmonton/Fort Saskatchewan area, the first of the two oil sands service agreements with Imperial Oil began in December, with the completion of solvent handling facilities at ADT. These facilities allow the delivery of solvents by rail car for Imperial Oil's Kearl oil sands project.
Work on Keyera's Fort Saskatchewan Condensate System ("FSCS"), including a 21-kilometre, 20-inch condensate pipeline connection to the Polaris pipeline and a new pump station at the Edmonton Terminal, continued during the quarter and should be completed by mid-year 2012. FSCS is an integrated network of infrastructure through which Keyera will provide diluent handling services for Imperial Oil and Husky under long term agreements in place with both companies.
With the anticipated increase in NGL production in western Canada, Keyera is evaluating an expansion of its Keyera Fort Saskatchewan fractionator, which would allow the facility to accept an ethane-rich stream of NGLs for processing. Keyera is currently in discussions with customers interested in securing capacity in the new facility and assuming commercial terms can be reached, construction could begin later in 2012.
In January, Keyera completed its acquisition of Alberta EnviroFuels ("AEF"), an iso-octane manufacturing facility located one kilometer south of Keyera's Edmonton Terminal. The cost of the transaction was US$194 million plus working capital of approximately US$43 million related mostly to inventory. Iso-octane is a high quality, high octane gasoline additive with low vapour pressure, making it an attractive product for refiners. AEF uses butane as a feedstock and is already pipeline connected with Keyera's NGL facilities in the Edmonton/Fort Saskatchewan area.
Also in January we announced a Memorandum of Understanding with a subsidiary of Enbridge Inc. to solicit interest in the possible construction of a diluent transportation pipeline and a rail and truck terminal to serve the oil sands. We are currently in discussions with oil sands producers with the intention of securing sufficient interest to underpin these projects.
Looking ahead at 2012 and beyond, I am confident that we have the right mix of assets, located in the right places and operated by the right people. This combination of attributes should allow us to continue to provide value added services to customers, generate new sources of cash flow from internal growth opportunities and selectively pursue acquisitions. In 2012, we anticipate that growth capital investment, excluding acquisitions, could range between $125 million and $175 million.
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 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 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 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.
For further information:
about Keyera Corp., please visit our website at www.keyera.com or contact:
John Cobb, Director, Investor Relations or Heidi Christensen Brown, Senior Advisor, Investor Relations.
E-mail: [email protected], Telephone: (403) 205-7670 / Toll Free: (888) 699-4853, Fax: (403) 205-8425.
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