Keyera Corp. Announces Second Quarter 2013 Results
CALGARY, Aug. 7, 2013 /CNW/ - Keyera Corp. (TSX:KEY)(TSX:KEY.DB.A), announced their 2013 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 continued to see growing demand for its services in the second quarter and worked to advance a number of new growth opportunities.
- Net earnings for the second quarter of 2013 were $48.2 million ($0.62 per share), $22.3 million ($0.28 per share) higher than the same period in 2012.
- Earnings before interest, taxes, depreciation and amortization1,2 ("EBITDA") were $99.4 million in the second quarter of 2013, 20% higher than the $82.7 million posted in the same quarter of 2012.
- Distributable cash flow1,2 was $79.3 million ($1.01 per share) in the second quarter of 2013, 33% higher than the $59.5 million ($0.78 per share) recorded in the same period last year.
- Keyera is increasing its dividend by 11%, from $0.18 per share per month to $0.20 per share per month, or $2.40 per share annually, beginning with its dividend payable on September 16, 2012. This will be Keyera's eleventh increase since going public in 2003, representing an 8.1% compound annual growth rate in dividends per share.
- Keyera's Gathering and Processing business delivered operating margin3 of $38.9 million in the second quarter of 2013 compared to $41.2 million in the same quarter last year. In the NGL Infrastructure segment, operating margin3 was $29.1 million compared to $27.8 million in the same quarter of 2012. Marketing operating margin3 was $46.8 million in the second quarter of 2013, $35.0 million higher than in the second quarter of last year.
- Subsequent to the quarter, Keyera announced a joint venture with Kinder Morgan Energy Partners L.P. to build the Alberta Crude Terminal, a crude oil rail loading facility in Edmonton, Alberta. The terminal will be capable of loading approximately 40,000 barrels per day of crude oil and will be constructed on newly acquired land next to Keyera's Alberta Diluent Terminal. Each party will be independently making other modifications at their existing facilities in conjunction with this terminal project.
- Keyera will be investing $40 million to modify its sulphur receipt and forming facilities at the Strachan gas plant in conjunction with a long-term agreement with Suncor Energy.
- In April, Keyera announced it would be constructing a new pipeline from the Wapiti area of Alberta to the Simonette gas plant and modifying the plant to add more processing capacity. As a result of producer interest, a segregated condensate pipeline will also be constructed as part of this project.
- Total growth capital investment was $69.1 million in the second quarter 2013, of which $23.1 million was acquisitions. Year-to-date, Keyera has invested $99.1 million in growth capital expenditures and $27.0 million in acquisitions4.
| ||1 ||See "Non-GAAP Financial Measures" on page 35 of the MD&A.|
| ||2 ||See page 30 and 31 of the MD&A for a reconciliation of distributable cash flow to cash flow from operating activities and EBITDA to net earnings.|
| ||3 ||See note 18 to the accompanying financial statements.|
| ||4 ||See "Capital Expenditures and Acquisitions" on page 27 of the MD&A for further discussion of Keyera's capital investment program.|
| ||Three months ended|
| ||Six months ended |
|Summary of Key Measures |
(Thousands of Canadian dollars, except where noted)
|Net earnings||48,173||25,842|| ||71,618||59,712|
| ||Per share ($/share) - basic||0.62||0.34|| ||0.92||0.80|
|Cash flow from operating activities||49,225||13,614|| ||185,913||119,027|
| || || || || || |
|Distributable cash flow1||79,259||59,517|| ||162,544||106,706|
| ||Per share ($/share)||1.01||0.78|| ||2.08||1.42|
|Dividends declared||42,232||39,191|| ||84,306||76,612|
| ||Per share ($/share)||0.54||0.51|| ||1.08||1.02|
| ||Payout ratio %1||53%||65%|| ||52%||72%|
|Gathering and Processing:|| || || || || |
|Gross processing throughput (MMcf/d)||1,292||1,230|| ||1,265||1,229|
|Net processing throughput (MMcf/d)||1,051||963|| ||1,015||965|
|NGL Infrastructure:|| || || || || |
|Gross processing throughput (Mbbl/d)||112||55|| ||113||81|
|Net processing throughput (Mbbl/d)||33||28|| ||36||34|
|Marketing:|| || || || |
|Inventory value||218,100||168,910|| ||218,100||168,910|
|Sales volumes (bbl/d)||83,000||75,200|| ||99,800||87,100|
| || || || || || |
|Acquisitions (including business combination)||23,101||22|| ||27,008||247,101|
|Growth capital expenditures||45,981||20,843|| ||99,097||44,496|
|Maintenance capital expenditures||9,498||13,671|| ||11,505||15,342|
|Total capital expenditures||78,580||34,536|| ||137,610||306,939|
| || || || ||As at June 30,|
| || || || ||2013||2012|
|Long-term debt 4|| || || ||636,926||680,169|
|Credit facilities|| || || ||170,000||70,000|
|Working capital surplus3, 4|| || || ||(175,904)||(214,398)|
|Net debt|| || || ||631,022||535,771|
|Convertible debentures 4|| || || ||—||13,437|
|Net debt (including debentures)|| || || ||631,022||549,208|
| || || || || || |
|Common shares outstanding - end of period|| || || ||78,307||76,958|
|Weighted average number of shares outstanding - basic|| || || ||78,013||75,036|
|Weighted average number of shares outstanding - diluted|| || || ||78,497||75,800|
|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 30 of the MD&A for a reconciliation of distributable cash flow to its most closely related GAAP measure.|
|2 || ||Beginning in the first quarter of 2013, Keyera excludes unrealized gains/losses from commodity related risk management contracts in the calculation of EBITDA. These non-cash gains/losses have been excluded because management believes it provides a better reflection of the financial performance of the business in the current period. The comparative amount has been adjusted to reflect this change. EBITDA is defined as earnings (excluding unrealized gains/losses) 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 the MD&A for a reconciliation of EBITDA to its most closely related GAAP measure.|
|3|| || Working capital is defined as current assets less current liabilities.|
|4|| ||Included in the calculation of working capital for Q2 2013 are current liabilities related to the $52,500 of unsecured senior notes due on August 26, 2013, and $7,830 of convertible debentures due on December 31, 2013.|
MESSAGE TO SHAREHOLDERS
Keyera had another successful quarter with EBITDA, distributable cash flow and dividends per share all higher than the same period last year. As producers continue to pursue liquids-rich natural gas and increase bitumen production in western Canada, we are seeing growing demand for handling, processing and delivery services and significant new growth opportunities for Keyera. As we evaluate these opportunities, we continue to apply the same disciplined methodology that has resulted in our success thus far and allowed us to deliver growing value for our shareholders.
Both business units performed well operationally in the second quarter. In the Gathering and Processing Business Unit, net throughput at Keyera gas plants grew again in the second quarter, increasing 9% to 1.1 billion cubic feet per day compared to the second quarter of 2012. Throughput increased at the Rimbey, Minnehik Buck Lake, Strachan, Caribou and Brazeau River gas plants. Offsetting these increases was lower throughput at the Simonette gas plant for the first half of the quarter, as a result of regulatory restrictions. Process modifications were made at our Simonette gas plant in the second quarter to address the processing of sulphur and the handling of higher volumes of natural gas liquids. We believe these steps will help accommodate the new gas volumes that are anticipated in the near future.
Design work is well underway for the plant modifications at the Simonette gas plant to process an additional 100 million cubic feet per day of raw natural gas and to handle increased condensate volumes. Planning for the 90-kilometre sour gas pipeline from the Wapiti area of Alberta to the Simonette gas plant is proceeding well and many producers have shown interest in securing the remaining available capacity. As a result of discussions with producers in the area, we are proceeding with construction of a dedicated condensate pipeline this winter in conjunction with the sour gas pipeline.
In June, Keyera announced a long-term agreement with Suncor Energy to provide sulphur handling services at the Strachan gas plant. The agreement underpins modifications to the sulphur receipt and forming facilities at the plant, including a new 1,500 tonne per day sulphur forming unit, an expanded rail off-loading facility and additional storage. Cost of the modifications are expected to be approximately $40 million and the facilities are expected to be operational in the first half of 2015. Keyera is also continuing to advance the development of a sulphur handling fertilizer production facility at Strachan. The facility would be jointly owned with Sulvaris Inc. with Keyera operating the facility.
Work is proceeding on the turbo expander project at the Rimbey gas plant and construction is expected to begin in the fourth quarter. As the Carlos pipeline approaches capacity, we are developing plans to utilize other existing Keyera pipelines in the area to handle the growing volumes of natural gas and NGLs.
A number of new business initiatives are underway in the Liquids Business Unit. In the second quarter, Keyera and Plains Midstream Canada successfully completed our solicitation of non-binding interest in the proposed Western Reach Pipeline System. We are proposing to build two pipelines dedicated to NGL mix and condensate service which would run through some of the most prospective geological areas being developed in western Canada today. We were pleased with the producer interest shown in the proposed pipeline system and are now working with interested parties on the next stages of the contracting process. A decision on whether to proceed with the project will depend on securing sufficient producer commitment through this next phase of the contracting process.
With the continued demand for fractionation services in Alberta, we are also working with producers to determine interest in an expansion of our NGL fractionation capacity in the Edmonton/Fort Saskatchewan hub. We have completed preliminary engineering and cost estimates for the project, have developed commercial terms and are working with producers to secure volume commitments. Also at Fort Saskatchewan, our twelfth cavern has received all regulatory approvals and is now in service, and our thirteenth cavern is currently under development. Work on the brine pond will continue through the summer and it is scheduled to be put into service later this year. Detailed engineering is continuing on our 30,000 barrel per day de-ethanizer project, long-lead items have been ordered and fabrication of major equipment is underway.
We are very pleased to partner with Kinder Morgan Energy Partners L.P. to build the Alberta Crude Terminal, a crude oil rail loading terminal, which will be located adjacent to our Alberta Diluent Terminal. When complete, customers will be able to direct crude oil streams handled at Kinder Morgan's Edmonton Terminal to this new terminal for delivery by rail to refineries anywhere in North America. The new terminal will have 20 rail loading spots, capable of handling approximately 40,000 barrels per day, and will be served by both Canadian National Railway and Canadian Pacific Railway. Construction of the Alberta Crude Terminal is underpinned by a five-year agreement with a large refiner. Engineering work is well underway and commissioning of the new terminal is anticipated in the second quarter of 2014, assuming receipt of regulatory approvals and delivery of long-lead items on a timely basis. To meet anticipated future demand for services, Kinder Morgan and Keyera are currently evaluating a possible expansion of the terminal to add up to 125,000 barrels per day and the possible addition of a diluent recovery unit.
Commissioning of the South Cheecham rail and truck terminal is currently expected to occur in September. Most of the work on site has been completed, with the exception of the construction of roads and highway intersections, which are now underway. We continue to see interest from customers interested in securing capacity at the terminal, and are evaluating an expansion of the facility. We are refurbishing our rail and truck terminal in Hull, Texas, in order to return it to service, initially handling propane, butane, iso-butane and NGL mix. The terminal is expected to be operational by the first quarter of 2014, assuming construction proceeds on schedule.
We continue to be pleased with how well Alberta EnviroFuels is fitting into our business strategy and with the growing demand for iso-octane shown by potential new customers. As a result of increasing demand, and the ability of customers to receive iso-octane deliveries by rail, throughput at our Alberta EnviroFuels facility increased during the quarter. Operational problems resulted in the plant being taken off-line on June 15 for repairs. The facility resumed operation in mid-July.
Given the growth in opportunities in Keyera's business, we now have over $800 million committed to growth capital projects that will begin generating cash flow over the next two or three years. In 2013, we anticipate investing between $400 and $450 million on these projects. Should other projects currently under evaluation proceed, our capital investments over the next several years could increase significantly.
With the size of Keyera's capital commitments, it is critical that we manage the engineering, design and construction of these projects to complete them on schedule and deliver the anticipated rates of return. Our dedicated team of engineers, operations personnel and business development representatives bring significant expertise to their roles and work hard to contribute to the success of our projects. Long-term value creation drives our business decisions at Keyera and we are committed to providing our shareholders with stable and growing cash flows.
To that end, with the growing cash flow from our business and the number of new projects under development, we are pleased to announce an increase in our monthly cash dividend. Effective with the August 2013 dividend, payable to shareholders on September 16, 2013, our dividend will increase by 11% to 20 cents per share per month, or $2.40 per share annually. This is Keyera's eleventh dividend increase since going public in 2003. Since that time, we have provided shareholders with an 8.1% compound annual growth rate in dividends per share.
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 and accompanying documents 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 and in Keyera's Annual Information Form dated February 14, 2013, 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. Pipeline projects are also subject to Keyera's ability to secure the necessary rights of way. 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. It is unclear whether Alberta's move toward a single regulator will affect processing times for projects that are subject to regulatory approval. Regulatory applications are also subject to intervention by interested parties which could result in delays.
Readers are cautioned that they should not unduly rely on the forward looking statements in this document and accompanying documents. 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 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.
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