Keyera Announces 2023 Year End Results and Provides Commercial Update

CALGARY, AB, Feb. 14, 2024 /CNW/ – Keyera Corp. (TSX:KEY) (“Keyera”) announced its 2023 year-end financial results today, the highlights of which are included in this news release. To view Management’s Discussion and Analysis (the “MD&A”) and financial statements, visit either Keyera’s website or its filings on SEDAR+ at www.sedarplus.ca.

“Keyera continues to execute on its strategy, achieving record annual adjusted EBITDA and distributable cash flow per share, driven by best-ever contributions from all three business segments” said Dean Setoguchi, President and CEO. “KAPS continues to deliver growth for Keyera while providing a much-needed alternative transportation solution for customers. In 2023, customers committed to significant additional long-term volumes on KAPS and across our integrated system, demonstrating its value. With strategically located assets and a strong production growth outlook for the basin, we are well positioned to continue to maximize value for our customers and shareholders.”

Fourth Quarter and Year-End Highlights

Financial Results

Adjusted earnings before interest, taxes, depreciation, and amortization1 (“adjusted EBITDA”) were a record $339 million for the quarter (Q4 2022 – $212 million) and a record $1.21 billion for the full year (2022 – $1.03 billion). Distributable cash flow1 (“DCF”) was $234 million or $1.02 per share for the quarter (Q4 2022 – $104 million or $0.47 per share) and a record $855 million or $3.73 per share for the full year (2022 – $654 million or $2.95 per share). The year-over-year increases were driven by record contributions from all three business segments.
Net earnings were $49 million for the fourth quarter (Q4 2022 – net loss of $82 million) and $424 million for the full year (2022 – $328 million). These results include a non-cash impairment charge of $210 million in the fourth quarter related to the Wildhorse terminal.

KAPS Driving Integrated Commercial Success – In 2023, the company added significant long-term integrated agreements with several producers to provide transportation on KAPS, fractionation, storage and product marketing. This includes approximately 30,000 barrels per day of incremental volumes on KAPS and 33,000 barrels per day of extended and incremental fractionation contracts at Keyera Fort Saskatchewan (“KFS”) (more detail provided below).
Pipestone Expansion Online and Fully Utilized – The Pipestone expansion was completed in the fourth quarter, adding 40 million cubic feet per day (“MMcf/d”) of capacity, for a total of 260 MMcf/d. The project was completed ahead of schedule for $58 million, below the expected cost range of $60 million to $70 million. The expansion is fully contracted under long-term take-or-pay agreements and the plant has been operating at full capacity since coming online.
Record Fee-For-Service Results – The Gathering and Processing (“G&P”) segment delivered record quarterly realized margin1 of $116 million (Q4 2022 – $93 million), and an annual record of $395 million (2022 – $347 million). These results include one-time turnaround recovery fees of $8 million in the fourth quarter and $17 million for the full year. The Liquids Infrastructure segment achieved record quarterly realized margin1 of $130 million (Q4 2022 – $102 million), and an annual record of $496 million (2022 – $406 million) supported by KAPS, strong utilization at KFS and record volumes through the company’s industry leading condensate system.
Marketing Segment Delivers Record Year – The Marketing segment delivered record annual realized margin1 of $479 million (2022 – $397 million), above the previously announced 2023 guidance range of $420 million to $450 million. These results were driven by record sales volumes for the segment, including record sales at Alberta EnviroFuels (“AEF”) and the continued strength of the iso-octane business.
Strong Financial Position – The company ended the year with net debt to adjusted EBITDA2 of 2.2 times, below the targeted range of 2.5 to 3.0 times. During the third quarter, the company received a credit upgrade from S&P and in early January issued $250 million of 30-year notes. The 2023 dividend payout ratio was 53% of DCF, at the low end of the targeted range of 50% to 70%. In 2024, the company is expected to generate strong free cash flow after funding dividends and growth capital investments.
Progressing ESG Priorities – The company published its latest ESG performance summary in the fourth quarter. Highlights include lower scope 1 and 2 emissions and lower emissions intensity compared to the prior reporting period. The company is now more than halfway towards achieving its target of reducing emissions intensity by 25% by 2025. Furthermore, the company has secured power purchase agreements to provide 40% of its commercial power needs from carbon-free sources by 2025.

KAPS Driving Integrated Commercial Success

Keyera continues to leverage the strength of its integrated value chain to maximize value for customers and shareholders. During the fourth quarter and throughout the year the company added significant long-term agreements with several producers to provide integrated services.

Details include:

Added approximately 30,000 barrels per day of new long-term KAPS commitments with a weighted average contract term of 12 years at 75% take-or-pay. Approximately half of these volumes begin contributing midway through 2024 and ramp up to 2029.
Added approximately 33,000 barrels per day of fractionation commitments at KFS with a weighted average contract term of 13 years at 85% take-or-pay. Approximately half of these volumes are new commitments with the remainder being renewals of existing contracts.
Added various contracts for storage at KFS and other ancillary services such as pipeline connectivity, terminaling services and product marketing.
Minimal additional capital is required to accommodate these incremental volumes.
Substantially all of these contracts are with highly credit worthy counterparties.

The fee-for-service contracts support Keyera reaching the upper end of its compound annual growth rate (“CAGR”) target for adjusted EBITDA holding Marketing constant1 of 6-7%, from 2022 out to 2025, and support continued growth beyond 2025. Incremental volumes through Keyera’s Marketing segment support the company’s previously announced increase to its base Marketing realized margin1 guidance of $310 million to $350 million.

2023 Guidance Update

Growth capital spending excluding capitalized interest was $191 million, below the latest guidance range of $200 million to $220 million. The decrease was primarily driven by lower spending on the Pipestone expansion project and various other capital projects.
Maintenance capital spending was $120 million, above the latest guidance range of $95 million to $105 million. The increase was primarily driven by higher turnaround costs at Rimbey and Pipestone and higher maintenance costs at Wapiti. Substantially all turnaround costs at Pipestone were recovered in 2023.
Cash taxes were $nil.

2024 Guidance Unchanged

On track to reach the upper end of the company’s CAGR target for adjusted EBITDA holding Marketing constant1 of 6-7% from 2022 out to 2025.
Growth capital expenditures are expected to range between $80 million and $100 million. This includes about $60 million of sanctioned capital for various optimization projects at Simonette, Wapiti, KAPS and AEF. The remaining $20 million to $40 million is contingent on the sanctioning of KAPS Zone 4 and fractionation capacity expansions at KFS.
Maintenance capital expenditures are expected to range between $90 million and $110 million of which about $20 million is recoverable in 2024 with another $15 million recoverable within the next few years.
Base Marketing realized margin1 guidance was increased in the fourth quarter and is now expected to range between $310 million to $350 million (previously $250 million to $280 million). Consistent with prior years, Marketing segment realized margin1 guidance will be provided with the first quarter results in early May, after the conclusion of the NGL contracting season.
Cash taxes for 2024 are expected to range between $45 million and $55 million.

AEF Outage

AEF continues to operate well achieving record production in 2023 and strong year-to-date performance. Keyera will be taking the facility offline for approximately 6 weeks in the spring of 2024 to proactively complete maintenance activities. These maintenance activities are intended to facilitate AEF’s continued reliable operations at full capacity until its next scheduled turnaround in 2026. The work is expected to impact 2024 realized margin for the Marketing segment by approximately $35 million to $45 million with no impact to maintenance capital. Due to strong near-term market fundamentals, the company still expects to be within its stated base Marketing realized margin guidance of $310 million to $350 million for 2024. Keyera will update 2024 Marketing segment realized margin guidance with Q1 results in May.

Updated Maintenance Schedule

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