Keyera Announces 2024 First Quarter Results, Increases Marketing Guidance
"We've had a solid start to the year, as the disciplined execution of our strategy continues to drive strong performance across all three of our business segments" said
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Financial Results – Net earnings were
$71 million (Q1 2023 –$138 million ), adjusted earnings before interest, taxes, depreciation, and amortization1 ("adjusted EBITDA") were$314 million (Q1 2023 –$292 million ), and distributable cash flow1 ("DCF") was$205 million (Q1 2023 –$227 million ). These results include another record contribution from the Liquids Infrastructure segment and continued strong performance from Gathering and Processing ("G&P") and Marketing. -
Continued Growth from Fee-for-Service Segments – The Liquids Infrastructure segment delivered record realized margin1 of
$137 million (Q1 2023 –$119 million ). The year-over-year increase is attributable to increased contributions from KAPS as contracted volumes continue to ramp up, and strong demand for Keyera's fractionation, storage, and condensate services. The G&P segment delivered realized margin1 of$104 million (Q1 2023 –$100 million ) which includes the first full quarter contribution from thePipestone gas plant expansion project. -
Solid Marketing Segment Performance, AEF Back Online – The Marketing segment delivered
$114 million of realized margin1 (Q1 2023 – $117 million). AEF is now operating at full capacity following the completion of a 6-week planned outage which began in early April. - Strong Financial Position – The company ended the quarter with net debt to adjusted EBITDA2 at 2.2 times, below the targeted range of 2.5 to 3.0 times. The company remains well positioned to equity self-fund future growth opportunities when they are ready for sanctioning.
- Following the conclusion of the NGL contracting season, 2024 realized margin1 for the Marketing segment is expected to range between
$430 million and$470 million (previous base guidance of$310 million to$350 million ) including the impact of the 6-week AEF outage. This outlook reflects lower butane feedstock costs and the continued strength of the iso-octane business as demand for high octane gasoline blending products remains strong. - Reaffirming growth capital expenditures are expected to range between
$80 million and$100 million . This includes$20 million to$40 million of capital that is contingent on sanctioning ofKAPS Zone 4 and the continued advancement of fractionation capacity expansion opportunities at KFS. - Reaffirming 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. - Cash tax expense is now expected to range between
$85 million and$95 million (previously$45 million and$55 million ). This new range reflects the increase in expected earnings contribution from the Marketing segment.
2024 Planned Turnarounds and Outages |
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|
6 weeks |
Q2 2024 |
Keyera Fort Saskatchewan Fractionation Unit 1 outage |
5 days |
Q2 2024 |
Keyera Fort Saskatchewan Fractionation Unit 2 outage |
7 days |
Q2 2024 |
Keyera Fort Saskatchewan Fractionation Unit 1 outage |
7 days |
Q3 2024 |
|
2 weeks |
Q3 2024 |
Wapiti Gas Plant turnaround |
3 weeks |
Q3 2024 |
Summary of |
|
Three months ended
|
||
(Thousands of Canadian dollars, except where noted) |
|
|
2024 |
2023 |
Net earnings |
|
|
70,914 |
137,789 |
Per share ($/share) – basic |
|
|
0.31 |
0.60 |
Cash flow from operating activities |
|
|
398,040 |
311,489 |
Funds from operations 1 |
|
|
231,725 |
247,306 |
Distributable cash flow 1 |
|
|
205,338 |
227,367 |
Per share ($/share) 1 |
|
|
0.90 |
0.99 |
Dividends declared |
|
|
114,577 |
109,994 |
Per share ($/share) |
|
|
0.50 |
0.48 |
Payout ratio % 1 |
|
|
56 % |
48 % |
Adjusted EBITDA1 |
|
|
314,304 |
292,158 |
Operating margin |
|
|
283,031 |
332,436 |
Realized margin1 |
|
|
355,415 |
335,454 |
Gathering and Processing |
|
|
|
|
Operating margin |
|
|
103,767 |
99,422 |
Realized margin1 |
|
|
104,329 |
100,306 |
Gross processing throughput3 (MMcf/d) |
|
|
1,534 |
1,692 |
Net processing throughput3 (MMcf/d) |
|
|
1,331 |
1,447 |
Liquids Infrastructure |
|
|
|
|
Operating margin |
|
|
135,145 |
117,406 |
Realized margin1 |
|
|
136,563 |
118,665 |
Gross processing throughput4 (Mbbl/d) |
|
|
203 |
194 |
Net processing throughput4 (Mbbl/d) |
|
|
118 |
98 |
AEF iso-octane production volumes (Mbbl/d) |
|
|
14 |
14 |
Marketing |
|
|
|
|
Operating margin |
|
|
44,056 |
115,642 |
Realized margin1 |
|
|
114,460 |
116,517 |
Inventory value |
|
|
239,801 |
210,127 |
Sales volumes (Bbl/d) |
|
|
192,400 |
206,100 |
Acquisitions |
|
|
— |
366,537 |
Growth capital expenditures |
|
|
19,106 |
80,732 |
Maintenance capital expenditures |
|
|
12,891 |
8,252 |
Total capital expenditures |
|
|
31,997 |
455,521 |
Weighted average number of shares outstanding – |
|
|
229,153 |
229,153 |
As at |
|
|
2024 |
2023 |
Long-term debt5 |
|
|
3,682,294 |
3,623,062 |
Credit facility |
|
|
— |
400,000 |
Working capital surplus (current assets less current liabilities) |
(72,882) |
(149,535) |
||
Net debt |
|
|
3,609,412 |
3,873,527 |
Common shares outstanding – end of period |
|
|
229,153 |
229,153 |
Carrying positive momentum into 2024. We had an excellent start to the year, leveraging the advantages of our integrated value chain to drive solid performance across all three business segments. Our strategy has focused on maintaining financial discipline while building a stronger and more competitive business. Keyera remains in a position of financial strength, with net debt to adjusted EBITDA at 2.2 times, below our targeted range of 2.5 to 3.0 times. This provides optionality to pursue opportunities that will further strengthen our business and continue to drive shareholder value.
Improving cash flow quality with fee-for-service growth. We remain on track to reach the upper end of our CAGR target for adjusted EBITDA holding Marketing constant of 6-7% from 2022 to 2025. This growth largely comes from strategic investments made in prior years. Our G&P segment delivered strong quarterly results, supported by the first full quarter contribution from the
Marketing segment is a valuable differentiator. In the last five years, our Marketing segment has delivered more than
Reaffirming strong free cash flow outlook and capital allocation priorities. We expect to generate significant free cash flow in 2024. Our capital allocation priorities have not changed and remain grounded in a long history of prudent financial management. Our balance sheet is strong, allowing us to further create value through investing in capital efficient growth opportunities and increasing returns to shareholders.
Platform for further capital efficient investment.
Positive Long-term fundamentals. The outlook for basin volume growth is strong. This growth will be supported by the Trans Mountain Pipeline Expansion, LNG Canada, a growing Petrochemical industry and increasing NGL exports from the
On behalf of Keyera's board of directors and management team I want to thank our employees, customers, shareholders, Indigenous rights holders, and other stakeholders for their continued support.
President and CEO
Notes: |
|
1 |
Keyera uses certain non-Generally Accepted Accounting Principles ("GAAP") and other financial measures such as EBITDA, adjusted EBITDA, funds from operations, distributable cash flow, distributable cash flow per share, payout ratio, realized margin and compound annual growth rate ("CAGR") for adjusted EBITDA holding Marketing constant. Since these measures are not standard measures under GAAP, they may not be comparable to similar measures reported by other entities. For additional information, and where applicable, for a reconciliation of the historical non-GAAP financial measures to the most directly comparable GAAP measure, refer to the section of this news release titled "Non-GAAP and Other Financial Measures". For the assumptions associated with the realized margin guidance for the Marketing segment, refer to the section titled "Segmented Results of Operations: Marketing" of Management's Discussion and Analysis for the period ended |
2 |
Ratio is calculated in accordance with the covenant test calculations related to the company's credit facility and senior note agreements and excludes hybrid notes. |
3 |
Includes gas volumes and the conversion of liquids volumes handled through the processing facilities to a gas volume equivalent. Net processing throughput refers to Keyera's share of raw gas processed at its processing facilities. |
4 |
Fractionation throughput in the Liquids Infrastructure segment is the aggregation of volumes processed through the fractionators and the de-ethanizers at the Keyera and Dow Fort Saskatchewan facilities. |
5 |
Long-term debt includes the total value of Keyera's hybrid notes which receive 50% equity treatment by Keyera's rating agencies. The hybrid notes are also excluded from Keyera's covenant test calculations related to the company's credit facility and senior note agreements. |
Keyera will be conducting a conference call and webcast for investors, analysts, brokers and media representatives to discuss the financial results for the first quarter of 2024 at
To join the conference call without operator assistance, you may register and enter your phone number here to receive an instant automated call back. This link will be active on
A live webcast of the conference call can be accessed here or through Keyera's website at http://www.keyera.com/news/events. Shortly after the call, an audio archive will be posted on the website for 90 days.
For more information about
Telephone: 403.205.7670
Toll free: 888.699.4853
For media inquiries, please contact:
Email: media@keyera.com
Telephone: 1.855.797.0036
This news release refers to certain financial and other measures that are not determined in accordance with Generally Accepted Accounting Principles ("GAAP") and as a result, may not be comparable to similar measures reported by other entities. Management believes that these supplemental measures facilitate the understanding of Keyera's results of operations, leverage, liquidity and financial position. These measures do not have any standardized meaning under GAAP and therefore, should not be considered in isolation, or used in substitution for measures of performance prepared in accordance with GAAP. For additional information on these non-GAAP and other financial measures, including reconciliations to the most directly comparable GAAP measures for Keyera's historical non-GAAP financial measures, refer below and to Management's Discussion and Analysis available on SEDAR+ at www.sedarplus.ca and Keyera's website at www.keyera.com.
Funds from operations is defined as cash flow from operating activities adjusted for changes in non-cash working capital. This measure is used to assess the level of cash flow generated from operating activities excluding the effect of changes in non-cash working capital, as they are primarily the result of seasonal fluctuations in product inventories or other temporary changes. Funds from operations is also a valuable measure that allows investors to compare Keyera with other infrastructure companies within the oil and gas industry.
Distributable cash flow is defined as cash flow from operating activities adjusted for changes in non-cash working capital, inventory write-downs, maintenance capital expenditures and lease payments, including the periodic costs related to prepaid leases. Distributable cash flow per share is defined as distributable cash flow divided by weighted average number of shares – basic. Distributable cash flow is used to assess the level of cash flow generated from ongoing operations and to evaluate the adequacy of internally generated cash flow to fund dividends.
The following is a reconciliation of funds from operations and distributable cash flow to the most directly comparable GAAP measure, cash flow from operating activities:
Funds from Operations and Distributable Cash Flow |
For the three months ended |
|||
(Thousands of Canadian dollars) |
|
|
2024 |
2023 |
Cash flow from operating activities |
|
|
398,040 |
311,489 |
Add (deduct): |
|
|
|
|
Changes in non-cash working capital |
|
|
(166,315) |
(64,183) |
Funds from operations |
|
|
231,725 |
247,306 |
Maintenance capital |
|
|
(12,891) |
(8,252) |
Leases |
|
|
(12,901) |
(11,092) |
Prepaid lease asset |
|
|
(595) |
(595) |
Distributable cash flow |
|
|
205,338 |
227,367 |
Payout ratio is calculated as dividends declared to shareholders divided by distributable cash flow. This ratio is used to assess the sustainability of the company's dividend payment program.
Payout Ratio |
|
For the three months ended
|
||
(Thousands of Canadian dollars, except %) |
|
|
2024 |
2023 |
Distributable cash flow1 |
|
|
205,338 |
227,367 |
Dividends declared to shareholders |
|
|
114,577 |
109,994 |
Payout ratio |
|
|
56 % |
48 % |
1 Non-GAAP measure as defined above. |
EBITDA is a measure showing earnings before finance costs, taxes, depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before costs associated with non-cash items, including unrealized gains and losses on commodity-related contracts, net foreign currency gains and losses on
The following is a reconciliation of EBITDA and adjusted EBITDA to the most directly comparable GAAP measure, net earnings:
EBITDA and Adjusted EBITDA |
|
For the three months ended
|
||
(Thousands of Canadian dollars) |
|
|
2024 |
2023 |
Net earnings |
|
|
70,914 |
137,789 |
Add (deduct): |
|
|
|
|
Finance costs |
|
|
56,484 |
41,721 |
Depreciation, depletion and amortization expenses |
|
|
86,549 |
72,186 |
Income tax expense |
|
|
21,480 |
40,556 |
EBITDA |
|
|
235,427 |
292,252 |
Unrealized loss on commodity contracts |
|
|
72,384 |
3,018 |
Net foreign currency loss (gain) on |
|
|
2,400 |
(3,112) |
Loss on disposal of property, plant and equipment |
|
|
4,093 |
— |
Adjusted EBITDA |
|
|
314,304 |
292,158 |
Realized Margin
Realized margin is defined as operating margin excluding unrealized gains and losses on commodity-related risk management contracts. Management believes that this supplemental measure facilitates the understanding of the financial results for the operating segments in the period without the effect of mark-to-market changes from risk management contracts related to future periods.
The following is a reconciliation of realized margin to the most directly comparable GAAP measure, operating margin:
Operating Margin and Realized Margin
Three months ended
|
|||||
(Thousands of Canadian dollars) |
Gathering & |
Liquids |
Marketing |
Corporate and Other |
|
Operating margin |
103,767 |
135,145 |
44,056 |
63 |
283,031 |
Unrealized loss on risk management |
562 |
1,418 |
70,404 |
— |
72,384 |
Realized margin |
104,329 |
136,563 |
114,460 |
63 |
355,415 |
Operating Margin and Realized Margin
Three months ended
|
|||||
(Thousands of Canadian dollars) |
Gathering &
|
Liquids |
Marketing |
Corporate and Other |
|
Operating margin (loss) |
99,422 |
117,406 |
115,642 |
(34) |
332,436 |
Unrealized loss on risk management contracts |
884 |
1,259 |
875 |
— |
3,018 |
Realized margin (loss) |
100,306 |
118,665 |
116,517 |
(34) |
335,454 |
Compound Annual Growth Rate ("CAGR") for Adjusted EBITDA holding Marketing constant
(previously CAGR for Adjusted EBITDA from the Fee-for-Service Business)
CAGR is calculated as follows:
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|
1 |
|
|
|
|
|
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|
|
|
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Number of Years |
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|
|
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CAGR |
= |
|
|
End of the period* |
|
|
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|
-1 |
|
|
|
|
|
Beginning of the period* |
|
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|
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* Utilizes beginning and end of period adjusted EBITDA as defined below.
CAGR for adjusted EBITDA holding Marketing constant is intended to provide information on a forward-looking basis. This calculation utilizes beginning and end of period adjusted EBITDA, which includes the following components and assumptions: i) forecasted realized margin for the Gathering and Processing and Liquids Infrastructure segments, ii) realized margin for the Marketing segment, which is held at a value within the expected base realized margin between
Forward-Looking Statements
In order to provide readers with information regarding Keyera, including its assessment of future plans and operations, its financial outlook and future prospects overall, this press release contains certain statements that constitute "forward-looking information" within the meaning of applicable Canadian securities legislation (collectively, "forward-looking information"). Forward-looking information is typically identified by words such as "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "plan", "intend", "believe", "commit", "maintain", "future", "strategy" and similar words or expressions, including the negatives or variations thereof. All statements other than statements of historical fact contained in this document are forward-looking information, including, without limitation, statements regarding:
- target payout, targeted annual adjusted EBITDA growth rate and net debt to adjusted EBITDA ratios;
- future capital expenditures and cash tax expenses;
- expectations regarding the anticipated benefits from certain projects, including the KAPS pipeline system and the
Pipestone gas plant and thePipestone gas plant expansion and expected capacity and volumes therefrom; - expectations regarding the approval and funding of future project opportunities and anticipated benefits from the same;
- Keyera's reliance on key relationships and agreements;
- expectations about future demand for Keyera's infrastructure and services;
- industry, market and economic conditions, including but not limited to commodity prices and basin volume growth, and any anticipated effects on Keyera;
- Keyera's future financial position and operational performance and future financial contributions and margins from its business segments including, but not limited to, Keyera's expectation that its Marketing business will contribute realized margin between
$430 million and$470 million in 2024 and an annual base realized margin of between$310 million and$350 after 2024; - the duration and impact of planned turnarounds and outages;
- Keyera's ability to maintain credit ratings;
- estimated maintenance and turnaround costs and estimated decommissioning expenses; and
- Keyera's financial priorities, including its capital allocation priorities, and ESG initiatives.
All forward-looking information reflects Keyera's beliefs and assumptions based on information available at the time the applicable forward-looking information is made and in light of Keyera's current expectations. Forward-looking information does not guarantee future performance. Management believes that its assumptions and expectations reflected in the forward-looking information contained herein are reasonable based on the information available on the date such information is provided and the process used to prepare the information. However, it cannot assure readers that these expectations will prove to be correct. All forward-looking information is subject to 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 information.
Readers are cautioned that they should not unduly rely on the forward-looking information included in this press release. Further, readers are cautioned that the forward-looking information contained herein is made as of the date of this press release. Unless required by law, Keyera does not intend and does not assume any obligation to update any forward-looking information. All forward-looking information contained in this press release is expressly qualified by this cautionary statement.
Further information about the assumptions, risks, uncertainties and other factors affecting the forward-looking information contained in this press release is available in filings made by Keyera with Canadian provincial securities commissions, including under "Forward-Looking Statements" in Keyera's MD&A for the three months ended
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