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Keyera Corp. Announces Third Quarter 2012 Results


CALGARY, Nov. 6, 2012 /CNW/ - Keyera Corp. (TSX:KEY)(TSX:KEY.DB.A), announced their 2012 third 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.

HIGHLIGHTS


    --  Demand for services from customers continued to support
        Keyera's business in the third quarter. In addition, Keyera
        advanced a number of new growth capital projects that will
        deliver shareholder value in the future.
    --  Keyera's Gathering and Processing business delivered operating
        margin(1) of $35.6 million in the quarter compared to $37.3
        million in the third quarter of 2011. In the NGL Infrastructure
        segment, operating margin(1) of $29.9 million was $13.1 million
        higher than the same quarter last year, another record quarter.
        Third quarter Marketing operating margin(1) was $16.7 million
        compared to $31.7 million in the same period last year, largely
        due to weak propane margins and the timing of hedge contract
        settlements.
    --  Earnings before interest, taxes, depreciation and amortization
        (2,3) ("EBITDA") were $72.2 million in the third quarter,
        slightly lower than the $77.0 million posted in the third
        quarter of 2011.
    --  Net earnings for the third quarter were $14.2 million ($0.18
        per share), compared to $38.6 million ($0.54 per share) in the
        same quarter last year, primarily due to higher non-cash
        expenses.
    --  Distributable cash flow(2,3) for the third quarter was $18.8
        million ($0.24 per share) compared to $50.5 million ($0.71 per
        share) in the third quarter last year, due largely to scheduled
        maintenance turnarounds at Alberta EnviroFuels and two gas
        plants.
    --  Keyera is increasing its dividend by 5.9%, from $0.17 per share
        per month to $0.18 per share per month, or $2.16 per share
        annually, beginning with its dividend payable on December 17,
        2012. This will be Keyera's tenth increase since going public
        in 2003, representing a 7.5% compound annual growth rate in
        dividends per share.
    --  Keyera announced approximately $330 million of growth capital
        initiatives in September. At its Fort Saskatchewan
        fractionation facility, it will construct a 30,000 barrel per
        day de-ethanizer to enable processing of a C2+ (ethane-rich)
        mix of NGLs. At the Rimbey gas plant, recoveries of ethane and
        other NGLs will be enhanced by the addition of a 400 million
        cubic feet per day turbo expander unit. Both projects are
        slated to be operational in 2014.
    --  Keyera entered into an agreement to acquire a rail and truck
        terminal in Hull, Texas, near Mont Belvieu. Keyera anticipates
        using the terminal to handle receipt and delivery of propane,
        butane and NGL mix.
    --  Total growth capital investment, excluding acquisitions, was
        $34.1 million during the quarter and $78.6 million
        year-to-date.  Keyera now expects its 2012 growth capital
        investment, excluding acquisitions, to be $125 million to $140
        million. In 2013, growth capital investment, excluding
        acquisitions, is expected to be between $250 million and $300
        million(4).

(1) See Note 19 of Keyera's Third Quarter 2012 Financial Statements.
(2) See "Non-GAAP Financial Measures" on page 40 of Keyera's Third Quarter 
2012 MD&A.
(3) See page 36 of Keyera's Third 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 33 of Keyera's Third 
Quarter 2012 MD&A for further discussion of Keyera's capital investment 
program.
                                          
                                 Three months ended Nine months ended
                                   September 30,       September 30,

Summary of Key Measures
(Thousands of Canadian dollars,
except where noted)                 2012       2011      2012      2011

Net earnings                      14,238     38,587    73,950   156,406

  Per share ($/share) - basic       0.18       0.54      0.98      2.21

Cash flow from operating          92,899   (64,800)   211,926   127,423
activities
                                                                       

Distributable cash flow(1)        18,771     50,460   125,477   150,980

  Per share( )($/share)             0.24       0.71      1.66      2.14

Dividends declared                39,379     34,192   115,991   100,415

  Per share( )($/share)             0.51       0.48      1.53      1.42

  Payout ratio %(1)                 210%        68%       92%       67%

EBITDA(2)                         72,202     77,013   217,648   228,281

Gathering and Processing:                                              

Gross processing throughput        1,154      1,159     1,204     1,149
(MMcf/d)

Net processing throughput            937        888       955       873
(MMcf/d)

NGL Infrastructure:                                                    

Gross processing throughput           89         83        84        84
(Mbbl/d)

Net processing throughput             32         26        33        26
(Mbbl/d)

Marketing:                                                             

Inventory value                  195,666    168,731   195,666   168,731

Sales volumes (bbl/d)             82,800     66,300    85,700    72,600
                                                                       

Acquisitions (including business  19,281        920   266,382     1,963
combination)

Growth capital expenditures       34,123     21,657    78,618    75,706

Maintenance capital expenditures  29,352      3,590    44,694    22,435

Total capital expenditures        82,756     26,167   389,694   100,104
                                                   
                                                    As at September 30,
                                                         2012      2011

Long-term debt                                        617,206   481,950

Credit facilities                                      95,000   176,000

Working capital surplus(3)                          (130,445) (196,000)

Net debt                                              581,761   461,950

Convertible debentures                                 11,875    16,588

Net debt (including debentures)                       593,636   478,538
                                                                       

Common shares outstanding - end                        77,324    71,337
of period

Weighted average number of                             75,746    70,632
shares outstanding - basic

Weighted average number of                             76,475    71,926
shares outstanding - diluted

Notes:
(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 36 of Keyera's Third 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 37 of Keyera's Third Quarter 2012 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.

Message to Shareholders

Keyera continued to see strong demand for its services from natural gas and 
oil sands customers in the third quarter. In addition, we advanced a number of 
new growth opportunities during the quarter which, when added to the projects 
currently underway, are anticipated to deliver significant shareholder value 
in the future.

Tempering these exciting new business opportunities was the passing of 
Keyera's Chairman, The Honourable E. Peter Lougheed, in September.  Peter 
served as Chairman of Keyera's Board of Directors for nearly a decade.  We 
have benefited from his extraordinary vision, spirit and determination, and he 
has been instrumental in our success. We all mourn the loss of our esteemed 
colleague.

In a separate news release today, we announced that Robert B. (Bob) Catell has 
been appointed Chairman of Keyera's Board of Directors. Bob has over 40 years 
of experience in the energy sector and has been a member of Keyera's Board 
since 2003. We wish him well and look forward to continuing to work with him 
in his new position.

Producer activity continued to support Keyera's business during the quarter, 
although operational challenges in both the Gathering and Processing and 
Marketing businesses affected financial results. EBITDA was $72.2 million in 
the third quarter, $4.8 million lower than the same period in 2011. Third 
quarter net earnings were $14.2 million ($0.18 per share), compared to $38.6 
million ($0.54 per share) in the third quarter last year. Net earnings were 
negatively affected by a non-cash impairment charge of $29.6 million relating 
to two gas plants. Distributable cash flow was $18.8 million ($0.24 per share) 
in the third quarter, compared to $50.5 million ($0.71 per share) in the same 
period last year. Distributable cash flow in the quarter was also affected by 
maintenance capital costs of $29.3 million, primarily due to scheduled 
maintenance turnarounds at Alberta EnviroFuels and the Gilby and Nordegg River 
gas plants.

With the growth in 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 November 2012 dividend, payable to shareholders 
on December 17, 2012, our dividend will increase by 5.9% to 18 cents per share 
per month, or $2.16 per share annually. This is Keyera's tenth dividend 
increase since going public in 2003. Since that time, we have provided 
shareholders with a 7.5% compound annual growth rate in dividends per share, 
reflecting Keyera's commitment to providing steady value growth to 
shareholders.

Third quarter gross throughput at our Gathering and Processing plants of 1.15 
billion cubic feet per day was slightly lower than the third quarter of 2011 
but year-to-date throughput of 1.2 billion cubic feet per day was tracking 
above last year. Continued solid performance at the Rimbey and Minnehik Buck 
Lake gas plants was offset by facility repairs at the Strachan and Edson gas 
plants, remediation costs on the Cranberry pipeline and scheduled maintenance 
turnarounds at the Gilby and Nordegg River gas plants. These items reduced 
operating margin by approximately $6 million to $35.6 million, 5% lower than 
the same period in 2011.

The NGL Infrastructure business continued to benefit from the acquisition of 
Alberta EnviroFuels in January, higher NGL production in western Canada, and 
demand from oil sands producers for additional condensate storage capacity. 
These factors have resulted in Keyera's NGL fractionators operating at full 
capacity, increasing diluent deliveries at the Alberta Diluent Terminal and 
higher storage revenues during the quarter. As a result, operating margin for 
NGL Infrastructure for the quarter was $29.7 million, 77% higher than the 
third quarter last year. In anticipation of continued demand for services, we 
are expanding our facilities in this area.

In our NGL Marketing segment, physical sales of butane and condensate were 
strong in the quarter and Keyera's crude oil midstream business also delivered 
good results. Offsetting this were weak propane results, lower iso-octane 
sales due to the scheduled maintenance turnaround at Alberta EnviroFuels in 
September and realized losses from the settlement of financial contracts 
relating to butane and condensate. As a result, Marketing operating margin of 
$16.7 million in the quarter was $15.1 million lower than the very strong 
results posted in the third quarter last year.

Producer activity led to a number of new initiatives around Keyera's gas 
plants in the quarter. As announced in September, we are proceeding with 
construction of a 400 million cubic feet per day turbo expander at our Rimbey 
gas plant. This $210 million project will enable us to enhance NGL recoveries, 
including extracting up to 20,000 barrels per day of ethane as well as 
incremental propane, butane and condensate. Supporting the project is a 
long-term sales agreement with a large ethane consumer in Alberta and a 
long-term fee-for-service processing agreement with a large producer.

Two producers are in the process of constructing gathering pipelines to 
deliver gas from new areas in west central Alberta to Keyera plants. Keyera 
has agreed to purchase the pipelines upon their completion over the next eight 
months, and is in negotiations with another producer to purchase a third 
pipeline. The two pipelines will deliver raw gas to the Strachan and Minnehik 
Buck Lake gas plants, while the third will deliver gas to Rimbey.

A number of producers continue to develop the Montney, Duvernay and other 
zones around the Simonette gas plant. In early October, producers east and 
south of Simonette began delivering raw gas to the plant through two new 
gathering pipelines completed in the third quarter. Keyera continues to 
discuss terms for an expansion of the plant and addition of deep cut 
facilities with producers in the area.

In the third quarter, we were successful in acquiring additional ownership 
interests in the Pembina North and Brazeau North gas plants, bringing our 
ownership in these facilities to 100%. We also acquired an additional 17.4% in 
the Minnehik Buck Lake gas plant, to bring our ownership in that facility to 
80%.

In September, we announced the development of a 30,000 barrel per day 
de-ethanizer at Keyera's Fort Saskatchewan fractionation and storage facility. 
Under the terms of a long-term fee-for-service agreement, Keyera will create 
specification ethane, propane, butane and condensate from a C2+ (ethane-rich) 
mix of NGLs delivered to the facility by a deep basin producer. The expected 
total cost of the project is $110 million and the schedule calls for the 
facility to be operational in the first half of 2014.

We have a number of projects underway to support the demand for terminalling 
and storage services from oil sands producers. At Fort Saskatchewan, drilling 
of the well bore for our thirteenth storage cavern was completed in August and 
washing of the cavern is expected to begin in the fourth quarter. To support 
the additional storage capacity, construction of a new brine pond is underway 
and is expected to be complete in the fall of 2013.

With the growth in demand for diluent in Alberta, we are moving to a 24-hour 
per day operation at the Alberta Diluent Terminal in December. At South 
Cheecham, work on the rail and truck terminal is progressing and we continue 
to talk with oil sands producers interested in securing capacity in the new 
facility for various services

In September we announced an agreement to purchase a rail and truck terminal 
in Hull, Texas, near Mont Belvieu. When operational, the terminal will enable 
Keyera to handle the receipt and delivery of propane, butane and NGL mix. 
Longer term, given the strategic location of the facility, we can evaluate 
adding to the terminal to handle other products, such as bitumen and dilbit.

Alberta EnviroFuels was off-line for all of September and half of October for 
its scheduled maintenance turnaround. The turnaround was completed 
successfully and the plant returned to full operation on October 18(th). Cost 
of the turnaround, which is included in maintenance capital, was $16 
million.  The replacement of catalyst and other maintenance capital projects 
were also completed while the facility was off-line bringing the total capital 
cost of the maintenance work to $23 million.

We are currently modifying our rail loading facility at the Edmonton Terminal 
to handle iso-octane. Based on the current schedule, we anticipate completing 
this work early December at which time we will be able to deliver iso-octane 
by rail. This project is expected to mitigate the effect of apportionment on 
the Trans Mountain pipeline, currently the primary delivery route for 
iso-octane produced at Alberta EnviroFuels, and allow us to access additional 
markets for incremental sales.

At this time, we anticipate that 2012 growth capital investment, excluding 
acquisitions, will likely be between $125 million and $140 million. In 2013, 
we anticipate growth capital investment, excluding acquisitions, will be 
between $250 million and $300 million. Given the level of industry activity, 
current projects already underway and other opportunities under consideration, 
we anticipate that Keyera's growth capital investment for the next several 
years will be significantly higher than recent expenditure levels.

On behalf of Keyera's directors and management team, thank you for your 
continued support.

Jim V. Bertram
Chief Executive Officer
Keyera Corp.

DISCLAIMER
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 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 Keyera's Third 
Quarter 2012 MD&A and in Keyera's Annual Information Form dated February 16, 
2012 filed on SEDAR are 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.

 

 

 

 

 

 

about Keyera Corp., please visit our website at www.keyera.com or contact:

John Cobb, Vice President, Investor Relations E-mail: ir@keyera.com, 
Telephone: (403) 205-7670 / Toll Free: (888) 699-4853; Fax: (403)  205-8425.

SOURCE: Keyera Corp.

To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/November2012/06/c5211.html

CO: Keyera Corp.
ST: Alberta
NI: OIL ERN 

-0- Nov/06/2012 22:02 GMT

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