Keyera Corp. Announces Second Quarter 2014 Results

CALGARY, Aug. 6, 2014 /CNW/ - Keyera Corp. (TSX:KEY) announced their 2014 
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 or, to view the MD&A and financial statements, visit 
either Keyera's website or the System for Electronic Document Analysis and 
Retrieval at 

    --  Net earnings were $62.9 million ($0.78 per share) in the second
        quarter of 2014, $14.7 million ($0.16 per share) higher than
        the $48.2 million ($0.62 per share) in the second quarter of
    --  Adjusted earnings before interest, taxes, depreciation and
        amortization(1, 2) (Adjusted "EBITDA") were $143.0 million in
        the second quarter of 2014, 44% higher than the $99.4 million
        posted in the same period in 2013.
    --  Distributable cash flow(1, 2) was $84.0 million ($1.04 per
        share) in the second quarter of 2014 compared to $79.3 million
        ($1.01 per share) recorded in the second quarter of 2013.
    --  Keyera's Gathering and Processing business delivered an
        operating margin(3) of $64.0 million in the second quarter of
        2014, compared to $38.9 million in the same quarter of 2013.
        The NGL Infrastructure segment also delivered record operating
        margin(3) of $49.0 million in the second quarter of 2014, 68%
        higher than the $29.1 million recorded in the second quarter of
        2013. Marketing operating margin(3) was $52.8 million in the
        second quarter of 2014, compared to $46.8 million in the second
        quarter of last year.
    --  Effective with its May dividend paid in June, Keyera increased
        its dividend by 7.5%, from $0.20 to $0.215 per share per month,
        or $2.58 per share annually. This is Keyera's twelfth dividend
        increase since going public in 2003, representing an 8%
        compound annual growth rate in dividends per share.
    --  Keyera acquired an 85% ownership interest in the Cynthia gas
        plant and various interests in associated assets in west
        central Alberta, and has been appointed operator.
    --  Keyera reached an agreement to participate as a 30%
        non-operating owner in the Enbridge Norlite pipeline. The
        Norlite pipeline will deliver condensate from Fort Saskatchewan
        to the Athabasca oil sands.
    --  Keyera advanced a number of capital projects, including
        construction of the Rimbey gas plant turbo expander, the
        de-ethanizer at Fort Saskatchewan, the condensate stabilizer at
        the Simonette gas plant and site preparation of the Josephburg
    --  Construction of the Twin Rivers pipeline project, with an
        expanded scope, is scheduled to begin later this year
    --  Keyera successfully completed a public offering of 4,312,500
        common shares in May, generating gross total proceeds of $318
        million. Net proceeds of the offering will be used to partially
        fund Keyera's capital growth program, to reduce its short term
        indebtedness under its credit facilities and for general
        corporate purposes.
    --  Total growth capital investment was $157.0 million in the
        second quarter of 2014 and $355.6 million year-to-date. Growth
        capital investment for 2014, excluding acquisitions, is now
        expected to be between $700 million and $800 million.(4)
    1                     See "Non-GAAP Financial Measures"
                          on page 39 of the MD&A.
                 See page 35 and 36 of the MD&A for
                          a reconciliation of distributable
                          cash flow to cash flow from
                          operating activities and Adjusted
    2                     EBITDA to net earnings.
    (3)                   See note 14 to the accompanying
                          financial statements.
                 See "Capital Expenditures and
                          Acquisitions" on page 33 of the
                          MD&A for further discussion of
                          Keyera's capital investment
    4                     program.
                                                                Three months ended       Six months ended
                                                                                         June 30,
                                                                 June 30,
    Summary of Key Measures                                    2014          2013        2014              2013
    (Thousands of Canadian dollars, except where noted)
    Net earnings                                             62,930        48,173     118,163            71,618
    Per share ($/share) - basic                                0.78          0.62        1.47              0.92
    Cash flow from operating activities                     106,675        49,225     226,168           185,913
    Distributable cash flow(1)                               84,015        79,259     162,235           162,544
    Per share ($/share)                                        1.04          1.01        2.02              2.08
    Dividends declared                                       51,044        42,232      98,649            84,306
    Per share ($/share)                                        0.63          0.54        1.23              1.08
    Payout ratio %(1)                                           61%          53%        61%              52%
    Adjusted EBITDA(2)                                      143,043        99,413     250,790           197,261
    Gathering and Processing:
    Gross processing throughput (MMcf/d)                      1,358         1,292       1,349             1,265
    Net processing throughput (MMcf/d)                        1,113         1,050       1,107             1,015
    NGL Infrastructure:
    Gross processing throughput (Mbbl/d)                        118           112         120               113
    Net processing throughput (Mbbl/d)                           29            33          33                36
    Inventory value                                         193,806       218,100     193,806           218,100
    Sales volumes (Bbl/d)                                    83,000        83,000      91,200            99,800
    Acquisitions                                            114,159        23,101     119,942            27,008
    Growth capital expenditures                             157,021        45,981     355,619            99,097
    Maintenance capital expenditures                         39,604         9,498      42,883            11,505
                                                             ------         -----      ------            ------
    Total capital expenditures                              310,784        78,580     518,444           137,610
    --------------------------                              -------        ------     -------           -------
                                                                                            As at June 30,
                                                                                       2014              2013
                                                                                       ----              ----
    Long-term debt                                                                1,154,172           636,926
    Credit facilities                                                                     -          170,000
    Working capital surplus(3)                                                    (319,846)        (175,904)
                                                                                   --------          --------
    Net debt                                                                        834,326           631,022
    Common shares outstanding - end of period                                        83,935            78,307
    Weighted average number of shares outstanding - basic                            80,196            78,013
    Weighted average number of shares outstanding - diluted                          80,196            78,497
    -------------------------------------------------------                          ------            ------

       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
                    35 for a reconciliation of
                    distributable cash flow to its
                    most closely related GAAP
    2               Adjusted EBITDA is defined as
                    earnings before interest,
                    taxes, depreciation,
                    amortization, accretion,
                    impairment expenses, unrealized
                    gains/losses and any other
                    non-cash items such as gains/
                    losses on the disposal of
                    property, plant and equipment.
                    EBITDA and Adjusted EBITDA are
                    not standard measures under
                    GAAP.  See section titled
                    "EBITDA" for a reconciliation
                    of Adjusted EBITDA to its most
                    closely related GAAP measure.
    3               Working capital is defined as
                    current assets less current

Message to Shareholders

Producer demand for liquids-rich gas processing continued to be strong in the 
second quarter, resulting in increased throughput at many of our facilities 
during the year. Oil sands developments continue to drive demand for services 
in our Liquids Business Unit, particularly in the areas of condensate 
logistics. Our customers continue to see the benefits of Keyera's integrated 
services from our three business segments. This growth in demand presents us 
with opportunities to expand our service offering and create value for our 

We are pleased with the performance of all three of Keyera's business segments 
in the second quarter. Strong industry fundamentals contributed to record 
adjusted EBITDA for the second quarter, 44% higher than the same period last 

Our Gathering and Processing business reported an operating margin of $64.0 
million, 64% higher than the second quarter of 2013. Strong second quarter 
results are primarily due to increased throughput at many of our facilities 
and to recoveries of fees related to turnarounds completed in the quarter. 
Several of our facilities are operating at or near capacity as a result of the 
increased drilling in several zones including the Cardium, Spirit River, 
Glauconite, Montney and Duvernay geological horizons. With some facilities 
reaching capacity, we are using our pipeline network to deliver volumes to 
nearby Keyera facilities to accommodate this increased demand for gas 

Several pipeline projects are underway that allow us to capture incremental 
production for delivery to Keyera facilities. Construction resumed on the 
Wapiti pipeline system in the Deep Basin in June, after spring breakup, and 
assuming no further delays, we anticipate the 90-kilometre, gathering 
pipelines to be completed this quarter. We have received regulatory approval 
for the plant expansion and the condensate stabilizer unit at Simonette and 
are proceeding with fabrication of these facilities.

The Wilson Creek pipeline and Carlos pipeline offload projects were both 
completed and brought on-line in the second quarter increasing throughput at 
the Rimbey gas plant. Regulatory approvals for the Rimbey gas plant turbo 
expander project were received in the second quarter. Construction is now 
underway and start up is expected in the first half of 2015. The 400 million 
cubic feet per day turbo expander will increase recoveries of natural gas 
liquids (NGLs) from the raw gas stream.

Construction of the Twin Rivers pipeline, that will deliver raw gas to 
Keyera's Brazeau River and West Pembina gas plants, is scheduled to begin this 
year. With strong producer interest in this project, in July, we reached an 
agreement with a producer to extend the pipeline further south along the 
Keyera network.

All legal challenges relating to the acquisition of the Cynthia gas plant, 
including rights of first refusal, were resolved in Keyera's favour in the 
second quarter. On June 11, Keyera was appointed operator of the plant. The 
facility underwent a scheduled turnaround in May, successfully completing all 
planned maintenance. Our business development and operations teams are now 
analyzing options to connect the plant with other Keyera infrastructure in the 

The Strachan, Caribou, West Pembina and Cynthia gas plants all completed their 
scheduled four year turnarounds in the second quarter at a total cost to 
Keyera of approximately $35 million. These turnarounds provide the opportunity 
to conduct scheduled cleaning and maintenance of plant equipment in order to 
operate efficiently and safely in the future.

Our Liquids Business Unit also had a very successful quarter. The Marketing 
segment reported operating margin of $52.8 million, compared to $46.8 million 
in the second quarter of last year.  Margins for iso-octane were strong in the 
second quarter, due to low feedstock costs, an effective risk management 
strategy and growth in sales volumes. Growing markets and access to Kinder 
Morgan's Galena Park rail, storage and marine facility on the Gulf Coast have 
increased iso-octane sales and allowed Alberta EnviroFuels to operate at close 
to full capacity in 2014. To serve local markets more efficiently, we are 
building an iso-octane truck loading facility at the site. Butane was also a 
significant contributor to Marketing results in the second quarter.

The NGL Infrastructure segment generated operating margin of $49.0 million, 
68% higher than the same quarter in 2013. Increased demand for our storage, 
fractionation and transportation services were the primary drivers for this 
increase. Increased liquids-rich drilling activity has driven growth in demand 
for our fractionation, storage and transportation services. A number of 
projects are underway to address this demand at our Fort Saskatchewan complex. 
We continue to make progress on the construction of our 30,000 barrel per day 
de-ethanizer unit and expect the de-ethanizer to be operational by the first 
quarter of 2015. The total gross cost of the project is now estimated to be 
approximately $200 million. We are awaiting regulatory approval to also add 
35,000 barrels per day of fractionation capacity at the site, and, assuming 
timely receipt of approvals, we are targeting startup of the new fractionator 
in early 2016.

Expansion of our storage facilities on site continues, with our 13(th) and 
14(th) underground storage caverns currently under development. We anticipate 
the 13(th) cavern will be completed in the third quarter of 2015, and that the 
14(th) cavern will be put into service in 2017. Construction of the fourth 
brine pond on site continues and is expected to be operational later this 
year. These expansions at Fort Saskatchewan address producers' needs for these 
services, supporting their liquids-rich drilling programs and enhancing the 
value of their NGL production.

In July, the Kinder Morgan Cochin pipeline was commissioned and we began 
receiving condensate from the pipeline at our Fort Saskatchewan facility. At 
present, Keyera is the only receipt point for product delivered on the Cochin 
pipeline. As the Cochin pipeline no longer handles propane, Keyera is 
developing a rail loading terminal at Josephburg to help address the need for 
propane egress out of Alberta. Engineering design of phase one of this project 
is ongoing and site preparation is currently underway.

In May, we announced that we would be participating as a 30% non-operating 
owner with Enbridge in the Norlite pipeline. The Norlite pipeline will deliver 
condensate from Fort Saskatchewan to the Athabasca oil sands, providing oil 
sands producers with access to the condensate needed to dilute bitumen 
produced in the area. The scope of the project has increased to a 24-inch 
diameter pipeline and, subject to regulatory and other approvals as well as 
finalization of scope, Enbridge estimates that Norlite will be completed in 
2017 at an estimated cost of approximately $1.4 billion.

Work is progressing well at our Alberta Crude Terminal, a 50/50 joint venture 
with Kinder Morgan that is adjacent to our Alberta Diluent Terminal in 
Edmonton. With the commissioning of new pipelines connecting these rail 
facilities with our Edmonton Terminal, we were able to begin loading crude oil 
onto rail cars in August. Full commissioning of the site is expected later 
this year. Upon completion, the facility is expected to have a capacity of 
approximately 40,000 barrels per day.

We are on target to execute our biggest capital spending program ever and now 
estimate that our capital investment in 2014 will be between $700 million and 
$800 million. These projects complement our existing assets and meet the 
growing needs of our customers. Keyera, like others in our industry, is facing 
challenges completing these projects on time and on budget, given the 
constraints associated with the high level of activity currently underway in 
Alberta. Successful project execution is critical to Keyera's success and we 
continue to devote considerable time and attention in order to accomplish this.

I am excited about the opportunities I see ahead for Keyera. Strong market 
fundamentals, combined with our new business opportunities, offer the 
potential for continued growth in the future. 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 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 13, 2014, filed on SEDAR 
and available on the Keyera website at

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 schedules and expected in 
service dates; quality of cost estimating; decision processes and approvals by 
joint venture partners; changes in project scope at the time of project 
sanctioning; regulatory approvals; and macro socio-economic trends.  Pipeline 
projects are also subject to Keyera's ability to secure the necessary rights 
of way; and underground cavern development is dependent on sufficient water 
supply. 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.  Typically, the earlier in the 
engineering process that projects are sanctioned, the greater the likelihood 
that the schedule and budget may change.  Alberta's move toward a single 
regulator has affected approval processing times for projects that are subject 
to regulatory approval.  The new regulatory requirements implemented with the 
transition to the AER, and possibly future changes as integration of the 
regulatory bodies continues, create uncertainty for project timing, 
requirements and compliance.  Regulatory applications are also subject to 
intervention by interested parties which could result in delays.

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 

SOURCE  Keyera Corp. 
For further information about Keyera, please visit our website at or contact: John Cobb, Vice President, Investor Relations and 
Information Technology or Julie Puddell, Manager, Investor Relations; E-mail:, Telephone: (403) 205-7670 / Toll Free: (888) 699-4853 
To view this news release in HTML formatting, please use the following URL: 
CO: Keyera Corp.
ST: Alberta
-0- Aug/06/2014 21:24 GMT
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