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 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 -- 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 2013. -- 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 terminal. -- 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 Marketing: 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 ------------------------------------------------------- ------ ------ 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 35 for a reconciliation of distributable cash flow to its most closely related GAAP measure. 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 liabilities. 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 customers. 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 year. 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 processing. 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 area. 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 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 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 SEDAR at www.sedar.com. SOURCE Keyera Corp. For further information about Keyera, please visit our website at www.keyera.com or contact: John Cobb, Vice President, Investor Relations and Information Technology or Julie Puddell, Manager, Investor Relations; E-mail: email@example.com, Telephone: (403) 205-7670 / Toll Free: (888) 699-4853 To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/August2014/06/c1476.html CO: Keyera Corp. ST: Alberta NI: OIL ERN
Keyera Corp. Announces Second Quarter 2014 Results
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