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  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  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    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 NI: OIL ERN  
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