Company Reports

Keyera’s first-quarter earnings were a bit better than expected, due to marketing outperformance yet again. Overall EBITDA improved 8% to CAD 314 million from last year’s levels. This marketing streak has continued a pattern for some time now, and Keyera continues to cling to its base marketing guidance of a midpoint of CAD 330 million. Now, 2024 is expected to achieve a midpoint of CAD 450 million, reflecting the continued strength of the iso-octane business. We’ve boosted our forecast for 2024 similarly, but also made sure that our 2025-28 marketing forecast reflects a minimum of CAD 476 million per year in contributions. Our revised fair value estimate is now CAD 36, up from CAD 34. Our no moat rating is unchanged.

Keyera's integrated business model is now finally benefiting from the Key Access Pipeline System. The pipeline will connect the firm’s northern plants to its Fort Saskatchewan liquids hubs and will consist of pipelines for condensate and natural gas liquids mix. By increasing its proportion of long-term contracts and maximizing utilization rates across facilities, Keyera is positioned to take advantage of more stable cash flows in the future while capitalizing on Canadian oil sands, natural gas, and NGL growth.

Keyera stands to benefit from an integrated business model with significant potential to grow via the Key Access Pipeline System, which has come online in early 2023. The pipeline will connect the firm’s northern plants to its Fort Saskatchewan liquids hubs and will consist of pipelines for condensate and natural gas liquids mix. By increasing its proportion of long-term contracts and maximizing utilization rates across facilities, Keyera is positioned to take advantage of more stable cash flows in the future while capitalizing on Canadian oil sands, natural gas, and NGL growth.

Keyera’s fourth-quarter results were strong, continuing the multiquarter streak of marketing-led outperformance. Full-year EBITDA was CAD 1.21 billion, above our CAD 1.16 billion forecast, driven by healthy marketing results. The marketing segment turned in a realized margin of CAD 479 million, above prior midpoint guidance of CAD 435 million, given when it released third-quarter earnings, helped by higher volumes and strength in the iso-butane business. Given the immaterial outperformance, we do not expect to change our CAD 34 fair value estimate or no-moat rating.

Keyera’s 2024 outlook was a bit better than our expectations, primarily around capital spending. After completing the Key Access Pipeline Systems, or KAPS, in 2023, the firm is shifting to several years of reduced spending as it reaps the earnings from several years of heavy investment. Growth capital spending for 2024 is set at a midpoint of CAD 90 million, well below our already low expectations and less than half of 2023 levels. After updating our forecast, our fair value estimate increases to CAD 34 from CAD 32 per share, reflecting higher levels of free cash flow. At least for the near term over the next year or two, the projects considered are more incremental expansions to existing systems, versus larger and more expensive newbuild efforts.

Keyera stands to benefit from an integrated business model with significant potential to grow via the Key Access Pipeline System, which has come online in early 2023. The pipeline will connect the firm’s northern plants to its Fort Saskatchewan liquids hubs and will consist of pipelines for condensate and natural gas liquids mix. By increasing its proportion of long-term contracts and maximizing utilization rates across facilities, Keyera is positioned to take advantage of more stable cash flows in the future while capitalizing on Canadian oil sands, natural gas, and NGL growth.

Keyera’s third-quarter results were quite strong, thanks to its marketing unit outperforming again. The firm raised its guidance for the third consecutive quarter. At the start of 2023, marketing contributions were expected to be a midpoint of CAD 265 million, whereas now they are expected to be about CAD 435 million. We attribute the outperformance mainly due to excellent execution, helped by better-than-expected oil and gas pricing and spreads. Keyera noted particular strength in iso-butane and motor gasoline pricing. After updating our model, our fair value estimate increased to CAD 32 from CAD 30, mainly due to the marketing improvement but also to slightly lower expected capital spending for 2023. Overall EBITDA increased to CAD 288 million from CAD 247 million last year.

Keyera stands to benefit from an integrated business model with significant potential to grow via the Key Access Pipeline System, which has come online in early 2023. The pipeline will connect the firm’s northern plants to its Fort Saskatchewan liquids hubs and will consist of pipelines for condensate and natural gas liquids mix. By increasing its proportion of long-term contracts and maximizing utilization rates across facilities, Keyera is positioned to take advantage of more stable cash flows in the future while capitalizing on Canadian oil sands, natural gas, and NGL growth.

Keyera’s second-quarter earnings were solid, in our view. Its marketing performance was the biggest contributor, as full-year guidance is now expected to be a midpoint of CAD 395 million, up from CAD 350 million, thanks to strong year-to-date performance, hedges in place, and expected oil and gas prices in the second half of the year. The liquids business also did very well, with the initial KAPS pipeline system contributions flowing through earnings and boosting realized margins by over 20% from last year’s levels, as well as the benefit from the acquisition of a partial interest in the Keyera’s Fort Saskatchewan complex. The benefits from these improvements more than offset the negative CAD 13 million wildfires impact. The earnings growth has allowed Keyera to boost the quarterly distribution to CAD 0.50 per share (CAD 2.00 annually), up 4%, which is its first increase since 2020. After updating our model, we will maintain our CAD 30 fair value estimate and no-moat rating.

Keyera stands to benefit from an integrated business model with significant potential to grow via the Key Access Pipeline System, which has come online in early 2023. The pipeline will connect the firm’s northern plants to its Fort Saskatchewan liquids hubs and will consist of pipelines for condensate and natural gas liquids mix. By increasing its proportion of long-term contracts and maximizing utilization rates across facilities, Keyera is positioned to take advantage of more stable cash flows in the future while capitalizing on Canadian oil sands, natural gas, and NGL growth.

Canadian wildfires in the Western Canadian Sedimentary Basin have shut in likely in excess of 300,000 barrels per day of production, per Rystad Energy, primarily across the Montney and Duvernay plays. The number of wildfires are about 17% above 10-year averages year to date with 944 fires, but the area burned is nearly 10 times 10-year averages year to date with nearly 500,000 hectares, according to the Canadian Interagency Forest Fire Center. The impact on our Canadian midstream firms (Enbridge, Keyera, Pembina, and TC Energy) is likely to be notable for second-quarter earnings but not material enough to result in fair value estimate or moat changes at this time.

Keyera’s first quarter was strong with the KAPS pipeline finally entering service in April (with a new 50% owner in Stonepeak) and its marketing business outperforming during the quarter. The firm’s marketing margin is now expected to be a midpoint of CAD 350 million compared with earlier guidance of CAD 265 million and our CAD 297 million forecast. The primary drivers of the outperformance are lower butane feedstock costs and high iso-butane premiums. The recently acquired capacity at the Fort Saskatchewan complex contributed to a record margin of CAD 119 million in the liquids infrastructure segment. After updating our model to boost our marketing forecast modestly, our fair value estimate of CAD 30 and our no-moat rating are unchanged.

Keyera stands to benefit from an integrated business model with significant potential to grow via the Key Access Pipeline System, which has come online in early 2023. The pipeline will connect the firm’s northern plants to its Fort Saskatchewan liquids hubs and will consist of pipelines for condensate and natural gas liquids mix. By increasing its proportion of long-term contracts and maximizing utilization rates across facilities, Keyera is positioned to take advantage of more stable cash flows in the future while capitalizing on Canadian oil sands, natural gas, and NGL growth.

Keyera stands to benefit from an integrated business model with significant potential to grow via the Key Access Pipeline System, which comes on line in early 2023. The pipeline will connect the firm’s northern plants to its Fort Saskatchewan liquids hubs and will consist of pipelines for condensate and natural gas liquids mix. By increasing its proportion of long-term contracts and maximizing utilization rates across facilities, Keyera is positioned to take advantage of more stable cash flows in the future while capitalizing on Canadian oil sands, natural gas, and NGL growth.

Keyera’s fourth-quarter results were a bit better than expected, as full-year EBITDA topped CAD 1 billion compared to our CAD 965 million forecast, mainly due to strong gathering and processing, and marketing results. Marketing, in particular, well outperformed a typical year of CAD 250 million-CAD 280 million in contributions with realized margins of CAD 397 million. At first glance, we will maintain our CAD 30 fair value and no-moat rating.

Plains has agreed to sell to Keyera a 21% stake in its Keyera Fort Saskatchewan facility for CAD 365 million in what we view as a mutually beneficial transaction. Given the small size of the deal, we do not expect it will affect our fair value estimates or no-moat ratings for both entities. For Plains, the deal raises a good amount of cash that it can use for deleveraging and investment at the Plains Fort Saskatchewan facility (separate from the Keyera one). This investment could include improving connectivity to Keyera assets.

Keyera’s third-quarter results were weak, in our view. After updating our model, we will maintain our no-moat rating and CAD 30 fair value estimate. The biggest disappointment was another increase in costs for the KAPS project to CAD 1 billion from CAD 900 million. The project’s costs were at a midpoint of CAD 840 million earlier this year at 70% complete. The higher costs are primarily caused by poor weather, but the pipeline (currently 90% complete) is expected to be in service at the end of the first quarter of 2023.

Keyera stands to benefit from an integrated business model with significant potential to grow via the Key Access Pipeline System, which comes on line in early 2023. Inflationary costs and poor weather have boosted the cost to complete the pipeline again in 2022, and costs now stand at CAD 1 billion. The pipeline will connect the firm’s northern plants to its Fort Saskatchewan liquids hubs and will consist of pipelines for condensate and natural gas liquids mix. By increasing its proportion of long-term contracts and maximizing utilization rates across facilities, Keyera is positioned to take advantage of more stable cash flows in the future while capitalizing on Canadian oil sands, natural gas, and NGL growth.

Keyera stands to benefit from an integrated business model with significant potential to grow via the Key Access Pipeline System, which comes on line in early 2023. Inflationary costs have boosted the cost to complete the pipeline by CAD 60 million, to CAD 900 million. The pipeline will connect the firm’s northern plants to its Fort Saskatchewan liquids hubs and will consist of pipelines for condensate and natural gas liquids mix. By increasing its proportion of long-term contracts and maximizing utilization rates across facilities, Keyera is positioned to take advantage of more stable cash flows in the future while capitalizing on Canadian oil sands, natural gas, and NGL growth.

Keyera’s second-quarter results were strong, and the company once again raised its 2022 guidance as a result of the higher marketing profits. Marketing profits are expected to now be a midpoint of CAD 395 million compared with last quarter’s guidance of CAD 320 million. The improved numbers were due to strong commodity prices and record iso-octane margins, the result of strong gasoline pricing and octane demand. Our forecast already incorporates the higher marketing profits, so we expect to maintain our fair value estimate and no-moat rating.