Keyera Corp. Earnings Call Highlights Growth and Challenges

Keyera Corp. ((TSE:KEY)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call from Keyera Corp. painted a generally positive picture, highlighting strong financial results and strategic growth initiatives. Despite acknowledging challenges such as an extended maintenance outage at the AEF facility and commodity market volatility, the company emphasized its robust balance sheet and proactive measures as a foundation for future growth.

Sanctioning of KFS Frac 3

Keyera announced the sanctioning of KFS Frac 3, a significant expansion project that will increase total frac capacity by about 60%. This expansion is backed by long-term customer commitments with high take-or-pay provisions, underscoring the company’s strategic growth initiatives.

Strong Financial Results

The company reported net earnings of $130 million, a substantial increase from $71 million in the same period last year. This growth was driven by strong margin contributions from the fee-for-service segment, which saw a 9% year-over-year increase.

Wapiti Gas Plant Ahead of Schedule

Keyera’s Wapiti gas plant is now expected to reach effective capacity in 2026, a year earlier than previously anticipated. Several optimization projects are supporting this accelerated timeline, contributing to the company’s growth trajectory.

Solid Balance Sheet

Keyera ended the quarter with a strong balance sheet, having reduced net debt by over $500 million over the last two years. The company’s net debt to EBITDA ratio stands at 2 times, which is below the targeted range, highlighting financial stability.

Extended Maintenance Outage at AEF Facility

The AEF facility experienced an extended maintenance outage, lasting 7 weeks instead of the anticipated 6. This impacted the Marketing segment’s realized margin by approximately $50 million, presenting a challenge for the company.

Commodity Market Volatility Impact

Despite implementing risk management strategies, recent volatility in commodity markets has affected Keyera’s projections. The Marketing segment guidance was lowered to account for the outage impact, reflecting the challenges posed by market conditions.

Forward-Looking Guidance

During the earnings call, Keyera provided guidance on several key metrics. The company reaffirmed its goal to grow fee-based adjusted EBITDA by 7% to 8% annually from 2024 to 2027. The sanctioning of KFS Frac 3 is expected to expand frac capacity by about 60%, with returns projected within a 10% to 15% range. Keyera also outlined expectations for growth and maintenance capital expenditures, as well as cash taxes, while maintaining optimism about long-term growth in the Western Canadian Sedimentary Basin.

In summary, Keyera Corp.’s earnings call highlighted a positive outlook with strong financial results and strategic growth initiatives. While challenges such as the extended AEF facility outage and commodity market volatility were acknowledged, the company’s solid balance sheet and proactive measures provide a strong foundation for future growth.