CIBC 18 th Annual Whistler Institutional Investor Conference January 22, 2015

Transcription

1 CIBC 8 th Annual Whistler Institutional Investor Conference January 22, 205

2 Forward-Looking Information In the interests of providing Keyera Corp. ( Keyera or the Company ) shareholders and potential investors with information regarding Keyera, including Management s assessment of future plans and operations relating to the Company, this document contains certain statements and information that are forward-looking statements or information within the meaning of applicable securities legislation, and which are collectively referred to herein as forwardlooking statements". Forward-looking statements in this document include, but are not limited to statements and tables (collectively statements ) with respect to: capital projects and expenditures; strategic initiatives; anticipated producer activity and industry trends; and anticipated performance. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, as well as known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur and which may cause Keyera s actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by the forward-looking statements. These assumptions, risks and uncertainties include, among other things: Keyera s ability to successfully implement strategic initiatives and whether such initiatives yield the expected benefits; future operating results; fluctuations in the supply and demand for natural gas, NGLs, crude oil and iso-octane; assumptions regarding commodity prices; activities of producers, competitors and others; the weather; assumptions around construction schedules and costs, including the availability and cost of materials and service providers; fluctuations in currency and interest rates; credit risks; marketing margins; potential disruption or unexpected technical difficulties in developing new facilities or projects; unexpected cost increases or technical difficulties in constructing or modifying processing facilities; Keyera s ability to generate sufficient cash flow from operations to meet its current and future obligations; its ability to access external sources of debt and equity capital; changes in laws or regulations or the interpretations of such laws or regulations; political and economic conditions; and other risks and uncertainties described from time to time in the reports and filings made with securities regulatory authorities by Keyera. The acquisition of certain reserves that were acquired as part of the Cynthia acquisition is subject to a right of first refusal claim. Readers are cautioned that the foregoing list of important factors is not exhaustive. The forward-looking statements contained in this document are made as of the date of this document or the dates specifically referenced herein. For additional information please refer to Keyera s public filings available on SEDAR at All forward-looking statements contained in this document are expressly qualified by this cautionary statement. 2

3 Who Is Keyera? Key service provider to oil and gas producers in western Canada Facilities well situated to capture decadeslong energy resources History of stable and growing cash flows Track record of efficient capital allocation Large portion of cash flows are fee-for-service with no direct exposure to commodity prices Excellent and varied growth opportunities One of the Largest Midstream Operators in Canada 3

4 Keyera s Vision To be the North American Leader in Delivering Midstream Energy Solutions How will this be achieved? By leveraging our strong market position in the natural gas and oil sands sectors By continuing to make customer service a priority By continuing to bring a long-term, disciplined approach to value creation By maintaining a conservative capital structure By applying proven operational expertise 4

5 Excellent Track Record of Financial Performance Per Share Historical Financial Results Payout Ratio $ % $ % $ % $ % $ % 50% $ % $.50 30% $.00 20% $0.50 0% $- 0% YTD Distributable Cashflow per Share (Diluted) Dividends per Share Payout Ratio 3% CAGR in distributable cash flow per share 3 8% CAGR in dividends per share dividend excludes the $0.45 per share special dividend. 2 Nine months ending September 30, Compound annual growth rate from 5/30/2003 to 2/3/ Compound annual growth rate from 7/5/2003 to 2/3/204. Providing Investors with Income and Growth 5

6 Industry Fundamentals Driving Keyera s Growth 3 Assuming timely receipt of approvals and no construction delays Infrastructure Required to Meet Growing Oil and Gas Production 6

7 Growing to Meet Customer Demand Approved Projects Rimbey turbo expander 20 Wapiti raw gas and condensate pipelines 80 Simonette plant modifications 95 Strachan Vitasul project 66 Gas gathering pipelines 29 Fort Saskatchewan de-ethanizer 55 Fort Saskatchewan frac expansion 75 Josephburg Rail Terminal 95 Alder Flats new gas plant construction (phases I & II) 8 Zeta Creek new gas plant construction 4 Other projects (including the Norlite pipeline and underground storage caverns) Capital Cost ($ Millions) >400 Keyera s share of estimated capital cost. See Keyera s Q3 204 MD&A for capital investment risks and assumptions. Forecast Growth Capital of $700 to $800 million in 205 7

8 Keyera s Integrated Business Lines * Fee-for-Service revenues were 68% of Keyera s 203 Operating Margin, including intersegment transactions. Operating margin refers to total operating revenues less total operating expenses and G&A expenses associated with the Marketing segment. Consistent Focus and Strategy for Over 6 Years 8

9 Western Canada Sedimentary Basin Canada is home to some of the most economic natural gas plays in North America Significant multi-zone gas potential on the deeper (west) side of Western Canada Sedimentary Basin Majority of geological zones have porosity and permeability (unlike shale gas production) Game changing horizontal drilling & multi-stage completions unlocking tight reservoirs and shale gas High NGL content supports favourable producer economics Supportive political, fiscal, regulatory regimes Sustainable Long-Term Liquids-Rich Gas Potential 9

10 Gathering and Processing Business Unit Well maintained, long-life facilities 2.7 Bcf/d licensed gross capacity Adding up to 274 MMcf/d licensed gross capacity with development of 2 new plants 2 Keyera operates 6 of 7 plants and will operate of the 2 new plants NGL extraction capability at 95% of plants Extensive gathering systems ~4,500 km of pipelines tied to existing plants Capture areas create franchise regions Fee-for-service revenues with negligible direct commodity exposure Largely flow-through operating costs Expanding gas gathering, processing and liquids handling capacity Licensed capacity is not equivalent to actual operating capacity. Actual operational capacity can be lower as it depends on operating conditions and capabilities of functional units at each plant. 2 Capacity at the new plants is expected to become available between 205 and 206, assuming construction schedules are met. Cardium Montney Duvernay Glauconite Network of Well-Maintained Facilities Supported by Fee-for-Service Revenues 0

11 Montney A World Class Resource Large portion of current western Canadian natural gas production coming from the Montney geological horizon Recent Montney study estimates marketable volumes of: ~449 Tcf of natural gas ~4 billion Bbls of NGLs and ~ billion Bbls of oil Montney a traditional sandstone/siltstone reservoir not a shale Attractive producer economics Near-term focus will be liquids-rich areas such as Wapiti, Elmworth, Simonette This formation expected to be the key zone underpinning westcoast LNG projects Source: National Energy Board; BC Oil Gas Commission; Alberta Energy Regulator; British Columbia Ministry of Natural Gas Development. Keyera Well Positioned to Provide Services to Montney Producers

12 Simonette Expanding to Handle Montney Production Constructed Wapiti pipeline system Opening new capture area northwest of plant in Wapiti / Elmworth area where producers are drilling liquids-rich Montney zone Two 90-km pipelines: 2-inch sour gas gathering pipeline and 6- inch condensate pipeline Capital cost ~$80 million, including inlet separation Modifying Simonette gas plant Adding 00 MMcf/d of processing capacity and improving condensate handling Capital cost estimated at ~$95 million, including condensate stabilization; anticipate plant expansion start up in Q 205 Pipeline Legend Keyera New Keyera Legacy Third Party Producers active in area: NuVista Paramount 7 Generations Sinopec Daylight Harvest Exxon Mobil CIOC Assuming construction schedule is met. Wapiti Area Experiencing Significant Liquids-Rich Development 2

13 Duvernay An Emerging Resource Development Duvernay developing in two areas (Northern Duvernay and Southern Duvernay) Multinationals have acquired significant land positions in both areas Initial indications are that Duvernay gas contains high levels of condensate and other NGLs Significant infrastructure required to develop resource Raw gas processing Condensate stabilization NGL mix transportation to Fort Saskatchewan Additional NGL fractionation Producers active in the area: Exxon Mobil Athabasca Oil Corp. Encana Trilogy Chevron Shell ConocoPhillips Yoho Pipeline Legend Keyera New Keyera Legacy Third Party Northern Duvernay Requires Significant Infrastructure 3

14 Southern Duvernay Significant Infrastructure Available Keyera is well positioned to capture southern Duvernay volumes: 2 plants in the area with 2.2 Bcf/d gross licensed capacity 2 new plants being developed, adding up to 274 MMcf/d of gross licensed capacity upon completion 2 Liquids recovery capabilities Extensive gathering systems already in place Existing deep-cut capacity at Ricinus, Cynthia, Rimbey, Gilby, Strachan and Minnehik Buck Lake gas plants Full fractionation at Rimbey for plant and trucked-in NGL mix Access to Edmonton/Fort Saskatchewan NGL and condensate markets via pipeline from Rimbey gas plant Ethane from Rimbey to Alberta Ethane Gathering System (AEGS) for delivery to Alberta s petrochemical facilities at Joffre and Fort Saskatchewan Licensed capacity is not equivalent to actual operating capacity. Actual operational capacity can be lower as it depends on operating conditions and capabilities of functional units at each plant. 2 Capacity at the new plants is expected to become available between 205 and 206, assuming construction schedules are met. Producers active in the area: Encana Shell Talisman Sinopec Daylight ConocoPhillips Vermilion Enerplus Bonavista Keyera s Infrastructure Provides Attractive Value for Producers 4

15 New Pipelines Capturing Growing Gas Production Producers targeting numerous geological zones in west central Alberta Wilson Creek Pipeline Keyera continues to expand plant capture areas through addition of gathering pipelines Several pipelines built in 203 Carlos pipeline offload completed in 204 for ~$23 million Wilson Creek gathering system completed in 204 for ~$26 million Twin Rivers pipeline under construction Expected to be on stream by Q2 205 Expected capital cost of ~$80 million Assuming timely receipt of regulatory approvals and construction schedule is met. Carlos Pipeline Wapiti Pipeline Developing an Efficient, Flexible Gathering Network 5

16 Enhancing Service Offering at Rimbey Adding 400 MMcf/d turbo expander to enhance liquids extraction: Ethane capacity up to 20,000 bbls/d Project underpinned by long-term ethane purchase agreement Gross capital ~$20 million Expected start-up in first half 205 De-bottlenecking fractionator to expand capacity by ~6,900 bbls/d Potential to expand plant capacity significantly by running turbo expander and lean oil system (additional capital investment and regulatory approval would be required) Assuming construction schedule is met. Providing Full Service Solution to Liquids-Rich Gas Producers 6

17 Growing Through Selective Acquisitions Disciplined evaluation criteria used to identify acquisition opportunities Acquisitions completed in 204: Existing Plants: 85% operating owner of Cynthia gas plant 7% operating owner of Ricinus gas plant New Plants: 35% non-operating owner of Alder Flats gas plant 60% operating owner of Zeta Creek gas plant Transactions add net licensed processing throughput of 332 MMcf/d,2 (573 MMcf/d gross) in an area seeking additional processing capacity Integration with other Keyera facilities enhances customer service offering Capacity at the new plants is expected to become available between 205 and 206, assuming construction schedules are met. 2 Licensed capacity is not equivalent to actual operating capacity. Actual operational capacity can be lower as it depends on operating conditions and capabilities of functional units at each plant. Potential to Acquire Additional Facilities When Commodity Prices are Low 7

18 Stable and Growing Plant Throughput Gross Plant Throughput (MMcf/d),750,500,250, Historical Gross Throughput vs. Natural Gas Price Average AECO Price (C$/gJ) $2.50 $.25 $0.00 $8.75 $7.50 $6.25 $5.00 $3.75 $2.50 $.25 - $- Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-0 Jan- Jan-2 Jan-3 Jan-4 Jan-5 Rimbey Edson Strachan Simonette Brazeau River Nevis Paddle River Nordegg Caribou Minnehik Buck Lake Bigoray Gilby Brazeau North & Pembina North West Pembina Cynthia Ricinus AECO Natural Gas Price Gas Processing an Essential Service for Producers 8

19 LNG Development Will Require Upstream Infrastructure Multi-decade development in early stages of development 4 LNG projects identified 7 export licenses approved by NEB Producers likely to develop highest netback gas zones first Significant gas expected from liquids-rich zones in B.C. and Alberta Edmonton/Fort Saskatchewan energy hub logical destination for NGL production Globe and Mail, April 2, 204. Keyera Positioned to Support Natural Gas and NGL Growth 9

20 Liquids Business Unit Fractionation: 80,000 bbls/d of capacity at 5 locations Storage:.5 million bbls in 2 underground caverns Iso-octane production: 3,600 bbls/d at Alberta EnviroFuels Marketing: Providing products to North American customers Rail & truck terminals: Propane, butane, condensate, NGL mix, crude, bitumen, sulphur Rail logistics: ~,500 rail cars and growing Strategically Integrated Assets at the Edmonton/Fort Saskatchewan Energy Hub 20

21 Keyera Fort Saskatchewan (KFS) Expanding Fractionation Capacity Adding 30,000 bbls/d de-ethanizer To fractionate an ethane-rich stream of NGLs (C2+ mix) Net cost to Keyera ~$55 million, including pipeline connections and cavern for C2+ raw feed storage Expected on-stream in Q 205 Adding 35,000 bbls/d of C3+ fractionation Net cost to Keyera ~$75 million Anticipate online Q Assuming current construction schedule is maintained. 2 Assuming timely receipt of regulatory approvals and construction schedule is met. Continuing to Grow Fort Saskatchewan Energy Complex 2

22 KFS Adding Underground Storage Capacity 3 th storage cavern being washed; expected in-service H th storage cavern washing began in Q4 204; expected inservice H th storage cavern drilling underway; washing to commence in Q2 205 Developing plans for the next phase of development, which is expected to add another ~4 million barrels of storage capacity Recently acquired additional land in area for future expansion Assuming current construction schedule is maintained. Growing to Meet Demand for NGL and Condensate Storage 22

23 Oil Sands Production Growth Expected to Continue Bitumen Production Forecast (Historical + Risked) Sources: Peters & Co. Limited estimates, AER, and geoscout. Majors and Multi-Nationals Driving Oil Sands Growth 23

24 Diluent Demand Drives Logistics Services Top 8 Consumers by Ranking of Operated Production Diluent supply from WCSBbased production to increase from 70Mb/d by MB/d; remainder of diluent to be supplied via imports from the US Source: Peters & Co. Limited estimates. 24

25 Extensive, Flexible Condensate Infrastructure Multiple receipt points: Kinder Morgan Cochin pipeline (sole receipt point) Enbridge Southern Lights pipeline Western Canada feeder pipelines Rail imports at the Alberta Diluent Terminal Strong service offering attracting oil sands producers; long-term take-or-pay and fee-for-service agreements with: Imperial Oil (Kearl) Cenovus Husky/BP (Sunrise) Suncor (Fort Hills) CNRL JACOS/Nexen Keyera s Condensate Network Connections to Cold Lake and Fort McMurray bitumen production Providing Service to Numerous Oil Sands Producers 25

26 Enbridge Norlite Pipeline Expanding our Condensate Service Offering Diluent pipeline from Fort Saskatchewan to Athabasca oil sands region Keyera will be participating as 30% non-operating owner Long-term take-or-pay agreement with owners of Fort Hills project Suncor, Total and Teck Norlite shippers will have access to Keyera s condensate infrastructure in Edmonton/Fort Saskatchewan region, including storage and rail Initial capacity of approximately 224,000 bbls/d with potential to be expanded to 400,000 bbls/d Enbridge estimates completion in 207 at a gross cost of ~$.4 billion Cost and timing subject to finalization of scope, timely receipt of regulatory approvals and construction schedule variables. Project Enhances Keyera s Cash Flow Stability 26

27 South Cheecham Terminal Diluent, Crude and Bitumen by Rail South Cheecham Rail and Truck Terminal completed in Q3, 203 Ownership Keyera 50% (operator), Enbridge 50% Terminal capable of receiving diluent and loading dilbit and bitumen onto railcars for delivery to upgraders Agreements in place with Statoil and JACOS Agreement to provide solvent handling services starting in 207 Assuming all conditions of the agreement are met and subject to timely receipt of regulatory approvals. Meeting the Growing Rail Needs of Canadian Oil Sands Producers 27

28 Alberta Crude Terminal Loading Crude onto Rail 50/50 partnership with Kinder Morgan Connection to Kinder Morgan s extensive storage facility provides customers access to several crude qualities Project underpinned by Irving Oil Terminal served by CN and CP railways 40,000 bbls/d crude oil loading capacity Potential to add more than 00,000 bbls/d of incremental capacity Commissioning completed in Q4 204 Long-Term, Flexible Service Offerings 28

29 Josephburg Terminal A Propane Solution for Industry Josephburg terminal will help address the need for new propane rail infrastructure to handle: Cochin propane volumes as the pipeline is no longer in propane service Growing propane supply from new liquids-rich production Capacity of approximately 40,000 bbls/d Capital costs of ~$95 million, including pipeline connections and storage bullets Expected on-stream mid-205 Assuming construction schedule is met. Helping Provide Market Access for Western Canadian Producers 29

30 Hull, Texas Terminal Access to Mont Belvieu Rail and truck facility in Hull, Texas, located between Mont Belvieu and Beaumont refining centre Terminal intended to facilitate the movement of NGL mix, propane, butane and iso-butane into the Mont Belvieu market Complementary storage agreement at Daisetta, Texas Facility commissioned in October 204 Extending Keyera s Value Chain 30

31 Iso-octane Manufacturing Alberta EnviroFuels Facility acquired from Chevron & Neste in early 202 Iso-octane an additive to create high octane, low vapour pressure gasoline Only merchant facility in North America that manufactures iso-octane Keyera has used its supply and distribution infrastructure and expertise to source feedstock and expand sales markets Liquid forward financial markets enable effective hedging of feedstock costs and sales revenues Significant unused land on site provides potential for new business opportunities Positive Synergies with Keyera s Integrated Value Chain 3

32 Keyera s Marketing Services Butane C4 Consumed in Alberta Feedstock for iso-octane production at AEF Supply & demand ~ in balance Seasonal imports from the U.S. Iso-octane ic8 Majority of sales in the U.S. High quality gasoline additive Produced from butane at Keyera s EnviroFuels plant Condensate Consumed in Alberta as diluent for bitumen C5 Demand significantly exceeds Alberta supply Significant imports today required Ethane Sold under long-term agreements to petrochemical producers in Alberta No spot market in western Canada Not a material part of Keyera s business C2 Propane C3 Majority sold to US markets Producers bear most commodity price risk Primarily a retail/industrial heating fuel Demand varies seasonally Supply exceeds demand in North America Diversified Portfolio (Multiple Products with Unique Markets) 32

33 All Three Business Segments Growing $ Millions $500 $450 $400 $350 $300 $250 $200 $50 $00 $50 $0 Operating Margin, YTD 3 Gathering & Processing NGL Infrastructure NGL Marketing Operating margin excludes other income from production. 2 Non-GAAP measures; see Keyera s Q3 204 MD&A for a definition of Operating Margin and Distributable Cash Flow. 3 At September 30, 204. Fee-For-Service Business Underpins Balanced Cash Flows 33

34 Conservative Capital Structure Long-Term Debt Maturities.80X Net Debt to EBITDA 2 2% Net Debt to Enterprise Value 3 $300 $250 $200 $CAD MM $50 $00 $50 $0 $264 $67 $25 $09 $43 $97 $46 $60 $60 $ As of September 30, 204 and calculated as per Keyera s debt covenants. 2 Non-GAAP measure. See Keyera s Q3 204 MD&A for a definition of EBITDA and adjusted EBITDA. 3 Enterprise value based on December 3, 204 closing price of $8.07 (KEY). Flexibility to Fund Keyera s Capital Program 34

35 Third Quarter Results (Millions of Canadian dollars, except where noted) Q3/4 Q3/3 Operating Margin Gathering & Processing NGL Infrastructure Marketing Other Total Operating Margin Adjusted EBITDA Net Earnings Distributable Cash Flow Per Share ($/share) Payout Ratio % 4 44% 90% Operating margin excludes other income from production and is a non-gaap measure. See Keyera s Q3/4 MD&A for a definition of Operating Margin. 2 Beginning in the first quarter of 204, Keyera excludes unrealized gains/losses from commodity-related risk management contracts in the calculation of Adjusted EBITDA. These non-cash gains/losses have been excluded because management believes it provides a better reflection of the financial performance of the business in the current period. The comparative amount has been adjusted to reflect this change. Adjusted EBITDA is defined as earnings (excluding unrealized gains/losses) before interest, taxes, depreciation, amortization, accretion, impairment expenses and any other non-cash items such as gains/losses on the disposal of property, plant and equipment. Adjusted EBITDA is not a standard measure under GAAP. See section titled EBITDA on page 3 of Keyera s Q3/4 MD&A for a reconciliation of Adjusted EBITDA to its most closely related GAAP measure. 3 Distributable cash flow is not a standard measure under GAAP. See Keyera s Q3/4 MD&A for a definition of Distributable Cash Flow. 4 Payout ratio is defined as dividends declared to shareholders divided by distributable cash flow. Payout ratio is not a standard measure under GAAP. 35

36 Trading Metrics KEY Trading Symbols (TSX) $8.07 Common Share Price $6.8 B Market Capitalization $7.8 B Enterprise Value, M Common Shares Outstanding 3 49,235 Daily Trading Volume 4 $2.58 Annualized Dividend per Share (2.5 / month) 3.8% Current Dividend Yield 53% Payout Ratio 5 Based on closing share price at December 3, Enterprise value includes debt (as at September 30, 204) less working capital. 3 Basic shares outstanding at November 30, Fourth quarter 204 daily average from all 3 exchanges and markets on which Keyera s shares are traded first nine months. 36

37 Providing Critical Infrastructure for the Oil and Gas Sector in Canada Keyera s growth driven by liquids-rich gas production & oil sands development Western Canadian geology provides multi-decade resource Business based on providing essential (non-discretionary) services to producers 205 growth capital expected to be largest in Keyera s history Conservative capital structure provides financial flexibility 37

38 For Further Information Contact: John Cobb Vice-President, Investor Relations Lavonne Zdunich Director, Investor Relations Nick Kuzyk Manager, Investor Relations Keyera Corp. 600, 44 4 Avenue SW Calgary, Alberta T2P 3N4 38