Title: Keyera Corp. - KEY (T) Cdn$42.98 Price: Cdn$42.98 StockRating: Outperform TargetPrice: Cdn$53.00 Headline: August 6, Keyera Corp.

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1 Title: Keyera Corp. - KEY (T) Cdn$42.98 Price: Cdn$42.98 StockRating: Outperform TargetPrice: Cdn$53.00 Headline: KEY (T) Stock Rating: Target: Risk Rating: Cdn$42.98 Outperform (Unchanged) Cdn$53.00 (Was Cdn$51.00) Average (Unchanged) Est. Total Return 26.6% Stock Data: 52-week High-Low (Canada) $ $34.49 Bloomberg/Reuters: Canada KEY CT / KEY.TO (Year-End December 31) 2014a 2015e 2016e EBITDA (mln) $541 $735 $714 Maint. Capex (mln) $41 $55 $35 Free-EBITDA (mln) $500 $680 $679 EV/Free-EBITDA 29.9x 13.2x 13.2x AFFO/share (FD) $2.77 $2.84 $3.32 P/AFFO 29.3x 15.1x 13.0x Dividend per Share $1.25 $1.41 $1.58 Dividend Yield 1.5% 3.3% 3.7% Adj. Payout Ratio 45% 50% 47% D/Free-EBITDA 2.6x 2.5x 2.7x August 6, 2015 Keyera Corp. The NBF Daily Bulletin Pipelines, Utilities & Energy Infrastructure Strong Q another 9% dividend hike! Still no signs of this dividend growth machine slowing down HIGHLIGHTS Strong Q2 + another 9% dividend hike! KEY reported AFFO/sh (FD) of $0.55 versus our $0.52 estimate on adj. EBITDA of $157 mln versus our $158 mln (Street: $148 mln). Meanwhile, KEY announced another 9% dividend increase to $1.50/sh annually bringing the company s year-to-date dividend growth to +16%. Much needed propane export terminal up and running KEY reiterated its 2015 organic growth capex budget of $700 mln to $800 mln. With ~$2 billion of secured organic growth projects, we continue to call for double-digit annual EBITDA growth through Of note, in July, KEY commissioned its 40,000 bpd propane rail export terminal at Josephburg, Alberta (near Fort Saskatchewan) on schedule providing a much needed outlet for Western Canadian propane. Financial Data: Shares Outstanding (mln) Market Capitalization (mln) $7 271 Net Debt (mln) $1 714 Enterprise Value (mln) $8 984 Net Debt/Enterprise Value 19% Total Return 26.6% Industry Rating: Market Weight - Energy (NBF Economics & Strategy Group) Estimates and dividend growth outlook intact With a bump to our Marketing contributions offset by slightly higher G&A costs and cash tax expense, our 2016e AFFO/sh remains largely unchanged at $3.32 (was $3.33) a payout ratio of 47% (was 45%; group: 70%). Elsewhere, we continue to forecast a further 10% dividend increase to $1.65/sh annually, beginning Q Target up $2 to $53; reiterate Outperform rating Based on the increase to our DDM valuation, our target moves up $2 to $53. Combined with ~20% unrisked to our current valuation stemming from ~$1.5 bln of unsecured organic growth opportunities, as well as significant M&A upside amid the current commodity price environment, we reiterate our Outperform rating and continue to recommend KEY as a core holding within the space. Company Profile: Keyera Corp. operates in the Midstream sector and has three lines of business: Natural gas gathering and processing; natural gas liquids (NGL) gathering, processing and storage; and NGL marketing and crude oil midstream. Stock Performance $125 $100 Keyera Corp. Vol. (mln) Patrick Kenny, CFA - (403) patrick.kenny@nbc.ca $75 $ Associate: Michael Nguyen - (416) michael.nguyen@nbc.ca $25 $ May-03 May-04 May-05 May-06 May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 May-15 Source: Bloomberg

2 Page 2 Strong Q another 9% dividend hike! Keyera reported AFFO/sh (FD) of $0.55 versus our estimate of $0.52 (Street: $0.50) on adjusted EBITDA of $157 million versus our estimate of $158 million (Street: $148 mln). Elsewhere, the company announced a 9% dividend increase to $1.50/sh annually (from $1.38) commencing with the August payment versus our next forecast dividend increase of 10% modeled in for Q Together with the 7% increase announced in conjunction with its Q results, Keyera has increased its dividend 16% year-to-date. AFFO RECONCILIATION Q2 2015A Expected Diff. Per Sh ($mln) ($mln) ($mln) $/sh Segments Gathering & Processing (0.7) (0.00) NGL Infrastructure (10.5) (0.06) NGL Marketing (1) Other Margins (0.3) (0.00) G&A (17.5) (13.5) (4.0) (0.02) Adj. EBITDA $156.9 $158.0 ($1.1) Interest Expense (12.9) (12.5) (0.4) (0.00) Cash Taxes (17.5) (22.5) Decommissioning Liability & Other FFO $131.1 $123.0 $8.0 $0.05 Maintenance Capital (38.8) (35.0) (3.8) (0.02) AFFO - FD $92.3 $88.0 $4.3 $0.02 Per Share $0.55 $0.52 (1) Excludes unrealized gains/losses on risk management contracts and non-cash inventory write-downs. Source: Company Reports, NBF Estimates Gathering & Processing (G&P) contributed $56 million, in line with our estimate. Of note, KEY completed three major plant turnarounds during Q2 at the Rimbey, Brazeau River and Bigoray gas plants, while also incurring a 12-day planned outage at the Simonette gas plant and experiencing curtailments on TransCanada s Alberta sale gas pipeline system (NGTL). NGL Infrastructure contributed $52 million versus our $63 million forecast largely reflecting timing differences related to the recently commissioned Fort Saskatchewan de-ethanizer expansion and underground storage caverns. NGL Marketing contributed $60 million, $14 million ahead of our estimate on margins per bbl of $6.50 versus our estimate of $5.30. Recall, in our Q2 preview, we highlighted potential upside to our Marketing forecast stemming from record high benchmark iso-octane gross profit margin estimates of US$46/bbl (LT avg.: US$17/bbl). Growth update much needed propane export terminal up and running Keyera reiterated its 2015 organic growth capex budget of $700 million to $800 million. Overall, with ~$2 billion of organic growth projects, we continue to call for double-digit annual EBITDA growth through Below we provide an update on KEY s major growth initiatives. $mln $541 $60 KEY E EBITDA RECONCILIATION $45 $35 4-yr CAGR: 11% $25 $50 $15 $40 $15 $ a Norlite Base Line Rimbey Turbo Wapati Pipeline Ft. Sask Expansions AB Crude G&P Acq'n Edm. 2018e Source: Company Reports, NBF Estimates

3 Page 3 Josephburg propane rail export terminal in July, KEY commissioned its 40,000 bpd propane rail export terminal at Josephburg, Alberta (near Fort Saskatchewan) on schedule. Furthermore, the scope of the project has been expanded to include three additional pipelines between KEY s Fort Saskatchewan facility and the Josephburg Rail for ~$30 million to increase long-term flexibility and security for incremental product movements. Fort Saskatchewan C3+ fractionation expansion KEY continued to advance work on its $230 million ($176 mln net) expansion of fractionation capacity at Fort Saskatchewan, which will more than double current C3+ (propane-plus) fractionation capacity to 65,000 bpd (from 30,000 bpd). That said, the project is now expected to be completed by the end of the H (was end of Q1 2016). Zeta Creek gas plant construction progressed on the $41 million (net), 54 mmcf/d Zeta Creek sweet gas plant (60% KEY / 40% Velvet Energy) under construction by Velvet Energy in the West Pembina area of Alberta, and is on track to be online in Q Of note, KEY will also participate as a 75% owner in the proposed sales gas lateral pipeline from the Zeta Creek gas plant to the TransCanada Mainline, and is also evaluating the option of a pipeline connection between its 145 mmcf/d Pembina North gas plant and the proposed sales gas lateral to the TransCanada Mainline to debottleneck the Pembina North facility. Base Line Keyera and 50/50 joint venture partner Kinder Morgan, Inc. (KMI: NYSE) are currently constructing the Base Line, a crude oil storage terminal on undeveloped land at KEY s Alberta EnviroFuels site in Edmonton, AB. The project is secured by several long-term (up to 10 years) take-or-pay agreements to underpin the construction of 12 crude oil storage tanks with aggregate capacity of 4.8 mmbbls representing net capex of $330 million. The will be commissioned in phases, beginning in H through Meanwhile, sufficient undeveloped land remains to add up to 1.8 mmbbls of additional storage to accommodate future demand. The will be constructed and operated by KMI and connected via pipeline to KMI s existing Edmonton storage terminal, providing customers with multiple delivery options via major export pipelines, as well as the nearby rail terminal operated by KEY and KMI (Alberta Crude ). Estimates largely unchanged Overall, a bump to our Marketing contribution assumptions is offset by slightly higher G&A costs and cash taxes with our 2016e AFFO/sh (FD) remaining largely unchanged at $3.32 (was $3.33) an AFFO payout ratio of 47% (was 45%), well below the high-payout group average of 70%. Elsewhere, we continue to forecast a further 10% dividend increase to $1.65/sh annually, beginning Q ESTIMATE CHANGES Previous Revised Change Comments ($000's) ($000's) ($000's) % Operating Margin G&P % NGL Infrastructure % Marketing % Quarterly adjustments Other % % G&A % Quarterly adjustments EBITDA % Net interest expense % Cash taxes % Alberta coroprate tax hike FFO % Maintenance capex % AFFO % per share (FD) $0.01 0% Dividend per share $0.10 6% AFFO Payout 45% 47% Net Debt % D/Free-EBITDA 2.7x 2.7x 0.0x Source: NBF Estimates

4 Page 4 Target up $2 to $53; reiterate Outperform rating Based on the increase to our DDM valuation, our target moves up $2 to $53 based on a risk-adjusted dividend yield of 3.0% (unchanged) applied to our 2016e dividend of $1.58/share (was $1.48/sh), a 14.5x multiple (was 14.25x) of our 2016e free-ebitda of $679 million and our discounted cash flow valuation of $52.00 (was $51.00). VALUATION SUMMARY Methodology Metric Valuation DDM 3.0% $53.25 EV/Free-EBITDA 14.5x $52.00 DCF Model 6.36% $52.00 Equally Weighted Avg. $52.50 Source: NBF Estimates Based on an estimated ~$1.5 billion of additional NGL and oil sands related unsecured growth opportunities, we estimate a further ~$4/share of unrisked organic growth upside. Coupled with our quick & dirty transaction assumption of 500 mmcf/d of capacity acquired for $500 million at 5x EBITDA, we highlight potential acquisition accretion of up to ~$6.50/sh representing total unrisked upside of ~20% unrisked to our current valuation. As such, we reiterate our Outperform rating and continue to recommend KEY as a core holding within the space. $/sh 80 KEY - UNRISKED VALUATION $52.00 $0.50 $0.50 $1.50 $1.50 $6.50 $ Current: $ Target AB Crude Simonette Deepcut Source: Company Reports, NBF Estimates, ThomsonOne NW AB Pipeline Oil Sands Opportunities M&A upside Unrisked A conference call will be held on Aug. 6, 2015 at 10:00 a.m. EST. Interested participants may dial in at

5 Page 5 KEYERA - SUMMARY TABLE 2015e 2016e Previous Revised Previous Revised Natural Gas Processed (mmcf/d) SUMMARY INFORMATION ($mln) Average Shares (mln) Ending Shares (mln) Fully Diluted Shares (mln) Operating Margin Gathering & Processing NGL Infrastructure NGL Marketing Other Margins Total Operating Margin EBITDA FFO Maintenance Capital AFFO Dividends Growth Capital Adj. Free Cash Flow (1) Equity Issued (net) Ending Net Debt D / Free-EBITDA 2.7x 2.5x 2.7x 2.7x D / Total Capital 54% 55% 51% 52% CF / D (2) 36% 36% 35% 35% CF / Interest (3) 11.8x 11.2x 10.8x 10.8x PER SHARE AMOUNTS Net Debt EBITDA Cash Flow AFFO/SH - Fully Diluted Dividends FFO payout ratio 42% 44% 42% 45% AFFO payout ratio 47% 50% 45% 47% (1) AFFO less growth capital. (2) CFO before changes in working capital divided by average 2-year total debt. (3) CFO before changes in working capital plus net interest expense divided by interest on debt less interest income. Source: Company Report, NBF Estimates KEY - CREDIT ANALYSIS $mln Q Q Q Q Q Q4 2015e Q4 2016e Adj. EBITDA LTM % change 15% 15% 7% 14% 0% 19% -3% Debt/EBITDA 2.0x 2.2x 1.9x 2.1x 2.4x 2.2x 2.4x Adj. Debt/EBITDA (1) 2.0x 2.2x 1.9x 2.1x 2.4x 2.2x 2.4x Net Debt/EBITDA 2.1x 2.0x 2.4x 2.3x 2.5x 2.3x 2.5x Debt/Capital 42% 44% 50% 52% 54% 55% 52% EBITDA/Interest (2) 8.0x 9.5x 10.7x 12.9x 13.1x 14.0x 11.5x FFO/Debt 39% 37% 47% 38% 35% 33% 36% FFO/Adj. Debt (1) 39% 37% 47% 38% 35% 33% 36% (1) Adj. Debt includes 50% debt treatment for preferred equity. (2) Interest includes preferred dividends. Source: Company Reports, NBF Estimates

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