M a r c h 2019 CORPORATE PROFILE

Transcription

1 M a r c h 2019 CORPORATE PROFILE

2 Disclaimer 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 forward-looking statements". Forward-looking statements in this document include, but are not limited to statements and tables 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. 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 Keyera at a Glance 1 Market capitalization: ~$6.6 billion 2 Enterprise value: ~$8.7 billion Adjusted EBITDA: $807 million 2018 Payout Ratio: 56% Dividend: $1.80/share p.a. ($0.15/share per month) Dividend yield: ~5.80% 2 Corporate credit ratings: BBB/Stable 3 Net Debt/EBITDA: 2.6x 2019 Growth Capital Program: $800-$900 million 1. All information as at December 31, 2018, unless otherwise stated. 2. As at February 22, DBRS and S&P One of Canada s largest midstream companies 3

4 Our Track Record 12 % cagr d i s t r i b u t a b l e c a s h f l o w p e r s h a r e 1, 3 8 % cagr d i v i d e n d p e r s h a r e 2, 3 56 % 2018 p a y o u t r a t i o 3, 4 1 Compound annual growth rate from 5/30/2003 to 12/31/ Compound annual growth rate from 7/15/2003 to 12/31/ Not a standard measure under GAAP. Based on dividends declared. 4 From 1/1/2018 to 12/31/2018, inclusive. 5 Includes reinvestment of dividends. Focused On Growing Value: 18% Annual Total Shareholder Return 5 Since IPO 4

5 Core Strengths Responsible stewards of capital Focused, consistent strategy One of the most integrated midstream companies Experienced and reliable operator 5

6 An Integrated Value Chain 1. Percentage of total realized margin for the year ended December 31 st 2018 ( %). Realized margin is defined as operating margin excluding unrealized gains and losses from risk management contracts from the Marketing segment. Realized margin is not a standard measure under GAAP. 6

7 Diversified and Growing Margins AEF Turnaround AEF Outage ~34% ~36% ~30% 1. Realized margin is defined as operating margin excluding unrealized gains and losses from risk management contracts from the Marketing segment. Realized margin is not a standard measure under GAAP. Includes intersegment transactions. This graph excludes other income from production associated with Keyera s oil and gas reserves. Fee-for-Service Business Underpins Balanced Growth 7

8 Investment Opportunities Continue Millions $1,400 ANNUAL CAPITAL EXPENDITURES $1,200 $1,000 $800 $600 $400 $200 $ /31/13 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19e Growth Capital Upper End of Growth Capital Range Acquisitions Maintenance Capital 1 Acquisition capital in 2017 reflects the $55 million purchase price for undeveloped land in the Industrial Heartland of Alberta completed in 1Q17, among other actual YTD costs. 2 Keyera s 50% acquisition of the South Grand Rapids pipeline is included in 2018 Acquisitions.. $800 $900 Million of Growth Capital Investment in

9 Growth Projects Currently Under Development Approved Projects Wapiti Area Gathering & Processing Complex (Phase I) 575 Wapiti Gas Plant (Phase II) & North Wapiti Pipeline System 325 Wapiti Water Disposal System 100 Simonette Inlet & Acid Gas Injection Enhancements 100 Simonette Plant Expansion 85 Pipestone Plant (Phase I) Wildhorse Terminal Capital Cost (Net, in $ Millions) US185 Storage Cavern Development Program at Keyera Fort Saskatchewan 110 TOTAL ~$2.1 Billion 1. Keyera s share of estimated capital cost. See Keyera s 2018 Year End MD&A for capital investment risks and assumptions. 2. Pipestone plant expected to start up in Return on Capital is defined as operating margin divided by the estimated capital cost of the projects noted on this slide. Keyera expects to achieve this return, in 2022 once all projects achieve their annual run rate. See non-gaap Financial Measure and Forward-Looking Statements in Keyera s 2018 Year End MD&A for further details. $2.1B Program expected to achieve 10-15% return on capital 3 9

10 Spirit River Western Canada Sedimentary Basin 335 Billion boe ultimate potential recoverable reserves of crude oil and bitumen 1 /Ellerslie 223 Tcf ultimate potential recoverable reserves of natural gas 1 /Fahler /Mannville Keyera facilities 1 Alberta Energy Regulator s ST : Alberta s Energy Reserves and Supply/Demand Outlook, February 28, 2017 Sandstone/Siltstone Carbonate Shale Globally Unique Multi-Zone Geology Underlies Alberta 10

11 Gathering and Processing Business Unit Well maintained, long-life facilities ~3.0 bcf/d licensed gross capacity 1 18 active gas plants; 16 operated by Keyera Extensive gathering systems Network of gathering pipelines tied into existing gas plants >4,000 kilometres of pipelines operated by Keyera Large capture areas create franchise regions Fee-for-service revenues with negligible direct commodity exposure 1. 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. Network of Facilities Supported by Fee-for-Service Contracts 11

12 Relatively Stable Throughput HISTORICAL THROUGHPUT & THE PERCENTAGE CHANGE IN AECO & WTI TO December 31,

13 Keyera s Presence in Liquids-Rich Area of NW Alberta With our plans at Pipestone, Wapiti and Simonette gas plants, Keyera will have 950 mmcf/d of gross processing capacity and 90,000 bbls/d of condensate handling facilities focused on liquids-rich Montney and Duvernay developments.. Supporting Producer Growth Plans in Liquids-Rich Developments 13

14 Simonette Gas Plant Investments Plant Expansion Project: Expanding processing capacity by 150 mmcf/d, resulting in total capacity of 450 mmcf/d Project expected to be completed 4Q19 1 at an estimated cost of $85 million 1 Inlet & Acid Gas Injection Enhancements: Improves inlet capabilities and adds acid gas injection facilities Backed by gas handling agreements with Athabasca Oil Corporation and Murphy Oil Company Ltd., including take-or-pay commitments and facility dedications Project expected to be operational in 3Q19 1 at an estimated cost of $100 million 1 Liquids Handling Expansion Project: Increases condensate handling capacity to ~27,000 bbls/d and improves liquids recoveries for customers Project completed in May 2018 for an estimated cost of $100 million 1 1 Project costs and timing are subject to construction and commissioning schedules. Supporting Growing Montney and Duvernay Production 14

15 Wapiti Area Gathering & Processing Complex New gas plant supporting liquids-rich Montney development New infrastructure includes: Phase 1: 150 mmcf/d of sour gas processing capacity; 25,000 bbls/d of condensate handling capacity; acid gas injection; raw gas gathering and field compression system. Target in-service date of mid Producers active in the Wapiti area: CNRL Cenovus Encana NuVista Paramount Seven Generations Shell Sinopec-Daylight Phase 2: incremental 150 mmcf/d of sour gas processing capacity, additional compressor station and raw gas gathering pipelines. Target in-service date of mid Phase 1 backed by an area dedication and take-orpay commitments under a long-term gas handling agreement with Paramount Estimated cost of Phase 1 ~$575 million 1 ; Phase 2 and the NWPS expected to cost ~$325 million 1 Future potential to connect the plant to Keyera s Wapiti pipeline and Simonette gas plant 1 Project cost and timing subject to timely receipt of remaining regulatory approvals and construction schedule variables. Supporting Producer Growth Plans in Liquids-Rich NW Alberta 15

16 North Wapiti Pipeline System (NWPS) NWPS extends Keyera s Wapiti gas plant 1 capture area to north of the Wapiti River New infrastructure includes: 12-inch sour gas gathering pipeline 8-inch condensate and water (emulsion) pipeline compressor station NWPS Compressor Station Wapiti River Grande Prairie Agreements with Pipestone Oil Corp. include: Long-term take-or-pay obligation for raw gas handling and processing as well as pipeline transportation Long-term NGL fractionation and marketing services Target in-service date in 2H19 NWPS provided the foundation for Phase 2 of the Wapiti gas plant adding 150 mmcf/d of processing capacity Montney Well North Wapiti Gathering Pipeline Keyera Wapiti Gas Plant Smoky River Producers in the Pipestone area: Blackbird CNRL Encana Hammerhead Inception Iron Bridge NuVista Paramount Pipestone Oil Corp. Seven Generations Shell Sinopec Velvet 1 The Wapiti gas plant is currently under construction. Supporting Producer Growth Plans in Liquids-Rich NW Alberta 16

17 Pipestone Liquids Hub and Plant Another new plant supporting liquids-rich Montney development Backed by long-term fee-for-service arrangement with an area dedication and modest revenue guarantee from Encana Keyera will own the facilities with an option to operate the Project after five years of plant start up Pipestone Liquids Hub and Plant New facilities include: Liquids Hub: 14,000 bbls/d of condensate processing capacity; completed in 3Q18 for $91 million Plant: 200 mmcf/d of sour gas processing capacity and 24,000 bbls/d of condensate processing capacity; expected to start up in ; estimated cost of $600 million 1 Future potential to expand Pipestone Plant up to an additional 200 mmcf/d Source: Peters & Co. 1 Project timing and cost subject to timely receipt of regulatory approvals, completing engineering and cost estimates, and construction schedule variables. Increasing Keyera s Presence in the Liquids-Rich Montney 17

18 Liquids Business Unit Unmatched Infrastructure for NGL and Oil Sands Customers 18

19 Fractionation at Multiple Locations Gilby Gas Plant 3,650 bbls/d gross (2,930 bbls/d net) of C3+ fractionation capacity Nevis Gas Plant 3,740 bbls/d of C3+ fractionation capacity Rimbey Gas Plant 28,000 bbls/d gross (27,640 bbls/d net) of C3+ fractionation capacity 20,000 bbls/d gross (19,740 bbls/d net) of de-ethanization capacity 65,200 bbls/d gross (50,000 bbls/d net) of C3+ fractionation capacity Keyera Fort Saskatchewan 30,000 bbls/d gross (23,010 bbls/d net) of de-ethanization capacity Dow Fort Saskatchewan 30,000 bbls/d gross (5,420 bbls/d net) of C3+ fractionation capacity 69,200 bbls/d gross (6,920 bbls/d net) of de-ethanization capacity Adding Value by Processing NGLs from the Gas Stream 19

20 Expanding Underground Storage at KFS Underground storage capacity expansion project: Gross storage capacity of ~14 million barrels 16 th and 17 th caverns currently being washed; expected in-service 1H20 1 and1h th cavern in engineering phase Expected net cost of $110 million 2 to complete three cavern program 1 Timing subject to receipt of remaining regulatory approvals and completion of final work to bring into service. 2 Costs subject to construction and schedule variables. Providing Customers with Flexibility 20

21 Keylink NGL Gathering Pipeline System New NGL gathering solution enhancing Keyera s integrated service offering: Connects eight Keyera gas plants to the Rimbey gas plant for on site fractionation Provides a safe, reliable and economically improved transportation alternative Enhanced service offering as Rimbey is pipeline connected to Keyera s Edmonton Terminal and Ft. Saskatchewan fractionation and storage complex Completed on time for $125 million, $25 million lower than the original forecast Capacity of ~22,000 bbls/d 1 1 Capacity is estimated based on certain assumptions An Integrated & Economic NGL Transportation Solution 21

22 Source: Peters & Co. Oil Sands Production Continues to Grow Company Select Projects Sanctioned and/or Under Construction Capacity (MB/d) Timing MEG Christina emsagp / Brownfield Oil Sands Production: Mining vs In Situ Cenovus Christina Lake Phase G Canadian Natural Kirby North Phase Imperial / Exxon Kearl Reliability CNOOC / Nexen Long Lake Southwest Expansion Imperial Aspen Phase Total Capacity Additions of Certainty 231 Company Projects with a High Likelihood Capacity (MB/d) Timing Canadian Natural Horizon Debottlenecks (SCO) WCSB Condensate Market: Supply vs Demand Suncor Fort Hills Debottleneck Cenovus Foster Creek Phase H Imperial Cold Lake Expansion Project Suncor / CNOOC Meadow Creek East Phase Cenovus Narrows Phase A Canadian Natural Kirby Phase 2 (North or South) Cenovus Christina Lake Phase H Canadian Natural Horizon PFT Expansion (Bitumen) Total Capacity Additions of High Likelihood 395 Bitumen Production Growth Driving Condensate Demand 22

23 Extensive, Flexible Condensate Infrastructure Most connected condensate hub in Western Canada Major oil sands delivery options: Polaris Norlite Access FSPL Grand Rapids South Cheecham Supply through multiple receipt points: Local fractionators and refineries Kinder Morgan Cochin pipeline Enbridge Southern Lights pipeline and CRW pool Western Canada feeder pipelines Canadian Diluent Hub Rail imports at the Alberta Diluent Terminal Storage at Keyera Fort Saskatchewan Long-term take-or-pay and fee-for-service agreements: Imperial Oil (Kearl) Cenovus (Christina Lake) Husky/BP (Sunrise) CNRL (Kirby, Primrose) Suncor/Teck/Total (Fort Hills) JACOS/Nexen (Hangingstone) North West Upgrading Devon (Jackfish) Industry-Leading Diluent Handling Services 23

24 Norlite Pipeline Diluent pipeline from Ft. Saskatchewan to Athabasca oil sands completed in June 2017 Enbridge is the operator of the pipeline; Keyera is a 30% owner Long-term take-or-pay agreements with owners of Fort Hills project (Suncor, Total and Teck) and other third parties Norlite shippers can contract for services through Keyera s other condensate infrastructure in Edmonton/Fort Saskatchewan, including storage and rail Initial capacity of approximately 218,000 bbls/d with potential to expand to 465,000 bbls/d 1 1 Pipeline capacities are estimated based on certain assumptions. Provides Additional Long-Term Stable Cash Flows 24

25 South Grand Rapids Pipeline 50/50 joint venture between Keyera and Grand Rapids Pipeline LP (TransCanada PipeLines and PetroChina Canada) and operated by Keyera 45-kilometre 20-inch diluent pipeline from Edmonton to Fort Saskatchewan Provides Keyera with 225,000 bbls/d of net capacity 1 for diluent transportation, a portion of which will be used to meet commitments under existing customer agreements Remaining capacity available for Keyera to pursue new diluent transportation business Net capital cost to Keyera $125 million Completed in 3Q18 1 Pipeline capacities are estimated based on certain assumptions. Further Enhancing and Expanding our Condensate Network 25

26 Base Line Terminal - Crude Oil Storage for WCSB 50/50 joint venture operated by Kinder Morgan 12 crude oil storage tanks with 4.8 million bbls of capacity located at Keyera s Alberta EnviroFuels site Completed in 4Q18 Connected to Kinder Morgan s Edmonton terminal Backstopped by 8 customers with take-or-pay contracts up to 10 years in length Expected net capital cost to Keyera of $315 million 1 Potential to add additional tanks for total storage capacity of up to 6.6 million bbls, subject to customer demand 1 Subject to finalization of outstanding costs, invoices and final clean up. Expanding and Diversifying Keyera s Service Offering 26

27 Undeveloped Land for Future Growth 132 undeveloped acres 1290 undeveloped acres 166 undeveloped acres Close proximity to pipelines and railroads 350 undeveloped acres Keyera holds salt rights beneath most of these lands Keyera s Hull Terminal in Texas Keyera Fort Saskatchewan (KFS) Keyera Josephburg Terminal (KJT) Strategic Optionality in the Industrial Heartland of Alberta 27

28 Wildhorse Crude Oil Terminal at Cushing, OK Crude oil storage and blending terminal 1 in a key U.S. liquids hub Backed by fee-for-service take-or-pay storage contracts ranging from 2 6 years in length Cushing, OK Unparalleled connectivity with 90 mmbls of storage Provides significant commercial opportunities by blending lower value products into higher value product streams 12 storage tanks with 4.5 million bbls of working storage capacity will be constructed Terminal will be initially pipeline connected to two existing storage terminals in Cushing, OK Expected to be in service in mid-2020 with a net capital cost to Keyera of US$185 million 2 Complemented by acquisition of Oklahoma Liquids Terminal, a nearby logistics and diluent blending facility 1 90/10 joint venture with an affiliate of Lama Energy Group 2 Cost and timing subject to construction and schedule variables. Wildhorse Terminal Expanding Keyera s Presence in the US at a major liquids hub 28

29 Hull Terminal and Pipeline System Rail, truck and pipeline terminal handles NGL mix, propane, butane and iso-butane South pipeline system completed in 2Q18 South pipeline system completed in 2Q18 Provides connections to Beaumont and Mont Belvieu, North America s largest NGL hub Provides commercial opportunities for Keyera s marketing business along with 3 rd party fee-for-service opportunities Agreement with major US midstream company securing storage and other midstream services in Mont Belvieu Enhancing Keyera s Access to Mont Belvieu 29

30 Marketing Services Condensate C5+ Keyera s C5+ hub creates industry liquidity Consumed in Alberta as diluent for bitumen Significant imports required today to meet demand Butane C4 Iso-octane ic8 Sourced and consumed in Alberta Feedstock for iso-octane production at Alberta EnviroFuels Seasonal imports from the U.S. Majority of sales in the U.S. High quality gasoline additive Produced from butane at Keyera s Alberta EnviroFuels facility Ethane C2 Propane C3 Sold under long-term agreements to petrochemical producers in Alberta Limited spot market in western Canada Produced at three Keyera facilities Supply exceeds demand in North America Majority sold into U.S. markets Demand and pricing vary seasonally Keyera uses its storage and logistics to access markets Diversified Portfolio of Logistics Services 30

31 Alberta EnviroFuels (AEF) Iso-octane (ic8) is a high octane, low vapour pressure gasoline additive Butane is the NGL feedstock Only merchant ic8 facility in North America Licensed capacity of 13,600 bbls/d Supply networks and distribution infrastructure used to source feedstock while rail logistics broaden sales markets Financial forward markets enable hedging of feedstock costs and large portion of ic8 sales ic8 demand driven by premium gasoline demand Seasonality is complementary to propane and butane ic8 is a Premium Value-Added Product Produced in Alberta 31

32 Iso-Octane Business and its Margin Components Strong demand for iso-octane - 13,600 bbls/d of facility capacity - Annual peak occurs during summer driving season Access to butane feedstock - Sourced locally and from the US - Utilize cavern storage assets and pipeline network to manage volumes and costs Operational expertise to maximize utilization Access to continental markets - Leverage Keyera s rail terminals, storage facilities and logistical expertise to identify best opportunities - Sell into regions with the strongest demand across North America, including the US Gulf Coast and Midwest to maximize iso-octane premiums Revenue Components Risk Management Hedges Foreign Exchange (ic8 sold in USD) Iso-Octane (ic8) Premium over RBOB RBOB Premium over WTI WTI Cost Components Risk Management Hedges Periodic Plant Maintenance Plant Operating Expenses, Storage & Transportation Costs ~1.4 bbl of C4 per bbl of ic8 Butane (C4) cost is a Fraction of WTI (priced in USD) NOTE: Components are not indicative of their relative size in the margin equation. Iso-Octane is a High-Value, Low-Volume Business 32

33 Conservative Capital Structure LONG- T E R M D E B T MATURITIES 2 ( e xcludes d r a wings u n d e r r e volver) 2.6x Net Debt 1 to EBITDA vs Midstream Peer Group 3 Average >4.5x Issuer Credit Ratings: DBRS Limited: BBB with a Stable trend S&P Global: BBB/Stable 1. Calculated as of December 31, 2018 in accordance with Keyera s debt covenants. For further information regarding covenant calculations, please see Keyera s 2018 Year End Report MD&A or copies of the note purchase agreements, all of which are filed on SEDAR. 2. All US dollar denominated debt is translated into Canadian dollars at its swap rate maturities as of February 1, Midstream Peer Group includes ENB, GEI, IPL, PPL, and TRP. Well Positioned to Fund Keyera s $2.1 Billion Capital Program 33

34 Current Financial Results (Millions of Canadian dollars, except where noted; arithmetic inconsistencies due to rounding) 4Q18 4Q17 Change Change Operating Margin Gathering & Processing % % Liquids Infrastructure % % Marketing % % Other % % Total Operating Margin % % Realized Margin % % Adjusted EBITDA % % Net Earnings % % Distributable Cash Flow % % Per Share % % Payout Ratio 2 47% 47% 0% 56% 61% -8% 1. Realized margin is a Non-GAAP Measure and excludes the effect of non-cash gains and losses from commodity-related risk management contracts. 2. Keyera uses certain Non-GAAP Measures such as Adjusted EBITDA, Distributable Cash Flow, Distributable Cash Flow per Share and Payout Ratio. Continued Strong Performance 34

35 Investment Summary Total return includes the simple receipt of dividends paid by Keyera and the TSX between May 30, 2003 and December 31, 2018, but not the reinvestment of dividends in any assumed security. 2 Distributable cash flow is not a standard measure under GAAP. See Keyera s 2018 Year End Report for a definition of distributable cash flow and for a reconciliation of distributable cash flow to its related GAAP measure. 3 Payout ratio is not a standard measure under GAAP. Payout ratio is defined as dividends declared to shareholders divided by distributable cash flow. Providing Growth and Income for Shareholders 35

36 Investment Highlights 20 year track record of profitable operations & project execution Long life integrated assets in the right liquids rich areas Diversified risk profile driven by oil, gas and NGL fundamentals Commitment to a strong balance sheet & dividend growth 36

37 Contact Information Lavonne Zdunich, CPA, CA Calvin Locke, P.Eng Director, Investor Relations & Communications Manager, Investor Relations Keyera Corp. Sun Life Plaza West Tower 200, Avenue SW Calgary, Alberta T2P 3N4 37