Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Keyera Corp (KEYUF, Financial) announced a 4% increase in its annual dividend to $2.8 per share, supported by a conservative payout ratio and a strong balance sheet.
- The company achieved record throughput volumes in the North region, contributing to a $102 million realized margin in the gathering and processing segment.
- The liquids infrastructure segment delivered its second-highest quarter ever with a $133 million realized margin, driven by the ramp-up of KAPS and growing demand for fractionation, storage, and condensate businesses.
- Keyera Corp (KEYUF) raised its marketing segment guidance to a range of $450 million to $480 million of realized margin in 2024, up from the previous guidance of $430 million to $470 million.
- The company maintains a strong financial position with a net debt to adjusted EBITDA ratio of 2 times, below its targeted range of 2.5 to 3 times, allowing for equity self-funding opportunities to enhance shareholder value.
Negative Points
- Net earnings decreased to $142 million from $159 million for the same period last year, primarily due to higher depreciation and interest costs.
- Distributable cash flow decreased to $202 million or $0.88 per share, compared to $207 million or $0.90 per share for the same period in 2023.
- Maintenance capital is expected to increase to a range of $120 million to $140 million, up from $90 million to $110 million, mostly due to increased costs for turnaround activities.
- The company faces potential challenges from a rail strike, which could impact logistics and operations, although they have storage and contingency plans in place.
- Producer curtailments in the South region led to a decline in overall volumes, although the impact was tempered by take-or-pay contracts.
Q & A Highlights
Q: Can you provide an update on the progress of the three growth projects, including KFS expansions and Zone 4?
A: Dean Setoguchi, President and CEO, stated that discussions are ongoing and commercially sensitive, but a decision is expected by the end of the year. James Urquhart, SVP and Chief Commercial Officer, added that they are proceeding with ordering long leads for Frac II expansion and are in the feed stage for Frac III, with full cost understanding expected by early 2025.
Q: How does Keyera plan to manage capital allocation, especially regarding the dividend increase and potential NCIB?
A: Eileen Marikar, CFO, emphasized the company's strong balance sheet and low payout ratio, which provide flexibility. The dividend increase is supported by growing fee-for-service cash flows. While NCIB remains an option, the focus is on allocating capital to the highest value opportunities, including organic and inorganic growth.
Q: What is the impact of producer curtailments in the South on G&P volumes, and how does it affect overall performance?
A: Dean Setoguchi noted that while there are temporary declines in the South, the North Montney G&P plants are performing well, driven by condensate economics. James Urquhart added that take-or-pay contracts mitigate the impact of shut-ins, and volumes are expected to return in the fall.
Q: How does Keyera view the potential rail strike's impact on logistics and marketing guidance?
A: James Urquhart explained that Keyera is proactively preparing for potential disruptions by utilizing significant on-site storage and railcar storage to minimize any impact on operations, particularly at the AEF terminal.
Q: What is Keyera's approach to M&A in light of its equity self-funded model?
A: Dean Setoguchi highlighted the company's strong financial position, which allows for flexibility in pursuing growth projects and potential M&A opportunities. The focus remains on disciplined capital allocation to maximize shareholder value.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
