News Column

Keyera Corp. Announces Year End 2013 Results

February 13, 2014

CALGARY, Feb. 13, 2014 /CNW/ - Keyera Corp. (TSX:KEY) announced their 2013 year end results today, the highlights of which are included in this press release. The entire press release can be viewed by visiting Keyera's website at www.keyera.com or, to view the MD&A and financial statements, visit either Keyera's website or the System for Electronic Document Analysis and Retrieval at www.sedar.com.

HIGHLIGHTS

• Net earnings were $146.8 million ($1.87 per share) in 2013, $16.2 million ($0.16 per share) higher than the $130.6 million ($1.71 per share) in 2012.



• Earnings before interest, taxes, depreciation and amortization1, 2 ("EBITDA") were $379.3 million in 2013, 28% higher than the $297 million posted in 2012.



• Distributable cash flow1, 2 was $288.1 million ($3.68 per share) in 2013, 44% higher than the $199.9 million ($2.62 per share) recorded in 2012.



Keyera's Gathering and Processing business delivered record operating margin3 of $157.5 million in 2013 compared to $150.9 million in 2012. In the NGL Infrastructure segment, operating margin3 was $123.3 million in 2013, compared to $112.5 million in 2012. Marketing operating margin3 was $132.9 million in 2013, $40.9 million higher than the prior year.



Keyera's South Cheecham rail and truck terminal has been operational since October 2013, receiving bitumen by truck for loading into railcars and is now able to handle diluent, synbit and dilbit as well.



• Work has begun on several raw gas gathering pipelines. Construction of the Wapiti pipeline system to the Simonette gas plant is progressing well. Keyera commenced additions and modifications to the Carlos pipeline system in January 2014 to accommodate incremental volumes, as the current system is operating near capacity. Agreements relating to the Wilson Creek pipeline, which will deliver gas to the Rimbey gas plant, were finalized in January, and construction is underway.



• Subsequent to year end, Keyera announced an expansion of its C3+ fractionator at Fort Saskatchewan that will add an additional 35,000 barrels per day of new capacity. This expansion is in addition to the 30,000 barrel per day de-ethanizer project that is currently under construction at Fort Saskatchewan. Keyera is also washing its 13th storage cavern and drilling the well bore for its 14th cavern.



• Today, Keyera announced it will be constructing a rail terminal at Josephburg, located near Fort Saskatchewan, to optimize propane movement out of western Canada. The terminal is expected to cost approximately $95 million and Keyera is targeting start up for the second half of 2015.



• In January 2014Keyera secured access to capacity at Kinder Morgan's Galena Park rail, storage and marine facility on the Gulf Coast. This agreement will provide added flexibility to manage Keyera's iso-octane inventory and provide access to additional markets.



Keyera closed $431 million of new long-term private placement debt in the fourth quarter, with an additional $75 million expected to close in April 2014. Keyera also amended the bank credit facility by extending the term to December 2017 and increasing the net debt to EBITDA ratio covenant, bringing it in line with the covenants in Keyera's other debt agreements.



• Total growth capital investment in 2013 was $332 million, of which $32 million was acquisitions. In 2014, growth capital investment, excluding acquisitions, is expected to be between $500 million and $600 million.4



1 See "Non-GAAP Financial Measures" on page 44 of the MD&A.
2 See page 36 and 37 of the MD&A for a reconciliation of distributable cash flow to cash flow from operating activities and EBITDA to net earnings.
3 See note 30 to the accompanying financial statements.
4 See "Capital Expenditures and Acquisitions" on page 32 of the MD&A for further discussion of Keyera's capital investment program.



Three months ended

December 31,
Twelve months ended

December 31,
Summary of Key Measures

(Thousands of Canadian dollars, except where noted)
2013 2012 2013 2012
Net earnings 34,396 56,651 146,836 130,601
Per share ($/share) - basic 0.44 0.73 1.87 1.71
Cash flow from operating activities 172,597 26,053 385,094 237,979
Distributable cash flow174,975 74,396 288,063 199,873
Per share($/share) 0.95 0.96 3.68 2.62
Dividends declared 47,297 41,104 177,132 157,095
Per share($/share) 0.60 0.53 2.26 2.06
Payout ratio %163% 55% 61% 79%
EBITDA299,474 95,069 379,324 296,999
Gathering and Processing:
Gross processing throughput (MMcf/d) 1,283 1,205 1,272 1,202
Net processing throughput (MMcf/d) 1,051 982 1,030 964
NGL Infrastructure:
Gross processing throughput (Mbbl/d) 112 116 112 92
Net processing throughput (Mbbl/d) 34 39 34 35
Marketing:
Inventory value 175,658 183,165 175,658 183,165
Sales volumes (bbl/d) 117,200 114,700 99,800 93,100
Capital expenditures 121,064 56,655 371,390 446,349
Long-term debt 1,077,140 619,666
Credit facilities 135,000
Working capital surplus3 (306,817) (160,839)
Net debt 770,323 593,827
Convertible debentures 11,083
Net debt (including debentures) 770,323 604,910
Common shares outstanding - end of period 79,187 77,663
Weighted average number of shares outstanding - basic 78,316 76,186
Weighted average number of shares outstanding - diluted 78,728 76,884


Notes:
1 Payout ratio is defined as dividends declared to shareholders divided by distributable cash flow. Payout ratio and distributable cash flow are not standard measures under GAAP. See page 36 for a reconciliation of distributable cash flow to its most closely related GAAP measure.
2 Beginning in the first quarter of 2013, Keyera excludes unrealized gains/losses from commodity related risk management contracts in the calculation of 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 amounts have been adjusted to reflect this change. 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. EBITDA is not a standard measure under GAAP. See section titled "EBITDA" on page 37 of the MD&A for a reconciliation of EBITDA to its most closely related GAAP measure.
3 Working capital is defined as current assets less current liabilities.



Message to Shareholders

Keyera delivered excellent financial results in 2013 and announced a number of strategic growth initiatives. We are pleased with our key financial and operating metrics, reporting a year-over-year increase of 44% in distributable cash flow and a 28% increase in EBITDA. The success of our business is a direct result of our focus on customer service and the integration of our three business segments, which enables us to generate incremental revenues all along our value chain.

It was a record year for each of Keyera's operating segments. Keyera's Gathering and Processing Business Unit reported operating margin of $157.5 million, 4% higher than 2012, primarily due to increased throughput at many of Keyera's facilities. Net throughput in the fourth quarter was 1,051 million cubic feet per day, 7% higher than the same period last year. We have seen increased drilling activity around many of our plants from producers focused on drilling liquids-rich gas from the Mannville, Cardium, Montney, Duvernay and Glauconite zones.

Keyera is working on a number of projects to keep pace with this activity. In the Rimbey area we have started working on modifications to the Carlos pipeline system, which is currently operating near capacity. With the proposed modifications we expect to be able to flow an additional 40 million cubic feet per day to the Rimbey plant for processing later this year. We are also working on a new pipeline to extend the capture area of the Rimbey plant into the Wilson Creek area where producers are targeting the Glauconite zone. The agreements necessary to underpin construction of the Wilson Creek pipeline system were completed in January 2014 and construction has since begun. This new pipeline system will have the potential to deliver 190 million cubic feet a day of raw gas and 25,000 barrels per day of condensate to the Rimbey gas plant. If there is sufficient producer demand, we would be able to extend this system further west to access production from the Duvernay zone in the Willesden Green area.

We are working with producers interested in the proposed Twin Rivers pipeline, to deliver gas directly to the Brazeau River gas plant and onward to the West Pembina gas plant. We remain confident about the need for this pipeline, but timing is dependent on successfully reaching the commercial terms that would underpin this capital commitment.

Work on the Wapiti pipeline system began in December and is progressing well, despite challenging weather. This pipeline is underpinned by a long-term fee-for-service agreement and Keyera is now working with another producer interested in securing the remaining capacity. When the Wapiti pipeline system is complete, we expect to see significant amounts of new gas delivered to the Simonette gas plant. In light of these anticipated volumes, we are continuing to work on the plant expansion with all equipment having been ordered.

We are ready to start construction of the new 400 million cubic feet per day turbo expander at the Rimbey gas plant. The new turbo expander will allow producers to receive higher netbacks for their liquids-rich gas, compared to the current situation where they do not receive full value for their liquids once they leave the plant and enter the sales gas stream. As a result, the project is strongly supported by producers in the Rimbey area, as well as Dow Chemicals, who has agreed to purchase the incremental ethane. Despite the project being delayed in the regulatory process due to statements of concern filed by AltaGas Ltd, Atco Energy Solutions Ltd, and NovaChemicals Corp, we remain optimistic that the project will proceed.

Our Liquids Business Unit also delivered record operating results in 2013. The NGL Infrastructure segment benefitted from higher demand for services and higher fees, posting operating margin of $123.3 million in 2013, a 10% increase over 2012. Our Marketing segment delivered strong results in 2013, with operating margin of $132.9 million, $41 million higher than 2012, due to higher volumes and margins in 2013 from our NGL products and growth in our iso-octane business. Over the last several years, we have expanded our infrastructure network in the Edmonton/Fort Saskatchewan energy hub to provide the range of services and flexibility needed to support liquids-rich gas drilling and oil sands production growth. Today, customers are recognizing the value of our integrated system and we are seeing growing demand for these services.

Fractionation and storage at Fort Saskatchewan continue to be in high demand. Subsequent to the quarter, we announced an expansion of our C3+ fractionator in Fort Saskatchewan, adding 35,000 barrels per day of capacity. This expansion is in addition to the 30,000 barrel per day de-ethanizer project that was announced in 2013. The fractionator and de-ethanizer projects enhance our service offering and support our customers' liquids-rich gas drilling programs.

To meet the continued demand for storage services, we are continuing to develop new underground storage caverns at our facility in Fort Saskatchewan. In July, we commissioned our twelfth underground storage cavern, increasing our gross underground storage capacity by approximately 700,000 barrels to total over 11.4 million barrels. We continue to develop our thirteenth cavern and have recently begun drilling the well bore for the fourteenth cavern.

Keyera is well positioned to provide the loading services necessary for the delivery of crude oil in western Canada. Our South Cheecham terminal was completed in late September and is currently able to handle bitumen, synbit, dilbit and diluent. Keyera is also working on the development of the Alberta Crude Terminal ("ACT"), a joint venture with Kinder Morgan, and is currently working through the regulatory process for the facility. Assuming approvals are received in a timely manner, we would expect to complete construction and commence operations later this year. Once completed, ACT will provide up to 40,000 barrels per day of crude loading facilities under a joint venture agreement with Kinder Morgan. With the entire capacity having been committed to Irving Oil under a multi-year agreement, we are currently looking at opportunities to expand the facility.

We continue to work with Enbridge on the agreements governing the operation and ownership details for the Norlite pipeline, in which we have the option to participate as a 30% non-operating owner. Our intention is to participate in the project, assuming that both parties are able to reach consensus on the details for the transaction.

We are currently building a pipeline tie-in at our Fort Saskatchewan facility to allow us to receive condensate from the Kinder Morgan Cochin pipeline when it begins diluent service later this year. This connection, which is expected to be complete in the second quarter of 2014, will provide another inlet for our Fort Saskatchewan condensate system. With the loss of the Cochin pipeline as an outlet for propane from western Canada, Keyera has initiated construction of a rail terminal at Josephburg, located near Fort Saskatchewan, to facilitate propane movements out of western Canada by rail.

We were pleased with the growth of our iso-octane business in 2013 and by the role the Alberta EnviroFuels facility continues to play in our butane value chain. In January 2014, Keyera secured access to storage and rail offload capacity at Kinder Morgan's Galena Park rail, storage and marine facility on the Gulf Coast. This agreement should provide added flexibility to manage Keyera's iso-octane inventory, provide marine delivery options for customers not able to receive iso-octane by rail and allow us to increase utilization at Alberta EnviroFuels.

As we look ahead, we believe that growing producer activity levels will result in new value-added services being required by our customers in each of our business lines. We remain focused on our strategy of pursuing infrastructure projects and acquisitions that deliver long-term growth and return for investors and currently have over $1.1 billion of growth capital investments underway. In the fourth quarter of 2013, we extended the term of our unsecured revolving credit facility to December 6, 2017, and have significant unutilized capacity on that facility that provides us with considerable future financing flexibility. Our strong balance sheet allows us to deliver both growth and yield for Keyera shareholders.

In August 2013, we announced an 11% increase in our monthly cash dividend from $0.18 to $0.20 per share. Since inception in 2003, we have increased dividends per share 120% through eleven increases. This represents a 7.8% compound annual growth rate in our dividends per share, an accomplishment that I am very proud of.

In closing, 2013 marked Keyera's 10th year as a public company and 15th year as an independent business. As we celebrate these milestones, there are many people I would like to thank for our success: our shareholders for their support and confidence in the business; our customers for allowing us to work with them to achieve their objectives; our Board of Directors for their support and guidance; and finally the employees of Keyera who have embraced our common vision and come to work each day looking for ways to make us more successful.

Jim V. Bertram

Chief Executive Officer

Keyera Corp.

DISCLAIMER

Certain statements contained in this document and accompanying documents contain forward-looking statements. These statements relate to future events or Keyera's future performance. Such statements are predictions only and actual events or results may differ materially. The use of words such as "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "plan", "intend", "believe", and similar expressions, including the negatives thereof, is intended to identify forward looking statements. All statements other than statements of historical fact contained in this document are forward looking statements.

The forward looking statements reflect management's current beliefs and assumptions with respect to such things as the outlook for general economic trends, industry trends, commodity prices, capital markets, and the governmental, regulatory and legal environment. In some instances, this document and accompanying documents may also contain forward-looking statements attributed to third party sources. Management believes that its assumptions and analysis in this document are reasonable and that the expectations reflected in the forward looking statements contained herein are also reasonable. However, Keyera cannot assure readers that these expectations will prove to be correct.

All forward looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events, levels of activity and achievements to differ materially from those anticipated in the forward looking statements. Such factors include but are not limited to: general economic, market and business conditions; access to capital and debt markets; operational matters, including potential hazards inherent in our operations; risks arising from co-ownership of facilities; activities of other facility owners; access to third party facilities, competitive action by other companies; activities of producers and other customers and overall industry activity levels; changes in gas composition; fluctuations in commodity prices and supply/demand trends; processing and marketing margins; effects of weather conditions; availability of construction crews and materials; fluctuations in interest rates and foreign currency exchange rates; changes in operating and capital costs, including fluctuations in input costs; actions by governmental authorities; decisions or approvals of administrative tribunals; changes in environmental and other regulations; reliance on key personnel; competition for, among other things, capital, acquisition opportunities and skilled personnel; changes in tax laws, including the effects that such changes may have on shareholders, and in particular any differential effects relating to shareholder's country of residence; and other factors, many of which are beyond the control of Keyera, some of which are discussed in this document and in Keyera's Annual Information Form dated February 13, 2014, filed on SEDAR and available on the Keyera website at www.keyera.com.

Proposed construction and completion schedules and budgets for capital projects are subject to many variables, including weather; availability and prices of materials; labour; customer project approvals and expected in service dates; regulatory approvals; and macro socio-economic trends. Pipeline projects are also subject to Keyera's ability to secure the necessary rights of way. As a result, expected timing, costs and benefits associated with these projects may differ materially from the descriptions in this document. Further, some of the projects discussed in this document are subject to securing sufficient producer/customer interest and may not proceed if sufficient commitments are not obtained. It is unclear whether Alberta's move toward a single regulator will affect processing times for projects that are subject to regulatory approval. Regulatory applications are also subject to intervention by interested parties which could result in delays.

Readers are cautioned that they should not unduly rely on the forward looking statements in this document and accompanying documents. Further, readers are cautioned that the forward looking statements in this document speak only as of the date of this document.

Any statements relating to "reserves" are deemed to be forward looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future.

All forward looking statements contained in this document and accompanying documents are expressly qualified by this cautionary statement. Further information about the factors affecting forward looking statements and management's assumptions and analysis thereof, is available in filings made by Keyera with Canadian provincial securities commissions, which can be viewed on SEDAR at www.sedar.com.







SOURCE Keyera Corp.


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