TSE:KEY Keyera Q2 2023 Earnings Report C$42.78 -0.01 (-0.02%) As of 05/1/2025 04:00 PM Eastern Earnings HistoryForecast Keyera EPS ResultsActual EPSC$0.69Consensus EPS C$0.46Beat/MissBeat by +C$0.23One Year Ago EPSC$0.78Keyera Revenue ResultsActual Revenue$1.50 billionExpected Revenue$1.94 billionBeat/MissMissed by -$444.77 millionYoY Revenue GrowthN/AKeyera Announcement DetailsQuarterQ2 2023Date8/10/2023TimeBefore Market OpensConference Call DateThursday, August 10, 2023Conference Call Time10:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptInterim ReportEarnings HistoryCompany ProfilePowered by Keyera Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 10, 2023 ShareLink copied to clipboard.There are 12 speakers on the call. Operator00:00:00Good morning. My name is Lara, and I will be your conference operator today. At this time, I would like to welcome everyone to Keyera Court's Second Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:29Thank you. I would now like to turn the call over to Calvin Locke, Manager of Investor Relations. You may go ahead, sir. Speaker 100:00:38Thank you, and good morning. Joining me today will be Dean Setiguchi, President and CEO Eileen Maricar, Senior Vice President and CFO Jamie Urquhart, Senior Vice President and Chief Commercial Officer and Jared Bustillini, Senior Vice President, Operations and Engineering. We will begin with some prepared remarks from Dean and Eileen, after which we will open the call to questions. I would like to remind listeners that some of the comments and answers that we will give you today relate to future events. To the operator. Speaker 100:01:15These forward looking statements are given as of today's date and reflect events or outcomes that management currently expects. In addition, we will refer to some non GAAP financial measures. For additional information on non GAAP measures In forward looking statements, please refer to Keyera's public filings available on SEDAR and on our website. With that, I'll turn the call over to Dean. Speaker 200:01:42Thanks, Calvin, and good morning, everyone. I'm pleased to announce that our Board of Directors Have approved a 4.2 percent dividend increase, returning Keyera to its long history of sustainable dividend growth. The increase is supported by the growth of Keyera's fee for service business segments. Over the last 5 years, we've been investing significantly to create a fully integrated service offering from the Montney and Duvernay place through to our core liquids infrastructure in Edmonton and Fort Saskatchewan. These strategic investments continue to deliver volume and cash flow growth. Speaker 200:02:19We remain on track to reach our targeted annual 6% to 7% to Fee for service EBITDA growth out to 2025. Our Liquid Infrastructure segment delivered 21% year over year growth Reaching a new quarterly record of $119,000,000 TAPS is now fully in service with the second of 2 pipelines Shipping its first volumes in June. Apps integrates our value chain making us more competitive and enhances our ability to track new volumes. Our platform offers customers a much needed competitive alternative from wellhead to end market. In our G and P segment, we delivered $84,000,000 in realized margin. Speaker 200:03:05This result was achieved Despite the impact of Alberta's wildfires, again, we'd like to thank all emergency responders and care personnel to ensure that everyone remains safe and that our assets were largely unimpacted. The outlook remains strong for our G and P business. We foresee continued filling of available capacity, particularly at Wapiti and Simonette as producer activity ramps up. Expansion of the Pipestone Gas Plant is on track for completion in the Q1 of 2024. Our G and P customers are in a strong financial position and have multiyear growth plans. Speaker 200:03:48This is driving continued growth of the segment, While at the same time increasing the length of contracts and improving cash flow stability. Our marketing segment had another strong quarter Supported by the strength of our iso octane and condsafe businesses. This segment delivered $134,000,000 of realized margin in the quarter And $251,000,000 year to date. We're increasing our 2023 guidance for this segment to range between 380 to $410,000,000 of realized margin. With the major investments of the last 5 years behind us, We expect gross spending to be lower going forward. Speaker 200:04:29This means we'll have more free cash flow to allocate. Our capital allocation priorities are unchanged. They are first to ensure financial strength And then the balance between increasing returns to shareholders and disciplined capital investments. Our debt leverage metrics are well within our targeted range And now we increased our dividend. In terms of future growth investments, they will be primarily focused on projects That leverage and enhance our existing core asset position in Western Canada. Speaker 200:05:04This could include a debottleneck of existing frac, to a new frac expansion and a potential CAPS Zone 4 extension. Any incremental investments to generate a strong return underpinned by long term contracts. I'll now turn over to Eileen to provide an update on Keyera's financial performance for the quarter. Speaker 300:05:25Thanks, Dean. Adjusted EBITDA for the quarter was $293,000,000 compared to $316,000,000 The same period last year. Distributable cash flow was $207,000,000 or $0.90 per share compared to $209,000,000 or $0.94 per share for the same period in 2022. To the operator. Net earnings were $159,000,000 compared to $173,000,000 for the same period last year. Speaker 300:05:55These results were driven by record performance from our Liquids Infrastructure segment and the 3rd best ever quarterly marketing segment margin. To share continues to maintain a strong financial position ending the quarter with net debt to adjusted EBITDA at 2.6 times at the lower end of our targeted range of 2.5 times to 3 times. Moving to our guidance for 2023. Operator00:06:23To the operator today. At this time, I would like to welcome everyone. Speaker 300:06:23As Dean mentioned, we now expect our marketing segment to contribute between $380,000,000 $410,000,000 of realized margin in 2023. 3. This is up from our previous guidance of $330,000,000 to $370,000,000 The revised guidance Takes into account financial hedges currently in place and assumes AEF runs at capacity. There are no significant logistics for transportation curtailments and current forward commodity pricing for any unhedged volumes for the remainder of the year. To the operator today. Speaker 300:06:57Growth capital guidance remains unchanged at between $200,000,000 to $240,000,000 Maintenance capital guidance is now expected to be between to $95,000,000 $105,000,000 up from the previous range of $75,000,000 to 85,000,000 About half the increase is due to the completion of work that was already prepaid. The balance of the increase includes additional maintenance cost to the Pipestone Gas Plant, which is expected to be recovered through increased future revenue. Cash tax expense is expected to be Speaker 200:07:34Thanks, Eileen. Macro outlook for our business environment remains very positive. Canada's energy resources will be essential in meeting the world's growing energy demand. Our basin continues to grow and set new records for both natural gas and crude oil production. LNG Canada and the Trans Mountain pipeline expansion will unlock future growth. Speaker 200:07:58We're excited to contribute to this growth by being an essential infrastructure service provider. On behalf of Keyera's Board of Directors and management team, I want to thank our employees, contractors, indigenous rights holders and other stakeholders for their continued support. With that, I'll turn it back to the operator for Q and A. Operator00:08:21Thank you, sir. Ladies and gentlemen, we will now begin the question and answer Your first question comes from the line of Rob Hope from Scotiabank. Please go ahead. Speaker 400:08:48Good morning, everyone. Thanks for taking my questions. First off, I want to maybe get a little bit of an update on caps. How have volumes ramped relative to your kind of base expectations just given, I guess it's early days, but just given some dynamics out in the basin as well as now that the pipeline is in service, have discussions with customers accelerated? Have any Speaker 200:09:18to Hey, good morning, Rob. It's Dean Setoguchi and Glad you're participating here in our call in the middle of August. So hopefully that didn't defer your vacation. Listen, it's a great question that you have on caps and I would have expected that. First of all, we're very pleased that The pipeline is fully in service with the 2nd pipeline again delivering volumes in June. Speaker 200:09:44So again, it's like any asset when you bring it up. To everything doesn't just turn on all at once. But I would say that that process works very, very smoothly. We work very closely with our customers. And now that it's in service and certainly there's a lot more visibility to growth in the basin, we have a lot of great discussions with our producers. Speaker 200:10:07And again, I want to emphasize that, first of all, we have a fully integrated system now, so we can offer that bundled service. Again, I always like to use analogy of your Internet cable and cell phone and security home security provider. I'd say almost everybody uses a bundled service because it's more efficient and obviously our bundle package is the same way. So I think that's a great advantage. What we're seeing is that our volumes are a little bit ahead of where we would have expected to start up. Speaker 200:10:44But again, it's still early days yet. We've always got into the market that this would be a slow ramp up and we still expect that. But as of where we are today, we're a bit ahead of schedule. But I would reiterate that as a final note that we did guide 6% to 7% to the EBITDA growth out to 2025. A lot of that is coming from our G and P business and filling our white space there. Speaker 200:11:10But part of it as well is CAPS and the CAPS ramp up to 2025. The great thing about CAPS is that Especially with the pace in growth that we're seeing, we expected to continue to grow in terms of volumes and cash flow right through the end of the decade. Speaker 400:11:28I appreciate that. And then as a follow-up, just take I want to dive a little bit deeper into the comments you made on capital allocation, specifically with how you'll take a look at outperformance in marketing. So good to see another Sustainable dividend increase. But when you take a look at moving forward, how do you balance Dividend increases versus growth capital. And in an environment where you could see outside marketing Margins like 2023, could you look to return those to shareholders via buybacks? Speaker 200:12:06Yes. Listen, that's a great question. And before I turn that over to Eileen, I'd just say that we're very pleased with the position that we're in today. We've undergone a number of years of very significant capital over the last 5, 6 years And we built a very strong Montney position, fully integrated Montney position over that period of time. And we have those expenditures behind us. Speaker 200:12:31We have a very strong balance sheet and we have growing cash flow. So that puts us in a great spot where now we have options as to where we allocate capital to add the most value for our investors. But with that, I'll turn it over to Eileen. Speaker 300:12:45Thanks, Steve. Hi, Rob. Yes, that is a great question. I think it is important to take it back to our overall priorities. Our first priority will always be to maintain our balance sheet strength and we're certainly there today. Speaker 300:13:00For this year, we are prioritizing paying down short term debt from the higher marketing contribution. But beyond the balance sheet, Our objective really is to grow distributable cash flow on a per share basis so that we can continue to grow the dividend. And this can really be achieved in 2 ways. 1, buying back shares or reinvesting in the business. As we look out to next year, it will be a competition for between these two options. Speaker 300:13:27Our preference would be to do smaller size, but impactful growth projects That meet our investment criteria. And really by small, I mean smaller relative to the large scale projects that we've undertaken over the past few years. Speaker 500:13:46Thank you. Operator00:13:49Thank you. Your next question comes from the line of Robert Kwan from RBC Capital Markets. Please go ahead. Speaker 600:13:58Great. Thank you. If I can maybe just continue on the capital allocation topic. And Eileen, Clearly, you're prioritizing the balance sheet. I'm just kind of wondering, the low debt to EBITDA is partly a function here of strong marketing. Speaker 600:14:15So do you introduce a 3rd priority, and even just the fiscal dividend of reducing leverage? Like How are you looking at that leverage range? Is it on the long term marketing number? Are you even though you have a long term number, are you kind of just planning for something That's closer to what you're doing, because the other way you can grow DCF per share is to just continue to repay debt and save the interest as well. Speaker 300:14:44Thanks, Robert. Yes, that's a great question. And when we planned leverage, I mean that 2.5 to 3 times Is very conservative and certainly through various cycles, it has protected us from taking any drastic measures like, For example, cutting the dividend during COVID, we never had to do that. So we're very, very much, we want to Stick to those principles. And when it comes to those marketing cash flows, you're absolutely right. Speaker 300:15:11We don't take into account nor plan for outsized marketing as we think about leverage going forward. We're really more to that base marketing guidance. Speaker 600:15:23Okay. So is the bias then whether if you can get the growth CapEx, that's great, But is the bias into 2024 to maybe continue to repay debt versus direct share buybacks? Speaker 300:15:37I think this year, like I said, that it really is to repay, use those strong marketing cash flows to reduce our short term debt. In terms of the rest of our debt profile, we don't have anything material that's coming due for the next until 2025. And so as we look at next year, it is when if we have some great projects or if it's returning cash through buybacks, we will look at to both options going into next year. Speaker 600:16:08Okay. That's great. If I can just finish with a couple of questions here on caps. The first is, Are you able to disclose what the actual contribution was in the quarter and also confirm that what was booked in the liquids infrastructure was all 3rd party margin. The second is just with your new partner here, has there been anything just Stonepeak, having a fresh set of eyes on CAPS, whether it's the contracting Or expansion potential that you've been able to get out of the partnership so far. Speaker 200:16:44Yes, maybe Thanks for the questions, Robert. Maybe just a last question with a new partner, they've been really great to work with. They're very engaged And our team has worked Jamie's team has worked very closely with them. So yes, we think that they've been very positive in terms of attracting new business. So we're going to continue to build that relationship and we're very aligned in terms of what we want to accomplish with to this pipeline. Speaker 200:17:12So that's all been great. Your first question, So disclosing amount. Yes, we're not going to disclose amount of how much caps contributed in the second quarter. I would say it was pretty modest just because again, it came on middle of the sort of mid quarter, But also, there's a wrap up profile, like each customer sort of come on sequentially. So it wasn't like everything came on at once, The volumes that we do have, so I would say it was modest in the second quarter. Speaker 600:17:48Okay. And was it all third party Revenue or are you booking Speaker 200:17:53Intercorporate as well? 3rd party. And as you know, we have a note. I can't remember off the top of my head of any sort of intercompany allocations, but I can't confirm it was 3rd party revenue in the Q2. Speaker 500:18:09That's great. Thank you. Operator00:18:13Thank you. Your next Question comes from the line of Robert Chatlier from CIBC Capital Markets. Please go ahead. Speaker 700:18:22Hey, I'd have some interest in knowing what the contribution is and also the schedule of the ramp up over the next couple of years, but looks like that might not be forthcoming today. So Maybe, Dean, you can talk about the actual physical operating performance of the asset since it's been placed into service. And second, they just the Zone 4, where you stand with that today and what's your vision for A reasonable timeline for making a decision there. Speaker 200:18:55Yes. Thanks for the question, Rob. It's It's great to get the 3 Rob questions right off the bat in sequence. You know what, first of all, just maybe add on more color to the ramp Of CAHPS is that obviously a lot of the discussions we have with customers is very commercially sensitive. So We have to be mindful of that. Speaker 200:19:18There are confidentiality provisions put in place and we'll update at the right time When it's good for our shareholders, but also respecting the confidentiality and sensitivity of those discussions. With respect to Zone 4, You know what, we remain optimistic on Zone 4, especially as we see Canada LNG, It's not that far away now. And once that gets put into service, that's going to be another couple of Bcf of demand. And we certainly see our basin growing to So I think that's going to be great for our whole NGL value chain. So with that, some of that's going to be in BC. Speaker 200:20:00We've obviously seen a lot of progress With the Blueberry First Nations Group and also the Treaty Aid. So with that, there's more overall optimism in BC. And so we continue to have a lot of engaging discussions with customers in Zone 4 in Alberta and also into BC to track their volumes right through the caps and into Fort Saskatchewan. So timing on that, I think that we We'd probably expect more in the first half of next year, but we do have really great conversations on that perspective. And again, the whole rationale for why producers are really interested is, A, they want to have a competitive alternative. Speaker 200:20:50They're investing 1,000,000,000 of dollars along that Montney Fairway. And From a reliability perspective, it's nice to have 2 systems to get your volumes into Fort Saskatchewan where the market hub is. And second of all, commercially, it's always nice to have 2 parties that you can negotiate with for your service. So, we're happy to be that competitive alternative. And I'd also maybe say the third point is that we have a brand new pipe. Speaker 200:21:19So from a reliability perspective, we think we will have really stellar run performance over the next several years. Maybe just on the operating performance on Capsule, I'll turn that over to Jared here. But I do commend the group for the great job they did in commissioning and bringing that project up. It went as seamless as one could hope for. Speaker 800:21:47Yeah. Good morning, Robert. It's Gerard here. Yes, we're really pleased with how that project came online and ramped up. And as Dean described, it was really a staged approach with the various customers and really on both to the lines rather than kind of one shot at a time and really pleased with how our ops and business teams worked with the customers and worked with each other to really bring all those up smoothly and we've been very pleased with the operational performance of that to the performance of that line so far. Speaker 800:22:08So it's allowed us to be a bit ahead of volumes as you heard, but it's early days in that ramp up. And That operational performance is really key for us in giving our existing customers confidence and our ability to attract new customers. And again, really, really pleased out of the gate. Speaker 700:22:24Okay. Thanks for that answer. I have a similar question on frac capacity. It looks like You're pretty high in terms of your utilization and that's not uncommon in the industry right now. So It leads me to believe that maybe the debottlenecking, although it's capital efficient, I'm just curious if it's really enough capacity. Speaker 700:22:49And related to that, I'm curious about your appetite for being in the market for a new frac, more Significant expansion at the same time that I'm going to use in the market with theirs. Speaker 200:23:02Yes, it's a great question. I mean, obviously frac capacity is And when you look at the forecast for nat gas volume growth in the basin over the next 3 or 4 years, it's very significant. And with that, we're We're going to see a lot more liquids that get stripped out of the gas stream as well. So we think that's a great opportunity for our frac complex at KFS. Again, we're very pleased that we're able to add capacity in a very tight market with our acquisition, 21% acquisition of interested in KFS earlier this year. Speaker 200:23:33So that helps us out. You're right. I mean, we've been Telling everyone that we've certainly been doing engineering on a debottleneck, which is I think likely going to be a great opportunity for us. But we certainly have our eyes set on a potential frac expansion in the future as well because more capacity will be required. And you know what, we provide a great service out of our CFS site. Speaker 200:23:57It's very, very well connected from a pipe perspective and for all commodities, But also for rail and truck egress as well. Jamie, is there anything else you wanted to add on that? Speaker 900:24:07Yes. Dean, I think you hit the high points. I think the only thing I'd add as well The opportunity exists and that we're making really good progress on actually recontracting our existing frac as well. So you made note that we've Sept into the other 21% at KFS, but the opportunity is now to be able to recontract and extend Existing agreements out into the future and that's been our first focus. We've been very happy with the success on that front. Speaker 900:24:36And then as Dean alluded to, we're looking at opportunities to either debottleneck or expand on our site. Speaker 200:24:44I think, I mean, obviously with the fully integrated system out of the Montney with caps in place, we're looking for those Full bundled package deals where we can offer G and P services, to NGL Transportation, Fractionation and Marketing Services. So trying to provide that full service and obviously that helps to boost our corporate profits overall. Speaker 700:25:12Okay. Last question for me is related I'm happy to see the 2023 marketing guidance increase, but as you've heard me say before, I've been expecting directionally a long term increase at some point. Is frac capacity the bottleneck For being able to do that or is there something else you need to see to take a second look at the long term marketing guidance? Thank you. Speaker 200:25:40Yes. I mean, that's a great question regarding our marketing guidance. Obviously, we have a very good track record with our marketing business. And I do want to emphasize that our marketing business is really leveraging off of the physical assets that we own and the volumes that we have in our system. So It's a way to really maximize profitability across our entire value chain. Speaker 200:26:01But maybe with respect to the guidance And a potential increase. I'll turn that over to Eileen. Speaker 300:26:08Sure. Thanks, Robert. Yes, I know this is a great question because we have consistently outperformed that guidance. Maybe just a little context on the base guidance. It's meant to represent a level of contribution that we have a high degree of achieving within like certain normal or typical assumptions. Speaker 300:26:25So and those are laid out in the MD and A, but the record margins that we saw last year and the increase in guidance this year is largely driven by exceptionally strong isooctane premium that cannot be hedged as well as our BOP pricing that's well above the 5 year average. But that said, we do plan to revisit our base guidance later this year in light of having access to more volumes now that Cas is online and with the additional frac capacity that we just acquired. So more to come on Speaker 700:26:58Okay. Thanks, everyone. Speaker 600:27:00Thank you. Operator00:27:03Thank you. Your next question comes from the line of Linda Ezergailis from TD Securities. Please go ahead. Speaker 1000:27:11Thank you. Recognizing that it's a Board decision on a dividend increase, beyond your 50% to 70% payout ratio guardrails, how might we think of the frequency and growth rate of future dividend increases, would kind of the default be typically once a year or maybe Prospectively, we might see, as new accretive assets, whether they're built or acquired, come in and contribute maybe a bit more of a bump then. Speaker 200:27:46Hey, good morning, Linda, and great question on the dividend. First of all, I want to reiterate that we're very pleased to return to dividend growth again. And You would know as well as anybody that that's really the legacy of our company. We started out as a trust 20 years ago, this is our 20th year as a public company, and we've distributed and dividend out a lot of money over that period of time. We took a bit of a hiatus after 2019 and part of that was we hit the COVID period, but We also had a heavy capital spend with caps. Speaker 200:28:25And so but I do want to reiterate though during that time, we shut off our DRIP. So we actually self funded caps during that period of time. We didn't increase our dividend, but now the cap is behind us, we're able to do that now. And we've never had a we've never reduced our dividend. So anytime we increase our dividend, it's got to be sustainable. Speaker 200:28:47But let me just turn it over to Eileen and she can maybe speak about our philosophy on dividends going forward. Speaker 300:28:53Thanks, Steve. Yes, Linda, it's really tied to growing that distributable cash on a per share basis. So EBITDA, but after taking into account interest taxes and maintenance expenses. And it has to be supported by Growth in our fee for service business. So we're on track to achieve that 6% to 7% EBITDA growth out to 2025 that comes from our fee for service business And that does support then growth in a DCF per share. Speaker 300:29:20But ultimately, the timing and the amount of future increases will be a Board decision. But that's the framework that we use. Speaker 1000:29:28Okay. Thank you. And just as a follow-up, the 6% to 7% growth, What is I mean, I'm assuming it's a high confidence that you can achieve that, but what element of that, If any might be coming from future capital investments, even if they're small bolt on projects versus the white space that you already have or the projects that are under construction. Speaker 200:29:56Yes, that's a great question. The great thing is that most of that 6% to 7% increase is capital that has already been invested already and We've spent the money. So it's really our G and P business and filling up white space there. There is some capital associated with the to So that's in the $50,000,000 to $60,000,000 range, but we've disclosed that. Some of that is tied to our to the 21% acquisition of KFS. Speaker 200:30:28And then obviously, we see contribution from our CAHPS pipeline that's going to wrap up over time. And as I said, that's going to contribute to our EBITDA growth Well, well into the end of the decade, so that will continue to grow. So, we'll enhance that. I mean, obviously, new projects will have a lead time in terms of build and being able to generate a return off of that. But we do see some good projects to build to add future growth for the future as well. Speaker 1000:31:00Thank you. And just as another quick follow-up, as it relates to cash flows, recognizing that there is some below the line moving parts below EBITDA. Can you talk about the current medium and longer term outlook for your to cash taxes as your capital expenditures kind of lighten up in terms of your tax Schools and how they're depleting and how we might think of the cash taxes ramping up over the next 5 years. Speaker 300:31:36Thanks, Linda. Yes, cash taxes, I mean, really, we don't provide We will in the Q3 for next year. But as you think about our pools, certainly the KFS acquisition gave us Significant pools, as well as the large capital projects that we've undertaken that will help for certainly a period of time. But you're absolutely right that there comes a point where tax is something that is definite and will come. And so That's just something that we will continue to manage. Speaker 300:32:11Thank you. Operator00:32:15To the operator. Your next question comes from the line of Patrick Kenny from National Bank Financial. Please go ahead. Speaker 1100:32:24Thank you. Good morning. Just to follow-up on the Liquids Infrastructure segment. Just wanted to confirm that You see this higher demand for your storage and fractionation services is being repeatable, I guess, under current commodity prices. And if so, What opportunities there might be to exceed that 6% to 7% adjusted EBITDA growth outlook Simply from sweating the assets either through optimizing your commercial framework at KFS or Perhaps looking at new ways to maximize throughput and NGL handling capacity at Rimbey. Speaker 200:33:06Well, listen, I mean, we still have white space in our system, so we're not forecasting 100% utilization of all of our assets. So, is there So is there possibilities to exceed our 6% to 7% growth? I would say that the best opportunities are still their G and P business And also in our caps pipeline, where we'd have the most capacity to do that. But We'll have to see in timing of when those volumes show up, but we do believe that we're going to help enable the basin to grow And we'll see more volumes in their system over time. In terms of higher demand for liquids infrastructure assets, Maybe I can turn that over to Jamie and he can provide a bit more color on that. Speaker 900:33:49Yes. So thanks for the question, Pat. Like I mean, I think What your question points to is something that we've always done in our organization is trying to either Optimize our existing assets physically, and we've been able to do that over the years and continue to look to do that around our KFS asset, but also with AEF as well. We've gotten a few extra percent of I see coming on over turnaround last fall, and we've got other ideas to increment up the capacity at AEF, not in Tens of percent, but in single digit percent, so over the next few years. And then As you were alluding to at KFS. Speaker 900:34:38So physically, we can do it. And then, as you alluded to, my group's mandate is to obviously optimize commercially, how we can sweat the assets as you said. So I think There's opportunities, but as Dean says, I think the more impactful opportunities will lie in the Wapiti Pipestones, the caps to capacity that we have, that's what's driving our target around EBITDA growth. Speaker 200:35:10Maybe just add to what Jamie said, Pat, We always talk about the 21% interest that we acquired at KFS and we always talk about the frac, but With it also came storage capacity and also the pipeline capacity in our FSPL system between Edmonton and Fort Saskatchewan. As volumes grow, we think that there's going to be certainly more demand for that storage, our pipeline capacity And also more volumes also translates to likely more business through our terminals as well. So I think it's a pretty positive outlook. Speaker 1100:35:49And then I guess with respect to throughput in the South region, you mentioned in the MD and A that You expect Deep Basin volumes to remain relatively strong just given the financial strength of producers. But Just curious if there's any other optimization or consolidation opportunities across the asset base in the South as you look into, Say 2024. Speaker 200:36:15Yes. You know what, we're we always talk about our Montney business, which that's where the majority of our G and P to margins are generated, but we shouldn't forget about the Deep Basin because the Deep Basin is still an attractive place. The geology is still very strong, not just with, some of the conventional plays that have been developed over time and applying better technologies to drilling and completing them. But we're seeing more emergence of the Duvernay that's starting to become an emerging play down there, which I think it could be exciting for us. So we see opportunities, but we still have a lot of we still have white space down in our South portfolio. Speaker 200:36:58So Our primary focus is going to be to fill that and make it as profitable as possible. But at the same time, maybe Jamie can comment I think we're starting to see opportunities to recontract some of the volumes that we have going through our facilities there, And that's been looking good as well. Speaker 900:37:20Yes, just to give a little bit more flavor. And I alluded to this, I can't remember who it was Last quarter or the quarter before is that we are seeing relatively high utilization in our Stracken, Nordic, Brazeau complex that's Connected with Pipe and as Dean alluded to is that we've been in the last 6 months in the process of Recontracting with customers around those assets and based on the fact that there is limited to capacity available. We're pleased with the results of that re contracting. The white space that Dean alludes to is probably more in the Rimbey area, but as Dean alluded to is that that is where we're starting to see some Pretty encouraging results from the Duvernay. And we have We're optimistic with respect to being able to support those producers' growth at the Rimbey gas plant. Speaker 900:38:23And that gas plant is fully integrated into our value chain, pipeline connected all the way into For Saskatchewan, so that's a key asset for us in the South GMP asset base. Speaker 1100:38:39All right. That's great, guys. I'll leave it there. Thanks. Speaker 200:38:43Thanks, Pat. Operator00:38:46Thank you. Your next question comes from the line of Fen Huang from BMO. Please go ahead. Speaker 500:38:53Hi, thanks. Good morning. A couple of questions on Keyera New Ventures. I'm wondering Perhaps maybe a commercial update on your key projects in new ventures and thinking more about potential sanctioning. I'm also curious around any thoughts around the draft legislation and tax credits last week and maybe comment on how you Speaker 200:39:24Good morning, Fin, and really great questions. And we're excited about our new ventures opportunities. Certainly, I would say they're more longer term, looking at the back half of the decade. But again, we think that we're very Well positioned to capture more opportunity there. As I said before, I mean, as an infrastructure company, we provide essential services to Conventional hydrocarbon business, mainly on the gases and NGL side. Speaker 200:39:54But for the enablement Of low carbon products, you need the same kind of services. You need pipelines, you need storage, above ground, below ground storage, you need to Truck and Rail Logistics. And you also need to have processing capabilities as well. All things that we have a lot of strength in. So We see a great opportunity there to maybe repurpose some of the assets that we have in the Greater Edmonton Fort Saskatchewan area. Speaker 200:40:24And specifically, we have a really great undeveloped land block there that we want to develop a low carbon industrial park. But With that, I mean, this is all under Jamie's group and maybe I'll turn it over to him to provide more color on that. Speaker 900:40:39Yes. So, I think I can provide a little bit more flavor around some of the things that we've announced previously with respect to Relationships that we have with CN around rail. I can share with you that we've gotten a lot of interest in uptake with respect to Customers with respect to the unit train opportunity that we see with CN on our to joining lands up in the Port Saskatchewan area. So we are progressing with Understanding those opportunities a little bit more, we're spending some money on engineering to forward that opportunity. Similarly, we're in conversations with other entities around carbon capture, sequestration To really make our lands the preferred location for some of the opportunities That others are looking at. Speaker 900:41:43Specific with respect to tax credits, not exactly sure Where you're leaning with respect to that question and perhaps you can just reach out to our Investor Relations group to Maybe pose that question and get the answers you're looking for. Speaker 500:42:01Okay. Thanks for that. And I was more curious if The legislation is anything different than you were expecting. I'm probably not more checking on that. And can you also talk about, Are you is anything with these parties projects related to the ammonia value chain? Speaker 500:42:23And could you comment also, are these more in the context of multi $1,000,000,000 of capital opportunity? Speaker 200:42:34Maybe just from a general macro perspective, we are seeing general interest in ammonia. And I think Japan, they're expressing an interest for ammonia and they have incentive in place. How real that is? I guess, only time will tell, but there's certainly a lot of interest. You've heard different projects that have been out there. Speaker 200:42:57We've been approached for citing some opportunities on our lands. But again, it's still very early days. The great thing is that this is a real opportunity. We have, I'd say, one of the best locations, if not the best locations to develop ammonia project. And again, it's just because of our connectivity in the area where we have industrial zone land, We have cavern underground cavern capacity. Speaker 200:43:24We have the potential for our rail terminal with CN to egress ammonia to the West Coast. But again, it's still early days and I think there's got to be a lot of work even from a transportation perspective and the safety of transporting ammonia through communities all the way to the West Coast. So Maybe the last advantage we have is we're very close to where you would connect to carbon capture line. So again, all things that you would need for ammonia project, but early days, but we're seeing we're certainly seeing interest there. Speaker 500:44:03Okay. Maybe lastly, anything on WildHorse, changes on outlook there? Speaker 900:44:12Yes, great question. We haven't talked about WildHorse in a while. That asset, just based on where crude Was trading given the fact that backwardization that we've seen over the last couple of years. When it started up, we had an existing customer base contracted the facility. We haven't seen a ton of volumes moving through the terminal, but that has actually started to change in the last quarter. Speaker 900:44:44And We're really optimistic now based on the unique characteristics of that terminal and the capabilities of that terminal and getting familiar with The entities that do new commerce in Cushing, that asset is starting to perform the way we envisioned when we originally sanctioned to that asset. So a timely question. I would probably had a less rosy outlook to share if You'd pose that question a year ago or even 6 months ago. Speaker 1000:45:16Okay, great. Thanks for the update. Speaker 200:45:19Thank you. Operator00:45:21Thank you. There are no further questions at this time. I'd now like turn the call back over to Mr. Kelvin Locke for any closing remarks. Speaker 100:45:32Thank you all once again for joining us today, and Please feel free to reach out to Keyera's Investor Relations team with any additional questions you may have. Speaker 500:45:41Thank you. Operator00:45:43Thank you, presenters. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallKeyera Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsInterim report Keyera Earnings HeadlinesCIBC Cuts Keyera (TSE:KEY) Price Target to C$47.00April 27, 2025 | americanbankingnews.comWhere I’d Invest $15,000 in Top Utilities Stocks for Steady IncomeApril 25, 2025 | msn.comTrump’s treachery Trump’s Final Reset Inside the shocking plot to re-engineer America’s financial system…and why you need to move your money now.May 2, 2025 | Porter & Company (Ad)Keyera Corp. (TSE:KEY) surges 8.0%; retail investors who own 56% shares profited along with institutionsMarch 14, 2025 | finance.yahoo.comKeyera Corp. (KEY) Receives a Rating Update from a Top AnalystMarch 14, 2025 | markets.businessinsider.comKeyera (TSE:KEY) shareholders have earned a 19% CAGR over the last three yearsFebruary 26, 2025 | finance.yahoo.comSee More Keyera Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Keyera? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Keyera and other key companies, straight to your email. Email Address About KeyeraKeyera (TSE:KEY) is a midstream energy business that operates primarily out of Alberta, Canada. Its primary lines of business consist of the gathering and processing of natural gas in western Canada, the storage, transportation, and liquids blending for NGLS and crude oil, and the marketing of NGLs, iso-octane, and crude oil. 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There are 12 speakers on the call. Operator00:00:00Good morning. My name is Lara, and I will be your conference operator today. At this time, I would like to welcome everyone to Keyera Court's Second Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:29Thank you. I would now like to turn the call over to Calvin Locke, Manager of Investor Relations. You may go ahead, sir. Speaker 100:00:38Thank you, and good morning. Joining me today will be Dean Setiguchi, President and CEO Eileen Maricar, Senior Vice President and CFO Jamie Urquhart, Senior Vice President and Chief Commercial Officer and Jared Bustillini, Senior Vice President, Operations and Engineering. We will begin with some prepared remarks from Dean and Eileen, after which we will open the call to questions. I would like to remind listeners that some of the comments and answers that we will give you today relate to future events. To the operator. Speaker 100:01:15These forward looking statements are given as of today's date and reflect events or outcomes that management currently expects. In addition, we will refer to some non GAAP financial measures. For additional information on non GAAP measures In forward looking statements, please refer to Keyera's public filings available on SEDAR and on our website. With that, I'll turn the call over to Dean. Speaker 200:01:42Thanks, Calvin, and good morning, everyone. I'm pleased to announce that our Board of Directors Have approved a 4.2 percent dividend increase, returning Keyera to its long history of sustainable dividend growth. The increase is supported by the growth of Keyera's fee for service business segments. Over the last 5 years, we've been investing significantly to create a fully integrated service offering from the Montney and Duvernay place through to our core liquids infrastructure in Edmonton and Fort Saskatchewan. These strategic investments continue to deliver volume and cash flow growth. Speaker 200:02:19We remain on track to reach our targeted annual 6% to 7% to Fee for service EBITDA growth out to 2025. Our Liquid Infrastructure segment delivered 21% year over year growth Reaching a new quarterly record of $119,000,000 TAPS is now fully in service with the second of 2 pipelines Shipping its first volumes in June. Apps integrates our value chain making us more competitive and enhances our ability to track new volumes. Our platform offers customers a much needed competitive alternative from wellhead to end market. In our G and P segment, we delivered $84,000,000 in realized margin. Speaker 200:03:05This result was achieved Despite the impact of Alberta's wildfires, again, we'd like to thank all emergency responders and care personnel to ensure that everyone remains safe and that our assets were largely unimpacted. The outlook remains strong for our G and P business. We foresee continued filling of available capacity, particularly at Wapiti and Simonette as producer activity ramps up. Expansion of the Pipestone Gas Plant is on track for completion in the Q1 of 2024. Our G and P customers are in a strong financial position and have multiyear growth plans. Speaker 200:03:48This is driving continued growth of the segment, While at the same time increasing the length of contracts and improving cash flow stability. Our marketing segment had another strong quarter Supported by the strength of our iso octane and condsafe businesses. This segment delivered $134,000,000 of realized margin in the quarter And $251,000,000 year to date. We're increasing our 2023 guidance for this segment to range between 380 to $410,000,000 of realized margin. With the major investments of the last 5 years behind us, We expect gross spending to be lower going forward. Speaker 200:04:29This means we'll have more free cash flow to allocate. Our capital allocation priorities are unchanged. They are first to ensure financial strength And then the balance between increasing returns to shareholders and disciplined capital investments. Our debt leverage metrics are well within our targeted range And now we increased our dividend. In terms of future growth investments, they will be primarily focused on projects That leverage and enhance our existing core asset position in Western Canada. Speaker 200:05:04This could include a debottleneck of existing frac, to a new frac expansion and a potential CAPS Zone 4 extension. Any incremental investments to generate a strong return underpinned by long term contracts. I'll now turn over to Eileen to provide an update on Keyera's financial performance for the quarter. Speaker 300:05:25Thanks, Dean. Adjusted EBITDA for the quarter was $293,000,000 compared to $316,000,000 The same period last year. Distributable cash flow was $207,000,000 or $0.90 per share compared to $209,000,000 or $0.94 per share for the same period in 2022. To the operator. Net earnings were $159,000,000 compared to $173,000,000 for the same period last year. Speaker 300:05:55These results were driven by record performance from our Liquids Infrastructure segment and the 3rd best ever quarterly marketing segment margin. To share continues to maintain a strong financial position ending the quarter with net debt to adjusted EBITDA at 2.6 times at the lower end of our targeted range of 2.5 times to 3 times. Moving to our guidance for 2023. Operator00:06:23To the operator today. At this time, I would like to welcome everyone. Speaker 300:06:23As Dean mentioned, we now expect our marketing segment to contribute between $380,000,000 $410,000,000 of realized margin in 2023. 3. This is up from our previous guidance of $330,000,000 to $370,000,000 The revised guidance Takes into account financial hedges currently in place and assumes AEF runs at capacity. There are no significant logistics for transportation curtailments and current forward commodity pricing for any unhedged volumes for the remainder of the year. To the operator today. Speaker 300:06:57Growth capital guidance remains unchanged at between $200,000,000 to $240,000,000 Maintenance capital guidance is now expected to be between to $95,000,000 $105,000,000 up from the previous range of $75,000,000 to 85,000,000 About half the increase is due to the completion of work that was already prepaid. The balance of the increase includes additional maintenance cost to the Pipestone Gas Plant, which is expected to be recovered through increased future revenue. Cash tax expense is expected to be Speaker 200:07:34Thanks, Eileen. Macro outlook for our business environment remains very positive. Canada's energy resources will be essential in meeting the world's growing energy demand. Our basin continues to grow and set new records for both natural gas and crude oil production. LNG Canada and the Trans Mountain pipeline expansion will unlock future growth. Speaker 200:07:58We're excited to contribute to this growth by being an essential infrastructure service provider. On behalf of Keyera's Board of Directors and management team, I want to thank our employees, contractors, indigenous rights holders and other stakeholders for their continued support. With that, I'll turn it back to the operator for Q and A. Operator00:08:21Thank you, sir. Ladies and gentlemen, we will now begin the question and answer Your first question comes from the line of Rob Hope from Scotiabank. Please go ahead. Speaker 400:08:48Good morning, everyone. Thanks for taking my questions. First off, I want to maybe get a little bit of an update on caps. How have volumes ramped relative to your kind of base expectations just given, I guess it's early days, but just given some dynamics out in the basin as well as now that the pipeline is in service, have discussions with customers accelerated? Have any Speaker 200:09:18to Hey, good morning, Rob. It's Dean Setoguchi and Glad you're participating here in our call in the middle of August. So hopefully that didn't defer your vacation. Listen, it's a great question that you have on caps and I would have expected that. First of all, we're very pleased that The pipeline is fully in service with the 2nd pipeline again delivering volumes in June. Speaker 200:09:44So again, it's like any asset when you bring it up. To everything doesn't just turn on all at once. But I would say that that process works very, very smoothly. We work very closely with our customers. And now that it's in service and certainly there's a lot more visibility to growth in the basin, we have a lot of great discussions with our producers. Speaker 200:10:07And again, I want to emphasize that, first of all, we have a fully integrated system now, so we can offer that bundled service. Again, I always like to use analogy of your Internet cable and cell phone and security home security provider. I'd say almost everybody uses a bundled service because it's more efficient and obviously our bundle package is the same way. So I think that's a great advantage. What we're seeing is that our volumes are a little bit ahead of where we would have expected to start up. Speaker 200:10:44But again, it's still early days yet. We've always got into the market that this would be a slow ramp up and we still expect that. But as of where we are today, we're a bit ahead of schedule. But I would reiterate that as a final note that we did guide 6% to 7% to the EBITDA growth out to 2025. A lot of that is coming from our G and P business and filling our white space there. Speaker 200:11:10But part of it as well is CAPS and the CAPS ramp up to 2025. The great thing about CAPS is that Especially with the pace in growth that we're seeing, we expected to continue to grow in terms of volumes and cash flow right through the end of the decade. Speaker 400:11:28I appreciate that. And then as a follow-up, just take I want to dive a little bit deeper into the comments you made on capital allocation, specifically with how you'll take a look at outperformance in marketing. So good to see another Sustainable dividend increase. But when you take a look at moving forward, how do you balance Dividend increases versus growth capital. And in an environment where you could see outside marketing Margins like 2023, could you look to return those to shareholders via buybacks? Speaker 200:12:06Yes. Listen, that's a great question. And before I turn that over to Eileen, I'd just say that we're very pleased with the position that we're in today. We've undergone a number of years of very significant capital over the last 5, 6 years And we built a very strong Montney position, fully integrated Montney position over that period of time. And we have those expenditures behind us. Speaker 200:12:31We have a very strong balance sheet and we have growing cash flow. So that puts us in a great spot where now we have options as to where we allocate capital to add the most value for our investors. But with that, I'll turn it over to Eileen. Speaker 300:12:45Thanks, Steve. Hi, Rob. Yes, that is a great question. I think it is important to take it back to our overall priorities. Our first priority will always be to maintain our balance sheet strength and we're certainly there today. Speaker 300:13:00For this year, we are prioritizing paying down short term debt from the higher marketing contribution. But beyond the balance sheet, Our objective really is to grow distributable cash flow on a per share basis so that we can continue to grow the dividend. And this can really be achieved in 2 ways. 1, buying back shares or reinvesting in the business. As we look out to next year, it will be a competition for between these two options. Speaker 300:13:27Our preference would be to do smaller size, but impactful growth projects That meet our investment criteria. And really by small, I mean smaller relative to the large scale projects that we've undertaken over the past few years. Speaker 500:13:46Thank you. Operator00:13:49Thank you. Your next question comes from the line of Robert Kwan from RBC Capital Markets. Please go ahead. Speaker 600:13:58Great. Thank you. If I can maybe just continue on the capital allocation topic. And Eileen, Clearly, you're prioritizing the balance sheet. I'm just kind of wondering, the low debt to EBITDA is partly a function here of strong marketing. Speaker 600:14:15So do you introduce a 3rd priority, and even just the fiscal dividend of reducing leverage? Like How are you looking at that leverage range? Is it on the long term marketing number? Are you even though you have a long term number, are you kind of just planning for something That's closer to what you're doing, because the other way you can grow DCF per share is to just continue to repay debt and save the interest as well. Speaker 300:14:44Thanks, Robert. Yes, that's a great question. And when we planned leverage, I mean that 2.5 to 3 times Is very conservative and certainly through various cycles, it has protected us from taking any drastic measures like, For example, cutting the dividend during COVID, we never had to do that. So we're very, very much, we want to Stick to those principles. And when it comes to those marketing cash flows, you're absolutely right. Speaker 300:15:11We don't take into account nor plan for outsized marketing as we think about leverage going forward. We're really more to that base marketing guidance. Speaker 600:15:23Okay. So is the bias then whether if you can get the growth CapEx, that's great, But is the bias into 2024 to maybe continue to repay debt versus direct share buybacks? Speaker 300:15:37I think this year, like I said, that it really is to repay, use those strong marketing cash flows to reduce our short term debt. In terms of the rest of our debt profile, we don't have anything material that's coming due for the next until 2025. And so as we look at next year, it is when if we have some great projects or if it's returning cash through buybacks, we will look at to both options going into next year. Speaker 600:16:08Okay. That's great. If I can just finish with a couple of questions here on caps. The first is, Are you able to disclose what the actual contribution was in the quarter and also confirm that what was booked in the liquids infrastructure was all 3rd party margin. The second is just with your new partner here, has there been anything just Stonepeak, having a fresh set of eyes on CAPS, whether it's the contracting Or expansion potential that you've been able to get out of the partnership so far. Speaker 200:16:44Yes, maybe Thanks for the questions, Robert. Maybe just a last question with a new partner, they've been really great to work with. They're very engaged And our team has worked Jamie's team has worked very closely with them. So yes, we think that they've been very positive in terms of attracting new business. So we're going to continue to build that relationship and we're very aligned in terms of what we want to accomplish with to this pipeline. Speaker 200:17:12So that's all been great. Your first question, So disclosing amount. Yes, we're not going to disclose amount of how much caps contributed in the second quarter. I would say it was pretty modest just because again, it came on middle of the sort of mid quarter, But also, there's a wrap up profile, like each customer sort of come on sequentially. So it wasn't like everything came on at once, The volumes that we do have, so I would say it was modest in the second quarter. Speaker 600:17:48Okay. And was it all third party Revenue or are you booking Speaker 200:17:53Intercorporate as well? 3rd party. And as you know, we have a note. I can't remember off the top of my head of any sort of intercompany allocations, but I can't confirm it was 3rd party revenue in the Q2. Speaker 500:18:09That's great. Thank you. Operator00:18:13Thank you. Your next Question comes from the line of Robert Chatlier from CIBC Capital Markets. Please go ahead. Speaker 700:18:22Hey, I'd have some interest in knowing what the contribution is and also the schedule of the ramp up over the next couple of years, but looks like that might not be forthcoming today. So Maybe, Dean, you can talk about the actual physical operating performance of the asset since it's been placed into service. And second, they just the Zone 4, where you stand with that today and what's your vision for A reasonable timeline for making a decision there. Speaker 200:18:55Yes. Thanks for the question, Rob. It's It's great to get the 3 Rob questions right off the bat in sequence. You know what, first of all, just maybe add on more color to the ramp Of CAHPS is that obviously a lot of the discussions we have with customers is very commercially sensitive. So We have to be mindful of that. Speaker 200:19:18There are confidentiality provisions put in place and we'll update at the right time When it's good for our shareholders, but also respecting the confidentiality and sensitivity of those discussions. With respect to Zone 4, You know what, we remain optimistic on Zone 4, especially as we see Canada LNG, It's not that far away now. And once that gets put into service, that's going to be another couple of Bcf of demand. And we certainly see our basin growing to So I think that's going to be great for our whole NGL value chain. So with that, some of that's going to be in BC. Speaker 200:20:00We've obviously seen a lot of progress With the Blueberry First Nations Group and also the Treaty Aid. So with that, there's more overall optimism in BC. And so we continue to have a lot of engaging discussions with customers in Zone 4 in Alberta and also into BC to track their volumes right through the caps and into Fort Saskatchewan. So timing on that, I think that we We'd probably expect more in the first half of next year, but we do have really great conversations on that perspective. And again, the whole rationale for why producers are really interested is, A, they want to have a competitive alternative. Speaker 200:20:50They're investing 1,000,000,000 of dollars along that Montney Fairway. And From a reliability perspective, it's nice to have 2 systems to get your volumes into Fort Saskatchewan where the market hub is. And second of all, commercially, it's always nice to have 2 parties that you can negotiate with for your service. So, we're happy to be that competitive alternative. And I'd also maybe say the third point is that we have a brand new pipe. Speaker 200:21:19So from a reliability perspective, we think we will have really stellar run performance over the next several years. Maybe just on the operating performance on Capsule, I'll turn that over to Jared here. But I do commend the group for the great job they did in commissioning and bringing that project up. It went as seamless as one could hope for. Speaker 800:21:47Yeah. Good morning, Robert. It's Gerard here. Yes, we're really pleased with how that project came online and ramped up. And as Dean described, it was really a staged approach with the various customers and really on both to the lines rather than kind of one shot at a time and really pleased with how our ops and business teams worked with the customers and worked with each other to really bring all those up smoothly and we've been very pleased with the operational performance of that to the performance of that line so far. Speaker 800:22:08So it's allowed us to be a bit ahead of volumes as you heard, but it's early days in that ramp up. And That operational performance is really key for us in giving our existing customers confidence and our ability to attract new customers. And again, really, really pleased out of the gate. Speaker 700:22:24Okay. Thanks for that answer. I have a similar question on frac capacity. It looks like You're pretty high in terms of your utilization and that's not uncommon in the industry right now. So It leads me to believe that maybe the debottlenecking, although it's capital efficient, I'm just curious if it's really enough capacity. Speaker 700:22:49And related to that, I'm curious about your appetite for being in the market for a new frac, more Significant expansion at the same time that I'm going to use in the market with theirs. Speaker 200:23:02Yes, it's a great question. I mean, obviously frac capacity is And when you look at the forecast for nat gas volume growth in the basin over the next 3 or 4 years, it's very significant. And with that, we're We're going to see a lot more liquids that get stripped out of the gas stream as well. So we think that's a great opportunity for our frac complex at KFS. Again, we're very pleased that we're able to add capacity in a very tight market with our acquisition, 21% acquisition of interested in KFS earlier this year. Speaker 200:23:33So that helps us out. You're right. I mean, we've been Telling everyone that we've certainly been doing engineering on a debottleneck, which is I think likely going to be a great opportunity for us. But we certainly have our eyes set on a potential frac expansion in the future as well because more capacity will be required. And you know what, we provide a great service out of our CFS site. Speaker 200:23:57It's very, very well connected from a pipe perspective and for all commodities, But also for rail and truck egress as well. Jamie, is there anything else you wanted to add on that? Speaker 900:24:07Yes. Dean, I think you hit the high points. I think the only thing I'd add as well The opportunity exists and that we're making really good progress on actually recontracting our existing frac as well. So you made note that we've Sept into the other 21% at KFS, but the opportunity is now to be able to recontract and extend Existing agreements out into the future and that's been our first focus. We've been very happy with the success on that front. Speaker 900:24:36And then as Dean alluded to, we're looking at opportunities to either debottleneck or expand on our site. Speaker 200:24:44I think, I mean, obviously with the fully integrated system out of the Montney with caps in place, we're looking for those Full bundled package deals where we can offer G and P services, to NGL Transportation, Fractionation and Marketing Services. So trying to provide that full service and obviously that helps to boost our corporate profits overall. Speaker 700:25:12Okay. Last question for me is related I'm happy to see the 2023 marketing guidance increase, but as you've heard me say before, I've been expecting directionally a long term increase at some point. Is frac capacity the bottleneck For being able to do that or is there something else you need to see to take a second look at the long term marketing guidance? Thank you. Speaker 200:25:40Yes. I mean, that's a great question regarding our marketing guidance. Obviously, we have a very good track record with our marketing business. And I do want to emphasize that our marketing business is really leveraging off of the physical assets that we own and the volumes that we have in our system. So It's a way to really maximize profitability across our entire value chain. Speaker 200:26:01But maybe with respect to the guidance And a potential increase. I'll turn that over to Eileen. Speaker 300:26:08Sure. Thanks, Robert. Yes, I know this is a great question because we have consistently outperformed that guidance. Maybe just a little context on the base guidance. It's meant to represent a level of contribution that we have a high degree of achieving within like certain normal or typical assumptions. Speaker 300:26:25So and those are laid out in the MD and A, but the record margins that we saw last year and the increase in guidance this year is largely driven by exceptionally strong isooctane premium that cannot be hedged as well as our BOP pricing that's well above the 5 year average. But that said, we do plan to revisit our base guidance later this year in light of having access to more volumes now that Cas is online and with the additional frac capacity that we just acquired. So more to come on Speaker 700:26:58Okay. Thanks, everyone. Speaker 600:27:00Thank you. Operator00:27:03Thank you. Your next question comes from the line of Linda Ezergailis from TD Securities. Please go ahead. Speaker 1000:27:11Thank you. Recognizing that it's a Board decision on a dividend increase, beyond your 50% to 70% payout ratio guardrails, how might we think of the frequency and growth rate of future dividend increases, would kind of the default be typically once a year or maybe Prospectively, we might see, as new accretive assets, whether they're built or acquired, come in and contribute maybe a bit more of a bump then. Speaker 200:27:46Hey, good morning, Linda, and great question on the dividend. First of all, I want to reiterate that we're very pleased to return to dividend growth again. And You would know as well as anybody that that's really the legacy of our company. We started out as a trust 20 years ago, this is our 20th year as a public company, and we've distributed and dividend out a lot of money over that period of time. We took a bit of a hiatus after 2019 and part of that was we hit the COVID period, but We also had a heavy capital spend with caps. Speaker 200:28:25And so but I do want to reiterate though during that time, we shut off our DRIP. So we actually self funded caps during that period of time. We didn't increase our dividend, but now the cap is behind us, we're able to do that now. And we've never had a we've never reduced our dividend. So anytime we increase our dividend, it's got to be sustainable. Speaker 200:28:47But let me just turn it over to Eileen and she can maybe speak about our philosophy on dividends going forward. Speaker 300:28:53Thanks, Steve. Yes, Linda, it's really tied to growing that distributable cash on a per share basis. So EBITDA, but after taking into account interest taxes and maintenance expenses. And it has to be supported by Growth in our fee for service business. So we're on track to achieve that 6% to 7% EBITDA growth out to 2025 that comes from our fee for service business And that does support then growth in a DCF per share. Speaker 300:29:20But ultimately, the timing and the amount of future increases will be a Board decision. But that's the framework that we use. Speaker 1000:29:28Okay. Thank you. And just as a follow-up, the 6% to 7% growth, What is I mean, I'm assuming it's a high confidence that you can achieve that, but what element of that, If any might be coming from future capital investments, even if they're small bolt on projects versus the white space that you already have or the projects that are under construction. Speaker 200:29:56Yes, that's a great question. The great thing is that most of that 6% to 7% increase is capital that has already been invested already and We've spent the money. So it's really our G and P business and filling up white space there. There is some capital associated with the to So that's in the $50,000,000 to $60,000,000 range, but we've disclosed that. Some of that is tied to our to the 21% acquisition of KFS. Speaker 200:30:28And then obviously, we see contribution from our CAHPS pipeline that's going to wrap up over time. And as I said, that's going to contribute to our EBITDA growth Well, well into the end of the decade, so that will continue to grow. So, we'll enhance that. I mean, obviously, new projects will have a lead time in terms of build and being able to generate a return off of that. But we do see some good projects to build to add future growth for the future as well. Speaker 1000:31:00Thank you. And just as another quick follow-up, as it relates to cash flows, recognizing that there is some below the line moving parts below EBITDA. Can you talk about the current medium and longer term outlook for your to cash taxes as your capital expenditures kind of lighten up in terms of your tax Schools and how they're depleting and how we might think of the cash taxes ramping up over the next 5 years. Speaker 300:31:36Thanks, Linda. Yes, cash taxes, I mean, really, we don't provide We will in the Q3 for next year. But as you think about our pools, certainly the KFS acquisition gave us Significant pools, as well as the large capital projects that we've undertaken that will help for certainly a period of time. But you're absolutely right that there comes a point where tax is something that is definite and will come. And so That's just something that we will continue to manage. Speaker 300:32:11Thank you. Operator00:32:15To the operator. Your next question comes from the line of Patrick Kenny from National Bank Financial. Please go ahead. Speaker 1100:32:24Thank you. Good morning. Just to follow-up on the Liquids Infrastructure segment. Just wanted to confirm that You see this higher demand for your storage and fractionation services is being repeatable, I guess, under current commodity prices. And if so, What opportunities there might be to exceed that 6% to 7% adjusted EBITDA growth outlook Simply from sweating the assets either through optimizing your commercial framework at KFS or Perhaps looking at new ways to maximize throughput and NGL handling capacity at Rimbey. Speaker 200:33:06Well, listen, I mean, we still have white space in our system, so we're not forecasting 100% utilization of all of our assets. So, is there So is there possibilities to exceed our 6% to 7% growth? I would say that the best opportunities are still their G and P business And also in our caps pipeline, where we'd have the most capacity to do that. But We'll have to see in timing of when those volumes show up, but we do believe that we're going to help enable the basin to grow And we'll see more volumes in their system over time. In terms of higher demand for liquids infrastructure assets, Maybe I can turn that over to Jamie and he can provide a bit more color on that. Speaker 900:33:49Yes. So thanks for the question, Pat. Like I mean, I think What your question points to is something that we've always done in our organization is trying to either Optimize our existing assets physically, and we've been able to do that over the years and continue to look to do that around our KFS asset, but also with AEF as well. We've gotten a few extra percent of I see coming on over turnaround last fall, and we've got other ideas to increment up the capacity at AEF, not in Tens of percent, but in single digit percent, so over the next few years. And then As you were alluding to at KFS. Speaker 900:34:38So physically, we can do it. And then, as you alluded to, my group's mandate is to obviously optimize commercially, how we can sweat the assets as you said. So I think There's opportunities, but as Dean says, I think the more impactful opportunities will lie in the Wapiti Pipestones, the caps to capacity that we have, that's what's driving our target around EBITDA growth. Speaker 200:35:10Maybe just add to what Jamie said, Pat, We always talk about the 21% interest that we acquired at KFS and we always talk about the frac, but With it also came storage capacity and also the pipeline capacity in our FSPL system between Edmonton and Fort Saskatchewan. As volumes grow, we think that there's going to be certainly more demand for that storage, our pipeline capacity And also more volumes also translates to likely more business through our terminals as well. So I think it's a pretty positive outlook. Speaker 1100:35:49And then I guess with respect to throughput in the South region, you mentioned in the MD and A that You expect Deep Basin volumes to remain relatively strong just given the financial strength of producers. But Just curious if there's any other optimization or consolidation opportunities across the asset base in the South as you look into, Say 2024. Speaker 200:36:15Yes. You know what, we're we always talk about our Montney business, which that's where the majority of our G and P to margins are generated, but we shouldn't forget about the Deep Basin because the Deep Basin is still an attractive place. The geology is still very strong, not just with, some of the conventional plays that have been developed over time and applying better technologies to drilling and completing them. But we're seeing more emergence of the Duvernay that's starting to become an emerging play down there, which I think it could be exciting for us. So we see opportunities, but we still have a lot of we still have white space down in our South portfolio. Speaker 200:36:58So Our primary focus is going to be to fill that and make it as profitable as possible. But at the same time, maybe Jamie can comment I think we're starting to see opportunities to recontract some of the volumes that we have going through our facilities there, And that's been looking good as well. Speaker 900:37:20Yes, just to give a little bit more flavor. And I alluded to this, I can't remember who it was Last quarter or the quarter before is that we are seeing relatively high utilization in our Stracken, Nordic, Brazeau complex that's Connected with Pipe and as Dean alluded to is that we've been in the last 6 months in the process of Recontracting with customers around those assets and based on the fact that there is limited to capacity available. We're pleased with the results of that re contracting. The white space that Dean alludes to is probably more in the Rimbey area, but as Dean alluded to is that that is where we're starting to see some Pretty encouraging results from the Duvernay. And we have We're optimistic with respect to being able to support those producers' growth at the Rimbey gas plant. Speaker 900:38:23And that gas plant is fully integrated into our value chain, pipeline connected all the way into For Saskatchewan, so that's a key asset for us in the South GMP asset base. Speaker 1100:38:39All right. That's great, guys. I'll leave it there. Thanks. Speaker 200:38:43Thanks, Pat. Operator00:38:46Thank you. Your next question comes from the line of Fen Huang from BMO. Please go ahead. Speaker 500:38:53Hi, thanks. Good morning. A couple of questions on Keyera New Ventures. I'm wondering Perhaps maybe a commercial update on your key projects in new ventures and thinking more about potential sanctioning. I'm also curious around any thoughts around the draft legislation and tax credits last week and maybe comment on how you Speaker 200:39:24Good morning, Fin, and really great questions. And we're excited about our new ventures opportunities. Certainly, I would say they're more longer term, looking at the back half of the decade. But again, we think that we're very Well positioned to capture more opportunity there. As I said before, I mean, as an infrastructure company, we provide essential services to Conventional hydrocarbon business, mainly on the gases and NGL side. Speaker 200:39:54But for the enablement Of low carbon products, you need the same kind of services. You need pipelines, you need storage, above ground, below ground storage, you need to Truck and Rail Logistics. And you also need to have processing capabilities as well. All things that we have a lot of strength in. So We see a great opportunity there to maybe repurpose some of the assets that we have in the Greater Edmonton Fort Saskatchewan area. Speaker 200:40:24And specifically, we have a really great undeveloped land block there that we want to develop a low carbon industrial park. But With that, I mean, this is all under Jamie's group and maybe I'll turn it over to him to provide more color on that. Speaker 900:40:39Yes. So, I think I can provide a little bit more flavor around some of the things that we've announced previously with respect to Relationships that we have with CN around rail. I can share with you that we've gotten a lot of interest in uptake with respect to Customers with respect to the unit train opportunity that we see with CN on our to joining lands up in the Port Saskatchewan area. So we are progressing with Understanding those opportunities a little bit more, we're spending some money on engineering to forward that opportunity. Similarly, we're in conversations with other entities around carbon capture, sequestration To really make our lands the preferred location for some of the opportunities That others are looking at. Speaker 900:41:43Specific with respect to tax credits, not exactly sure Where you're leaning with respect to that question and perhaps you can just reach out to our Investor Relations group to Maybe pose that question and get the answers you're looking for. Speaker 500:42:01Okay. Thanks for that. And I was more curious if The legislation is anything different than you were expecting. I'm probably not more checking on that. And can you also talk about, Are you is anything with these parties projects related to the ammonia value chain? Speaker 500:42:23And could you comment also, are these more in the context of multi $1,000,000,000 of capital opportunity? Speaker 200:42:34Maybe just from a general macro perspective, we are seeing general interest in ammonia. And I think Japan, they're expressing an interest for ammonia and they have incentive in place. How real that is? I guess, only time will tell, but there's certainly a lot of interest. You've heard different projects that have been out there. Speaker 200:42:57We've been approached for citing some opportunities on our lands. But again, it's still very early days. The great thing is that this is a real opportunity. We have, I'd say, one of the best locations, if not the best locations to develop ammonia project. And again, it's just because of our connectivity in the area where we have industrial zone land, We have cavern underground cavern capacity. Speaker 200:43:24We have the potential for our rail terminal with CN to egress ammonia to the West Coast. But again, it's still early days and I think there's got to be a lot of work even from a transportation perspective and the safety of transporting ammonia through communities all the way to the West Coast. So Maybe the last advantage we have is we're very close to where you would connect to carbon capture line. So again, all things that you would need for ammonia project, but early days, but we're seeing we're certainly seeing interest there. Speaker 500:44:03Okay. Maybe lastly, anything on WildHorse, changes on outlook there? Speaker 900:44:12Yes, great question. We haven't talked about WildHorse in a while. That asset, just based on where crude Was trading given the fact that backwardization that we've seen over the last couple of years. When it started up, we had an existing customer base contracted the facility. We haven't seen a ton of volumes moving through the terminal, but that has actually started to change in the last quarter. Speaker 900:44:44And We're really optimistic now based on the unique characteristics of that terminal and the capabilities of that terminal and getting familiar with The entities that do new commerce in Cushing, that asset is starting to perform the way we envisioned when we originally sanctioned to that asset. So a timely question. I would probably had a less rosy outlook to share if You'd pose that question a year ago or even 6 months ago. Speaker 1000:45:16Okay, great. Thanks for the update. Speaker 200:45:19Thank you. Operator00:45:21Thank you. There are no further questions at this time. I'd now like turn the call back over to Mr. Kelvin Locke for any closing remarks. Speaker 100:45:32Thank you all once again for joining us today, and Please feel free to reach out to Keyera's Investor Relations team with any additional questions you may have. Speaker 500:45:41Thank you. Operator00:45:43Thank you, presenters. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.Read morePowered by