Keyera Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 14, 2024

There are 12 speakers on the call.

Operator

Good morning. My name is Lara, and I will be your conference operator today. At this time, I would like to welcome everyone Keyera's 2023 Year End Conference Call. All lines have been placed on mute to prevent any background noise. Thank you.

Operator

I would now like to turn the call over to Calvin Locke, Manager of Investor Relations. You may begin.

Speaker 1

Thank 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 Bastille, 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 today relate to future events. These forward looking statements are given as of today's date and reflect events or outcomes that management currently expects.

Speaker 1

In addition, We will refer to some non GAAP financial measures. For additional information on non GAAP measures and 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 Deed.

Speaker 2

Thanks, Calvin, and good morning, everyone. Keyera delivered record results in 2023. We continue to execute our strategy of increasing competitiveness, enhancing and extending our integrated value chain, financial discipline and sustainability leadership. Results include best ever safety performance and exceptional financial results driven by record realized margin across all three of our business segments. Keyera ended the year in a strong financial position with net debt to adjusted EBITDA at 2.2 times, below our targeted range of 2.5 to 3 times.

Speaker 2

We had several strategic accomplishments in 2023 That helped drive the next phase of growth for Keyera. Early in the year, we closed the acquisition of an additional working interest at our core KFS complex, adding meaningful fractionation capacity in a high demand market. In the spring, we brought CAPS online, Strengthening our long term competitive position. We now offer Montney and Duvernay Producers A fully integrated solution that's driving commercial success across our value chain. Today, We announced that we've added long term integrated agreements with several producers.

Speaker 2

This includes approximately 30,000 barrels per day of incremental volume commitments on caps and 33,000 barrels per day of incremental and extended fractionation commitments at KFS. These have weighted average contract terms of 12 13 years respectively. These integrated agreements also include storage at KFS and other services like rail transportation, pipeline connectivity and product marketing. These contracts are highly credit were with highly credit worthy counterparties, include a high degree of take or pay and require minimal additional capital. Keyera delivered record fee for service growth in 2023 with best ever contributions from our Gathering and Processing and Liquids Infrastructure segments.

Speaker 2

Continued growth from Wapiti, Pipestone, KFS and CAPS Support us reaching the upper end of our EBITDA growth target of 6% to 7% from 2022 out to 2025. The new commitments we announced today support continued growth beyond 2025. Our marketing segment delivered A record $479,000,000 of realized margin in 2023 driven by record sales volumes for the segment and continued strength of our isooctane business. Our ability to leverage our physical assets and logistics expertise provides us with a distinct competitive advantage and delivers strong cash flow. This marketing margin is then reinvested into long life infrastructure projects, in turn driving growth and high quality fee for service cash flows.

Speaker 2

As we close out a successful 2023, we're excited for the year ahead. 2024 is anticipated to be a year A strong free cash flow generation resulting from continued margin growth and lower capital spending relative to the past several years. Our capital allocation priorities remain the same. They are first to maintain the strength of our balance sheet and then the balance between increasing returns to shareholders and investing in additional growth opportunities. Fractionation expansion opportunities at KFS and a CAPS Zone 4 expansion are great examples of capital efficient opportunities that support our growth outlook beyond 2025.

Speaker 2

Our strong balance sheet provides optionality to bring forward growth investments when they're ready. Lastly, you would have seen in our release this morning that we'll be taking AEF offline this spring for approximately 6 weeks to proactively complete maintenance activities. These maintenance activities are intended to facilitate AEF's continued reliable operations at full capacity until its next scheduled turnaround in 2026. The work is expected to impact 2024 realized margins for the Marketing segment by approximately $35,000,000 to $45,000,000 with no impact to maintenance capital. Due to strong near term market fundamentals, we still expect to be within our stated Base marketing guidance of $310,000,000 to $350,000,000 for 2024.

Speaker 2

Consistent with prior years, we'll update our 2024 marketing guidance with Q1 results in May. This will include the impact of this outage. I'll now turn it over to Eileen to provide a further update on our quarterly and annual financial performance.

Speaker 3

Thanks, Dean. Adjusted EBITDA was a record $339,000,000 for the quarter and a record $1,200,000,000 for the full year compared to $212,000,000 $1,000,000,000 for the same periods last year. Distributable cash flow was $234,000,000 or $1.02 per share for the quarter compared to $104,000,000 or $0.47 per share for the same period last year. DCF for the full year was a record $855,000,000 or $3.73 per share compared to $654,000,000 or $2.95 per share for 2022. These results were driven by record contributions from all three business segments.

Speaker 3

We recorded net earnings of $49,000,000 for the 4th quarter and $424,000,000 for the full year 2023. This compares to a net loss of $82,000,000 for the 4th quarter and net earnings of $328,000,000 for the full year 2022. The 2023 results include a non cash impairment charge of $210,000,000 related to the WildHorse terminal. The 2023 dividend payout ratio was 53% of DCF at the low end of our target range of 50% to 70% and corporate return on invested capital for 2023 was 16%. At year end, we had over $1,000,000,000 of available liquidity and in January of this year, we issued $250,000,000 of 30 year notes at a coupon rate of 5.66 percent.

Speaker 3

Looking forward, our 2024 guidance remains unchanged. Growth capital expenditures are expected to range between $80,000,000 100,000,000 This includes about $60,000,000 of sanctioned capital for various optimization projects, with the remaining $20,000,000 to $40,000,000 contingent on the sanctioning of Capsule IV and fractionation capacity expansions at KFS. Maintenance capital expenditures are expected to range between $90,000,000 $110,000,000 of which about $20,000,000 is recoverable in $24,000,000 another $15,000,000 is recoverable within the next few years. Cash taxes are expected to range between $45,000,000 $55,000,000 Thank you, and I'll turn it back to Dean.

Speaker 2

Thanks, Eileen. Man for Canada's energy has never been stronger. Our basin set new records for both natural gas and crude oil production in 2023. Trans Mountain pipeline expansion and LNG Canada support the next phase of basin growth. Keyera is positioned to participate in a meaningful way.

Speaker 2

On behalf of Keyera's Board of Directors and management team, want to thank our employees, customers, shareholders, indigenous rights holders and other stakeholders for their continued support. With that, I'll turn it back to the operator for Q and A.

Operator

Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. Our first question is from Rob Hope from Scotiabank. Please go ahead.

Speaker 4

Good morning, everyone. The first question is on the KFS contracting. So the 33,000 barrels a day would be, we'll call it half the propane plus capacity assuming that the volumes are propane plus. But where do we stand on the remaining capacity at KFS? And with This incremental contracts at hand now does the contracting strategy then turn to the expansion?

Speaker 2

Good morning, Rob, and thanks for your question this morning. Obviously, we're very pleased with Our contracting and how that's really integrated with our CAPS pipeline project, again, allowing us to be able to deliver integrated service brings to add value for our customers. And certainly we haven't for commercial reasons and sensitive reasons. We haven't disclosed how much of our capacity is locked up. But certainly this helps support our future expansion.

Speaker 2

And anyway, that's a key part of our integrated infrastructure at KFS asset. And maybe I'll just turn it over to Jamie if he wants to add any other comments.

Speaker 5

Yes. Thanks, Dean, and thanks, Rob, for the question. So As we think about expansion, it's really driven, as you pointed out, around demand for frac capacity, both in the near term and the long term. And As you noted, we with our additional 21% working interest in KFS, That's really given us an advantage in the market to be able to go out and contract long term because we've got capacity available in the short term. So There's a couple of ways that we're looking at expanding our frac capacity in Fort Saskatchewan.

Speaker 5

Our most capital and time efficient option is to pursue a debottleneck of frac 2. And this allows us to take advantage of existing equipment. So the per barrel cost of incremental capacity is more favorable. And also we're looking at further capacity expansions by building out Frac III, which would be a new build on our existing lands. So we're also actively evaluating the best way to proceed with this project and we'll update as appropriate.

Speaker 5

But it's really important to note that this isn't an either or or. If you think about it sort of as a build, as we increase our frac capacity, the debottleneck would then lead into a potential frac 3. But So they're very exciting opportunities for us. I'll just remind you and the listeners that it's subject to appropriate customer underpinning and Board sanction.

Speaker 4

Great. Appreciate that. And then maybe keeping on the contracting Good to see some incremental contracts on caps. Can you maybe just give some additional color on where we are in Further discussions with customers on increasing that percentage contracted even further as well as how the Zone 4 contracts discussions are going, especially given the fact that a BC pipeline now has regulatory approval, although it's not yet sanctioned?

Speaker 2

Yes. No, we're having great conversations with our customers. And obviously, we're also very excited about The growth in the basin, when you think about LNG Canada finally coming into service in a short time period, We think that's going to unlock growth in the basin. And when you think about global demand for LNG, We have a tremendous opportunity off the West Coast of Canada. So I certainly expect that there's going to be further expansions below Phase 1 of LNG Canada.

Speaker 2

So really what that means is that there's going to be a lot of growth opportunities in the basin and we're very well positioned. So the contracts that we announced, again integrated contracts for our services, we are in active discussions with other producers to continue to add more volumes to our system. And in addition to that, with the growth we see, We think that there's going to be a lot more volume added in the years to come. In terms of Zone 4, Certainly, we believe that there's going to be development along the entire Montney Fairway into BC. So we'd love to build our pipeline to the border.

Speaker 2

It's great that North River Midstream received federal approval for that connected across the Alberta BC border. So that's a tremendous milestone Over 3 years of work on their behalf, so I congratulate them on the great work they did to get that approval. And For all the reasons why producers were supportive of Capstone 1 to 3, those same reasons apply to a zone forward into BC. And that's that they want optionality of their transportation of NGL service. They want competition.

Speaker 2

And again, it doesn't hurt to have a new pipe in the ground in terms of overall reliability. So we're very happy that we can provide that competitive for our customers. We're here to add value for our customers and I think that we have a great opportunity to do that for them. And if we do a great job of it, we'll also create value for our stakeholders as well. But, James, anything else you want to add on that?

Speaker 5

No, I think you hit the nail on the head.

Speaker 2

Maybe just lastly, our caps, we just want to remind you that our guidance is Now at the high end of range, so 7% EBITDA growth out to 2025. And the contracts that we announced and again, some of the deals that we're working on going forward will help deliver growth beyond that 2025 time period. So we're very excited about it.

Speaker 4

Excellent. Thank you.

Operator

We have our next question coming from the line of Robert Kwan from RBC Capital Markets. Please go ahead.

Speaker 6

Thank you. Good morning. If I can just start with questions on capital allocation and Capital efficiency. You mentioned the number one priority is balance sheet strength and just where debt to EBITDA is You're already there below your range. So are you rethinking the nature of that range, Particularly just where investor feedback is and trying to prepare for future CapEx and we should that you want to be below the range or that you're going to move the range?

Speaker 6

And then the second part is just on capital efficiency and How do you define or think about what capital efficient is and just the idea Trying to understand your approach to projects and major projects that night.

Speaker 2

Maybe I just had a couple of comments and I'll pass it over to Eileen, Robert. But thank you for the question. And I'll just state the obvious that we're in an enviable position that we just delivered our best year ever. And our balance sheet is also in unbelievable strong position. So it gives us a tremendous amount of optionality for us to opportunity and we see a lot of opportunity across our entire integrated value chain, especially when you overlay the growth that we see coming in our base over the next several years.

Speaker 2

So again, we're very pleased with the position that we have. And sorry, with that, I'll just over to Eileen and maybe she can add a few comments as well.

Speaker 3

Sure. Thanks, Robert. Yes, it's a great question as it relates to the balance sheet. I think it's To answer the question, it's really important to note that the 2.2 leverage at year end included record marketing results. So once you normalize marketing to even the high end of our new base, so say the 350,000,000 ratio is at 2.5 times, which is at the bottom of our target range.

Speaker 3

So I think the key message here is that we are very comfortable remaining at this range. The balance sheet provides us optionality as we said before to pull forward growth spending. And as Dean alluded to in his comments, we have several exciting opportunities, Zone 4, frac expansion. So based on where the balance sheet is today, we feel comfortable that we could fund these types of opportunities on a self funded basis. And maybe the capital efficiency question, I think maybe Dean can add to it, but I think we really look at How are we adding projects to our existing value chain and looking at the fully integrated returns, not in the whole system.

Speaker 3

And I think that's where additional frac expansions and extending caps to Zone 4, those are Certainly more capital efficient.

Speaker 6

Yes. And certainly on that sorry, go ahead. Go ahead.

Speaker 2

Well, I was just going to say, I mean, obviously, a big part of our capital efficiency too is just having the financial backing to make sure that we can deliver strong returns for our stakeholders as well. So that's a key part of our strategy and how we deploy capital. But sorry, go ahead and ask your question.

Speaker 6

No. So yes, so there's a bit of that just you've had that old range of 10% to 15%. You've talked about wanting to be towards the high end. So presumably that's kind of what you're getting at around being efficient. You want your returns at that high end.

Speaker 6

Jamie also talked a little bit around smaller projects or time efficient projects. Is there a real bias to trying to take on smaller initiatives that can be done quickly or is there still an appetite for a caps like and I don't know what that project would be, but to take on a larger project that would be a multiyear build?

Speaker 2

Yes, I think that's a those are great questions. And 1st of all, I'll say that we're here to provide a very competitive and efficient service for our customers. So we look for opportunities to be able to provide that service offering for our customers. And we're also about adding value for our shareholders and on a per share basis. So that's how we think about value.

Speaker 2

It's got to be value accretive. When we think about individual projects, We do look at large projects and small projects too because there's a number of smaller projects You know that but generally our small projects have to have a very high return. And that's to compensate for the resource allocation that we would to those types of investments. Generally, they're ones that we can turn around on a shorter time period versus The big projects that might take have a 2 to 3 year development and build cycle. So there's always a combination of both that we're pursuing.

Speaker 2

I think the one thing that's exciting too about our small projects is that Jared's team has identified a number of emissions reduction opportunities That also have really great economics. So we're also satisfying our goal of reducing our overall emissions and achieving our 25% intensity reduction goal by 2025.

Speaker 6

Got it. If I can just finish on marketing and I know you're going to update your guidance, but just if we can deconstruct 2023 just where the market is, I think you mentioned that you put up a record year. There was actually a slight loss on hedging. So, hedging wasn't really a driver, If anything, you're just the upside. Can you just talk about where you're seeing though the butane market right now?

Speaker 6

And in 2023, how much of a benefit did you get from Conde? Do you see that as one time just with Trans Mountain coming in and oil sands growth? Would you see that as continuing? And then how much might have been a benefit from E15 roles although those may get rolled over as well. Just was there what was unusual in 2023 that people shouldn't be thinking about as carrying over into the 'twenty four and beyond?

Speaker 2

That's a lot of questions, Robert. First of all, I just say in general terms, obviously, we had a record year and we benefit from volume because we're a volume times margin business. So as the volumes to our systems grow, our downstream marketing business will benefit as well. Our ISO octane business has been very strong and Jamie can speak to some of those factors that contribute to that. But also want to say that you also touched on hedging.

Speaker 2

And I do want to remind everyone, even though that we have great marketing results, We have a very disciplined hedging strategy. In our team, we have a team of executives and our marketing team that meet every week and we go through all of our positions. And so we want to always make sure that we're preserving margin and we're not trying to swing for the fence to also expose yourself to big losses as well. So that's all part of our overall marketing margin strategy as well. But With that, I'll turn it over to Jamie for his comments.

Speaker 5

Yes. So Robert, I was feverishly jotting down your question here. So hopefully I hit all the points that you were asking I think the first thing that you were inquiring about was our butane costs. So excuse me, as we look Butane right now, I think we look at the market as being in a relatively similar places as last year. And But it's early days within our supply season and ultimately what we would be able to contract for butane.

Speaker 5

And to remind everybody in 2023 butane was in probably the mid range of like slightly lower than what we would have seen in a 5 year average. So it wasn't like it was an extraordinarily inexpensive butane market in 2023. So that really goes to the next question condensate you inquired about. As I look At our condensate business, it's really driven off of the assets that we have and that we've invested in over the years. And So, was condensate's contribution sort of a one time thing in 'twenty three?

Speaker 5

I would say not because That business is driven off of the assets that we have in the ground and the service that we provide and remind everybody, we do touch over 70% of all the condensate that ultimately gets delivered to the oil sands in Western Canada. So we have very, very enviable assets on the condensate side. On the isooctane side, what we're seeing around the premiums that we're receiving For isooctane and also RBOB pricing is that we continue to see good fundamentals on a supply demand perspective for gasoline within North America and also for octane. So continue to see lower imports of octane blend products coming into North America and with new gasoline regulations in the U. S.

Speaker 5

In particular, we're seeing less octanes being produced and ultimately therefore a higher demand for our product to be able to top up, if you will, the octane requirements for gasolines in North America. So those are all things that contribute Our guidance, our base guidance that we communicated in the latter part of 'twenty three. I guess the last point I'd make is that The marketing team has done a very, very good job as well of accessing better, more Lucrative advantage markets for isooctane over the last couple of years. And once again, I think that's really driven by some of the change in regulation in gasoline and ultimately a demand or iso octane in those jurisdictions. So that all rolled together is sort of the backdrop for what we see in 2024 going forward.

Speaker 5

That pretty much sums it up in a fairly long winded manner.

Speaker 6

And I appreciate the color. Thank you very much. Thanks.

Operator

We have our next

Speaker 7

A couple of questions on I'm wondering if the contracts that you've announced, do you think you could have been able to those contracts if you didn't have the KFS deal and optionality that you had?

Speaker 2

Hi, good morning, Ben. And that's a great question. I think independently, there's A lot of demand for again competing alternate transportation service for NGLs on a standalone basis. So I think that that asset stands on its own. And again, it's evidenced by the contracts that we signed.

Speaker 2

But I can say that we're very active in adding to that contract base. So there's good demand for that. I would say that overall with our integrated system now across the Montney is that it enables us to provide a bundled service offering. And I think it's a more efficient service for our customers, which again will it's a one stop shop that will help add value for them. And for that reason, we're able to leverage other parts of our integrated value chain, including our G and P business and also our downstream Storage and Marketing business.

Speaker 2

So it's really complementary to our integrated value chain and that's why you're seeing integrated deals and expect to see more of those in the future.

Speaker 7

Okay, got it. And are you able to provide a bit more context on The measuring around the 10% to 15% return on caps getting pushed out beyond 2020 sorry, 2025?

Speaker 2

Yes. No, that's a great question. We're still not in the range, but I can say that this certainly takes us in the right direction. And as I mentioned before, we're in active discussions to add more contracting. So we feel pretty good about how that's looking.

Speaker 2

And again, I do want Sized to your earlier question that it really helps us provide an efficient service for our customers to basically sign a fully integrated deal with them, which helps generate strong returns at enterprise level and we think that's a big advantage for us.

Speaker 7

Okay. And can you remind me too on Pipestone, you had the bottleneck and things are going Pretty well there. Can you hear me on is there some sort of operating agreement there that It's going to expire or is that on something else now? How do you see that shaking out from your perspective?

Speaker 2

Yes, Ben, Great question on Pipestone. And we're very pleased that that project came in under budget. And actually before On schedule, actually before the scheduled in service date. So it's great that we brought in service in Q4. There was a lot of gas that was waiting to be processed.

Speaker 2

So Basically, we're using the full capacity of what we just added, which is fantastic. We do have an option to take over operatorship and that basically option exists after 5 years of daemon service. So that's something that we'll be addressing in the future.

Speaker 7

Okay, got it. Okay, thank you.

Speaker 2

I should mention though on Pipestone, though, we do have we are the commercial lead on that project. So we're the ones who contract incremental volumes to that facility. We just don't physically operate it today in the field. But we do have some of our ops folks that are very integrated with that facility.

Speaker 7

Okay. Thanks, MD.

Speaker 2

Thank you.

Operator

Our next question comes from the line of Zach Van Averin from DPH. Please go ahead.

Speaker 8

Perfect. Thanks for taking my question today, guys. So it sounds like Pipestone is running near capacity even after the expansion you guys brought on. Are there other opportunities you're looking at there? Or can you push incremental volumes to maybe less utilized plants around the area?

Speaker 8

Just trying to get an idea of how much more growth you can see out of that.

Speaker 2

Yes. No, thanks for the question, Zach. And we're very fortunate to have a footprint in a Highly economic area of the Montney. It's very condensate rich and which really drives a lot of strong economics in that area. So we see a lot of demand, but maybe I'll just turn over to Jamie for his comments.

Speaker 5

Yes. So just to supplement that a little bit is With the Pipestone debottleneck and then ultimately the expansion that came online at the back end of last year, that's fully contracted with high taker pay. But it is a very active area. So we had announced last year that we were looking at a further expansion of Pipestone and we still continue to work with producers in the area see whether we can get the volume commitments to be able to pursue that opportunity. The ability for us to be able to shift volumes around to ultimately other facilities such as Wapiti or Simonette It has a limited we have a limited capability to be able to do that.

Speaker 5

And what I would say is I also think that the geology and the activity around both Simonette and Wapiti would support them getting to very high utilizations in the very near regardless.

Speaker 8

Got you. That makes sense. And then kind of Shifting downstream a little bit, the fractionation facility saw a pretty big jump this quarter. Are you pretty maxed on fractionation capacity as well at this point or do you have a little bit more operating leverage there?

Speaker 2

Our station demand is very high. So we are operating at pretty much full capacity. I would remind you that the 21% of KFS that we acquired last year really helped us because we acquired more capacity at a time when it's needed the most. And that's how she helped us leverage into some very long term contracts as well at that complex. And as Jamie mentioned, we're working on expansion too for the future to service the basin.

Speaker 8

Perfect. I appreciate it guys. Thanks.

Speaker 2

Thank you. Have a good day.

Operator

Our next question comes from the line of Patrick Kenny from National Bank Financial. Please go ahead.

Speaker 9

Thank you. Good morning. Just on the write off of the Wildhorse Terminal, I assume you had very little, if any contributions Cushing baked into your base marketing guidance. But just wondering if we extrapolate the fundamentals around crude oil blending from down south up to your Canadian operations, especially with the outlook for tighter heavy differentials once TMX comes online. Any thoughts around how you're looking to maybe reposition your overall tankage and crude oil marketing portfolio just to help mitigate some of these structural macro headwinds?

Speaker 2

Hey, good morning, Pat. It's a good question, Wildhorse, and I'll turn that over to Jamie.

Speaker 5

So thanks for the question, Pat. Yes, so the structural Forward curves of crude oil with the backwardization that we're seeing right now, it's just it's really a challenge to justify high tankage fees for that type of opportunity. Having said That backwardization in the higher crude prices that we're seeing and enjoying right now as an industry is Also beneficial to Kyra is other components of its business as well because we price isooctane off of crude and RBOB crack off of that. So but back to The storage business that we have down in Cushing, that we're not a huge crude player And that asset was viewed as an opportunity for blending. And it just frankly hasn't panned out the way that we expect it to over the 1st few years of operation.

Speaker 5

Not to say that at some point as the forward curve shifts That asset won't have its day. But and as we look at it from Western Canadian perspective, once again to be repetitive, we're not a big Crude Blender, we have an interest in BTT, but really that asset is More of an enabler for crude to ultimately go into other pipes. Certainly, we'll be benefited from the Trans Mountain expansion that we're hopeful that will ultimately be in service shortly. So and that's not as we talk about our core business, it's probably not an area that we would look to get a further position in.

Speaker 9

Okay, great. Thanks for that, Jamie. And then maybe 2, just on the propane side. So looking at supplies Continuing to grow in both Canada and the U. S, but just in light of consumption being down this winter, You guys mentioned the disciplined hedging strategy on the margin front, but just wondering if there's any concerns around physical sales volumes being down, say for Q1, just given the warmer winter and the higher inventories that we're seeing across North America?

Speaker 5

Yes. So, yes, great question. I think as we think of propane is that We think about really export. North America is very well positioned to be able to clear product Out of the Gulf and as we see opportunities on the West Coast of Canada, we really do view that, That export capability is always going to allow propane to, and the producers that ultimately have that as being one of their products To clear into markets that are going to justify the cost to produce and ultimately Fractionate the propane. So that's our view.

Speaker 5

I think we've certainly seen a run up in propane in the last little while. And as you point out, not driven off of North American demand, but frankly, global demand.

Speaker 2

Yes, I think maybe just to add to that as well, Pat, is that our strategy has also been to have optionality to be able to hit multiple markets. So we do deliver locally to the industrial market in Alberta. We're pipe connected to IPL's PDH facility. We deliver some to the West Coast, but we also deliver some in the United States. And again, the highest price market varies over time.

Speaker 2

Right now, it's really helping us having that optionality in the physical assets to be able to deliver to all those markets.

Speaker 7

Perfect. Thanks guys.

Speaker 2

Thank you.

Operator

Our next question comes from the line of Will Gu from CIBC. Please go ahead.

Speaker 10

Hi, good morning. Just wondering if there are any plans to roll volumes at AF from here and what would that look like? Would it happen perhaps during a future turnaround or any comments around that?

Speaker 2

Yes, it's a great question, Will. And obviously, that part of our business is very lucrative for us. And what I can say is that over the last 3 or 4 turnarounds, Our team has found ways to just create small debottlenecks. So we can operate that facility above nameplate capacity. And we've been operating as high as 110% of nameplate.

Speaker 2

So I think that's really great because every barrel we produce in that facility generates a lot of margin. But maybe I'll just turn it over to Jared to comment on what he sees about the future for that facility. Yes. Well, it's

Speaker 11

a good question. In terms of future capability to grow volumes there. There are opportunities that we do continue to pursue. Dean touched on some of the incremental work that we've done over the past few years to really grab kind of small snippets of capacity. And there are opportunities to go bigger than that and do true debottlenecking work.

Speaker 11

And our team does continue to evaluate those opportunities. But you're correct that we'd be looking to plan that kind of work around turnaround execution windows given the nature of the work and the importance of runtime in that facility in between turnarounds.

Speaker 10

Okay, awesome. Thanks. Last one for me. Just what impact Has the cold snap recently had on operations? And how do you view asset performance in inclement weather?

Speaker 2

Yes. It was obviously very cold in Alberta for the 1st couple of weeks of January and those Extreme cold conditions do cause production issues, but maybe I'll turn it over to Jared to speak.

Speaker 11

Yes. Well, it's a great question. And it's certainly challenging times across the whole industry, I think, when those happen. And I really give credit and thanks to all our field folks at times like that when they're doing the best they can, primarily to stay safe during conditions like that and then also keep the facilities running safely and reliably. So we made out pretty well, but we as you'd In minus 40 conditions, there are some things that just don't run that well.

Speaker 11

So there's always minor things that happen at our sites and with our producer customers out in the field as well. So folks are always working together to try to keep things running as best they can, but I think you can always expect some sort of impact when it gets that cold.

Speaker 10

Great. Thanks. That's all for me.

Speaker 2

Thank you all.

Operator

Thank you. There are no further questions at this time. I'd now like to turn the call back over to Mr. Locke for final closing comments.

Speaker 1

Yes. Thank you all again for joining us today and please feel free to reach out to our Investor Relations team with any additional questions you may have. Thank you.

Operator

Thank you, sir. Ladies and gentlemen, this concludes your conference call for today.

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Keyera Q4 2023
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