Keyera Q2 2026 Earnings Report

Keyera EPS Results

• Actual EPS: C$1.19
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Keyera Revenue Results

• Actual Revenue: $2.40 billion
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Keyera Announcement Details

• Quarter: Q2 2026
• Date: 8/6/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, August 6, 2026
• Conference Call Time: 10:00AM ET

Keyera (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. The firm currently has interests in about a dozen active gas plants and operates over 4,000 km of pipelines.

Keyera Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record fee-based performance: Gathering & Processing realized margin reached CAD 128 million and Liquids Infrastructure realized margin reached CAD 222 million, supported by the Plains Canadian NGL assets and full KAPS ownership.
• Positive Sentiment: The Plains Canadian NGL business is performing above initial expectations, with strong volumes and extraction rates across its pipeline, Fort Saskatchewan fractionation, and Empress operations; management also sees substantial integration and commercial synergy opportunities.
• Positive Sentiment: Keyera reaffirmed its 2026 Marketing realized-margin guidance of CAD 360 million–CAD 390 million and maintained its fee-based adjusted EBITDA-per-share growth outlook of 16%–18% for 2025–2027 and 7%–8% for 2027–2029.
• Positive Sentiment: KFS Frac II Debottleneck entered service more than a month early and 20% below its original budget, while other contracted growth projects remain on time and on budget; the board also approved a 4% annual dividend increase.
• Negative Sentiment: Net debt to adjusted EBITDA rose to 3.3 times following the acquisitions and weaker first-half Marketing contributions, above Keyera’s long-term target range; management expects to deleverage back within the range in 2028, while additional maintenance spending may be needed for acquired assets and the Competition Tribunal litigation remains unresolved.

Presentation

[Operator]

Good morning. My name is Jenny, and I will be your conference operator today. At this time, I would like to welcome everyone to Keyera's 2026 second quarter conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star then the number two. Thank you. I would now like to turn the conference call over to Dan Cuthbertson, General Manager of Investor Relations. You may begin.

[Dan Cuthbertson, General Manager of Investor Relations at Keyera]

Thanks, and good morning. Joining me today will be Dean Setoguchi, President, CEO; Eileen Marikar, Senior Vice President and CFO; Jamie Urquhart, Senior Vice President, Liquids Business Unit; and Brad Slessor, Senior Vice President, G&P and NGL Pipeline Business Unit. We'll begin with some prepared remarks from Dean and Eileen, after which we will open the call to questions. I'd 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. 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 our website. With that, I'll turn the call over to Dean.

[Dean Setoguchi, President and CEO at Keyera]

Thanks, Dan, and good morning, everyone. This quarter, we successfully closed two strategic acquisitions, the Plains Canadian NGL business and the remaining 50% interest in KAPS. These acquisitions are part of a strong foundation we have assembled for the next phase of disciplined growth and long-term value creation. Our focus now turns to integrating these investments, executing our growth projects, and delivering greater value to customers and shareholders. Our team is working hard on integrating the Plains business and continues to make meaningful progress on identifying and delivering synergies. We will continue to provide updates as that work progresses. After the quarter, Keyera also submitted its response to the Competition Tribunal regarding the Competition Bureau's notice of application.

[Dean Setoguchi, President and CEO at Keyera]

Because this is an ongoing litigation, we are limited in what we can say but remain confident in the strength of our case and look forward to demonstrating the value creation that will result from this transaction. Turning to our quarterly results. In Gathering & Processing, we delivered a new quarterly record for realized margin, driven by strong contributions across the segment. We also set a new quarterly realized margin record in Liquids Infrastructure, reflecting contributions from the Plains Canadian NGL business. We continued to deliver and advance our growth projects. KFS Frac II Debottleneck was brought into service in early June, more than one month ahead of schedule and 20% below its original budget. KFS North Debottleneck, KFS Frac III, Capstone 4, and ACE Rail Terminal continue to progress well, all on time and on budget.

[Dean Setoguchi, President and CEO at Keyera]

These projects are highly contracted and will contribute to growth and stable fee-for-service cash flow, supporting the strength of our balance sheet and long-term dividend sustainability. Yesterday, the board approved another 4% annual increase in the dividend. Dividend increase reflects our confidence in the business and allows us to preserve our balance sheet strength and financial flexibility to invest in further fee-based growth. Now turning to AEF. The facility was restarted at the beginning of June and has been performing well. We continue to view this asset as an important part of our integrated value chain and a meaningful contributor to Keyera's long-term value creation. During the outage, we completed a comprehensive review of the facility and its associated operating plan and have identified opportunities to strengthen performance and reliability.

[Dean Setoguchi, President and CEO at Keyera]

Our objective is to maximize iso-octane production over the full four-year cycle while maintaining our focus on safe, reliable, and efficient operations. With that, I'll turn the call over to Eileen to discuss financial results and outlook.

[Eileen Marikar, SVP and CFO at Keyera]

Thanks, Dean, good morning, everyone. Keyera's second quarter results reflect continued strength in our fee-for-service business, which was offset by lower Marketing contributions. Excluding transaction costs related to the Plains acquisition, adjusted EBITDA was CAD 309 million, and distributable cash flow was CAD 101 million, or CAD 0.39 per share. Net earnings for the quarter were CAD 308 million. In our fee-for-service segments, Gathering & Processing delivered record quarterly realized margin of CAD 128 million. In Liquids Infrastructure, we also delivered record realized margin of CAD 222 million. Results included contributions from the Plains Canadian NGL assets and the KAPS acquisition. Turning to the Marketing segment, realized margin was CAD 36 million for the quarter. Decrease compared to last year was primarily attributable to the AEF outage and corresponding timing impacts related to risk management activities.

[Eileen Marikar, SVP and CFO at Keyera]

The risk management timing impacts are expected to partly offset over the second half of 2026 as physical volumes are sold. Looking ahead, we continue to expect Marketing to deliver strong contributions through the second half of the year, we are reaffirming our 2026 realized margin guidance range of CAD 360 million-CAD 390 million. We ended the quarter with net debt to adjusted EBITDA of 3.3 times above our long-term target range. The increase reflects higher net debt related to recent acquisitions and lower Marketing contributions in the first half of 2026. We remain focused on de-leveraging and returning to within our target range in 2028. We remain on track to deliver a 16%-18% fee-based adjusted EBITDA per share CAGR from 2025 to 2027, a 7%-8% fee-based adjusted EBITDA per share CAGR from 2027 to 2029.

[Eileen Marikar, SVP and CFO at Keyera]

This growth outlook is underpinned by several clearly defined drivers, including our current synergy target of CAD 120 million-CAD 140 million, the continued filling of available system capacity, and our portfolio of sanctioned growth capital projects. Beyond those drivers, we continue to see meaningful potential upside from additional synergies, further capacity optimization of our condensate system, additional KAPS contracting, and capital-efficient investment opportunities across the entire asset base. As our integration work progresses, we're encouraged by the additional value creation opportunities we've identified. We're also identifying opportunities to further enhance reliability across the acquired assets, which may modestly increase maintenance capital requirements over the next couple of years as we continue to apply Keyera's operating standards. Lastly, Keyera's 2026 guidance for growth capital, maintenance capital, and cash taxes remain unchanged. With that, I'll turn it back to Dean for closing remarks.

[Dean Setoguchi, President and CEO at Keyera]

Thanks, Eileen. Keyera continues to deliver its strategy to strengthen and extend our integrated value chain, building a more connected and efficient system that supports customer growth and improves access to key markets. Looking ahead, we'll remain focused on disciplined integration, continued execution of our growth projects, and delivering long-term value for our customers and shareholders. On behalf of our board and management team, I want to thank our employees, customers, shareholders, Indigenous rights holders, and other stakeholders for their continued support. With that, we'll open the line for questions. Operator, please go ahead.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press the star followed by the one on your touchtone phone. If you wish to cancel your request, you may press star two. Once again, that is star one should you wish to ask a question. Your first question is from Rob Hope from Scotiabank. Your line is now open.

[Rob Hope, Analyst at Scotiabank]

Morning, everyone. First question is on the Liquids Infrastructure segment. The CAD 78 million of incremental contribution from Plains was quite a bit higher than we were expecting as well as commentary when the deal was first announced. Can you maybe speak to the specific drivers of that strength, whether that could be annualized or were there, we'll call it abnormally high volumes in Q2?

[Dean Setoguchi, President and CEO at Keyera]

Hey, good morning, Rob, thank you very much for the question. I think the general comment that we'd like to emphasize here is that the Plains Canadian NGL business has been performing better than the way we'd originally modeled it and envisioned it. That's right across the board from their core pipeline, the frac business in Fort Saskatchewan, and also Empress. The volumes have been strong and the extraction cuts there have been better than what we had modeled. Overall, the assets are performing and the business is performing very well. We're still getting up to speed, obviously. It's been less than three months since we've taken over the operatorship of those assets. We see a lot of great opportunities across the portfolio that we're getting more details on and trying to prioritize and get at them as soon as we can.

[Dean Setoguchi, President and CEO at Keyera]

I'd also like to caution that this is a partial quarter, and I would say it's premature to try to extrapolate a whole year's EBITDA based on a partial quarter right now. Generally, I want to emphasize that the business is performing very well.

[Rob Hope, Analyst at Scotiabank]

Great. Appreciate that. Then maybe moving over to your condensate assets. A key theme this quarter has been kind of the outlook for increasing condensate demand and supplies in Western Canada. Can you speak to how your business is positioned to handle an increasing condensate demand and what opportunities are you seeing?

[Dean Setoguchi, President and CEO at Keyera]

Yeah, that's a great question. First of all, I'd just like to comment that we are extremely excited with the developments that we've seen here and the cooperation that we've seen from the B.C. and Alberta government and also the federal government. With that, we feel a lot more optimistic that we're going to see a lot more pipeline egress out of the province, which is going to help more oil sands growth in the future. As you know, we have the hub for condensate, and roughly two-thirds of all the condensate that goes up to oil sands for diluent originates off of our system.

[Dean Setoguchi, President and CEO at Keyera]

When we think about the growth in oil sands production over the last two to three years with Trans Mountain coming into service, we've seen that part of our business, our pipelines that receive the condensate and our storage business, and also our interest in Norlite Pipeline, those volumes have been increasing very well. That part of our business has been very strong. We anticipate more growth in the future with, again, more pipeline egress. We certainly envision more capital efficient debottlenecks on that system to continue to provide that service.

[Dean Setoguchi, President and CEO at Keyera]

What I would say is that it is a tailwind for our entire business because a lot of that condensate is also going to come from the liquids rich Montney and also the Duvernay, for which we're very well positioned, both, I would say, in the Deep Basin and also up in the Montney fairway up to the northwest in Alberta and also into B.C. I'd also like to emphasize, this is also part of the reason why we doubled down on KAPS because we believe this is going to be an essential service that will be required by the industry for the next decade. We're very pleased to have 100% of that pipeline to provide that service. Incremental to that, we are looking at other solutions, which I think is premature right now.

[Dean Setoguchi, President and CEO at Keyera]

We have capabilities to rail in more condensate, but also looking at other solutions to provide more condensate or diluent as that demand increases.

[Rob Hope, Analyst at Scotiabank]

All right. Appreciate the color. Thank you.

[Operator]

Thank you. Your next question is from Robert Catellier from CIBC. Your line is now open.

[Robert Catellier, Analyst at CIBC]

Hey, good morning. I just wanted to follow up on the condensate discussion. Maybe you can give us a little bit more color on your capabilities to deliver from Edmonton up to the oil sands. It looks like you're near contractual capacity in the Fort, so maybe some color on what you're looking at there to debottleneck and the timing of any potential opportunities. The timing in particular I wanted to talk about just because, as the oil sands gets going, it might take a while before production ramps to meet the pipeline or the other egress and service dates.

[Dean Setoguchi, President and CEO at Keyera]

Yeah, that's a great question, Rob. You know what? I'll turn that over to Jamie, that's certainly part of his business and things that they're focusing on.

[Jamie Urquhart, SVP of Liquids Business Unit at Keyera]

Yeah, thanks for the question, Robert. I think I alluded to this last quarter as well, is that we have a very well-defined capital execution plan to basically increase the capacity of both the Fort Saskatchewan transit system, but also working with our partner, Enbridge, on the Norlite Pipeline. Those things can either be fairly quickly implemented like DRA, drag reducing agent, or installing pump stations or even looping pipe for a segment of the pipeline where we can increase capacity. We've identified all those. We believe that they're all very capital efficient, as Dean alluded to. Also I'd like to emphasize is that we are in conversations with all the oil sands players with respect to making sure that we're in their minds and we're their solution as they think to expand maybe two, three, five, 10 years out.

[Robert Catellier, Analyst at CIBC]

Okay. Lots going on, so we'll wait and see there. I just want to touch on the frac spread. You gave your levels or proportion of hedging and you've chosen not to disclose the price, but presumably, you're hedging at levels above your underwriting case. I'm just curious about the 2027 level, the 65% of frac spread hedges. Is it all from the hedge level you had coming into the Plains deal, so the levels that were in place at closing or has there been incremental hedging since then? Just pricing relative to your underwriting assumptions.

[Dean Setoguchi, President and CEO at Keyera]

Yeah, Rob, those are great questions. We have layered in incremental hedges both this year and next year. As you know, we had a 12-month hedge in place already with Plains. It left us more exposed in the second half of 2027 and we've layered in a significant amount of hedges in the second half as well as topping up, again, the first half of 2027 and the rest of this year. We think that's important for a number of reasons. One is the frac spreads have been very strong, so well above our deal thesis. Two, as Eileen mentioned, we're beyond our stated range of where we'd like our balance sheet. We're still in a very comfortable range, but we like to be in a more conservative range. This will ensure that we'll be able to deliver a balance sheet as Eileen described.

[Robert Catellier, Analyst at CIBC]

Okay, last one from me is just that you're gonna give an update, I think, on the synergies later in the year. With what you know now, what areas are most likely to generate additional opportunities? Is that gonna come from the cost side or the commercial side?

[Dean Setoguchi, President and CEO at Keyera]

I would say all the above. We've already announced that we delivered CAD 90 million of synergies on day one and we're still operating redundant systems and things like that. We weren't able to convert them all on day one. We still have G&A savings, I would say, yet to come. We have operating savings yet to come, certainly synergies in maintenance, and turnarounds as well. We've talked about logistics opportunities for more optimization there. Generally, what we've seen across the board is there's been an under-investment in the business. We just see a lot of opportunities both to integrate our existing Keyera business and the business we just acquired, but also more growth opportunities, commercial opportunities on the Plains assets that we acquired as well. We're very optimistic about the upside we see.

[Dean Setoguchi, President and CEO at Keyera]

We would also caution, too, that there'll likely be a little bit more maintenance costs in the first year, one and a half to two years, I would say. There are a few things that we would like to accelerate to get it to the operating standard that we like and to get to a steady state after that. That initial maintenance cost that we might be exposed to, and we're still evaluating that, is very small relative to the upside prize that we see overall with the business.

[Robert Catellier, Analyst at CIBC]

Okay. Thank you, and congratulations on closing those two acquisitions.

[Dean Setoguchi, President and CEO at Keyera]

Yeah. Thanks a lot, Rob.

[Operator]

Thank you. Your next question is from Ben Thom from BMO. Your line is now open.

[Ben Thom, Analyst at BMO]

Hi, good morning. First question is on acquisitions. You've now closed two major ones, the Plains and the remaining KAPS. I'm curious as you think the next couple of years going forward, should investors view Keyera as more of a harvest? You mentioned a deleveraging focus or do you think with your footprint, is there any white space or further M&A opportunities that you see in the next few years?

[Dean Setoguchi, President and CEO at Keyera]

Good morning, Ben. Those are great questions. I really want to emphasize that our focus right now is 100% on capturing the opportunities that we see, both in the KAPS acquisition and also the Plains NGL business. Those opportunities are very significant in our mind, and we can deliver a lot of value for our customers and our shareholders for the visible future. Eileen described the upside that we talked about, the 16%-18% from 2025-2027, fee for service EBITDA growth, then 7%-8% out to 2029. We see growth opportunities well beyond that, especially when you think about the macro environment that we're in. I think that we're in a 10-year cycle of really great growth in our basin for which we're very well positioned. Will we consider future M&A? Sure, we will.

[Dean Setoguchi, President and CEO at Keyera]

I want to just emphasize that our primary focus is just delivering on the value of the acquisitions we've already made and our base business. We have a lot of big projects that we're also executing on, and we want to make sure that we do the best possible job on that as well.

[Ben Thom, Analyst at BMO]

Okay, got it. Thanks for that, Dean. Maybe on the organic growth side, you had some good news on the KFS Frac II execution. I know it's a small project, a big percentage benefit on the budget. As you think about your remaining projects, you're advancing them forward. Do you see maybe potential read-throughs on similar optimizations? Just on that topic, too, can you remind us with cost savings versus budget, is that a benefit to Keyera customers? Is it a mix between the two?

[Dean Setoguchi, President and CEO at Keyera]

Maybe I'll start answering the question, I'll toss it over to Jamie. On the cost-saving side, we're pursuing both. There are areas where it will accrue 100% to us, especially at places like Empress, but some of the costs also at our KFS North location. We also want to pursue opportunities where we create more value for our customers. If we can reduce our costs and those costs that flow through to our customer provide a better service to them and more value to them, we are equally as incentivized to pursue those as well. In terms of our overall execution of our program, maybe I can just turn it over to you, Jamie.

[Jamie Urquhart, SVP of Liquids Business Unit at Keyera]

Yeah. Thanks, Dean, thanks for the question, Ben. I think the factors behind ultimately the success that we've seen in the KFS 2 debottleneck and how we've seen success to date in the projects that we're executing, the bigger projects, is multiple fold. I think we've matured as an organization with respect to project execution. We've hit the market at a good time with respect to the service providers, the constructors in the field, but also shop spaces available. That's benefited us in the short term, it's also, we believe, going to benefit us in the long term because we've consciously developed partnerships with those service providers that are long-term in nature.

[Jamie Urquhart, SVP of Liquids Business Unit at Keyera]

For us giving them line of sight to long-term business, we've reaped the benefits in the short term, we also believe that we're going to reap the benefits in the long term because there will be a change in our environment. You can even see it unfolding right now in Western Canada with respect to more projects putting pressure on the skill set that's available, we believe that that will give us a competitive advantage going forward as well.

[Dean Setoguchi, President and CEO at Keyera]

Yeah, maybe just to add one more thing to Jamie's comments is that one thing that we've really put more focus on is just more oversight on all our contractors, in terms of fabrication shops and things like that, we have our people right embedded in those shops to ensure that the quality of what we're getting that gets delivered to site is in accordance to the spec that we set out to deliver.

[Ben Thom, Analyst at BMO]

Okay. That's great color. Thank you.

[Dean Setoguchi, President and CEO at Keyera]

Thank you.

[Operator]

Thank you. Your next question is from Maurice Choy from RBC Capital Markets. Your line is now open.

[Maurice Choy, Analyst at RBC Capital Markets]

Thank you, and good morning, everyone. I wanted to take a high-level overview about your cash flow profile. I wonder if you could discuss between the three buckets of take-or-pay fee-for-service that have volumetric exposure and then marketing. Directionally, where do you see a split today, and where do you reckon you want to be by the end of your forecast period in 2029, and what gets you there?

[Dean Setoguchi, President and CEO at Keyera]

Good morning, Maurice. I'll turn that question over to Eileen to answer.

[Eileen Marikar, SVP and CFO at Keyera]

Thanks, Maurice. Great question. I would refer you back to when we announced the Plains acquisition. At that time, we were 70% fee-for-service on a pro forma basis, 30% was Marketing. Of that 75%, 45% was take-or-pay with average contract lengths around 12 years, again, on a pro forma basis, which is very strong. That is just an average from 2026 to 2028. As we continue to bring on these projects, with more of the KAPS that we just acquired, 100% of KAPS, where the contracts are long duration, well over 10 years, 75% take-or-pay, Frac 3, the ACE terminal, all of these projects, that just continues to grow that very, very strong cash flow. We will provide an update, again, when we provide a greater update on some of the other items on what that revised cash flow looks like.

[Eileen Marikar, SVP and CFO at Keyera]

I can assure you, it does continue to improve as we start to execute and bring on these projects.

[Maurice Choy, Analyst at RBC Capital Markets]

Understood. If I could finish off with a question on the macro, and in this case, I'm going to request that you speak on behalf of the industry on this one. You mentioned earlier that you believe on the macro side, we're on a 10-year cycle of growth. What, if anything, do you think the industry still needs, be that from the government, from other indicators, for this cycle of growth to proceed?

[Dean Setoguchi, President and CEO at Keyera]

Yeah, that's a great question, Maurice. First of all, I do want to emphasize, because sometimes I think our industry, we complain about the things we don't have, and we don't maybe sometimes stop and give enough credit for the tremendous progress that's been made. I want to give a lot of credit to our federal government. Our Prime Minister is driving us in the right direction, working with Premier Smith and also Premier Eby, too, in B.C. When I think back two years ago and the things I worried about, the top three things I worried about were all government-related, mainly our federal government. That's much different now. Yes, we need more progress and more clarity in terms of policy and improvements in some regulations to streamline things.

[Dean Setoguchi, President and CEO at Keyera]

I just want to say there's a tremendous amount of momentum that's carrying us in the right direction, I have a high level of confidence that our governments are going to get to where we need to be to be that energy superpower and for our industry to thrive and continue to grow for the benefit of all Canadians.

[Maurice Choy, Analyst at RBC Capital Markets]

That's great to hear. Thank you very much.

[Dean Setoguchi, President and CEO at Keyera]

Thank you.

[Operator]

Thank you. Your next question comes from Patrick Kenny from National Bank Capital Markets. Your line is now open.

[Patrick Kenny, Analyst at National Bank Capital Markets]

Thank you. Good morning, everyone. Maybe just back on the consolidation of KAPS and thinking outside of the financial accretion. Dean, maybe you can just expand on some of the other strategic benefits that you've alluded to. What other commercial opportunities, either upstream or downstream of the pipe that you might now be able to accelerate as 100% owner? I guess, with these opportunities in front of you, if you might consider further non-core asset sales as just a way to build some dry powder and also accelerate the timing back to 3x.

[Dean Setoguchi, President and CEO at Keyera]

Those are great questions, Pat. Maybe I'll start backwards on the asset sales. I think we've been very disciplined about continuing to high-grade our portfolio and making sure that our resources are focused on the things that matter most for the company, not just today, but for the long-term future. We have sold a number of facilities over the last three years, and we'll continue to high-grade our portfolio, especially the stuff that is not super core to our long-term strategy. Having said that, I wouldn't expect anything super significant in terms of a dollar value sale that is going to meaningfully change our debt position in the next 18 months.

[Dean Setoguchi, President and CEO at Keyera]

As we mentioned, we've been very disciplined about locking in our hedges, especially on the frac spread, but also with our iso-octane business to make sure that we have the cash flow to drive that leverage just with the performance of the business. With respect to KAPS, when you go back on KAPS, I would say in my time, it's probably the biggest decision we ever made at the time, but probably the best decision we ever made. KAPS connects our downstream and upstream business. For us to provide the best value add service for our customers, KAPS is a core piece of that.

[Dean Setoguchi, President and CEO at Keyera]

When you think about the NGLs and condensate that is going to get produced in this basin with all the pipeline egress that's going to get built for crude oil and more LNG facilities, that is going to be an essential asset that we're going to fill it to capacity. We just think that it's a core part of our overall integrated service to make our business work better and more competitive. Anything you guys want to add?

[Jamie Urquhart, SVP of Liquids Business Unit at Keyera]

No, I think, as we think about our assets and the opportunity to integrate it with Plains, as Dean alluded to, I think we're very pleasantly surprised with respect to the quality of the people. We alluded to the assets are foundational core assets for us going into the future. We may need to spend a few dollars, I think, here in the next year or two to get them up to our standard as Dean said. That will enable us to grow our collective business. I think one of the short-term benefits is, Dean allowing to take the very talented people that we've brought into our organization to think more broadly around the system of assets that we've brought into the asset.

[Jamie Urquhart, SVP of Liquids Business Unit at Keyera]

They tended to look at things more on an asset-by-asset basis, where they're highly integrated, and the decisions we make at one asset impact other assets as well. That's one of the short-term benefits that we've been able to see in action very quickly. Then as Dean alluded to, the long-term integration opportunities that we're extremely excited about. That would be all I would add to the Plains acquisition element of it.

[Patrick Kenny, Analyst at National Bank Capital Markets]

Okay. That's great color. I appreciate that. Then maybe just to follow up on the Marketing outlook. I know you're well hedged, but I guess just curious, given the strong crack spread, refined product environment. If these market dynamics continue, might there be some further tailwinds here for the iso-octane margins going forward? Maybe just confirm where any potential outsized Marketing contributions would first be directed, namely, balance sheet versus growth.

[Eileen Marikar, SVP and CFO at Keyera]

Thanks, Pat. Great question. In terms of the Marketing itself, I think, again, for this year, the CAD 360 million-CAD 390 million we feel is still very appropriate, weighted very much towards the second half of the year. Of course, it reflects the outage that we had in the first half of the year at AEF. As you said, as we look forward, we're set up really well for 2027 from a Marketing perspective. As you noted, those RBOB to WTI spreads or what we refer to as RBOB cracks, have been incredibly strong, and we have been layering on RBOB hedges into next year as well as even into 2028 because the values are that strong. I think that's a positive.

[Eileen Marikar, SVP and CFO at Keyera]

As Dean mentioned earlier on the frac spread side, where more than 65% of the volumes are also hedged at better values than our deal thesis. The propane business is also, in general, set up quite well. Again, our ability to export propane to Asia through AltaGas export facility, where demand remains strong. I think for next year, we're set up quite well. In terms of cash flow, yes, back to capital allocation, our priority is to bring the balance sheet back within the target range. You asked about asset sales, the good thing is our leverage, it's conservative, that two and a half to three times, even though we're a bigger size, we don't need to sell assets. It's more just a matter of cleaning up the portfolio as part of normal course.

[Patrick Kenny, Analyst at National Bank Capital Markets]

That's great. Thanks, Eileen. Thanks, everybody.

[Jamie Urquhart, SVP of Liquids Business Unit at Keyera]

Thanks a lot.

[Dean Setoguchi, President and CEO at Keyera]

Thanks a lot.

[Operator]

Thank you. Once again, that is star one should you wish to ask a question. Your next question is from Aaron MacNeil from TD Cowen. Your line is now open.

[Aaron MacNeil, Analyst at TD Cowen]

Hey, morning all. Thanks for taking my questions. Dean, one of the strategic rationales for the Plains transaction was increasing connectivity across the NGL value chain. Again, I am not trying to get you to front run a capital project or anything like that, but now that you have been operating the assets, I am wondering if you could provide an example or an anecdote of something that would support that previous messaging that maybe you had not touched on in the past.

[Dean Setoguchi, President and CEO at Keyera]

Yeah. Good morning, Aaron. That is a great question. We are just tremendously excited by the combination of the two asset bases because our business was more centered in the West and also getting molecules down into the U.S. We have had our hands on this business now for two and a half months, and now we are getting more exposure out to the eastern markets and it is all priced off of Bellevue. We just see tremendous opportunity to take those molecules to the east, but also to be able to distribute them in the mid-continent too right from Empress, down in the U.S. and accessing also into Wisconsin and Michigan as well. We just like those markets. We are a supply-based basin, so a big part of the value that we add is being able to access markets efficiently.

[Dean Setoguchi, President and CEO at Keyera]

While the Asian markets are very strong off the West Coast, and we're well-positioned there, continentally, the eastern markets are strong too, especially in the wintertime, and we're very happy to have the assets that can serve those markets as well. I don't know if there's anything else you guys want to add.

[Jamie Urquhart, SVP of Liquids Business Unit at Keyera]

Yeah, no. I think just to add on to something I shared with the last answer to the question was, without getting into specifics, we certainly see opportunities to debottleneck the assets in a very capital-efficient way to facilitate some of the opportunities that perhaps the previous owner just didn't have the commitment and the focus to pursue. There's no big projects that I think we're in a position to be able to announce over the next little while. It's kind of boring, I had a boss once that said, "Bunt singles score runs." There's just a lot of bunt singles that we're unearthing. That's going to result in some really impressive, I think, growth for our organization over the next year or two.

[Aaron MacNeil, Analyst at TD Cowen]

Like you sensed my next question, I wanted to ask about bottlenecks. I think that the KAPS volume ramp is well documented, as are your fractionation and rail capacity additions. Where do you see the greatest bottlenecks across the added platform over the next 3 to 5 years? Is it the Plains business? Is it something else? Is it G&P? How would you rank sort of what's most urgent to not as urgent?

[Dean Setoguchi, President and CEO at Keyera]

That's a great question. The great thing is that we have sanctioned projects in place to address some of the bigger ones. We still have capacity on KAPS. Yes, we'll have to add more pumping stations and things like that. We still have great capacity there to serve the Montney and Duvernay developments at that part of the basin. We think that we can use our assets more effectively together, like some of our storage assets perhaps, to get better effective utilization out of the storage, as an example. I think that's positive. We talked about our oil sands assets, the pipe connectivity and the capacity on that between Edmonton, Fort Saskatchewan, and storage is included as part of that, but also the Norlite Pipeline.

[Dean Setoguchi, President and CEO at Keyera]

There might be debottlenecks that are required on those assets over time. As Jamie just described, these are all generally low capital debottlenecks that I'm talking about now. I would envision that they're all very capital efficient, and are going to generate very high returns for us overall. I'd say the biggest capital need over time is probably on a GP front, where to process all the incremental gas that's going to get developed, there's going to be likely more processing capacity. Brad, do you want to add some comments?

[Brad Slessor, SVP of G&P and NGL Pipelines Business Unit at Keyera]

Yeah. Thanks, Aaron. It's Brad here. Really appreciate the question. I think as leveraging off what Dean said, as the oil sands continues to call for more condensate, we think that's going to come from the Montney and the Duvernay. We think we're very well-positioned to capture our fair share of that growth coming down the KAPS pipeline. All that drilling for condensate brings the need for more gas processing and more NGLs to make it to market as well. You've seen us talk in the past about a really capital-efficient debottleneck at Simonette, at our Wapiti gas plant, and we've also recently talked very briefly about getting in front of the incremental need for gas processing we see out in the basin in the Montney, especially for sour gas processing, which is complex and is right in our area of expertise.

[Brad Slessor, SVP of G&P and NGL Pipelines Business Unit at Keyera]

That's some of the areas that our team is certainly focused on, and we look forward to chatting more about that in the coming quarters.

[Aaron MacNeil, Analyst at TD Cowen]

Yes. Thanks, everyone. I'll turn it back.

[Dean Setoguchi, President and CEO at Keyera]

Thank you.

[Operator]

Thank you. Your next question is from AJ O'Donnell from TPH. Your line is now open.

[AJ O'Donnell, Analyst at TPH]

Hey, good morning, everyone. I just wanted to focus on some of the macro intrabasin, just thinking about some of the incremental progress that's been made on the data center development. Particularly, given your position of land in the Industrial Heartland corridor, could you maybe talk about your surplus of land or maybe potential gas supply capability that could potentially support a similar power generation project? Or something data center adjacent opportunity?

[Dean Setoguchi, President and CEO at Keyera]

Good morning, AJ. Great question. I think that we're going to see a lot of opportunity for many developments in the Industrial Heartland. As you mentioned, we have 1,300 acres of land there that is situated in a very good spot. It has very good pipe connectivity right through those lands for pretty much every product. The pipes run right through the land, that's a big advantage. We do have the salt rights to build cavern storage. We have our ACE Rail Terminal that's getting built, which we can multipurpose for other projects. Also, I'd point out that Shell's carbon capture line cuts through the northeast corner of that land as well. If there's any projects that require carbon sequestration, we have a short tie-in to get into their line. There's a lot of advantages there. I won't speak specifically to data centers.

[Dean Setoguchi, President and CEO at Keyera]

That's always a possibility, and I think it's great to have more demand centers for our natural gas. I would just say that any developer that requires a reliable supply of feedstock, they're going to look to Alberta. This is a great place to do business and again, I can't think of a better place to locate new opportunities in our lands and in that area. Our team, we have a business development team that's working on opportunities. It's too early to talk about what those opportunities look like, but I think that for the long-term future growth of Keyera, you're going to see a lot more development on that land because it's so well-situated and has so many amenities that advantage it.

[AJ O'Donnell, Analyst at TPH]

Okay, thanks, Dean. Maybe just the last one, just thinking about your system and tying it back to the macro and just overall volume growth into the remainder of the year. Just wondering if you could refresh us all on how producer activity is tracking right now, what you're expecting for the cadence of volume ramp through next year or through the end of this year and into 2027. Thanks.

[Dean Setoguchi, President and CEO at Keyera]

Yeah. Well, listen, as I mentioned before, we are very excited about the macro future, the long-term future, both short, medium, and long term. Will there be some cycles and blips to there? Sure there will be, generally, I think there's a very strong tailwind for our entire business, and that is good for Keyera. We have core basin infrastructure that helps to enable the basin to grow. We provide services that add value to our customers, the producers, which help them, incentivize them to continue to drill more because it's profitable for them. We've already published our guidance for our fee-for-service EBITDA growth, which again, I believe it's the very best out of all the midstream providers. 16%-18% fee-for-service EBITDA growth from 2025 to 2027, and 7%-8% from 2027 to 2029.

[Dean Setoguchi, President and CEO at Keyera]

That guidance is what we're locked in on delivering, and as we said, we see a ton of opportunity that's going to carry our growth well beyond 2029. We're very excited.

[AJ O'Donnell, Analyst at TPH]

All right. Thank you very much.

[Dean Setoguchi, President and CEO at Keyera]

All right, thanks. Have a great day.

[Operator]

Thank you. There are no further questions at this time. Please proceed with the closing remarks.

[Dan Cuthbertson, General Manager of Investor Relations at Keyera]

This is Dan Cuthbertson with Investor Relations. Thanks all again for joining us today. Please feel free to reach out to our IR team with any additional questions. With that, I hope everyone enjoys the rest of the summer.

[Operator]

Thank you. Ladies and gentlemen, that concludes the conference call for today. Thank you all for joining. You may now disconnect your line.

Participants

Executives

• Dan Cuthbertson, General Manager of Investor Relations
• Dean Setoguchi, President and CEO
• Eileen Marikar, SVP and CFO
• Jamie Urquhart, SVP of Liquids Business Unit
• Brad Slessor, SVP of G&P and NGL Pipelines Business Unit

Analysts

• Rob Hope, Analyst at Scotiabank
• Robert Catellier, Analyst at CIBC
• Ben Thom, Analyst at BMO
• Maurice Choy, Analyst at RBC Capital Markets
• Patrick Kenny, Analyst at National Bank Capital Markets
• Aaron MacNeil, Analyst at TD Cowen
• AJ O'Donnell, Analyst at TPH