Keyera Corp. is a leading energy infrastructure company in Canada and has been an integral part of the country’s energy sector for two decades. Keyera operates assets in the oil and gas industry in the areas of oil and gas exploration and production, as well as refining and marketing of finished products.
Keyera also markets isooctane, propane, butane, condensate and crude oil to customers in Canada. Keyera’s core infrastructure is strategically located in key production areas of the sedimentary basin in western Canada and the Edmonton / Fort Saskatchewan energy center.
The company operates in the segments of collecting and processing (~ 27% of realized margins), liquid infrastructure (~ 42%) and marketing (~ 31%). Keyera’s NGL and condensate network, including pipelines, terminals, fractionation and storage facilities, is located in major North American NGL hubs.
Keyera currently has interests in 14 active gas facilities in Alberta. The company operates well-maintained and durable facilities as well as an extensive collection system with over 4,000 km of pipelines.
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Sales growth and market presence
With two decades of experience, Keyera has built a solid reputation for expertise in operating complex energy processing systems. The integrated business areas offer customers a comprehensive range of important midstream services. Keyera’s broad customer base includes a high proportion of investment grade counterparties.
Keyera is growing both organically and through acquisitions. The company strengthens its leadership position by investing in capital programs designed to support future growth. Projects such as the Wapiti and Pipestone gas plants were intended to double Keyera’s existing gas processing capacity.
The company is well positioned to capitalize on long-term growth opportunities in the Western Canada’s Sedimentary Basin, a rich natural gas basin in Canada. All projects are underpinned by long-term agreements with manufacturers that also contribute to the cash flows for service fees.
Keyera continues to invest in projects that generate strong RoIC rates with their healthy balance sheets. It focuses on improving its integrated value chain for higher margins. The company’s high barriers to entry in the form of strategically located gas facilities in liquid-rich western Alberta, busy fractionation, storage, transportation, and upgrade facilities, as well as industry-leading condensate systems, etc., and access to high-value markets act as strong competitive advantages.
Keyera reported a net loss of $ 62 million for full 2020 due to impairment charges related to the shutdown of gas facilities as part of the asset optimization program. The Liquids Infrastructure segment has proven its resilience through several commodity price cycles. The company should benefit from the ramp-up of the newly commissioned Pipestone gas facility and the Wildhorse crude oil storage and blending terminal, which is expected to be operational in mid-2021.
Keyera Corp is a Canadian dividend aristocrat with a long history of steady dividend growth since going public in 2003. The company currently has an impressive return of more than 7% and has grown its dividend growth by 6% annually over the past decade. The aim is a payout ratio of 50% -70%. Keyera paid dividends of $ 423 million in 2020, up 7% year over year.
Keyera is in strong financial condition and is well positioned to fund its capital program. The company has a solid track record of generating revenue and growth supported by mostly fee-paying cash flow (~ 70%) and virtually no direct commodity price risk for its Gathering & Processing and Liquids Infrastructure businesses.
The marketing business continues to make a major contribution to cash flow. Around 65% of Keyera’s realized margins come from investment grade customers, and ~ 40% of realized margins were generated from take-or-pay contracts with an average remaining term of 7 years.
Keyera expects further increases in volume and associated cash flows from its infrastructure investments in the condensate-rich Montney area. Distributable cash flow per share is expected to benefit from higher volumes through new assets, lower cash taxes, and maintenance capital, and has grown 9% CAGR since 2008.
The company reported distributable cash flow for the full year of $ 718 million, an annual increase of 21%. Investments during the year were in the projected range of $ 500 million to $ 550 million and were significantly reduced by one year due to the postponement of the KAPS pipeline project. Keyera expects growth capital of between $ 400 million to $ 450 million and maintenance investments of $ 25 to $ 35 million in fiscal year 211. The company has also made significant strides toward its annual cost savings target of $ 45 million to $ 65 million.
Keyera continues to add shareholder value through prudent capital investments that are expected to generate attractive returns on capital. An extensive network of large scale natural gas processing plants and pipelines and customer relationships form a deep rift around Keyera’s business.
Enbridge Inc, TransCanada Corp, Pembina Pipeline Corp, and Inter Pipeline Ltd are Keyera’s leading competitors.
Enbridge is Canada’s largest natural gas distribution provider, while Pembina Pipeline is a leading midstream and transportation service provider in North America. TransCanada Pipeline is a North American infrastructure company that supplies more than 25% of the natural gas consumed in North America every day.
Keyera’s predominantly paid and integrated business, strategic locations, and extensive business set it apart from its peers.
Keyera Corp. is a lucrative stock with a high dividend yield and a recovery in oil demand. The company is very well positioned in terms of growth opportunities in the midstream chain through 2022.
Keyera has some growth opportunities due to its expertise, strong balance sheet and financial flexibility. With the ongoing KAPS pipeline, a significant growth capital program continues to be conducted that will enable secure, long-term cash flow with 75% take-or-pay.
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