On Thursday, Keyera (TSX:KEY) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Access the full call at https://app.webinar.net/GER3o2qD86Z
Summary
KeyCorp reported a successful acquisition of Plains’ Canadian NGL business, which expands their platform and enhances connectivity across their system.
Financial performance included a record quarterly realized margin in gathering and processing, with adjusted EBITDA of $232 million and a net loss of $122 million due to acquisition costs.
Strategic initiatives focus on integration and capturing synergies from the acquisition, as well as progressing growth projects like the KFS frac2d and Capzone 4.
Future outlook includes maintaining a strong balance sheet with a net debt to adjusted EBITDA ratio of 2.2x and guidance for marketing realized margin between $210 million and $250 million.
Management expressed confidence in their case before the Competition Tribunal regarding the acquisition and emphasized continued execution on growth and long-term value delivery.
Full Transcript
OPERATOR
Good morning. My name is Joelle and I will be your conference operator today. At this time I would like to welcome everyone to the Keyera’s 2026 first 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 followed by two. Thank you. I would now like to turn the call over to Dan Kupferson, General Manager, Investor Relations. You may begin.
Dan Kupferson (General Manager, Investor Relations)
Thanks and good morning. Joining me today will be Dean Setaguchi, President and CEO Eileen Maricar, Senior Vice President and CFO Jamie Urquhart, Senior Vice President, Liquids Business Unit and Brad Slesser, Senior Vice President, GMP and NGL Pipelines Business Unit. We will 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 on our website. With that, I’ll turn the call over to Dean.
Dean Setaguchi (President and CEO)
Thanks Dan and good morning everyone. Two days ago we successfully closed the acquisition of Plains’ Canadian NGL business in its entirety. This is a transformative deal that materially expands Keyera’s integrated platform. This transaction is a natural extension of our strategy to extend our integrated value chain. It enhances connectivity across our system and improves our ability to efficiently process, transport and market products for our customers. The combined platform provides improved access to key markets, greater flexibility and increased reliability. It also represents an important step for Canada bringing critical energy infrastructure under Canadian ownership. It enhances Canadian energy security, supports economic resilience and establishes a stronger, more efficient Cross Canada NGL corridor. As previously disclosed, the Commissioner of Competition has filed an application with a Competition Tribunal in connection with the transaction. As you can appreciate, this matter is now before the tribunal, so we’re limited in what we can say about this process. We are confident in the strength of our case and excited to demonstrate to our shareholders and to our stakeholders the strategic rationale and the value creation that will result from this transaction. Our focus now is on integration and capturing the synergies of the expanded system Turning to our quarterly results, we continue to execute on our strategy, building a more connected and efficient system to support our customers and strengthen our platform. In gathering processing. We delivered a new quarterly record for realized margin driven by record throughput at Wapiti and contributions from our recently acquired interest in the Simonette East gas plants. We also continue to advance our growth projects. The KFS frac2d bottleneck remains on schedule for completion by the end of June and is now expected to come in below budget. FRAC 3 and KAPS Zone 4 continue to progress well both on time and on budget. These projects are highly contracted and will continue to drive growth and stable Fee for Service cash flow supporting the strength of our balance sheet and long term dividend sustainability. Now turning briefly to AEF following the previously announced outage, the repairs have been completed. We’re also now completing the turnaround plan for the fall, eliminating the need for a separate shutdown later this year. The facility is expected to return to full operating capacity by the end of May. While the reliability of the asset has been below expectations, we recognize the importance of AEF to our business and the value it delivers during the outage. We completed a comprehensive review of the facility and its operating plan. As a result, we expect to enhance our maintenance strategy by supplementing the existing four year major turnaround cycle with a smaller plant outage between major turnarounds. Our objective is to maximize production of iso-octane during a four year cycle while ensuring safe and efficient operations. With that, I’ll turn it over to Eileen to walk through our financial results and outlook.
Eileen Maricar (Senior Vice President and CFO)
Thanks Dean and good morning everyone. Keyera’s first 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 $232 million and distributable cash flow was 133 million or $0.58 per share. Net earnings for the quarter or a loss of 122 million in our fee for service segments gathering and processing delivered record quarterly realized margin of 118 million in liquids. Infrastructure realized margin was 141 million. Results included record throughput across our condensate system supported by continued growth in oil sands production. Turning to the marketing Segment, realized margin was 13 million for the quarter. The decrease compared to last year was primarily attributable to the AEF outage and corresponding butane risk management activities. We ended the quarter with net debt to adjusted EBITDA of 2.2x which remains below our long term target range and provides Continued financial flexibility following the completion of the NGL contracting season. We are providing 2026 marketing segment realized margin guidance on a standalone basis. Marketing realized margin is expected to range between $210 million and $250 million, with the majority of contributions weighted toward the second half of the year. All other Keyera standalone guidance for growth capital, maintenance capital and cash taxes remain unchanged. With that, I’ll turn it back to Dean for closing remarks.
Dean Setaguchi (President and CEO)
Thanks, Eileen. Keyera continues to execute on a clear strategy to strengthen and extend our integrated value chain. Building a more connected and efficient system that supports customer growth improves access to key markets. With the closing of the Plains acquisition, we are entering into the next phase of growth for the company with an expanded platform that further enhances our ability to serve customers across the basin. Looking ahead, we will remain focused on disciplined integration, continued execution of our growth projects and delivering long term value for our customers and shareholders.
Dean Setaguchi (President and CEO)
On behalf of the 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. Should you have a question, please press Star followed by the 1. On your touch tone phone, you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press Star followed by the two. If you are using a speakerphone, please lift the handset before pressing the keys. One moment please, for your first question.
OPERATOR
Your first question comes from Rob Hope with Scotiabank. Your line is now open.
Rob Hope (Equity Analyst)
Morning everyone. I’d like some more color on the Competition Tribunal process. So you have 45 days to put in your application. There’s, Can you maybe give us a little bit more incremental color on what the key themes that you would like to put forward to the Competition Bureau to state your case that the acquisition should close as filed, as well as, you know, Do you think you’ll take the full 45 days or could you accelerate that? Yeah.
Dean Setaguchi (President and CEO)
Good morning, Rob, and thank you for the question. You know, we’re not in a position to speak more about what our position is. I just want to emphasize that we’re very confident in the strength of our case. And again, because the matters before the tribunal, we’re limited in what we can say. But with respect to the actual process. I’ll just turn it over to Eileen and she can speak to it in more detail?
Eileen Maricar (Senior Vice President and CFO)
Sure. Thanks. Good morning, Rob. There’s not too much incremental from what was Already in Dean’s opening remarks. The matter now will proceed through the tribunal process and it’s an impartial and independent specialized court which gives us the opportunity to have our case heard by a panel of judges and non judge tribunal members. And as Dean mentioned, we believe in our case and look forward to presenting it to the tribunal.
Eileen Maricar (Senior Vice President and CFO)
At this point it’s really too early to speculate on what the timeline will be.
Rob Hope (Equity Analyst)
All right, thanks. I thought I’d try maybe moving over to the marketing guidance excluding Plains. Can you maybe help us understand what commodity price assumptions are included in that? Just given it is looking similar to kind of the prior guidance, yet the commodity pricing looks quite a bit different than before.
Eileen Maricar (Senior Vice President and CFO)
Thanks Rob, I can take that one. So the guidance we did provide is on a standalone basis and it does incorporate the AEF outage which was approximately 110 million. I would say it’s conservative at this point in time. It does include the impact of butane, which is lower than our 10 year average. So that’s a positive. Certainly there were some hedges on the inventory where we took a loss in the front month, but we’ll start to see that as we sell the inventory.
Eileen Maricar (Senior Vice President and CFO)
The one thing that again could be a tailwind to the guidance we’ve put out is the iso-octane premiums. As you are aware, that’s something that we cannot hedge. And so as AEF comes up and by the end of the month and we get into the summer driving period, that is a potential tailwind to the guidance that we provided but largely in line with the assumptions that we had laid out. The hedges that were already in place, which is the 210 to 250.
Dean Setaguchi (President and CEO)
I think just to add on to Eileen’s comments, Rob, overall we think that there is more of a macro tailwind to our marketing business. I mean if you think about the situation in Strait of Hormuz, the longer that blockage lasts, it really puts a higher floor under the whole price complex for crude oil, natural gas and also LPGs, for a longer period of time. So we think that’s positive for frac spreads. We think that’s positive for our octane business.
Dean Setaguchi (President and CEO)
And Eileen talked about the premiums but obviously if you look at the gasoline cracks, they’re very strong as well. And the underlying crude oil price is very high. So you know, we think the forward prices for the rest …
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