Keyera (KEY) Q4 2023 earnings summary

Executive summary

• Record 2023 adjusted EBITDA of $1.21B and DCF of $855MM, with record realized margins across all three segments.

• Year-end net debt to adjusted EBITDA was 2.2x, with $1.05B liquidity and a 53% DCF payout ratio.

• Growth outlook targets 6–7% adjusted EBITDA CAGR from 2022–2025, holding Marketing realized margin constant at $310MM; outlook is at the upper end of the target.

• KAPS and KFS commitments and capacity utilization strengthen the integrated infrastructure platform and support targeted growth through 2025.

Financial highlights

• Q4 adjusted EBITDA was a record $339MM vs. $212MM in Q4 2022; FY adjusted EBITDA was a record $1.21B vs. $1.03B.

• Q4 DCF was $234MM, or $1.02/share, vs. $104MM, or $0.47/share; FY DCF was a record $855MM, or $3.73/share, vs. $654MM, or $2.95/share.

• Net earnings were $49MM in Q4 vs. a net loss of $82MM; FY net earnings were $424MM vs. $328MM. Q4 included a $210MM non-cash Wildhorse terminal impairment.

• FY cash flow from operating activities was $975MM and funds from operations were $1.03B.

• Marketing realized margin was $478.967MM in 2023 vs. $397.421MM in 2022; operating margin included a $75.284MM unrealized risk-management loss adjustment. Fee-for-service realized margin was $890.644MM vs. $752.684MM; operating margin included an $11.747MM unrealized gain adjustment.

Outlook and guidance

• 2024 base Marketing realized margin guidance is $310–$350MM, raised from $250–$280MM; a Q1 2024 update was planned.

• 2024 growth capital guidance is $80–$100MM; maintenance capital is $90–$110MM, including ~$20MM recoverable in 2024; cash taxes are $45–$55MM.

• AEF’s planned six-week spring 2024 outage is expected to reduce Marketing realized margin by $35–$45MM; full-year margin is expected within guidance.

• Near-term fee-for-service drivers include Wapiti capacity fill, Pipestone expansion, KAPS ramp-up, an additional 21% KFS stake and stronger KFS service-contract terms.

• 2025+ opportunities include KAPS Zone 4, KFS fractionation debottlenecking and expansion, and the Low Carbon Hub; projects require strong contracts and Board sanction.