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Keyera sees diverse NGL dealmaking options but says it will remain prudent

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Keyera sees diverse NGL dealmaking options but says it will remain prudent

There is no shortage of opportunities for Keyera Corp. to develop its midstream businesses, but while the company sees itself as well-positioned to take advantage of potential investments, it will continue to apply strict criteria to acquisitions and project expansions, company executives said Aug. 7.

"We are seeing more assets come available or at least people exploring monetizations of different assets. I think from our point of view, we just want to continue to be very prudent about how we deploy capital: How do we view returns on a risk-adjusted basis and making sure we get strong returns?" Keyera CFO Steven Kroeker said during a conference call.

Kroeker said opportunities are particularly abundant in gas gathering and processing, which the Calgary, Alberta-based company called the foundation of its value chain, including in liquid petroleum gas infrastructure and in marketing. Keyera may increase its exposure to gathering and processing in the liquids-rich Montney and Duvernay shales in northwestern Alberta, but the company has a "pretty full plate" of projects right now and wants to keep its portfolio balanced across its three major business lines, Kroeker added.

Keyera executives remain keenly focused on the long-term sustainability and path to growth for potential gathering and processing facility acquisitions, CEO David Smith said, noting that gas plant developments and expansions at Pipestone, Simonette and Wapiti offer a template for the company's criteria. Keyera also entered into a joint venture with SemCAMS Midstream ULC in May to build a roughly C$1.3 billion pipeline system to move NGLs and condensate from Montney and Duvernay to Edmonton.

"There are assets for sale, but a lot of them don't have those sorts of characteristics that we would look for," Smith said. "And as you're probably aware, there have been two transactions announced that come to mind in 2019, and we were not the successful acquirer of either of those assets, so I think that's an indication that we will continue to be disciplined."

Asked about the merits of moving product by rail to the U.S. versus participating in export terminal developments on the West Coast, Smith said Keyera continues to consider diversification opportunities but currently has no plans to become an equity investor in export projects.

"Having said that, those are the kinds of opportunities that we'll look at all the time," he added.

"Particularly with respect to propane, our approach has been to make sure that we have the flexibility with our facilities in Western Canada, along with our [NGL rail and truck terminal] at Hull, Texas, to be able to move that product to the highest value markets," he said. "We are moving propane to the West Coast for exports through the terminals that exist there, and I think we'll continue to kind of monitor how that develops."

Keyera on Aug. 6 reported EBITDA rose nearly 19% to C$249.4 million in the second quarter of 2019 from the year-ago period, with operating margins jumping substantially in all three of its business segments on a year-over-year basis. It also announced it would increase its monthly dividend by 7%.