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Keyera gathering, processing assets come online as production increases

After prolonged low prices, Canada's oil and natural gas liquids production is picking up, and Keyera Corp. is building out its infrastructure to take advantage of rising demand for gathering and processing capacity, officials said Feb. 15.

"Over the past three years, we've placed into service C$1.6 billion worth of capital and investment projects [and] increased our distributable cash flow on a per share basis by 14%," said David Smith, Keyera's president and CEO, during an earnings call. "As our 2017 results demonstrate, demand for Keyera's essential services continues to be strong, and we are making great progress on our major capital projects."

Weak gas prices across Canada in 2017 were in part counteracted by strengthening prices for crude oil and natural gas liquids, or NGLs, especially during the second half of the year, executives said. That support for oil and NGLs drove increased drilling activity in the liquids-rich Montney and Duvernay shales and translated to greater demand for gathering and processing capacity, the officials said.

With this production on the rise, Keyera officials expected the company to invest between C$800 million and C$900 million in growth capital in 2018. These funds will mainly go toward projects that are already underway, along with 50% of the South Grand Rapids diluent pipeline, the company said.

Keyera has expansion projects on track for completion in the coming months, executives noted during the call. The company's Keylink natural gas liquids gathering pipeline project is slated for completion in the second quarter of 2018, as is an expansion of the Simonette liquids facility, officials said. Keyera's Base Line Terminal, an aboveground crude oil storage facility developed with Kinder Morgan, already has four tanks in service, and the other eight should come online in 2018.

Looking beyond those projects, Keyera's North Wapiti pipeline system and the first phase of the Wapiti gas plant near Grand Prairie, Alberta, are scheduled to be operational in 2019, the company said. The company is already working with area producers to attract additional volumes to support the second phase of the Wapiti gas plant project. The first phase includes a 150 MMcf/d sour gas processing plant, 25,000 barrels per day of condensate processing facilities, a gathering pipeline system and field compressor stations. The second phase would add another 150 MMcf/d of sour gas processing capacity.

"All of these investments position Keyera for future growth in some of the best areas of the Western Canada Sedimentary basin," Smith said.

There is increased public awareness and concern around infrastructure projects, Bradley Lock, Keyera's senior vice president of gathering and processing, said during the call. As a result, the company chose to try to center its infrastructure away from population centers, he said.

Keyera on Feb. 15 reported fourth-quarter adjusted EBITDA of C$197.4 million, an increase from C$153.5 million a year earlier. The company's distributable cash flow in the fourth quarter was C$173.9 million, up from C$104.0 million in the prior-year period. For the full year, the company posted adjusted EBITDA of C$617.0 million, up from C$605.1 million a year prior. Distributable cash flow for the year was C$510.4 million, up from C$459.6 million in the previous year.