Keyera Reiterates Confidence in its Business and Provides Marketing Guidance for 2020
D
ue to the unprecedented environment and the sharp decline in Keyera's share price, Keyera Corp. (TSX:KEY) (Keyera) is providing the following information to address investor inquiries.
Keyera remains confident in its business outlook given its strong financial position and integrated portfolio of diverse assets and services that serve both natural gas and oil sands producers.
Keyera's Strong Financial Position
Keyera's financial position includes the following
a strong balance sheet with Net Debt to Adjusted EBITDA of 2.7x as of December 31, 2019, including 50% of the subordinated hybrid notes as debt;
a long-term payout ratio target range of between 50% and 70% (2019 - 67%; 2018 - 56%);
BBB investment grade corporate credit ratings from DBRS Limited and S&P Global;
a $1.5 billion line of credit ($90 million drawn as of December 31, 2019); and
no meaningful long-term debt maturities in the next five years (less than 15% of total long-term debt).
Keyera's 2020 Marketing Guidance
Based on year-to-date performance and negotiation of natural gas liquids (NGL) supply agreements for the contract year beginning April 1, Keyera expects 2020 realized margin for the Marketing segment to range between $270 million and $310 million, which exceeds the base guidance range of between $180 million and $220 million. The expected range for 2020 reflects Keyera's effective risk management program, Marketing's strong contribution year-to-date and the following assumptions i) current forward pricing for any unhedged volumes in the remainder of 2020; ii) AEF operating near capacity; iii) no significant logistics or transportation curtailments; and iv) a risk adjustment for contracted NGL supply volumes. Keyera plans to provide a further update for its Marketing business outlook in its first quarter 2020 financial release.
Keyera's 2020 Cash Tax Recovery and Maintenance Capital Expenditures
As previously disclosed, in 2020 Keyera expects to benefit from a cash tax recovery of between $15 million and $25 million (2019 - $98 million cash tax expense) and maintenance capital expenditures of between $35 million and $45 million (2019 - $105 million).
Keyera's Growth Capital Program
Keyera takes a long-term view of its business and remains committed to its strategy of delivering steady disciplined growth to create long-term value for shareholders. Currently, Keyera continues to expect to invest between $700 million and $800 million in 2020 to complete the second phase of the Wapiti gas plant and the Wildhorse terminal, as well as to advance the Pipestone gas plant and the KAPS pipeline system. With the capital investment for KAPS expected to commence in the second half of this year, Keyera will closely monitor market conditions and the needs of its customers and adjust its plans if necessary. Capital expenditures in 2021 are expected to decrease to between $400 million and $500 million as the Company completes its current growth capital program. With a strong balance sheet, Keyera expects to fund this capital program without issuing common equity, apart from the existing dividend reinvestment plan.
Keyera's Credit Worthy Customer Base
With three business segments, Keyera provides a variety of essential services to a diverse group of gathering and processing, liquids infrastructure and marketing customers. Overall, Keyera's broad customer base includes a high proportion of investment grade counterparties.
While this is a challenging and uncertain time in our industry, I am confident in Keyera's business outlook, said David Smith, Keyera's CEO. We have always been disciplined in the execution of our strategy, with a strong balance sheet, dedicated team, commitment to safety, and diverse portfolio of assets and services. During this time, we will continue to carefully navigate the short-term challenges and enhance the long-term success of Keyera and our customers. Keyera is closely monitoring the unfolding COVID-19 crisis and taking all prudent steps to ensure the health and safety of our employees and maintain reliable operations at our facilities.
✔️ Keyera Reiterates Confidence in its Business and Provides Marketing Guidance for 2020
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