Earnings call transcript: Keyera Q2 2025 beats EPS forecast, stock rises

Keyera Corp. (KEY), a midstream company with a market capitalization of $19.13 billion, reported its second-quarter earnings for 2025, showcasing a robust performance with earnings per share (EPS) of $0.55, significantly surpassing the forecast of $0.3811. This 44.32% surprise in EPS was achieved despite a revenue shortfall, with actual revenue of $1.37 billion falling short of the expected $1.46 billion. According to InvestingPro analysis, Keyera trades at a low P/E ratio relative to its near-term earnings growth and has maintained dividend payments for 23 consecutive years, demonstrating consistent shareholder returns. Following the earnings release, Keyera’s stock experienced a positive movement, rising by 1.12% to $43.32, reflecting investor confidence in the company’s strategic direction and operational efficiency. The stock currently offers a substantial dividend yield of 4.69%, and InvestingPro data shows analyst targets ranging from $18 to $43, with 6 additional exclusive ProTips available to subscribers.

Key Takeaways

• Keyera’s EPS of $0.55 exceeded forecasts by 44.32%.
• Revenue fell short of expectations by 6.16%, reaching $1.37 billion.
• Stock price increased by 1.12% post-earnings announcement.
• Fee-for-service segments showed strong margin growth, contributing $255 million.
• Keyera announced significant strategic projects and acquisitions.

Company Performance

Keyera demonstrated strong operational performance in Q2 2025, with key segments like fee-for-service showing an 8% year-over-year margin increase. Despite a decline in marketing realized margins compared to the previous year, the company’s strategic focus on capital-efficient growth projects and acquisitions, such as the Plains Canadian NGL business, has positioned it well in the competitive midstream sector.

Financial Highlights

• Revenue: $1.37 billion, down from forecasted $1.46 billion.
• Earnings per share: $0.55, up significantly from forecasted $0.3811.
• Adjusted EBITDA: $252 million, including $12 million in transaction costs.
• Distributable Cash Flow: $159 million or $0.69 per share.
• Net Earnings: $127 million.

Earnings vs. Forecast

Keyera’s EPS exceeded expectations by 44.32%, a substantial beat that contrasts with the revenue shortfall of 6.16%. This performance highlights the company’s effective cost management and operational efficiency, despite facing challenges in marketing realized margins.

Market Reaction

Following the earnings announcement, Keyera’s stock rose by 1.12% to $43.32, reflecting a positive investor sentiment. The stock remains within its 52-week range, with a high of $47.9 and a low of $37.8, indicating stable market confidence despite the revenue miss.

Outlook & Guidance

Looking ahead, Keyera is optimistic about its growth prospects, targeting a 7-8% annual fee-based adjusted EBITDA growth from 2024 to 2027. The company plans to invest $275-$300 million in growth capital and expects marketing realized margins to range between $310-$350 million. With a beta of 1.11, the stock generally trades with low volatility relative to the market. For detailed analysis and comprehensive valuation metrics, investors can access the full Pro Research Report, available exclusively on InvestingPro, which provides deep-dive analysis of Keyera among 1,400+ top stocks. Keyera’s strategic initiatives, including potential expansions in the Montney/Duvernay region and new rail logistics projects, underscore its commitment to long-term growth.

Executive Commentary

CEO Dean Setaguchi highlighted Keyera’s strategic advancements, stating, "We’re advancing capital-efficient growth projects, securing long-term contracts, expanding our integrated platform." CFO Eileen Maricar emphasized the competitive advantage of their marketing business, reflecting the company’s strong market position.

Risks and Challenges

• Potential market saturation in the Western Canadian basin.
• Fluctuations in demand for natural gas liquids (NGLs).
• Macroeconomic pressures that could impact capital projects.
• Integration risks associated with the Plains acquisition.
• Regulatory changes affecting the midstream sector.

Q&A

During the earnings call, analysts inquired about the integration of the Plains acquisition and its expected impact on Keyera’s market access. Executives expressed confidence in closing the acquisition by Q1 and emphasized the strategic value of expanding their integrated network. Additionally, discussions centered on optimizing existing assets and exploring new growth opportunities in the Montney/Duvernay region.

Full transcript - Keyera Corp. (KEY) Q2 2025:

Angeline, Conference Operator: Good morning. My name is Angeline, and I will be your conference operator today. At this time, I would like to welcome everyone to Keyera’s twenty twenty five Second Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ 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 the pound key. Thank you. I would now like to turn the call over to Dan Kokbritsen, general manager of investor relations. You may begin.

Dan Kokbritsen, General Manager of Investor Relations, Keyera: Thank you, 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 and Chief Commercial Officer and Jared Vistillney, Senior Vice President, Operations and Engineering. We’ll 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’ll 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, Keyera: Thanks, Dan, and good morning, everyone. Keyera delivered strong results in the second quarter and advanced its long term strategy. Strong commercial momentum led to the sanctioning of key growth projects. We also secured more access to LPG exports off the West Coast and announced a transformational acquisition that significantly expands our scale and enhances our service offering for customers. So far in 2025, we’ve sanctioned three capital efficient growth projects.

These are the Frac two debottlenecks, Frac three and Capstone four. In the last several months, we’ve also secured over 100,000 barrels per day of new long term contracted volumes on CAPS zones 1 To 4. These have been mostly integrated deals, and as a result, frac capacity at KFS, including both expansions, is now substantially contracted. These developments keep us well on track to achieve our growth target of 7% to 8% annual fee based adjusted EBITDA from 2024 to 2027, and they’ll continue to drive growth well beyond that timeframe. This continued visibility to fee for service growth gives us the confidence to continue to sustainably raise our dividend.

Yesterday, the Board approved another 4% annual increase. In June, we announced the transformational acquisition of Plains Canadian NGL business, a defining step that expands our scale, reach and service offering across the NGL value chain. This acquisition creates a much larger integrated network, adding more efficient connectivity to key demand hubs across The Prairies, Ontario and The US. It also strengthens our ability to serve customers across all NGL products, specifically enhancing our propane market access. For customers, it means better connectivity, optimized product flows, increased diversification and stronger netbacks.

For shareholders, the deal is expected to be mid teens accretive to DCF per share in the first full year, assuming $100,000,000 in near term synergies. Our fee based adjusted EBITDA will increase by approximately 50% over that period. It’s also important to note that this transaction is a great Canadian story. This deal brings strategic infrastructure under Canadian ownership, supporting energy security and ensuring that value creation and decision making remain right here at home. With this expanded footprint, Keyera is even better positioned to enable the next phase of volume growth.

The basin continues to benefit from low cost long life resources in the Montney and Duvernay. Increased demand from LNG exports, oil sands and petrochemical development is driving sustained increases in natural gas and NGL volumes. Our combined platform will play an important role in meeting that demand efficiently. With that, I’ll turn it over to Eileen to walk through our financial performance this quarter.

Eileen Maricar, Senior Vice President and CFO, Keyera: Thank you, Dean. We delivered solid financial results in the second quarter, driven by continued strength in our gathering and processing and liquids infrastructure segments. Adjusted EBITDA was $252,000,000 which includes $12,000,000 in one time transaction costs related to the Plains acquisition. This is compared Q2 twenty twenty four of $326,000,000 Distributable cash flow was $159,000,000 or $0.69 per share. Net earnings were $127,000,000 compared to $142,000,000 last year.

Our fee for service segments, which are G and P and Liquids Infrastructure, together contributed $255,000,000 in realized margins. This is up over 8% from the same period last year. This steady growth in high quality contracted cash flow continues to strengthen the foundation of our business and underpins the long term sustainability of our dividend. The Gathering and Processing segment delivered realized margin of $111,000,000 up from $102,000,000 last year. The increase was driven by strong performance in the North Region, including a new daily throughput record at Wapiti and higher throughput at Simonette.

Liquids Infrastructure delivered $143,000,000 in realized margin, up from $133,000,000 in the same period last year. This segment benefited from continued growth in long term contracted volumes on CAPS and strong utilization at our fractionation assets and condensate system. Marketing realized margin was $60,000,000 compared to $136,000,000 last year. The decline mainly reflects softer commodity pricing, as both periods included outages at AEF. Annual impact of the 2025 AEF outage remains estimated at $50,000,000 We ended the quarter with net debt to adjusted EBITDA of two times, well below our 2.5 to three times target.

This is excluding acquisition related costs. Our strong financial position enabled us to pursue the Plains acquisition while preserving our investment grade credit ratings and long term leverage targets. Turning to 2025 guidance. We are reaffirming our marketing realized margin range of $310,000,000 to $350,000,000 Growth capital is now expected to range between $275,000,000 to $300,000,000 compared to the previous range of $300,000,000 to $330,000,000 The difference is mostly related to project timing. Maintenance capital and cash tax guidance are unchanged.

With that, I’ll turn it back to Dean for closing remarks.

Dean Setaguchi, President and CEO, Keyera: Thanks, Eileen. Our strategy is clear and we’re executing it. We’re advancing capital efficient growth projects, securing long term contracts, expanding our integrated platform and creating value for both customers and shareholders. The Plains acquisition builds on this momentum and positions us for the next phase of growth. Combined with the strong macro tailwinds for volume growth, we are very confident in our long term outlook.

On behalf of Keyera’s Board of Directors and management team, I want to thank our employees, customers, shareholders, indigenous rights holders and other stakeholders for their continued support. With that, I’ll turn the call back to the operator for Q and A.

Angeline, Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session.

Speaker 4: Session.

Angeline, Conference Operator: Your first question comes from Rob Hope with Scotiabank. Please go ahead.

Rob Hope, Analyst, Scotiabank: Good morning, everyone. Regarding the next wave of growth projects, what’s looking the most attractive currently, whether it be kind of a GMP expansion in the North, some real expansions or future extraction projects?

Dean Setaguchi, President and CEO, Keyera: Hey, morning, Rob. It’s Dean. Thank you for the question. We’re very excited about our entire business to be honest. And, first of all, I’d start with the macro outlook.

We see a lot of continued growth across our basin, both for natural gas and crude oil growth, which obviously we support with diluent. So with that, we just see a lot of opportunity. We’re looking at our rail logistics options and some of that might be through the Plains acquisition and optimizing it, or it might mean building a new unit train facility on our Josephburg site. And so that’s a project that we’re doing some early stage engineering work on. Certainly we’re very excited about opportunities that we see in our G and P business up in the Montney Duvernay Fairway.

And certainly we see a lot of growth up in that area. So we’re looking at opportunities where we may be able to acquire some assets and enhance them. Certainly looking at ways that we can expand our capacity at our existing facilities and potentially a new greenfield facility. So again, lots of opportunity. I would emphasize that any opportunity that we pursue on the G and P side will be based on very solid contracting for any assets or investments we make in that part of our business.

But also the contracts will be integrated contracts with our downstream caps fractionation and marketing business as well. So we just see tremendous opportunities to provide a lot of great service for our customers to enable them to grow. Outside of that, I might also mention that some people have made note of a condensate fractionator, a license that we applied for very recently. And what it is, is it’s a fractionator that would process condensate into various hydrocarbon products. And that would include light to mid weight condensates, NGLs and also crude oil.

And anyway, this is still early stages. So we’re working on engineering and also contracts with customers to potentially toll through a facility like that. So anyway, those are just some of the examples of the opportunities that we see long term, but at the same time, don’t want to get ahead of ourselves. And we do have a lot of projects as you know, that we need to execute well on in addition to the Plains acquisition. So we have a very full plate, but we have a team that’s very eager to do a great job at it and I have full confidence that we will do it too.

Rob Hope, Analyst, Scotiabank: Great. Appreciate that. And then maybe sticking with contracting. So good to see the KFS is largely contracted now. Looking forward, how do you expect your contracting strategy to evolve as you layer in the Plains assets as well as kind of what you would target for fees for service and marketing?

Dean Setaguchi, President and CEO, Keyera: Well, one thing I’d like to point out, maybe I can throw it over to Jamie as well, but I just point out that, to your point, we’ve signed a lot of long term contracts across our business. The demand for our services is very strong as you saw. 100,000 barrels of contracting on Capstone one to four, I’m very pleased with that. But again, a lot of those contracts tied to volumes in through our frac and into our marketing business. So on an enterprise level, we can generate superior results.

When we look at the combination of planes and with those growing contracted fee for service cash flows, overall our business is going to be roughly 70% fee for service and 30% marketing with the planes assets too. So the overall composition isn’t going to be significantly different. We’re going to apply a very disciplined and rigorous risk management strategy to planes straddle business. Again, no different than the discipline we apply to our marketing business today. So yes, it’s a bit different, but overall the composition of our business doesn’t change that much.

And we think that the marketing piece will again be a differentiator that helps us generate best in class return on capital metrics. But anything else you want to add to that?

Jamie Urquhart, Senior Vice President and Chief Commercial Officer, Keyera: Yeah, the only thing I’d add Dean is that we are confident that with the acquired assets with Plains that does have some commodity exposure that we will adhere to the same disciplined risk management process that we do in our existing business. And we’re very comfortable with the assets that we’re bringing in through the Plains acquisition.

Speaker 7: That’s great. Thank you. Thanks. Have a good day.

Angeline, Conference Operator: Thank you. The next question comes from Robert Catellier with CBIC Capital Markets. Please go ahead.

Robert Catellier, Analyst, CBIC Capital Markets: Hey, good morning. I wondered if you could just comment on any initial customer feedback you’ve had on your agreement to buy the Plains NGL assets and how that might influence the Competition Bureau strategy.

Speaker 7: Yeah, good morning, Rob. Yeah,

Dean Setaguchi, President and CEO, Keyera: thanks for the question. And you know what, I can tell you that our customers have been very supportive generally overall. I think that they can see what we’re trying to do for our industry, which is to create very efficient solutions for our customers that maximize their netbacks. And they can see that it’s still a very competitive space. Any customers that if you look at a situation like where we have our CAPS and Pembina’s Peace Pipeline, anybody that is in that fairway knows that we compete very hard with Pembina and our goal is to be the most competitive integrated midstream operator.

And with that, we aim to provide our customers the very best service and again, to maximize their netback. So I think that they can see that. It’s not to say that they don’t have any concerns, but certainly we’re addressing what those any questions that they might have. As for the Competition Bureau, all I can say with that is that we’re certainly working with the Competition Bureau. It’s a process that is necessary to get the closing.

We’ll provide an update when it’s appropriate. And I just want to reiterate that we’re very confident that we’ll close this deal as disclosed in every material aspect.

Robert Catellier, Analyst, CBIC Capital Markets: Yeah, that’s great. Obviously there’s a lot more to it than just price. Obviously the entire netback and flexibility matters a lot. And I’m just curious, you’re still very confident in the timeline as well, given that you’ve just started up with the Competition Bureau. Is that timeline still on the high level of confidence?

Dean Setaguchi, President and CEO, Keyera: Yeah, we believe in the timeline, but obviously some of that is out of our control. We’re going through the process. We’re working very closely with them and planes through this process. So we believe Q1 is a sweet spot, but again, we’ll provide an update when it’s appropriate.

Robert Catellier, Analyst, CBIC Capital Markets: Okay, great. Last one for me then. Just on the Duvernay, I wondered what your specific plans are there. Get the sense that maybe activity there is picking up. Do you need to add any capacity or services to help support the Duvernay?

Dean Setaguchi, President and CEO, Keyera: Sure, I’ll turn that one over to Jamie.

Jamie Urquhart, Senior Vice President and Chief Commercial Officer, Keyera: Yeah, Rob, thanks for the question. I guess I want to get specific on what portion of the Duvernay you’re referring to. Is it the West Shale around our Roombi gas plant? Or are you talking more up in around our Simonette gas plant or both?

Robert Catellier, Analyst, CBIC Capital Markets: I was thinking more Simonette.

Jamie Urquhart, Senior Vice President and Chief Commercial Officer, Keyera: Yeah, so, you know, we’re the Simonette gas plant. We actually, I think people will have noticed we had more throughput through that facility over the last couple of quarters than we have historically. And we’ve had some good success in being able to attract additional volumes, but we’re also consciously looking to see what that facility can do. Originally, it wasn’t built for a Montney Duvernay type gas. And so we’ve actually gotten some comfort that we’re going to be able to get the effective capacity at that facility up by about 50,000,000 a day from about the low 200s the higher 200,000,000 a day range and the associated liquids that come with it.

And ultimately, obviously that is destined for the CAPS pipeline and downstream markets. So we’re right now have a higher level of confidence in being able to contract with the Duvernay or Montney producers in that area. And then we’re also doing some further work to see how we can unlock even more natural gas and liquids capacity over the next year or two.

Speaker 4: Okay, that’s excellent. Thank you.

Eileen Maricar, Senior Vice President and CFO, Keyera: Thank you. The

Angeline, Conference Operator: next question comes from Aaron MacNeil with TD Cowen. Please go ahead.

Aaron MacNeil, Analyst, TD Cowen: Hey, morning all. Thanks for taking my questions. Dean, maybe to build on Rob Hope’s question, with fractionation capacity now fully contracted, does that make it more challenging for you to provide that sort of full path service and contract incremental volumes on CAPS? And then just as an extension of that, how should we think about spare capacity on the Plains fractionation assets and what potential connectivity to CAPS might that create if you’re able to successfully?

Dean Setaguchi, President and CEO, Keyera: Yeah. Thanks for the question, Aaron. Certainly And we’re very pleased with the long term contracts that we’ve signed on our frack complex at KFS. What I’d say is that it’s not a 100% contracted. When we say substantially all, we’re kind of saying around the 90% and greater mark.

So we do have some capacity. Most of the contracts are long term and when I say long term ten plus years, but we do have some a few shorter term contracts that will be expiring over the next few years. So we will have some capacity available to work with. Certainly we are going to, when we integrate the Plains assets one of our objectives too will be to improve reliability overall between both complexes. Some of that is with utilizing our storage more effectively between the two complexes to manage any short term outages.

And again, but also keep the reliability run rates super high. So those are some of the things that we’re looking at in capacity. Certainly we’re here to provide the capacity that the industry needs. So if there’s more demand in the future, we’re going to be looking for the most capital efficient way between the planes and cure assets to add that capacity when it’s needed. So I certainly believe we could bridge to that time period when we see growth above and beyond what we’re building already.

Go ahead, Gene.

Jamie Urquhart, Senior Vice President and Chief Commercial Officer, Keyera: Yeah, the only thing I’d add, Aaron, is that he made reference to CAPS and PFS, Plainsport Saskatchewan. We’re already in the process of having Plainsport Saskatchewan be connected to CAPS. That commitment was made a couple of years ago to help support customers on CAPS and our commitment to customers that they’re allowed to connect to any fractionator that they so choose off of the CAPS system. It’s an open system for our customers.

Aaron MacNeil, Analyst, TD Cowen: Makes sense, and that’s what I was expecting in terms of other contracts potentially rolling and allowing you to re up. And then maybe just keeping with the 100,000 barrels per day of contracted capacity on CAPS, can you give us a sense of how those contracts layer in by quarter or year and if we need to see any compression adds to the pipe in order to accommodate those contracts?

Eileen Maricar, Senior Vice President and CFO, Keyera: Hi, Erin, it’s Eileen. I can try to answer that question. I think just really stepping back, it is, we have that seven to 8% EBITDA growth that’s from our existing 2027, that’s our existing CAPS one to three, and beyond that, our new projects like Zone 4 and all of this additional contract, whether it’s on the fractionation expansions as well as Zone 4, those will continue to ramp up all the way into even the next decade. But the ramp on Zone 4 will be quicker than what we saw on Zones 1 To 3, when we initially brought CAPS on. It will be a quicker ramp as we bring on Zone 4, but again, this will just help to push out growth well beyond that 2027 timeframe and well into the 2030s.

Dean Setaguchi, President and CEO, Keyera: Yeah, and so just to further add on to Eileen’s comments is that when we look at our profile, it’s really in the early into the new decade is where we reach the max capacity of the contracts that we signed. Not the max capacity, the the max production flow of the contracts that we signed. Early twenty thirties.

Aaron MacNeil, Analyst, TD Cowen: Okay. That’s that’s helpful. Thanks. I’ll turn it back.

Speaker 7: Thank you.

Angeline, Conference Operator: Thank you. The next question comes from Maurice Toi with RBC Capital Markets. Please go ahead.

Dan Kokbritsen, General Manager of Investor Relations, Keyera0: Thanks, and good morning, everyone. Sticking with the theme about contracting here. You’ve highlighted that over the past several months, you’ve added more than 100,000 barrels a day of new long term contracts at Caps, Those are fully contracted at KFS. Can

Speaker 4: you give us

Dan Kokbritsen, General Manager of Investor Relations, Keyera0: a flavor as to what generally are the top reasons your customers choose you? And also take the opposite direction where what are some of the reasons why they don’t choose you, which perhaps offer you upside if and when a deal like claims is closed or or through other deals that could improve your offering?

Dean Setaguchi, President and CEO, Keyera: That’s a great question. They love us now. Listen, I I think there’s a number of reasons why customers deal with us. I do think that they appreciate the fully integrated service offering that we do provide and with that we can be very competitive when we’re offering a bundled deal. So I think that they appreciate our ability to access high value markets for their NGLs, which help them maximize their netbacks.

And as we said with Plains acquisition, this is going to enhance that market access out to Eastern markets both in Canada and The United States. So it’s going to give them a lot more optionality overall. I think that they like the reliability of our system and it’s something that we continue to improve and we’re going to be able to improve reliability and again optionality with the combined assets of planes. So this is only getting better for our customers with the combination. So lastly, we try to be very customer focused.

It’s not like one solution fits all. We try to understand what our customers’ needs are, what’s important to them and what we can offer to help them successfully execute their business plan. So while we’re smaller, I feel like we can be more custom fitting to the needs of our customers and hopefully nimbler. Jamie, if there’s anything else you want to add?

Jamie Urquhart, Senior Vice President and Chief Commercial Officer, Keyera: No, I think you hit the reason why they choose us. Maybe I’ll touch on why historically they haven’t supported or chosen us. And that’s just uncertainty whether we had a project or not. And now that we have the project, and you’ll see that when we announced the sanction of Zone 4, we had 75,000 barrels and we’re now at 100. So once you have a real project, I think there’s greatest momentum that we’ve got is yet to come.

Dan Kokbritsen, General Manager of Investor Relations, Keyera0: Thanks for the wholesome answer. If I could just finish off with another big picture, but perhaps a longer term thought here. Just curious how you think over the long term, how NGL molecules will move differently from how it does today. Obviously, today, lot of liquids rich growth are being piped and fracked to and at support task, including caps and PFS. But as you see more export heading out west, do you see the potential for more midstream assets in Northeast BC and Northwest Alberta, and what does that all mean to you and your facilities?

Dean Setaguchi, President and CEO, Keyera: Yeah. That’s a great question. I mean, certainly, we see the runway for a lot of growth in natural gas and with that a lot of NGLs in Western Canada. And obviously that’s what’s driven the contracting that we’ve seen so far. There’s absolutely, and I certainly don’t see, I’ve been asked before whether there will be an LPG pipeline built to the West Coast.

There’s no world I see that you can justify the capital cost of building a pipeline like that to the West Coast because there’s just not enough volumes to support it. So I think that would be cost prohibitive. So a lot of barrels will still move by rail. Some of that, as you suggested, I certainly believe that there’s going to be more field frac projects in whether that’s in Northwest Alberta or into BC. I think we’ll see more of that and there will be some product that gets railed directly to the West Coast.

But anybody that moves any product by rail would also appreciate that rail is not ratable like a pipeline. So whether weather frees up, you get strikes, you get whatever other issues that call your cars get bunched up, whatever happens, there’s disruptions. So if you don’t have enough storage and on-site storage above ground storage is very expensive. So if you can’t ship all your product for a couple of weeks, that adds to a lot of dollars and a lot of value. If you have to truck all that, that’s super expensive.

And so the reliability of having a pipe to underground cavern storage, to the hub where all of those NGLs, a lot of them are consumed already, still

Speaker 4: the point

Dean Setaguchi, President and CEO, Keyera: I’m trying to make is still going to be a lot of demand for those products to still go to Fort Saskatchewan. So I see a little bit of all above where there’s still going be field track, but there’s still going to be a lot of demand to get to the hub in Fort Saskatchewan. And just maybe the other point I’d like to make is that the West Coast, obviously we think that there’s growing demand in Asia and that’s a good place to be, the FEI index, but I’d also point out that there’s also high demand centers locally and we want to make sure that we can provide optionality for our customers because a lot of times they don’t want to put all their eggs in one basket or one market. So again, with the Plains acquisition, we’re also going to be able to help them access those Eastern markets. And I can tell you when it’s cold, they need the product and they’re going to price the product.

The products can get priced to stay in Canada so that they get the ability to heat their homes and things like that. So bottom line, I think there’s going be great demand still at KFS for Saskatchewan.

Speaker 7: Perfect. Thank you very much. Thank you.

Angeline, Conference Operator: Thank you. The next question comes from Ben Pham with BMO. Please go ahead.

Speaker 4: Hi, thanks. Good morning. Maybe to expand on that last question, but more specifically on the propane market in Western Canada. Can you comment also similarly on the flow dynamic that you think could anticipate LPG exports has been viewed as taking market share from other regions? Can you comment on that?

And whether there’s any potential impact on the Sauna market or The U. S. Export side of things?

Dean Setaguchi, President and CEO, Keyera: Well, thanks for the question, Ben. First of all, like I say, the NGL market is just getting over and over supplied. We are a supply base basin. We have a very small population. So our consumption relative to how much we produce that is becoming more imbalanced.

So you’re just going to have a growing oversupply of product that has to clear the market somewhere. So yes, the West Coast Asian markets, yes, they’re going to be a very valuable market to access and clear some of that excess surplus product. But what we’ve seen is that in the Mid Continent US, in the Northeast US and places like you get into Wisconsin and also into Michigan and Sarnia, you get into the Prairies and Canada. I mean, it gets cold here as you know. When that happens, it’s as pricey inelastic, like they need to heat their homes.

And there’s a lot of homes that will never be connected to natural gas. And so they rely a lot on propane. And so when you get demand spikes because of weather, they need the product and it’s going to price higher than the West Coast because it has to make sure that product goes there. So I just think it’s always great to have options and optionality of accessing high value markets because the highest place to send a molecule propane changes from time to time and even during the same season. And I’m really happy that we can hit any one of those markets and take advantage of the strong pricing.

Speaker 4: Okay, I understood. So, sounds like maybe there’s some potential market share changes, but the absolute movement is on a trend up versus down.

Speaker 7: I’d say yes.

Speaker 4: Thanks for that. And maybe my next question, you mentioned a reference to some acquisition activity. How do you think about framing that inorganic strategy now with a large deal you’re getting approval for and then integrating afterwards? Are you pulling back on the b t BD side of things, telling those folks to reallocate their time? Are you still looking actively on transactions considering this is just where your balance sheet is heading towards?

Dean Setaguchi, President and CEO, Keyera: Yeah, I’d say overall that we’re still looking for opportunities to enhance our integrated service offering. And at the top end of that services is our G and P business. So, we’re not looking to do big acquisitions right now or anything like that, but can we look at some smaller tuck in opportunities that integrate well with our existing business? Absolutely. So, we’re in the business to provide a service for our customers and we can’t start it and stop it.

It’s business that continues every day. The great thing is that with the financial plan that we executed on and Eileen can speak to that in more detail, we’ve left ourselves some flexibility to maintain those activities. So Eileen, is there anything you want to add?

Eileen Maricar, Senior Vice President and CFO, Keyera: No, just to add that, yeah, as Dean mentioned, it is the strength of our balance sheet and it was really getting our base business, execution of it, the growth in our fee for service that allowed us to do such a transformational acquisition. And so, the funding plan that we did put in place was intended to maintain our targeted leverage at that 2.5 to three times so that it didn’t stop opportunities because we do see so many and we want to continue to grow.

Dean Setaguchi, President and CEO, Keyera: Yeah, maybe one thing, more thing I’d just like to add is that the bulk of our people in our company are still driving our business and working hard to make it more competitive and more profitable. And we have a segregated team that is going to be dedicated to the integration and bringing in the planes business and combine it with ours when closing happens. So we have different work streams in our company, but our base business is still a big focus of most of our people.

Speaker 4: I got it. If I may, just one quick follow-up on that topic with gas processing transactions. Is the focus more looking at that North Montney area where maybe utilization is already quite strong, you’re bolstering an entire footprint? Or is it more maybe the soft region where you can buy for value and enhance and integrate?

Dean Setaguchi, President and CEO, Keyera: I mean, again, we’re here to supply services where there’s greatest demand and right now the greatest demand is up along the Montney Duvernay Fairway up in our Northern region. We still have capacity available in South Region. So again, most of our focus down there is to fill what we have.

Speaker 4: Okay, got it. Thank you.

Speaker 7: Thank you.

Angeline, Conference Operator: Thank you. The next question comes from AJ O’Donnell with DTH. Please go ahead.

Dan Kokbritsen, General Manager of Investor Relations, Keyera1: Morning, everyone. I was wondering if we could go back to just overall NGL competition in the basin. In light of some of the contracts, incremental contracts that you guys have been able to sign with Capstone one to four. Just thinking over the longer term and maybe some of the comments from larger producers in the basin about overall transport rates are looking to save on overall transport rates by the end of the decade. How would you characterize the contracts that you’ve been signing?

Have they been pretty competitive from a price advantage? Or are we getting into a situation where we start to build out all this NGL infrastructure in the basin and we could potentially see some margin compression later on in the decade as things start to roll off and recontract.

Dean Setaguchi, President and CEO, Keyera: Good morning, AJ. And again, thank you for the question. Certainly the basin is very competitive and that’s why we have such a competitive marginal cost supply overall for the basin, which is great. And what I’d say is that I said this earlier is that our objective is to build the most competitive integrated midstream platform. And our goal is to keep on improving every day and this is a relentless pursuit that will never stop.

And so we’re very pleased that we could be competitive to sign and attract 100,000 barrels of supply onto our system. And that led to obviously including downstream contracts through our frack and logistics and marketing business. So we can be very competitive. I do want to reiterate that all of our projects are well within our capital return expectations. So they fill that and they’re well within the range on an independent basis.

And again, when you look at it on an integrated basis, we feel very confident that we’re going to deliver superior return on capital returns for our shareholders. So we believe this is very sustainable. We think that there’s going to be more consolidation in the basin and if that happens, again, we’re very well positioned to compete for their business in that world and still deliver strong returns for our shareholders.

Jamie Urquhart, Senior Vice President and Chief Commercial Officer, Keyera: Yeah, I think the only thing I’d add Dean, and I agree a 100% with everything you said is that, as we think about our frac suspensions coming online, as Dean has said, is that the way we looked at it is we contracted fracs one, two, and then we contracted frac three. So when you think about fully contracted, it’s not just frac three, a bunch of contracts are rolling off on one and two. We looked at it from a stacked perspective and it’s all of our frac complex that has a high degree of contracting. The contracts that are rolling off and there’s some, a huge amount. We think about it with respect to being able to offer that integrated offering as Dean said.

The fact that we’ve got another fractionation expansion coming online next year might create some very short term oversupply in the market, but the fundamentals and the drilling activity that we’re seeing is our view is that frac capacity within our base is going to be highly utilized in the long term and can’t speak for our competitor, but we’re already looking at the next frac expansion. We’re not looking to wait another seven, eight years like we did the last time between Frac 2 and Frac 3. We believe that the basin is going to require more frac capacity much sooner than that.

Dan Kokbritsen, General Manager of Investor Relations, Keyera1: Great. I appreciate that detail. Maybe just the last one for me. I know it’s only been a couple of months in and the Plains assets are not quite in your hands yet. But you guys have talked about your prudent risk management activities.

And just wondering, as you look out over the frac forward curves into next year, maybe what your ability is like? Have you been able to lock in any additional margin or hedges on that business? Yeah, just any comments on that? Thank you.

Eileen Maricar, Senior Vice President and CFO, Keyera: Hi, AJ. Thanks for the question. And yeah, I think I can speak generally about our hedging. As we mentioned earlier, in terms of the pro form a business mix, there’s not going to be that significant of a change as to the amount of marketing. It’s about 30%, which is kind of what we’ve seen over the past few years from our standalone business.

And again, we view our marketing business as a true competitive advantage because we have the storage, the logistics, and the risk management discipline. As it relates to hedging specifically, really our philosophy isn’t going to be very different. What we do is we look to protect inventory, which is really key, and we look to lock in future margins. So when it comes to the frac spread exposure, the key elements to this is ECO gas, propane in particular, and butane as well as FX. These components already fit very well within our existing risk management program.

So, I think we feel very confident that we will be able to manage this as we close and get into next year.

Dean Setaguchi, President and CEO, Keyera: Yeah, I’d also add, Ajay, that we can’t speak to this in a lot of detail, but I’d say that there are hedges in place that gives us confidence with our mid teens DCF accretion in the first full twelve months of closing.

Speaker 7: Great. Thank you, everyone. Thank you.

Angeline, Conference Operator: Thank you. The next question comes from Patrick Kenny with National Bank Financial. Please go ahead.

Dan Kokbritsen, General Manager of Investor Relations, Keyera2: Thank you. Good morning, everyone. Just on the G and P margin front, I know LNG Canada is still working through some growing pains. But in light of where AECO prices are at, just wondering if you could comment how you’re seeing fees and overall margins holding up across your G and P portfolio going forward, especially in the South where, whether or not you might need to share the pain at least over the near term just to support current production levels at whether it’s Rimbey, Brazeau or Strachan?

Dean Setaguchi, President and CEO, Keyera: Hey Patrick, good morning. You know, thanks for the question. I’ll I’ll turn this over to to Jamie, but, you know, I just I just wanna make a couple quick points. One is that about 70% of our margins from our G and P business is generated from the North. So that’s more linked to condensate pricing.

So it’s less elastic to natural gas prices. So 30% is in the South. What I’d say is that we’ve seen low prices for a long time, so this is nothing new. So volumes have been pretty steady because of that, but I’ll turn over to Jamie.

Jamie Urquhart, Senior Vice President and Chief Commercial Officer, Keyera: Yeah, I was going to make the same point is that sharing in the pain, we’ve been sharing in the pain for a period of time now Patrick. Obviously everybody’s aware of where gas prices have been over the last few years. The point I’d like to make is that the growth that we see around some of our facilities have some liquids associated with them. We’re optimistic with respect to some of the growth opportunities we do see in the South that spends all of our facilities, not just around the Rimbey gas plant, but also the facilities that we do have have great interconnectivity, deeper cuts traditionally, and they have great interconnectivity to market. So if you look at the plays that we service in the South, there’s still a pretty significant liquids component and value proposition associated with them.

That still makes it attractive for customers to drill wells. Now, would they prefer gas prices to be north of $2.03 dollars Of course, but they can still make it work for them. I think you would have seen there’s just more plays that are developing to be a little bit repetitive around the Duvernay, the Belly River, we’re obviously in conversations with customers to help serve their needs on those emerging plays that are more liquids based. Yeah,

Dean Setaguchi, President and CEO, Keyera: and maybe one more thing to add Patrick. I’d also say that Jared’s team has done a lot of work to find optimization efficiencies across our entire portfolio, including our self GMP. And with that, it helps enable us to provide a service to our customers at a price point where it makes sense for them, but where we can also generate a margin as well.

Dan Kokbritsen, General Manager of Investor Relations, Keyera2: Got it. Okay. Thanks for that. That’s great color. And then just on the shift in some growth CapEx into $26,000,000 I know it’s not a huge number, but just wondering if you had a bit more color on which project or projects might be experiencing a bit of a delay, whether it’s specific to the project or more macro related, but also maybe what initiatives your team might be undertaking just in order to maintain the target in service dates?

Eileen Maricar, Senior Vice President and CFO, Keyera: Hi, Patrick. I can start and maybe Jared has something to comment. Honestly, reduction in growth CapEx, it’s really just a shift in timing. It’s largely just re forecasting, and so there’s really been no impact to timing, schedule, overall cost of any of the key projects that we have sanctioned. So I would say overall, our guidance that we provided in December, I think we said over ’26 and ’27, we would average $350,000,000 to $450,000,000 in each of those years.

You know, I think you can expect that one year may have higher spend versus the other, but on average that still remains.

Dan Kokbritsen, General Manager of Investor Relations, Keyera3: Yeah, what I’d add Patrick is, you know, as some of that timing was shifting is that, know, the commercial arrangements were coming together on some of those projects. Our engineering team was was in lockstep with our commercial group and understood that. We were able to make a bunch of adjustments in terms of kind of sequencing and timing around those projects, when we ordered some of the long lead equipments and made some of those commitments to still preserve the ISDs that we originally planned for.

Dan Kokbritsen, General Manager of Investor Relations, Keyera2: Okay, that’s perfect. Thanks everybody.

Speaker 7: Thanks, Patrick.

Angeline, Conference Operator: Thank you. There are no further questions at this time. Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.

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