FIXED INCOME INVESTOR PRESENTATION A final base shelf prospectus - - PowerPoint PPT Presentation

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FIXED INCOME INVESTOR PRESENTATION A final base shelf prospectus - - PowerPoint PPT Presentation

FIXED INCOME INVESTOR PRESENTATION A final base shelf prospectus containing important information relating to the securities described in this document has been filed with the securities regulatory authorities in each of the provinces of Canada. A


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FIXED INCOME INVESTOR PRESENTATION

J u n e 1 3 - 1 5 , 2 0 1 8

A final base shelf prospectus containing important information relating to the securities described in this document has been filed with the securities regulatory authorities in each of the provinces of Canada. A copy of the final base shelf prospectus, any amendment to the final base shelf prospectus and any applicable shelf prospectus supplement that has been filed, is required to be delivered with this document. This document does not provide full disclosure of all material facts relating to the securities offered. Investors should read the final base shelf prospectus, any amendment and any applicable shelf prospectus supplement for disclosure of those facts, especially risk factors relating to the securities offered, before making an investment decision.

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Disclaimer

In the interests of providing Keyera Corp. (“Keyera” or the “Company”) investors and potential investors with information regarding Keyera, including Management’s assessment of future plans and operations relating to the Company, this document contains certain statements and information that are forward-looking statements or information within the meaning of applicable securities legislation, and which are collectively referred to herein as “forward- looking statements". Forward-looking statements in this document include, but are not limited to statements and tables with respect to: capital projects and expenditures; investment opportunities; strategic initiatives; anticipated producer activity and industry trends; and anticipated performance. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward looking statements involve numerous assumptions, as well as known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur and which may cause Keyera’s actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by the forward-looking statements. These assumptions, risks and uncertainties include, among other things: Keyera’s ability to successfully implement strategic initiatives and whether such initiatives yield the expected benefits; future operating results; fluctuations in the supply and demand for natural gas, NGLs, crude oil and iso-octane; assumptions regarding commodity prices; activities of producers, competitors and others; the weather; assumptions around construction schedules and costs, including the availability and cost of materials and service providers; fluctuations in currency and interest rates; credit risks; marketing margins; potential disruption or unexpected technical difficulties in developing new facilities or projects; unexpected cost increases or technical difficulties in constructing or modifying processing facilities; Keyera’s ability to generate sufficient cash flow from operations to meet its current and future obligations; its ability to access external sources of debt and equity capital; Keyera’s ability to maintain its corporate credit rating; credit ratings for securities that may be issued in the future; current and future counterparty risk profile; changes in laws or regulations or the interpretations of such laws or regulations; political and economic conditions; and other risks and uncertainties described from time to time in the reports and filings made with securities regulatory authorities by Keyera. Readers are cautioned that the foregoing list of important factors is not exhaustive. The forward-looking statements contained in this document are made as of the date of this document or the dates specifically referenced herein. For additional information please refer to Keyera’s public filings available on SEDAR at www.sedar.com. All forward-looking statements contained in this document are expressly qualified by this cautionary statement. Except as required by law, Keyera does not undertake any

  • bligation to update or revise any forward-looking information.

This document also contains non-GAAP measures. See the section titled “Non-GAAP Financial Measures” in Keyera’s 2017 Annual Management Discussion and Analysis and 2018 Q1 Management Discussion and Analysis for further information.

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Keyera Attendees

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Steven Kroeker

Senior Vice President and Chief Financial Officer

  • Over 25 years experience in the oil and gas industry
  • 12 years with Keyera
  • Over 5 years as CFO; Over 6 years as VP Corporate Development
  • 9 years in Energy Investment Banking
  • MBA from Ivey Business School and B.Comm from University of Calgary

Avery Reiter

Director, Treasury

  • Over 22 years experience in the oil and gas industry
  • 17 years with Keyera
  • CPA and B.Comm from the University of Alberta
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SLIDE 4

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Agenda

I. Overview of Keyera II. Business Unit Overview

  • III. Growth and Capital Expenditures
  • IV. Financial Overview
  • V. Conclusion
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SLIDE 5
  • I. Overview of Keyera

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Structure Canadian Listed Public Corporation Stock Ticker KEY Market Capitalization1 $6.9 billion Adjusted EBITDA2 (LTM) $658 million Debt3 $1.8 billon Enterprise Value 1,3 $8.7 billion Credit Ratings DBRS: BBB Stable S&P: BBB/Stable Debt3 / Capitalization4 42.0% Debt3 / Adj. EBITDA2 (LTM) 2.8x Dividend Payout Ratio (LTM) 60% Dividend Yield1 5.01% ($1.68/yr dividend)

Overview of Keyera

1. Based on shares outstanding and closing share price of $33.51 on March 31, 2018. 2. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, accretion, impairment expenses, unrealized gains/losses and any other non-cash items such as gains/losses

  • n the disposal of property, plant and equipment. EBITDA and Adjusted EBITDA are not standard measures under GAAP. See section of the MD&A titled “EBITDA” for a reconciliation of Adjusted

EBITDA to its most closely related GAAP measure. As of March 31, 2018. 3. Includes current portion of long term debt As of March 31, 2018. 4. Capitalization equals long term debt plus total shareholders equity as of March 31, 2018.

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Investment Highlights

  • Long life integrated assets in the right liquids rich areas
  • Strong business risk profile
  • Provides essential services for producers
  • 20 year track record of profitable operations and project execution
  • Disciplined financial approach with a proven commitment to a strong

balance sheet

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SLIDE 8

Our History

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SLIDE 9

Our Business Strategy

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Our vision: To be the North American Leader in Delivering Midstream Energy Solutions

  • In support of this vision, Keyera has maintained a consistent commitment to its strategy of

delivering steady value growth built around sustainable, competitive energy facilities.

  • As part of this strategy, Keyera:
  • Focuses on operational safety
  • Strives to provide reliable midstream services at a competitive price
  • Pursues opportunities to increase throughput at its existing facilities
  • Invests in expansion and optimization opportunities to meet its customer needs and

complement its service offerings

  • Selectively pursues acquisitions
  • Builds on the interconnectivity of its infrastructure and its integrated business model
  • Maintains a conservative capital structure
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SLIDE 10

An Integrated Value Chain

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RAW GAS

Gathering Compression Sweetening NGL extraction

E X T R A C T I O N C O N S U M P T I O N

Gathering & Processing 37% Liquids Infrastructure 41%

Fractionation Storage Transportation Marketing

Ethane Propane Butane Condensate Iso-octane

F E E F O R S E R V I C E M AR G I N

E N D M A R K E T S

OIL SANDS

Marketing 20% LIQUIDS BUSINESS UNIT LTM Realized Margin1

  • 1. Realized margin is defined as operating margin excluding unrealized gains and losses from risk management contracts from the Marketing segment. Realized margin is not a standard measure under
  • GAAP. See section of the MD&A titled “Results of Operations: Marketing” for a reconciliation of Operating Margin to Realized Margin as it relates to the marketing segment only. Includes intersegment
  • transactions. LTM is last twelve months ending March 31, 2018.
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  • 1. Realized margin is defined as operating margin excluding unrealized gains and losses from risk management contracts from the Marketing segment. Realized margin is not a standard measure under GAAP. See

section of the MD&A titled “Results of Operations: Marketing” for a reconciliation of Operating Margin to Realized Margin as it relates to the marketing segment only. Includes intersegment transactions. This graph excludes other income from production associated with Keyera’s oil and gas reserves.

Diversified and Growing Realized Margin

Fee-for-Service Business Underpins Balanced Growth

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Percent of Last Four Quarters Realized Margin1 20% 41% 37%

Fee-for- Service (including Take-or-Pays)

2%

Production (not shown) $0 $100 $200 $300 $400 $500 $600 $700 $800 03/31/17 06/30/17 09/30/17 12/31/17 03/31/18 Millions Realized Margin (Rolling Last Four Quarters)1 Gathering & Processing Liquids Infrastructure Marketing

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  • II. Business Unit Overview

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Gathering and Processing Overview

  • Well maintained, long-life facilities
  • ~3.0 bcf/d licensed gross capacity1
  • 18 active gas plants; 16 operated by Keyera
  • 2 gas plants under development
  • Extensive gathering systems
  • Network of gathering pipelines tied into existing gas plants
  • >4,000 kilometres of pipelines operated by Keyera
  • Large capture areas create franchise regions
  • Value Added Services
  • Almost all of the capacity can extract NGLs
  • Significant sour gas/acid gas injection expertise
  • 1. Licensed capacity is not equivalent to actual operating capacity. Actual operational capacity can be lower as it depends on
  • perating conditions and capabilities of functional units at each plant.

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Gathering and Processing Infrastructure

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Gross processing capacity shown

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Gathering and Processing Revenue Model

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  • Fee-for-service revenues, including take-or-pay
  • Ownership of natural gas and NGLs remains with

producers

  • No direct commodity price exposure in fee structure
  • Majority of fees are flow through with two

components

  • Operating cost recovery fee and capital fee
  • Recovery of most turnaround costs
  • Tied-in gas generally stays tied-in
  • Customer base is well diversified and includes large,

credit worthy producers

  • Additional take-or-pay revenues expected as capital

invested

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Liquids Infrastructure Overview

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  • Process raw NGL mix into saleable

products, such as propane, butane and condensate

  • Operate in the Fort Saskatchewan /

Edmonton NGL and diluent hub

  • Highly connected and contracted diluent

hub

  • Fractionation, storage, transportation,

rail and truck terminals

  • Operate Alberta EnviroFuels iso-octane

facility, only such facility in North America

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SLIDE 17

Liquids Infrastructure

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Gross processing capacity shown

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Liquids Infrastructure Revenue Model

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  • Fee-for-service revenues, including take-or-pay revenues
  • Negligible exposure to “frac spread”
  • Annual, multi-year, and long-term contracts
  • Long-term contracts (e.g. Imperial, Husky, Cenovus and

Fort Hills shippers (Suncor, Total, Teck) related to oil sands services)

  • Keyera Marketing pays market-based fees when using

Keyera infrastructure services, including Alberta Envirofuels

42% External (3rd Parties)

2017 Liquids Infrastructure Revenue

58% Keyera Internal

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SLIDE 19

Marketing Overview

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  • Purchases NGL mix from producers behind

Keyera operated gas plants and other gas plants

  • Utilizes Keyera facilities to process (de-ethanize or

fractionate) NGL mix into specification products

  • Markets specification products, such as propane,

butane, condensate and iso-octane as well as NGL mix, crude oil and sulphur

  • Liquids Blending business blends lower value

products into higher value products using Keyera

  • wned assets
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SLIDE 20

Alberta EnviroFuels (AEF)

  • Iso-octane (iC8) is a high octane, low vapour

pressure gasoline additive

  • Only merchant iC8 facility in North America
  • Licensed capacity of 13,600 bbls/d
  • iC8 demand driven by premium gasoline demand
  • Financial forward markets enable hedging of

feedstock costs and large portion of iC8 sales

  • Butane is the NGL feedstock
  • Supply networks and distribution infrastructure

used to source feedstock while rail logistics broaden sales markets

  • Seasonality is complementary to propane and

butane

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iC8 is a Premium Value-Added Product Produced in Alberta

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  • III. Growth and Capital Expenditures

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$- $200 $400 $600 $800 $1,000 $1,200 $1,400

12/31/15 12/31/16 12/31/17 12/31/18e

Millions

ANNUAL CAPITAL EXPENDITURES

Growth Capital Projected Growth Capital Range Acquisitions Maintenance Capital

  • 1. Acquisition capital in 2018 reflects the $41 million purchase price for an NGL pipeline; and the US$80 million purchase price for a liquids blending terminal in Oklahoma (FX rate of $1.30 assumed)

scheduled to close pending satisfaction of closing conditions.

  • 2. Estimated growth capital for 2018 includes the acquisition cost for 50% of the South Grand Rapids pipeline payable by Keyera upon completion of construction in mid-2018; and $39 million in acquisition

costs associated with acquisition of Encana’s Pipestone Liquids Hub; .

Investment Opportunities Continue

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1,2

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SLIDE 23

190 307 290 130 146 165 156 463 100 200 300 400 500 600 700 800 900 1,000 Simonette Gas Processing & Liquids Stabilization Other Gas Gathering and Processing Rimbey Turbo Expander, Debottlenecking & Truck Offload Keylink NGL Gathering System Rail Terminals (Josephburg, Hull) De-ethanizer at KFS Fractionation (propane-plus) Expansion at KFS Condensate System (Norlite, Edmonton Tanks, Pipeline)

Proven Project Execution

Multiple Growth Avenues and Manageable Project Sizes

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~$1.8 Billion in Completed Projects (Q1 2015 to Q1 2018) Expanding and enhancing existing businesses Increasing presence in liquids rich Montney/Duvernay

$Millions

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SLIDE 24

655 865 185 237 330 88 140 100 200 300 400 500 600 700 800 900 1,000 Pipestone (Gas Processing and Liquids Stabilization) Wapiti (Gas Gathering & Processing, Liquids Stabilization, Pipeline) Simonette (Gas Processing and Enhancements) Wildhorse Terminal (Oil Storage & Liquids Blending) Base Line Tank Terminal (Oil Storage) Storage Caverns Condensate System (South Grand Rapids Pipeline)

Investment Opportunities Continue

Significant Progress on Business Strategies

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Targeted Completion Date Mid 2018 May 2018, 1H 2020, and 1H 2021 for three caverns Tanks Throughout 2018 Mid 2020 Q3 2019 and Q4 2019 Mid 2019 and Mid 2020 Q4 2018 (liquids hub) and 2021

$2.5 Billion in Projects Currently Underway

Expanding and enhancing existing businesses Increasing presence in Canadian and U.S. liquids hubs Increasing presence in the liquids rich Montney/Duvernay

* U.S. $185 million and assuming 1.28 exchange rate

*

$Millions

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  • IV. Financial Overview

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  • Pursue longer term financing to help protect

economics of longer term projects

  • Maintain prudent capital structure, as

demonstrated historically (< 3x Debt / EBITDA1)

  • Maintain BBB investment grade public debt ratings
  • Develop Keyera’s access to public debt and

preferred share markets

  • Use dividend reinvestment programs to fund
  • ngoing robust capital programs
  • Continue relatively low dividend/distributable cash

flow payout ratio (60% LTM)

Financing Objectives / Philosophy

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Distributable Cash Flow Per Share and Payout Ratio2

1. Per existing covenants. 2. Payout Ratio is defined as dividends declared to shareholders divided by distributable cash flow. Payout ratio and distributable cash flow are not standard measures under GAAP. See section of the MD&A titled “Dividends: Distributable Cash Flow” for a reconciliation of distributable cash flow to its most closely related GAAP measure.

$2.56 $2.70

$1.54 $1.65 60% 61% 0% 50% 100% 150% 200% $- $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 2016 2017

Payout Ratio % Dividends and DCF ($/Share)

Distributable Cash Flow Dividends Payout Ratio (RHS)

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SLIDE 27

Strong Financial Results

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Debt2 to Capitalization3 Adjusted EBITDA1

1. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, accretion, impairment expenses, unrealized gains/losses and any other non-cash items such as gains/losses on the disposal of property, plant and equipment. EBITDA and Adjusted EBITDA are not standard measures under GAAP. See section of the MD&A in Keyera’s 2018 first quarter report titled “EBITDA” for a reconciliation of Adjusted EBITDA to its most closely related GAAP measure. 2. Includes current portion of long term debt. 3. Capitalization equals long term debt plus total shareholders equity.

$605 $617

2.9x 2.9x 8.1x 7.1x

0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x $- $100 $200 $300 $400 $500 $600 $700 2016 2017

$ Millions

Adjusted EBITDA Debt to Adjusted EBITDA (Right Axis) Adjusted EBITDA to Interest (Right Axis)

48% 42%

0% 10% 20% 30% 40% 50% 60% 2016 2017

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Summary of Existing Debt

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  • 1. All US dollar denominated debt is translated into Canadian dollars at its swap rate as of March 31, 2018. Excluding the impact of swaps, the total outstanding debt under the private notes is $1.8 billion.

Keyera Partnership:

  • Credit Facilities
  • $1.5 billion 5 year facility with

$350 million accordion

  • $75 million operating facilities
  • Total amount drawn on all

facilities: $50 million2

  • Private Notes
  • $1.7 billion1

Public debt would be issued by Keyera Corp. and rank pari passu with existing debt

Long-Term Debt Maturities1 (excludes drawings under revolver)

  • 2. As of June 4th, 2018
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  • V. Conclusion

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Investment Highlights

  • Long life integrated assets in the right liquids rich areas
  • Strong business risk profile
  • Provides essential services for producers
  • 20 year track record of profitable operations and project execution
  • Disciplined financial approach with a proven commitment to a strong

balance sheet

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Questions?

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