Logistics Services for the Heavy Oil Sector Peters & Co. 2013 - - PowerPoint PPT Presentation

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Logistics Services for the Heavy Oil Sector Peters & Co. 2013 - - PowerPoint PPT Presentation

Logistics Services for the Heavy Oil Sector Peters & Co. 2013 Energy Conference David G. Smith, President and COO Forward-Looking Information In the interests of providing Keyera Corp. (Keyera or the Company) shareholders and


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SLIDE 1

Logistics Services for the Heavy Oil Sector

Peters & Co. 2013 Energy Conference David G. Smith, President and COO

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SLIDE 2

Forward-Looking Information

In the interests of providing Keyera Corp. (“Keyera” or the “Company”) shareholders 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 (collectively “statements”) with respect to: capital projects and expenditures; strategic initiatives; anticipated growth and performance; anticipated producer activity and industry trends; geological predictions such as the future importance of the WCSB as a source of gas supply and future demand for condensate;; anticipated timing associated with capital projects and future revenue streams; and objectives of or involving Keyera. 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

  • r 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; 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.

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SLIDE 3

One of Canada’s Largest Midstream Operators

About Keyera (TSX:KEY)

  • Strong track record of income and growth
  • Disciplined approach to value creation
  • Stable cash flows from largely

fee-for-service activities

  • Proven operational expertise
  • Strategically positioned assets
  • Exciting growth opportunities tied to
  • ur integrated business lines:

– Focus on liquids-rich drilling – Increasing demand for oilsands services

3

22%

compound annual total return1 to shareholders

8.1%

CAGR3 in

dividends per share

11

dividend increases

since IPO in 2003

$2.40

per share per year2

1 From May 30, 2003 to May 31, 2013 2 Effective with August dividend payable September 16, 2013 3 From June 24, 2003 to August 31, 2013
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SLIDE 4

Delivering Midstream Energy Solutions Along the Value Chain

Integrated Business Lines – Superior Service Offering

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* Includes intersegment transactions. See Keyera’s Second Quarter 2013 MD&A for a definition of Operating Margin.

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SLIDE 5

Fee-For-Service Business Underpins Cash Flow for Dividends

Growing the Business

74% Fee-for-service4

(66% YTD 2013)

1 Operating margin excludes other income from production.2 Non-GAAP measure. 3 See Keyera’s Q2 2013 MD&A for a definition of operating margin and EBITDA. 4 Fee-for-service operating margin includes fees paid by Marketing to NGL Infrastructure. 5 2009 normalized to exclude $29.2 million paid out as a special dividend.

$0 $50 $100 $150 $200 $250 $300 $350 $400

2008 2009 2010 2011 2012

NGL Marketing - margin based NGL Infrastructure - fee-for-service Gathering & Processing - fee-for-service

Operating Margin1,3

$ Millions

5

$0 $50 $100 $150 $200 $250 $300 $350 $400

2008 2009 2010 2011 2012

EBITDA Dividends⁴

EBITDA2,3,5

$ Millions

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SLIDE 6

Franchise Facilities in the Right Locations

Gathering and Processing Business Unit

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  • Well maintained, long-life facilities

– 2.4 Bcf/d licensed gross capacity – Keyera operates 14 of 15 plants – NGL extraction capability at 95% of plants

  • Extensive gathering systems

– ~4,000 km of 4”-12” diameter pipelines – Capture areas create franchise regions

  • Fee-for-service revenues with negligible

direct commodity exposure

– Largely flow-through operating costs

MONTNEY CARDIUM DUVERNAY GLAUCONITE

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SLIDE 7

Liquids Business Unit

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  • NGL Infrastructure is a fee-for-service business providing:

– 80,000 bbls/d of fractionation capacity at 5 locations – Rail & truck handling facilities at 17 Locations, including a 1,300+ rail car fleet – 11.4 million barrels of underground storage at 12 caverns plus >300,000 barrels of above ground storage – Iso-octane production at Alberta EnviroFuels

  • Marketing provides various support services including:

– Purchasing propane, butane and condensate from producers in western Canada and the U.S. – Fractionating NGL mix into spec products – Storing NGLs as required to meet demand and

  • perational fluctuations

– Utilizing Keyera’s integrated facilities and logistics expertise to move spec products to markets across North America

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SLIDE 8

Growth Projects Increasing Cash Flow

Strong Suite of Growth Opportunities

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Operational

  • New gas gathering pipelines
  • Turbo expander at Strachan
  • Turbo expander at MBL
  • ADT moved to 24/7 operations
  • Kearl contract – diluent and

solvent handling

  • AEF (acquired in 2012)
  • Iso-octane deliveries by rail to

market

  • 12th storage cavern

Under Development

  • Rimbey turbo-expander
  • Wapiti pipelines (2 x 90 km)
  • Simonette modifications
  • Strachan sulphur expansion
  • Alberta Crude Terminal
  • Hull Terminal refurbishment
  • South Cheecham Rail and Truck

Terminal

  • 4th brine pond at KFS
  • 13th storage cavern at KFS
  • KFS de-ethanizer

Under Evaluation

  • Gas gathering pipelines
  • Enhancing NGL recoveries at gas

plants

  • Future Simonette expansion
  • Rail loading terminals
  • South Cheecham expansion
  • Norlite diluent pipeline to oilsands
  • Alberta Liquids Pipeline System
  • Hull Terminal expansion
  • NGL frac expansions
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SLIDE 9

Significant Organic Growth Projects Underway

Projects Capital Cost $ Millions1 2013 2014 2015 Rimbey turbo expander 210 Wapiti raw gas and condensate pipelines 155 Simonette plant modifications 90 Strachan sulphur projects 65 South Cheecham Rail & Truck Terminal 68 Fort Saskatchewan de-ethanizer 111 Alberta Crude Terminal 65 Hull Terminal refurbishment 35 Fort Saskatchewan storage projects 29 Total 828

2013 Growth Capital Budget1 - $400 million to $450 million

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1 Keyera’s share of estimated capital cost. See Keyera’s Q2 2013 MD&A for capital investment risks and assumptions.
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SLIDE 10

Keyera Ideally Suited to Provide Diluent Handling Services

Diluent Business Opportunity

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  • Bitumen must be thinned with a lighter

hydrocarbon, called diluent, for movement via pipeline

  • Majority of future bitumen production

will be transported by pipeline to upgraders – Condensate is diluent of choice – Approximately 1 barrel condensate is blended with 3 barrels of bitumen

Source: Imperial Oil

1 10 100 1,000 10,000 100,000 1,000,000

Viscosity at Room Temperature (cP)

Water Olive Oil Pancake Syrup Honey Ketchup Peanut Butter Athabasca Bitumen Light Crude Oil Cold Lake Bitumen

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SLIDE 11

Diluent Imports Required to Meet Oilsands Growth

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SLIDE 12

Providing Customers with Significant Receipt and Delivery Flexibility

  • Diluent transportation, storage

and terminalling services in Edmonton/Fort Saskatchewan

  • Connections to access all

diluent streams in Alberta

  • Strong service offering

attracting new business:

  • Kearl (Imperial Oil)

– 25-year diluent transportation services began July 2012 – 15-year storage services agreement

  • Sunrise (Husky Oil/ BP)

− Services to begin in 2014 − Storage and transportation agreement

  • Other deals being negotiated

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Keyera’s Fort Saskatchewan Condensate System

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SLIDE 13

Integrated Approach to Condensate Logistics

Projects to Enhance Keyera’s Condensate Network

  • Simonette modifications :

– Adding new condensate stabilizer – Building a 90km condensate pipeline from the Wapiti region to Simonette

  • Rimbey modifications:

– Evaluating debottlenecking

  • ptions to increase

fractionation capacity – Evaluating expansion of pipeline system (natural gas + condensate)

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  • Cochin Pipeline

– Condensate delivery to KFS,

  • nce reversal is complete in

2014.

  • Other projects under

evaluation: – Norlite pipeline – Edmonton storage tanks – Future Hull Terminal expansion

  • Nevis modifications:

– Adding NGL mix truck

  • ffload to access fractionator
  • Alberta Liquids Pipeline

System – Soliciting producer interest to underpin construction of a new pipeline system – System would enable producers to transport NGL mix and condensate from the Deep Basin to Fort Saskatchewan

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SLIDE 14

Future Oil Takeaway Capacity – Rail Part of the Solution

  • Rail delivery necessary while

pipeline projects are approved and completed

  • Flexibility to handle all crude

qualities and deliver to any markets is expected to support rail delivery longer- term

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Source: CAPP “Crude Oil Forecast, Markets and Transportation”

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SLIDE 15

Providing Market Access by Expanding Rail Loading Facilities

  • Rail and truck loading at 17 locations
  • >1,300 rail cars on lease
  • Have been moving propane, butane and

condensate by rail since Keyera’s inception in 1998

  • Began moving iso-octane by rail in 2012
  • Adding crude oil rail loading in 2013

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SLIDE 16

Strategic Rail Terminal Development

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Existing Terminal Business

ADT

  • Up to 50,000 bbls/d diluent rail offload
  • >300,000 bbls above ground storage

Edmonton

  • Iso-octane, propane, butane rail and truck

loading/offloading

  • Pipeline connected to other Keyera NGL infrastructure

Rimbey Plant

  • ~ 10,000 bbls/d propane rail loading
  • NGL mix truck offload

Terminals Under Construction / Evaluation

South Cheecham

  • 20,000 bbls/d diluent offloading & 32,000 bbls/d dilbit

loading Alberta Crude Terminal (ACT)

  • 40,000 bbls/d crude loading
  • Possible expansion of up to 125,000 bbls/d crude loading

Hull, USA

Phase 1

  • Terminal located near Mt. Belvieu hub
  • Propane & butane loading/unloading

Josephburg

  • Land acquired near Fort Saskatchewan with access to rail
  • Terminal options being evaluated

Alberta Diluent Terminal South Cheecham Rail and Truck Terminal

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SLIDE 17

Meeting the Needs of Canadian Oil Sands Producers

South Cheecham Terminal – Extending our Logistics Footprint

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  • Construction of South Cheecham Rail and

Truck Terminal underway with completion expected in Q3

  • Ownership Keyera 50%, Enbridge 50%;

Keyera constructing and will operate facility

  • Terminal will be capable of receiving diluent or

solvents and loading dilbit onto railcars for delivery to upgraders

  • Agreements in place with Statoil and JACOS
  • Gross costs of ~$135 million
  • Evaluating facility expansion
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SLIDE 18

Alberta Crude Terminal – Developing Crude By Rail Loading in Edmonton Area

  • 50/50 partnership with Kinder Morgan
  • Access to all crude qualities from Kinder Morgan
  • Underpinned by large refiner
  • Served by CN and CP railways
  • 40,000 Bbls/d crude oil loading facilities
  • Net capital cost to Keyera of ~$65 million
  • Possible future expansion of up to 125,000

Bbls/d

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SLIDE 19

Strong Balance Sheet for Growth and Flexibility

Conservative Capital Structure

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Laddering of Maturities Reduces Financing Risk

Key Debt Metrics (as at June 30, 2013)

1.8 x

Net debt and convertible debentures / LTM EBITDA1

12%

Net debt and convertible debentures / Enterprise value2

1 Net debt and conv. debs. $631.0 million. LTM EBITDA $353.1 million (adjusted for IFRS and non-GAAP measure. See Keyera’s Q2 2013 MD&A for comparable GAAP measure). 2 Enterprise value based on Sept 4, 2013, closing prices: $56.87 (KEY) and $288.11 (KEY.DB.A).

$45 $85 $60 $125 $104 $60 $144 $100 $100 $8

$0 $20 $40 $60 $80 $100 $120 $140 $160 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

$CAD MM

Senior Notes Convertible Debentures NOTE: Notes maturing in 2025 and 2028 are part of a private placement that is expected to close on October 10, 2013

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SLIDE 20

In Summary - Our Platform for Success

  • Track record of steady value creation
  • Stable cash flows with demonstrated growth
  • Focused strategy, disciplined approach
  • Positioned to benefit from liquids-rich gas

production

  • Positioned to capitalize on growth in oil sands

activities

  • 2013 growth plans to be largest in Keyera’s

history

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SLIDE 21

For Further Information Contact: John Cobb Vice-President, Investor Relations

  • r

Julie Puddell Manager, Investor Relations 888-699-4853 ir@keyera.com Keyera Corp. 600, 144 – 4 Avenue SW Calgary, Alberta T2P 3N4 WWW.KEYERA.COM