YIELD plus GROWTH The Best of Both Worlds Jim Bertram, President - - PowerPoint PPT Presentation

YIELD plus GROWTH – The Best of Both Worlds

Jim Bertram, President & CEO National Bank Conference, Montreal, April 5, 2011

Forward Looking Information

This presentation contains forward-looking information that involves known and unknown risks and uncertainties, many of which are beyond Keyera’s control. The forward-looking information is based on management’s current expectations and assumptions relating to Keyera’s business and the environment in which it operates As the results or events Keyera s business and the environment in which it operates. As the results or events predicted or implied in the forward-looking information depend upon future events, actual results or events may differ materially from those predicted. Some of the factors which could cause actual results or events to differ materially include the ability of Keyera to successfully implement strategic initiatives, whether such initiatives yield the expected benefits, operating and other costs, future operating results and the components of those results, fluctuations in the demand for natural gas, NGLs and crude oil, the activities of producers, competitors and

• thers, the weather, overall economic conditions and other known or unknown factors. There

can be no assurance that the results or developments anticipated by Keyera will be realized

• r that they will have the expected consequences for or effects on Keyera. Keyera’s dividend
• r that they will have the expected consequences for or effects on Keyera. Keyera s dividend

policy is based on the continuation of favourable growth parameters for current and future projects (including Keyera’s ability to finance such projects on favourable terms) and continued sustainable results of all Keyera’s business segments. Keyera’s disclosure with respect to its conversion plans also assumes there will be no change in the rules governing i i h i i Th i b ff d b ll f h f conversion in the interim. These assumptions may be affected by any or all of the factors listed above. For additional information on these and other factors, see Keyera’s Annual Information Form and other public filings on www.sedar.com. Unless otherwise required by applicable laws, p g q y pp , Keyera does not intend to publicly update or revise forward-looking information, whether as a result of new information, future events or otherwise.

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Strong Track Record of Growth

Addi t E i ti N t k f F iliti Adding to our Existing Network of Facilities

• Eight dividend increases1
• 7 5% CAGR2 in dividends

250

Share Performance KEY vs. Other Indices

• 7.5% CAGR in dividends

per share1

• 22.5% compound annual

150 175 200 225

KEY S&P/TSX S&P/TSX O&G Producers S&P/TSX Pipelines & Storage S&P/TSX Utilities

p total return per share1

• Focused strategy;

25 50 75 100 125

disciplined approach

• Positioned to benefit from

future natural gas and oil

• 50
• 25

May-05 May-06 May-07 May-08 May-09 May-10

future natural gas and oil sands growth

1 Since inception in 2003 2 Compound Annual Growth Rate

Providing Investors with Income and Growth

3

Growth in Distributable Cash Flow per Share1 Payout Ratio (%)

Strong Track Record of Growth

14.7% 6.6% 6.5% 6.2% 4.6% 0 7% 5.0% 10.0% 15.0% Median: 5.4%

Growth in Distributable Cash Flow per Share1

90% 100% 110%

Payout Ratio (%)

0.7%

• 3.1%
• 10.3%
• 10.0%
• 5.0%

0.0% 50% 60% 70% 80%

• 15.0%

KEY 9.2% 6.8% 5.0% 3.6% 3.0% 5 0% 10.0% Median: 3.3%

15 17

hare per h

Dividends Since Inception Growth in Dividends per Share2

50% 2003 2004 2005 2006 2007 2008 2009 2010

Infrastructure Peer Group

• 5.0%
• 5.0%
• 10.0%
• 5.0%

0.0% 5.0%

9 11 13

Cents per sh month

Source: Company reports, NBF Publications

1 Six-year compound annual growth rate (2004 - 2010) 2 2004 to current dividends per share

• 11.3%
• 15.0%

KEY

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Infrastructure Peer Group

Growing Dividends While Decreasing Payout Ratio

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Investment Profile $ C di $ Canadian

• Market value1

$2 8 billion

• Market value
• Enterprise value1
• Share price1

$2.8 billion $3.2 billion $39 32

• Share price
• Current yield1
• Dividends

$39.32 4.9% $0 16 per share

• Dividends
• Trading volume

230 000 shares $0.16 per share per month

• Trading volume

230,000 shares per day (Q1 2011)

1 Closing price of $39.32 (KEY), $313.00 (KEY.DB) and $204.59 (KEY.DB.A) on March 31, 2011

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Stable Business Supports Attractive Metrics

Who is Keyera? O f th L t Mid t O t i C d

• Natural gas and natural gas

One of the Largest Midstream Operators in Canada liquids (“NGLs”) midstream

• perator
• Franchise type gas plants with
• Franchise type gas plants with

large capture areas in the Foothills, Deep Basin and West Central Alberta regions

• Well-positioned NGL facilities in

the Edmonton / Fort the Edmonton / Fort Saskatchewan energy hub

Key Service Provider to Oil & Gas Producers

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Integrated Energy Infrastructure

Raw Gas Processing

Sales gas to market

Revenue Stream

Fee-for-service

Gathering and

Waste products removed from gas F f i NGL Mix

Fractionation, Storage, Pi li T i l

cash flow (47% of total contribution*)

Processing

Raw Gas Fee-for-service cash flow (23% of total contribution*)

Pipelines, Terminals

Liquids B i NGL Facilities

Margin based cash flow Propane

Business Unit Marketing

Ethane (30% of total contribution*) Butane Condensate

* Percentage of 2010 Contribution. See Keyera’s 2010 MD&A for a definition of Contribution.

Creating Value All Along the Value Chain

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Gathering and Processing Weak Commodity Environment Presents Challenges Weak Commodity Environment Presents Challenges

Requirement Solution

• Plays with large resources &

t bilit

• The west side of the WCSB, where

K ’ l t l t d t i repeatability Keyera’s plants are located, contains multiple “stacked” geological zones containing large reserves

• Wells with high initial production rates
• Horizontal drilling and multi stage
• Wells with high initial production rates

to drive early payouts and positive economics

• Horizontal drilling and multi-stage

completion techniques significantly changing the economics of tight gas reservoirs

• Play types with high liquids (NGL)

content to enhance economics

• 99% of Keyera’s processing capacity

has the ability to extract NGLs from the raw gas stream

• Availability of existing infrastructure to

enable quick tie-in of production

• Keyera has extensive gathering

systems and available plant processing capacity

Keyera Well Positioned to Meet Customers’ Needs

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Keyera Gathering and Processing O f th L t G P i C d

• Large flexible processing plants
• Operate 16 of 18 gas plants

One of the Largest Gas Processors in Canada

• Operate 16 of 18 gas plants
• Licensed capacity of 2.6 billion cubic feet per day
• Natural gas liquids (NGL) extraction
• Sweet and sour gas processing capability
• Extensive gathering systems
• 3,400 km of gathering systems
• Large capture areas create franchise regions

g p g

• Long-life assets
• Technology has increased the recoverability of reserves
• Positioned for growth in “unconventional”
• Positioned for growth in unconventional

resource developments

• Fee-for-service revenues

Franchise Facilities in a Key Natural Gas Basin

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WCSB1 – A Significant Gas Prone Basin T h l D i i P d A ti it

• The WCSB contains significant gas reserves, primarily

th t id f th b i

Technology Driving Producer Activity

• n the west side of the basin
• “Stacked” geological horizons offer multi-zone potential
• Horizontal drilling and multi-stage completions

g g revitalizating existing reservoirs and opening up new tight reservoirs

• High value of NGLs resulting in focus on liquids-rich gas
• Changes to Alberta regulatory regime (royalties, co-

mingling of zones) enhancing economics

1Western Canada Sedimentary Basin

Significant Gas Reserves Remaining to be Produced

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Competitive within North America WCSB G Pl P id Att ti E i

• Many WCSB gas plays can be produced with economics as attractive as any in North America
• Positive economics at less than $4.00/Mcf , in large part due to liquids (NGL) content

WCSB Gas Plays Provide Attractive Economics

• Gas containing higher amounts of NGLs can reduce break-even pricing even lower

$6.00 $5.00

North American Natural Gas Plays Break-Even Price, Half Cycle Economics

$4 00 $5.00 $3.00 $4.00 EX $US/Mcf C$/Mcf $3.00 $4.00 $1.00 $2.00 NYME $2.00 $0.00

SOURCE: Peters & Co. North American Energy Overview Winter 2011

Positive Economics at Less Than $4.00/Mcf

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NGLs Drive Gas Economics Li id Ri h G E h P d N tb k Liquids-Rich Gas Enhances Producer Netbacks

Methane Eth Propane Butane

Natural Gas Li id

Ethane Butane Condensate

Liquids

Liquids-Rich Gas is the WCSB’s Competitive Advantage

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Rimbey Gas Plant C l Pi li E t i

• 45 kilometre, 12” raw gas gathering pipeline into the

liquids-rich Hoadley Glauconite area nearing completion

Carlos Pipeline Extension

• Low costs and deep cut facilities at Rimbey attractive

to producers and a key advantage for Keyera

• Transportation and processing agreements support

Keyera economics

Technology Driving Producer Activity

• Hoadley Glauconite trend runs approximately 200 plus

km southwest from Rimbey plant km southwest from Rimbey plant

• Gas is very rich in liquids (50 – 60 Bbls/MMcf).
• More than 15 producers drilling horizontal wells with

multi-stage fracs g

• Producers expect 70 – 100 MMcfd of gas to be

developed over the next 12 – 18 months with long term drilling inventory

Hoadley Glauconite Play One of Most Economic in North America

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Simonette Gas Plant

L t d i H t f D B i

• Keyera acquired 100% of Simonette gas plant

and extensive gathering systems in 2010

Located in Heart of Deep Basin

• Licensed capacity 150 MMcfd
• Significant producer activity in lands

surrounding Simonette plant g p

• New discoveries in liquids-rich Montney and

Wilrich formations

• Land sales in 2010 & 2011 for Duvernay

d l t development

Opportunities

• New gas discoveries may lead to plant

expansion expansion

• “Deep cut” NGL extraction being evaluated
• Pipeline extensions being evaluated

Source: Cequence Energy Ltd

Multi-Zone Deep Basin Geology Driving Area Development

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Edson Gas Plant B fitti f D B i A ti it

• Keyera acquired 22% of Edson gas plant in 2010
• Significant horizontal drilling occurring in numerous

Benefitting from Deep Basin Activity

liquids-rich resource developments

• Vertical wells with multi-zone completions are also

allowing new resource plays to be economically developed developed

• Duvernay shale driving big land sale activity NW of

Edson plant

Opportunities pp

• NGL pipeline connecting Edson plant to Peace

Pipeline will give Keyera access to NGL bbls for fractionation and marketing at Fort Saskatchewan

• Opportunities to acquire additional plant ownership

interests

• Optimization opportunities with existing Keyera plants

Expanding Footprint in Deep Basin

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Strachan Gas Plant M lti l G l i l Z

• “Deep cut” liquids recovery plant
• 275 MM fd li

d it

Multiple Geological Zones

• 275 MMcfd licensed capacity
• Numerous liquids-rich resource

developments underway

• Multiple zones including Glauconite
• Multiple zones, including Glauconite

Opportunities

• Gathering system expansions into new

g y p resource development areas

• Increased liquids recovery with turbo

expansion

• Sulphur remelting/forming opportunities

Strategic Gas Plant In Multi-Zone Liquids Rich Area

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Brazeau / West Pembina Gas Complex M lti l G l i l Z

• Horizontal drilling is opening up extensive

tight gas resource development in the area

Multiple Geological Zones

g g p

• Vertical wells with multi-zone fracs are

significantly improving economics of sweet liquids-rich tight zones q g

Opportunities

• Enhanced liquids recoveries and NGL

pipeline opportunities

• Plant consolidation opportunities
• Sulphur optimization

New Liquids Rich Sweet Gas Resource Plays Being Developed

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Liquids Business Unit

“U l ki Hidd V l f P d ” “Unlocking Hidden Value for Producers”

Fractionation Storage Rail & Truck Pipelines Rail Cars Sales T i l Fractionation Storage Rail & Truck Terminals Pipelines Rail Cars Terminals

• Flexibility and market outlets for producers
• Assets allow producers to maximize netback for NGL products
• Market liquidity, particularly for condensate and butane

Well Connected, Flexible Liquids Infrastructure

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Potential NGL Expansion Opportunities

Rapid growth in liquids-rich gas drilling; Strengthening our strategic position in Fort Saskatchewan

Simonette Fort Saskatchewan Simonette

• Enhanced liquids extraction
• Connection to Peace

Pipeline

• Storage expansion (continuing)
• Fractionation

Brazeau / Pembina Area

• Enhanced liquids extraction
• Pipeline connection to Rimbey

Edmonton/Fort Saskatchewan

• Pipeline and terminal connections
• Solvent handling

Pipeline connection to Rimbey

Minnehik Buck Lake

• Enhanced liquids expansion

Strachan

• Pipeline connection

( l t d)

Rimbey Plant

• Expanded ethane extraction
• Evaluate fractionation

d b ttl ki / i (completed)

• Enhanced liquids extraction

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• debottlenecking/expansion

Taking NGL Infrastructure to the Next Level

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Keyera’s Liquids Infrastructure Connections

Polaris

• Fractionation (80,000 Bbls/d) at

five facilities

• Storage

Provident Shell Dow FS Frac/Storage

KEYERA Fort Saskatchewan Frac/ Storage

BP FS Frac/ Storage Polaris Diluent Pipeline

• 9.7 million Bbls in 10 underground

caverns (11th cavern expected in 2011)

Esso Strathcona Redwater Frac/Storage Shell Scotford Refinery

KEYERA Rail/ Truck loading

Storage

ADT

• 6 above ground storage tanks

(343,000 Bbls)

• 7 NGL pipelines

KEYERA Edmonton Terminal

Strathcona Refinery Suncor Edmonton Refinery Gibsons Rail/Truck Loading

p p

• 19 rail and truck terminals
• Pipeline connections to major

customers and markets in Alberta

KEYERA Rimbey Pipeline

AEF PetChem Kinder Morgan TransMountain Pipeline Enbridge Pipeline

KEYERA Rimbey Gas

Market Market Enbridge

customers and markets in Alberta

Pipeline

Plant

Southern Lights Pipeline

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Market Growth Pulling NGLs to Hub

Increasing demand resulting from:

• Growth in oilsands activity
• Condensate for use as diluent
• Butane for solvent and blending
• Petrochemical plant / Refinery consumption
• Ethane
• Propane
• Butane

Di ib i h b i Alb f

• Distribution hub intra-Alberta for:
• Butane
• Condensate
• Export hub for deliveries to:

Market Pull

• Export hub for deliveries to:
• USA (propane)
• Eastern Canada

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Demand Growth Creating Business Opportunities

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Keyera’s Oil Sands Strategy L i E i ti NGL B i

• Keyera’s assets in and around

Edmonton/Fort Saskatchewan ideally

Leveraging Existing NGL Business

Edmonton/Fort Saskatchewan ideally suited to provide essential services to oil sands sector Oil d d i dil t t

• Oil sands producers require diluent to

enable bitumen to flow to upgraders for processing – condensate is the preferred diluent diluent

• Keyera’s strategy is to grow traditional

NGL business by providing services to oil d t sands sector

Flexible Infrastructure Provides Numerous Business Opportunities

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Significant Oil Sands Growth Expected

~1.6 MMbbl/d of Incremental Bitumen Expected by 2020

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Why Dilute Bitumen? Bit M t b Dil t d t Fl i Pi li

Athabasca Bitumen

Viscosity

C ld L k Peanut Butter

1000,000

Bitumen Must be Diluted to Flow in Pipelines

Bitumen Pancake Syrup Honey Ketchup Cold Lake Bitumen utte

10,000 100,000

rature (cP)

Light Olive Oil y p

100 1,000

• om Tempe

Water g Crude

1 10

cosity @ Ro

Source: Imperial Oil

Visc

Condensate, a By-Product of Natural Gas, is the Preferred Diluent

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Demand for Diluent Creates Opportunities E t i Dil t L i ti S i R i d Extensive Diluent Logistics Services Required

Oil Sands Producers Will Require Transportation, Storage and Terminalling Services

25

Kearl and Sunrise Oil Sands Projects F t C h Fl F L T S i A t Future Cash Flow From Long Term Services Agreements

• Long-term fee-for-service arrangements

with Imperial Oil and Husky for Kearl and with Imperial Oil and Husky for Kearl and Sunrise oil sands projects

• Keyera to provide diluent transportation,

storage and terminalling services storage and terminalling services

• Large portion of revenue stream not

dependent on throughput volumes

• New infrastructure will enhance

connectivity to diluent supply, pipelines and markets

• Additional capacity available to provide

services to other oil sands players

Keyera Established Supplier of Diluent Logistics Services

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Liquids Marketing I t ti f B i U it K t S Integration of Business Units Key to Success

K ’ i f t t d ti

• Keyera’s infrastructure and expertise

provide access to high-value markets

Methane Ethane

• Keyera storage, pipelines, rail and

truck terminals deliver products to market

Propane Butane

Natural Gas Liquids

• Growth in liquids-rich gas production
• ffers growth in Marketing business

Condensate

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A G i B i Liquids Marketing

$120

A Growing Business

LTM1 Marketing Contribution2

$80 $100 $40 $60

$ millions

$0 $20 $ $0

1 Last twelve months 2 Non GAAP measure. See Keyera’s 2010 MD&A for comparable GAAP measures.

Facility Expansions Underpin Marketing Growth

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Keyera’s Integrated Model

Gas Processing The Market Fractionation, Storage & Transportation NGL Extraction Ethane

NGL mix

Propane Butane Condensate Terminals Condensate

Propane Butane Condensate

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Creating Value All Along the Value Chain

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Summary

• Track record of steady value

creation

• Focused strategy, disciplined

approach

• Business characteristics provide

resilience to low gas prices

• Strategically positioned to benefit

from liquids-rich gas production

• Positioned to capitalize on growth in
• il sands activities

Stable Cash Flows with Demonstrated Growth

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FOR FURTHER INFORMATION INFORMATION CONTACT: John Cobb, Director, Investor Relations Investor Relations Heidi Christensen Brown, Senior Advisor, Investor Relations 888-699-4853 403-205-7670 ir@keyera.com KEYERA

600 144 4th Avenue S W 600, 144 – 4t Avenue S.W. Calgary Alberta T2P 3N4

www.keyera.com

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