Keyera Earnings: Strong Marketing Profits Yet Again Lead to Better 2023 Outlook and Higher FVE

Keyera’s KEY third-quarter results were quite strong, thanks to its marketing unit outperforming again. The firm raised its guidance for the third consecutive quarter. At the start of 2023, marketing contributions were expected to be a midpoint of CAD 265 million, whereas now they are expected to be about CAD 435 million. We attribute the outperformance mainly due to excellent execution, helped by better-than-expected oil and gas pricing and spreads. Keyera noted particular strength in iso-butane and motor gasoline pricing. After updating our model, our fair value estimate increased to CAD 32 from CAD 30, mainly due to the marketing improvement but also to slightly lower expected capital spending for 2023. Overall EBITDA increased to CAD 288 million from CAD 247 million last year.

With the start-up of KAPS earlier this year, volumes have exceeded Keyera’s expectations here, as well. Contributions from the liquids segment were good with a realized margin of CAD 128 million compared with CAD 101 million last year. This is reflective of KAPS, which began operations in the second quarter, but also higher storage and fractionation revenue associated with acquiring a greater interest in the Keyera Fort Saskatchewan, or KFS, complex. Fractionation plants at Keyera’s two units at the KFS complex were fully utilized during the quarter and are expected to remain so into 2024.