Keyera Earnings: Marketing and Liquids Outperformance Offsets Wildfire Impacts

Keyera’s second-quarter earnings were solid, in our view. Its marketing performance was the biggest contributor, as full-year guidance is now expected to be a midpoint of CAD 395 million, up from CAD 350 million, thanks to strong year-to-date performance, hedges in place, and expected oil and gas prices in the second half of the year. The liquids business also did very well, with the initial KAPS pipeline system contributions flowing through earnings and boosting realized margins by over 20% from last year’s levels, as well as the benefit from the acquisition of a partial interest in the Keyera’s Fort Saskatchewan complex. The benefits from these improvements more than offset the negative CAD 13 million wildfires impact. The earnings growth has allowed Keyera to boost the quarterly distribution to CAD 0.50 per share (CAD 2.00 annually), up 4%, which is its first increase since 2020. After updating our model, we will maintain our CAD 30 fair value estimate and no-moat rating.