Keyera Q2 2026 Earnings Call Transcript

Keyera (TSX: KEY ) reported second-quarter financial results on Thursday. The transcript from the company's second-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

Access the full call at Summary Keyera successfully closed two strategic acquisitions: the Plains Canadian NGL business and the remaining 50% interest in CAPS, focusing on integrating these assets and identifying synergies. The company reported record quarterly realized margins in both Gathering & Processing and Liquids Infrastructure segments, aided by contributions from the new acquisitions. Keyera raised its dividend by 4% and aims to maintain long-term dividend sustainability through growth in fee-for-service cash flow. Adjusted EBITDA for the quarter, excluding transaction costs related to the acquisitions, was $309 million, while net earnings were $308 million.

The company aims to deliver a 16% to 18% fee-based adjusted EBITDA per share CAGR from 2025 to 2027 and a 7% to 8% CAGR from 2027 to 2029, focusing on synergies and capacity optimization. Keyera is focused on deleveraging and returning to its target debt range following the recent acquisitions, indicating a cautious approach to further M&A activity. Management expressed optimism about growth opportunities in the oil sands and condensate demand, with plans for capital-efficient debottlenecks and continued investment in the KAPS pipeline.

The company remains committed to integrating and optimizing acquired assets, expecting some initial increase in maintenance costs to meet Keyera's standards. Keyera reaffirmed its 2026 realized margin guidance range of $360 million to $390 million for its Marketing segment, with expectations of strong contributions in the second half of the year. Full Transcript Jenny, Operator Good morning. My name is Jenny and I will be your conference operator today.

At this time I would like to welcome everyone to Keyera's 2026 second quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press Star then the number one on your telephone keypad.

If you would like to withdraw your question, please press Star then the number two. Thank you. I would now like to turn the conference call over to Dan Cuthbertson, General Manager of Investor Relations. You may begin.

Dan Cuthbertson, General Manager, Investor Relations Thanks and good morning. Joining me today will be Dean Setoguchi, President & CEO; Eileen Marikar, Senior Vice President and CFO; Jamie Urquhart, Senior Vice President, Liquids Business Unit; and Brad Slesser, Senior Vice President, G&P and NGL Pipeline Business Unit. We'll begin with some prepared remarks from Dean and Eileen, after which we will open the call to questions. I'd like to remind listeners that some of the comments and answers that we will give today relate to future events.

These forward-looking statements are given as of today's date and reflect events or outcomes that management currently expects. In addition, we will refer to some non-GAAP financial measures. For additional information on non-GAAP measures and forward-looking statements, please refer to Keyera's public filings available on SEDAR and our website. With that, I'll turn the call over to Dean.

Dean Setoguchi, President & Chief Executive Officer Thanks Dan and good morning everyone. This quarter we successfully closed two strategic acquisitions, the Plains Canadian NGL business and the remaining 50% interest in CAPS. These acquisitions are part of a strong foundation we have assembled for the next phase of disciplined growth and long-term value creation. Our focus now turns to integrating these investments, executing our growth projects and delivering greater value to customers and shareholders.

Our team is working hard on integrating the Plains business and continues to make meaningful progress on identifying and delivering synergies. We will continue to provide updates as that work progresses after the quarter. Keyera also submitted its response to the Competition Tribunal regarding the Competition Bureau's Notice of Application. Because this is an ongoing litigation, we are limited in what we can say but remain confident in the strength of our case and look forward to demonstrating the value creation that will result from this transaction.

Turning to our quarterly results, in Gathering & Processing we delivered a new quarterly record for realized margin driven by strong contributions across the segment. We also set a new quarterly realized margin record in Liquids Infrastructure reflecting contributions from the Plains Canadian NGL business. We continue to deliver and advance our growth projects. KFS FRAC 2 debottleneck was brought into service in early June, more than one month ahead of schedule and 20% below its original budget.

KFS North debottleneck, KFS FRAC 3, Capstone 4 and ACE Rail Terminal continue to progress well, all on time and on budget. These projects are highly contracted and will contribute to growth and stable fee-for-service cash flow supporting the strength of our balance sheet and long-term dividend sustainability. Yesterday the board approved another 4% annual increase in the dividend. Dividend increase reflects our confidence in the business and allows us to preserve our balance sheet strength and financial flexibility to invest in further fee-based growth.

Now turning to AEF, the facility was restarted at the beginning of June and has been performing well. We continue to view this asset as an important part of our integrated value chain and a meaningful contributor to Keyera's long-term value creation. During the outage, we completed a comprehensive review of the facility and its associated operating plan and have identified opportunities to strengthen performance and reliability. Our objective is to maximize isooctane production over the full four-year cycle while maintaining our focus on safe, reliable and efficient operations.

With that I'll turn the call over to Eileen to discuss financial results and outlook. Eileen Marikar, Senior Vice President & Chief Financial Officer Thanks Dean and good morning everyone. Keyera's second quarter results reflect continued strength in our fee-for-service business which was offset by lower Marketing contributions. 39 per share.

Net earnings for the quarter were 308 million. In our fee-for-service segments, Gathering & Processing delivered record quarterly realized margin of 128 million. In Liquids Infrastructure, we also delivered record realized margin of 222 million. Results include contributions from the Plains Canadian NGL assets and the CAPS acquisition.

Turning to the Marketing segment, realized margin was 36 million for the quarter. Decrease compared to last year was primarily attributable to the AEF outage and corresponding timing impacts related to risk management activities. The risk management timing impacts are expected to partly offset over the second half of 2026 as physical volumes are sold. Looking ahead, we continue to expect Marketing to deliver strong contributions through the second half of the year, and we are reaffirming our 2026 realized margin guidance range of $360 million to $390 million.

3 times, above our long-term target range. The increase reflects higher net debt related to recent acquisitions and lower Marketing contributions in the first half of 2026. We remain focused on deleveraging and returning to within our target range. In 2028, we remain on track to deliver a 16% to 18% fee-based adjusted EBITDA per share CAGR from 2025 to 2027 and a 7% to 8% fee-based adjusted EBITDA per share CAGR from 2027 to 2029.

This growth outlook is underpinned by several clearly defined drivers, including our current synergy target of 120 million to 140 million, the continued filling of available system capacity and our portfolio of sanctioned growth capital projects. Beyond those drivers, we continue to see meaningful potential upside from additional synergies, further capacity optimization, our condensate system, additional CAPS contracting and capital-efficient investment opportunities across the entire asset base. As our integration work progresses, we're encouraged by the additional value creation opportunities we've identified.

We're also identifying opportunities to further enhance reliability across the acquired assets, which may modestly increase maintenance capital requirements over the next couple of years as we continue to apply Keyera's operating standards. Lastly, Keyera's 2026 guidance for growth capital, maintenance capital and cash taxes remain unchanged. With that, I'll turn it back to Dean for closing remarks. Dean Setoguchi, President & Chief Executive Officer Thanks Eileen.

Keyera continues to deliver its strategy to strengthen and extend our integrated value chain, building a more connected and efficient system that supports customer growth and improves access to key markets. Looking ahead, we will remain focused on disciplined integration, continued execution of our growth projects and delivering long-term value for our customers and shareholders. On behalf of our board and management team, I want to thank our employees, customers, shareholders, Indigenous rights holders and other stakeholders for their continued support. With that, we'll open the line for questions.

Operator, please go ahead. Jenny, Operator Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. If you have a question, please press the star followed by the one on your touchtone phone.

Should you wish to cancel your request, you may press star two. Once again, that is star one should you wish to ask a question. And your first question is from Rob Hope from Scotiabank. Rob Hope, Analyst at Scotiabank Morning everyone.

First question is on the Liquids Infrastructure segment. So the $78 million of incremental contribution from Plains was, you know, quite a bit higher than we were expecting, as well as commentary when the deal was first announced. Can you maybe speak to the specific drivers of that strength? Whether that can be annualized or whether we'll call it abnormally high volumes in Q2?

Jamie Urquhart, SVP - Liquids Business Unit Good morning Rob, and thank you very much for the question. I think the general comment that we'd like to emphasize here is that the Plains Canadian NGL business has been performing better than the way we originally modeled it and envisioned it. And, you know, that's right across the board from, you know, their core pipeline, the frac business in Fort Saskatchewan and also Empress. The volumes have been strong and the extraction cuts there have been better than what we had modeled.

So overall, the assets are performing and the business is performing very well. We're still getting up to speed. Obviously, it's been less than three months since we've taken over the operatorship of those assets. We see a lot of great opportunities across the portfolio that we're getting more details on and trying to prioritize and get at them as soon as we can.

But I'd also like to caution that this is a partial quarter. And I would say it's premature to try to extrapolate a whole year's, you know, EBITDA based on a partial quarter right now. But generally, I want to emphasize that the, you know, the business performed very well. Rob Hope, Analyst at Scotiabank Appreciate that.

And then maybe moving over to your condensate assets, you know, a key theme this quarter has been kind of the outlook for increasing condensate demand and supplies in Western Canada. You know, can you speak to how your business is positioned to handle an Dean Setoguchi, President & Chief Executive Officer Yeah, that's a great question. C. and Alberta governments and also the federal government.

And with that, we feel a lot more optimistic that we're going to see a lot more pipeline egress out of the province, which is going to help more oil sands growth in the future. As you know, we have the hub for condensate, and roughly two thirds of all the condensate that goes up to the oil sands for diluent originates off of our system.

So, you know, when we think about the growth in oil sands production over the last couple, two to three years with Trans Mountain coming into service, we've seen that part of our business — our pipelines that receive the condensate and our storage business and also our interest in the Norlite pipeline — those volumes have been increasing very well. And so that part of our business has been very, very strong. We anticipate more growth in the future with, again, more pipeline egress. So we certainly envision more capital-efficient debottlenecks on that system to continue to provide that service.

C. I'd also like to emphasize this is part of the reason why we doubled down on KAPS, because we believe this is going to be an essential service that will be required by the industry for the next decade. So we're very pleased to have 100% of that pipeline to provide that service. Incremental to that, we are looking at other solutions, which I think is premature right now.

We have capabilities to rail in more condensate but are also looking at other solutions to provide more condensate or diluent as that demand increases. Jenny, Operator Thank you. Thank you. Your next question is from Robert Kadoya from CIBC.

Your line is open. Robert Kadoya, Analyst at CIBC Hey, good morning. I just wanted to follow up on the condensate discussion. Maybe you can give us a little bit more color on your capabilities to deliver from Edmonton up to the oil sands.

And it looks like you're at contractual, near contractual capacity in the Fort. So maybe some color on what you're looking at there to debottleneck and, you know, the timing of any potential opportunities. And the timing in particular I wanted to talk about just because, you know, as the oil sands gets going, it might take a while before production ramps to meet the pipeline or the other egress in-service dates. Dean Setoguchi, President & Chief Executive Officer Yeah, that's a great question, Rob.

And you know what, I'll turn that over to Jamie, and that's certainly part of his business and things that they're focusing on. Jamie Urquhart, SVP - Liquids Business Unit Yeah, thanks for the question, Robert. And I think I alluded to this last quarter as well, that we have a very well-defined capital execution plan to basically increase the capacity of both the Fort Saskatchewan condensate system but also working with our partner Enbridge on the Norlite pipeline. Those things can either be fairly quickly implemented — like DRA, drag-reducing agent — or installing pump stations, or even looping pipe for a segment of the pipeline where we can increase capacity.

So we've identified all those. We believe that they're all very capital efficient, as Dean alluded to. I'd also like to emphasize that we are in conversations with all the oil sands players with respect to making sure that we're in their minds and we're their solution as they think to expand maybe two, three, five, ten years out. Robert Kadoya, Analyst at CIBC Okay, so lots going on.

So we'll wait and see there. I just want to touch on the frac spread. You gave your levels or proportion of hedging, and you've chosen not to disclose the price, but presumably you're hedging at levels above your underwriting case. So I'm just curious about the '27 level, the 65% of frac spread hedges — is that all from the hedge level you had coming into the Plains deal, so the levels that were in place at closing, or has there been incremental hedging since then?

And, you know, just pricing relative to your underwriting assumptions? Dean Setoguchi, President & Chief Executive Officer Yeah, Rob, those are great questions. And we have layered in incremental hedges both this year and next year. As you know, we had a 12-month hedge in place already with Plains, so it left us more exposed in the second half of 2027.

And we've layered in a significant amount of hedges in the second half as well as topping up, again, the first half of '27 and the rest of this year. We think that's important for a number of reasons. One is the frac spreads have been very strong, so well above our deal thesis. And two, as Eileen mentioned, we're beyond our stated range of where we'd like our balance sheet.

We're still in a very comfortable range, but we'd like to be in a more conservative range. And this will ensure that we'll be able to deliver the balance sheet as Eileen described. Robert Kadoya, Analyst at CIBC Okay, last one for me is just, you're going to give an update, I think, on the synergies later in the year. But with what you know now, what areas are most likely to generate additional opportunities?

Is that going to come from the cost side or the commercial side? Dean Setoguchi, President & Chief Executive Officer I would say all of the above.