Keyera Corp. ranks amongst the largest independent midstream energy companies in Canada. It operates an integrated midstream business with extensive interconnected assets across the nation.
The company engages in providing services to oil and gas producers in the Western Canada Sedimentary Basin, including NGL gathering and processing, fractionation, storage, transportation, logistics and marketing services. Keyera also markets iso-octane, propane, butane, condensate and crude oil to customers in Canada and the United States.
The company operates through Gathering and Processing, Liquids Infrastructure and Marketing segments. Keyera’s NGL and condensate network, including pipelines, terminals, fractionation and storage facilities are located in major North American NGL hub. The company has a strong presence in western Canada.
Keyera currently has interests in 18 active gas plants and two gas plants that are under construction in Alberta. The company operates well maintained and long life facilities along with extensive gathering system consisting of over 4,000 km of pipelines.Investment Data
- Opportunity Score: 80%
- Ticker: TSE:KEY
- Sector: Energy
- Industry: Oil & Gas - Midstream
- Market Cap: 6.90B
- P/E: 17.2
- Dividend Yield: 5.48%
- Dividend Payout Ratio: 94.24%
- FFO Payout Ratio: Dividend Snapshot Members Only
- FCF Payout Ratio: Dividend Snapshot Members Only
- Chowder Score: Dividend Snapshot Members Only
Revenue Growth & Market Exposure
With two decades of experience, Keyera has developed a strong reputation for expertise in operating complex energy processing facilities. Its integrated businesses provide customers with a full range of essential midstream services.
Keyera’s core infrastructure is strategically located in key producing areas of Western Canada Sedimentary basin and Edmonton/ Fort Saskatchewan energy hub.
Keyera is growing organically as well as through acquisitions. The company is strengthening its leading position by investing in capital programs that will support future growth. Expansion at the Simonette gas plant and new Wapiti and Pipestone gas plants will drive the next phase of cash flow growth. These projects will double Keyera’s existing gas processing capacity in the area and also increase its condensate handling capacity. Once completed, these projects will fortify Keyera’s position in the liquids-rich area of northwestern Alberta.
Given its depth of expertise in delivering midstream energy solutions, Keyera enjoys the reputation of an experienced and reliable operator. It is one of the most integrated midstream companies that continue to focus on enhancing its infrastructure to meet the needs of its customers.
Keyera is well positioned to capitalize on the long-term growth opportunities within the Western Canada Sedimentary Basin, which is a rich natural gas basin in Canada. All of Keyera’s projects are underpinned by long-term agreements with producers which should add to its fee for service cash flows.
Keyera has maintained its dividend track record and last increased its dividend by 7%. It has an impressive yield of more than 6% and has compounded its dividend growth in the high single digit range in the last few years.
Keyera has an approved project pipeline worth $2 billion underway in the liquids-rich Montney and Duvernay development areas. The program is expected to start generating cash flow by 2019 mid and is expected to earn an annual return on capital of 10%-15% in 2022. The completion of phase one of the Wapiti gas plan should support cash flow growth. Keyera has maintained a strong financial position and is well positioned to fund its capital program. The company has a sound track record of delivering income and growth, supported by a predominantly fee-for-service cash flow stream.
An extensive network of natural gas processing facilities and pipelines, large scale, and relationships with customers form a deep moat around Keyera’s business. The management believes that Canadian hydrocarbon fuels will continue to play an essential role to meet the global energy demand, which should act as a tailwind for the company.
Enbridge is Canada’s largest natural gas distribution provider while Pembina Pipeline is a leading midstream and transportation service provider in North America. TransCanada Pipeline is a North American infrastructure company, supplying more than 25% of natural gas consumed daily across North America. Keyera’s predominantly fee-for-service based and integrated business, strategic locations and large scale differentiates it from peers.
Stable cash flows, strategically located facilities and a strong balance sheet have supported Keyera in delivering income and growth over the years. Its integrated business model allows it to generate cash flows all along the NGL value chain. Keyera plays an important role in transporting oil and natural gas from producers to the end users.
The company is extending its integrated network to better serve its liquids-rich natural gas producers and oil sands customers. Keyera will have a strong position in the liquids-rich area of northwestern Alberta once all of its projects are completed. Revenue and cash flow should also increase and support future dividend growth as the new projects and assets go live.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.