Keyera Q2 Earnings Call Highlights

Keyera (TSE:KEY) reported record quarterly realized margins in its Gathering Processing and Liquids Infrastructure segments during the second quarter of 2026, as recently completed acquisitions contributed to fee-for-service results. The company also increased its annual dividend by 4% and reaffirmed its 2026 Marketing guidance.

President and CEO Dean Setoguchi said Keyera closed its acquisitions of the Plains Canadian NGL business and the remaining 50% interest in KAPS during the quarter. Management’s focus is now on integrating the acquired assets, identifying synergies, executing sanctioned projects and strengthening the company’s connected infrastructure network.

“Our team is working hard on integrating the Plains business and continues to make meaningful progress on identifying and delivering synergies,” Setoguchi said. He added that Keyera submitted its response to the Competition Tribunal following the Competition Bureau’s notice of application related to the Plains transaction, though the company said it was limited in discussing the ongoing litigation.

Quarterly Results and Segment Performance

Excluding transaction costs associated with the Plains acquisition, Chief Financial Officer Eileen Marikar said adjusted EBITDA totaled C$309 million in the second quarter, while distributable cash flow was C$101 million, or C$0.39 per share. Net earnings were C$308 million.

• Gathering Processing realized margin reached a quarterly record of C$128 million.
• Liquids Infrastructure realized margin reached a quarterly record of C$222 million, including contributions from the Plains Canadian NGL assets and the KAPS acquisition.
• Marketing realized margin was C$36 million, reflecting the outage at the Alberta EnviroFuels facility, or AEF, and timing effects from risk-management activities.

Marikar said the Marketing segment’s risk-management timing impacts are expected to partly reverse in the second half as physical volumes are sold. Keyera reaffirmed its 2026 Marketing realized margin guidance of C$360 million to C$390 million and said it expects strong contributions in the second half of the year.

AEF restarted at the beginning of June and has been performing well, according to Setoguchi. During the outage, the company completed a review of the facility and its operating plan, identifying opportunities to improve reliability and performance. Keyera’s stated objective is to maximize iso-octane production through its four-year operating cycle while maintaining safe and efficient operations.

Plains Integration and Growth Opportunities

Management said the Plains Canadian NGL business has performed better than initial expectations across its pipeline operations, fractionation business in Fort Saskatchewan and Empress assets. Setoguchi cited strong volumes and higher extraction rates than the company had modeled.

However, he cautioned investors against annualizing the quarter’s results because Keyera had operated the assets for less than three months and the contribution represented only a partial quarter.

Keyera previously announced a C$120 million to C$140 million synergy target for the acquisition. Setoguchi said C$90 million of synergies had been delivered on day one, while further opportunities remain in general and administrative expenses, operations, maintenance, turnarounds and logistics. He also said the company sees commercial growth opportunities across the acquired asset base.

Management noted that it may increase maintenance spending over the next one-and-a-half to two years to improve reliability and bring acquired assets up to Keyera’s operating standards. Marikar said these requirements could modestly increase maintenance capital needs during that period, though the company’s 2026 guidance for growth capital, maintenance capital and cash taxes remains unchanged.

Projects, Condensate and Capital Allocation

Keyera brought its KFS Frac II Debottleneck project into service in early June, more than one month ahead of schedule and 20% below its original budget. The KFS North Debottleneck, KFS Frac III, Capstone 4 and ACE Rail Terminal projects remain on time and on budget, the company said.

Setoguchi said the projects are highly contracted and are intended to generate stable fee-for-service cash flow. Management expects the projects, the Plains acquisition synergies and available capacity across its network to support fee-based adjusted EBITDA per-share compound annual growth of 16% to 18% from 2025 through 2027, followed by 7% to 8% from 2027 through 2029.

The company also highlighted opportunities tied to rising condensate demand from oil sands production. Setoguchi said roughly two-thirds of condensate used as diluent in the oil sands originates on Keyera’s system. Keyera is evaluating capital-efficient capacity expansions, including drag-reducing agents, pumping stations and potential pipeline looping on its Fort Saskatchewan transit system and the Norlite Pipeline, which is operated with partner Enbridge.

Brad Slessor, senior vice president of Gathering Processing and NGL Pipelines, said additional condensate production from the Montney and Duvernay could also create demand for more gas-processing capacity, particularly sour-gas processing.

Leverage and Dividend

Keyera ended the quarter with net debt to adjusted EBITDA of 3.3 times, above its long-term target range. Marikar attributed the increase to debt associated with recent acquisitions and lower Marketing contributions during the first half. The company aims to return to its target range in 2028.

Management said it has layered in additional hedges for frac spreads through 2027 and has also added RBOB hedges into 2027 and 2028, citing strong market values. Marikar said that if cash flow exceeds expectations, Keyera’s capital-allocation priority remains returning leverage to its target range.

The board approved a 4% increase in the annual dividend. Setoguchi said the increase reflects management’s confidence in the business while preserving financial flexibility for further fee-based growth investment.

About Keyera (TSE:KEY)

Keyera is a midstream energy business that operates primarily out of Alberta, Canada. Its primary lines of business consist of the gathering and processing of natural gas in western Canada, the storage, transportation, and liquids blending for NGLS and crude oil, and the marketing of NGLs, iso-octane, and crude oil. The firm currently has interests in about a dozen active gas plants and operates over 4,000 km of pipelines.

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