Mr. Dean Setoguchi reports

KEYERA PROVIDES BUSINESS UPDATE AND 2024 GUIDANCE

Keyera Corp. has provided a general business update and 2024 guidance.

"Keyera continues to leverage the strength of its integrated value chain, maximizing value for customers and generating strong returns for shareholders," said Dean Setoguchi, president and chief executive officer. "The fundamentals for natural gas liquids volume growth in the Western Canada Sedimentary basin remain strong and the recent investments we have made position Keyera to benefit for many years to come, as an essential enabler of this growth. As we look to 2024, we will experience continued growth from investments made in prior years coupled with lower capital spending. This is anticipated to result in strong free cash flow generation after funding dividends and growth capital."

Highlights:

• Strong execution against Keyera's strategy in 2023, on target for a record year.
• Keyera expects to reach the upper end of its compound annual growth rate (CAGR) target for adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) holding marketing constant of 6 per cent to 7 per cent over the 2022 to 2025 time frame.
• Driving an improvement in the quality of cash flows, realized margin from the fee-for-service business segments has grown by more than 20 per cent since the beginning of 2022.
• Increasing base marketing realized margin guidance range to $310-million to $350-million (previously $250-million to $280-million).
• 2024 is expected to generate strong free cash flow after financing current dividends and growth capital investments of $80-million to $100-million.

Delivering on the strategy in 2023

Keyera continued to deliver against its strategic pillars in 2023 and displayed the strength of its competitive position in the basin. Select accomplishments include:

• Demonstrating financial discipline:
  • Maintained financial strength throughout the year with net debt to adjusted EBITDA at 2.5 times as at the third quarter, at the bottom of the company's stated target of 2.5 times to 3.0 times.
  • Received a corporate credit rating upgrade from S&P Global to BBB, with a stable outlook.
  • Returned to Keyera's long history of sustainable dividend growth with a 4.2-per-cent dividend increase for its common shares. This is supported by the growth of high-quality cash flow in its fee-for-service business segments.
  • On target to deliver record distributable cash flow (DCF) per share in 2023.
• Driving competitiveness of the assets:
  • With KAPS complete, Keyera now has a fully integrated value chain from the Montney and Duvernay plays to its core infrastructure in Edmonton and Fort Saskatchewan. This has made the company more competitive, enhancing its ability to attract volumes.
  • Reached record utilization and volumes at several facilities, positioning Keyera to be on target to deliver record realized margins from all three business segments in 2023.
• Strengthening the integrated value chain:
  • Executed the accretive acquisition of an additional 21-per-cent interest in the Keyera Fort Saskatchewan (KFS) complex, thereby increasing the company's stake in a highly strategic core asset at the heart of Keyera's value chain.
  • Successfully completed the KAPS pipeline.
  • Completed the 40-million-cubic-foot-per-day (MMcf/d) Pipestone gas plant expansion, ahead of schedule and slightly below the budgeted range of $60-million to $70-million.
• Ensuring long-term business sustainability:
  • Significant improvement in total recordable injury frequency (TRIF), down to 0.24 at the end of Q3 2023 from 0.62 in 2022.
  • 60 indigenous owned or affiliated businesses were contracted for KAPS.
  • A 13.5-per-cent decrease in GHG (greenhouse gas) intensity over the 2019 to 2022 period. The company remains on target to meet its GHG intensity reduction targets of 25 per cent by 2025 and 50 per cent by 2035.
  • Keyera's 2022 ESG (environmental, social and governance) performance summary is now available at its website.

Expect to reach upper end of growth target

The company expects to reach the upper end of its CAGR target for adjusted EBITDA holding marketing constant of 6 per cent to 7 per cent over the 2022 to 2025 period. This is calculated leaving the marketing realized margin contributions at $310-million (previously $250-million) per year over the same period. This growth has largely been funded in prior years. The key drivers of growth are:

• Filling of available capacity at the Wapiti gas plant;
• The start-up of the 40 MMcf/d Pipestone gas plant expansion in December of 2023;
• The continued ramp-up of KAPS;
• Recontracting of available fractionation capacity and other services at KFS, where the company purchased an additional 21-per-cent interest earlier this year.

Beyond the 2022 to 2025 time frame, additional growth could come from a KAPS Zone 4 expansion and increasing fractionation capacity at KFS. These projects are subject to appropriate customer underpinning and board sanction.

The company continues to evaluate the potential to pursue its low-carbon hub strategy. This strategy leverages Keyera's existing land, assets, connectivity and proximity to large industrial players to offer value-added low-carbon infrastructure services.

Growth in high-quality cash flows

Realized margin from Keyera's fee-for-service business has grown over 20 per cent since the beginning of 2022, improving the quality of cash flow.

The gathering and processing (G&P) business has undergone a significant transformation. In 2017, over 70 per cent of the realized margin in this segment was from the company's south region assets. Since then, the company has built a strong G&P asset footprint in its north region, focused on the Montney and Duvernay plays. It also completed an optimization program in the southern region aimed at redirecting volumes from less efficient plants toward its most efficient plants, increasing profitability.

Today, over 70 per cent of the realized margin1 in G&P comes from the north region, which has a significantly higher proportion of cash flow being generated from take-or-pay contracts for longer durations with strong counterparties. Additionally, volume growth in the north region is more closely linked to condensate pricing rather than AECO (Alberta Energy Company) gas pricing. With the north region now fully integrated to KAPS and Keyera's core infrastructure at Edmonton and KFS, the company has more opportunity to capture liquids and make additional margin across the entire value chain.

In the liquids infrastructure segment, contributing to higher-quality cash flow is the continued ramp-up of KAPS, renewal of fractionation contracts at the KFS complex and the growth in the oilsands, which is driving higher demand for Keyera's industry-leading condensate system. These growth factors contribute to a higher proportion of take-or-pay cash flows.

Increasing base marketing guidance

The base realized margin guidance for the marketing segment has been increased to range between $310-million and $350-million (previously $250-million and $280-million). This range indicates management's current view of what is achievable with a high degree of confidence.

There are structural shifts driving the increased estimate, including higher volumes now flowing through Keyera's integrated system and the company's ability to unlock more advantaged pricing markets for iso-octane. The principal assumptions are detailed in the "2024 guidance and business update" presentation found at the company's website.

As has been usual practice, the annual marketing guidance range will be updated with Keyera's results for the first quarter of 2024, which will be released in May following the conclusion of the next NGL (natural gas liquid) contracting season.

Two thousand twenty-four guidance

Continued growth in adjusted EBITDA has been largely funded in prior years and the company is focused on optimization projects to maximize the value of its existing value chain in Western Canada. As a result, growth capital spending for this year is lower than in prior years, leading to strong free cash flow generation after funding dividends and growth capital in 2024.

Two thousand twenty-four capital spending:

• Growth capital is expected to range between $80-million and $100-million in 2024. This includes about $60-million of sanctioned capital for various optimization projects at Simonette, Wapiti, KAPS and AEF. The remaining $20-million to $40-million is contingent on the potential sanctioning of KAPS Zone 4 and potential fractionation capacity expansions, for the procurement of long-lead items. Progressing with these projects will require appropriate customer underpinning and board sanction.
• Maintenance capital is expected to range between $90-million and $110-million, of which about $20-million is recoverable in 2024 with another $15-million recoverable within the next few years. Go-forward annual run-rate maintenance capital is expected to range between $70-million and $90-million in years without a major AEF turnaround. AEF turnarounds typically occur every four years, with the next one scheduled in 2026.

Two thousand twenty-four cash taxes

• Cash taxes for 2024 are expected to range between $45-million and $55-million. The increase relative to 2023 (nil) is due to the accelerated usage of tax pools in 2023 due to strong financial performance.

Capital allocation priorities

Two thousand twenty-four is anticipated to be a year of strong free cash flow generation as the company enters a phase of lower capital spending relative to the past five years. This leaves more cash available to build balance sheet optionality and to increase returns to shareholders.

Two thousand twenty-four guidance conference call and presentation details

Date:  Dec. 12, 2023

Time:  8 a.m. MT (Mountain time) (10 a.m. ET (Eastern time) or 3 p.m. GMT (Greenwich mean time)

A live webcast of the conference call, with accompanying presentation, can be accessed through Keyera's website. Shortly after the call, a webcast archive will be posted on Keyera's website.

The audio-only conference call dial-in number is 888-664-6392 or 416-764-8659. A recording of the conference call will be available for replay, and can be accessed by dialling 888-390-0541 or 416-764-8677 and entering passcode 537947.

To join the conference call without operator assistance, you may register and enter your phone number on-line, to receive an instant automated call back. The link will be active on Tuesday, Dec. 12, 2023, at 7 a.m. MT (9 a.m. ET).

About Keyera Corp.

Keyera operates an integrated Canadian-based energy infrastructure business with extensive interconnected assets and depth of expertise in delivering energy solutions. Its predominantly fee-for-service-based business consists of natural gas gathering and processing; natural gas liquids processing, transportation, storage and marketing; iso-octane production and sales; and an industry-leading condensate system in the Edmonton/Fort Saskatchewan area of Alberta. Keyera strives to provide high-quality, value-added services to its customers across North America, and is committed to conducting its business ethically, safely, and in an environmentally and financially responsible manner.

We seek Safe Harbor.