Mr. David Smith reports

KEYERA ANNOUNCES 2020 SECOND QUARTER RESULTS

Keyera Corp. has released its 2020 second quarter financial results, the highlights of which are included in this news release. The entire news release can be viewed by visiting Keyera's website, or, to view the management's discussion and analysis (MD&A) and financial statements, visit either Keyera's website or Keyera's filings on SEDAR.

Highlights:

• Keyera delivered strong results in the second quarter despite the continuing COVID-19 pandemic and low commodity prices that continue to affect the global economy and energy industry. To date, Keyera has successfully implemented its pandemic response and business continuity plans, resulting in safe and reliable operations.
• During the second quarter, Keyera made significant progress to enhance its long-term competitive positioning by reducing its overall cost structure. Keyera expects these efforts to contribute a total annual improvement in earnings before tax of between $45-million and $65-million, with the majority to begin in 2021.
• Keyera's capital projects are progressing well and the company now expects to invest growth capital in 2020 of between $500-million and $550-million. In addition, Keyera expects to invest approximately $70-million in 2020 related to the butane distribution infrastructure at Kinder Morgan's Galena Park facility. Keyera plans to finance its 2020 capital program without issuing common equity and expects to adhere to this financing model for growth capital projects in the short to medium term.
• Keyera maintains its strong financial position, with a net debt to adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) ratio of 2.5 times as of June 30, 2020, a conservative year-to-date payout ratio of 51 per cent, two investment-grade corporate credit ratings, access to a $1.5-billion line of credit and minimal long-term debt maturities over the next five years.
• During the second quarter, all three business segments performed well. The gathering and processing segment reported operating margin of $69-million, similar to the same period last year (Q2 2019 -- $70-million), reflecting Keyera's strong customer relationships that helped ensure only modest volumes were shut in during the quarter.
• The liquids infrastructure segment generated $100-million in operating margin (Q2 2019 -- $93-million), demonstrating the resilience of Keyera's storage, transportation and fractionation assets.
• The marketing segment earned realized margin of $54-million (Q2 2019 -- $115-million) as Keyera's effective risk management program protected margins and inventory values from the sharp decline in commodity prices that began in March. Keyera now expects the marketing segment to generate realized margin of between $300-million and $340-million in 2020, exceeding previous guidance of $270-million to $310-million.
• Keyera's adjusted EBITDA was $182-million (Q2 2019 -- $249-million) and distributable cash flow increased over the same period last year to $158-million or 71 cents per share (Q2 2019 -- $144-million or 67 cents per share), resulting in a year-to-date payout ratio of 51 per cent. Keyera plans on maintaining its current monthly dividend of 16 cents per share or $1.92 per share annually.
• Net earnings for the second quarter were $18-million or eight cents per share (Q2 2019 -- $225-million or $1.05 per share), and included unrealized non-cash losses associated with risk management contracts from the marketing segment, severance costs and a lower income tax recovery than in 2019.

                                        SUMMARY OF KEY MEASURES
                         (in thousands of Canadian dollars, except where noted)

                                               Three months ended June 30,     Six months ended June 30,
                                                      2020           2019           2020           2019

Net earnings                                   $    17,763    $   224,511    $   103,371    $   259,463
Per share ($/share) -- basic                          0.08           1.05           0.47           1.22   
Cash flow from operating activities                159,647        191,221        476,331        415,030
Funds from operations                              177,366        197,414        463,714        325,980
Distributable cash flow                            157,649        143,568        410,688        251,516
Per share ($/share)                                   0.71           0.67           1.87           1.18
Dividends declared                                 106,091         96,085        211,303        191,384
Per share ($/share)                                   0.48           0.45           0.96           0.90
Payout ratio (%)                                       67%            67%            51%            76% 
Adjusted EBITDA                                    182,159        249,371        509,274        413,781
Gathering and processing                           
Gross processing throughput (mmcf/d)                 1,261          1,471          1,323          1,543
Net processing throughput (mmcf/d)                   1,029          1,146          1,085          1,222
Liquids infrastructure                                                                                          
Gross processing throughput (mbbl/d)                   144            173            154            176
Net processing throughput (mbbl/d)                      66             79             73             85
AEF iso-octane production volumes (mbbl/d)              12             15             13             13
Marketing                                                                                                      
Inventory value                                    102,336        131,646        102,336        131,646
Sales volumes (bbl/d)                              134,800        139,700        152,900        145,100
Acquisitions                                         1,630            332          1,630            549
Growth capital expenditures                        127,082        234,193        337,696        524,742
Maintenance capital expenditures                     6,213         40,487         14,421         47,845
Total capital expenditures                         134,925        275,012        353,747        573,136
 
                                                                                          As at June 30,
                                                                                    2020           2019

Long-term debt                                                               $ 2,968,703    $ 2,688,686
Credit facility                                                                        -              -
Working capital surplus                                                         (109,362)       (84,446)
Net debt                                                                       2,859,341      2,604,240

Message to shareholders

Our world continues to experience unprecedented challenges due to the continuing COVID-19 pandemic and its impact on the global economy. The health and safety of our employees, customers and other stakeholders continue to be Keyera's No. 1 priority and, to date, we have successfully implemented our pandemic response, resulting in continued safe and reliable operations.

Beginning in March, the energy industry was challenged not only by the pandemic but also by a sharp decrease in global oil prices. However, the global crude oil supply response was greater than initially anticipated and, in June, supported a recovery in commodity prices from the extreme lows experienced earlier in the year. While the economic and commodity price environment remains uncertain due to the recent surge in COVID-19 cases globally, Keyera continues to focus on what we can control and take prudent steps to address the short-term challenges and enhance the long-term success of the company and our customers. During the quarter, we worked with our customers to develop mutually beneficial solutions to ensure they could continue to flow the majority of their volumes to our facilities. We maintained our strong financial position, which includes a healthy balance sheet, two investment-grade credit ratings, a $1.5-billion undrawn credit facility and minimal long-term debt obligations in the next five years. We believe our financial strength will allow us to maintain the stability and continuity of the business during this unprecedented economic time, while providing us with flexibility to be opportunistic.

During the quarter, we made significant progress enhancing our competitive positioning by reducing our overall cost structure. We implemented measures to reduce both our operating and general and administrative expenses, while continuing to advance the optimization plan in our gathering and processing business. We expect these efforts to have a meaningful impact on our bottom line beginning in 2021 and also reduce our greenhouse gas emissions.

Our second quarter results were impressive given the challenging environment, showing the resilience of our integrated business that provides essential services to producers and is backed by secure long-term contracts. Each of our business segments performed well and we delivered adjusted EBITDA of $182-million, distributable cash flow of $158-million or 71 cents per share, and net income of $18-million or eight cents per share.

Given the resilience of our integrated business and the pro-active steps we have taken to date, I am confident in Keyera's future. We remain committed to generating value for our shareholders and plan on maintaining our current monthly dividend.

Gathering and processing operations

The gathering and processing segment delivered steady results in the second quarter despite the low-commodity-price environment. We worked with our customers during this time to find short-term solutions that prevented significant volumes from being shut in. As a result, Keyera generated an operating margin of $69-million in the gathering and processing segment, similar to the same period last year.

During the quarter, we continued to advance our optimization plan. We suspended operations at our Minnehik Buck Lake gas plant, and recently announced plans to suspend gas processing operations at our Bigoray gas plant later this year and at our Brazeau North gas plant in 2021. To date, Keyera's optimization plan includes suspending operations at six of our gas plants in 2020 and 2021, which is expected to increase utilization in the south region from less than 50 per cent of processing capacity to approximately 70 per cent by the end of 2021. These decisions have been difficult, as many of the facilities have contributed to Keyera's success for decades; however, the decisions were necessary to increase the competitiveness and profitability of our gathering and processing operations.

Liquids infrastructure operations

Keyera's liquids infrastructure segment demonstrated its resilience in the second quarter, generating operating margin of $100-million, which represents an 8-per-cent increase over the same period last year. With high take-or-pay contracts in this part of our business, our cash flow stream remained steady even though market conditions resulted in lower volumes through our fractionation capacity and condensate system. Demand for our underground storage increased during the quarter as producers contracted more capacity to improve operational flexibility during these uncertain times. We expect demand for our storage assets to continue.

Marketing business

The marketing segment delivered realized margin of $54-million in the second quarter, as Keyera's effective risk management program protected margins and inventory values from the sharp decline in commodity prices that began in March. With strong contributions through the first half of the year and an improving commodity price outlook for the remainder of the year, Keyera now expects marketing to generate realized margin between $300-million and $340-million in 2020, compared with the previous guidance of $270-million to $310-million.

Keyera's marketing services are important to our integrated business model as they allow us to access high-value markets for the natural gas liquids we handle and generate free cash flow that we can reinvest into our fee-for-service business.

Business development

We continue to advance our 2020 capital program according to plan. In September, we expect the Pipestone gas plant to begin processing volumes as our anchor customer, Ovintiv, redirects its production from two other gas plants in the area. In the fourth quarter, we expect to commission phase 2 of the Wapiti gas plant and also begin operating the Wildhorse crude oil storage and blending terminal in Cushing, Okla. These three projects substantially complete our current capital program, allowing us to focus on the development of the KAPS pipeline, which is expected to transport condensate and natural gas liquids from the Montney to our liquids infrastructure assets in Fort Saskatchewan beginning in 2023.

Keyera has a history of disciplined capital allocation, a record we plan to continue. With the changing landscape of our industry and higher cost of capital, our goal is to ensure future investments improve the quality of Keyera's cash flows. We will focus growth in our liquids infrastructure segment, which has high barriers to entry and assets that serve the entire Western Canada sedimentary basin. We will look for investments that are backed by long-term take-or-pay contracts with credit-worthy counterparties and we will adhere to a financing model that does not require the issuance of common equity for growth capital projects in the short to medium term.

Outlook

While the full extent, effect and duration of the COVID-19 pandemic continues to be unknown, Keyera continues to implement measures to ensure our long-term success. To date, we have reduced our 2020 capital program by deferring the KAPS pipeline project one year, discontinued the dividend reinvestment program, reduced our overall cost structure, including both operating costs and general and administrative expenses, and continued to advance our gathering and processing optimization plan. We have also maintained our strong financial position and demonstrated a resilient business model that delivers results in the most challenging environment.

Looking ahead, it appears that commodity prices have stabilized and are now at levels that are incenting both natural gas and oil sands producers to return their production volumes to pre-COVID-19 levels. As a result, we expect volumes moving through our facilities to continue to recover for the remainder of 2020 and into 2021.

On the world stage, I believe Canadian energy has a long and healthy future, and Keyera will be an important part of this success. Keyera's mission is connecting energy for life and we will contribute to helping make Canada's resource industry the most responsible in the world. We are committed to reducing our environmental footprint and creating environmentally superior energy solutions for the future.

On behalf of Keyera's board of directors and management team, I would like to thank our employees, customers, shareholders and other stakeholders for their continued support.

Please continue to stay safe and healthy.

David G. Smith

Chief executive officer

Second quarter 2020 results conference call and webcast

Keyera will be conducting a conference call and webcast for investors, analysts, brokers and media representatives to discuss the financial results for the second quarter of 2020 at 8 a.m. Mountain Time (10 a.m. Eastern Time) on Thursday, Aug. 6, 2020. Callers may participate by dialling 888-231-8191 or 647-427-7450. A recording of the call will be available for replay until 10 p.m. Mountain Time (12 a.m. Eastern Time) on Aug. 20, 2020, by dialling 855-859-2056 or 416-849-0833 and entering passcode 2672038.

Internet users can listen to the call live on Keyera's website. Shortly after the call, an audio archive will be posted on the website for 90 days.

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.