Keyera Earnings: Marketing Performance Is Overshadowed by Other Segments, For Once

Keyera’s second-quarter results were quite good, led, for once, by the gathering and processes and liquids business as the marketing segment suffered from a six-week planned outage at Alberta Envirofuels. After updating our model to reflect slightly higher marketing profits for 2024, higher maintenance and slightly lower growth spending, our fair value estimate has increased to CAD 39 from CAD 36. Our no-moat rating is unchanged. Overall EBITDA improved 11% to CAD 326 million from last year’s levels.While marketing has historically led the firm’s performance for many quarters, it was the liquids and gathering and processing business that did well this quarter. The gathering and processing business benefited from strong volumes in the North region gas plants, and wildfires did not affect the business this year. The liquids business saw higher contributions from the Key Access Pipeline System as it continues to ramp up, and healthy fractionation, storage, and condensate volumes. We think the firm has done well capturing growth opportunities via KAPS, and it has an attractive slate of new efforts to pursue. Future growth apart from KAPS can come from the Trans Mountain Expansion, LNG Canada, West Coast LPG exports, and higher condensate volumes from its North region gas plants serving the Montney and Duvernay basins. The physical marketing business will continue to serve as a way for Keyera to capture incremental margins off a highly integrated asset base to deliver product throughout North America.