Keyera's 2026 Third Quarter Results Conference Call - DEFI TECHNOLOGIES INC

Financial Performance:

• Adjusted EBITDA for the quarter (excluding transaction/integration costs) was $466 million; Free Cash Flow (DCF) was $247 million ($0.84/share).
• Reported a net loss of $68 million due to one-time charges and operational disruptions.
• Realized margins: Gathering and Processing at $125 million; Liquids Infrastructure at a record $272 million; Marketing at $95 million.
• Liquids Infrastructure performance driven by full-quarter contributions from acquired Plains assets and a 50% interest in CAPS.
• Net debt to adjusted EBITDA ratio stands at ~3.6x; leverage expected to return to long-term target range by 2028.
• Capital expenditures: Maintenance CapEx guidance increased to $260M–$280M (up $20M) for the current period; Growth CapEx remains $630M–$670M.

Guidance and Future Outlook:

• Increased 2027 Marketing Realized Margin guidance to $400M–$430M, reflecting strong iso-octane/butane margins, inventory revaluation benefits ($50M), and Plains synergies.
• Fee-based adjusted EBITDA per share CAGR targets remain on track: 16–18% (2025–2027) and 7–8% (2027–2029).
• 2027 Maintenance CapEx guidance: $250M–$280M (includes $20M for AEF equipment replacement and $20M for one-time IT integration).
• Cash taxes guidance: $55M–$75M (current year); $130M–$150M (2027).
• Marketing guidance will be provided in Q1 2027; 2026 Marketing guidance is $400M–$430M.
• Major capital projects expected to complete by end of 2027, with spending significantly decreasing in 2028 to aid deleveraging.

Business Segments and Product Lines:

• Gathering & Processing: Strong growth in the North Region; Wapiti and Simonet gas plants approaching full capacity; focusing on bottleneck mitigation projects.
• Liquids Infrastructure: Record margins driven by increased throughput and new assets; Fort Saskatchewan condensate system bottleneck expansion (15% capacity increase) expected early next year.
• Marketing: Margins impacted by Enbridge Line 5 disruption and lower AEF utilization, partially offset by strong iso-octane pricing and butane sales.
• AEF (Iso-Octane): Experiencing reliability issues; interim outage of ~4 weeks scheduled for early January to repair heat exchangers; permanent replacement installation planned for May 2027 with full production expected by end of May.
• Rail & Terminals: Active in crude rail movements (ADT facility); exploring flexibility to move propane/butane via rail from KFS North and ACE terminal; ACE terminal land holds potential for future product tie-ins.

Market and Competitive Landscape:

• Canadian energy sector viewed as a "generational opportunity" due to secure energy demand and constructive government/industry alignment.
• Condensate demand projected to grow with planned pipeline projects supporting oil sands production; Trans Mountain capacity increases have driven higher demand for condensate services.
• Northern Region gas flows remain robust; increasing gas production (even from liquids-rich formations) and potential LNG Canada Phase 2 demand driving need for gathering capacity.
• Acquired Plains assets performing above original deal thesis models due to higher volumes, yields, and emperors, plus identification of low-hanging fruit in under-invested areas.

Risks and Challenges:

• AEF Reliability: Persistent heat exchanger failure; previous redesign (2022) did not perform as expected, requiring a permanent fix in May 2027.
• Operational Disruptions: Enbridge Line 5 disruption caused a $35M hit to the quarter; multiple large turnarounds (Brazel River, KFS North, Empress) impacted Q3 results.
• Deleveraging: Leverage remains above target range (~3.6x) with a peak expected at year-end before returning to target by 2028.
• Capital Execution: While tracking on/below budget, market conditions are becoming busier; maintaining partnerships with service providers is critical to mitigate cost/schedule risks.

Management Commentary and Tone:

• Tone: Generally confident and optimistic regarding the expanded platform, synergy realization, and long-term market fundamentals.
• Sentiment: Management expressed strong satisfaction with the integration of Plains assets, noting they are delivering synergies ($115M in 9 months) ahead of the 12-month target ($120M–$140M).
• Acknowledgment: CEO Dean Setaguchi and CFO Eileen Maricar acknowledged AEF issues seriously but emphasized the strong underlying fundamentals of the iso-octane business.
• Strategy: Focus remains on disciplined integration, operational reliability, and advancing growth projects to benefit from Canadian energy expansion.

Analyst Questions and Answers:

• AEF Specifics: Management confirmed the January outage will restore capacity temporarily; the permanent fix (returning to the 25-year-old proven design) is scheduled for May 2027. No acceleration of the May date beyond weeks is expected.
• Plains Synergies: $115M delivered so far; synergies derived from better-than-expected base performance (volumes/yields), avoided capital, and operational cost reductions.
• Capital Program: Projects are on time/budget; Zone 4 is $40M under budget. 2026 guidance reflects timing of spend (e.g., ACE terminal). Major spend completes by end of 2027.
• Condensate Demand: The new Fort Saskatchewan bottleneck project is already contracted; additional expansion discussions are underway with major oil sands players.
• Norlite Expansion: No hurdles identified; the original 24-inch pipe design allows for capital-efficient expansion via pump stations in alignment with Enbridge.
• Marketing Guidance: Confident in providing 2027 guidance in Q1 2027; hedging strategies lock in favorable spreads, though AEF operations remain a key assumption.
• Leverage Cadence: Leverage expected to peak end of year; potential to deleverage faster than 2028 if marketing/base business outperforms, though targets remain conservative.

Other Key Points:

• The company views the expanded platform as offering customers greater flexibility and market access, particularly in managing operational disruptions.
• AEF operations are shifting from short-term production maximization to reliability-focused parameters with more frequent planned maintenance.
• The ACE terminal and surrounding infrastructure offer significant flexibility for future crude and spec hydrocarbon movements via rail and existing pipeline tie-ins.
• All major growth projects remain on schedule and tracking on or below budget.
• Management reiterated a commitment to contracting before expanding capacity in both liquids and gas segments.