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

Explicit Guidance:

• 2027 Marketing Realized Margin: Raised to $400 million–$430 million, driven by stronger-than-expected iso-octane and butane margins, plus $50 million in incremental benefits from inventory/hedge revaluations related to the Plains acquisition. (Note: Final 2027 guidance to be provided in May 2027).
• 2026 Maintenance CapEx: Increased by $20 million, now guided at $260 million–$280 million.
• 2026 Cash Taxes: Revised to $55 million–$75 million.
• 2027 Growth CapEx: Maintained at $630 million–$670 million, primarily funding projects already underway.
• 2027 Maintenance CapEx: Maintained at $250 million–$280 million, including ~$20 million for AES (AEF) equipment replacement and $20 million for one-time IT integration costs.
• 2027 Cash Taxes: Maintained at $130 million–$150 million.
• 2025–2027 Fee-Based Adjusted EBITDA per Share CAGR: Target of 16%–18% remains on track.
• 2027–2029 Fee-Based Adjusted EBITDA per Share CAGR: Target of 7%–8% remains on track.
• Leverage: Expect to return to long-term target range by 2028; net debt to adjusted EBITDA was ~3.6x at end of Q3.

Business-Segment Outlook:

• Liquids Infrastructure: Condensate demand expected to grow to support oil sands production expansion. A bottleneck in the Fort Saskatchewan condensate system (CONSAFE) will be resolved by adding ~15% capacity, expected in service early next year (Q1 2027). This expansion is contracted; additional conversations for a next-phase expansion with major oil sands players are ongoing.
• Gathering & Processing (North Region): Both Wafiti and Simonet facilities approaching full operating capacity. Robust gas flows driving demand; monitoring bottlenecks at Wapiti and Simonet gas plants. Expect to discuss specific capacity expansion details in 2027.
• Marketing (AEF): AEF reliability has fallen short of expectations. An interim 4-week outage is planned for early January to repair heat exchanger tubes, aiming to return near full capacity temporarily. Permanent heat exchanger installation scheduled for May 2027, with full production expected by the end of May 2027. Management expects to provide sufficient 2027 guidance in May 2027 based on this timeline.
• Plains Acquisition Integration: Assets performing ahead of expectations (higher volumes, liquids yields, and emperors). $115 million of synergies delivered by end of Q3 2026, tracking ahead of the $120 million–$140 million 12-month target. Additional capital-efficient opportunities identified beyond initial synergy targets.
• ISO-Octane Fundamentals: Strong underlying long-term contribution expected; business to benefit from favorable crude/RBOC crack pricing and locked-in value for 2027.

Market and Competitive Outlook:

• Condensate Demand: Anticipated to rise due to planned pipeline projects supporting oil sands production growth.
• Natural Gas Supply: Record well drilling in the Montney region driving higher-than-expected gas flows; increased gas processing demand even from liquids-rich formations.
• LNG Canada Phase 2: Anticipated future demand for gathering and processing capacity to support LNG Canada Phase 2 and other potential LNG projects.
• Propane/Butane Markets: Bullish on propane outlook; excited by opportunities to transport Plains' propane to eastern markets. Butane spot sales remain favorable; eastern markets for butane viewed as attractive.
• Crude Rail: Rail assets positioned to capitalize on short-term opportunities from wider heavy diffs and pipeline constraints; ACE terminal and KFS North rail facilities offer flexibility to move crude and hydrocarbons west-to-east.

Macro / Industry Outlook:

• Canadian Energy Sector: Management views Canada as having a "generational opportunity" to strengthen its position as a global energy supplier.
• Investment Environment: Citing growing demand for secure energy and alignment between governments/industry, creating a constructive environment for investment.
• Commodity Pricing: Strong crude and RBOC crack prices have enabled locking in favorable values for 2027 and 2028; proactive risk management utilized to secure margins.
• Weather: Winter propane demand hedged and contracted; low end of guidance assumes worst-case scenario for winter propane demand but includes flexibility to manage physical volumes.

Strategic Initiatives:

• CAPEX Timing: Majority of major announced projects expected to be completed by the end of 2027. Significant capital spend reduction expected in 2028, aiding balance sheet deleveraging.
• Norlita Pipeline: 24-inch pipe installed in 2026 allows for future capacity expansion via pump stations (capital efficient) rather than new piping; aligned with partner Enbridge.
• ACE Terminal: Spend concentrated in 2027; facility expansion planned to handle increased propane/butane throughput.
• AEF Facility: Shift in operational strategy from maximizing short-term production to operating within defined reliability parameters with more frequent planned maintenance (shorter outages than traditional 4-year cycles).
• Plains Integration: Prioritizing a list of hundreds of margin-enhancing/cost-cutting opportunities; expected to deliver synergies and value add through system optimization and shared service provider partnerships.

Risks and Headwinds to Outlook:

• AEF Reliability: Primary headwind for 2026 results and near-term outlook; performance of interim repairs may see slow deterioration; permanent solution delayed until May 2027.
• Enbridge Line 5: Previous disruption caused a $35 million hit to the quarter; ongoing monitoring of impact.
• Capital Project Execution: While currently on budget, future execution depends on retaining service providers in an increasingly busy basin.
• Leverage: Net debt/EBITDA remains above target range through 2027, peaking at year-end 2026, before returning to target in 2028.
• Assumptions: 2027 guidance relies on AEF operating as planned post-repair; weather impacts on propane demand.

Management Tone on the Future:

• Confidence Level: High confidence in the "generational opportunity" in Canadian energy, the strategic execution of the expanded platform, and the ability to execute capital projects on time and under budget.
• Synergies: Strong confidence in delivering the $120M–$140M synergy target by May 2027, with optimism for value creation beyond this baseline.
• Hedges/Caveats: Repeated emphasis on the "temporary" nature of AEF repairs and the "outside date" of May 2027 for permanent resolution; caution that 2027 guidance is based on assumptions regarding AEF performance and market pricing.
• Overall: Optimistic about 2027 and beyond, viewing current operational setbacks (AEF) as manageable within a strong macro and business framework.

Miscellaneous:

• Dividends/Buybacks: No specific updates mentioned regarding changes to dividend policy or share buyback programs.
• Tax Rate: No specific effective tax rate target mentioned, only absolute cash tax guidance ranges.
• Share Count: No specific guidance on share count changes provided.